LeadingAge Magazine · September-October 2019 • Volume 09 • Number 05

Reflections on Opening a Rural PACE in Michigan

September 17, 2019 | by Mike Logan

This member recounts the ups and downs of a difficult project—launching a Program of All-Inclusive Care for the Elderly in a rural area.

Why should providers care about rural health care? Critics argue that rural areas are less marketable. They are less populated, span a larger geographic area, lack public transportation, and struggle to attract new physician and nurse talent. To sum it up, rural areas require more effort to reach fewer people and are therefore less profitable for health systems.

According to Peter Fitzgerald, executive vice president for strategy and policy at the National PACE Association, there are only 20 rural Programs of All-Inclusive Care for the Elderly, or PACEs, in the United States.

PACE Central Michigan photo 1
Participants Elsie Petersen (left) and Zelpha Volz enjoy each
other’s company at the PACE Central Michigan Day Center.

“Rural [PACEs] represent 15% of the 129 [PACEs] already in existence,” explains Fitzgerald. “More importantly, not for-profit health providers are the majority sponsor of all [PACEs]. As a result, rural health care continues to lag behind in terms of access, population health and number of lives served.”

However, the fundamental mission of nonprofit organizations is to serve people in need. We should care about rural health care because the needs of all people matter. It might be easier to reach more people in densely populated areas, but our responsibilities extend beyond the city and suburban limits. More specifically, nonprofit, tax-exempt organizations must lead the charge in developing progressive health care models in all populations that are underserved, including those in rural areas.

Michigan Masonic Home exists primarily to serve our 25,000 fraternal members across Michigan. Our members live in all types of settings. Our mission, “Inspired by the true spirit of Freemasonry, we enhance lives,” supports our brotherly obligation to our communities and to “aid and assist all poor, distressed Master Masons and their widows.” Based on our mission, our desire to be involved in a PACE revolved around seeking alternative progressive health service models, serving a larger population, and providing new revenue streams within our existing business model.

Origins of a New PACE

In 2017, Roger Myers, CEO of Presbyterian Villages of Michigan (PVM), presented Michigan Masonic Home with an opportunity to open a rural PACE in mid-Michigan. As a fellow Mason, Roger had a history with the Masonic Fraternity. He also had extensive experience in PACE operations, development, and fundraising.

“Together, Michigan Masonic Home and PVM bring over 200 years of experience, dedication, and commitment in serving frail seniors,” explains Myers. “This exciting partnership with MMH will enable us to serve more frail seniors through the innovative PACE model.”

PVM wanted to expand its PACE footprint within Michigan, and we desired to expand our services into the greater Mid-Michigan rural community.

PACE Central Michigan builds on PVM’s presence in the mid-Michigan region, that we’ve had for the past 15-years,” says Myers.

This strategic partnership was paramount to our trustees’ decision to move forward with the project.

Developing a PACE commands a significant amount of capital investment, consulting expertise, physician leadership, and real estate. Providers seeking alternative health service offerings will need to have significant organizational capacity to develop a PACE. It is a unique model that requires organizations to have not only the desire to create one, but also operational acumen and financial stability to make it a success.

One of our first initiatives was to secure capital through fundraising. With an initial $1 million grant from the Harry and Jeanette Weinberg Foundation, secured by PVM, both organizations were able to develop a joint partnership to develop the PACE. Furthermore, the Edward N. & Della L. Thome Memorial Foundation awarded Michigan Masonic Home a $100,000 grant to fund first-year operations. As the majority owner (60%), Michigan Masonic Home also took on the role of management agent for PACE Central Michigan. Pre-development of the PACE began in late 2017 with a projected opening in September 2018.

Months of preparation, hard work, and hundreds of emails, voice mails, meetings, and face-to-face interactions occurred between our PACE consultant, Palmetto Health Senior Consulting (now part of Prisma Health), PACE Executive Director Tim McIntyre, Myers, and myself. When we were almost ready to launch our program, a glitch in our Medicare Part D application pushed us a month behind schedule.

As we worked through the setback, we took advantage of the extra time and held some marketing events. These additional efforts gave us hope that we would open with 10 participants.

We opened with 4 participants. It was not the strong start we wanted, but at least we were open. While grateful to be up and running, we were still facing notable challenges. We still needed to secure another hospital contract and fix our food service provider problem.

Long story short: We did not have a food provider. McIntyre and I discussed our limited options. We sought contracts with the Area Agency on Aging, senior centers, hospitals, and even local colleges. We finally landed in a partnership with Central Michigan University Dining Services, through Aramark.

Time to move on to the next challenge: I needed to gain a better understanding of our position. I had been hearing buzz that we were up against some tough competition. More specifically, I heard that our greatest competitor was the MI Choice Waiver Program. Like a PACE, the Michigan Medicaid waiver program offers caregivers and other supports in the home. While a PACE offers a much broader support system, the Medicaid waiver program was familiar to this area and the PACE concept was not.

I never thought finding participants for the PACE would be easy. However, I did not think it would be as difficult as it was turning out to be.

Based on our first 3 months of operation, we needed to make significant changes to our marketing efforts. Myers led the main charge in conducting community-wide marketing efforts. I felt like we had to resort to “guerilla marketing” tactics—to create unconventional referral relationships because common marketing practices were not reaching deep enough into our rural market. In doing so, we were careful to operate within the PACE marketing guidelines. In small towns throughout our service area, we spoke with people who would know and care about the people there. This included café and bakery owners, library directors and volunteers, senior and community center staff members, and barbers and beauticians. The list goes on. The task was and continues to be great, but we have to do this. Our rural communities need this resource.

I needed to hire a person with significant business development skills. The original financial pro forma did not provide for any business development budget. Fortunately, Michigan Masonic Home had the financial bandwidth to recruit additional talent. I called my colleague, Dayna Altom, to join me as our senior director of business development. I knew her extensive experience in PACE contracts, health care provider census development, and new business development would benefit our organization. We brought her on board and began the process of executing an aggressive and intentional business plan.

In March, we began budget development. The upcoming budget year was going to be a stretch. We planned for at least 5 enrollees a month, though historically, we had averaged 3-4. Based on our stretch budget, I decided to hire a community liaison to assist us with the community marketing efforts. We also budgeted for a Michigan state Medicaid worker, on a consulting basis, to assist us with Medicaid enrollments. Neither of these positions were included in the original financial pro forma.

In April, our fiscal year-end financials arrived. We made budget! We ended the fiscal year with a financial loss of over $1.5M. While this was better than budget, I was still disappointed with the number of enrollments. Looking back at the previous fiscal year, I realized we had experienced a higher-than-average participant death rate and disenrollment rate (the latter due to participants moving out of our service area). These factors were not within our control, but it did not make our active enrollment numbers any more pleasing.

The National PACE Association says that new providers experience an operational loss for up to 3 years, and often wait up to 8 years to recoup their initial investments. I do not like experiencing any operational loss. However, I trust the process and pro forma, and believe we will be able to meet our financial targets in less than 3 years.

PACE Central Michigan photo 2
The PACE Central Michigan center in Mt. Pleasant, MI.

In June, Altom told me that between April and May, we received over 42 referrals from our existing referral network for PACE Central Michigan! That was the highest number we had received since opening our program. It appeared that our marketing efforts were paying off with referral volume. In addition, our new community liaison, Bart Stoneman, was making significant inroads with new referral agents. I was feeling positive.

Negative 1 was the total number of new PACE enrollees for July. The news was disappointing. How could we have a negative enrollee outcome? We could because we had only 1 new enrollee, 1 participant passed away, and 1 moved outside of our service area. The news left me deflated, but we needed to stay positive, follow our marketing plan, and trust the people responsible for ensuring our enrollment numbers.

August returned some great news. We enrolled 4 new participants. We continued to see positive momentum with the number of referrals. We began to grow our marketing focus to include Masonic Lodges within our primary marketing area, as well as emergency 911 organizations, local pharmacies, and utility and postal workers.

Lessons Learned About a Rural PACE

  • It is never too early to begin the marketing process. While opening up a PACE center takes 6-8 months of preparation, all management staff must take a proactive role in nurturing referral agents, building community relationships, and creating excitement about the PACE offerings.
  • Historically, PACEs achieve their targeted participant goal within 2-3 years. Boards, investors, and managers need to understand that it takes years to achieve the targeted census, and even longer to recoup the initial investment. According to the National PACE Association, it generally takes 7-8 years to recoup the operational losses of prior years as well as the initial investment.
  • Traditional marketing efforts through Area Agencies on Aging and senior health care providers are not enough. A rural PACE must employ more “guerrilla marketing” tactics in order to ensure meeting their enrollee targets. This includes making our presence known in libraries, coffee shops, diners, emergency rooms, and churches.
  • Transportation is key. Serving large geographic areas requires a significant investment in transportation and creativity to ensure that those served by your program have access to the full array of services. Based on our experience, an urban PACE may have an average 45-minute drive time while a rural one may face 90-minute drive times.
  • A rural PACE will tend to be smaller than an urban one, so providers will experience a smaller census and lower use of the PACE center.
  • A rural PACE must seek additional PACE centers due to the distances covered. Access is key to operational success, and providers must consider the need for additional sites.
  • Rural PACE providers must consider the unique cultural values and social norms of the rural community. Most individuals living in rural communities want to stay in their homes and have fewer interactions with health care providers in their daily life.
  • Rural PACE providers have a much more difficult time in recruiting specialized employees, such as social workers, physicians, and dieticians.
  • Access to geriatric psychiatric services is limited within a rural PACE. Organizations must take proactive measures through psychiatric physician service networks to ensure mental health services are accessible to participants.
  • Do not underestimate your competition. Given the limited availability of long-term services and supports, rural communities are loyal to the existing organizations who have served them for many years.

Committed to Our Opportunity

In the 1992 film A League of Their Own, Coach Dugan, played by Tom Hanks, responds to his star player (Geena Davis) wanting to quit his baseball team because the game became “too hard” by saying, “The hard is what makes it great.”

These past 12 months demonstrated to me that people, not population density, matter. Rural health care is vital to society, and nonprofit organizations must take the lead in developing access to health care for all underserved populations. In order to be great, nonprofit, tax-exempt organizations must understand that real community impact is challenging and hard.

Rural populations tend to wait longer to seek medical services than do their urban and suburban counterparts, isolation is a greater factor for seniors in rural areas, and trust is not just given. New programs tend to be received with much skepticism and therefore have a lot more proving to do in rural areas.

In order to fast track an effective level of trust with rural communities, a PACE first needs to create widespread community awareness about the model. It needs to educate rural communities in both conventional and unconventional ways. This is where some of the “guerilla marketing” tactics apply.

Based on our financial pro forma, our investment in PACE Central Michigan is better than budget. This is largely due to holding down significant expenses, however. The number of participants is lower than we expected. We are, as of August 2019, at 32 enrollees.

PACE Central Michigan will eventually serve 150 participants within 41 ZIP codes in 7 rural counties, in addition to portions of neighboring counties. Our service area remains challenging, and competition from the Medicaid waiver program remains solid. We will continue to work our marketing and sales plan, and seek additional referral agents. More importantly, we will remain optimistic and grateful for the opportunity to serve our underserved rural population.

Mike Logan is CEO of Michigan Masonic Home, Alma, MI.