The Program of All Inclusive Care for the Elderly (PACE) provides a comprehensive, fully integrated, package of Medicare and Medicaid services to frail elders who require a nursing home level of care. Members’ care is managed by an interdisciplinary team that includes physicians, nurses, transportation providers, and others. PACE organizations (POs) function both as a health care provider and a health plan because most service providers, including primary care physicians, are employed by the PO but some services are delivered by contracted providers. All POs receive capitation payments from both state Medicaid agencies and the federal Medicare program. POs operate under a “three-way agreement” among the PO, the state, and Medicare. Some states also enter into separate agreements with POs that define state-specific requirements.

In May 2021 NASHP convened the NASHP State PACE Action Network (Network) to support the efforts of five states (Iowa, Louisiana, Maryland, Massachusetts, and New Jersey) seeking to increase access to PACE services. All five states sought to increase access by securing contracts with new POs to expand the states’ existing PACE programs into new geographic areas. NASHP supported those efforts and the learning that emerged from that work is presented here.

Approach to PACE Organization Selection

NASHP identified seven non-Network states that used an application process to select POs: California, Florida, Kansas, Michigan, North Dakota, Pennsylvania, and Washington. Among the Network states, Iowa chose to join this group and is currently piloting its process. Almost all these states, including Iowa, prescribed similar application steps and requirements including submitting an initial letter of intent, preparing a feasibility study, a marketing plan and an implementation plan, and a commitment from the applicant to fund the program during development and start-up. States that used this process reported that the benefits of using an application approach included being able to begin working with the prospective PO as soon as an organization expressed interest, as well as the ability to accept new applications on a rolling basis.

NASHP identified four non-Network states that used a competitive process to select POs: the District of Columbia, North Carolina, Texas, and Virginia. Among the Network states Maryland and Massachusetts chose to develop a competitive process, Louisiana refined its existing process, and New Jersey planned to continue to use its existing process. These states required prospective POs to submit much of the same information as those states that used an application process, however, their processes were aimed at selecting the best qualified organizations among multiple potential bidders.

Lessons Learned

1. Opening a new PACE site will likely take more than a year. Multiple factors contribute to the length of the process. In many cases the prospective PO must build or renovate a physical space to serve as the PACE center. (All POs must operate a PACE center at which members receive much of their care, including primary care, therapies, meals, recreation, and socialization). Also, in some states the organization must obtain one or more licenses. Finally, because the PACE contract is a three-way contract, the prospective PO must meet requirements set by both Medicaid and Medicare before it can begin operating. The state initially confirms that the prospective PO meets state requirements by providing a “state assurances document” to the organization for submission to CMS. This document also confirms that the state is willing to enter a PACE agreement with the organization. Later in the application process the state conducts an on-site state readiness review. The prospective PO cannot enter a three-way agreement until after the state readiness review is completed. On the state side, states need time to amend their state Medicaid plans, secure sufficient staff for program administration, implement any needed changes to their Medicaid eligibility and enrollment systems and, sometimes, negotiate a two-way agreement with the PO to address issues that are not addressed in the three-way agreement.
2. States need to decide whether they will go beyond federal program requirements in PACE program administration. Over the past decade, state managed care operations have grown more sophisticated, clinical knowledge and technical capabilities have advanced, and states have increasingly implemented delivery system and payment reforms in Medicaid managed care programs. Because the PO functions as a health plan (as well as a provider) some states have begun to adapt some of the innovations they found effective in managing managed care organizations (MCOs) to POs. Colorado, for example, collects encounter data from POs for quality oversight, rate setting and other purposes. This state also plans to use American Rescue Plan Act (ARPA) funding to develop a pay for performance model for PACE, that would offer POs financial incentives to meet benchmark performance standards on specified quality measures. Of course, POs are not MCOs, and some approaches that worked well for MCOs may not be effective for POs. Colorado for instance found that it had to develop a PACE-specific manual to enable the POs to submit encounters for services provided to PACE members that would not otherwise be covered by Medicaid, such as Chaplain services. States need to work with existing and potential POs as they consider program improvements to develop policies that will be effective in PACE. Among the Network states, Maryland plans to collect encounter data and Massachusetts was also interested in developing a pay for performance model.
3. States will want to work with the prospective PO before the PO applies to the Medicare program. California has laid out a multi-step application process that is aligned with the federal process. The state described the process in a policy letter and has developed a website that contains onboarding material for applicants, including a boilerplate two-way contract. Among the Network states, New Jersey allots for this time by first issuing a request for application (RFA) to identify the best PO for an area and then issuing a request for further information to finish qualifying the winning organization. Maryland has adopted the New Jersey approach.
4. States can structure their selection process to help them achieve related policy goals. For example, Louisiana is working to move Medicaid beneficiaries with severe mental illness (SMI) who live in nursing homes into the community and views its POs as potential partners in that effort. Therefore, the state’s 2021 PACE RFI required potential POs to, “…describe how the organization will integrate community mental health services with care plans. OAAS transitions as many as 300-400 individuals each year and PACE organizations must have resources and systems to properly serve this often-challenging population.” In addition, states have flexibility to set the Medicaid capitation rates paid to POs as long as the rates do not exceed the amount the state would otherwise pay to serve the population and some states are considering using this flexibility to create incentives for POs to expand into rural areas.
5. States can structure their selection process to minimize the state resources needed to administer the program. North Carolina, for example, issued an RFA, but only existing PACE contractors could apply. This enabled the state to expand PACE without increasing the number of contracts that state staff needed to manage. Massachusetts is taking a similar approach but has stated it will go to an open competition if it does not get sufficient coverage from existing POs.

Summary

Given that PACE programs do not yet exist in many areas of the country, states’ primary method of expanding access to the program will be via securing POs to serve more areas of the state. States have multiple policy choices to make in that effort including whether to use an application or competitive process, whether to encourage existing POs to expand their service areas or secure new POs, and how to ensure that the state will be able to work with the PO while it readies itself to open its doors. As they make these choices states will need to consider the resources available to the state and PO, where beneficiary need is greatest, and the length of the application process.

Acknowledgements: The National Academy for State Health Policy (NASHP) would like to thank the members of the NASHP State PACE Action Network (Network) for their hard work and dedication to expanding access to PACE. Network members included both state officials and PACE Organization representatives from Iowa, Louisiana, Maryland, Massachusetts, and New Jersey. We also thank representatives of California, Colorado, Michigan, Oregon, North Carolina, and Virginia for their willingness to share their knowledge and experience with Network members. Peter Fitzgerald and Liz Parry, our partners at the National PACE Association, also made valuable contributions. Finally, the author wishes to thank Hemi Tewarson, Kitty Purington, and Luke Pluta-Ehlers of NASHP for their contributions to the Network and this brief. This brief was supported by The John A. Hartford Foundation, the Gary and Mary West Foundation, and the Harry and Jeanette Weinberg Foundation.