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Setting the PACE.

To the officers of Grane Healthcare, owner of nine nursing homes and two assisted living facilities in western Pennsylvania, the handwriting is on the wall: Older people want to remain at home whenever possible. Meanwhile, state and federal government administrators are searching for more options for their againg citizens while looking for ways to pay less for chronic care.

These factors presented Grane with the classic business dilemma: When challenges arise, do you retrench or branch out? Diversification was the path that Grane chose. So when the state of Pennsylvania issued a call to providers to participate in a program known as PACE, Grane was ready.

PACE, or Program of All-Inclusive Care for Elderly, is a revolutionary model of care delivery for frail seniors who need nursing home-level care but want to remain at home. The premise is simple: Given enough medical and social support--which PACE delivers primarily in adult day centers--seniors can stay at home longer.

Grane Healthcare hopes to be among the first Pennsylvania organizations operating PACE programs. Partnering with two hospitals in two locations in the state, Grane has committed $2.5 million to each site. Mark Fox, the company's vice president of business development, believes the program can build membership to 250 participants and profitability within three years. "One of the first hurdles we had to get over as organization was to quit looking at this as a threat and look at it as an emerging industry," he says. "You can either watch things happen or participate."

How it works

The typical PACE member is one nursing home and assisted living staff will recognize instantly--an 80-something widow who takes multiple medications and has a host of medical problems, including dementia. Under federal guidelines, PACE enrollment is open to people over age 55 who are deemed to be nursing home certifiable, a definition that varies by state but generally indicates they are in poor health.

Because of their age and health status, most PACE participants are eligible for both Medicare and Medicaid. Organizations that operate PACE programs receive capitated payments, usually from both Medicare and Medicaid, and are responsible for all the services a member needs.

Some states alter eligibility requirements. In Pennsylvania, for example, PACE is restricted to people who are over age 60 and eligible for both Medicaid and Medicare. Other states launch so-called pre-PACE programs, in which providers receive capitated Medicaid payments but still bill Medicare on a fee-for-service basis.

The two cornerstones of PACE are an interdisciplinary approach to care and the PACE center, where most care is provided. The center amounts to a highly medicalized adult day health center, where participants come sometimes as often as every weekday, typically transported by a van provided by the program. A PACE center can usually accommodate no more than 200 participants, so large programs may have more than one location.

At the center, PACE participants receive services ranging from medical care provided by a geriatrician or geriatric nurse practitioner to rehabilitation, dental care, and psychiatric care. In addition, participants receive meals, which they can either eat at the center or take home. Participants also receive home care services.

In contrast to the way long term care is traditionally provided, PACE's inpatient costs account for only 13 percent of average expenditures. On average, center-based care consumes 36 percent of revenues, in-home care 22 percent, and administration 14 percent. Participants' inpatient use of nursing homes and hospitals is similar to those in Medicare fee-for-service--2,180 days per 1,000 in 1997--even though they are much frailer than the average Medicare recipient. Only 7 percent of PACE participants nationwide are permanent nursing home residents.

Ready, set, grow

Until recently, PACE programs were confined to a limited number of locations and considered "experiments" by HCFA and state officials. Today there are only about 7,000 PACE participants nationwide.

But the Balanced Budget Act of 1997 gave the 23 existing PACE sites permanent status as approved Medicare providers and lifted limits on the number of programs allowed nationally. The act also opened PACE participation to include up to 10 for-profit organizations under a demonstration that has yet to be launched.

Providers can participate in a variety of ways, with the level of involvement depending primarily on an organization's interest level and the resources available to it.

Another factor is how much support is available from the state. Many states had put PACE development on hold pending HCFA's release of the final regulation on November 24. "In general we are quite pleased [with the regulation]," says Christine van Reenen, director of public policy for the National PACE Association (NPA).

At press time in early January, NPA planned to review the link made between Medicare+Choice and PACE payment methodologies because "our service delivery system provides a unique way to maximize community-based care," says van Reenen. The NPA also hoped to convince HCFA to loosen some protocols. "For example, members of the multidisciplinary team are required to be employees [of the PACE program]," she explains. "But we also want to use contractual relationships."

A number of states, including Pennsylvania, California, Missouri, and New York, have begun to promote the PACE model as an alternative to institutional care. Pennsylvania, for example, hopes to have 10 PACE programs operating within a few years, says Jim Pezzuti, director of the division of long term care for the state Department of Public Welfare. Pezzuti has sought to reassure traditional long term care providers that there is still a role for them while nudging them toward community-based care.

"Nursing homes aren't going to go away, no matter how intensive a community-based model you can put up, Pezzuti says. "But ... the nursing home industry knows that the pie is shrinking."

Getting involved

How will the expanding program affect nursing homes and other long term care providers? The program can be seen as "another nail in the occupancy coffin," says Kathleen Griffin, national director of postacute care services for Health Dimensions, a consulting firm in Scottsdale, Arizona. That is, unless providers decide to get with the PACE program.

One way to participate is by owning a PACE site. That's the route taken by Alexian Brothers Health System, based in Elk Grove Village, Illnois. They are launching PACE programs in St. Louis, Missouri and Chattanooga, Tennessee. Others may choose to partner with a hospital or health maintenance organization to co-sponsor a PACE program, as Grane Healthcare has, or to convert an unused space to a PACE center.

Contractual arrangements are another way long term care providers get involved. Since PACE programs typically aren't equipped to provide all services needed by participants, many contract with nursing homes, home health agencies, and other providers who offer subacute care, respite care, or other needed services.

But PACE isn't for everyone. Launching a program costs from $1 million to $35 million, says Judy Baskins, president of the NPA. And, of course, there's no guarantee you'll make a profit. Financial success is typically tied to growth in enrollment and declines in hospital utilization, factors all PACE sites struggle to control. Increasing enrollment, for instance, can be difficult in a state whose attempts to reach stalled or whose plans to expand the eligible population are lacking.

But, says Baskins, "if you are looking at a long term care industry that needs to diversify and reinvent itself, I think PACE is a viable alternative."

Grane, for one, is pursuing PACE for reasons other than immediate profits. "One of our prime motives is to learn how to manage a senior's total life," Fox says, adding that managing PACE participants' care will help the organization better manage the care of traditional residents. That skill will be vital if managed care and others ask long term care providers to take on more financial risk, notes Fox.

Executives at AltaMed Health Services, a 30-year-old health and social services organization in Los Angeles, also see PACE as an investment in the future, though not one without risks. In 1996, after five years of planning, AltaMed converted one of its three adult day centers into Senior BuenaCare, a PACE site that today serves 115 participants. Though the foray hasn't been profitable to date, AltaMed plans to convert its other centers to PACE sites, says Marie Torres, senior vice president of long term care services.

Conversion isn't easy. "There is no comparison to running an adult day health center," Torres says. Not only does PACE involve many more staff participants and services, but the paperwork and accounting required are much more complex. "if people are going to get into this business, they need to understand that this really is a managed care program." she says. "It is capitated. All your systems have to be tight."

Contracting with a PACE site to provide respite or inpatient care involves fewer risks. Community Care for the Elderly, a PACE program in Milwaukee, contracts with both nursing homes and home health agencies, notes Susan McCarthy, a director of technical assistance who is based at CCE. She says that such partnerships benefit all parties, including patients. A nursing home patient who has tapped her Medicare rehabilitation benefits, for example, might be able to return to the community with the support of PACE.

Nursing facilities perform an important function in keeping costs down, says Jeffrey Burl, MD, medical director for Fallon Community Health Plan of Worcester, Massachusetts, a PACE program that contracts with three nursing homes and a home health agency. "We try to use them for the vast majority of acute care instead of hospitals," says Burl.

The relationship with Fallon has been a good one for 101-bed Beverly Healthcare-Hermitage, says Teresa Brosnihan, its director of nursing. Not only does the program help fill empty beds, but Fallon pays a higher rate than private pay. The facility receives about 10 PACE participants a month, who stay from one to two weeks for respite care and for about 14 days if they have pneumonia or some other illness requiring intravenous medications.

To secure a PACE contract, providers must meet standards set by the program. SNFs might be required to "ramp up" their rehabilitation and subacute capabilities. Fallon's contractors, for example, must offer physical and occupational therapy six days a week and speech therapy five days a week; they must be able to read an X-ray within four hours and process lab results within about two-and-a-half hours.

PACE isn't business as usual. But that's a plus to some who have made the transition. As Dan Gray, vice president of elderly services for Alexian Brothers Health System, sees it, the fundamental question providers need to ask is: Am I in the nursing home business, or am I in the health and housing business? "We have decided to be in the health and housing business," he says.

Theresa Defino is a freelance writer based in Olney, Maryland.
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Author:Defino, Theresa
Publication:Contemporary Long Term Care
Date:Feb 1, 2000
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