InnovAge Holding Corp. (InnovAge) is the healthcare delivery platform by number of participants focused on providing all-inclusive, capitated care to high-cost, seniors, many of whom are dual-eligible.
The company’s programs are designed to address two of the most pressing challenges facing the U.S. healthcare industry: rising costs and poor outcomes. The company’s participant-centered care delivery approach is designed to improve the quality of care the company’s participants receive, while ke...
InnovAge Holding Corp. (InnovAge) is the healthcare delivery platform by number of participants focused on providing all-inclusive, capitated care to high-cost, seniors, many of whom are dual-eligible.
The company’s programs are designed to address two of the most pressing challenges facing the U.S. healthcare industry: rising costs and poor outcomes. The company’s participant-centered care delivery approach is designed to improve the quality of care the company’s participants receive, while keeping them in their homes for as long as safely possible and reducing over-utilization of high-cost care settings such as hospitals and nursing homes. Through the company’s Program of All-Inclusive Care for the Elderly (‘PACE’) program, the company fulfills a broad range of medical and ancillary services for seniors, including in-home care services (skilled, unskilled and personal care), in-center services such as primary care, physical therapy, occupational therapy, speech therapy, dental services, mental health and psychiatric services, meals, and activities; transportation to and from the PACE center and third-party medical appointments; and care management.
The company directly contracts with government payors, such as Medicare and Medicaid, and does not rely on third-party administrative organizations or health plans. The company’s model aligns with how healthcare is evolving, namely (i) the shift toward value-based care, in which coordinated, outcomes-driven, quality care is delivered while reducing unnecessary spend, (ii) eliminating excessive administrative costs by contracting directly with the government, (iii) focusing on the patient experience, and (iv) addressing social determinants of health.
InnovAge manages its business as one reportable segment, PACE.
PACE
As of June 30, 2024, the company served approximately 7,020 PACE participants, making it the largest PACE provider in the United States (the ‘U.S.’) based on participants served, and operated 20 PACE centers across California, Colorado, Florida, New Mexico, Pennsylvania, and Virginia.
PACE is a fully-capitated managed care program, which serves the frail elderly, and predominantly dual-eligible, population in a community-based service model. The company defines dual-eligible seniors as individuals who are 55+ and qualify for benefits under both Medicare and Medicaid. InnovAge provides all needed healthcare services through an all-inclusive, coordinated model of care, and the company is at risk for 100% of healthcare costs incurred with respect to the care of its participants. PACE programs receive capitation payments directly from Medicare Parts C and D, Medicaid, Veterans Administration (‘VA’), and private pay sources. Additionally, under the Medicare Prescription Drug Plan, the Centers for Medicare and Medicaid Services (‘CMS’) share part of the risk for providing prescription medication to the company’s participants. The company delivers its participant-centered care through the InnovAge Platform (as defined herein), which is designed to bring high-touch, comprehensive, value-based care.
The company’s vertically integrated care model and full-risk contracts requires the company to coordinate and manage all aspects of a participant’s health, and deliver the necessary care.
The company directly contracts with Medicare and Medicaid on a per member, per month (‘PMPM’) basis, which creates recurring revenue streams and provides significant visibility into the company’s revenue trajectory. The company receives 100% of the pooled capitated payment to directly provide or manage the healthcare needs of the company’s participants.
Market Opportunity
The company is one of the largest healthcare platforms focused on frail, dual-eligible seniors, serving participants exclusively through the company’s PACE program. The company has built the largest PACE-focused operation in the country based on number of participants, with 20 operational centers across six states; the company is 11% larger than the size of its closest PACE-focused competitor and more than 30 times larger than the typical PACE operator. Given the company’s scale across geographies, the company is positioned to capitalize on a significant market opportunity to provide care to frail, high-cost, dual-eligible seniors.
The company’s care model targets the most complex, frail subset of the dual-eligible senior population. The company estimated its target population at approximately 2.3 million in 2023, representing seniors who are dually eligible for Medicare and Medicaid and meet the nursing home eligibility criteria for PACE. The company prioritizes growth in high-density urban and suburban areas, where there are sizable numbers of frail dual-eligible seniors who would benefit most from the company’s program. The company leverages the InnovAge Platform, which is designed to provide comprehensive, coordinated healthcare to enable the company’s frail, eligible for skilled nursing seniors to live independently in their homes and communities. People want to stay in their home for as long as possible, and the InnovAge Platform is designed to empower seniors to age independently in their own homes, on their own terms, for as long as possible.
The InnovAge Platform
The company’s participant-centered approach is tailored to address the complex medical and social needs of the company’s frail dual-eligible senior population. The company leverages the InnovAge Platform to deliver comprehensive, coordinated healthcare to the company’s participants. The InnovAge Platform consists of the company’s Interdisciplinary Care Teams (‘IDTs’); and the company’s community-based care delivery model. The key attributes of the InnovAge Platform include:
Participant Focus. The company’s model is focused on caring for frail, high-cost, dual-eligible seniors. The company’s target participant population is the frail, nursing home-eligible subset of dual-eligible seniors to whom the company refers as ‘high-cost, dual-eligibles’ given their high healthcare acuity and the associated high level of spend. The company’s participants are among the most frail and medically complex individuals in the U.S. healthcare system. Based on InnovAge data as of June 30, 2024, the typical InnovAge participant had, on average, ten chronic conditions and, based on the data most recently available to the company from a 2022 modified health outcomes survey, required, on average, assistance with two or more ADLs. The company’s platform is designed to enable participants to exercise their preference to age independently in their homes and stay active in their communities for as long as safely possible. All of the company’s participants are certified as nursing home-eligible. As of June 30, 2024, 92% of the company’s participants were able to live safely in their homes and communities.
Interdisciplinary Care Teams. The IDT structure is core to the company’s clinical model. The company’s IDTs oversee all aspects of each participant’s unique care plan and function as the core group of care providers to the company’s participants. The company’s IDT structure is designed to enhance access to care for the company’s participants and eliminate information silos and gaps in care that frequently occur in a fee-for-service model. The company is responsible for all of its participants’ medical care, and the company directs care delivery across multiple settings. The company delivers individualized care for each participant that addresses both his or her specific medical conditions and social determinants of health. The company delivers or manages primary and specialist care, in-home care, hospital visits, nutrition, transportation to and from the company’s care centers and to other medical appointments, pharmacy and behavioral health. The company leverages a technology suite, which is powered by industry-leading clinical and operational information technology solutions to collect and analyze data, streamline IDT workflows and empower the company’s teams with timely participant insights that improve outcomes.
Each IDT convenes, at a minimum, experts across at least 11 disciplines to collectively manage the complex care needs of each participant. IDTs are typically consisted of a primary care provider, registered nurse, master’s level social worker, physical therapist, occupational therapist, recreational therapist or activity coordinator, dietician, center manager, home care coordinator, personal care attendant and driver. The IDTs meet multiple times per week to discuss each participant’s care plan and closely monitor key clinical metrics so that each participant receives optimal treatment based on his or her current conditions.
Community-Based Care Delivery Model. The company’s high-touch model delivers care across a continuum of community-based settings. The company’s multimodal approach leverages (1) the care center, (2) the home and (3) virtual care capabilities to deliver comprehensive care to the company’s participants. The company’s capitated payment model gives the company the flexibility to invest in care coordination, transportation and other services to mitigate challenges presented by participants’ social determinants of health, regardless of what is traditionally covered by insurance. As a result, the company’s capabilities are not limited to what the company is able to offer inside of its centers.
Community-Based Care Centers. The company’s purpose-built community-based care centers are designed for the specific needs of its target population and serve as a medical and social hub for the company’s participants. The company’s participants often spend the full day in these centers receiving medical treatment, meals and physical therapy and socializing with peers. The company’s care centers are larger than those of most other comparable care organizations and include dedicated spaces for medical care, physical therapy, behavioral health and dentistry, in addition to day-rooms and dining spaces for socialization among the company’s participants. The company incorporates population-specific design elements, such as grab bars and rounded hallways, to accommodate the frailty and the prevalence of dementia among the company’s participant population. The size and design of its centers enable the company to deliver a significant portion of the company’s participants’ care in one location, simplifying the healthcare experience for participants and their families.
In-Home Care Capabilities. The company’s in-home care capabilities are designed to enable its participants to live safely in their homes and avoid nursing homes to the extent safely possible. The company directly delivers or manages all skilled and unskilled care a participant may require to live independently at home. Additionally, the company has dedicated strategic partnerships with ‘hospital-at-home’ providers to deliver acute care in-home when appropriate. In addition, the company manages transportation not only to and from the company’s centers, but also to all third-party medical appointments. The company’s capitated payment model gives the company the flexibility to invest in home modifications, such as ramps, grab bars and shower chairs, to reduce falls and make the home safer for the company’s participants. The company’s presence in its participants’ homes gives the company real-time insight into their health and enables the company to positively influence many environmentally-driven social determinants of health.
Virtual Care Capabilities. The company’s virtual care capabilities give the company the flexibility to deliver medical care and social services virtually when appropriate. The company’s physicians are equipped with several telehealth platforms to provide virtual care and utilize the option best suited for each individual participant’s preferences and needs. The company offers telehealth visits when clinically indicated, allowed per regulations and more convenient for the participant. The company’s aim is to make virtual care access simple and convenient for the company’s participants.
Addressing Social Determinants of Health. The company’s care delivery model is designed to provide services that mitigate challenges presented by participants’ social determinants of health, such as economic stability, transportation, physical environment, community and social context, food and nutrition, health literacy, and fitness.
Technology Suite. The company’s fully capitated care model is operationally complex; it requires coordination among dozens of different providers per participant, real-time integration of clinical data from disparate sources and predictive analytics to enable effective interventions. The company licenses a suite of third-party clinical technologies that the company uses to create a comprehensive view of its participants’ health, empowering the company’s IDTs to make optimal care decisions. The company leverages industry-leading reporting and predictive analytics solutions to collect and analyze data, stratify its population and uncover actionable participant insights.
Growth Strategy
The company’s strategies are to increase participant enrollment and capacity within the company’s centers; build de novo centers; execute tuck-in acquisitions and partnerships; and reinvest in the InnovAge platform to optimize performance.
Regulation
The company is subject to a complex array of federal and state laws, regulations, and guidance, including legal requirements directly applicable to PACE providers, as well as Medicare and Medicaid laws and regulations. As a PACE provider that provides qualified prescription drug coverage, the company is also subject to Medicare laws, regulations, and requirements applicable to Medicare Part D plan sponsors.
The Centers for Medicare and Medicaid Services (CMS) and state regulatory authorities regularly audit the company’s performance to determine its compliance with CMS’s regulations and the company’s contracts with CMS and state authorities, and to assess the quality of the services the company provides to its participants.
In addition to state requirements, the company, its centers, and its healthcare professionals are in some cases subject to federal licensing and certification requirements, such as certification or waiver under the Clinical Laboratory Improvement Amendments of 1988 for performing laboratory services and Drug Enforcement Administration registrations for prescribing, storing, and dispensing controlled substances.
The company employs its own sales force and attempt to meet the Anti-Kickback safe harbor for bona fide employment.
The company has endeavored to structure its business arrangements to fit within applicable federal Anti-Kickback Statute safe harbors and to otherwise operate in material compliance with the federal Anti-Kickback Statute and state analogs.
On January 19, 2021, the Office of Inspector General (OIG) issued regulations under the Anti-Kickback Statute that added new safe harbors and modified existing safe harbors that protect certain payment practices and business arrangements from sanctions under the Anti-Kickback Statute in order to remove potential barriers to more effective coordination and management of patient care and delivery of value-based care. Among other changes, these regulations contained safe harbors for value-based arrangements centering around value-based enterprises, which are enterprises, such as the company, composed of participants collaborating to achieve one or more value-based purposes, including coordinating, and managing the care of a target patient population and coordinating and managing the care of a target population.
To the extent the company falls within the types of entities to which the federal Ethics in Patient Referral Act (Stark Law) applies, then the company needs to ensure that any financial relationships that the company has with a referring provider would satisfy a statutory or regulatory exception to the Stark Law prohibition. In addition to the Stark Law, various states in which the company operates have adopted their own self-referral prohibition statutes.
In addition to the FCA, the various states in which the company operates have adopted their own analogs of the FCA.
Through the company’s various service offerings, the company acts primarily as a covered entity under HIPAA but may also act as a business associate of other covered entities. The Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH Act), and their implementing regulations (collectively, ‘HIPAA’) privacy and security regulations extensively regulate the use and disclosure of PHI and require covered entities and their business associates, to develop and maintain policies and procedures and implement and maintain administrative, physical, and technical safeguards to protect the security of such information. Additional security requirements apply to electronic protected health information (PHI). These regulations also provide the company’s participants with substantive rights with respect to their health information.
Some examples of legislative and regulatory changes impacting the company’s business include:
In March 2010, broad healthcare reform legislation was enacted in the United States through the ACA. There have since been numerous political and legal efforts to repeal, replace or modify the ACA, some of which have been successful, in part, in modifying the law. Although some provisions of the ACA have been and may be modified, the reforms, particularly those relating to Medicare and Medicaid programs, could continue to have an impact on the company’s business. These and other provisions of the ACA remain subject to ongoing uncertainty due to developing regulations, as well as continuing political and legal challenges at both the federal and state levels.
There have in recent years been congressional efforts to move Medicaid from an open-ended program with coverage and benefits set by the federal government to one in which states receive a fixed amount of federal funds, either through block grants or per capita caps, and have more flexibility to determine benefits, eligibility or provider payments. If these types of changes are implemented in the future, the company cannot predict whether the amount of fixed federal funding to the states will be based on current payment amounts, or if it will be based on lower payment amounts, which would negatively impact those states that expanded their Medicaid programs in response to the ACA.
Legislation enacted in 2011 requires CMS to sequester or reduce all Medicare payments, including payments to PACE organizations, by two percent per year beginning on April 1, 2013.
The Inflation Reduction Act of 2022 includes a few provisions intended to lower the costs of some drugs covered under Medicare Part D and to limit Medicare beneficiaries’ out-of-pocket spending under the Medicare Part D benefit. It is not yet clear what effect, if any, these legislative changes and any subsequent implementing regulations and guidance will have on the company’s business.
The ‘Medicare Program; Contract Year 2024 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly’ final rule (‘PACE Final Rule’) set out a number of changes for PACE organizations, including (i) clarifying that CMS has enforcement discretion to impose civil monetary penalties or an intermediate sanction in the event CMS has made a determination that could lead to the termination of a PACE program; and (ii) reinstating the requirement that PACE organizations enter into written contracts with each outside organization, agency, or individual that furnishes administrative or care-related services not furnished directly by the PACE organization, including 25 medical specialties enumerated by the PACE Final Rule.
The remaining provisions of the PACE final rule from 2024 were issued alongside the new PACE Final Rule for 2025. In this new final rule, CMS sets out changes which include but are not limited to: (i) implementation of past performance guidelines used to evaluate new PACE organization applications; (ii) personnel medical clearance guidelines; (iii) updates to service delivery timeframes by which participants must receive services; (iv) guidelines on IDT care coordination across all service settings with timeframes applied to external provider recommendations; (v) new content and documentation guidelines for participant plans of care; (vi) expansion of participant rights in care settings; and (vii) revisions to existing grievance process to align with standard determination request guidance.
CMS and state Medicaid agencies also routinely adjust the RAF which is central to payment under PACE and Managed Medicaid programs in which the company participates. The monetary ‘coefficient’ values associated with diseases that the company manages in its population are subject to change by CMS and state agencies.
Occupational Safety and Health Administration regulations require employers to provide workers who are occupationally subject to blood or other potentially infectious materials with prescribed protections. These regulatory requirements apply to all healthcare facilities, including the company’s participant centers, and require employers to make a determination as to which employees may be exposed to blood or other potentially infectious materials and to have in effect a written exposure control plan.
Seasonality
The company’s business experiences some variability depending upon the time of year. The company therefore sees higher levels of per-participant medical costs in the company’s second and third fiscal quarters (year ended June 2024). Medical costs also depend upon the number of business days in a period, with shorter periods generally having lower medical costs, all else being equal. There is also increased variability of participant enrollment during the open enrollment period, which occurs during the company’s third fiscal quarter.
History
The company was incorporated in 2015. It was formerly known as TCO Group Holdings, Inc. and changed its name to InnovAge Holding Corp. in 2021.
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