Residential aged care: Proposed alternative models for allocating places

* Certainty of supply - particularly in regional, remote and rural areas
* Simple process to secure a bed during what is a stressful time
* Process does not require 3rd party prioritising of their perceived needs - the consumer decides when they require the bed
* Consumer able to move in when they want - even if lower care needs
* They have comfort knowing that the Government has issued the bed license to the provider after a comprehensive review of the providers ACAR application submission
* Ability to find a placement quickly after a trauma/accident/acute episode/exit fom hospital
* Increased certainty of supply leads to less likelihood of provider/service failure (eg Earle Haven)

* Known process and timing around when ACAR will occur
* Certainty of supply relative to demand
* Certainty of supply improves investment decision and assists the provider in obtaining funding - particularly in rural, remote and regional areas
* Ability to utilise lower care facilities that may not have a use in an environment where prioritisation would see only those with higher care needs reach the top of the queue
* Increased certainty of supply leads to less likelihood of provider/service failure (eg Earle Haven)

* The paper does address the impact on competition from the number of providers in the market. It is not clear if the number of providers (which has been steadily decreasing in a growing market) will increase or decrease and what is the better outcome for consumers

* The paper does address the impact on competition from the number of providers in the market. It is not clear if the number of providers (which has been steadily decreasing in a growing market) will increase or decrease and what is the better outcome for consumers.
* The short timeframe to complete the ACAR application
* Lack of transparency re success of an application
* Uncertainty when the next allocation will occur
* Lack of enforcement of compliance with bringing beds online

REFORMS TO ACAR
Make ACAR more transparent and better targeted
The drivers of place allocations through ACAR need to be reviewed and more clearly disclosed.
A framework for more rigorously evaluating supply constraints and unmet needs should be developed. And addressing these supply constraints should be given greater priority in allocation decisions.
Improved transparency should also extend to disclosure of the timing of planned ACAR rounds well in advance.
Tighten controls on unused places
Places that remain provisional or offline for significant periods of time should expire, unless the provider can clearly demonstrate extenuating circumstances.
Royal Commission
Finally any decision to change the ACAR process should be informed by the recommendations from the Royal Commission into Aged Care Quality and Safety.

Happening at a National level however it is exacerbated at a regional, remote and rural level

* That nearly 50% of providers are not making a financial return (Stewart Brown).
* The year on year decrease in the number of providers in the sector
* The increased instances of providers such as Earle Haven failing and requiring the Dept and other providers to step in

Needs to take into account the current financial situation of providers and the impact that any changes will have on providers

Doesn't take into account any outcomes from the RC

Needs to take into account the current financial situation of providers and the impact that any changes will have on providers

Doesn't take into account any outcomes from the RC

This is the preferred model

Transparency in selection of preferred providers through the ACAR process

Need to differentiate between RRR and metro to ensure investment in these areas.

Continue to focus on SNG and ensuring providers allocated licenses based on their submissions are actually delivering to these groups.

Attach conditions to the allocations and ensure deliver within specific timeframes

nil

Transparency of the process
Longer time to complete the application process with a greater focus on the provider not the statistics they're able to source (so smaller providers who are unable to finance an external consultant have the opportunity to secure places)

Enforcing delivery of beds as per submissions

Model one providers some level of certainty. As a provider focused on areas outside metro - this enables us to develop in RRR areas and support older people living in these areas.

The limitation on supply through a staged ACAR process - especially in RRR areas - equates to more stable occupancy and more certainty around staffing models.

The sector will continue to support those living in RRR areas
The level of stability will continue with service provider failure rare

CASE FOR DEREGULATION
As the paper notes, ACAR has a number of problems:
 the number of criteria that are considered mean that it is not transparent how decisions are made;
 there may be mismatches between supply and demand that inhibit access to services;
 supply constraints limit competition (together with the accompanying choice and pressure to improve or exit that competition creates); and
 many allocated places are non-operational.
However, the discussion paper provides limited evidence on the extent of these problems, which makes it difficult to determine the nature, scale and urgency of reform that is required.
The roughly 30 per cent success rate in the latest ACAR round provides some evidence of supply constraints. However, it seems unlikely that the full 37,000 places that were applied for would be built if the constraints imposed by ACAR were removed – especially given the current low occupancy levels and the high number of non-operational places.
Given falling occupancy rates, providers are already facing significant pressure to improve and innovate to attract new consumers. ACAR itself should also be responsive (albeit slowly) to local mismatches between supply and demand; where services are capacity constrained they should be able to apply for and receive additional places. Providers also report that the slow operationalisation of places is often due to delays in planning approvals.
Additionally, declining investment intentions in the face of deteriorating financial performance and the large number of provisionally allocated and non-operational places suggest that releasing the constraints imposed by ACAR may do little to increase competition and expand capacity until other constraints facing the sector are resolved. Increasing uncertainty (at least in the medium term) increases investment risk profile which would further limit investment in residential care to meet growing demand.
REFORMS TO ACAR
Make ACAR more transparent and better targeted
The drivers of place allocations through ACAR need to be reviewed and more clearly disclosed.
A framework for more rigorously evaluating supply constraints and unmet needs should be developed. And addressing these supply constraints should be given greater priority in allocation decisions.
Improved transparency should also extend to disclosure of the timing of planned ACAR rounds well in advance.
Tighten controls on unused places
Places that remain provisional or offline for significant periods of time should expire, unless the provider can clearly demonstrate extenuating circumstances.
Royal Commission
Finally any decision to change the ACAR process should be informed by the recommendations from the Royal Commission into Aged Care Quality and Safety.

Redacted text Response to the Discussion Paper: Proposed Alternative Models for Allocating Residential Aged Care
Places Page 4
File Ref:Redacted text Response to the Discussion Paper - Proposed Alternative Models for Allocating Residential Aged
Care Places 13092019
Date Created: 12 September 2019
Last Reviewed: 12 September 2019
CASE FOR DEREGULATION
As the paper notes, ACAR has a number of problems:
 the number of criteria that are considered mean that it is not transparent how decisions are made;
 there may be mismatches between supply and demand that inhibit access to services;
 supply constraints limit competition (together with the accompanying choice and pressure to improve or exit that competition creates); and
 many allocated places are non-operational.
However, the discussion paper provides limited evidence on the extent of these problems, which makes it difficult to determine the nature, scale and urgency of reform that is required.
The roughly 30 per cent success rate in the latest ACAR round provides some evidence of supply constraints. However, it seems unlikely that the full 37,000 places that were applied for would be built if the constraints imposed by ACAR were removed – especially given the current low occupancy levels and the high number of non-operational places.
Given falling occupancy rates, providers are already facing significant pressure to improve and innovate to attract new consumers. ACAR itself should also be responsive (albeit slowly) to local mismatches between supply and demand; where services are capacity constrained they should be able to apply for and receive additional places. Providers also report that the slow operationalisation of places is often due to delays in planning approvals.
Additionally, declining investment intentions in the face of deteriorating financial performance and the large number of provisionally allocated and non-operational places suggest that releasing the constraints imposed by ACAR may do little to increase competition and expand capacity until other constraints facing the sector are resolved. Increasing uncertainty (at least in the medium term) increases investment risk profile which would further limit investment in residential care to meet growing demand.

Needs to take into account EBA cycles, impact in finances - especially for NFP who may have placed a value on the license.

Improvements to the MAC
Community consultation - both consumers and providers
Consultation with financial providers

CREATION OF A QUEUE
Given the number of people with standing residential aged care approvals, the abolition of licences in the absence of uncapping supply would likely involve the creation of a queue.
A residential care queue would force people who wish to enter care quickly to wait (possibly in hospital) while placing pressure on those that wish to stay at home as long as possible to enter residential care or give up their approved place.
While some people may already be waiting because their preferred service is full, there would be few cases where there is absolutely no spare capacity within a region.
Additionally the priority queue has a number of notable challenges for the consumer and the provider including:
1. Consumers requiring urgent residential care, for example trauma leading to hospital admission then requiring residential care admission. It is unclear how these customers will be treated if there is a queue process.
2. Consumers with lower care needs seeking placement in an aged care facility may not reach the “top of the queue” if clinical care needs are a major consideration in the queue prioritisation.
3. Given point two, existing residential care assets that were formerly “low care” or hostel type accommodation - and most likely unsuitable for consumers with higher care needs - may remain vacant.
A queue would also create challenges for business planning and viability as providers may have invested in response to local demand but be unable to fill places because demand is higher than expected elsewhere.
CROWDING OUT SERVICES TO VULNERABLE GROUPS (INCLUDING RURAL AND REMOTE)
ACAR targets the allocation of places towards services that support vulnerable groups and those in rural and remote areas, whereas a market based approach targets supply towards the groups that will deliver the greatest return.
A market based approach may actually be more responsive to some niche markets than administrative allocations, but there is a real risk that over time commercial objectives will crowd out social objectives either through competition for priority within organisations or through competition between organisations.
Other mechanisms also act to support supply to vulnerable groups, but relying solely on these mechanisms would be risky, particularly in the absence of a rigorous approach to measuring vulnerability and unmet need.
LIMITED CONSUMER INFORMATION
Consumers have limited information on the quality of care in a service (particularly in advance of entering care) so competition is likely to occur on more visible factors such as build quality; service/feature lists; and the size and effectiveness of marketing activities.
INCREASED DISRUPTION
Competition is messy and disruptive. Under an administrative approach if two providers wish to open new places within a market, the administrative decision maker evaluates the applications and decides which is best. Often this will not reflect consumer preferences. However, under a market based approach both providers may invest (perhaps without knowing that the other is doing so) and discover the market is too small to support both of them, forcing significant investments to be written off, particularly as demand in residential aged care is likely to be unresponsive to price.
More generally, competition will lead to increased numbers of service failures with impacts on their clients and potential prudential risks. This may be more pronounced in regional and remote areas.
Aggressive expansion strategies may add risk and instability that later require the closure of many services after other providers have already been pushed out of the market (as occurred with ABC Learning and its subsequent failure).
Further, a change to the competitive environment (such as a queue) would likely increase marketing expenditure in an industry already under significant financial pressure and experiencing provider failure.
CURRENT FINANCIAL INSTABILITY AND PROBLEMS WITH FUNDING
Introducing further instability in the sector would be particularly risky at a time when providers are already under significant financial pressure due to problems with the quantum and allocation method for residential aged care funding.
REGULATORY BARRIERS TO PRODUCT DIFFERENTIATION
Product differentiation is currently heavily restricted by problems with the regulation of additional services, and broader limitations on residential aged care pricing such as the basic daily fee.

CREATION OF A QUEUE
Given the number of people with standing residential aged care approvals, the abolition of licences in the absence of uncapping supply would likely involve the creation of a queue.
A residential care queue would force people who wish to enter care quickly to wait (possibly in hospital) while placing pressure on those that wish to stay at home as long as possible to enter residential care or give up their approved place.
While some people may already be waiting because their preferred service is full, there would be few cases where there is absolutely no spare capacity within a region.
Additionally the priority queue has a number of notable challenges for the consumer and the provider including:
1. Consumers requiring urgent residential care, for example trauma leading to hospital admission then requiring residential care admission. It is unclear how these customers will be treated if there is a queue process.
2. Consumers with lower care needs seeking placement in an aged care facility may not reach the “top of the queue” if clinical care needs are a major consideration in the queue prioritisation.
3. Given point two, existing residential care assets that were formerly “low care” or hostel type accommodation - and most likely unsuitable for consumers with higher care needs - may remain vacant.
A queue would also create challenges for business planning and viability as providers may have invested in response to local demand but be unable to fill places because demand is higher than expected elsewhere.

Additionally the priority queue has a number of notable challenges for the consumer and the provider including:
1. Consumers requiring urgent residential care, for example trauma leading to hospital admission then requiring residential care admission. It is unclear how these customers will be treated if there is a queue process.
2. Consumers with lower care needs seeking placement in an aged care facility may not reach the “top of the queue” if clinical care needs are a major consideration in the queue prioritisation.
3. Given point two, existing residential care assets that were formerly “low care” or hostel type accommodation - and most likely unsuitable for consumers with higher care needs - may remain vacant.

The priority queue has a number of notable challenges for the consumer and the provider including:
1. Consumers requiring urgent residential care, for example trauma leading to hospital admission then requiring residential care admission. It is unclear how these customers will be treated if there is a queue process.
2. Consumers with lower care needs seeking placement in an aged care facility may not reach the “top of the queue” if clinical care needs are a major consideration in the queue prioritisation.
3. Given point two, existing residential care assets that were formerly “low care” or hostel type accommodation - and most likely unsuitable for consumers with higher care needs - may remain vacant.

As above

We do not support the introduction of a queue

They would require information on the provider - the level of which would equate to what is provided in the ACAR submissions now

We do not support the introduction of a queue

We do not support the introduction of a queue

We would no longer be able to invest in RRR areas due to the uncertainty.

We would change our business model to focus on metro areas and consumers who can afford to pay for additional services.

?

Additional funding.

More certainty around investment decisions and thereby in securing appropriate financing

Additional funding

Separate allocation methodology

Separate allocation methodology

Yes however needs to not be over regulated

We would change our business model. The investment in RRR areas is already challenging, this model would make this more so.

However it would make supplying to metro - more affluent areas more attractive and provide more financial stability to our organisation so we would most likely look to invest in these areas.

CONCERNS WITH A MORE MARKET BASED APPROACH
While ACAR has limitations, there are also issues with a more market driven approach, particularly the complete abolition of licences.
CREATION OF A QUEUE
Given the number of people with standing residential aged care approvals, the abolition of licences in the absence of uncapping supply would likely involve the creation of a queue.
A residential care queue would force people who wish to enter care quickly to wait (possibly in hospital) while placing pressure on those that wish to stay at home as long as possible to enter residential care or give up their approved place.
While some people may already be waiting because their preferred service is full, there would be few cases where there is absolutely no spare capacity within a region.
Additionally the priority queue has a number of notable challenges for the consumer and the provider including:
1. Consumers requiring urgent residential care, for example trauma leading to hospital admission then requiring residential care admission. It is unclear how these customers will be treated if there is a queue process.
2. Consumers with lower care needs seeking placement in an aged care facility may not reach the “top of the queue” if clinical care needs are a major consideration in the queue prioritisation.
3. Given point two, existing residential care assets that were formerly “low care” or hostel type accommodation - and most likely unsuitable for consumers with higher care needs - may remain vacant.
A queue would also create challenges for business planning and viability as providers may have invested in response to local demand but be unable to fill places because demand is higher than expected elsewhere.
CROWDING OUT SERVICES TO VULNERABLE GROUPS (INCLUDING RURAL AND REMOTE)
ACAR targets the allocation of places towards services that support vulnerable groups and those in rural and remote areas, whereas a market based approach targets supply towards the groups that will deliver the greatest return.
A market based approach may actually be more responsive to some niche markets than administrative allocations, but there is a real risk that over time commercial objectives will crowd out social objectives either through competition for priority within organisations or through competition between organisations.
these mechanisms would be risky, particularly in the absence of a rigorous approach to measuring vulnerability and unmet need.
LIMITED CONSUMER INFORMATION
Consumers have limited information on the quality of care in a service (particularly in advance of entering care) so competition is likely to occur on more visible factors such as build quality; service/feature lists; and the size and effectiveness of marketing activities.
INCREASED DISRUPTION
Competition is messy and disruptive. Under an administrative approach if two providers wish to open new places within a market, the administrative decision maker evaluates the applications and decides which is best. Often this will not reflect consumer preferences. However, under a market based approach both providers may invest (perhaps without knowing that the other is doing so) and discover the market is too small to support both of them, forcing significant investments to be written off, particularly as demand in residential aged care is likely to be unresponsive to price.
More generally, competition will lead to increased numbers of service failures with impacts on their clients and potential prudential risks. This may be more pronounced in regional and remote areas.
Aggressive expansion strategies may add risk and instability that later require the closure of many services after other providers have already been pushed out of the market (as occurred with ABC Learning and its subsequent failure).
Further, a change to the competitive environment (such as a queue) would likely increase marketing expenditure in an industry already under significant financial pressure and experiencing provider failure.
CURRENT FINANCIAL INSTABILITY AND PROBLEMS WITH FUNDING
Introducing further instability in the sector would be particularly risky at a time when providers are already under significant financial pressure due to problems with the quantum and allocation method for residential aged care funding.
REGULATORY BARRIERS TO PRODUCT DIFFERENTIATION
Product differentiation is currently heavily restricted by problems with the regulation of additional services, and broader limitations on residential aged care pricing such as the basic daily fee.

The impact from the outcomes of the RC

Unsure

Move to additional services and remove extra service

Unsure

POSITION ON REFORM
Given the above concerns, moving directly to Model Two would likely be too significant a change at present. Redacted text supports a measured and incremental approach to the deregulation of the allocation of residential aged care places (i.e. Model One) though this could still be a stepping stone to a more fully deregulated model at some point in the future.
COLLECT MORE EVIDENCE
The first step in moving forward should be to collect more information and evidence – particularly in relation to the current problems with ACAR, but also in relation to the operation of more market driven models elsewhere. This will help inform reform options, monitor the effect of changes, and manage concerns in relation to the risks.
Better data
The analysis of existing supply constraints that is presumably undertaken to support the allocation of places through ACAR should be made public (at a suitably aggregated level) and used to support a deeper understanding of the nature and need for reform.
This should include analysis of whether and how quickly ACAR responds to identified supply constraints. Using ACAR, places and occupancy data it may also be possible to see how markets respond when supply expands.
Analysis of similar markets
Additional information about the likely effects of deregulation could be gathered through analysis of similar reforms in other industries (such as home care, child care and vocational education) or the analysis of more market driven approaches to allocating institutional long-term care places in other countries.

POSITION ON REFORM
Given the above concerns, moving directly to Model Two would likely be too significant a change at present. Redacted textsupports a measured and incremental approach to the deregulation of the allocation of residential aged care places (i.e. Model One) though this could still be a stepping stone to a more fully deregulated model at some point in the future.
COLLECT MORE EVIDENCE
The first step in moving forward should be to collect more information and evidence – particularly in relation to the current problems with ACAR, but also in relation to the operation of more market driven models elsewhere. This will help inform reform options, monitor the effect of changes, and manage concerns in relation to the risks.
Better data
The analysis of existing supply constraints that is presumably undertaken to support the allocation of places through ACAR should be made public (at a suitably aggregated level) and used to support a deeper understanding of the nature and need for reform.
This should include analysis of whether and how quickly ACAR responds to identified supply constraints. Using ACAR, places and occupancy data it may also be possible to see how markets respond when supply expands.
Analysis of similar markets
Additional information about the likely effects of deregulation could be gathered through analysis of similar reforms in other industries (such as home care, child care and vocational education) or the analysis of more market driven approaches to allocating institutional long-term care places in other countries.

Community, provider and financial provder consultation

Changes to the existing model - particularly focused on enforcing delivery of the beds in line with the bed license allocation.

REFORMS TO ACAR
Make ACAR more transparent and better targeted
The drivers of place allocations through ACAR need to be reviewed and more clearly disclosed.
A framework for more rigorously evaluating supply constraints and unmet needs should be developed. And addressing these supply constraints should be given greater priority in allocation decisions.
Improved transparency should also extend to disclosure of the timing of planned ACAR rounds well in advance.
Tighten controls on unused places
Places that remain provisional or offline for significant periods of time should expire, unless the provider can clearly demonstrate extenuating circumstances.
Royal Commission
Finally any decision to change the ACAR process should be informed by the recommendations from the Royal Commission into Aged Care Quality and Safety.

SUMMARY
The Aged Care Approval Round (ACAR) has shortcomings that may limit competition and create mismatches that reduce access to preferred service providers.
However, a more market based approach to allocating places also raises a number of risks, including the creation of a queue and various possible market failures, including access to services for vulnerable groups. Providers are also concerned with the possible timing of deregulation given current financial pressures and lack of progress on many related policy issues.
Limited evidence on both problems with ACAR and the risks of a more market driven approach make it difficult to determine the nature, scale and urgency of reform that is required.
Given current instability in residential aged care and uncertainty about both the benefits and risks of change, Redacted text supports a measured and incremental approach to reform in line with Model One.
A key focus should be collecting better evidence on the nature of existing constraints, and evaluating more market driven approaches to allocating services in similar markets in Australia and overseas.
Related policy issues need to be addressed ahead of any significant deregulation, including:
 developing a more rigorous approach to ensuring access to services (including respite services), particularly for vulnerable groups and rural and remote areas;
 addressing problems with the regulation of additional services fees and other restrictions that inhibit product differentiation; and
 resolving structural problems with quantum and allocation of funding.
ACAR should be made more regular and transparent, and the approach to targeting areas where supply is constrained should be reviewed and strengthened where necessary.
Persistent non-operational places should be investigated more closely and stricter expiry dates should be considered taking into account factors outside of a provider’s control.
CASE FOR DEREGULATION
As the paper notes, ACAR has a number of problems:
 the number of criteria that are considered mean that it is not transparent how decisions are made;
 there may be mismatches between supply and demand that inhibit access to services;
 supply constraints limit competition (together with the accompanying choice and pressure to improve or exit that competition creates); and
 many allocated places are non-operational.
However, the discussion paper provides limited evidence on the extent of these problems, which makes it difficult to determine the nature, scale and urgency of reform that is required.
The roughly 30 per cent success rate in the latest ACAR round provides some evidence of supply constraints. However, it seems unlikely that the full 37,000 places that were applied for would be built if the constraints imposed by ACAR were removed – especially given the current low occupancy levels and the high number of non-operational places.
Given falling occupancy rates, providers are already facing significant pressure to improve and innovate to attract new consumers. ACAR itself should also be responsive (albeit slowly) to local mismatches between supply and demand; where services are capacity constrained they should be able to apply for and receive additional places. Providers also report that the slow operationalisation of places is often due to delays in planning approvals.
Additionally, declining investment intentions in the face of deteriorating financial performance and the large number of provisionally allocated and non-operational places suggest that releasing the constraints imposed by ACAR may do little to increase competition and expand capacity until other constraints facing the sector are resolved. Increasing uncertainty (at least in the medium term) increases investment risk profile which would further limit investment in residential care to meet growing demand.