In the PACE Space

One of the most disturbing articles I read this past week--from a geriatric perspective-- was a piece in the NY Times about a new development within PACE, the Program of All Inclusive Care for the Elderly. Private equity firms are setting up PACE (Program of All Inclusive Care for the Elderly) programs.

I am a great fan of PACE programs. They do all the right things for the frailest, most vulnerable older people, individuals who are enrolled both in Medicare and Medicaid and who are disabled enough to qualify for nursing home care: PACE keeps them out of nursing homes, prevents hospitalizations, and focuses on quality of life. It does this by engaging patients and families in advance care planning, by talking with them about what really matters to them, and by providing services ranging from podiatry to physical therapy to physician care at home or in the adult day health centers where many of them spend their days. The program receives a substantial sum from Medicare and Medicaid in exchange for their providing all the patient’s medical services. And until recently, PACE programs have always been not-for-profit. But apparently the government changed the rules a year ago and a number of for-profit companies have entered the “PACE space,” hoping to make a substantial profit.

Now I realize that PACE in its traditional form has had a problem—it hasn’t caught on. As of January, 2016, there were reportedly a mere 40,000 people enrolled in one of 100 PACE programs found in 32 states. But are private equity firms the way to go?

As part of the book that I’m writing on the journey through the health care ecoculture, I looked into the role of private equity firms in both the hospital and the nursing home sectors. What private equity companies do is to buy distressed facilities and turn them around so they can sell them for a profit. The jury is still out on what happens to patients in the process—but the data so far are concerning. According to a NY Times investigation of all nursing homes bought up by private equity firms between 2000 and 2006, the result was a dramatic decrease in the number of nurses caring for patients and a concomitant drop in the quality of care. Another report, this one by the Sacramento Bee about nursing home chains in California, found that after one company, Brius LLC, bought up skilled nursing facilities in the state, a slew of complaints ensued. Moreover, the company embarked on a complicated strategy of instituting a convoluted management structure to hide assets as a shield against civil and criminal liability. Nonetheless, the 81 nursing homes in the chain have attracted the attention of the California Attorney General, the California Department of Health Care Services, and even the FBI because of alleged negligence and abuse. To be sure, there is another perspective: of the 81 nursing homes in question, 59 were insolvent and on the verge of closing or else faced decertification due to poor care at the time they were acquired. The chain claims it improved care by investing in these troubled facilities. But it seems unlikely that borderline institutions would provide better care after Brius instituted a worse nurse to patient ratio, as happened across the board.

So when NY Times reporter Sarah Varney published a long piece on the foray by private equity into PACE, I worried. She describes how InnovAge, a Denver-based company, gained a $196 million investment from the firm Walsh, Carson, Anderson and Stowe, a multibillion dollar private equity company, to provide PACE services. The InnovAge model is to do what PACE programs usually do—but more cheaply, by substituting video calls for on site doctoring and other as yet undetermined strategies. The revenue for the new PACE enrollees will come from Medicare and Medicaid, as it always has. Maybe for profit PACE won't cut corners. Maybe rounded corners are desirable. But CMS needs to be extremely vigilant and have a low threshold for pulling the plug.