Grand Traverse Pavilions and the Grand Traverse County Health and Human Services Board have filed a lawsuit “to recover over $5 million in start-up and operating costs incurred by the Pavilions in the creation of PACE North,” according to a press release sent to local media on Wednesday. The lawsuit alleges that PACE North is trying to cut ties with the Pavilions – which effectively incubated the organization – without paying back the money the Pavilions invested.

PACE (which stands for “Program of All-Inclusive Care for the Elderly”) is a type of senior care program that exists under Medicare and that works to provide “coordinated” and “comprehensive” medical care to older adults in a way that “enables them to remain in the community rather than receive care in a nursing home.” Per Medicaid.gov, “Financing for the program is capped, which allows providers to deliver all services participants need rather than only those reimbursable under Medicare and Medicaid fee-for-service plans.”

PACE programs like PACE North boast “interdisciplinary teams” made up of a variety of healthcare professionals – including physicians, registered nurses, home care coordinators, social workers, occupational therapists, physical therapists, registered dieticians, and more – who work together to help older adults devise and execute a “plan of care,” including decisions about primary medical care, nutrition, recreational therapy, medications, and acute care. PACE North provides most of these services at its “day center,” located at 2325 Garfield Road, but also delivers some additional services to seniors in their homes.

According to yesterday’s Pavilions press release, “the process to create PACE North began in 2016 when the Pavilions applied to the Centers of Medicare and Medicaid Services (CMS) for permanent provider status to create and operate a PACE facility. In doing so, the Pavilions committed to an unconditional guarantee, in the case of insolvency, to ensure the continuation of benefits to PACE North participants for the duration of the period for which capitation payments have been made.”

Now, Cecil McNally – who serves as chairperson for the county Health and Human Services board – claims that the PACE North board has taken steps “to terminate the management agreement that has been in place between the Pavilions (the manager) and PACE North (the owner).” The Pavilions is countering those steps with its lawsuit, arguing that PACE North cannot terminate the management agreement without repaying its debts to the Pavilions.

“The Pavilions invested over $5 million in direct and indirect costs during PACE’s first few years of operation,” McNally said in the press release. “The terms of our management agreement called for Grand Traverse Pavilions to subsidize PACE’s start-up costs. And once PACE North reached an agreed upon milestone of financial stability, they would then begin repaying [the Pavilions] based on a percentage of their annual revenue. That has not happened.”

McNally continued by noting that the PACE board “now prefer to frame the Pavilions’ over $5 million investment as a ‘gift.’ That certainly was not the intent of the original management agreement…” McNally also suggested that PACE is seeking to terminate the management agreement “to avoid compensating the Pavilions for its financial investments over the past six years and its ongoing obligations.”

The Pavilions has officially filed the lawsuit with Grand Traverse County's 13th Circuit Court. The lawsuit is an attempt “to recover the Pavilions’ financial investment” in PACE North, including money spent on exploring the idea of establishing PACE North, recruiting initial PACE North employees, securing the lease for the PACE North facility, helping with the “rehabilitation and construction” of that facility, and more.

Through the lawsuit, the Pavilions is seeking a $90,000 management fee from PACE North that it says was agreed upon for 2023, as well as an ongoing collection of management fees in the years to come to repay the alleged $5 million investment. Pavilions CEO Rose Coleman also said that the organization hopes to “remain in a position to consider the current financial situation of PACE North annually to support its viability as a going concern to serve the need within our community.”