Vulnerable seniors have been brushed aside as InnovAge prioritized financial growth in recent years, people who have worked for the company say. Regulatory trouble has slammed $INNV, which is down roughly 70% from its peak.
Julia Gutierrez spent her final weeks in pain. Last year, the 78-year-old Arvada, Colo., assisted-living resident suffered a serious skin breakdown. When she got to the hospital, she was found to have severe dehydration and sepsis, and a portion of her bowel had failed, says Gutierrez’s daughter Sylvia Torralba. Gutierrez was put on hospice care and died at her daughter’s home less than two weeks later.
Backed by private equity, InnovAge has more than doubled its enrollment over the past five years while snaring Washington-connected directors, including scions of the Bush and Kennedy families and two former top Medicare officials. On Wall Street, the company raised roughly $374 million in a March initial public offering.
InnovAge’s evolution from humble nonprofit to Wall Street growth story also underscores how the revolving door between Washington D.C. and the private sector can generate wealth for the well-connected and have profound implications for health policy and the public interest.
But as the top Medicare and Medicaid official under President George W. Bush, Scully was known for his work on Medicare’s Part D prescription-drug benefit and Medicare Advantage, two programs that gave the private sector a major role in providing coverage for seniors. Scully, together with other former top officials at CMS, became instrumental in unleashing the private sector in PACE—and Scully’s firm would be among the first in line to profit from it.
Among those with misgivings about the for-profit conversion were the geriatricians involved in the late 1980s formation of the non-profit organization that became InnovAge. In the organization’s early days, “I remember saying, ‘if we don’t accomplish our mission, I don’t give a damn if we’re profitable or not,’” says Dr. Alan Lazaroff, founder of the nonprofit PACE provider Total Longterm Care, which later became InnovAge.
Hewitt didn’t respond to requests for comment. But Scully says InnovAge’s board determined that Lazaroff and Orr had a conflict because their physician practice had a contract with the organization to provide participant care. In the five years ending June 2021, InnovAge’s participant count climbed about 120%, and revenues grew more than 170%, reaching $638 million in the fiscal year ended June 30—virtually all of it from Medicare and Medicaid. InnovAge’s acquisitions of four PACE organizations in 2017 and 2018 gave the company eight new centers in Pennsylvania and Virginia. Welsh Carson, which initially paid $196 million for InnovAge in 2016, started to cash in.
Whistleblower suits “happen all the time,” Scully says. “I’m certain that InnovAge was never intentionally denying services to anybody.” As for the CEO’s alleged treatment of the whistleblower, Scully says he has never observed Hewitt behaving that way, adding, “I don’t know any of the circumstances.”
“Apparently we got backed up in Sacramento and had some service issues and responded very poorly” to CMS’s questions about it, says Scully. InnovAge is working to improve staffing, provider agreements, referrals and other issues found in Sacramento, Hewitt said on the company’s earnings call this week. The enrollment suspension remains in effect until CMS validates that the problems have been fixed.
Asked about the allegations against DxID, Scully said that InnovAge’s risk scores are below the industry average, and he’s confident the company has been coding properly. As for the DxID business filing at InnovAge’s address, “they had no right to do that,” Scully says. “It’s kind of bizarre.” The filing was withdrawn early this year, shortly before InnovAge’s IPO. DxID shut down earlier this year. Independent Health didn’t respond to requests for comment.
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