Dismembering PACE

In October 1999 Tom Bodenheimer, a progressive San Francisco community
physician published a review article in the New England Journal of Medicine,
presenting an historical overview of the Program of All-inclusive Care
for the Elderly (PACE), a model of community-based long-term care for frail
elders. Bodenheimer’s review of PACE was far from the first, there having
been published at least 55 prior articles. But to have PACE reviewed in
America’s most prestigious medical journal was a milestone.

To summarize PACE, this unique model serves disabled and frail elderly
populations, mostly poor elders in urban environments from diverse ethnic
communities. It uses adult day health centers for physical and occupational
rehabilitation therapy, primary medical care (acute, chronic, preventive,
plus specialty care and hospitalization), home support and home nursing
care as needed, van transportation, social activities, various group and
individual therapies, and other support services. Most services are provided
at the day center location under the care planning role and guidance of
a center-based interdisciplinary team which includes a physician, with
a patient panel averaging 100, sometimes a nurse practitioner, RNs, social
workers, therapists, day center and home care staff, dietitian, and transport
representatives. Support staffing in PACE is, incredibly, about one staff
person per two clients. Average age of participants is about 80 years and
average time in the program about 5 years until death. Most program participants
live out their lives and die in community settings and spend few days in
hospitals or nursing homes.

Begun in 1979 by On Lok Senior Health Services in San Francisco’s Chinatown,
the model grew to 11 programs nationwide in the 1980s and early 1990s and
was finally mainstreamed by the 1997 Balanced Budget Act (BBA). The Health
Care Financing Administration (HCFA) published regulations governing PACE
(as required by Congress in the BBA) only in November 1999. Dually capitated,
(by Medicare and Medicaid) PACE programs receive monthly payment allowances
(like an HMO), which pays for all care. But PACE programs have controlled
costs without implementing any blanket restrictions on covered therapeutic
services, durable goods or pharma- ceuticals, as seen under Medicaid. Everything
is covered and easily accessible on site, from medications to dental care
to shopping assistance.

In the past two years, the number of PACE sites nationally has doubled
to 25 agencies (encompassing over 80 teams and day centers). Though PACE
has had outstanding reviews for quality and cost control, there is a growing
array of obstacles that may sink PACE and, moreover, are indicative of
the challenges to health care reform movements in the current U.S. environment.

PACE, which was designed and developed before the health market consolidation
by managed care organizations began. It faces similar fiscal pressures:
in particular, the need for utilization and cost control. This creates
intrinsic pressure to limit services. But despite this pressure PACE, with
service provider teams making all care decisions autonomously, has not
rationed care. As a result PACE has prospered as an outstanding model of
health care. Funded at 2.39 times the rate of the standard Medicare Plus
option that many large insurers are offering, PACE demonstrated to Congress
and the States that bundling acute, long-term, and preventive care into
a coordinated team-based project, simultaneously controlled costs and improved
quality and consumer satisfaction.

In its new provider status for 2000, PACE faces aggressive marketplace
forces that have largely monopolized health care in the 1990s: large insurers
with giant marketing budgets who have capitated millions of senior lives
(without sufficient expansion of services), government regulators and regulations
designed to limit the creaming of excessive profits, and false representations
by these same forces. These elements are squeezing PACE in a vice-grip,
for this environment is not compatible with PACE’s labor intensive day-to-day
monitoring, its interdisciplinary team and day center-based approach to
supporting the lives of the frail elderly.

In an effort to control inflationary pressures in market health care (remember
that we were told that market competition would end the health care inflationary
spiral) Congress directed HCFA to create new Medicare capitation cost controls.
Currently, these planned controls include moving away from simple uniform
capitation rates for the Medicare Plus option offered by many large Insurance
Companies, as well as the nursing home eligible population that PACE serves,
and toward disease-based diagnosis profiles to create variable-risk monthly
capitation payment. Variable risk capitation is similar to the concept
that insurance companies have used to vary auto insurance rates based upon
higher accident rates and claims in some areas or to redline. To this date,
HCFA has not incorporated global functional status (the level of physical
and mental dependency and need for support) into this mix, though functional
status is highly correlated with health service needs. But even if they
do, a payment stratification process will result, driving health care reimbursement
mechanics back toward an inflexible model like the Diagnosis Related Group
(DRG) rates that hospitals have been required to use for Medicare payment
over 25 years with the intent of limiting excess Medicare reimbursement.
If superimposed upon PACE capitation rates, this approach could easily
destroy this innovative model.

PACE teams create highly variable and creative care plans based on case-specific
conditions. Even people with the same diagnoses, severity and co-morbidities
(disease impacts) do not necessarily want, or need the same support and
medical interventions. In PACE, individualized care planning by a professional
interdisciplinary team that meets daily and amends services to clients
frequently, replaces the principle of entitlement; except that everyone
is entitled to the best care plan for their particular needs and to be
involved in their own care planning.

This works efficiently because, with the intensity of their relationship
to patients and families, most PACE care providers more easily understand
when there is a mismatch between technological interventions and patient
needs and desires. By more successfully tailoring care plans to individuals,
PACE often lowers exorbitant end of life costs when there is nothing to
be gained, no quality of life to be preserved. This frees funds to enhance
both a supportive environment for frail elders in the later years of life
and more medical care. The PACE physicians provide more regular primary
care, preventive screening and chronic disease monitoring to their patients
than anyone else can afford to give or to assure, without rationing, even
seeing patients daily when appropriate.

Impacts of Market Forces

The negative impacts of market forces upon PACE beyond HCFA’s intervention
with its new rate setting concerns include:

1. Yearly inflation increments in government capitation rates are not commensurate
with real increasing costs. For example, labor costs for programs that
rely heavily upon nursing assistants in the home and day health center
environment for helping people with basic daily functions and monitoring,
are rising dramatically (as well they should). Nevertheless, HCFA raised
the Medicare capitation by only 2 percent in 1998 and in 1999. (The negative
impact on staffing also affects nursing homes and home health agencies
where quality of service has been under intense scrutiny and cannot improve
without greater training and higher wages).

Likewise, recent inflation in pharmaceutical prices, and standard of care
reliance upon ever more newer costly drugs (sometimes flooded onto the
market with poorly proven efficacy and inadequate testing for side effects),
cannot be controlled simply by well-managed utilization. Because of this
latter problem, President Clinton’s proposal to include coverage of medications
under Medicare could cause a fiscal crisis unless Congress were to simultaneously
impose price controls on the pharmaceutical industry, an unlikely event.


2. As hospital closures, reorganizations, consolidations, and other market-derived
instability (e.g. artificial staffing crises) create problems in the acute
hospital setting, hospitalization becomes more dangerous for everyone,
but more so for the frail and disabled. Length of stay for PACE patients—generally
significantly lower than the total well Medicare population—is tending
to increase due to poorer coordination of needed in-patient services.

Once stabilized, frail PACE patients are often managed more effectively
and safely in the community because in hospitals they rapidly decompensate
both physically and mentally even under good conditions. Geriatricians
have observed that the elderly, and particularly the frail elderly, increased
length of stay creates major risks including permanent loss of ambulation,
protein deficiency and malnutrition, pressure (decubitus) ulcer formation,
anemia, hospital acquired pneumonia and other, sometimes fatal, infections.

3. Sensing market pressure to compete for “market share” and to try and
transition from a “boutique” serving 6,000 people nationally to a project
serving a major proportion of the frail elderly, a premier PACE program,
in 1999, asked for government approval to compete within the catchment
area of a sister program. Catchment protection has been important to PACE
because the disability level of the frail elderly creates major obstacles
(experienced nationally) to their seeking out and finding programs for
community based support. The guiding principles of Marie Louise Ansak,
On Lok’s founder, had led HCFA and the States to “protect” PACE programs
by providing distinct catchment areas to each approved program.

Should catchment area protection end, this will likely lead to the eating
of one program by another, and may actually encourage competition by large
insurers with vast marketing budgets, at no apparent benefit to recipients.
And since each program provides its own unique spin and scope of services
(overlaid on the basic model of care), such consolidation could have the
negative effect of eliminating diversity and experimentation across the
country, while reinforcing the impact of corporatization in health care.

4. In the professional practice realm, considerable interest within PACE
has shifted from the complex problem of quality of life assessment (requiring
a mix of qualitative and quantitative research) to evidence based, and
thus medical/technical and hard data driven outcome measure assessments.
Under the “evidence based medicine” rubric that is the current rage in
medicine, both practice and research in PACE may move away from identifying
and fortifying the hard to describe central strengths of this social-environmental-medical
(public health type) model and toward a more fundamental reliance on one-dimensional
disease based care. Pharmaceutical research dollars have recently begun
to flow to PACE and may further drive this tendency, despite the fact that
pharmaceuticals are a peripheral influence in the gestalt of this unique
total care system.

5. Within PACE a trend has arisen toward “hospicizing” PACE—a growing focus
of attention and research on making PACE a good place to die. PACE does
provide hospice-type care when its clients are dying from chronic conditions.
But, while the similarities between the caring and holistic approaches
of hospice and PACE should not be overlooked, PACE’s greatest contribution
is as a project that enhances quality of life and longevity for the frail.
PACE achieves this by assuring a measure of autonomy, a full life, and
extensive chronic care monitoring and therapies throughout the participants’
lifetime. Good end of life care is achieved if the focus on quality of
life is maintained.

Ethical Challenge of Market Medicine

At the Center for Elders’ Independence (CEI, a PACE program since 1992),
we are engaged in preliminary research (abstract presentation at the American
Geriatrics Society meetings, May 2000) that supports results from an earlier
HCFA-sponsored evaluation of longevity in PACE. The HCFA-sponsored ABT
Associates assessment, based upon a two and one half year window, showed
people living sigificantly longer and better quality lives in PACE compared
with an equally frail Medicare group that declined entry into PACE. In
agreement, the CEI data shows no significant increase in probability of
dying over time in the program.

If PACE clients live longer, however, though they might cost less per year,
overall costs might not decline. Such a conclusion is a likely concern
for insurers irrespective of the value of enhanced quality and longevity
of life. In the market context an early emphasis on hospice rather than
therapeutic may provide a market-based contradiction with quality of life.
This can be clearly demarcated in PACE because at any given moment in time
the PACE physician and team frequently face an ethical choice in a particular
patient over whether to try to sustain their life through aggressive therapy
(which may involve frequent needle sticks for testing, intravenous fluids
and antibiotics, cajoling to perform physical therapies, verbal pressure
to eat and drink more etc.) or to support them through the dying process,
not both.

Are PACE and the professional community prepared to resist a health care
paradigm that would equate prolonged quality lifetime for the elderly with
unacceptable costs, even when those costs are not excessive? Time may give
the answer. But this question reflects the paradox lying at the heart of
today’s market health care system reform crisis. The paradox (that good
outcomes in quality and longevity of life and well managed and supportive
health care, may be undermined by market forces and values) reflects a
tyranny of financial values over human values. These values can decimate
even a cost-effective health care model.

This crisis is reflected in contemporary politics as well. Thus, although
many Democrats and Republicans have experienced, endorsed, and sponsored
PACE legislatively, no prominent presidential candidate is likely to put
forward a meaningful general health care initiative that will guarantee
access, truly comprehensive care—integrating all types of health related
services—nor to support any care system for all Americans that isn’t market

Why is this true? The excuses are myriad but in truth such a reform would
inevitably end the financial dominance of health care by the insurers,
by market forces, which no candidate can afford to alienate. The major
money managers in health care will, therefore, use the political process
to block a system of accessible care for all in the U.S. Meanwhile, whole
sub-fields of cost-benefit analysis such as pharmaco-economics have proliferated
to look at the “costs per life saved” from various pathways of screening,
diagnosis and care (e.g., mammography, occult blood screening, colonoscopies,
Prostate Specific Antigen screening, etc). Though such analyses can serve
to clarify the relative costs and benefits of implementing specified system-wide
(and nation-wide) health screening policies, they are also used to justify
rationing and limiting care.

These approaches are often applied inappropriately at the individual level
where the unwise try to assign a variable dollar value to individual lives—whether
based on social utility or other poorly conceived measuring sticks. For
example, overly stringent cost-benefit parameters led to a 15-year effort
to undermine the efficacy of simple population screening for stool occult
blood that can detect early colon cancer. One argument against that test
was the high cost of follow up colonoscopies on the proportion of people
with positive tests for blood who would turn out not to have cancer. Because
that argument held sway, tens of thousands of people died needlessly from
colon cancer over that period because of the faulty recommendation. Over
the last five years this baby with the bath water view was successfully
defeated and early screening for colon cancer is again being promoted,
as it should be. But the growing strength of the market in care quality
decisions creates pressures that may well annihilate entire models of comprehensive
care, like PACE.

Summing Up

PACE programs value life commensurate with the perceived capacity for joy,
tranquility, autonomy and the wishes of their participants and families.
As a model designed to support human dignity and autonomy, PACE is helping
to restore “quality of life” to its rightful place as a principal criterion
for what is good and comprehensive care for elders. But neither PACE nor
other innovative models of care can survive in this U.S. health care environment
governed by market forces. Even if they survive their positive content
will be diluted, washed out.

Along with the public and the professional community, PACE is caught in
this conundrum. In the U.S., we—both the public and the broad health community—may
be close to accepting, in principle, that a unified financing mechanism
for accessible continuous health care for all is the only way to provide
a system of quality care; yet the problem of winning electoral campaigns
to implement such a system, against highly financed campaigns distorting
the message, is a major obstacle to progress.

PACE is yet another example that shows that comprehensive care and global
financing work, contain costs reasonably, are humane and are affordable.
But that doesn’t mean PACE or other fine models will necessarily survive
without a revolution in health care.