STATE WORK GROUP ON PACE
ISSUE BRIEF #1
Site Selection and Application Process for PACE
April 1st, 1999
Site Selection and Application Process for PACE
OBJECTIVES OF STATE WORK GROUP ON PACE
Upon passage of The Balanced Budget Act of 1997 (P.L. 105.33), the Program of All-Inclusive
Care for the Elderly (PACE) became a permanent provider under Medicare and a State option
under Medicaid. PACE is a managed care program designed for a subset of the dual eligible
population who meet the following requirements: 1) are a minimum of 55 years of age; 2) live
within a defined geological catchment area; and are certified eligible by the State for nursing
home level care. The Program provides a comprehensive array of Medicare and Medicaid
institutional and community-based benefits under capitation financing, assuming financial risk for
the full primary, acute and long-term care services.
In January 1998, the State Work Group on PACE was convened by the National PACE
Association with the objective of building upon the States’ extensive experience in developing
and implementing both PACE and pre-PACE programs and to be a resource to States considering
whether or not to pursue PACE development under expanded provider authority.
With funding from The Retirement Research Foundation, the Work Group met over a period of 18
months. At the direction of Work Group members, staff developed a series of issue briefs on a
variety of topics of interest to States including Site Selection and Application Process for PACE,
PACE capitation Rate-Setting, etc. to be made available to States, as well as other interested
organizations and individuals. These issues are intended to be a resource to State policymakers
and others, reflecting the state-of-the-art in PACE development, identifying areas in which further
work is required and raising key questions for States to consider in implementing PACE. The
Work Group is made up of ten members including representatives of nine states and one HCFA
staff person. Staff support is provided by the National PACE Association and consultants.
ACKNOWLEDGMENTS
This paper is the product of the State Work Group on PACE, convened by the National PACE
Association (NPA) with funding from The Retirement Research Foundation. The NPA is
extremely appreciative for the time, expertise and thoughtfulness provided by Work Group
members and wishes to acknowledge the contribution of: Regina Anderson-Cloud (Virginia
Department of Medical Assistance); Lora Connolly (California Department of Health Services);
Diane Flanders (Massachusetts Division of Medical Assistance); Linda Gowdy (New York State
Department of Health); Nicki Harvey (South Carolina Department of Health and Human Services);
Leslie Hendrickson (New Jersey Department of Health and Senior Services); Mary James
(Michigan Department of Community Health); Dee O’Connor (Connecticut Department of Social
Services); James Pezzuti (Pennsylvania Department of Public Welfare): and Terry Pratt (U.S.
Health Care Financing Administration). Additional staff from the States represented on the Work
Group also have contributed significantly, especially Cindy Proper (Pennsylvania Department of
Public Welfare) and Cheryl McDougall (New Jersey Department of Health and Senior Services)
and the NPA thanks them as well.
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Site Selection and Application Process for PACE
OVERVIEW OF STEPS IN SITE SELECTION AND
APPLICATION PROCESS FOR PACE
Step 1: State chooses whether or not to pursue PACE development
♦ Undertakes analysis of need for PACE services based on demand for services and
existing long-term care delivery system;
♦ State elects to provide PACE as an optional State plan benefit
♦ States checks with HCFA to make sure that the actual number of PACE providers will
not exceed the number authorized if the State proceeds with PACE development
Step 2: State creates structure for development and implementation of PACE
♦ If required, State legislation is passed authorizing PACE development;
♦ State department responsible for PACE is identified;
♦ Licensing requirements are considered, including question of whether PACE must be
licensed as a risk-bearing entity
Step 3: State confirms the availability of PACE “slots” with HCFA
Step 4: State selects qualified providers from among interested entities
♦ Criteria are established to assess provider capacity to develop PACE;
♦ State engages in process of soliciting/responding to providers’ interest in developing
PACE
♦ Process is undertaken to choose from among multiple interested providers
Step 5: Providers with formal State approval apply to HCFA for PACE provider status with
required assurances from the State
Step 6:
Provider application is reviewed by HCFA; and joint State/HCFA site visit takes
place (in cases in which applicant operates a PACE or pre-PACE program)
Step 7:
On the basis of the provider application and/or joint site visit, provider initiates
PACE operations under a 3-way program agreement between the State, HCFA and
the provider
Step 8: For those applicants which did not operate as PACE or pre-PACE programs prior to
applying for provider status, a joint State/HCFA site visit and operational survey
must occur within six months of the provider enrolling its first client with final
approval of provider status contingent on a successful operational survey.
This chart, “Overview of Steps in Site Selection and Application Process for PACE,” is a summary of the State Work
Group’s recommendations on various PACE start-up issues, taking a step-by-step approach. The following pages
elaborate on each of these steps.
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Site Selection and Application Process for PACE
Note: The following information is current as of the date of publication of this issue brief. The State Work
Group anticipates that after the Federal regulation-implementing PACE provider status is published, some
revisions may need to be made. In that event, revised copies of the brief will be made available.
INTRODUCTION
Upon passage of The Balanced Budget Act (BBA) of 1997 (P.L. 105-33), the Program of Allinclusive Care for the Elderly (PACE) became a permanent provider under Medicare and a State
option under Medicaid. The total number of authorized programs was increased substantially from a
maximum of 15 demonstration sites (authorized under Section 9412(b) of the Omnibus Budget
Reconciliation Act) to up to 40 providers in the year following enactment of P.L. 105-33. An
additional 20 sites are authorized each year thereafter.
With passage of the BBA, the process of PACE development and the role of States in this process
changes significantly. This issue brief, the first in a series, is intended to assist States respond to
their changing roles and responsibilities following establishment of permanent provider status for
PACE.
Under the original PACE demonstration, providers initiated development of PACE programs; secured
the cooperation and participation of their States; and, together, providers and States applied to the
Health Care Financing Administration (HCFA) for a limited number of Medicare 222 and Medicaid
1115 waivers. The BBA offers the promise of easing PACE development by eliminating the need for
waivers and potentially redefines the role that States play in PACE development and oversight. The
objective of this and forthcoming issue briefs prepared by the State Work Group is to address a
range of issues in PACE development from the perspective of States and to assist interested States
with their roles in the transition of PACE from demonstration to provider status.
This first issue brief focuses on the site selection and application process for PACE and is
comprised of the following seven parts:
♦ Part I Background: Site Selection Under the Demonstration: Description of how PACE
sites were chosen under the demonstration
♦ Part II Obtaining State-level Authority to Pursue PACE Development: Discussion of
electing the State plan option for PACE and the need for authorizing legislation at the State
level
♦ Part III Soliciting/Responding to Provider Interest at the State Level: Discussion of
how a State may solicit or respond to providers’ interest in developing PACE
♦ Part IV Criteria for States to Use in Site Selection: Presentation of criteria States may
use in evaluating the capacity of interested providers to implement PACE
♦ Part V
Site Selection Process at the State Level: Suggestions on processes for
choosing from among prospective providers
♦ Part VI Applying for Provider Status at the Federal Level: Review of what HCFA may
require of prospective providers in the PACE Provider Application, including assurances
from States
♦ Part VII Prepaid Health Plan Start-Up: Discussion of whether or not HCFA or States
should require providers to operate as prepaid health plans prior to initiating PACE
operations
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Site Selection and Application Process for PACE
I.
BACKGROUND: SITE SELECTION UNDER THE DEMONSTRATION
PACE providers in the original demonstration were selected from among organizations that
responded to a Request for Proposals (RFP) developed by On Lok, the prototype for the PACE
model and a key participant in the demonstration.1 Based on responses to the RFP, in 1988,
On Lok identified six sites to proceed with PACE development. A critical component of sites’
proposals was evidence of their States’ willingness to participate in the demonstration. In all
cases, then, PACE development was initiated by providers who then elicited interest and
commitment from State policymakers. Subsequent to the initial RFP, provider organizations
typically contacted either On Lok, HCFA or, later, existing PACE programs or PACE Technical
Assistance Centers, with interest in developing PACE.
The demonstration nature of the PACE program, related uncertainty regarding its future, and
the small number of authorized sites limited the number of providers and States that could
move forward with PACE development. Even so, interested providers and States far out
numbered authorized demonstration sites.
Now that PACE has achieved permanent provider status and many more programs are
authorized, a concomitant increase in interest is expected among provider organizations in
pursuing PACE development. States’ historical approach of responding to provider-initiated
interest may no longer be practical in that: 1) providers’ level of interest may exceed that of a
State’s; 2) States prefer to solicit interest in a more systematic way rather than respond to
providers’ inquiries; and 3) the number of prospective providers across all States eventually
may exceed the total number authorized by Federal law.
The establishment of PACE as a State Medicaid option presents States, particularly State
Medicaid agencies, with the opportunity to play a more active role in initiating PACE
development, in addition to reacting to interest from providers or legislators. In the remainder
of the paper, the Work Group suggests how States that have decided to pursue PACE
development can move forward with implementation.
1
On Lok’s role in the PACE demonstration was defined by HCFA’s interpretation of the law authorizing the demonstration
in 1986 requiring that all sites “participate in an organized initiative to replicate the findings of the On Lok long-term care
demonstration project…”. HCFA’s interpretation of the original statute established On Lok as a participant in the site
selection process at the Federal level for the demonstration project.
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II.
OBTAINING STATE-LEVEL AUTHORITY TO PURSUE PACE DEVELOPMENT
Policy and Planning Issues Sections 1894 and 1934 of the Social Security Act2 establish
Federal authority for PACE providers under both Medicare and Medicaid; however,
participation in the program is a State plan option for States. In determining whether or not to
pursue PACE development, each State must make policy decisions which define the role of
PACE within the State’s long-term care delivery system. States will be faced with the following
types of questions: What is the role of PACE vis-a-vis other long-term care programs, both
institutional and community-based? How many PACE programs is the State seeking to
develop, i.e., a single site for determining the purposes of the program’s viability or multiple
sites as a means of enhancing the State’s community-based long-term care capacity? Where
should the program(s) be located geographically?
Technical Issues If the State chooses to implement PACE as an optional benefit under its
State Plan for Medical Assistance, an amendment to its plan must be filed with HCFA. HCFA
has provided the States with guidance on how to satisfy the State plan amendment
requirement in the attached letter (Appendix 1). Each State may have unique requirements at
the State level to modify its State plan. In some States, legislation may be necessary to add
a new service to the State plan. In others, public notification of the proposed change may be
all that is required.
Beyond amending the State plan, implementation of PACE may require State legislation. The
specific need for and type of legislation required or desired for implementation of PACE has
varied significantly from State to State (refer to Appendix 2 for examples). The following
summary of States’ legislative efforts to date may be useful:
♦ In California, legislation was passed in 1989 establishing the California Program of AllInclusive Care for the Elderly and authorizing the State Director of Health Services to
contract with up to five organizations to develop PACE programs under the original
PACE demonstration authority. In 1998, the number of programs authorized was
increased from 5 to 10.
♦ In Connecticut, legislation was passed in 1998 to allow the State to proceed with PACE
development and to avoid the need for a competitive procurement process for the
selection of PACE sites.
♦ In New Jersey, legislation was passed in 1998 authorizing the State to contract with
PACE (and pre-PACE) providers. Further, the legislation exempts PACE providers from
requirements of P.L. 1973 (the State’s Health Maintenance Organizations Act) and
establishes minimum solvency requirements.
♦ In New York, several pieces of legislation have been passed for PACE. The legislation
has given the State’s Department of Social Services the authority to enter into contracts
with PACE providers. As examples, legislation passed in 1994 authorizing the State to
contract with Rochester Health Care, Inc. (now ViaHealth) to operate its PACE program
is included in Appendix 2 along with a more comprehensive piece of legislation passed
in 1997 authorizing a variety of managed long term care plans, including PACE.
2
As created by Sections 4801-4804 of The Balanced Budget Act of 1997.
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♦ In Pennsylvania, PACE was included in the State’s budget resolution to authorize
Medicaid funding for the program.
In Virginia, legislation was passed in 1998 authorizing the State’s Department of Medical
Assistance Services to contract with PACE (and pre-PACE) providers; establishing a process for
developing regulations, licensing requirements and oversight; establishing minimum solvency
requirements for PACE (and pre-PACE) providers, and exempting the programs from HMO
licensing requirements. In addition, legislation provides for an amendment to Virginia’s State Plan
for Medical Assistance to include provision of PACE services.
III.
SOLICITING/RESPONDING TO PROVIDER INTEREST AT THE STATE LEVEL
Under the demonstration, States have, for the most part, responded to interest from On Lok or
individual providers in developing PACE. Now that PACE is a permanent provider type, States
will take a more proactive role in initiating PACE development. Further, States may need to
institute processes for choosing from among a number of organizations interested in pursuing
PACE.
Prior to initiating a process for identifying prospective PACE providers, States should consult
with HCFA central office to determine the availability of PACE provider “slots” at the Federal
level. Unlike other provider types, the total number of PACE providers is capped at no more
than 40 in the year ending August 1998 with an additional 20 authorized each year thereafter.
Consequently, even with the expansion, more entities may seek to become PACE providers
than are authorized. To assist States and providers with their planning, HCFA plans to track
the number of entities seeking provider status.
Any process that a State develops for soliciting or responding to providers’ interest in PACE
must be consistent with its procurement regulations. More specifically, the following questions
must be addressed: 1) What authority does the State have to contract selectively with a limited
number versus all willing providers? and 2) What processes are in place to choose one or
more providers from among a larger pool of interested organizations?
Selective Contracting
States and HCFA are precluded from contracting with unlimited
numbers of PACE providers for at least two reasons: 1) the limit on the total number of
programs nationally; and 2) the legislative provision in the BBA that gives the Secretary of
Department of Health and Human Services discretion to exclude an area already served by
another PACE provider from the service area of a prospective PACE provider.3
States
themselves may prefer to enter into a limited number of provider agreements and to monitor the
impact of the program before extending the availability of PACE services more widely.
HCFA interprets the Federal legislation for PACE to give States authority to contract with a
limited number of PACE providers. Referring to Section 1934 of the Social Security Act (SSA)
which authorizes PACE as a State option, subsection (g) identifies requirements of Title XIX
3
Section 1894(e)(2)(B) and Section 1934(e)(2)(B) of the Social Security Act: “(B) SERVICE AREA OVERLAP.—In
designating a service area under a PACE program agreement under subparagraph (A)(i), the Secretary (in consultation
with the State administering agency) may exclude from designation an area that is already covered under another PACE
program agreement, in order to avoid unnecessary duplication of services and avoid impairing the financial and service
viability of an existing program.”
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Site Selection and Application Process for PACE
that do not apply to PACE. In particular, Section 1934(g)(3) refers to Section 1902(a)(23) of
the SSA and waives requirements related to freedom of choice of providers under a PACE
program.4
Soliciting Provider Interest in PACE Development Again, up to this point, States have not
typically solicited providers’ interest in pursuing PACE development. In the future, States may
wish to do so and one example of this that may be instructive comes from Pennsylvania.
The Pennsylvania Department of Public Welfare announced interest in developing PACE sites
in the state’s bulletin (see Appendix 3) as an RFI (Request for Information). This
announcement identifies minimum criteria for provider participation; general factors the state
will use in the site selection process; and asked qualified providers to submit a letter of interest
to the Department of Public Welfare. Pennsylvania considers PACE sites as providers rather
than contractors. Provider agreements allow the state to avoid the problems created by limited
term contracts.
Choosing From Among Multiple Providers
Based on States’ experience under the
demonstration, there are a couple of general approaches that States can use to choose from
among multiple providers interested in pursuing PACE. Pennsylvania and California provide
examples of each of these approaches.
In Pennsylvania, all prospective providers are required to have participated in a PACE
5
feasibility study and have a letter of support from a PACE Technical Assistance Center (TAC)
in order to be considered by the State. Prospective providers are required to submit copies of
their feasibility studies for the State’s review in responding to the State’s RFI. The feasibility
studies provide Pennsylvania with information on the potential of the organizations to develop
PACE successfully, assessing key factors such as administrative support, market demand, and
service and financial capacity. Based on the number of PACE programs sought by the State
and the capabilities of respondents to the RFI, individual organizations are selected to proceed
with PACE development. These organizations then proceed with development and, when
ready, undergo a readiness assessment which includes an on-site review. Pennsylvania’s OnSite Readiness Review Report is included as Appendix 4 (please note that Pennsylvania refers
to its PACE program as the Long Term Care Capitated Assistance Program).
In contrast, California does not use a RFI process. Rather, the number of sites is authorized
legislatively. The State then responds to qualified applicants on a first-come, first-served
4
Section 1902(a)(23) “except as provided in subsection (g) and in section 1915 and except in the case of Puerto Rico,
the Virgin Islands, and Guam, provide that (A) any individual eligible for medical assistance (including drugs) may obtain
such assistance from any institution, agency, community pharmacy, or person, qualified to perform the service or
services required (including an organization which provides these services, or arranges for their availability, on a
prepayment basis), who undertakes to provide him such services, and (B) an enrollment of an individual eligible for
medical assistance in a primary care case-management system (described in 1915(b)(1)), a health maintenance
organization, or a similar entity shall not restrict the choice of the qualified person from whom the individual may receive
services under section 1905(a)(4)(C);”
5
The first PACE Technical Assistance Center was On Lok. On Lok worked with each of the initial replication sites,
providing technical assistance in the areas of program planning and development, program management, and service
delivery. As other PACE sites have matured, a number of them including Palmetto Senior Care in Columbia, SC,
Independent Living for Seniors in Rochester, NY, Community Care for the Elderly in Milwaukee, WI and Elder Service
Plan in East Boston, MA have developed TAC capacity and have worked with providers interested in developing PACE.
In many cases, the TACs also have been a resource to States for information about PACE.
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Site Selection and Application Process for PACE
basis. Applicants submit an application to the State that includes: extensive information on the
organization’s background and administrative/management structure; a plan for delivery of
PACE services; a description of the provider’s network of contract providers; a quality
improvement plan, etc. Historically, prospective sites have worked with On Lok’s TAC to
assess their capacity to develop a PACE program prior to engaging in the formal application
process. In the future, the State plans to develop a prescreening tool that organizations can
use for purposes of assessing organizational capacity.
IV.
CRITERIA FOR STATES TO USE IN SITE SELECTION
Regardless of the process States use to solicit or respond to provider interest, e.g., a RFI, RFP
or alternative application process, States must identify criteria against which providers’ capacity
to develop PACE can be evaluated. Whether or not an interested organization satisfies these
criteria, at least in part, should be the basis for a State’s decision to pursue development with a
particular provider.
Based upon the experience of States and sites in the demonstration, the following factors have
been determined to be important in assessing providers’ capability to implement PACE
successfully:
♦ Organizational commitment to principles consistent with the PACE model. Although
somewhat intangible, the motivation underlying the development of PACE is an important
indicator of the program’s future success. The organization should show evidence that it is
mission-driven to provide high-quality, cost-effective care, as opposed to being exclusively
bottom-line oriented. Evidence of this may come from the organization’s mission statement,
existence of community involvement in decision-making, letters of support from the
community, etc.
♦ Evidence the organization has the depth in leadership and experience required to develop
and implement PACE successfully. Beyond reviewing organizational charts, job descriptions
and staff resumes, on-site visits and meetings with staff and/or board members may be
necessary to assess capacity at the administrative, management and service delivery levels.
♦ Evidence of experience in providing primary, acute and/or long-term care services. In
evaluating an organization’s capacity to develop and implement the PACE model
successfully, prior experience as a provider of medical and long-term care services is critical.
Current demonstration sites include many different types of organizations, for example,
integrated health systems, hospitals, community-based agencies, and long-term care
providers, and one is not necessarily preferable to another. Each type of organization
presents unique strengths and weaknesses. While it is helpful to have experience in
providing a range of services including primary medical care, adult day care and home
health care, the presence of these services is not a guarantee of success. Providers must
be willing and able to think flexibly and creatively about how services can be delivered more
effectively in a capitated system, and they need to appreciate the extent to which existing
service delivery systems must be reconfigured to develop an effective PACE program. An
organization’s plan for PACE development should reflect this realization and identify how
services will be integrated through a single PACE interdisciplinary team.
♦ Evidence of experience in serving a dual eligible population. The organization should have
experience serving a population that is eligible for both Medicare and Medicaid. From a
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marketing perspective, an organization that has developed a positive reputation among the
target population has greater chances for success.
♦ Assurance that the provider has financial wherewithal to assume full financial risk. Under
the demonstration, PACE sites shared financial risk with Federal and State payers during
their initial three years of operations. This feature of the demonstration does not exist under
provider status.
Consequently, PACE providers will assume financial risk for the
comprehensive acute and long-term care benefit immediately upon initiating PACE
operations. The organization must provide evidence of sufficient resources to meet
whatever Federal and State solvency requirements apply to PACE.
♦ Evidence of sufficient demand for PACE services in proposed service area. At a minimum,
the number of PACE eligibles should be sufficient to produce a PACE enrollment of 250-300
individuals within 4-5 years of program start-up. The TACs have developed an approach to
estimating the size of the target population on the basis of the number of adults 65 and over
in a given service area, who are likely to be eligible for a nursing home level of care, and
who also would likely be eligible for Medicaid. Drawing upon U.S. Census data, the TACs
have focused on the number of individuals 65 and over, with both mobility and self-care
limitations as a proxy for clinical eligibility. To the extent that PACE programs enroll a
predominantly Medicaid-eligible population, it is necessary to estimate the number of
individuals who are likely to meet Medicaid financial eligibility criteria from among those who
are clinically eligible for PACE. To do so, TACs have applied the percentage of households
headed by persons 65 and over with annual incomes less than $15,000 (or, in some states
with more stringent financial eligibility criteria, $10,000) to the number of persons clinically
eligible for PACE with the belief that older persons with this level of income would either be
eligible for Medicaid or quickly spend-down. Based on these calculations, the size of the
potential population should be on the order of 1,000, for the program should not be expected
to achieve market penetration rates far in excess of 25% to reach a program census of 250.
The approach outlined in the preceding paragraph generates a rough estimate of the number of
potential PACE eligibles; however, it is only a starting point. Estimating the size of the potential
target population for PACE is a dynamic process and census data alone is not sufficient. The
market assessment also should take into consideration the potential of the organization to
establish a strong network of referrals and the availability of other long-term care services within
the proposed service area. The organization should supplement the analysis of census data
with a detailed assessment of the number of PACE referrals they expect to generate from both
internal and external sources, e.g., hospital discharge planners, home health agencies, case
management entities, local area agencies on aging, nursing homes. Ideally, the analysis of
referrals should identify specific referral sources, confirm the support of each referral source for
the PACE program, and include estimates of the numbers of referrals each source might provide
to the PACE program on a monthly or quarterly basis.
♦ Assurance of adequate financial capacity to fund program development and start-up. The
organization must be willing and able to fund program development and start-up costs which
typically include capital renovation for a PACE Center and substantial operating deficits during
the program’s initial 18-24 months of operation while enrollment is below a break-even census.
Historically, providers have spent $1 - $1.5 million during this period.
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Site Selection and Application Process for PACE
♦ Organization’s timeline for program development. The length of time required to operationalize a
PACE program has varied substantially from site to site in the demonstration. This variance is
attributable to a number of factors including each organization’s internal time frame for planning
and decision-making, the length of time required to raise capital for program development, the
length of time required to identify a location for and renovate/build a PACE Center, the length of
time required to establish Medicaid capitation rates and write a contract, etc. Therefore, it is
difficult to establish specific criteria for the timeline; however, it should be realistic and consistent
with the State’s time frame for PACE development.
In addition to site-specific criteria, States may want to consider additional factors in choosing
among interested providers. These “external” factors may include:
♦ The supply of alternative long-term care services in the proposed PACE program’s service
delivery area. In choosing from among organizations expressing interest in PACE development,
the State may want to take into consideration the market for long-term care services in the
proposed service area. For instance, the State may seek to develop PACE as an alternative to
nursing home bed construction in areas of the State experiencing a shortage of nursing home
beds. Or, alternatively, the State may favor a geographic area in which the availability of
community-based long-term care services is limited.
♦ Existence of other PACE provider(s) in the same service area. Because PACE programs target
a subset of the elderly population, specifically individuals who are a minimum of 55 years of age
and eligible for a nursing home level of care, the number of potential eligibles within a specific
geographic area is limited, particularly in non-urban areas. Because PACE programs ultimately
must enroll a minimum of 250-300 individuals, establishing two or more providers in a catchment
area where the demand for PACE services is limited may prevent any of the providers from
establishing a successful program. In light of this, the Federal PACE legislation includes a
provision that allows the Secretary, in consultation with the State, to consider the presence of an
existing PACE program in a geographic area when evaluating whether or not to approve a new
provider in the same area.6
V.
SITE SELECTION PROCESS AT THE STATE LEVEL
In the past, the factors identified in Part IV have been evaluated in the context of a PACE
feasibility study undertaken by a PACE TAC. In the case of Pennsylvania, the State has chosen
to rely on the input of the PACE feasibility study process and the experience of a PACE TAC to
evaluate interested organizations’ capacity to implement PACE successfully. While this strategy
allows the State to draw upon existing expertise, Federal legislation no longer requires that sites
work with On Lok or any other TAC to develop PACE. Further, just four PACE programs actively
provide technical assistance to prospective providers; and their capacity is limited. If a large
number of States required organizations to contract with TACs for feasibility studies, the TACs
quickly would be overwhelmed. This option is complicated further in areas where the host
agency of the TAC may be a competitor of the prospective provider, raising the question as to
the impartiality of the TAC. The prospective provider may understandably be hesitant to share
6
“(B) SERVICE AREA OVERLAP.---In designating a service area under a PACE program agreement under
subparagraph (A)(i), the Secretary (in consultation with the State administering agency) may exclude from designation an
area that is already covered under another PACE program agreement, in order to avoid unnecessary duplication of
services and avoid impairing the financial and service viability of an existing program.”
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its plans and strategies for development with such a TAC. Lastly, the relationship between the
prospective provider and the TAC is a contractual one in which the TAC acts as a consultant to
the provider. Typically, the feasibility study identifies the strengths and weaknesses of the
provider relative to PACE development and outlines the activities the provider must undertake in
order to implement a PACE program successfully. The studies are not comparative in nature
and do not rank the merits of one organization relative to another.
Fortunately, States have other ways, besides reviewing a TAC-prepared feasibility study, to
evaluate organizations’ capacity in the areas identified in Part IV.
♦ As in the case of Pennsylvania, the State can publish an RFI. It may specifically identify the
criteria by which responses will be evaluated and the areas for which information is required.
♦ State staff can review providers’ responses themselves or with input from an external
consultant.
♦ The State may contract with a PACE TAC or other entity directly as its consultant to avoid
the potential conflict of interest that exists when the TAC has contracted with a prospective
PACE site.
VI.
APPLYING FOR PROVIDER STATUS AT THE FEDERAL LEVEL
In addition to the State’s Medicaid approval process, HCFA also must approve PACE
providers under the Medicare program. Consequently, once the site selection process is
completed at the State level, prospective PACE providers must interact directly with HCFA to
secure one of the available PACE “slots” by submitting a PACE provider application. This
application must be accompanied with a written assurance from the State that it is willing to
enter into a PACE program agreement with the provider if HCFA approves the application,
and that the State has taken the necessary steps enabling it to do so, i.e., modified its State
plan.
Federal requirements for PACE providers will be specified in regulations that are forthcoming.
Although P.L. 105-33 required the Secretary to implement these regulations no later than
August 5, 1998, the regulation has not been published as of November 19, 1998. HCFA
anticipates the regulation will be published shortly and implemented soon thereafter.
As of the date this issue brief was prepared, it is not known exactly what HCFA will require in
the provider application; however, the Work Group anticipates that HCFA will evaluate an
organization’s capacity to provide PACE services on the basis of the following information:
♦ program’s administrative structure and relationship to sponsoring organization;
♦ detailed explanation of program’s service delivery approach, including identification of
which services will be provided directly versus through contractual arrangements;
♦ evidence that the PACE Center and staff are prepared to begin operations;
♦ identification of key administrative and clinical staff, e.g., Project Director, Medical Director,
other administrative staff;
♦ list of all contract providers;
♦ copies of signed provider contracts;
♦ marketing plan and marketing materials;
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Site Selection and Application Process for PACE
♦ program policies and procedures, including grievance and appeals, and enrollment and
disenrollment procedures;
♦ evidence of care protocols, explaining processes for assessment, care planning and
delivery;
♦ explanation of process for determining prospective enrollees’ clinical eligibility;
♦ program’s quality improvement plan and evidence of program’s capability to meet quality
reporting requirements;
♦ evidence that all State and local licensing and certification requirements have been met;
♦ appropriate assurances from the State that the program has met the State’s qualifications
to be a PACE provider and evidence of State plan amendment to implement PACE;
♦ evidence of program’s capability to meet all State and Federal data and financial reporting
requirements;
♦ budget for program’s first three years of operations with evidence that program will achieve
financial break-even;
♦ assurances that program has sufficient start-up capital to support program deficits in first
two to three years of operations;
♦ indicators of fiscal soundness and an insolvency plan (such plan should address funds for
periodic operational deficits related to variations in utilization of services as well as an
insolvency reserve); and
♦ site review by the State and HCFA.
In the case of existing PACE demonstration programs that transition to provider status and
7
organizations that previously operated as pre-PACE programs , HCFA and the State will be
able to evaluate the programs on the basis of operational experience. In the future, however, a
number of prospective PACE providers may not be operational as PACE or pre-PACE
programs at the point of application. In these cases, applicants will not have the authority to
enroll and serve clients prior to being approved as PACE providers; and HCFA and the State
will not be able to evaluate their performance on the basis of real life PACE or pre-PACE
operations. For these applicants, the State Work Group has recommended to HCFA that a
provider agreement be signed between the applicant, HCFA and the State if two conditions are
met: 1) HCFA, based on the written application, determines that the applicant has met provider
requirements; and 2) the State, based on its own readiness review process, determines that
the applicant is capable of operating as a PACE provider. Signing of the agreement authorizes
the new provider to begin enrolling clients and to receive capitated Medicare and Medicaid
payments for the delivery of services. In these cases, however, final approval of provider
status would be contingent on a joint site visit by HCFA and the State and a successful
operational survey within six months of the provider enrolling its first client.
It is expected that nearly all existing PACE demonstration programs, existing pre-PACE
programs, and organizations that expressed an intent to develop a PACE program prior to
passage of the BBA will apply for PACE provider status over the course of the 2-year transition
period set forth in the statute. These organizations have effectively gone through the State
selection process, developed program capacity and, in the case of PACE and pre-PACE
7
Pre-PACE programs operate under Medicaid pre-paid health plan authority and provide Medicaid long-term care
services under capitation. Enrollees’ Medicare-covered services are paid on a fee-for-service basis. For more
discussion of pre-PACE programs, refer to Part VIII.
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Site Selection and Application Process for PACE
programs, are operational on a capitated basis. Further, all these programs have priority or
special consideration status under the legislation.8,9
VII.
PREPAID HEALTH PLAN START-UP
As explained earlier, a number of prospective PACE providers already have initiated
operations as Medicaid prepaid health plans (PHPs). As PHPs, they provide a comprehensive
package of institutional and community-based long-term care services to their enrollees. In
addition, they coordinate and, to the extent possible without Medicare waiver authority,
integrate the delivery of Medicare-covered services with the long-term care benefit. During the
PHP, or pre-PACE, phase of development, however, Medicare payment is fee-for-service and
no restrictions exist on beneficiaries’ use of Medicare providers.
There are some advantages to pre-PACE start-up:
♦ provider gains operational experience in managing long-term care services under capitation
for frail elderly enrollees;
♦ States have some assurance regarding provider’s capability to manage service delivery and
financial risk under capitation. (This assurance may be particularly important to States in
working with small community-based providers who have limited experience assuming risk
and may need a transitional phase during which financial strength is gained to meet
solvency requirements.); and
♦ if demand for PACE “slots” exceeds federal authorization, pre-PACE start-up allows
providers to become operational while waiting for slots to become available.
Pre-PACE operations do not guarantee success in implementing PACE, however, and there
are costs associated with this strategy:
8
Section 4803( c) of P.L. 105-33: (c ) PRIORITY AND SPECIAL CONSIDERATION IN APPLICATION.--- During the 3year period beginning on the date of enactment of this Act:
(1) PROVIDER STATUS.---The Secretary of Health and Human Services shall give priority in processing applications of
entities to qualify as PACE programs under section 1894 or 1934 of the Social Security Act--(A) first, to entities that are operating a PACE demonstration waiver program (as defined in sections 1894(a)(7) and
1934(a)(7) of such Act); and
(B) then to entities that have applied to operate such a program as of May 1, 1997.
(2) NEW WAIVERS.---The Secretary shall give priority, in the awarding of additional waivers under section 9412(b) of
the Omnibus Reconciliation Act of 1986--(A) to any entities that have applied for such waivers under such section as of May 1, 1997; and
(B) to any entity that, as of May 1, 1997, has formally contracted with a State to provide services for which payment
is made on a capitated basis with an understanding that the entity was seeking to become a PACE provider.
(3) SPECIAL CONSIDERATION.---The Secretary shall give special consideration, in the processing of applications
described in paragraph (1) and the awarding of waivers described in paragraph (2), to an entity which as of May 1, 1997,
through formal activities (such as entering into contracts for feasibility studies) has indicated a specific intent to become a
PACE provider.
9
As of 5/1/97, there were 12 PACE programs, 14 programs operating under Medicaid capitation contracts; and 65
organizations that had expressed a specific intent to become a PACE provider as evidenced by entering into contracts
for feasibility studies with a PACE TAC. Of the 65 organizations that undertook feasibility studies, 22 are not expected to
proceed with PACE development.
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Site Selection and Application Process for PACE
♦ providers have substantially higher start-up costs due to inability to offset cost of expanded
community-based
long-term
care
benefit
with
Medicare
revenues;
♦ capability in managing capitated long-term care benefit does not necessarily indicate
capacity to manage Medicare-covered services effectively;
♦ development time for PACE program lengthens considerably;
♦ Medicaid financial eligibility requirements for pre-PACE may be more restrictive than they
are for PACE, thereby limiting the size of the program’s target population. More specifically, in
States where income eligibility for Medicaid is established as a percentage of SSI income,
PACE enrollment may be available to individuals with incomes up to 300% of the SSI level.
This is not necessarily so in the case of pre-PACE programs; however, some States have
utilized their 1915(c ) waiver authority as a mechanism for extending more liberal income
requirements to pre-PACE enrollees.
Although pre-PACE start-up has some advantages, the Work Group recommends against
requiring pre-PACE operations at the Federal level as a requirement for prospective PACE
providers. Rather, each State should evaluate the pros and cons of pre-PACE in the context of
PACE development within the State.
CONCLUSION
This issue brief has outlined PACE provider site selection and other issues of concern to
States interested in implementing PACE. The intent has been to distill the experience to date
in developing PACE from an idea to an operating demonstration that now is a provider type
under Medicare and a state option under Medicaid.
Because the Federal regulatory framework for PACE is still under development as of this
writing, the Work Group’s recommendations should be viewed as work-in-progress.
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