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CMS Updates PACE Regulations on Elderly Care
Thursday, June 20, 2019

The Centers for Medicare & Medicaid Services (CMS) recently made several substantive and technical updates to the Programs of All-Inclusive Care for the Elderly (PACE), published in the Federal Register at 84 FR 25610 on June 3, 2019. Significant changes were made in the areas of corporate organization, compliance and monitoring, employees and contractors, and participants’ rights that are important for PACE providers and entities interested in providing PACE services. The changes become effective Aug. 2, 2019. This GT Alert examines the material changes to the PACE regulations implemented by the final rule.


PACE is a comprehensive managed-care program for the frail elderly, most of whom are dually eligible for Medicare and Medicaid benefits, and all of whom are assessed as eligible for nursing home placement according to Medicaid standards. The PACE model utilizes a core team of providers, employees, and contractors, and a PACE center to coordinate and provide services in a community-based PACE center and in a participant’s home. Core services including adult day health care and care management are provided by the PACE provider, and specialized services, such as hospital, nursing home, home health, and others, are delivered via contracts with third-party providers.

The essential elements of the PACE Protocol, recently replaced by the PACE Agreement, highlight the foundational functions of the PACE program:

  • The focus on frail elderly qualifying individuals who require the level of care provided in a nursing facility.

  • The delivery of comprehensive integrated acute and long-term care services.

  • An interdisciplinary team (IDT) approach to care management and service delivery.

  • Capitated, integrated financing that allows the PACE organization (PO) to pool payments received from public and private programs and individuals.

  • The assumption by the PO of full financial risk.

Corporate Organization

For Profit Entities: Consistent with applicable statutory provisions in the Social Security Act (Act), the final rule removes the not-for-profit restriction on POs, thereby confirming the position that for-profit entities can become POs.

Change of Ownership and Expansion Applications: The final rule extends the timeframe for CMS and the applicable state administering agency (SAA) to review a change of ownership application from 14 to 60 days, and requires POs planning a change of ownership to comply with all requirements in 42 CFR part 422, subpart L, which applies to Medicare Advantage organizations. Furthermore, a novation agreement would be required in an asset purchase transaction, and upon approval, a new PACE agreement would be executed with the acquiring entity. The final rule also clarifies the expansion application requirement for assurance the SAA is willing to amend the PACE agreement accordingly. Although deemed approval only applies to applications to become a PO and not to expansion applications, the final rule clarifies that CMS must make a determination to request additional information, approve, or deny an application within 90 days for entities seeking to become a PO, within 45 days for expansion applications, and within 90 days for expansion applications to both expand the service area and open a new site. If more than 12 months elapse between the date of submission of the application and the response to CMS’s request for additional information, the entity must update the application with the most current information.


Compliance Program: The final rule imposes two elements of the Medicare Part D compliance program on all POs, specifically, the requirements to adopt and implement (i) effective compliance oversight and (ii) measures that prevent, detect, and correct fraud, waste and abuse. Effective compliance oversight includes measures that prevent, detect, and correct noncompliance with CMS program requirements. Measures that prevent, detect, and correct fraud, waste and abuse include, at a minimum, establishing and implementing procedures and a system for promptly responding to compliance issues as they are raised; investigating potential compliance problems promptly and thoroughly to reduce the potential for recurrence; and ensuring ongoing compliance with CMS requirements. The final rule further specifies elements of the system for promptly responding to compliance issues, including that a PO (i) conduct a timely, reasonable inquiry if it discovers evidence of misconduct related to payment or delivery of items or services, (ii) conduct appropriate corrective actions in response to the potential violation (for example, repayment of overpayments or disciplinary actions against responsible employees), and (iii) have procedures to voluntarily self-report potential fraud or misconduct to CMS and the SAA. These provisions give POs relative flexibility to design their own compliance programs that meet the requirements. The final rule also makes explicit that the POs offering qualified prescription drug coverage and meeting the definition of a Medicare Part D plan sponsor must abide by all applicable Medicare Part D program requirements in 42 CFR part 423.

Civil Monetary Penalties: The final rule adds a new provision allowing CMS the discretion to impose alternative sanctions or civil monetary penalties (CMPs) in instances where CMS is authorized to terminate a PO’s PACE agreement. This change aligns the PACE enforcement structure with the enforcement structure that applies to the Medicare Advantage program and gives CMS the discretion to impose sanctions and CMPs on POs for continued noncompliance, instead of terminating a PACE agreement. In many cases, imposing sanctions or CMPs prior to terminating PACE agreements would provide POs with an opportunity to correct identified issues of noncompliance. Commenters noted, however, that a large CMP or enforcement action could drive a PO out of business.

Monitoring: The final rule specifies that during the three-year trial period, CMS must conduct an onsite visit to observe the PO’s operations and include a detailed analysis of the entity’s substantial compliance with all significant requirements of sections 1894 and 1934 of the Act and the PACE regulations. The visit and analysis may include review of marketing, participant services, enrollment and disenrollment, and grievances and appeals. However, CMS has reduced the burden for both the agency and the POs regarding ongoing monitoring, which will be conducted based on risk assessments that identify which POs will be reviewed. The final rule states that CMS in cooperation with the SAA will conduct reviews of the operations of PACE organizations as appropriate as determined by a risk assessment of each PO, which takes into account the PO’s performance level and compliance with the Act and the regulations.
Corrective Action: The final rule clarifies that a PACE organization must act to correct deficiencies identified by CMS or the SAA through ongoing monitoring of the PACE organization, reviews and audits of the PO, complaints from PACE participants or caregivers, and other instances where CMS or the SAA identifies programmatic deficiencies requiring correction. Additionally, POs must make review results available for examination in a place readily accessible to participants, families, caregivers, and authorized representatives.

Record Retention: The final rule increases the record retention requirement from six years to 10 years, consistent with the statute of limitations in the False Claims Act.

Employees and Contractors 

Interdisciplinary Team: The PACE regulations specify the IDT must be composed of at least the 11 members listed in the regulations. The final rule provides that POs must compile an IDT that fulfills the 11 roles but may have one individual fulfill two separate roles if the individual meets applicable state licensure requirements, is qualified to fill each role, and is able to provide appropriate care to the meet the needs of the participants, effectively allowing the PO to reduce the number of members on the IDT. The final rule also amends the regulations by requiring that any member of a PO’s staff with direct participant contact must have at least one year of experience working with a frail or elderly population or, if the individual has less than one year of experience but meets all other requirements, must receive training on working with a frail or elderly population. Additionally, the final rule revises the requirements related to primary care to permit POs to provide primary medical care through a range of providers, including primary care physicians, community-based physicians, qualified physician assistants, or nurse practitioners. Accordingly, the PO must ensure all members have appropriate licenses or certifications under state law and act within the scope of practice. Another significant change is the deletion of the requirement that members of the IDT primarily serve PACE participants.

These changes to the provision of primary care and composition of the IDT allow for greater flexibility in the delivery of care and continuity of care, and increased cost and operational efficiencies.

Prior Convictions: The final rule clarifies restrictions on employees or contracted individuals with prior convictions. While not wanting to foreclose POs from employing or contracting with qualified individuals or organizations that would pose no harm to participants despite past convictions, the final rule also adds two new restrictions. One, which parallels restrictions applicable to long-term care facilities, prohibits POs from employing individuals or contracting with organizations or individuals who have been found guilty by a court of law of abusing, neglecting, or mistreating individuals or who have had a finding entered into the state nurse aide registry concerning abuse, neglect, mistreatment of residents, or misappropriation of property. The second new restriction prohibits POs from employing individuals or contracting with organizations or individuals who have been convicted of any crimes listed in Section 1128(a) of the Act (the reasons for mandatory exclusion from federal health care programs), which include (i) conviction of program-related crimes; (ii) conviction relating to patient abuse; (iii) felony conviction relating to health care fraud; or (iv) felony conviction relating to a controlled substance. In accordance with statutory requirements, the final rule also requires that all administrative or care-related services, except for emergency services, not furnished directly by a PO must be obtained through contracts that meet the requirements specified in the regulations, and clarifies certain contract requirements that apply to individuals providing contracting services to the IDT or performing the duties of the program director or medical director.

Marketing: The final rule makes several changes and clarifications to PACE marketing practices. POs are already required to provide printed marketing materials to prospective and current patients in English and any other principal languages of the community. The final rule clarifies that “principal languages of the community” are languages spoken in the home by at least 5% of the individuals in the applicable service area, a threshold similar to the 5% language threshold for marketing materials in the Medicare Advantage program. The final rule also makes clear that gifts or payments to induce enrollment are prohibited, unless the gifts are of nominal value, are offered to all potential enrollees without regard to whether they enroll, and are not in the form of cash or other monetary rebates. This update aligns more closely with federal prohibitions against beneficiary inducement. Furthermore, unsolicited means of direct contact, including calling or emailing, is prohibited, along with door-to-door marketing, which was already prohibited. This change is consistent with marketing requirements for Medicare Advantage organizations. The final rule also prohibits marketing by any individual or entity directly or indirectly compensated by the PACE organization based on activities or outcomes, unless the individual or entity has been appropriately trained on PACE program requirements. In addition, the final rule makes the PO responsible for the activities of contracted individuals or entities who market on their behalf. The PO is required to develop a method to document training provided to contracted individuals and entities. Finally, the final rule removes the requirement that POs have a documented marketing plan with measurable enrollment objectives and a system for tracking its effectiveness.

Participant Rights 

Participant Assessment and Plan of Care: Pursuant to the updates in the final rule, the initial assessment must be in person, completed in a timely manner after enrollment, and the plan of care must be completed within 30 days of enrollment. The IDT must document any of the prescribed services that will not be included in the participant’s plan of care and reasons such services do not need to be included. Additionally, the final rule removes the requirement for annual assessments in addition to semi-annual assessments and retains only the requirement for semi-annual assessments; however, unscheduled reassessments are required for a change-in-participant status or at the request of the participant or the designated representative. The final rule limits the required members present for such reassessment to include the primary care provider, registered nurse, and Master’s level social worker, who will determine whether other team members should be involved in each reassessment. Reassessments at the request of participants or designated representatives can be conducted via remote technology. Team meetings also are no longer required to be in person, however, an in-person reassessment must be conducted before a PO can deny a service request. The final rule adds three requirements to the plan of care: (i) the plan of care must utilize the most appropriate interventions for each of the participant’s care needs to advance the participant toward a measurable goal and outcome; (ii) the plan of care must identify each intervention and how it will be implemented; and (iii) the plan of care must identify how each intervention will be evaluated to determine progress reaching specified goals and desired outcomes.

Disenrollment: The final rule makes explicit that the participant has the right to disenroll from the program at any time. Such disenrollment will be effective the first day of the month following the date the PO receives the participant’s notice of voluntary disenrollment. The final rule also makes several changes to the involuntary disenrollment process. For one, the participant’s disenrollment occurs after the PO meets the applicable requirements and is effective on the first day of the next month that begins 30 days after the PO sends notice of the disenrollment to the participant. The final rule also adds additional reasons for involuntary disenrollment: (i) the participant, after the 30-day grace period, fails to pay or make satisfactory arrangements to pay any applicable Medicaid spend-down liability or any amount due under the post-eligibility treatment of income processes; and (ii) the participant’s caregiver engages in disruptive or threatening behavior that jeopardizes the participant’s health or safety, or the safety of the caregiver or others. The final rule clarifies that electing enrollment in any other Medicare or Medicaid prepayment plan or optional benefit after enrolling in PACE is considered a voluntary disenrollment from PACE. Additionally, the 30-day grace period applies to both the participant’s failure to pay and failure to make satisfactory arrangement to pay any premium due to the PO. The PO has a responsibility to make appropriate referrals and ensure medical records are made available to new providers within 30 days of disenrollment. Finally, to prevent POs from encouraging disenrollment by participants who require additional services, the final rule requires that POs ensure their employees and contractors do not engage in any practice that would reasonably be expected to steer or encourage disenrollment of participants due to a change-in-health status.

Participant Rights Displayed: Participant rights must be written in English and any other principal languages of the community, as determined by the state in which the PACE organization is located or the languages spoken by at least 5% of individuals in the relevant service area, and must be displayed in a prominent place in the PACE center.


The substantive changes to PACE requirements in the areas of corporate organization, compliance and monitoring, employees and contractors, and participant rights, along with the additional updates regarding quality improvement plans, membership cards, waiver requests, and the Medicaid payment methodology used in the PACE agreement, are poised to drive innovation in the way PACE services are provided and to attract new entities and individuals interested in becoming or working with POs.

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