Angry investors filed a fraud suit Tuesday against InnovAge, a Denver-based Program of All-Inclusive Care for the Elderly (PACE), which operates nearly 20 PACE centers in five states. Shareholders allege the embattled company violated securities laws when it went public in March of 2021.
The lawsuit claims InnovAge was singularly focused on aggressive enrollment for profit at the expense of healthcare for seniors whose needs were not addressed. On average, InnovAge received a fixed amount of $95,000 annually for each patient enrolled in the program, indicating that the fastest and simplest way to grow revenue was through enrollment in the PACE program. Investors claimed the rapid enrollment led to patient dissatisfaction and adverse health outcomes.
“InnovAge systemically failed to meet the healthcare needs of seniors, in a highly regulated industry that demands holistic care from providers,” Julie Goldsmith Reiser, partner at Cohen Milstein Sellers & Toll and plaintiffs’ attorney, said in a statement. “Upon its conversion to a for-profit entity, InnovAge touted itself as the largest PACE provider in the United States and continued to prioritize enrollment, even while failing at its primary purpose of serving the elder community. This approach harmed patients and did so at the expense of investors that believed InnovAge could deliver on its promise of quality care in a model capable of expansion.”
Investors also claimed in the lawsuit that InnovAge centers suffered from severe staff shortages, high caseloads and lack of contact from specialists.
Other PACE organizations, which are commonly run by nonprofits, were quick to set themselves apart from InnovAge and its troubles.
“Every PACE organization faces stringent regulatory requirements to ensure the highest care standards met,” California PACE Association CEO Peter Hansel told McKnigth’s Home Care Daily Pulse in a statement. “We support strong quality standards and are committed to preserving the faith seniors and their families place in PACE to provide the best care for them.”
InnovAge came under fire late last year when the Centers for Medicare & Medicaid Services suspended enrollment at its PACE programs in Colorado and Sacramento, California, following an audit. CMS found the company failed substantially to provide participants with medically necessary items and services that are covered under PACE.
A CMS spokesperson told McKnight’s Home Care Daily Pulse in an email late Wednesday the enrollment suspensions continue as “CMS continues to oversee InnovAge’s corrective actions along with state partners to ensure the deficiencies that formed the basis of the sanction have been corrected and are not likely to recur.”
Colorado Attorney General Phil Weiser has also launched an investigation into InnovAge. The combined actions forced the firm’s board to oust CEO Maureen Hewitt in January and replace her with former Bayada executive Patrick Blair.
PACE is a 50-year-old care model that got its start 50 years ago in San Francisco. The program provides center-based and in-home care to Medicare and Medicaid dual eligible seniors who qualify for skilled nursing, but prefer to remain in their homes. PACE programs operate in 31 states and serve approximately 60,000 older adults.