PACE organizations in California may soon see an increase in the level of oversight activity from state regulators.
PACE, which stands for the Program of All-Inclusive Care for the Elderly, is a Medicare and Medicaid program that helps older adults who require a nursing home level of care remain living in the community instead of being institutionalized. It’s a comprehensive healthcare model that provides and coordinates all necessary medical and social services through an interdisciplinary team, ensuring seniors can live independently for as long as possible.
Since 2016, the number of new PACE organization applications and expansions of existing PACE organizations has surged in California, mostly as a result of a change in law that allowed PACE organizations to be for-profit entities. (Prior to that, PACE organizations were required to be non-profits.) For the last several years, there have been an average of about 5 new PACE organizations or PACE expansions per year in California, and the California Department of Health Care Services (DHCS), the primary state regulator of PACE organizations, as of Jan. 2025, expected growth in the development of new and existing PACE organizations to continue. (That projection, however, may not have taken into account the uncertainly in Medicaid funding stemming from legislative action at the federal level to drastically cut the Medicaid program. In addition, new limits on California’s payment rates to PACE organizations to take effect in 2027 could dampen some of that projected growth.)
Recent developments also point to greater attention from DHCS to PACE organization in California. To keep up with the growth in the PACE program in California, DHCS had sought additional funding for the 2025-2026 fiscal year to add over 30 staff to support administration and oversight activities for the PACE program. Even if all those positions are not ultimately approved, DHCS has clearly indicated a need for greater oversight of the PACE program in California. DHCS has also sought new legislation that expressly allows DHCS to impose a wider array of sanctions — including financial penalties — on PACE organizations that fail to comply with their contractual requirements with DHCS or with federal and state requirements. PACE organizations, therefore, may want to assess their operations and systems, including their processes for responding to grievances and appeals from PACE enrollees, and take appropriate action to mitigate risks where feasible.