The California Department of Health Care Services (“DHCS”) announced via a Policy Letter that the state has paused the application process for Program of All-Inclusive Care for the Elderly (“PACE”) organizations for a minimum of two years.[1] Beginning November 20, DHCS will not accept applications to establish new PACE organizations or accept service-area expansion requests from existing programs. The letter makes clear that the pause is tied to DHCS’s oversight responsibilities under the Welfare & Institutions Code and reflects the agency’s need to manage growth and maintain the integrity of the program.[2]
Exceptions and Treatment of Current Applications
Although the freeze is broad, it does not disturb applications already in the pipeline. Applications received before November 19, 11:59 p.m. (the “Deadline”) remain in the queue for DHCS to continue to review through its existing process. Programs already in the Q4 2025 cycle may still receive an approval, a denial, or—under the existing rules—a deferral to be reviewed in Q1 2026. For Letters of Intent (“LOIs”) that were submitted before the Deadline, DHCS will review their complete applications if they are submitted before 11:59 p.m. on December 26, 2025.
Notably, the application pause makes an exception for change of ownership (“CHOW”) applications for existing PACE organizations. DHCS will continue to accept and process CHOW applications for existing PACE organizations pursuant to the current legal framework for California PACE organizations. This framework comes from long-standing federal CHOW guidance from the Centers for Medicare and Medicaid Services (“CMS”) and requirements under California state law from DC’S. From a legal perspective, this exception is significant because it leaves room for strategic affiliation, restructuring, and realignment during a period when expansion and new entries to the market would otherwise be impermissible. In practice, CHOW activity may become the only viable pathway for organizational change until DHCS reopens the application process.
What to Expect Next from DHCS During and After the Pause
The policy letter also signals that DHCS intends to update its broader application standards by revising Policy Letter 23-01, which governs LOI submissions and application procedures.[3] The reference to Policy Letter 23-01 suggests that DHCS is taking a closer look at governance expectations, financial stability requirements, and operational readiness standards—all of which are areas that have been subject to increased scrutiny nationally following CMS’s recent emphasis on stronger PACE oversight.
During the next two years, existing PACE organizations can likely expect DHCS to shift its focus toward internal compliance, governance structure, quality reporting, and overall organizational readiness. Providers considering expansion will need to recalibrate their timelines, while those exploring partnership or affiliation strategies may want to evaluate whether a CHOW makes sense under the current framework.
Providers should expect more guidance—and potentially more stringent expectations—before the application window reopens in 2027.
FOOTNOTES
[1] Policy Letter 25-02, California Department of Health Care Services (November 17, 2025).
[2] Cal. Welf. & Inst. Code § 14592(k).
[3] Policy Letter 23-01, California Department of Health Care Services (April 14, 2023).
