How private investment is becoming a driving force behind PACE

2025 could be the year a 50-year-old program that keeps older adults out of nursing facilities goes mainstream as for-profit companies innovate and launch more programs.

Habitat Health, Seen Health, One Senior Care and InnovAge are planning to expand Programs of All-Inclusive Care for the Elderly from California to Ohio. These investor-backed organizations are scaling and innovating PACE at a time when more states are offering the Medicare-Medicaid program for frail older adults, and as legislation before Congress could make its services more widely available. Still, these for-profit programs face administrative hurdles and high start-up costs that have hamstrung PACE for decades.

Related: PACE gains speed as states seek nursing home alternative

Seen Health is the latest for-profit entrant in the PACE space. The 3-year-old healthcare start-up plans to launch its first PACE program in January targeted at the Asian and Pacific Islander community in Alhambra, California. The company was co-founded by Xing and Yang Su —  brothers and former tech executives – who received $22 million in funding from venture capital firms 8VC, Basis Set, Primetime Partners, Virtue and value-based care platform Astrana Health to launch the program.

The brothers said they leveraged their experience at technology companies Uber and Salesforce to design an integrated technology platform for Seen Health that includes a proprietary electronic health record system that they think will drive efficiencies in their PACE program.  Xing Su said the technology is the bedrock of the company’s future plans.

“Our ambition isn’t really in the single center,” he said. “[It’s about] how we fundamentally re-architect the PACE program, leverage a lot of technology pieces and drive a lot of the experiences through a culturally focused angle, then take this model and spread it across other communities.”

PACE provides home care, prescriptions, meals and transportation for mostly Medicare-Medicaid dual-eligible older adults. Some Medicare beneficiaries can pay a premium to cover the long-term care and prescription portions of the program. Participants also socialize and receive a variety of medical services at PACE centers. Providers receive capitated payments — a predictable, upfront amount of money — from Medicare and Medicaid to cover each person.

The program was relatively unknown for more than three decades and was mostly operated by nonprofit organizations. But an aging population and the COVID-19 pandemic ignited interest in PACE from for-profit organizations that have the financial resources to scale the program, innovate it and push more states to offer PACE. Approximately 80,000 participants in 33 states are enrolled in PACE, according to the National PACE Association. That is a 45% increase in participants since the beginning of the decade.

PACE can be a heavy lift to launch. Providers say it can cost anywhere from $10 million to $20 million to launch a single program. It can also take months and sometimes years to turn a profit. That has made it tough for some nonprofit operators to scale their PACE programs beyond a single center in a single state, said Jade Gong, senior adviser at healthcare consulting firm ATI Advisory.

“Launching these [programs] requires teams of people with different skills and people with PACE-specific expertise,” Gong said.

That could give investor-backed PACE programs with deeper pockets a competitive advantage.

San Francisco-based Habitat Health hopes to launch its first PACE programs in Sacramento, California, and Los Angeles in 2025. Kaiser Permanente, along with venture capital firms Town Hall Ventures and New Enterprise Associates jointly funded Habitat Health in March with $50 million. Habitat Health plans to eventually expand to other states through partnerships with healthcare providers.

Erie, Pennsylvania-based One Senior Care, which operates PACE programs in Pennsylvania, Virginia and Kentucky, will expand into Ohio in 2025, opening three PACE programs there, said Chief Operating Officer Craig Worland. He said the company also wants to expand into Georgia, which approved PACE in April. 

One Senior Care offers the program in underserved, rural areas. Worland said the company’s experience with PACE helped it expand into Kentucky this year, quickly scaling programs in Pikeville and Corbin. He said One Senior Care is also targeting other rural states that don’t offer PACE, but might in the future. 

“We want to identify where we think we are uniquely positioned to serve people and then we can go to the state and try to position the state for [PACE],” Worland said. “It is very limited right now, but it is definitely a part of our plan for the future.”

Despite the program’s growing popularity, most states limit the number PACE programs that can operate in a region. That can make it difficult even for the for-profit operators to expand within states. But that could change. California now allows multiple PACE programs to operate in the same area.

Last week, Congress passed the Senator Elizabeth Dole 21st Century Veterans Healthcare and Benefits Improvement Act with wide bipartisan support. If signed into law, the legislation would give military veterans increased access to PACE by allowing Veterans Affairs Department medical centers to partner with PACE programs. Increased access to the program for veterans could encourage expansion of PACE to other states, said Patrick Blair, CEO of InnovAge. The company operates PACE programs in California, Colorado, Florida, New Mexico, Pennsylvania and Virginia.

Other legislation that would streamline enrollment and lower prescription drug costs for Medicare-only PACE participants has languished in Congress. But Blair is hopeful there could be support in the new Congress and Trump administration for those bills and others that could expand PACE.

“With the current transfer of power impacting all levels of government, it will take some time before we know if there is enough support to make these changes,” he said.