Chicago Pacific Sees Upside in Owning Both Senior Housing, Medicare Advantage Companies

Chicago Pacific Founders (CPF) has begun acquiring Medicare Advantage companies, and leaders with the private investment fund are seeing synergies with the senior housing communities in their portfolio — with much greater integration likely in the future.

“The plan is for it to grow exponentially,” CPF Founding Operating Partner John Rijos [pictured above] told Senior Housing News, referring to the Medicare Advantage-senior housing linkage.

Prior to co-founding Chicago Pacific Founders in 2014, Rijos was president and COO of Brentwood, Tennessee-based Brookdale Senior Living (NYSE: BKD), currently the largest provider in the nation.


Rijos joins several prominent senior housing leaders who recently have drawn attention to the evolving Medicare Advantage (MA) landscape, and who believe that MA will play an increasingly important role in senior living in the coming years.

Rijos has a unique perspective on the topic: Not only does CPF own Medicare Advantage provider companies, Rijos also leads the firm’s senior living subsidiary as CEO of CPF Living Communities.

CPF Living Communities owns 37 senior housing properties that are operated by affiliated Grace Management. Grace provides third-party management for strategic partners at an additional 14 communities.


The portfolio is sure to expand further in the years ahead, as Chicago Pacific Founders has more than $200 million to deploy from its second fund.

CPF’s Medicare Advantage investments

Currently, Chicago Pacific Founders owns two Medicare Advantage provider companies. In 2017, the firm acquired Las Vegas-based P3 Health Partners, which manages about 22,000 lives in Nevada and Arizona. Last year, CPF acquired Florida Elite Medical Group, which manages about 7,000 lives in the Tampa area, where the company is based.

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P3 and Florida Elite are not Medicare Advantage insurance companies but rather are groups of primary care physicians and other clinicians that take on fully capitated risk from MA insurers in their markets.

The private sector insurance companies that administer Medicare Advantage plans — such as Humana or Aetna — typically turn to provider groups like P3 and Florida Elite to manage the benefits, and take on the financial risks and rewards, for certain beneficiary populations. Typically, these types of health care provider groups take on about 8% of the insurers’ total MA rolls, Rijos said.

“Because they’re offloading full capitation and risk to my company, the insurers say we need $1,000 for administrative control and costs, and the other $9,000 [per beneficiary per year] goes to you, you’re taking all the risk,” Rijos told SHN, using ballpark figures.

It then falls to P3 and Florida Elite to provide the care coordination, case management and other services to manage costs and outcomes for this beneficiary population, in order to drive profitability.

These types of Medicare Advantage provider companies fit into CPF’s investment approach for several reasons. While most health care-focused private equity firms invest in medical devices and diagnostics, Chicago Pacific Founders targets health care service providers.

Private equity typically shies away from acquiring providers because they don’t understand this aspect of health care, but CPF’s partners are all former CEOs of health care services companies, Rijos noted. They’ve seen first-hand how inefficient the traditional fee-for-service Medicare system is, because it encourages a high volume of services and therefore drives unnecessary spending on tests, procedures and the like.

This system is “quite frankly torturing grandma” with the barrage of uncoordinated care and services, Rijos said.

Medicare Advantage is an attractive and fast-growing alternative to traditional Medicare, as it ties plan profitability to care coordination and consumer satisfaction. As such, the government is leveraging MA to effectively privatize Medicare, with about one-third of all Medicare-eligible seniors currently opting for an MA plan, Rijos said. And MA enrollment is expanding at a substantially faster clip than traditional Medicare.

On top of all these other factors that make Medicare Advantage an investment target for CPF, there are synergies between the MA companies and the larger Chicago Pacific health care portfolio, including senior living.

For instance, referrals are already flowing from P3 to the five CPF communities across Tucson and Las Vegas.

“Two residents moved into Vegas [communities] in the last 10 days that are patients of our P3 organization,” Rijos said. “The primary care doctors in P3 said, Jane Doe, you need to live in a more congregate care environment, and by the way, an affiliated company of ours owns three of them here in town.”

Referrals could be the tip of the iceberg, as Rijos believes there is potential for substantially more integration between MA and senior living in the future.

Having seen success with P3 and Florida Elite, Chicago Pacific is now in the process of acquiring a Medicare Advantage insurer itself — not just a provider company assuming capitation and risk from a larger plan. The insurer is located in the Pacific Northwest, and CPF anticipates announcing that deal within the next 60 days, Rijos said.

The future for senior living

Last April, a policy change allowed Medicare Advantage plans to start offering coverage of non-medical in-home services starting this year. These newly allowed supplemental benefits present an opportunity for senior living, as they could be a way for MA plans to begin directly reimbursing providers.

Rijos identified four discrete areas where MA dollars could begin flowing to senior living: transportation; physical fitness and wellness programs; nutrition; and some home care services. These are already pillars of the senior living offering, he noted.

To a Medicare Advantage insurer, the idea of reimbursing a senior living provider in these areas makes sense in theory, as a way to keep beneficiaries who live in these communities out of the hospital and other high-cost settings. Rijos envisions a future in which MA plans might be contributing as much as $500 a month toward these services for their beneficiaries in senior living.

However, that is not going to happen overnight.

Currently, MA plans are offering these supplemental benefits at a small scale and mostly as a marketing play. Plans can distinguish themselves from the competition through more attractive supplemental benefits packages.

If senior living providers can prove their value — demonstrating through data that they are indeed saving a health plan money through providing care management and top-notch non-medical services — then that will give insurers the incentive and confidence to greatly expand the supplemental benefits, Rijos believes. Supplemental benefits are not yet providing reimbursement to senior living in the markets served by P3 and Florida Elite.

“We’re trying to be very careful about our record keeping [at CPF Living Living Communities], so that once those benefits payments start going around, [we can show] there’s value to the MA plan to be providing support,” Rijos said.

Meanwhile, he isn’t tied to P3 or Florida Elite patients going to CPF Living Communities buildings, necessarily, Rijos noted.

“I don’t care where they go — if we can get them into a lower-cost environment with coordinated care, that’s great,” he said.

Seeing these same trends that CPF has identified, some senior living providers — including McLean, Virginia-based Sunrise Senior Living and a group of companies known as The Perennial Consortium — have started or intend to start their own Medicare Advantage plans.

Doing so is a difficult play, Rijos cautioned. One major challenge is that a senior living provider must enough scale to get enrollment high enough for an MA plan to be viable.

Sunrise and the Perennial Consortium might have the right ingredients to be successful, Rijos said, but he stressed that for most senior living providers, marketing themselves to existing plans is a far safer move into Medicare Advantage.

And there is no intention at the moment for CPF Living Communities to start a plan of its own.

“We’re operating on both sides of the horizon,” Rijos said, referring to CPF’s investment in both MA and senior living companies. “As we learn more about one and participate more on the other, we’ll make some decisions about it in the future.”

Interested in learning more about the Medicare Advantage opportunity for senior living providers? Click here to access Senior Housing News’ deep-dive report on the topic.

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