AGED CARE: Maximising Sustainability Post ACFI Funding Cuts

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Author: Ansell Strategic – for PASA. 

David Cox, Partner & Head of Operational Strategy, Ansell Strategic will be speaking at The PASA 3rd Annual Aged Care Procurement Conference on 29th & 30th March.

Following recent cuts to ACFI funding and escalating costs of care, residential care providers in Australia are seeking alternative revenue sources to support cost of care services. Capitalising on the increasingly consumer driven market and ‘user pay’ orientation of newer residents, providers are generating revenue through charging care recipients for additional services. Charging for ‘extras’ is not a new concept for care providers, ‘extra service’ fees are and have been charged to residents for additional commodities such as, pay telephone, internet and pay TV. Expanding the afore mentioned ‘extras’ to include novel services and amenities such as, private dining,  hair and beauty treatments and personal safes however, is a newer concept in the industry.

At present, legislation is not specific on permitted additional services. Approved providers argue they should be free to charge for any services outside the confines of the Act, while the Department of health has signalled that some practises are ‘not supported by legislation’ and will not be tolerated.

As the burden of cost of care increases for residents, the demand for services is also rising. Residents and their families are increasingly requesting a diverse range of amenity and service options beyond the more traditional ‘extra service’ bundles as they seek a more personalised service and care environment. The most proactive organisations are currently responding to this increasing demand by introducing a variety of novel services to meet both current and future demand. A number of providers have introduced ‘club style’ fees In lieu of ‘extra service’ fees, either paid as a daily fee or a deduction from the RAD. These additional amenities and services initiated by providers can fulfil a dual purpose, a new revenue source, as well as heightened attraction to their facility, by offering residents a differentiated lifestyle.

In order to provide additional services that are suitable to fit the needs and abilities of residents, many providers are opting to provide a suite of additional services rather than a fixed package. This could involve charging residents a fixed cost for a package of services and giving them the ability to select the amenities and services they desire, in effect, they are able to create a package that is customised to their preferences and abilities. Some services and amenities that are being offered at cost to residents include private dining, furnishing packages, additional menu choices, laundrette services such as dry cleaning and therapy and wellness packages (often supplied through allied health providers).

Another revenue stream a number of operators have recently introduced is capital refurbishment, asset contribution or room reinstatement fees. These are described as a resident contribution to the refurbishment or replacement of capital (buildings and equipment) as a result of the residents stay in the home. Currently the charging of these fees is generally limited to larger for-profit operators who charge non-supported RAD or RAD/DAP paying residents, most fees ranging from $10-$18 per day. Some providers and legal advisors argue that a capital refurbishment fee is kosher by reason of the care recipients choosing to enter into a voluntary agreement with their providers, the Government clearly does not agree. The Department has sought to summarise and capture these fees as a collective and say that they are not providing direct benefits to residents, not charged on a fee for service basis and not the services of the normal operations of the home.

The Aged Care Act 1997 (the Act) and the Aged Care (Transitional Provisions) Act 1997 regulate the fees that a provider can charge to residents. Providers are permitted to charge fees for services that are not provided under the confines of Specified Care and Services if the resident is assessed as requiring these. Providers are permitted to charge for the service if it does not form part of the ‘normal operation of the aged care home’ – this however, is inherently contradictory to what the Act otherwise allows under division 56. The Department has also stated that services cannot be charged ‘unless the resident receives a direct benefit or has the capacity to take up or make use of the services’ – however again, there is no legislative support for this statement and The Act permits ‘extra services’, which as a concept under the Act is a bundle of services, some of which the residents may or may not utilise by choice or capacity.

Ansell strategic have been involved in advising a large number of providers on funding and pricing strategies following the recent ACFI cuts. In light of these, we recommend providers actively pursue additional service income by charging for non-specified services that have traditionally been provided in the past without charge. Furthermore we recommend that providers seek out new opportunities to include in their additional service offerings that meet the needs and preferences of current and future residents. It is important, however, that when pursuing additional services, providers remain aware that legalities surrounding additional services in this sector have become unclear, appropriate market, cost-benefit and legal analysis should be undertaken to ensure providers remain within their legal boundaries.

Ansell Strategic is one of the most recognised aged care advisory firms in Australia and New Zealand. Having led many significant research studies and transactions across Australasia, we have established an extensive network of aged care and retirement living specialists that can support your leadership team. Our team works with peak industry advisors to deliver strategic advice and guidance to improve businesses in the sector. For more info, visit the website

David Cox, Partner & Head of Operational Strategy, Ansell Strategic will be speaking at The PASA 3rd Annual Aged Care Procurement Conference on 29th & 30th March.

 

About Author

Procurement and Supply Australasia (PASA) is the leading provider of information and education to procurement and supply professionals throughout Australia and New Zealand. PASA supports the largest community of engaged procurement stakeholders in the region, through its renowned series of events, publications, awards, plus various community and network building activities. PASA is a trading name of BTTB Marketing, for many years recognised as the leading producer of conferences and events for the procurement profession in Australia and New Zealand. Whether producing under the BTTB, CIPSA Conferences or now PASA brands over the last ten years, our events have consistently led the market in terms of both educational and networking opportunities.

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