Residential aged care: Proposed alternative models for allocating places

The limited supply of places enables potential value of places to be realised by providers. The limit on places supports increased likelihood of occupancy which contributes to business and workforce stability. When places are allocated, they are perpetual, reallocation is not required. Once places are allocated, they are an asset that enables a provider to be “guaranteed” future income. This encourages investment in capital assets.
From a compliance perspective a limited group of providers in a more manageable cohort to audit for the Aged Care Quality Commission.

As there are limited places available consumers have a reduced selection of providers to process which can be advantageous in a highly complex process where the consumer must make a rapid decision, for example post hospitalisation. The current allocation of places offers stable residential aged care for consumers.

The current allocation does consider the provision of places in rural and remote areas and for older people living with special needs – these may not be so well catered for in a deregulated environment.

The current process of applying for places, including the tender process, allows for little innovation or new service models that adapt to consumers.
The success of the application process is weighted towards providers and models that are traditional and well established. The actual application forms do not give much scope for describing innovative models.

The timing of the applications can be difficult for providers in terms of planning and allocation of resources to complete the applications. If the application round was at a regular time each year then providers could plan and ensure that appropriate resources were allocated to complete the applications.

The lack of transparency in the assessment process is troubling for many providers who have been unsuccessful in obtaining residential care places from ACAR.
There needs to be a verification process to check that the information included in applications by providers is truthful and factual.

The current allocation planning formula needs to be reviewed. The current formula does not consider the movement of older people from region to region for the specific purpose of entering an Aged Care facility, often close to their adult children or other family members. It also does not appear to take into consideration actual demand and occupancy information. High occupancy may occur in facilities in highly sought after inner metropolitan suburbs and waiting lists occur for these facilities but obtaining new places for these “over bedded” areas (based on the current planning formula) appears to be impossible.

Eldercare, in South Australia, has unsuccessfully applied for places in the metro east region for three rounds despite presenting compelling data supporting a demand for these places. The feedback is that the area is “over bedded”.

The design principles are broad and encompass the themes which are normally considered to be of importance in social policy.

The principles should consider the broader reforms which are currently listed as out of scope. For the aged care sector to be coherent any allocation design should align consistently with the principles of the funding mechanism, aged care standards and approach. Currently, the RUCS proposed model of funding is based on assessment of consumer physical deficit and clinical need while the new standards are based on consumer choice, dignity and opportunity. These models are diametrically opposed in the incentives for successful aged care service provision. Therefore, the allocation determinants need to align with the principles of funding and standards in a transparent manner to support the preferred outcomes of the government.
A principle relating to transparency of assessment and decision making should be included – this is to ensure that the process is free from conflicts of interest or political involvement.

The improved ACAR and Places Management Model 1, does not clearly identify how this will improve the allocation. Unlike home care, RAC is an industry with high barriers to entry, and new places require 3 – 4 years lead time to construct. Moving places around is not practical unless infrastructure is already available. Flexibility is also constrained by workforce requirements and business viability. We welcome greater transparency in the ACAR process however the determinants for allocation need to be explicitly defined to enable clarity of understanding regarding the overall success factors contributing to successfully being allocated places.

The allocation of places was designed to be based on a ratio of places to number of people 70 years or over. This blunt tool has been operational for over 20 years and although some adjustments have been made the ratio is applied nationally, regardless of the geographical location or socio-economic status of the population. This approach does not support the differences which occur between affluent versus disadvantaged populations, where the disadvantaged are more likely to experience greater care needs, require support earlier than more affluent counterparts and cannot pay privately for care services. Demographic trends are often a poor indicator of future demand, particularly in discrete regional or remote areas. Families often make decisions to locate their kin close to where they live rather than where the consumer currently lives. This is a practical decision to ensure that families are able to easily visit and engage in care for the person in residential aged care. This skews the ratio away from statistical or geographic forecasts for particular regions.
The ratio by geographic region is likely to be less significant if the Commonwealth funding follows the consumer as the allocation of funds could be based on planning region but the consumer could then seek a place at their discretion.
A big equity concern for the government is how to manage ‘thin markets’ especially in rural and remote regions. The current thinking is to have a single equitable model which applies to all regions. An alternative option is to have two or more service model approaches which are differently allocated and funded. Regional and remote areas are more likely to need greater support and direction from government. One of the biggest challenges we face as a provider with facilities in regional and remote areas is the attraction and retention of staff. Occupancy is an ongoing challenge and although there is demand and expressed need there are periods of time when demand is less than supply. Operating regional and remote facilities is more costly than metropolitan sites, support services are scant or nonexistent and consumers are often not able to pay for accommodation and services. A critical cost driver for our regional and remote sites is the management of staff rosters and the use of external agency staff for unplanned leave. Human resource support is unavailable in the region and as such agency staff are sourced from metropolitan agencies. This results in large travel, accommodation and inflated wage expenses. The experience and business modelling in regional and remote areas are very different to metropolitan.
It is important to note that not all consumers are equal. The allocation process does not consider the complexity, severity and ability of consumers to seek and obtain care.
For providers a key issue is consumer mix to ensure that the residents of a facility are able to receive safe and high-quality care and services. It is often unreasonable to place a person with severe behaviours requiring specialist care where there are not the resources to provide this care. Therefore, consumers with these specific needs may face more barriers to finding a suitable place.

It is important to note that not all consumers are equal. The allocation process does not consider the complexity, severity and ability of consumers to seek and obtain care.
For providers a key issue is consumer mix to ensure that the residents of a facility are able to receive safe and high-quality care and services. It is often unreasonable to place a person with severe behaviours requiring specialist care where there are not the resources to provide this care. Therefore, consumers with these specific needs may face more barriers to finding a suitable place.

For ‘thin markets’ it may be worth considering a completely different model of care. This ‘thin market’ model would need to retain the same quality and safety standards but may need to have government intervention to support workforce, increased costs associated with distance from metropolitan area and reduced income due to lower means of the average consumer in these regions. Our experience with residential aged care in regional and remote locations is that the family and broader community support older people to live in the community for a lot longer and therefore may have greater interest in respite options rather than long term care. As such, low occupancy may be better supported with relaxed respite options. Other service options may serve smaller communities better including the creation of a more integrated aged care community hub with meals, day programs, therapy programs and respite as well as long stay. This would be best supported if there were also transport options to bring people to central hubs.
Whatever model is adopted for “thin markets” it cannot be considered in isolation of the funding model for these markets. The allocation model and the funding model and intrinsically linked. Rural and remote services are generally not financially viable, and incentives need to be created to ensure that providers stay providing services in these areas.

Enable some flexibility regarding the locational distribution of places to better match the needs of consumers (vs planning allocation that may not match actual need).

Ensure that the approval process for gaining “approved provider status” is rigorous from a financial viability point as well as the provider being able to demonstrate that they can meet consumer needs and expectations. It should not be a “given” that a provider is able to obtain approved provider status. This status should then be regularly reviewed using transparent assessment criteria (different from accreditation).

Where we have evidence that we have demand and the capacity to develop more places we are more likely to receive allocation but only if it matches the assessment made by the Department based on the current planning formula. Currently, business growth has been constrained by locational controls in regions where we have clear demand.

The proposed approach is likely to benefit large well-resourced providers. The intent to attract smaller providers is unlikely to be realized because their inability to compete with the potential reach of large commercial operations. Large organisation would be able to weather a period of over supply and drive out higher cost smaller providers

We may be able to exercise flexibility in offering places where there is demand by releasing from sites of lower demand or with concerns relating to viability

We do not envisage significant disruption, therefore change management would be minimal.

Introduction of longer announcement periods for allocation rounds would be helpful particularly for smaller providers to prepare adequate evidence and effectively resource the application process while managing business as usual.
ACAR being held at the same time period every year so that providers can better plan for the process.

A communication plan to include detailed guidelines, opportunities to discuss the details with government officials, and a contact centre rather than just an email service to support new processes. Providing an intuitive and user-friendly application tool would also aid the application.
Very clear documentation on what the changes are and how the new system meets the design principles.

The government on the one hand seeks to have a strong commercially driven aged care sector which is determined by consumer choice, and on the other hand seeks to maintain tight control of place allocation, compliance and financial contribution, and management of providers.
Choice for consumers will only work if the level of information about the provider available is dramatically increased and is more accessible. This needs to be more than the “marketing” information. It must include clinical outcome data and consumer satisfaction data. Providers are known to make significant promises and then not deliver and, it is not easy for an older person to change providers once they have been admitted to a residential care facility.
To drive the new agenda of consumer choice and dignity the government should logically allow the market greater freedoms. The risks are that the market could fail and as such a contingency plan is required to ensure the safety of aged care consumers regarding their service and investment. This contingency is best placed with the government.
There will be clear winners and losers with this model. Providers that have a high success rate for achieving allocations from the ACARs may be disadvantaged but it may also open the market to more competition and enable providers to commence operating in areas that they have not been able to “break into”.
This proposed model cannot be considered in isolation of the overall funding model and overall policy context. With high percentages of facilities already under financial stress, the loss of certainty in ongoing income associated with allocated aged care places, will place further financial strain on some providers who do not have either the scale or the cash reserves to weather this loss of certainty.
It will be more difficult to obtain funding from financial institutions for developing new residential care facilities. Without the ongoing certainty of assured funding from an aged care place the provider will need to be able to fund repayments of borrowings from operational surplus. At a time when operational surpluses are diminishing this will be difficult.

A (demand) queue is another way of saying that government is unwilling to provide enough funding to meet the assessed demand. To demonstrate this point by analogy, consider the provision of aged pensions. If the same principles applied, an elderly person assessed as qualifying for the aged pension would have to join a queue and would receive the pension only from the date they get to the front of the queue. This would be completely unacceptable.
The current system has the potential for demand to exceed supply e.g. in discrete regions. The only effective long-term way to avoid an excessive queue is for supply of funded places (under any model, whether assigned to consumers or providers) to exceed demand for places.
A prioritisation system will only address the demand issue for those consumers who are fortunate to be at the top of the queue. The comparison to home care is weak, as there are 4 levels of packages available, and consumers can take up a lower package, and extra packages can be rolled out in a shorter time frame. In RAC, it will be futile consolation to tell a consumer who urgently needs a place that they are only ‘20 places away’ from the front of the queue.
A queue will be an ongoing cost to the Commonwealth and will be complex to manage effectively. The placement process is already demanding for consumers and their families, the increased choice may in fact slow decision making for the consumer at a time of crisis. Provider capacity to meet the consumer needs, not just provision of a vacant place is an important consideration in securing a place for the consumer. The state (acute) health care system will become the default provider if decision making is further slowed.
The queue becomes a funnel to manage a scarcity of funded places and as such will ultimately reduce consumer choice and create queue management problems where consumers are unable to quickly identify a suitable facility when they are assigned a place.
Queuing also creates disparity of opportunity to be placed, because some consumers and consumer representatives, including discharge planners and aged care brokers, will work out how to ‘game the system’ and advance in the queue more quickly than others by accentuating the issues which are critical for rapid placement.

This is reasonable; however, the provider may still be able to ‘cherry pick’, leaving vulnerable people who have urgent needs unable to be placed or them having to approach many providers across a wide geographical area to secure a place. Therefore, the choice element could be negated in some instances for consumers who are not considered ‘good fit’.
In addition to the urgency, for providers, resident mix is a necessary consideration for providing safe and quality services. There will also be additional complexities to what contributes to urgent need including socio-economic factors as well as health and care needs. Providers will need to create a resident mix that provides not only the right resident mix for the wellbeing of the site community but also the most viable business option.
Furthermore, if a consumer is placed and decides to execute their choice to go to another provider, if they are required to rejoin the queue their urgency will no longer be high and as such will not be high enough on the queue to be offered options.

Unfortunately, there are serious considerations which cross over into risk related to funding and compliance matters when a provider considers offering a place to a consumer. For example, a consumer with a recent history of behaviours of concern that involve repeated physical violence or sexual inappropriateness require specialist services that will not be provided by every provider. Allocation will be impacted by these serious considerations as providers will avoid consumers with more difficult care needs (adverse selection).

The validity period could make choice difficult if consumers are worried, they will lose their place while waiting for vacancy at preferred sites. They may feel compelled to take a place which is not preferred or when they are not quite ready to take the place. The need for residential care is often in response to an urgent crisis and cannot always be well planned.
Consumers need a residential care place when they need it. A priority rating system will not be effective as the default for the consumer will always be an acute hospital bed if they cannot obtain prompt approval and allocation of an aged care place.
However, it is important that places remain available for people who are in greatest need. Perhaps short-term immediate placement could be considered.

If the goal here is to obtain the most equitable balance possible then the principles must be:
• Declining a service cannot negatively impact a consumer’s access to future services.
• The reason for declining a service must be understood and trends examined.
• If declining a service because alternative services or informal supports can continue to provide adequate support, then this suggests the initial comprehensive assessment was flawed and residential care is not needed, or the consumer should not have progressed to the top of the queue at the time that they did.
• If declining services due to financial considerations, then this is a serious concern as a person in great need may not be receiving urgently required care.
• If declining a service is due to preferred choice not available, then any barrier to resuming place could arguably be considered anti-choice.
• Re-entry to the queue should be accompanied by re-assessment to ensure that the consumer is appropriately assessed for need against others in the queue. If only a few determinates are to be used, then the new entry date to the queue will force them down the queue.

When people are provided with too great a choice the more difficult it is to make decisions (the paradox of choice). Furthermore, consumers are faced with the dilemma of being new to a complex aged care industry where they may not even know the right questions to ask to make a short list of choices.
Providers know more about their service than consumers do (asymmetric information). The aged care sector could have a ‘trip advisor’ style rating based on consumer perspective. This populist approach may assist consumers to navigate the options but may result in bottlenecks while people wait for what they believe is the best option.
Alternatively, there could be a NAPLAN style rating system which will cost government to manage but may help people to consider options based on evidence. This will again be problematic for people who are unable to afford more expensive care, cannot wait for their preferred place or consumers who have limited options due to geographic constraints and may feel disappointed or frustrated with the limitations.
Another option would be for consumers to be able to filter options by completing a small questionnaire to assist in factors such as location, cost, room style, facilities, specialist services, facility performance. This system will need to be resourced and regularly updated.
Aged care ‘brokers’ (for those who can afford them) and hospital discharge planners currently assist people to find a suitable aged care place. It is likely that brokerage services will expand under this model but will remain inaccessible to low income consumers if there is not an equivalent government funded service.
In a more competitive market where any form of provider ranking exists, it is highly likely that poor ranking outcomes could be legally challenged. In competitive market, it is also a reality that those organisations with the largest budget to market their product can put a positive spin on a product that may be inferior. Experience from other industries shows that high ratings can be a function of marketing budgets and is open to ‘gaming’. Online consumer rating or feedback systems also work better in industries with a consumer focus or repeat business.

Equitable access is best supported via the funding model to ensure that the consumer is able to purchase the care they need. Providers are in a commercial, highly regulated environment where business decisions regarding resident mix must be considered to ensure that the facility is able to provide appropriate levels of care for the cohort of residents within the facility. The risk of getting this wrong does result in serious financial consequences for providers, for example accreditation issues which may result in financial and long-term reputational risk. Extra ongoing costs to provide increased workforce to manage complex needs/behaviours of concern which may be very damaging financially.
Providers will be prudent about risk and be reluctant to take risks which are too high. The only way to encourage support to improve equity in the current system is to provide financial incentives. To produce a shift in provider thinking, these incentives would need to be for the life of the service agreement between the consumer and provider not a one-off admission payment.

Yes, we would be interested in a model which offers real choice for residents regarding small scale semi-independent, temporary care (respite and rehabilitation) and dependent living spaces. A more cohesive aged care hub where people can engage during the day for care, hygiene and therapy services.
A model which offers consumers freedom to make choices will however require considerably more money in the system to support people to receive the quality and safety predicated by regulation. Deregulating the allocation of places will not improve the system without an increase in care fees and care funding. Additional issues such as transport costs, additional carer and therapist workforce would be required, as this would challenge traditional service delivery approaches and business models.
Building and maintaining new and existing Infrastructure is a critical cost driver for any model. Income margins would need to be attractive for investors to manage site development and maintenance, alternatively large capital funding would be required from government. Allocation and administration of capital grants would need to be revised.
Decisions regarding consumer versus government expenditure requires careful consideration. The government will need to be transparent about the real cost of aged care and its expectation regarding co-contribution.

In a competitive environment we would need to develop a strategy which positions us uniquely in the market and will be highly nuanced regarding the business rules. At present the funding model restricts providers from developing highly attractive services for consumers due to the limitations on funding and the restrictions placed on providers from the aged care quality standards.
Better funding will enable more consumer driven care models and better workforce support and training.

Not applicable

Certain market-based freedoms would be required to ensure sustainability, differentiation and innovation of service:
• Authority for the provider to set the fees paid privately by the consumer – have the ability to factor in sustainable pricing such as covering for vacant bed days, and infrastructure maintenance
• Enable flexibility for providers to develop services as marketable products which may include government supported and fully privately funded options
• Enable providers to offer a variety of service options under the one license, e.g. long-term care, respite, STRC, transition care
• Establish a variable consumer contract for residential services to enable consumers to purchase aged care services and accommodation in a range of ways, for example, lease, rent, purchase, reverse mortgage, discrete packages

There will be a reduction in availability of capital financing from financial institutions if a provider does not have assured income from an aged care facility. Currently a bed place translates to assured future funding.
Providers will be required to fund repayment of borrowings from their EBIDTA and with more providers being placed under financial pressure it will become almost impossible to secure funding based on current EBIDTA performance.

The residential aged care sector will only remain an attractive investment for financiers and lenders if there is certainty of income and return on investment. The proposed method of allocation of places appears to create a significantly increased level of uncertainty that may restrict the number of new facilities which can be built as external financiers look for security and a relatively short period to repay debt.

Where the market becomes more competitive and access to bed licenses is more flexible, there is increased risk that occupancy could be detrimentally affected; it is likely that investment will be more difficult to secure. Suggest consultation with the major banks is required to seek their view on how they would assess debt funding proposals if there is no certainty on bed places.

In the current arrangement, the return on investment is a long-term prospect.

The increased competitiveness within the aged care sector has the perverse outcome of reducing innovation, (especially through collaboration between providers), which will also be unattractive to investors. It could create a ‘race to the bottom’ where larger providers are able to provide lower cost facilities and squeeze out higher quality providers/facilities.

There are a range of options for example, inter government agency collaboration to allow government service infrastructure to be flexibly used in these areas – extension of MPS/APHCP to include use of education, welfare, disability, indigenous services to provide sustainable tailored services.
Government and corporate collaborations to establish solutions which are tailored to specific communities.

Currently, residential aged care services in our experience, make a concerted effort to accommodate the needs of vulnerable cohorts. Our service provides a coordinated effort with the provision of extra chaplaincy support and external services where required.
There could be opportunities for aged care providers to collaborate more intensively to provide highly specialized service options, but a competitive environment would be counter to this
Another possibility would be the creation of ‘flying squads’ who are able to provide specialist short-term interventions for complex needs across the sector as needed; not only providing assessment and advice, but also additional resources for providing additional care.

There are existing conditions which could be extended, and those specialist services could be best supported by further financial incentive to provide the additional services and meet the higher costs which may be attributable to the location or consumer cohort.

The benefits of model 2 are increased focus on consumer control over the places. As the consumer is in control of the place the providers will develop a stronger consumer engagement culture to be able to best market their services. This should drive providers to focus on innovation, achievement of consumer outcomes and responsiveness to consumer requirements and needs. The costs for the organisation may include higher marketing costs, increased business administration, increased costs in maintaining high calibre buildings, fittings, activities, consumables, food to support consumer and stakeholder experience. Larger, well-resourced providers will be able to handle the additional investment required and smaller organisations may struggle. The risk is that the freeing of places may result in less financially robust organisations being unable to expand thereby narrowing the choice for consumers ultimately. It is worth noting that consumers are not best placed to know what are the most important features of care and service that ensure their own wellbeing. They may pay more for factors they perceive to be most important as occurs in other aspects of highly marketed consumer goods.

It is likely to contract the number of providers and the providers which are viable will be larger organisations which have opportunities to diversify their business models to sustain services during fluctuations in demand. The larger organisations will be able to flourish in an environment where there are less competitors and larger market share will further support for-profit entities and therefore shareholder interests. This disruptive market force is likely to reduce the number and relative proportion of not-for-profit entities.
The sector will become more consumer driven and this is likely to increase the sophistication of marketing, hospitality and ability of organisations to manage consumer feedback, rather than the quality of clinical and care services.

The more flexible the model for RAC is going forward, the more likely that seamless transition from the home care program to RAC will become. This could enable movement into and out of care levels and care types if the funding incentive is aligned and rewards outcomes.

In the model where a consumer has choice and the funds follow the consumer it is consistent to then allow the consumer to choose their type of service including respite. If places could be used for long-term or respite care, providers would have additional options for reducing bed vacancies.
Increased respite opportunities for consumers is likely to be favourably received by consumers, however to ensure viability for providers demand will need to be sufficient to keep the bed occupied or alternatively be lucrative enough to manage any dip in supply.

It appears that extra services are diminishing as an option for residential aged care and being rapidly replaced and overtaken by additional service options.
It is likely that additional services could completely replace extra services or alternatively changes to the models used by providers to charge for care or service could include packages of care or other service options which are less regulated. This could obviate the need for extra or additional services.
Consideration must be given to the impact of outgoing RADS for providers transitioning from extra services to additional services. This could cause a provider to no longer meet prudential requirements if they lose significant capital with the loss of RADS in a short period of time.

In relation to the capital grants component of ACAR, it is worth noting that the most recent funding for capital grants of $60m would only be enough to build about 270 new places (or three medium size facilities). We do not view this funding as a key component of the ACAR process and the administration of capital grants could be relatively easily administered via a different mechanism.

This model will require a substantial lead time to assist providers to realign their business and service models to be able to administer the likely changes. Any change will need to include a process to grandfather existing resident arrangements. The completed model with guidelines will need to be received at least 24 months prior to implementation. A staged approach which gradually introduces the critical features of the new model may support a more seamless introduction. Any change will need to consider impact on funding models and accreditation processes.

A training program is essential and e.g. a call center to clarify and support transition. Detailed guidelines must be available on an interactive website. Engage with stakeholders such as hospital discharge planners and aged care brokers about the change. Access to service and system experts who are able to support providers on site face-to-face to adopt the new IT.

This reform could be an opportunity to consider the introduction of macro-economic reform measures to assist in the affordability of consumer choice in the future. For consumer choice to work, consumers need adequate resources to purchase from a range of quality providers and service options. Where the resources are inadequate or the options too narrow, real choice cannot exist.
Greater collaboration between government services and aged care providers may provide innovative options to promote choice.
Changes to the regulation of places must be considered in the context of increasing care costs, dependency ratios (welfare recipients to tax payers), financial means (superannuation, real estate) and consumer expectations. Changes to the funding provided if certain supported ratios are maintained, increased contribution from consumers with higher means (user pay) and the removal of the exemption of the family home from the asset test could be considered.
Another option could be coordination based on regional planning areas, where a broad range of services can be flexibly offered to a population within an envelope of resources which are tailored to the needs of the consumers. There could be a base funding level and a mix of government, not for profit and for profit services offering a comprehensive suite of services. The funding pool could be adjusted to manage complexity, locational factors and special needs. Places could be used flexibly to manage demand and consumer choice.
The regional model could be coordinated by government or outsourced. The planning region could be responsible for governance and outcomes for the population. This regional approach could be based on maximizing wellness and base funding could be used flexibly to meet the expressed needs of communities and individuals. If funds were able to be used flexibly and consumers were engaged in decision making at a community level, there would be an increased likelihood of innovation, prevention, restorative and maintenance programs.

Nil