Since 1971, the Program of All-Inclusive Care for the Elderly (PACE) has operated as one of healthcare’s most effective yet least scaled models. Created to keep nursing home–eligible seniors in their own homes, PACE combines full clinical responsibility with full financial risk. Historically, the PACE model attracted nonprofits and minimal for-profit capital; however, this dynamic is shifting. 

The Model & Mechanics: Full-Risk, Dual-Payer Capitation

PACE traces its roots to San Francisco, where the first nonprofit PACE program, On Lok Senior Health Services, was created to help aging residents avoid institutional care. The Balanced Budget Act of 1997 permanently established PACE, recognizing the program as a Medicare provider with state-optional Medicaid participation under federal code 42 CFR Part 460. Since then, PACE has expanded across 33 states and the District of Columbia.  

Nationwide enrollment has nearly doubled since 2019, rising from 51,000 to over 96,000 participants, while the number of programs has reached 204. Despite this growth, PACE serves less than 5% of the estimated 2M eligible older adults, leaving considerable room for expansion. 

Enrollment distribution has also been uneven. California alone accounts for roughly one-third of national enrollment, while the five largest states—California, New York, Pennsylvania, Michigan, and Massachusetts—account for about two-thirds of current enrollment. The average program serves 473 participants, while the median program serves just 241, a gap that reflects a long trail of small programs alongside a handful of large ones. Seventeen states still lack any PACE programs, though states such as Georgia, Minnesota, Connecticut, New Hampshire, and South Dakota have taken formal steps toward expansion, including conducting feasibility studies and submitting requests for information. As of mid-2026, none have publicly confirmed expansion.

PACE eligibility is based on four criteria: being age 55 or older, living in a designated service area, requiring a nursing-home level of care as certified by the state, and being able to live safely in the community with PACE assistance. The resulting population is an aging, medically complex patient base that represents one of the highest-cost groups in U.S. healthcare and the fastest-growing demographic. The alternative to PACE enrollment is institutional long-term care, which is both expensive and rarely the patient’s preference.

The payment model is central to how PACE works. A PACE organization receives a fixed per-member-per-month capitation rate from Medicare Parts A, B, and D, and Medicaid. Medicare payments are based on Medicare Advantage benchmarks adjusted for frailty, while Medicaid rates are negotiated with each state and must remain below the cost of equivalent nursing home and community-based care. The organization then bears the full risk of care, with no participant cost-sharing. This unique risk structure allows a single organization to serve as both the insurer and provider of care.

Savings by Design & Rise of For-Profit Capital

PACE’s payment model builds in cost savings: Medicaid rates are set below the nursing-home alternative, averaging 12% less than the cost of caring for a comparable population through other Medicaid services, while Medicare rates are benchmarked against the cost of comparable fee-for-service care. Public research has found that PACE is associated with fewer hospitalizations and emergency department visits, reduced mortality, and lower costs. According to the National PACE Association, roughly 95% of participants can continue living in the community rather than enter a nursing home.

PACE has drawn interest from for-profit capital because of its unique payment model, fragmented competitive landscape, and strong long-term growth prospects. Capitated payments provide predictable, recurring revenue, while low market saturation and fragmentation provide extensive runway for growth. The model aligns financial performance with clinical outcomes, rewarding operators that prevent costly hospitalizations and institutionalization. At the same time, upfront capital requirements for facility construction and early-stage losses favor scaled, well-capitalized platforms over smaller nonprofit or independent operators.

Nonprofits still hold the largest share of overall enrollment, but recent growth has shifted toward for-profit operators. around 2015, the National Opinion Research Center (NORC) at the University of Chicago found that, between 2016 and 2022, for-profit contracts grew by roughly 182% and enrollment by about 173%, far outpacing nonprofit growth over the same period.

Notable for-profit operators include InnovAge, the largest PACE operator and the only publicly traded company in the industry. After being acquired by Welsh, Carson, Anderson & Stowe in 2016, InnovAge converted from a nonprofit to a for-profit organization, sold a stake to Apax Partners in 2020, and completed its initial public offering in March 2021. Other notable operators include WelbeHealth (backed by General Atlantic, Adams Street Partners, and .406 Ventures) and BoldAge PACE (backed by Enfield Capital Partners). These platforms have also partnered with health systems when entering new markets. InnovAge formed joint ventures with Tampa General Hospital and Orlando Health, while WelbeHealth partnered with Sutter Health in California.

InnovAge: Only Public Pure-Play

As the sole publicly traded, pure-play PACE provider, InnovAge offers insight into how financial markets have valued the company over time. Welsh, Carson acquired control in 2016 at approximately 7.9x EBITDA, and Apax’s 2020 investment valued the business at about 14.4x EBITDA. Following the March 2021 initial public offering, InnovAge was priced at more than 30x EBITDA, implying an enterprise value of roughly $2.7B. Multiples subsequently compressed, driven by regulatory enrollment sanctions in California and Colorado that halted new admissions and strained profitability as EBITDA turned negative in fiscal year (FY) 2023. Since then, InnovAge has executed a disciplined turnaround, and . InnovAge is expected to report its fiscal year-end (FYE) June 2026 results in early September 2026.

PACE InnovAge Valuation Multiple Trends

Case for Consolidation

Despite recent growth, PACE remains highly fragmented, with most operators running a single program in a single state and the median program serving fewer than 250 participants. Meanwhile, market penetration remains low, and 17 states still have no PACE infrastructure. The strongest case for consolidation stems from the capital required to fund early-stage losses. These losses can create financial distress for smaller organizations; whereas larger, well-capitalized platforms are generally better positioned to absorb them while continuing to invest in growth.

Regulatory policy will play a key role in shaping consolidation because the PACE model operates under rigorous oversight. California’s two-year moratorium on new entity and expansion filings, enacted in late 2025, highlights the extent to which the regulatory environment can constrain growth. In a fully capitated model, compliance deficiencies can quickly translate into financial exposure, such as enrollment freezes and fines—a risk inherent to any operator in the model. While scale does not eliminate regulatory risk, it offers greater financial and operational flexibility to manage it. As the sector grows alongside an aging population, consolidation will likely favor platforms that can demonstrate quality, compliance, and operational discipline. With the market still fragmented and largely nonprofit, there is ample room for scaled players to spread fixed costs, invest in compliance infrastructure, and continue expanding into underserved areas.

Evaluating a PACE investment or growth opportunity? VMG Health brings healthcare-specific insight to transactions, valuations and strategic decisions across the healthcare landscape.