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When asked to summarize the company’s 2024 thus far, InnovAge Holding Corp. (Nasdaq: INNV) CEO Patrick Blair called it “a year of continuous improvement.”
One of the reasons for this is that — after putting its regulatory challenges in the rearview — is the company continuous fine-tuning of compliance.
It has also assembled a management team that Blair believes will help InnovAge grow and scale responsibly. Its ability to manage medical costs effectively is already there.
As InnovAge keeps moving forward, Blair has begun to think about the broader future of Program of All-Inclusive Care for the Elderly (PACE), too.
“I tell people, PACE is the best kept secret in health care, and we’ve got to do a much better job of creating awareness of the value that it delivers. We have to ensure the program flourishes, over the long term. That’s a hard business objective of the company,” Blair told Home Health Care News.
During a conversation with HHCN, Blair also revealed where InnovAge currently stands with the Centers for Medicare & Medicaid Services (CMS) and other regulators, why home-based care is integral to PACE and how a recent acquisition allowed the company to rapidly expand.
In 2022, the company went through some very public regulatory challenges with Colorado’s Department of Health Care Policy and Financing and CMS. Looking back, walk me through how the company was able to turn things around, and where does InnovAge stand now?
It starts with the relationship. The first thing we really needed to do was start engaging deeply with CMS and our state partners. In that case, it was both Colorado and California, and using the audit findings as a roadmap for opportunities for improvement. We had regular working sessions with them, where they provided us input and direction based on their audit findings. For each of the deficiencies that were identified, we went through a very rigorous root cause analysis and identified whether the root cause of the issues were related to people, process, technology, or documentation, and then we developed action plans for each of those areas of opportunity. We assigned an accountable leader in the organization to lead the remediation effort. We would communicate our progress to our regulatory partners on a regular basis. It was generally monthly, against a set of jointly developed audit performance measures that we were holding ourselves accountable to, and they were holding us accountable to. We just kept them informed of our progress every step of the way, and followed up quickly on all their requests to ensure they were completely satisfied with our improvements we were making, and the quality care we are providing.
Ultimately, I think it gave all the regulators a lot of confidence that we had resolved the issues. The standard for the audits is that the regulators don’t believe that they’ll occur again in the future. It was a challenging period for the company, but I believe we possess all of the operational experience, the capabilities, and the commitment to quality care, to be a market leader in all ways, including compliance.
In general, what are some of the biggest operational or financial challenges in the PACE space, and how is InnovAge navigating these issues?
The first would be ensuring we receive rational reimbursement rates each year from our states that are reflective of the population that we serve, and that it accounts for all the drivers of annual health care inflation. Receiving those rates, that’s where it starts with a PACE program being able to invest in the tools, the technology and the people to help keep seniors safely in their home. Our overarching approach is to be much more proactive and data-driven in our rate discussions with states.
We believe that the PACE model drives meaningful savings for our government partners when they compare it to other alternatives. It’s really incumbent on us, and we’ve spent a lot of time on building the skills and the capabilities to empirically demonstrate the value we’re delivering and ensuring and making the case that we’re being paid a financially suitable rate for the services that we offer. One of the keys, in some ways, has been adding a very experienced actuary to our team. Someone who has extensive experience in Medicaid managed long-term care program rate setting and rate advocacy strategies with states. That was an important investment we made to help us navigate that challenge.
On the operational side, I mentioned administrative process barriers that delay enrollment. These can take the shape of delays in processing Medicaid applications, or constraints on the state’s part, conducting the necessary level of care assessments to determine need and eligibility. In PACE, the enrollment process is really a joint effort between the PACE program and the state partner. In some cases, the state uses subcontractors to perform assessments, or to validate our assessments. Ultimately, they process the applications. When there’s delays there it can result in people seeking other solutions, or having a longer time to service, from when they first express their interest.
We’re fortunate that our states are very open to working with us to implement process improvements, and to ensure that everyone who qualifies and needs PACE has a path to coverage. We hired a new head of government affairs that has a lot of deep operating experience, legislatively, in the regulatory environment — as well as in the community stakeholder environment — that’s really helping us engage in productive discussions on these topics. We’ve been able to create a repeatable and a scalable platform.
We’ve recently seen the introduction of the PACE Anytime Act. Can you talk about the significance of this bill? How likely is this to gain traction?
It relates back to the prior question, in terms of what are some of the operational barriers that PACE programs encounter. It’s really exciting to see the increasing support for administrative and operational changes that would make it easier for us to qualify seniors to join PACE. This proposed bill, at its core, is about allowing qualified seniors to enroll anytime during the month, rather than just limiting enrollment to the first of the month. It could be tremendously impactful legislation, if passed. It would be incredibly helpful to us in closing any potential gaps in care, as seniors transition to PACE. Many of our PACE participants are very frail with acute needs for coordinated medical care, and home- and community-based services. Any regulatory change that can help accelerate the speed to clinical service is a wonderful thing.
From our perspective, the bill is very consistent with the work that MACPAC is doing on timely level of care, redeterminations. I think they had a report out in April, but both of these are sort of evidence of the increasing public policy focus on getting these seniors the services they need without unnecessary delay. As the PACE program grows, one of the most challenging processes is the level of care determination performed by the state or their designee. We’re starting to see more momentum across the federal regulators and states, as it relates to their commitment and dedication to reducing administrative barriers for entry into PACE.
Staying on legislation, what else would you like to see lawmakers include in future legislation that aims to expand PACE?
I think that legislation or regulatory changes that address the key challenges that are hindering PACE growth, in areas such as administrative requirements, approval timelines for new market expansions, enrollment processing barriers and turnaround times, eligibility limits for some populations that could benefit from PACE and marketing restrictions that can disadvantage PACE, relative to other options in the community, I think we need to keep pushing on all of these at the state and federal level.
Anything that reduces barriers to access can just be very important for our seniors of the community.
How is InnovAge collaborating with home-based care providers? In general, what opportunities are you seeing here?
As a Bayada alumni, I’ve seen firsthand the impact that great home-based care can have on the quality of care, that it can have on the families who are trying to support their loved ones, and on the total cost of care. It’s an integral part of the PACE program and its success. The model is designed to enable seniors to age in their homes and on their own terms, and critical to that effort is us meeting them where they are. While our participants actively attend our centers regularly, many still require assistance in their homes with both skilled and unskilled care. They spend more time there than they do in our community-based centers. I think maybe 40% of our participants are taking advantage of home-based care services. We complete about 400,000 in home visits per year. The support is tightly integrated with and overseen daily by our interdisciplinary team. They’re in a position to help provide us with the eyes and ears of what’s happening in someone’s home. There has been changes of condition in a period of time since they’ve been in the center. We employ most of our home care professionals, and they’re in real-time coordination with the primary care physician to ensure we’re keeping the people safe in their community, so skilled and unskilled care are a big part of our core delivery model.
We also are starting to use more physician care in the home. That’s another area where we might have individuals that are very frail in need of more specialized care, and sometimes more urgent care. We use a number of partners to help provide a much more expansive set of services in the home, when necessary, and when we do a good job at this, fewer people get admitted to the hospital. That’s better for the participants, better for their families, and better for the PACE program.
Going forward, I think there’s a lot of opportunity, in some ways, to expand the definition. We’re starting to build mental health capabilities that can be deployed to the home. We’re starting to think of creative strategies around what are historically known as personal emergency response partners.
Last year, InnovAge acquired two PACE programs in California from ConcertoCare. Can you give readers an update on this? What has acquiring these programs allowed InnovAge to accomplish?
In some ways, we consider this transaction more of a hybrid between an acquisition and a de novo market entry because it included a recently opened center in the Crenshaw neighborhood of Los Angeles, with very minimal census. It also included another center in the final stages of the application for licensure in Bakersfield. In some ways, this is a bit of a hybrid, in that one was operational and very new, and one was not yet operational.
We were looking at several alternatives to continue responsible growth in the California market. These centers allowed us to move faster and more cost-effectively to expand in the market, compared to building new centers from scratch, while also enabling us to implement our operating model from Day One.
California is a very attractive market, given the state’s commitment to ensuring seniors have a comprehensive set of home- and community-based care options. Obviously, there’s a large population of PACE eligibles, and it’s not only large, but it’s growing. The ConcertoCare acquisition allowed us to have a much more rapid expansion than we would have otherwise been able to achieve without it.
How much does M&A factor into your future growth plans?
We view ourselves as having a multi-prong growth strategy that consists of organic growth, or growing in our existing centers, what we call de novos, or new market expansions, new geographic expansion, and M&A.
I would say that we’ve prioritized filling our existing centers. Priority No. 1 is just making sure that we have capacity in our centers. We will continue to be opportunistic and will always engage in discussions with potential opportunities from an acquisition perspective, but job one is responsible growth within our existing centers.
As CEO, what are your goals for the rest of the year, and what are you focused on for 2025?
It starts with making sure we have the best people in every job, and that we have a highly motivated, engaged workforce of caring people with an owner’s mindset.
We want each of our centers to serve more seniors every month, especially our new centers. We want to continue to capture the value from our Epic investment to help us become more efficient, more productive and to improve quality of care. We want to continue on the great path we’ve been on related to quality and compliance. I want to see continuous improvement there.
More broadly, we want to demonstrate and strengthen PACE’s value proposition relative to other types of value-based care models. We’ve created a platform that not only allows us to deliver high-quality care in all of our geographies, but we’ve also built capabilities to help us better manage capitated risk and improve economic performance.
Government programs are massive, and they’re growing, and the U.S. is spending more than a trillion dollars on Medicare and Medicaid. We know that the cost of care is unsustainable, and we know that patients are often dissatisfied with the care they receive, and we just believe there’s a tremendous market opportunity there for PACE, and other organizations, like ours, to deliver a comprehensive win-win value proposition. That’s a big goal of this next year, is to continue to position PACE as a solution.
I tell people, PACE is the best kept secret in health care, and we’ve got to do a much better job of creating awareness of the value that it delivers. We have to ensure the program flourishes, over the long term. That’s a hard business objective of the company.
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