Missed a session or want to pass along to colleagues? Purchase the VALUE PACK:

Full access to 200+ education session audio recordings and PowerPoints (as released by speakers for inclusion) – so you can gain access to many more sessions than you can

attend.

Pricing: $300 for 200+ sessions, $75/track or $25/session

Stop by Registration and ask for a Value Pack order formor visit www.leadingage.org/livelearningcenter

PACE: A New Line of BusinessHow PACE Works

Session 211-POctober 15, 2011

Dan Gray

Agenda

• Participant Net Growth Rate• Rates and Participant Payer Mix• Capital Costs• Operating Practices• Contracted Services• Financial Performance

Participant Net Growth

• Most critical and difficult to predict

• Many factors interrelated (access, approval process, eligibility, community perceptions)

• Death rates (increase in years 3-5)

Participant Net Growth

• Competition—real or perceived

• Marketing—reaching potential participants

• Gatekeepers—Division of Aging, AAA

• Financial Eligibility—100% to 300% of poverty level

Participant Net Growth

• Greater initial enrollment (accelerate break even)

• Staffing for growth (assessment and timely additions of staff)

• Timely expansion of adult day health center capacity

The Numbers

Statistic Experience Minimum Impact

Net Growth

1 to 14 per month

3 Five-year impact of achieving 5 instead of 3

Doubling of cash and operating income

Initial Census

1 to 20 participants

5 First year impact of opening with 20 instead of 8

Breakeven occurs 4 months earlier and operating losses drops by $500,000

Rates • Medicaid rate—negotiated with the state

and usually has a rate for dually capitated participants and a separate rate for Medicaid only

• Medicare rate based on participant’s medical history and frailty

• Pharmacy (Part D) requires actuarial determined rate

Payor Mix

• Higher capitation for ESRD

• Lower rate for Medicaid only

• Documentation dramatically affects Medicare rate

Medicare Payment

Based on diagnosis plus frailty factor Medicare risk scores ranged from 1.672

to 3.424 based on January 2010 PDAC data

Average risk score=2.44 Improvement of .10 in risk score equals

approximately $100 PMPM

Medicaid

Medicare

Capital Costs

*Range due to relationship between building condition and capital requirements

Component Expense

Adult Day Center

Build

Purchase

Lease

Capital Improvements

$4M to $15M*

$1M to $3M*

$3 to $30 per SF/year*

$900K to $2.3M ($60-$150/SF)*

Vans $45 to $50K each

Start-up Costs $500K to $1M

Operating Losses $500K to $4M

Cash Reserves $500K

Capital Costs

• Reserves based on 30 days capitation revenue and contractual costs (approximately 12% of net revenues)

• Adequate Reserves– Cash– Guarantee– LOC

Operating Factors/Practices

• Participants living alone—5 to 40% (dramatically affects costs)

• Prevalence of specific chronic diseases– ESRD– COPD– Behavioral

• Primary care effectiveness

• Team Performance

• Day center attendance

• Day center expansion—mitosis or start from scratch

Operating Factors/Practices

• End of life care

• Caregiver support

• Participant noncompliance management

• Review all hospital discharges and readmits within 30 days

Operating Factors/Practices

Contractual Services

• Hospital—rates and utilization significantly affect financial performance

• Nursing Home—utilization

• Assisted Living

• Home health/home care

• Specialists

Total Capital Investment $1M to $5M

Operating Margin 5% to 15%

Break Even 6 to 18 months

Program Revenue intensive for minimal investment

Financial Performance

Total Income

Total Expenses

Operating Margin

Questions

1501 Greer LaneSignal Mountain, TN 37377423.517.0567 ▪ 423.517.0568 Fax

dan.gray@consulting-cds.comwww.consulting-cds.com