CMS Issues Report to Congress on the PACE For-Profit Demo

Today CMS has submitted to Congress its final report on the PACE for-profit Demo Study. The submission of the report and finding of no differences between the for-profit demo PACE organizations and not-for-profit PACE organizations means that CMS will no longer make a distinction between for-profit and not-for-profit providers. However, since the PACE regulation states that the program agreement shall require a PACE organization to meet all applicable State and local laws and requirements states will continue to retain authority regarding for-profit sponsorship of PACE.

NPA congratulates Senior LIFE in Pennsylvania, the sponsor of the four PACE organizations studied. Senior LIFE will immediately move from demonstration status to permanent provider status. It was on the basis of their successful track record of serving different communities over many years that led CMS to open the doors to for-profit sponsorship.


The Balanced Budget Act of 1997 (BBA) created a demonstration program allowing up to 10 organizations to operate for-profit PACE programs. On August 10, 2001, CMS issued a Notice of Solicitation for Proposals in the Federal Register for a private, for-profit demonstration of the Programs of All-Inclusive Care for the Elderly (PACE). The BBA required CMS to submit a Report to Congress on the impact of this for-profit demonstration on cost, quality and access to services, and specifically address the following:

  • The number of covered lives for which a statistically significant analysis can be undertaken if the number is fewer than 800;
  • Whether or not the population enrolled with such entities is less frail than the population enrolled with other PACE providers;
  • Whether or not access to or quality of care for individuals enrolled with such entities is lower than such access or quality for individuals enrolled with other PACE providers;
  • Whether or not this program will result in an increase in expenditures under the Medicare or Medicaid programs and if such expenditures would have been made in the absence of this program.

The purpose of the demonstration was to determine whether the risk-based long-term care model employed by not-for-profit PACE organizations could be replicated successfully by for-profit organizations in various communities nationwide with comparable costs, quality, and access to services. Sections 1894(h) and 1934(h) of the Social Security Act provided authority to conduct ten for-profit PACE demonstration in order to assess the comparability of access, cost and quality of services with existing not-for-profit PACE providers over a 3-year period. The demonstration required that each applicant meet and operate under the standards set forth in the regulations for the not-for-profit PACE program.

If the Secretary determined that the “pilot group” of for-profit providers could achieve the same cost efficiencies and high quality of care as had already been demonstrated by non-profit PACE providers, other for-profit organizations would be allowed entry into the PACE program. The publication of the report, provides the assurance from the CMS Secretary that no differences were found, thus ending the not-for-profit distinction in PACE.

Implications for the Future

For organizations seeking to develop new PACE organizations, CMS will no longer require that they are not-for-profit or public entities. CMS will no longer take their IRS tax status into consideration when accepting new PACE applications. However, as stated above, States do retain authority on whether they will allow for and support for profit sponsorship of PACE.

In 2014, the NPA Board, in anticipation of this report and the ending of the requirement of not-for-profit status for PACE sponsorship, made the following changes to the By-Laws:

  • Recognized both not-for-profit and for-profit sponsored PACE organizations as provider members of NPA.
  • Specified that that the NPA Board of Directors could have no more than 2 members representing for-profit provider members.
  • Specified that all officers of the Board, the chair of Primary Care Committee and the chair of the Quality Committee will be from not-for-profit provider members.

This is a significant development in the history PACE. For the first time for-profit organizations are free to make a business decision to develop PACE programs. In the past, for many for-profits, having to operate under demonstration authority made the decision to move forward with PACE development much more uncertain and were the demonstration program to be suspended — impossible. NPA does not fully know at this time to what extent for-profit organizations may choose to enter the PACE marketplace. However, given that the PACE model of care includes significant incentives for sponsors to provide good care we look forward to seeing how this latest development will help to expand the availability of PACE to more states and more frail elderly in need of fully integrated care.

For more information, contact Shawn Bloom.

Last updated on August 27th, 2018 at 02:03 pm