By Bethany Pray

Programs of All-inclusive Care for the Elderly (PACE) provide a range of services to people over the age of 55 who qualify for nursing-home level care but wish to retain their independence.

PACE programs are responsible for providing enrollees, many of whom have chronic illnesses or are in fragile health, with all aspects of medical care: doctor’s visits, medications, day programs, behavioral services, hospital care, and long-term services and supports. Most PACE participants are enrolled in both Medicare and Medicaid.

Bethany Pray

The philosophy and structure of PACE programs came from an innovative program in the early 1970s that brought together adult day centers, in-home care, home-delivered meals, etc., to residents of the Chinatown-North Beach community of San Francisco. That program’s success led to pilot programs in the 1980s and 1990s, and culminated in 1997 legislation to establish such programs nationally.

Final regulations published in 2006 permitted only nonprofit or public entities to operate PACE programs, though the original legislation also allowed a handful of programs to apply for participation in a for-profit demonstration project. The goal of the demonstration project was to evaluate whether for-profit programs could achieve similar outcomes to the nonprofit or government entities.

In May 2015, the Centers for Medicare and Medicaid Services presented a report to Congress showing that the for-profit demonstration PACE programs did, in fact, meet the required criteria. The findings triggered a provision in the original PACE legislation that required CMS to accommodate for-profit PACE providers.

Until this year, Colorado law mirrored federal law by requiring PACE providers to operate as nonprofits. Colorado legislation anticipating the change was enacted this past spring and paved the way for nonprofit PACE providers to convert to for-profit status. InnovAge, Colorado’s largest PACE provider, worked on Senate Bill15-137, which passed.

Why would such a conversion matter to Coloradans? Conversions from nonprofit to for-profit status raise some important concerns: What happens to the value accrued by the nonprofit? How does the public know what that value is? Who should benefit from those dollars? What happens to those already using PACE services during the transition from nonprofit to for-profit? And how will we ensure that the for-profit entity continues to provide the same or better care to this vulnerable population?

A general principle regarding nonprofit entities is that their value is derived from charitable, tax-exempt funds and must remain dedicated to public benefit. Whatever the original source of those funds, a nonprofit truly belongs to the public.

The assets of PACE programs derive from the savings realized through beneficial tax status, and from grants given by charitable organizations (not to mention, substantial Medicare and Medicaid dollars). Public citizens might be seen, therefore, as the nonprofit’s owners. The public paid for it – so in a sense, the public “owns” it.

Recognizing the likely impact that these conversions would have on the public, the Colorado Center on Law and Policy worked with supporters of the Colorado legislation to amend SB 137, helping to ensure that there is a public process associated with any conversion through which stakeholders can weigh in.

The amendments require nonprofit PACE providers to submit a conversion plan to Colorado’s Attorney General at least 60 days before a conversion is to occur. That plan must include a valuation of the fair market value of the business, a detailed explanation of how the value of the nonprofit will be distributed upon conversion, a description of the nonprofit entity that will receive the proceeds and the composition of its board of directors, information regarding any bonuses that officers or directors of the converting entity will receive as a result of the conversion, and audited financial statements for the three most recent years.

The AG will then post the conversion plan and ensure that stakeholders have at least 30 days to comment on any aspect of that plan, from the valuation to the type of charitable foundation that will receive the funds. Under common law principles, and as embodied by Colorado conversion law specific to hospitals and insurance companies, the purpose of foundation dollars resulting from a conversion should remain as close as possible to the original purpose of the funds.

In the case of a PACE program, the value would be expected to continue to benefit older and disabled people who wish to maintain their independence. Health care for this group should be of paramount concern to the public, especially when one notes that Colorado’s population of those 65 and over is expected to more than double by 2030, according to a report from the Bell Policy Center.

PACE conversions are on the horizon. Current or future recipients of services, family members, caregivers, providers and advocates will have a vital role in ensuring that the full value of PACE programs’ public dollars continues to benefit older and disabled Coloradans to the greatest extent possible.

Bethany Pray is health care attorney for the Colorado Center on Law and Policy.