Programs of All-Inclusive Care for the 
Elderly (PACE) 
 
Chapter 2  Administrative Requirements 
Table of Contents 
(Rev. 2, Issued: 06-09-11) 
 
Transmittals for Chapter 2 
 
10 - Introduction 
 
20 - PACE Organizational Structure 
 
20.1 - Program Director 
 
20.2 - Medical Director 
 
20.3 - Organizational Chart 
 
30 - Governing Body 
 
40 - Participant Advisory Committee 
 
40.1 - Participant Representation on the Governing Body 
 
50 - Program Integrity 
 
50.1 - Persons with Criminal Convictions 
 
50.2 - Direct or Indirect Interest in Contracts 
 
50.3 - Disclosure Requirements 
 
50.4 - Privacy Policy 
 
50.5 - De-identified Health Information and Limited Data Set 
 
60 - Fiscal Soundness 
 
60.1 - Fiscally Sound Operation 
 
60.2 - Insolvency Plan 
 
60.3 - Arrangements to Cover Expenses   
70 - Emergency and Disaster Preparedness 
 
70.1 - Emergencies Defined 
 
70.2 - Emergency Training 
 
70.3 - Availability of Emergency Equipment 
 
70.4 - Annual Test of Emergency and Disaster Plan  10 - Introduction 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
The purpose of this chapter is to provide information about the requirements established 
relating to the organizational structure, the governing body and program integrity of the 
PACE organization as well as the relationships between entities. These requirements are 
essential to the PACE organizations ability to ensure the health and safety of the 
participants and provide a well functioning organizational environment in which 
appropriate care can occur. 
 
20 - PACE Organizational Structure 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
A PACE organization must be, or be a distinct part of, one of the following: 
 
  An entity of city, county, State, or Tribal government;  
 
  A private not-for-profit entity organized for charitable purposes under Section 
501(c)(3) of the Internal Revenue Code of 1986. The entity may be a 
corporation, a subsidiary of a larger corporation, or a department of a 
corporation; 
 
  A for-profit entity, subject to a demonstration waiver. CMS notes that 
Sections 1894(a)(3)(B) and 1934(a)(3)(B) of the Act allow private, for-profit 
entities to participate in PACE, subject to a demonstration waiver described in 
Section 1894(h) and 1934(h) of the Act. (For-profit entities wishing to 
participate in PACE applied for a demonstration waiver under Section 1894(h) 
and 1934(h) of the Act. CMS issued a Federal Register notice on July 24, 
2009 announcing July 26, 2010 as the closing date for submission of 
proposals for the for-profit demonstration project for PACE). While 
participating in the PACE for-profit demonstration, they must meet all 
requirements set forth in PACE regulations. CMS explicitly stated they would 
expect the PACE organization to retain all key administrative functions 
including marketing and enrollment, quality assurance and program 
improvement, and contracting for institutional providers and other key staff.  
 
A potential PACE organization must supply evidence that core staff have been chosen 
and accepted specific key positions in their official application submission. 
 
In the event of a change of ownership, CMS would apply the general provisions 
described in 42 CFR  422.550 [Effect of change of ownership or leasing of facilities 
during term of contract.] 
 
[42 CFR  460.12, 460.32, 460.60(a); 71 FR 71263 (Dec. 8, 2006)] 
 
  20.1 - Program Director 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
The organization must employ, or contract with in accordance with 42 CFR  460.70, a 
program director who is responsible for oversight and administration of the entity. 
 
The program director should be responsible for the effective planning, organization, 
administration and evaluation of the organizations operations. The program director 
should also ensure that decisions about medical, social, and supportive services are not 
unduly influenced by the fiscal manager. The program director should be responsible for 
ensuring that appropriate personnel perform their functions within the organization. The 
program director should inform employees and contract providers of all organization 
policies and procedures. If the PACE organization is part of a larger health system, the 
program director should clearly define and inform the PACE organization staff 
(employees and contractors) of the policies applicable to the PACE organization. 
 
[42 CFR  460.60; 71 FR 71262 (Dec. 8, 2006)] 
 
20.2 - Medical Director 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
The PACE organization must employ, or contract with in accordance with 42 CFR  
460.70, a medical director who is responsible for the delivery of participant care, for 
clinical outcomes, and for the implementation, as well as oversight of, the quality 
assessment and performance improvement program. 
 
The medical director is responsible for achieving the best clinical outcomes possible for 
all participants. CMS requires the medical director to use the organizations data to 
demonstrate internal improvements in outcomes over time. 
 
[42 CFR  460.60(c); 71 FR 71263 (Dec. 8, 2006)] 
 
20.3 - Organizational Chart 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
The organizational chart is requested at the time of application or expansion request and 
when there are changes in key personnel: 
 
  The PACE organization must have a current organizational chart showing 
officials in the PACE organization and relationships to any other 
organizational entities; 
 
  The chart for a corporate entity must indicate the PACE organizations 
relationship to the corporate board and to any parent, affiliate, or subsidiary 
corporate entities; 
    A PACE organization planning a change in organizational structure must 
notify CMS and the State Administering Agency, in writing, at least 14 days 
before the change takes effect. 
 
NOTE: A change in organizational structure is one that may affect the philosophy, 
mission, and operations of the PACE organization and impact care delivery to 
participants. This would include any change in ownership, relationships to another 
corporate board and to any parent, affiliate, or subsidiary corporate entities, the PACE 
governing body, its officials, program director and medical director. 
 
[42 CFR  460.32(a)(4), 460.60(d)] 
 
30 - Governing Body 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
The governing body must create and foster an environment that provides quality care that 
is consistent with the participant needs and the program mission. 
 
A PACE organization must be operating under the control of an identifiable governing 
body (for example, a board of directors) or a designated person functioning as a 
governing body with full legal authority and responsibility for the following: 
 
  Governance and operation of the organization; 
 
  Development of policies consistent with the mission; 
 
  Management and provision of all services, including the management of 
contractors; 
 
  Establishment of personnel policies that address adequate notice of 
termination by employees or contractors with direct patient care 
responsibilities. These policy and procedures need to be in compliance with 
local, state and federal guidelines; 
 
  Fiscal operations; 
 
  Development of policies on participant health and safety, including a 
comprehensive, systemic operational plan to ensure the health and safety of 
participants; 
 
  Quality assessment and performance improvement program (QAPI). The 
purpose of this requirement is to link the development, implementation, and 
coordination of the ongoing QAPI program with all aspects of the PACE 
program. 
 
[42 CFR  460.62(a); 71 FR 71264 (Dec. 8, 2006)]   
40 - Participant Advisory Committee 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
A PACE organization must establish a participant advisory committee to provide advice 
to the governing body on matters of concern to participants. Participants and 
representatives of participants must constitute a majority of the membership of this 
committee. The participant advisory committee must provide the liaison to the governing 
body with meeting minutes that include participant issues. 
 
[42 CFR  460.62(b)] 
 
40.1 - Participant Representation on the Governing Body 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
A PACE organization must ensure participant representation on issues related to 
participant care. This shall be achieved by having a participant representative on the 
governing body (this representation may take the form of a participant, his/her caregiver, 
or an advisory committee member). The participant representative is a liaison of the 
participant advisory committee to the PACE organization governing body. The 
participant representative must present issues from the participant advisory committee to 
the governing body. 
 
[42 CFR  460.62(c)] 
 
50 - Program Integrity 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
50.1 - Persons with Criminal Convictions 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
A PACE organization must not employ individuals or contract with organizations or 
individuals: 
 
  Who have been excluded from participation in the Medicare or Medicaid 
programs; 
 
  Who have been convicted of criminal offenses related to their involvement in 
Medicaid, Medicare, other health insurance or health care programs, or social 
service programs under Title XX of the Act, or 
 
  In any capacity where an individuals contact with participants would pose a 
potential risk because the individual has been convicted of physical, sexual, 
drug, or alcohol abuse. 
  Verification of criminal background check may be done through a database check such as 
Department of Justice or State criminal background databases. The PACE organization 
will maintain a copy of this verification in the employees personnel record, and this 
verification needs to be done upon hire or at some other duration established by CMS or 
in accordance with state requirements, whichever is most stringent. 
 
[42 CFR  460.68] 
 
50.2 - Direct or Indirect Interest in Contracts 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
The PACE organization shall identify members of its governing body or any immediate 
family member having direct or indirect interest in any contract that supplies any 
administrative or care-related service or materials to the PACE organization. PACE 
organizations must develop policies and procedures for handling any direct or indirect 
conflict of interest by a member of the governing body or by the members immediate 
family. In the event of a direct or indirect conflict of interest by a member of the PACE 
organizations governing body or his or her immediate family member, the board 
member must (1) fully disclose the exact nature of the conflict to the board of directors 
and have the disclosure documented; and (2) recuse himself or herself from discussing, 
negotiating, or voting on any issue or contract that could result in an inappropriate 
conflict. 
 
Examples of indirect interests are holdings in the name of the spouse, dependent child, or 
other relative who resides with the member of the governing body. These requirements 
are intended to protect participants by preventing fraud under Medicare and Medicaid by 
preventing members of the governing body with conflicts of interest from inappropriately 
influencing PACE organization decisions. 
 
CMS remains committed to working with rural and Tribal communities to help them 
address the challenges of developing successful PACE programs. Due to potential limited 
availability of individuals willing to and capable of performing key functions for the 
PACE organization, there is a special need for flexibility in rural and Tribal areas, and 
CMS remains committed to allowing waivers to promote PACE in medically underserved 
areas. 
 
[42 CFR  460.68(b); 71 FR 71269 (Dec. 8, 2006)] 
 
50.3 - Disclosure Requirements 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
A PACE organization must have a formal process in place to gather information related 
to persons with criminal convictions (section 50.1 above) and direct or indirect interest in 
contracts (section 50.2 above) and must be able to respond in writing to a request for 
information from CMS within a reasonable amount of time. 
  [42 CFR  460.68(c)] 
 
50.4 - Privacy Policy 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
A PACE organization must abide by all applicable Federal and State laws regarding 
confidentiality and disclosure for mental health records, medical records and other 
participant health information (PHI) 
(See http://www.cms.hhs.gov/HIPAAGenInfo/Downloads/HIPAALaw.pdf to obtain 
further information on current HIPAA regulations). 
 
[42 CFR  460.200(e)(4)] 
 
50.5 - De-identified Health Information and Limited Data Set 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
If it is necessary to disclose PHI, there are two methods to accomplish the release of 
information. The organization may de-identify the information. The de-identified 
information is not PHI because it does not identify an individual and there is no 
reasonable basis to believe that the information can be used to identify an individual. De-
identified information, therefore, is outside the purview of the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) privacy standards. 
 
Under the HIPAA privacy requirements there are two ways to de-identify PHI: 
 
  The organization may de-identify in accordance with generally accepted 
statistical and scientific principles and methods; or 
 
  The organization may remove all identifiers of an individual or of relatives, 
employers or household members of the individual listed in the safe harbor 
method in the regulation: 
 
  Names; 
 
  All geographic subdivisions smaller than a State; 
 
  All elements of dates (except year) for dates directly related to an individual, 
including birth date, admission date, discharge date, date of death, and all ages 
over 89 and all elements of dates (including year) indicative of such age, 
except that such ages and elements may be aggregated into a single category 
of age 90 or older; 
 
  Telephone numbers; 
 
  Fax numbers; 
    Electronic mail addresses; 
 
  Social security numbers; 
 
  Medical record numbers; 
 
  Health plan beneficiary numbers; 
 
  Account numbers; 
 
  Certificate/license numbers; 
 
  Vehicle identifiers and serial numbers, including license plate numbers; 
 
  Device identifiers and serial numbers; 
 
  Web URLs; 
 
  IP address numbers; 
 
  Biometric identifiers, including finger and voice prints; 
 
  Full face photographic images and any comparable images; and  
 
  Any other unique identifying number, characteristic, or code. 
 
Additionally, the PACE organization does not have actual knowledge that the 
information could be used alone or in combination with other information to identify an 
individual who is the subject of the information. 
 
The organization may assign a code or other means of record identification to allow 
information de-identified to be re-identified. 
 
The PACE organization should have the following HIPAA Compliance for Safeguarding 
PHI: 
 
  The organization has a contingency plan and disaster recovery plan for all PHI; 
  The organization has security policy and procedures for data. 
 
[45 CFR  164.514(a) and (b)] 
 
60 - Fiscal Soundness 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
  60.1 - Fiscally Sound Operation 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
A PACE organization must have a fiscally sound operation, as demonstrated by the 
following: 
 
  Total assets greater than total unsubordinated liabilities; 
 
  Sufficient cash flow and adequate liquidity to meet obligations as they 
become due; 
 
  A net operating surplus or a financial plan for maintaining solvency that is 
satisfactory to CMS and the State Administering Agency. 
 
A PACE organization under the three-year trial period is required to submit quarterly 
financial statements to CMS within 45 days from the end of each quarter of the PACE 
organizations fiscal year. After the trial period, if CMS or the State Administering 
Agency determines that an organizations performance requires more frequent 
monitoring and oversight due to concerns about fiscal soundness, CMS or the State 
Administering Agency may require a PACE organization to submit monthly or quarterly 
financial statements, or both. The financial statements shall include a balance sheet, 
income statement, and a cash flow statement. In addition to the quarterly financial 
statements, PACE organizations under a three year trial period are required to submit 
their latest independently prepared audit report containing their audited financial 
statements along with the auditor's opinion and auditor notes. PACE organizations 
operating within larger sponsoring entities must also submit their sponsoring entities 
independently prepared audit report. The audit reports are due within 180 days from an 
organization's fiscal year end. 
 
CMS no longer accepts hardcopy documentation. Instead, PACE organizations are 
required to upload a PDF or zip file of their quarterly financial statements and annual 
audit reports to the fiscal soundness module within the Health Plan Management System 
(HPMS). 
 
In addition to the financial statements PACE organizations must upload 4 financial data 
elements (taken from the audited and quarterly financial statements) along with the 
financial statements. The fiscal soundness module will not accept the financial statements 
if the data elements are not uploaded at the same time. 
 
If you cannot file the financial information by the regulatory deadlines shown under 42 
CFR  460.208(a), you must contact CMS before the prescribed due date. Failure to 
submit on time without notifying CMS places your company in non-compliance status 
and could result in your company receiving a non-compliance letter with the requirement 
of a corrective action plan to resolve the deficiency. 
 
[42 CFR  460.80(a), 460.208(c)]   
60.2 - Insolvency Plan 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
The PACE organization must have a documented plan in the event of insolvency, 
approved by the Centers for Medicare & Medicaid Services, and the State Administering 
Agency, which provides for the following: 
 
  Continuation of benefits for the duration of the period for which capitation 
payment has been made; 
 
  Continuation of benefits to participants who are confined in a hospital on the 
date of insolvency until their discharge; 
 
  Protection of participants from liability for payment of fees that are the legal 
obligation of the PACE organization. 
 
[42 CFR  460.80(b)] 
 
60.3 - Arrangements to Cover Expenses 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
A PACE organization must demonstrate that it has arrangements to cover expenses in the 
amount of at least the sum of the following in the event it becomes insolvent: 
 
  One months total capitation revenue to cover expenses the month before 
insolvency; 
 
  One months average payment to all contractors, based on the prior quarters 
average payment, to cover expenses the month after the date it declares 
insolvency or ceases operation; 
 
  Arrangements to cover expenses may include, but are not limited to, the 
following: 
 
  Insolvency insurance or reinsurance; 
 
  Hold harmless arrangement; 
 
  Letters of credit, guarantees, net worth, restricted State reserves, or State 
law provisions. 
 
[42 CFR  460.80(c)] 
 
  70 - Emergency and Disaster Preparedness 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
The PACE organization must establish, implement, and maintain documented procedures 
to manage medical and nonmedical emergencies and disasters that are likely to threaten 
the health or safety of the participants, staff, or the public. Additional information on 
requirements regarding emergencies can be found in Chapter 7 of the PACE Manual. 
 
[42 CFR  460.72(c)(1)] 
 
70.1 - Emergencies Defined 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
Emergencies include, but are not limited to, the following: 
 
  Fire; 
 
  Equipment, water, or power failure; 
 
  Care-related emergencies; 
 
  Natural disasters likely to occur in the organizations geographic area (An 
organization is not required to develop emergency plans for natural disasters 
that typically do not affect its geographic location). 
 
[42 CFR  460.72(c)(2)] 
 
70.2 - Emergency Training 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
A PACE organization must provide appropriate training and periodic orientation to all 
staff (employees and contractors) and participants to ensure that staff demonstrate a 
knowledge of emergency procedures, including informing participants what to do, where 
to go, and whom to contact in case of an emergency. 
 
[42 CFR  460.72(c)(3)] 
 
70.3 - Availability of Emergency Equipment 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
Emergency equipment, including easily portable oxygen, airways, suction and emergency 
drugs, along with staff who know how to use the equipment, must be on the premises of 
every center at all times and be immediately available. The organization must have a 
documented plan to obtain emergency medical assistance from sources outside the center 
when needed. 
  [42 CFR  460.72(4)] 
 
70.4 - Annual Test of Emergency and Disaster Plan 
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11) 
 
At least annually, a PACE organization must actually test, evaluate and document the 
effectiveness of its emergency and disaster plans. 
 
[42 CFR  460.72(c)(5)]  Transmittals Issued for this Chapter 
 
Rev #  Issue Date  Subject  Impl Date  CR# 
R2PACE 06/09/2011  Initial Publication of Manual  06/03/2011 NA 
06/03/2011  Initial Publication of Manual - Rescinded and  06/03/2011 NA 
R1_SO 
replaced by Transmittal 2 
 
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