The business side of PACE, Part 2: how the actual experience of two PACE organizations is contributing to the development of new programs - Feature Article - Programs of All-inclusive Care for the Elderly

Nursing Homes, May, 2003 by Jade Gong, Robert Greenwood

The baseline scenario reduces acute care utilization from 3,500 days per 1,000 participants in year one to 2,200 days per 1,000 in year five. As shown in the Table, by year five in our baseline scenario, hospital expenses represent 7.2% of total expenses while nursing home expenses represent 9.8%.

8. PACE programs should plan for growth PACE program sponsors are looking forward to a time when PACE will become a major player in the movement toward community-based long-term care delivery. Indeed, some states, such as Colorado and Texas, have passed legislation to encourage PACE development across the state. TLC, which operates four PACE sites in the Denver metropolitan area and has an enrollment of more than 600, has developed an aggressive growth plan. TLC is now building one "super site" that will house two interdisciplinary teams serving an enrollment of 360 in one physical location, along with administrative space. Through experience, TLC has determined that its break-even point is between 90 to 105 participants per team and each team can handle between 180 to 200 participants. To facilitate the smoothest possible opening of each new center, TLC conducts the opening by moving half of its participants and staff to the new center. Each staff then has the critical mass and the professional experience to grow to full capacity. The PACE Financial Proforma model allows the user to develop several teams and sites as needed, based upon the assumptions made about growth.

9. PACE programs achieve financial success. Since PACE sites, until only recently, have operated as demonstration programs, there is limited information on their financial performance. In developing the Financial Proforma model, a baseline scenario was developed that uses assumptions from the two case studies described in this article. The baseline scenario shows that a new PACE program can achieve net income at 18 months and break even at 38 months (including the recovery of start-up costs), can achieve a margin percentage* of22% in year five, and can get a return on net revenue** of 20 in year five.

10. PACE programs can be successful either as part of a health system or as a freestanding program. When Congress allowed PACE programs to become permanent providers under Medicare and Medicaid, nonprofit organizations were offered an extraordinary leadership opportunity to provide community-based long-term care. At present, only nonprofit organizations can sponsor PACE programs, although for-profit organizations can participate in a new demonstration program that the Centers for Medicare and Medicaid Services is organizing. PACE programs can be complementary to a hospital system and use the existing components of the continuum, including nursing home care, hospital care, and home care, within a coordinated care model. While ABCS is sponsored by a hospital system, it does not operate a hospital in Chattanooga. PACE programs such as TLC can also be successful as freestanding PACE programs that can contract with hospitals, nursing homes, and assisted living programs in the community.