Residential aged care: Proposed alternative models for allocating places

Consumers
• Gives consumers surety that there is and will continue to have residential care options in their location thus instilling confidence in the system.
• Gives consumers surety that planned distribution of places contributes to the ongoing viability of the sector (and assists providers currently operating to remain viable)
• ACAR provides certainty that future need will be met. This can be increased or decreased in line with demand.
• Consumers can be confident that they can receive a place in an aged care facility when they need it, if they have an ACAT assessment and are registered with MyAgedCare. Both of which can be undertaken before they find themselves in a medical crisis situation.
• Consumers currently have choice; they can choose the location where they want to live in residential home, the amount they want to spend on RADs or DAPs, the lifestyle they are after, service offerings, accommodation style – unit style, or single room. This area is constantly evolving as the vacancy rate ensures that there is already competition for consumers and many providers have been and continuing to upgrade their building stock

Providers
• Planning mechanisms for future expansion based on successful application of ACAR.
• Ensures appropriate national distribution of places including in prosperous and thin markets.
• The model supports the financial growth of RAC.
• The model allows providers to operate a viable service in thin markets.
• Thin markets by definition can’t be ignored because collectively they are make a thick market.
• DGAS supports introducing flexibility to the allocation of ACAR places which allows providers to apply for places outside the standard ACAR funding round announcements with a set criteria including: viability, social outcomes which include catering for thin markets, growth should be capped at 20% of their current allocation or up to a total of 20 places.
• The current model has created an occupancy national rate of 90.3% this drives innovation and competition, providers have to work hard to drive occupancy up.

• Planning mechanisms for future expansion based on successful application of ACAR.
• Ensures appropriate national distribution of places including in prosperous and thin markets.
• The model allows providers the potential to operate a viable service in thin markets.
• Thin markets by definition can’t be ignored because collectively they make up a substantial market
• DGAS supports introducing flexibility to the allocation of ACAR places which allows providers to apply for places outside the standard ACAR funding round announcements with a set criteria including: viability, social outcomes which include catering for thin markets, growth should be capped at 20% of their current allocation or up to a total of 20 places.
• The current model has created an occupancy national rate of 90.3% (vacancy rate of 5.7%) this competition to fill beds drives innovation and competition, providers have to work hard to drive occupancy up.

• Providers already strive to meet consumer needs and requests, in order to fill their beds.
• Consumers already have a loud voice and providers value their requests as reflected by the ever increasing additional services being offered and taken up. This is on a steep trajectory.

• Old buildings are being past by, as consumers demand and are choosing newer private rooms, this will lead to a natural replacement of older shared rooms over the next few years.

• ACAR funding rounds are announced at irregular intervals. This makes it difficult to prepare a submission in a timely manner.
• Providers land bank while waiting for significant industry issues to be finalised. (ie new standards, Royal Commission, funding instrument etc)

Data on increasing additional services, vacancy rates, financial viability and declining margins is all available from StewartBrown and Associates.

• DGAS supports the proposed Model 1 with some modifications
• Model 1 assures ongoing service and choice for consumers in all areas and markets (including thin markets)
• Model 1 can be improved by creating a stable ACAR calendar. Creating an annual process whereby there are known opening and closing dates, announcement dates for the results, whereby providers can plan their application process much better. Ensuring there is an annual process will also remove the ‘lucky dip’ scenario as providers will have the ability to seek feedback and improve their submissions each year. This benefits the entire sector, as projects will more rounded and considered, thus increasing their prospect of success. The overall quality will increase as there are more regular ACAR’s.
• Model 1 can be modified by increasing Capital Grants as stimulus for specific thin markets and for innovative models to be trialled . Can Pilot/Trial some innovations within a geographic area to test the advantages and disadvantages of the innovations.
• ACAR creates a competitive market by the way allocations are made. This allows the government to control the number of places. The control aspect is important as it has been identified in both model 1 and 2, whereby the government wants to control the ‘supply’ either through allocation of places or via the proposed ticketing/prioritising system.
• We don’t see transparency as a major problem. In any case, this can be overcome by publishing the strong “elements” that led to the successful bids in each respective area. Eg. Strong focus on ethno specific in a particular location due to the demographic with specific cultural services delivered on site. This informs future ACAR bids. By making this information public it will lift the standard of bids overall.
• Lengthy ACAR submissions should not be seen as a case for change. This is a strength of the current system as it ensures that new projects are well researched, well considered, well planned and well resourced. This is a vital piece of the puzzle that ensures the industry is sustainable which in turn is vital for consumers. As we have seen in recent weeks with the sudden closure of Earle Haven sent shock waves through the community. Sustainability is paramount as it provides ‘confidence’ to consumers.
• It is clear how respite will be provided under Model 1. Respite services achieves several objectives. Apart from assisting carers and consumers to have much needed respite at different times of the year, it also provides a taste of what residential care is like. It enables consumers to try several facilities during the lead up years prior to needing permanent care and thus enables them to narrow down their preferred facilities in the event they require permanent care in future. It also enables consumers to enter residential age care during a crisis while waiting to get all the other affairs in order.
• Model 1 is already permitting a consolidation within the industry. The data already shows that the industry has been transitioning to an economy of scale model.
• DGAS supports the reduction in locational controls on the distribution of residential aged care places.

• DGAS supports the monitoring of offline places and reallocation of places if providers don’t meet obligations that show a plan for operationalising them in an agreed and reasonable timeframe.

• DGAS supports the proposal to have Providers who are allocated places and who do not meet operational obligations return allocated places to the Government for reallocation following an agreed and reasonable timeframe.

• The Government introduces a flexible ‘top up’ administrative model where organisations can automatically and easily apply for ‘top up’ places outside the ACAR funding round.

• The current allocation model in the most part ensures adequate supply and equitable access to residential aged care services.

• Without intervention, there will continue to be places unavailable to consumers in locations where a place is required.

• ACAR allocations should be made in rural, regional and remote areas in a flexible and sustainable way. There is a need to have different requirements for the provision of aged care.

• Flexible administrative options (such as 'top up' places) allocating places to address and meet the needs of thin markets.

ACFA reported in 2019 report that since 1 July 2014 the rate of increase in consumers of respite care is more than triple that of the increase of permanent residents, this highlights a need to retain the current Model 1.

ACAR already allows these special needs group to be catered for as it encourages well thought out proposal to be submitted with conditions to meet these vulnerable cohorts requirements attached to the allocated places.

See other comments

Consumers Benefits

• Maintains a reliable predictor of services availability, via good service planning at both Government and Provider level.
• Direct access to a service once provided with ACAS and MAC reference number, not need to wait for prioritisation by MAC.
• Providers and Government continue to work together to ensure supply meets growing and changing demand, and by providing better options to consumers.

Consumers Risks

• Choice may be limited to consumers in some markets if they cannot find a suitable Provider that meets their needs.
• 40,000 + places not being taken up by providers reducing access and choice to consumers.

Benefits
• Certainty about who the competition is and better transparency about potential growth of competitors in the area through the ACAR funding round.
• Ability to expand to wider geographic areas based on providers ability to offer a service need.
• Ability to offer confidence to consumers that the service offered will be ongoing.
• Reduce the opportunity for further disruption, in an already highly disruptive sector.
• DGAS supports the introduction of a flexible ACAR option for one off small or specific funding submissions outside the scheduled ACAR funding round which enables providers to meet demand and to maintain or improve viability
• Model 1 is likely to provide ongoing and reliable employment, workforce planning, budgeting and management enhanced for providers when growth is known and predictable
• Workforce stability is critical to wellbeing of residents – The RC identified that regular and carers that know the needs and preferences of consumers
• Workforce need certainty to seek work in the sector
• Provides the government better fiscal assumptions

Potential risks

• Growth may be impacted using this model, as places are allocated using a government planning formula, not based on demand and need.
• Adding administrative regulations to the process in an already highly regulated sector has the potential to negatively impact on viability.
• Banks are preparing and expecting ACAR to be removed, meaning organisation have to invest in preparing for this change.
• Disruption of the sector may result in aged care places no longer being needed if older people are able to receive adequate care in their own home

Refer to comments in Q 42.

Overall Comments for Model 2 - Not supported and why

• This model indicates that there will be strategies in place to cater for thin markets and that the other critical issues currently being faced by providers such as financial viability and future funding instruments will have been resolved. We don’t believe that the “residential age care places” issue can be looked at in isolation. The age care system has to be considered holistically as an eco-system. The fact is that thin markets are not just thin. If you combine the thin markets together (multi-cultural, homelessness, ethno specific, supported, etc) then the thin markets become a significant major portion of the overall market.
• Removal of ACAR will lead to providers pursuing investment in location/segmented markets that are lucrative, at the detriment of thin markets and other less lucrative locations. As a result, Consumers will have less overall choice.
• The current Home Care system is evidence consumer allocated places does not work. Regardless of the interpretation of the data on waiting lists, there is ‘hard’ data that states there are consumers waiting for much needed care. If a similar ticketing system is introduced in residential aged care this would put consumers “at significant risk” and would also affect the efficiency of the system. At present, the key drivers of financial sustainability are Occupancy, Funding per bed day, and Rostering to revenue ratios. At present there is a review being undertaken on an alternative funding model. By introducing a “MyAgeCare” (MAC) led ticketing and queuing system, will also remove another key driver from providers. The efficiency of the system is currently being driven by providers who have a vested interest in the efficient admissions system (which includes guiding, educating, hand holding customers through the “Maze” of entering aged care. This strength (being driven solely by the vested interest of providers) will be lost under the proposed model 2. MAC already has inherent flaws and creates significant inefficiencies which translates into costs for both consumers and providers. Increasing the load on MAC will create “speed humps” in a critical part of the already complex residential aged care road. The issues with MAC are well known and documented and as such, this is a significant weakness in Model 2.
• One of the main points quoted for the “Case for Change” is that consumers have limited choice. The initial reaction is that Model 2 will enable providers to build additional beds without restriction. However, following that rationale through to the next stage also highlights that this will cause additional financial distress to an industry which is currently struggling. The knock on effect is that providers will close facilities, due to old stock, financial losses (or worse still have a repeat of Earle Haven). This would ultimately result in same or less choice. The example we provide is that of a neighbourhood with 3 Coffee shops who are just getting by with low to average returns which keeps all 3 operating. A fourth coffee shop opens in the neighbourhood which results in all coffee shops earning very low or negative returns. This results in 2 coffee shops closing down. The end result being that the local consumers now have 2 coffee shops to choose from compared to the 3 previously. As a result, the case for change may drive more competition initially but the ultimate result is fewer choices, and in particular providers who exit thin markets in the pursuit of more lucrative ones, which will leave consumers with less choice.
• Model 2 will have a negative impact on new consumers as many come into residential age care from hospital (close to 90%) following a medical crisis. A queuing and ticketing system will further amplify the crisis being experienced as it is already compounded by administrative complexities, legal, financial and family dynamic complexities. Currently, our organisation is able to escort a consumer through the process and admit them within a week. This will be increased substantially under Model 2 as there will be further delays and frustrations to consumers caused by the queuing and ticketing system.
• It is unclear how respite will be provided under Model 2.
• Lack of bed places will affect the borrowing ability of providers and will result in lower Loan/Value ratios (LVR) imposed by banks. This will further reduce access to capital at a time when RAD levels are already declining. This doesn’t bode well if the objective is to increase the level of investment.
• Increases the risk of provider failure which in turn affects all providers via the Bond Guarantee scheme

• DGAS does not support people needing to access residential aged care be place in a queue.
• Length of stay in residential aged care has reduced substantially over the past 3 to 5 years. People are coming into residential aged care at a time of crisis; this is usually after all other avenues of home based care options have diminished. In the majority of scenarios DGAS see people accessing residential aged care within a week of first making contact with our organisation.
• The Royal Commission has shown that the community expect that people will be able to access the type of care required when it’s required., particularly in residential aged care, when it is as a result of a medical crisis.

• The evidence that Home Care prioritisation methodology is one to emulate is a flawed premise, given the number of complaints that have emerged that people are not accurately allocated the correct home care package and given the first hand experiences of people waiting to be allocated the next level package.
• The Royal Commission has heard that the community expect that people will be able to access the type of care required when it’s needed.
• This takes away a consumers ability to self-determine and determine themselves when they need to move to residential aged care. This decision should not be made whilst waiting in a queue.

• Acuity levels
• Health conditions - complexity of health conditions
• Isolation
• Homelessness
• Poverty
• Hazards
• Risks to personal safety
• Elder abuse
• Family support
• Alternatives available to the person while waiting

• Consumers allocated a specific ticket number may find themselves waiting in the queue to be 'prioritised' while they are desperately waiting to be discharged from hospital and nervously waiting to take up their place in residential aged care before they lose it (as it will be given to someone else).

• Consumers may find themselves waiting for a number of days to take up a place in aged care following the issuing of a prioritisation number, could cause unnecessary distress for residential care consumers looking for an aged care place. If a consumer doesn’t sign a formal agreement within a set number of days then the place will be reissued to another consumer and the original consumer will go back on the waiting list. It may take a number of days, weeks or months before they get another prioritisation number to take up a place again, causing further distress.

• For providers there is a high risk places will be not be filled at the time of a vacancy, due to the timing of the prioritisation given by MyAgedCare and then the family needing to source a vacancy in a desired facility, this will impact on occupancy and negatively impact financial viability
• Giving residents a designated time to sign a formal agreement will distress consumers and impact negatively on occupancy.
• This process will negatively impact on viability and sustainability.
• Our experience tells us that consumers seek out information about moving to an aged care facility when they are in a crisis, and under pressure usually from the hospital to free the hospital bed.
• Providers will lose too much time and money with Model 2 , if a consumer is given priority and a timeframe to enter into a formal agreement, they may take the full time allocated and then decide not to take up the place, leaving the provider waiting for another consumer cycle to take place.
• Who will cover the costs for lost time while consumers are waiting for prioritisation to occur?
• Model 2 will add an addition administrative burden to providers as consumers will ask providers to explain the cause of the delays and to reassure them that a place will be available soon.
• Capability of staff in MAC to be able to assess the needs and to prioritisation, this requires a high degree resourcing.
• The experience of CDC in Home Care since 2017 where funds were issued directly to the consumer has resulted in numerous cases of the inadequate allocation level of a home care package, Model 2 does not address or explain how prioritisation will be market driven rather than more government control over the allocation of places.

• Once a consumer is approved and prioritised, this approval should not expire.

Our experience tells us that consumers become very distressed and frustrated when dealing with MAC, particularly when a consumer's situation and care needs change in a very short time frame. Model 2 does not cater for the needs of frail, vulnerable older people.

• Consumers need time to understand and navigate the aged care system.
• The data shows that older people prefer to remain at home after a significant event.
• Our experience tells us that people often return to hospital several times before they ultimately take up an aged care place in residential care by this stage, they usually have a medical crisis, therefore a ticketing system and waiting to be prioritised put them in a situation of undue risk.
• Our experience is older people's situation can change quickly and dramatically. Model 2 does not account for people immediate needs.

• It usually takes a family member or social worker in a hospital or a community agency to advocate on behalf of consumers to find a residential aged care place that best meets the needs of the consumer.
• Consumers are looking for a place in residential aged care when all other options for care and support are exhausted. They are often recovering from a serious event or a series of events before a person takes up a place in residential aged care.
• Model 2 assumes people are able to navigate the aged care system themselves; our experience is that this is not the case. Even with family members looking for and visiting facilities on behalf of consumers, this still a distressing time for all.
• People with limited resources and capacity (all friends and family) will be very disadvantaged and miss out on accessing aged care under this model.

• We would be forced to engage more casual staff to enable business viability due to more volatile occupancy as a result of longer waiting times for people to be prioritised.
• Royal Commission has heard that the best outcomes for consumers are achieved with a stable workforce.
• Model 2 would force providers to create a more flexible workforce contrary to the above statement.

• Continue to innovate and be person centred

• The innovation and differentiation under Model 2 will be the same as Model 1.

• ACAR ensures the security of financing.
• Project can be financed with an LVR of 70%
• Model 2 will make it more difficult to secure financing and will lead to a lower LVR.
• This has been confirmed by our bank who have stated an LVR of 50% is likely under Model 2

Refer comments Q 42

• Inability to plan adequately for future demand and need, based on not having control over the release of places to consumers directly.
• This model does not support workforce security or planning.
• Lack of places available for people when they need it most.

• Introducing Model 2 will continue to loose community confidence in a system that is already under immense scrutiny.
• Additional processes in accessing and allocating a person’s eligibility and prioritisation into RAC will take more time and energy for family members, social workers or community based workers to navigate the system on behalf of the elderly.
• Providers need to have sufficient transition times to adjust to a new Model.
• More data analysis of sector to increase innovation will be needed
• Provide incentives to get providers to enter thin markets, flexible models and respite services
• Transition to new models requires cultural change processes in place (designed, tested and applied)
• Workforce will be casual – resident outcomes will decline.

Refer to Q42

• Providers should be provided with incentives to provide respite to people in need, subsidies, fees and charges apply for the use regardless of the length of stay without this much needed respite will not be made available thus putting elderly consumers and their carers at risk.
• Providers should not be disadvantaged for having a bed allocated to a respite consumer.
• Respite will be in higher demand with the desire for people to remain living at home for as long as possible.

Ample transition time needs to be provided for any change as it has significant implications for the structure and viability of the industry. This significant transition period will provide time to reduce any negative impact as a result of unintended consequences.

Given the current the reviews been undertaken and the current financial state of providers and the Royal Commission. It is our view that no transition to Model 2 take place within the next 7 years, in order for all the other more immediate issues be addressed such as Royal Commission recommendation, new funding instrument, new standards etc.

Australia requires a national discussion on what aged care services we are wanting for our elderly and what prices we as a nation are prepared to pay to meet this expectation.

Choice comes in two forms:
1. Number of facilities and room types to select from
2. Different services to choose from within the facility chosen
The comments below address both of these.
Consumer choice can be encouraged with the following suggestions:
1. Maintaining Model 1 with some enhancements will encourage more rooms to be built. This can be achieved by allowing existing facilities to automatically (without going through ACAR) increase the number of beds by up to 20% or 20 places (whichever is the greater) on an “existing” site each year. This will allow small facilities to expand for viability reasons. This typically will be a benefit to Regional Rural and Remote areas which are often of a smaller scale. For example, a 30 bed rural facility can increase to 50 beds in a year without having to apply through ACAR
2. Create more certainty for providers which reduces the level of risk and thus encourages investment. At the moment, there is too much uncertainty, far more than most industries. Apart from the usual uncertainties that most industries deal with, there is capped pricing regulated by the government, subsidies controlled by government, specified care and services regulated by legislation, uncertainties about licensing and funding, as well as, indexation which is uncertain and announced at the last minute usually on the 29 June well after new financial year budgets are completed. In every aspect of revenue, there is uncertainty and/or restraining factors. By modifying some of these factors, the industry can reduce its risk and thus make investment decisions with some confidence. Some of these simple factors can include:
a. announcing COPE indexation by mid May each year
b. another is to set a clear framework of what Additional Services can and cannot cover. To date, this has been unclear and there have been some high profile cases that are clouding the issue. This will drive innovation in services and provide more choice to consumers. It will also unshackle providers and enable them to explore alternate revenue streams thus improving the financial sustainability of the industry.
c. With the introduction of CDC in residential care, there has to be an acknowledgement that this comes at a higher cost to the provider, as a result, there is another compelling reason to establish a clear framework for additional services.
d. Review Means Testing and Annual Cap rules to increase the co-contribution of consumers and thus increase the low funding currently being received from ACFI.
e. Establish co-ordinated trials/pilots for innovation with shared contributions and learnings in areas which affect the entire industry
f. Encourage innovation in financial products available to consumers. Many consumers are “Asset rich” but “Cash poor”. This low liquidity means that they are unable/reluctant to contribute towards services that they would like and would impact on their well being. Financial products that allow consumers to unlock equity in assets will provide more choice to consumers. Financial products such as such as reverse mortgages, without the complicated elements associated with Reverse Mortgages.
3. Address the future funding instrument as this is causing significant uncertainty in the industry and without this being addressed, no one will want to invest the required capital in an industry where 45% of facilities are losing money. This is the single biggest reason for lack of investment, followed by low occupancy. There won’t be any significant investment in additional beds while there is a vacancy rate of 5.7%. That is too high a cost in dormant under utilised capital. That equates to $1.7m in unused bedrooms in a $30m facility. It also has a negative impact on operating costs as it affects many fixed operating costs as well as depreciation. All these factors play a pivotal role when any Board looks at a business case for a prospective new project as it affects the bottom line, payback period and rate of return.

In the event that a final decision is made to pursue Model 2 either in its stated form or in a modified form then we strongly recommend that a substantial transition period be included in the implementation of that model.