The National PACE Association develops new Financial Planning Tools for would-be developers
BY JADE GONG, MBA, BSN, AND ROBERT GREENWOOD Programs of All-inclusive Care for the Elderly (PACE) is well known for the high-quality clinical outcomes its enrollees experience and the ability to provide care for vulnerable people in the community (see "PACE: The Basics"). However, questions about the costs and revenue potential associated with creating and operating a PACE program have prevented many potential PACE sponsors from seriously considering the development of a program. As part of the PACE Expansion Initiative-a program funded by grants from the Robert Wood Johnson Foundation and the John A. Hartford Foundation-the National PACE Association (NPA) has focused on cataloging both the actual start-up and operational financial experience of two programs and, based on the findings, developing financial-planning tools (see "The Tool Kit") for organizations considering PACE development. "As we began the PACE Expansion Initiative, we sat down with leaders in the field and listed a number of barriers that existed to PACE development," says Shawn Bloom, NPA president. "Developing the capacity to help healthcare organizations understand PACE from a business-development perspective was high on our list. We needed to be able to have a tool to help organizations answer questions like: How much will it cost? What are PACE programs paid? How many enrollees does it take to break even? Where do programs get the funding to start?"
The association realized that an approach to translate the experiences of existing PACE programs into terms that would enable interested organizations to make financial projections was lacking. As a result, the association hired consultants with experience in strategic planning and financial analysis to develop financial-planning tools that decision makers could use with confidence to develop financial proforma models.
While the PACE model has been successful in every market it has occupied thus far, two PACE sites-Total Long-term Care (TLC) in Denver, Colorado, and Alexian Brothers Community Service (ABCS) in Chattanooga, Tennessee-were chosen because of their exceptional success in growing enrollment. ABCS provided operating assumptions for a recent PACE start-up, while TLC provided operating assumptions for a mature site experiencing rapid growth. (The complete case studies are available at www.NPAonline.org under the "Developing PACE" section. Click on "PACE Financial Planning Resources.") Additional assumptions were also developed using information from DataPACE, a comprehensive data-collection program in which all PACE programs are required to participate as demonstration programs. Using the financial proforma model, a financial baseline scenario representing the start-up costs for the first five years of a new PACE program was developed.
Interested providers have access to these tools to increase their knowledge of PACE. Their efforts culminate, often with the help of a PACE Technical Assistance Center (TAC), in the development of a customized financial proforma. PACE TACs are NPA members that specialize in assisting organizations in developing new PACE programs. (More information about PACE technical assistance is available at www.NPAonline.org under "Developing PACE.") Also, the NPA has created a new service program called Exploring PACE, which makes many resources available to interested providers, including many of the newly developed Financial Planning Tools. Using the PACE Financial Proforma Model
The PACE Financial Proforma is a series of spreadsheets that represent a generic financial model for determining the preliminary financial viability of a PACE program. The accompanying user's guide contains step-by-step instructions on how to use this model.
The model estimates the costs of operating a PACE program that is in compliance with current regulatory requirements by the Centers for Medicare and Medicaid Services. The financial model is designed to compute proforma financial statements based upon assumptions. (So-called default assumptions make up another PACE publication, PACE Financial Baseline Scenario.) Once information is entered into the assumption worksheets, a balance sheet, income statement, and statement of cash flows are calculated automatically. The model generates projections for an 18-month start-up period and five full years of operations.
The complete set of Financial Planning Tools includes the following:
- Business Planning Checklist
- Case Study: Total Longterm Care, Denver, Colorado
- Case Study: Alexian Brothers Community Service, Chattanooga, Tennessee
- PACE Financial Proforma Baseline Scenario
- PACE Financial Proforma and User's Guide
- General assumptions include critical assumptions, such as net monthly enrollment growth, average daily attendance at the PACE center, capitation rates and inflation factors, and capital requirements for building the PACE center.
- Personnel assumptions include staff that will need to be hired during the start-up period.
- Nonsalary assumptions include purchased services, which may be contract personnel, such as social services and physician services, and items such as food or transportation.
Guidelines for Use
In using this information, it is recommended that: