The For-Profit World Moves Into an Elder Care Program
Bad news for elders in those programs, I would say. While things may start well, the drive to increase profits will inevitably lead to staff reductions and reductions in quality of service, a progression seen repeatedly when private corporations take over government functions (prisons, hospitals, nursing homes, hospice care, and the like). Sarah Varney reports in the NY Times:
Inside a senior center here, nestled along a bustling commercial strip, Vivian Malveaux scans her bingo card for a winning number. Her 81-year-old eyes are warm, lively and occasionally set adrift by the dementia plundering her mind.
Dozens of elderly men and women — some in wheelchairs, others whose hands tremble involuntarily — gather excitedly around the game tables. After bingo, there is more entertainment and activities: Yahtzee, tile-painting, beading.
But this is no linoleum-floored community center reeking of bleach. Instead, it’s one of eight vanguard centers owned by InnovAge, a company based in Denver with ambitious plans. With the support of private equity money, InnovAge aims to aggressively expand a little-known Medicare program that will pay to keep older and disabled Americans out of nursing homes.
Until recently, only nonprofits were allowed to run programs like these. But a year ago, the government flipped the switch, opening the program to for-profit companies as well, ending one of the last remaining holdouts to commercialism in health care. The hope is that the profit motive will expand the services faster.
Hanging over all the promise, though, is the question of whether for-profit companies are well-suited to this line of work, long the province of nonprofit do-gooders. Critics point out that the business of caring for poor and frail people is marred with abuse. Already, new ideas for lowering the cost of the program have started circulating. In Silicon Valley, for example, some eager entrepreneurs are pushing plans that call for a higher reliance on video calls instead of in-face doctor visits.
The business appeal is simple: A baby boom-propelled surge in government health care spending is coming. Medicare enrollment is expected to grow by 30 million people in the next two decades, and many of those people are potential future clients. Adding to the allure are hefty profit margins for programs like these — as high as 15 percent, compared with an average of 2 percent among nursing homes — and geographic monopolies that are all but guaranteed by state Medicaid agencies to ensure the solvency of providers.
The goal of the program, known as PACE, or the Program of All-Inclusive Care for the Elderly, is to help frail, older Americans live longer and more happily in their own homes, by providing comprehensive medical care and intensive social support. It also promises to save Medicare and Medicaid millions of dollars by keeping those people out of nursing homes.
For decades, though, the program has failed to catch on, with only 40,000 people enrolled as of January of this year.
“PACE is still a secret in the minds of the public,” Andy Slavitt, Medicare’s acting administrator, said at the National PACE Association meeting in April. The challenge, he said, was to make PACE “a clear part of the solution.”
Several private equity firms, venture capitalists and Silicon Valley entrepreneurs have jumped into the niche. F-Prime Capital Partners, a former Fidelity Biosciences group, provided seed funding for a PACE-related start-up, as have well-regarded angel investors like Amir Dan Rubin, the former Stanford Health Care president, and Michael Zubkoff, a Dartmouth health care economist.
And no company has moved with more tenacity than InnovAge. Last year, the company overcame protests from watchdog groups to convert from a nonprofit organization to a for-profit business in Colorado. And in May, InnovAge received $196 million in backing — the largest investment in a PACE business since the rule change was made — from Welsh, Carson, Anderson & Stowe, a private equity firm with $10 billion in assets under management. . .
Venture capitalists invest for one reason: profit. And they want big profits. It will be interesting to see how the elderly fare.