Summary:
- The PACE Moratorium in California is primarily caused by a rising state administrative burden that is not fully funded.
- Losers include under-served seniors in rural areas.
- Winners are legacy PACE providers and the newer PACE innovators.
- PACE, the Program of All-Inclusive Care for the Elderly, is funded by Medicare, Medi-Cal, and Medicaid matching federal dollars to Medi-Cal.
- In California, PACE serves 26,753 elders as of October, 2025.
For PACE across California, the strategic landscape shifted on November 20, 2025.
The Department of Health Care Services (DHCS) initiated a moratorium on new California PACE organization applications and service area expansions for a minimum of 2 years.
This pause marks the end of a rapid expansion phase in California PACE. For the next two years, the industry’s focus must transition from acquiring new territory to deepening operations within existing footprints.
Here is a detailed look at the moratorium, the operational realities behind it, and what it could mean for PACE's growth strategy through 2027.
The PACE Moratorium Explained
The directive from the state establishes a clear boundary for future growth. Effective November 20, 2025, DHCS has suspended the acceptance of two key types of filings:
- Initial PACE Organization applications - new entrants into PACE.
- Service Area Expansion applications - new centers, or larger service areas, from existing PACE organizations.
Any application in these categories submitted after the cutoff date will be returned without review. This freeze is scheduled to remain in effect until at least November 20, 2027.
However, the path to submitting an application to enter a new county, or expanding a service map, is effectively closed.
Change of Ownership applications remain permissible, for instance, when InnovAge acquired ConcertoCare in 2023.
The State of California Needs a Breather to Balance Needs & Capacity
While the official announcement centers on "quality oversight," the context is broader. It seems that DHCS has reached its operating limit. Too much work for too few resources.
Since 2016, California has seen a surge in PACE applications, particularly from new PACE organizations. This growth has outpaced the state's administrative capacity.
Reviewing a single PACE application is a resource-intensive process requiring audits, site visits, and financial reviews.
Yes, there are "application fees" paid by new PACE organizations, intended to cover these costs. The public record states that without a commensurate increase in budget to hire and train additional staff, DHCS has faced a growing backlog.
California Department of Health Care Services submitted a budget which includes funds from PACE organizations *not for expansions or applications* but for the everyday oversight: reviewing applications, conducting audits, rate adjustments, legal and so forth. [See page 2 of the January 2025 proposed budget. DHCS requested an additional ~$6 million per year for the next 5 years.]
CalPACE, the advocacy organization of PACE in California, was reportedly successful in fighting off new fees -- which they called "de-facto taxes" -- on PACE organizations to fund the requests of the State.
Regardless of the root cause, the outcome is the same: the state is taking a timeout, and providers must adjust.
A Strategic Advantage for Existing PACE
For new organizations hoping to serve elders in competitive markets (eg., Los Angeles) or under-served rural markets, this pause presents a significant hurdle.
However, for long-established PACE including Center for Elders' Independence (CEI), AltaMed, and On Lok, the timing aligns with recent expansions and openings of new centers.
These organizations have spent the last several years investing heavily in physical infrastructure. Having already secured their service areas and built new centers, their immediate need is not further geographic expansion but filling those centers, getting to breakeven and then becoming cash-flow positive i.e. financially sustainable.
| Organization | Recent Expansion Activity | Status / Capacity Impact |
|---|---|---|
| Center for Elders' Independence (CEI) | Opened 3 new centers in Summer 2025 (Tri-Valley, West County, to replace aging El Sobrante center, Temescal, to replace aging Berkeley center) | Doubled total capacity to >3,300 participants. |
| AltaMed | Opened Sunland Center (Oct 2025) and West Covina ACS (Mar 2025) | Added capacity for ~500+ participants in LA/San Gabriel Valley. |
| On Lok | Opening 2 new centers (Union City, South San Jose) | Scheduled to open early 2026; renovation of 7 existing sites ongoing. |
With no new competitors entering their service areas for at least two years, these established providers can focus entirely on filling the centers they have built. The moratorium helps ensure their financial and operating sustainability, it is "a big win" in an environment where PACE are entering overlapping service areas, to serve even more participants.
This google sheet shows the growth of PACE in California among all PACE organizations -- of all tax status. Plenty of privately-funded PACE have also grown substantially, notably InnovAge and Welbe. This only includes applications through 2024, not applications submitted in 2025.
Tighter Deadlines to Submit PACE Participant Applications to CA State
Beyond the moratorium, organizations must navigate a tightening of enrollment operations.
To enroll a participant for the 1st of the upcoming month, the signed enrollment agreement and data file must be submitted before the 15th of the month [not on the 15th]. This allows DHCS mroe breathing room in reviewing applications for PACE. [It also aligns PACE with the to the state by the Medi-Cal Managed Care File Input Due Date (the MEDS cutoff).
If a participant signs their agreement on the 15th, they cannot be enrolled for the 1st of the coming month. Instead, their start date pushes to the 1st of the following month.
[A few years ago, DHCS even would allow PACE organizations to retroactively enroll people to the 1st of the month, if their application came in on the final days - 30th or 31st -- of the month.]
During this extended wait, a frail senior may experience a health decline, a hospitalization, be approached by competitors, or simply decide to make no change at all. Any of these factors jeopardizes the elder getting the PACE services that they have medically qualified for.
This delay increases the consumer's friction in enrolling in PACE compared to a D-SNP or C-SNP Medicare Advantage plan.
PACE with the best operating agility, technology and marketing will still thrive.
The Pivot - and the Good News - Deepening Market Penetration
For the past five years, growth strategy in California often meant planting flags in new territories. With that avenue closed, the metric for success changes.
Growth must now come from serving more elders from the same center. The focus shifts from real estate and licensing to operational excellence in marketing, enrollment and retention. PACE that can generate awareness and interest, streamline their intake process, manage the 45-day wait period effectively, and maximize referrals within their current footprint will continue to grow.
This is a shift from extensive growth (more map dots) to intensive growth (higher census (i.e. more patients served) per center). Overall, this kind of operating leverage is good for existing PACE operators.
Who Wins?
Across healthcare, there is a long-standing simmering dislike of "for-profits" from the non-profit community, and PACE is no different. Though the historical origins of this resentment go beyond the publicly reported headlines (esp. sanctions imposed against Innovage) this tension does underly some dynamics within the sector.
Under this moratorium, it is not entirely the "non-profits" vs. the "for-profits." In my view, the long-term advantage will go to the innovators.
When one reflects on the innovation within PACE, it is often the newer PACE organizations which possess clear structural advantages. PACE with the best operating agility, technology, marketing and reputation will thrive with referral sources, the public and employees.
While recognizing the exceptional work done by non-taxable/non-profit PACE in modernizing operations, the successful growth and advantages of the fully-taxable (i.e. privately-funded, for-profit) PACE must be acknowledged:
- Seen Health leverages technology for outstanding health outcomes and returns PACE to its roots of cultural community;
- myPlace Health leans into the goals of care for each participant, a large distribution and outreach network, plus a strategic partnership with SCAN.
- With respect to operating agility, leadership and team members' commitment to care, BoldAge stands out.
- And, for the ability to scale quickly to serve as many seniors as possible, and success in developing partnerships with healthcare providers, Welbe excels.
So it is all established PACE which now have an opportunity to thrive and demonstrate growth, participant satisfaction and improved outcomes data.
A 2027 Forecast
PACE in the market today have a marked financial advantage. The door to under-funded or less-committed entrants is closed.
When DHCS reopens the application window in November 2027, the entry requirements may be different.
DHCS could use this 2-years to refine its regulatory framework. Future applicants could face a more demanding process, potentially including:
- Strengthened Financial Standards: Requirements for deeper initial capitalization to ensure stability.
- Governance Scrutiny: Clearer distinctions for administrative service agreements and board oversight.
- Operational Readiness: More rigorous pre-opening audits.
Organizations planning for post-2027 expansion might want to use this time to prepare for a higher barrier to entry.
DHCS might also use this time to push for what it did not gain -- increased fees from PACE organizations to fund oversight activities.
PACE in the Pipeline
The door is not entirely closed yet. Applications and Letters of Intent (LOI) submitted prior to the November 20, 2025 cutoff are being processed.
This "grandfathered" cohort represents the final wave of potential new centers and expansions we will see until late 2027.
Some Members of The Final Pipeline Class
This includes data up to 2024, not including 2025 {to be updated when available}
| Organization | County | Status |
|---|---|---|
| Clinica Sierra Vista | Kern / Tulare | LOI Submitted |
| Vista Community Clinic | Los Angeles | LOI Submitted |
| Shasta Community Health Center | Northern CA | Pending Application |
| Habitat Health | Alameda / Contra Costa | Pending Expansion |
| United Health Centers | Fresno / Madera / Kings | Pending |
| Asian Health Services | Alameda | Pending |
| LGBT PACE | Los Angeles | Pending |
| Innercare | Imperial | Pending |
The next two years will be defined by execution rather than expansion.
For PACE, the map is set. The work now is to serve the elders within its boundaries.
This is a quickly-developing article and will be updated. Comments? Questions? Corrections? Contact us here.