Residential aged care: Proposed alternative models for allocating places

The current allocation model facilitates access to care for consumers through:
o targeting places to regions based on the current and future ageing demographic (70+ population);
o encouraging geographical spread by targeting priority locations, for example, rural and remote areas;
o establishing ‘priority of access’ through ‘conditions of allocation’ for special needs groups, people living with dementia, respite and other key issues;
o rigorous needs-based planning methodology undertaken by the Department of Health (DoH) that ensures places are targeted to areas of need.
• Places management aims to facilitate the timely progress for making provisional allocations operational and deliver residential care services promptly .

Given the uncertainty around government policy and funding outcomes in the sector, and low and declining financial returns, the current allocation model and places management model delivers providers some certainty which works to encourage capital investment in the construction of modern, fit-for-purpose, new residential aged care facilities and rejuvenation of existing facilities. In an environment when the funding instrument is under review and sustainability is a key theme, the ability to make credible and defendable investment decisions is critical.

Aspects of the residential aged care allocation and management of places that work well and are conducive to provider operations and facilitate access for consumers are:
• The current allocation of residential places is underpinned by legislative provisions under the Aged Care Act (s14-2) and Principles (Part 4, Div. 2 s27) 1997 (the Act) that focus on what “would best meet the needs of the aged care community in a region”. This ensures that the needs of the ageing community in a location, including diversity of choice, special needs, dementia and continuity of care are considered.
• The advertising of residential places through the Aged Care Approvals Round (ACAR), the availability of an Essential Guide and the establishment of clear criteria for assessment of applications in accordance with the legislation, aims to create a level playing field and ensures that applicants/providers are well informed.

• There were 31,603 PAs nationally at 30 June 2018 plus 7,802 unused places. This is approximately 16% of all allocated places nationally. The length of time it takes to operationalise provisional allocations (PAs) of residential places is a national issue and effectively restricts access to care. To ensure PAs ‘take effect’ in a timely manner, the Department must validate evidence of ‘bed readiness’ at the point of assessment and consistently apply legislative provisions in the management of places. Facilitating places becoming operational more promptly will improve access, as the population ages.

• In a typical competitive market, market intelligence and insight into competitor activity would be expected from participants. However, the low profit margins in the sector and the prevalence of not-for-profit participants means that the capacity to invest in ascertaining the market and competitive position is limited. In this context, the industry requires Government to provide a level playing field with consistent and reliable policy and regulation, so that all participants are equally informed and critical investment decisions can be made with confidence.
• An issue relating to the allocation of places is the lack of transparency in relation to allocation decisions. Anecdotal evidence indicates this is a national issue, especially considering the Department no longer provides individual feedback to applicants regarding the reasons their application was unsuccessful.

These issues are national, however they impact on provider in their regional delivery of services and on consumers in accessing services. Their impact is likely to be greater in rural and remote areas and for special needs groups for whom access can often be limited.

See above.

• In theory, these principles are appropriate and relevant. As equitable access to care is a priority, an important design principle is “to maintain and improve access to residential aged care and respite services, including in regional, rural and remote areas, thin markets and for vulnerable consumer cohorts”. In a consumer driven market where ‘greater choice’ may equate to ‘capacity to pay’, access for 'supported' and special needs clients must be maintained.
• It is unclear how the design principles pertaining to continued growth, financial investment and financial sustainability will be met in a consumer driven allocation model? These design principles are impacted on by a number of other critical factors, such as policies around funding levels (for example, changes to ACFI scoring and the indexation pause, potential impact of the new AN-ACC) and costs associated with accreditation and regulatory processes (for example, implementing the new quality standards, complaints and compliance requirements). Some of these factors have significantly impacted on providers, as seen by the drop in financial performance of 45% of facilities surveyed, that reported a negative EBT (earnings before tax) [StewartBrown March 2019].

• The model for allocating places should be based on reliable, needs-based planning principles. The Department may need to continue to provide planning data to the industry to support the development of residential services in geographical locations with high ageing populations, to facilitate access to care. A good geographical distribution of places consistent with planning need, is also important to accommodate older people who wish to enter residential care in their current location or where their children and/or relatives live. This is a key consideration of facilitating equity of access.

• The ACAR process has achieved an equitable distribution of places based on a needs-based planning model that best meets the needs of the community in a particular location or region. It is understood that proceeding to a consumer driven model of allocating places is a tenet of the Aged Care Reforms (Living Longer Living Better). Therefore, retaining the ACAR with some improvements (Model 1), is supported as an interim model to allow providers enough time (3 to 5 years) to prepare for the transition to a consumer allocation model.
• There needs to be ongoing consultation with all stakeholders in the aged care sector regarding the development of an appropriate, functional, market-based, consumer driven model for the allocation of residential places that addresses all key design principles. Providers should be informed well in advance of the new model to be implemented, with acceptable transition timeframes agreed.
• Improvements to the ACAR and places management that are supported are:
i. Locational controls should be reduced to allow providers to vary the location of their allocated places (provisional and operational) and to transfer places between providers at the State and Territory levels, regardless of when allocated;
ii. the ACAR should incorporate a separate, non-competitive stream for small allotments of places (for example, up to 50 places) for refurbishments and upgrades of smaller facilities to improve care delivery and financial viability. This is consistent with the ‘top-up’ principle proposed and supports the ‘significant refurbishment’ policy aimed at upgrading old stock;
iii. timeframes should be established under the legislation for operational places that are taken offline or unused. These timeframes should be consistent with provisional allocation timeframes, as places are usually taken offline pending the redevelopment or building of new facilities;
iv. places management processes should be simplified and minimised. The Department should cease the annual review of progress with bringing a provisional allocation on line. Provisional allocations are allocated for four years, at which point providers should be reminded of the requirement to apply to extend the provisional allocation period or the places will lapse. The six-year timeframe should be consistently applied in accordance with ‘exceptional circumstances’ provisions under the Aged Care Principles.

• Incentives should be provided to attract providers into thin markets. Presently ‘priority of access’ conditions of allocation are not consistently observed as vacancies are responsive to demand. If an incentive “top up” subsidy payment was provided for special needs residents and ‘vulnerable cohorts’, similar to the viability supplement and high care respite supplement, it may encourage providers to deliver in specific locations and/or to specific client groups.
• Locational controls on the distribution of residential aged care places should be reduced, but not eliminated. As noted earlier, to encourage the building of places in areas of greatest need, the Department should provide current, needs-based planning data at the local government, SA2 and SA3 levels, that providers can readily access and easily extract from its website. The data should include population demographics (70 years and above) and the number of allocated, operational, unused and provisionally allocated places at the sub-regional level (this is available in the annual Stocktake but only at the State and regional levels).

• The issues associated with residential respite provision have been highlighted in the ACFA ‘Report on respite for aged care recipients’ October 2018’. To facilitate
the provision of residential respite in response to demand, it is suggested that the condition of allocation that providers must have an allocation of residential respite place days to deliver respite be removed. A respite allocation tends to limit provision of respite to within that allocation. It also creates an unnecessary administrative workload for providers who need to monitor and extend their allocations, or incur a loss of funding, if they exceed their allocation. The residential respite supplement should be set at the ‘low’ and ‘high’ levels. The high care respite incentive could be smoothed across the high care respite supplement (i.e. not based on 70% usage), to facilitate the provision of high care residential respite. This will not increase funding levels but will allocate it differently.
• To maintain some level of control on respite usage and funding, consumers should still require an ACAT approval and have an annual allocation of 63 days (or more) per annum, with the option to extend through an ACAT.

• Refer to Q6 and Q9 regarding access to reliable planning data, priority of access and conditions of allocation, residential respite and ‘top up’ of places for refurbishments.

• Aged care policy, regulation and government decision-making should create an environment within which providers and financiers are confident about long term capital investment in the sector, which is pertinent to the ACAR. Since 2017-18, this confidence has been eroded with changes to the Aged Care Funding Instrument (ACFI), the indexation pause, an uncertain regulatory environment and the Royal Commission. There should be recognition that the sustainability and competitiveness of the aged care sector is impacted on by government policy decisions and how, when and what changes are implemented.
• The ACAR process should prioritise applications for refurbishment or rebuilding of older facilities to make them more viable. Upgrades and expansions support existing providers to be more competitive and financially viable and provide more attractive, improved living environments for consumers.

• It is supported that a separate process outside the ACAR be introduced if providers require ‘top up’ places for a re-development or extension. A realistic number of places per allotment should be made available (e.g. 50 places),to make this a feasible development option, as older hostels were usually built around 40 places.

• The impact of Model 1 will be minimal as the allocation of places is still being controlled by government through the ACAR process and there will continue to be a places management function. This proposed model is maintaining the ‘status quo’ with some relaxation of locational and top-up arrangements, to provide greater flexibility.
• However, the impact of these changes cannot be taken in isolation of other current reform measures. A key risk is the timing of these changes being implemented in conjunction with other reform changes that the sector is trying to manage (refer Q17)

Refer to Q. 15 and 17

• It is recommended that Model 1 be implemented in the interim, pending transition to a consumer allocated residential places model, which is consistent with broader aged care reforms.
• It is critical however, that whichever model is implemented, the implementation process and timeframes do not overlap with implementation of the AN-ACC scheduled for mid 2020. The AN-ACC is a significant reform for the aged care sector, with wide ranging implications for residential providers, new assessment agencies and care recipients. This is akin to creating a ‘perfect storm’ for aged care providers to navigate, should it overlap with other major reform measures. It is strongly proposed that the AN-ACC be fully embedded, so that providers understand the financial implications of the new funding model, prior to changes being made to the model for allocating residential aged care places.

Refer to Q 12 & 15

• It is suggested that changes to the ACAR process, as outlined in Model 1, are introduced for the next ACAR, post implementation of the AN-ACC. That ACAR should be geared towards achieving the target ratio of 125 places (78 residential places, 45 home care packages and 2 STRC places) per 1,000 persons aged 70 and above (target date 2021-2022).
• 3 months prior to the opening of the next ACAR, the Department should fully appraise aged care peak bodies (ACSA, LASA, COTA, NACA) and providers of the changes and final model to be implemented.

• Information sessions should be held in each State and Territory, for providers, consumers and key stakeholders in the aged care sector, prior to the opening of the ACAR.
• An interactive question and answer forum should be available on the DoH website.
• When the ACAR is advertised, the Department should provide a thorough and comprehensive Essential Guide clearly outlining the changes and new requirements for the ACAR.

• Model 2 is in line with the ‘Living Longer Living Better’ reforms introduced in 2012, which focused on greater consumer choice and increased competition through the progressive deregulation of services. This model has been recommended by the Productivity Commission 2011, in the Aged Care Roadmap and the Tune Review (2017) and is broadly supported as part of the longer term reforms of aged care.
• However, if the underlying demand for aged care remains unclear and the provision ratios controlling the supply of places still needs to be re-engineered, as outlined in Recommendation 9 of the Tune Review, it is not timely to implement this model until these supporting elements are further progressed.
• There is concern regarding the prioritisation methodology of consumers for residential care, due to the immediacy of a person’s circumstances if they can no longer be cared for at home. Older people in this situation often have limited options, and delays in accessing residential care is likely to have significant implications on hospital discharge, care awaiting placement, transition care and most importantly, on the individual and their support mechanism (carers, family members, friends).
• Unmet demand within residential care is unclear and difficult to determine as supply is constrained and potential residents are often ‘multi-listed” with providers. If supply continues to be controlled, as proposed through a national prioritisation queue, and if timeframes for allocating residential places to consumers become lengthy, this will have a significant impact on the individual, their carer/family members, the wider health care sector and the community in general.
• Model 2 will need to be implemented with safeguards in place to ensure access for all consumers, especially special needs clients, consumers with unique care needs and/or special equipment needs (e.g. bariatric clients), those requiring specialised care (e.g. dementia and behavioural issues, mental health disorders) and in thin markets (rural and remote areas).
• In an open market model, the Department will need to consider the implications of imposing conditions on providers and at what point these conditions may be imposed. If facilities are not designed to accommodate specific special needs of consumers, it will be difficult to impose’ conditions of allocation’ after they are built (e.g. dementia specific secure areas

• As noted earlier, residential care is often the final stage when there are no longer any other accommodation and care options available for older people. If a person is flexible about where they go, they can usually access residential care fairly quickly. However, what are their options if they cannot be cared for at home and they are not allocated a place for several months due to government control of supply? Current wait times for high care Level 3 and Level 4 home care packages are in excess of 12 months, hence even this level of interim support at home is not immediately available to the consumer.

• The above model of approval date and urgency is not presently working in home care, with high care consumers waiting in excess of 12 months for an assigned level package. Unfortunately, it is not the model that is the issue but the supply of places, which is constrained by government due to budgetary constraints. Similar wait times in residential care would have a disastrous impact on consumers requiring urgent care.

• One option may be for all residential care providers to be allowed to operate ‘interim care’ or care awaiting placement (CAP) places. These places will provide interim care for up to 12 months, pending the person being allocated a permanent place. The consumer will also be allocated an ‘interim care’ place if their situation is urgent and they require immediate placement. Interim care places should be used flexibly across a facility and be funded at a set level, similar to residential respite. If government decides to introduce interim care places, the subsidy needs to be of a level to attract providers to deliver this type of care.

• If assigned places are not taken up in a timely manner, this reduces the overall availability of places to consumers, as supply is capped based on the provision ratio applied by government. This is not equitable for other residents in need and who are awaiting care.
• Hence, if a consumer has been assigned a place, that offer of a place should be valid for a specific period, such as 6 months. The validity period should give the consumer enough time to find a suitable residential place (based on average wait times) and settle their personal affairs prior to entry.
• Setting a time limit on assigned places should facilitate their ‘take up’ and ensure that people who apply for residential care, both require this level of care and are ready to enter care.

• An ACAT approval should be valid for a specific period. If a consumer has a valid ACAT, they should be allowed to re-apply for a place and re-join the queue within that period of time.
• The prioritisation of people on the queue will be constantly changing, hence the wait times for being re-assigned a place may be different when a consumer applies to re-join the queue. This is a risk the consumer faces if they choose not to take an assigned place.
• Consumers generally apply for residential care early because they are concerned about a potential episode, a sudden deterioration in their condition or that it will take a long time to access care, similar to the current situation in home care. If validity periods are applied by government, this should be supported by the timely allocation of places to consumers. If people are aware that they can access care within a timely manner (3 to 6 months), they may be less inclined to apply early ‘just in case’.

• There are a number of areas in which assistance can be provided to consumers and their families such as:
o ensuring the accuracy of information listed on My Aged Care (MAC) regarding what is offered by a residential care facility (for example CALD specific services, design (single bed/ensuite, shared rooms, secure dementia), unique/innovative services, additional services etc).
o the capacity for consumers to speak to someone who can guide them in the use of the MAC website and provide direct assistance, if necessary.
o having readily accessible information on standards of care - accreditation outcomes, standards not met, compliance activity including sanctions and notices of non-compliance, serious complaints upheld etc.

• Residential care subsidies and supplements should ensure funding levels incentivise the provision of care to residents with special needs (as defined under the Aged Care Act 1997), people with dementia, supported residents and other categories of consumers who may be experiencing difficulty accessing residential care.
• Where providers are eligible for capital funding for developments catering for special needs clients, that funding should be tied to conditions of allocation.
• Government should advertise ‘key priorities’ in target regions in each State and Territory for the provision of residential aged care each year.

• A primary consideration of financial modelling undertaken for any aged care development focuses on its financial sustainability – this will be maintained.
• Under Model 2, the onus will be on providers to ensure that key factors such as the size, location, ageing population demographics, design, projected RAD/DAP, supported residents, co-location with other aged care services (retirement living, assisted living, transition care, home care), multi-purpose sites (health and ageing) are all considered to ensure the model attracts consumers, facilitates care delivery and is viable and sustainable. The business, service and workforce model that providers will need to adhere to, to be competitive, must be consumer focused and receptive to the needs and 'wants' of consumers.

Ensuring competitiveness and attracting consumers can be maintained by:
• monitoring consumer satisfaction;
• undertaking market analysis of the target population in the catchment area to inform the development model;
• refurbishments and upgrades undertaken to ensure the accommodation is ‘fit for purpose’;
• innovative, contemporary design models;
• innovative models of care that are responsive to the needs and preferences of consumers and are consumer focused and consumer directed

N.A

• For providers to operate sustainably under a model where places are no longer allocated to the provider but to the consumer, they will need to be assured they can attract consumers to their services and maintain occupancy levels. This is driven by a range of factors including demand from an ageing population in the area, quality of care, standard of buildings, service offerings, consumer preferences, location of family, etc.
• To support consumers to choose between providers in a competitive market, it is important that consumers have access to accurate, reliable and objective information. The Department could support this by ensuring provider information on My Aged Care is current, accurate and comprehensive.
• The Department could also support providers by making available supply-based planning data (70+ population, aged care planning ratios and need for places (under/over supply) to identify areas of greatest need at the regional and sub-regional levels. This will facilitate the building of new facilities in areas with potentially high demand.
• Research and information could be made available on the AIHW GEN website on alternate residential models, ‘niche markets’, ‘additional services’ models, international models, new design concepts and continuum of care models that facilitate the reform objective of progressing to a single aged care system.

The current ACAR system assures successful applicants of an allocation of places. These allocated places have a guarantee of funding (subsidy from government) when they become operational and are occupied by an eligible resident. This ‘ownership’ of places offers financiers a level of certainty for capital funding purposes, as the places are seen as an asset.

• clarity and detail around which residential care allocation model will be applied by government and when;
• improved financial results for the sector (refer ACFA Sept 2018 report, StewartBrown June 2018 report);
• understanding the impact of the proposed new AN-ACC funding model on the financial sustainability of providers;
• clarity around the outcomes of the Royal Commission into Aged Care Quality and Safety and their impact on the sector
• confidence and stability within the sector

Refer to Q 26:
• Residential care subsidies and supplements should ensure funding levels incentivise the provision of care to residents with special needs (as defined under the Aged Care Act 1997), people with dementia, supported residents and other categories of consumers who may be experiencing difficulty accessing residential care.
• Where providers are eligible for capital funding for developments catering for special needs clients, that funding should be tied to conditions of allocation.
• Government should advertise ‘key priorities’ in target regions in each State and Territory for the provision of residential aged care each year.

Refer to Q26 (above)

• In a market based, consumer driven model, providers must have the flexibility to adapt and modify services to meet the needs of the local community and consumer groups they serve. Providers should be accountable for what they offer and deliver to consumers, in accordance with the Aged Care Act 1997. Setting conditions is a regulatory mechanism and creates more red tape and inflexibility – this is contradictory to a market-based model.
• Instead of conditions, consideration should be given to ‘tied’ or incentive funding to facilitate service delivery in specific locations or to particular consumer groups.

Potential impacts of this model are:
• a major risk is the ability to attract consumers when existing stock is ageing;
• existing facilities may become unviable if occupancy drops;
• refurbishment of older stock to make it more attractive and competitive is costly. In a market based system where resident fees and charges are tightly controlled by government, there is limited ability to attract more funding, other than through higher RADS/DAPS. This may curtail major re-developments. The Higher Accommodation Supplement (HAS) is a positive initiative and facilitates significant upgrades to facilities

• The residential aged care sector is in a precarious situation with 45 per cent of facilities reporting a negative EBT (Earnings Before Tax), based on the StewartBrown quarterly Aged Care Financial Surveys March 2019. This situation will worsen if the introduction of a national prioritisation queue results in higher vacancy rates due to longer timeframes to fill places. This will impact on financial viability.
• Providers with newly built facilities and sizeable loans to service will be affected by longer lead times to fill their places.
• The above may lead to a reluctance by providers to build residential places, until there is more certainty around the impact of this model. There has already been a downturn in building commencements since 2016-17, as reported by ACFA (see below*). With building timeframes taking around 4-5 years, access to residential care will be impacted by the continued downturn in new development due to a lack of confidence and uncertainty around aged care policy.
• The government will need to seriously consider the combined impact of the multiple reform measures that have recently been implemented and that are on the agenda for implementation in the next 12-18 months (e.g. new single set of standards, AN-ACC, revised ACAR allocation model) on provider sustainability.

• Consumers will need to be better informed about residential aged care to make decisions about where to go, as their choices will no longer be restricted to only those providers that have vacancies in their location (vacancy data will not be available).
• Delays in consumers being assigned a place will impact on health and other aged care programs such as hospitals, Interim Hospital Packages, Transition Care, community health services, CHSP and Home Care packages. These programs will need to manage high care consumers for longer in the community.
• ACFA noted in their report Update on funding and financing issues in residential aged care Sept 2018* (Executive Summary and Pg.18) that “Many providers are putting investment plans on hold, the result of financial pressures and uncertainty over future policy settings”. Data collected on building and upgrading since 2013-14 showed a significant drop in 2016 -17. Based on feedback from their consultations, they indicated there will be a further significant decline in 2017-18 and that “This is a concern because of the lead times involved in bringing new aged care facilities onto the market and the expectation that there will be a significant increase in demand for residential services as the bulk of the baby boomer generation enters their 80s in about eight years”. Uncertainty around allocation models and their impact will only further exacerbate this situation.
• Changes to the model for allocating residential aged care places should not be implemented at the same time as other major reform measures, such as the AN-ACC (refer to Q 17)

• The issues associated with residential respite provision have been highlighted in the ACFA ‘Report on respite for aged care recipients’ October 2018’. To facilitate
• the provision of residential respite in response to demand, it is suggested that the condition of allocation that providers must have an allocation of residential respite place days to deliver respite be removed. Respite should be offered based on approval of the consumer by the ACAT. Providers should be able to accept a respite resident if they have a vacancy.
• A respite allocation tends to limit provision of respite to within that allocation. It also creates an unnecessary administrative workload for providers who need to monitor and extend their allocations, or incur a loss of funding, if they exceed their allocation.
• The residential respite subsidy and supplement should be set at the ‘low’ and ‘high’ levels. The high care respite incentive could be smoothed across the high care respite supplement (i.e. not based on 70% utilisation), to facilitate the provision of high care residential respite. This will not increase funding levels but will allocate it differently (Refer to Q12).

• Extra service should be replaced by the flexible ‘additional services’ model.
• Existing extra service places and funding should be grandfathered for those who wish to continue, but providers should be offered the option to relinquish their places if they wish. Existing Extra Services residents should not be disadvantaged and continue to receive and pay for the same level of services, as per their Extra Service Agreement with the provider.

• Capital grants should continue to be offered to facilitate the building of places for special needs groups (as per current eligibility criteria under the Act), key priorities and in locations where it is difficult to access services i.e. thin markets. If applicants fail to deliver on their Capital Grant Agreement, the funds should be repaid.

• It is suggested that Model 1 be implemented in the interim, for the next ACAR. During the lead up to and following the next ACAR, discussion and consultation with the aged care industry and consumer representatives should be maintained to progress the development of Model 2. Thorough investigation and research should be undertaken into the implications of a market driven, consumer based model, including demand and supply considerations, as discussed in Chapter 4 of the Tune Review.

Residential care providers, the aged care sector and consumers need to be fully informed about the model to be implemented, with realistic timeframes and an implementation process for transitioning to the new model, agreed by all key stakeholders. This will minimise risks and enable a successful transition. It will also give providers that do not believe they can compete in this market, time to exit the market.

• Information sessions should be held in each State and Territory for providers, consumers and key stakeholders in the aged care sector.
• An interactive question and answer forum should be available on the DoH website.
• The Department should provide a thorough and comprehensive Factsheet on their website outlining the changes and new requirements.

• uncap supply with assignment of a place based on an ACAT assessment and prioritisation based on urgency (need);
• user contributions should be based on capacity to pay and not be capped;
• government funding should focus on access by supported residents;
• apart from the specified care and services which set a baseline for care provided, consumers should be able to negotiate additional services with a provider without any government intervention or controls.

It is not timely to transition to a consumer driven model for the allocation of residential aged care places at this stage, as proposed in Model 2. It is acknowledged that Model 2 is consistent with reforms in both home care and residential aged care, as outlined in the Aged Care Roadmap and the Tune Review, and that the government and the industry must commence working towards these longer term reform objectives. The government should work in collaboration with the peak bodies, ACSA, LASA, NACA, and COTA, to implement Model 1 in the interim and to progress the development of Model 2. Preliminary requirements as outlined in the Tune Review will need to be addressed prior to progressing model development and establishing a transition process and timeframes. All aspects should be agreed with industry representatives.