19/07/2016 - 13:37

Funding shake-up for aged care

19/07/2016 - 13:37


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An ageing population and government cuts to funding have driven the aged care sector into unfamiliar territory.

HOPEFUL: Michelle De Ronchi is confident St Ives can remain the largest provider of home care in WA amid changes to the sector. Photo: Attila Csaszar

An ageing population and government cuts to funding have driven the aged care sector into unfamiliar territory.

The aged care sector is facing significant challenges to its business model amid rapidly growing demand for its services and shrinking financial support.

Statistics show there were about 343,000 Western Australians over the age of 65 last year; in 10 years that number is projected to increase to 510,000, suggesting a rise in demand.

In addition, 65 per cent of the current aged care workforce will retire in the next 15 years.

Despite the looming convergence of these demographic events, the federal government has cut $3.1 billion from aged care funding since 2014, leaving many providers concerned over the sector’s sustainability.

St Ives Group chief operating officer Michelle De Ronchi said the cuts reflected an ongoing failure by government to implement a cost of care analysis to properly plan and fund aged care services.

“The lack of support being paid to aged care is not meeting the expectations of aged residents or service providers,” Ms De Ronchi told Business News.

“When you look at the stats, between 35 and 38 per cent of current aged care providers are now financially unviable.”

In addition to the cuts of the past three to four years, Ms De Ronchi said, the sector had been undergoing a transitionary phase whereby the choice of delivery of care was being shifted from provider to consumer, putting further pressure on all involved.

“We’ve gone from a pretty paternalistic medical model to giving people the ability to choose what they want and the option to select what’s important to them,” Ms De Ronchi said.

Baptistcare chief financial officer John Frame took a pragmatic approach, saying the government had recognised it was unable to adequately fund the sector over the long term and was progressively moving to deregulate the industry to make it more market focused and consumer demand driven.

“What this (funding cuts) does is force providers to be innovative and find alternative income streams through customer user-pay regimes,” Mr Frame said.


The Aged Care Approvals Round (ACAR) is an annual process that enables approved aged care providers to apply for government funding in the form of a capital grant.

Legislative changes introduced in March will shift the application process for home care from the provider to the individual, offering consumers that choice as well as the ability to change providers.  

The ACAR legislation will come into effect in February 2017, and while Ms De Ronchi acknowledged the change would provide a better outcome for the end consumer, it gave providers less than a year to adjust to the new regime.

“It’s going to challenge the way we’ve ever done business,” Ms De Ronchi said.               

Through the previous ACAR system, she said, block funding was provided to providers upfront, thereby allowing them to budget ahead.

“We won’t know what’s coming in from a cash flow perspective, we’ve always been paid in advance on run rates,” Ms De Ronchi said.

“We would know we’re going to have a number of packages a year at certain per cent occupancy rate and plan accordingly; with these changes we won’t know how many clients we’re going to have and funds will be in arrears.”

Cuts of $1.2 billion to the aged care funding instrument (ACFI), which determines the required funds needed for an individual’s level of requirements, will also change the way the industry operates.

Aegis Aged Care Group director Geoff Taylor said the cuts would limit the ability of residential care services to accommodate people and eat into complex health care services, including pain and medication management

“Providers are going to have to look very carefully at the types of residents they take in because it just won’t be viable to look after some with higher care needs,” Mr Taylor told Business News.

“The average ACFI subsidies for aged care are about $170 a day, and if they apply these cuts then those people will be left in hospital, which might cost $1,200 a day.”

Mr Taylor said this could also put pressure on the hospital system, as building more aged care facilities would no longer be financially sustainable.

“Aegis have built the most facilities and put the most beds in the last 10 years in WA … we won’t be building any more because it’s just not viable for us to continue,” he said. 

“We operate at 99 per cent occupancy and the need for beds is going up exponentially; demand will be stronger, but people won’t be able to get into aged care so they’ll be staying in hospital.”


Silver Chain general manager social care, Melanie Kiely, believes adapting to the cuts in a more consumer-driven market will require significant operational change and more of a focus on marketing efforts.

“With an increasing emphasis on the cost of services expected as funding is transferred to the consumer, we need to ensure we remain efficient in the way we deliver services without compromising on our high standards of quality and care,” Ms Kiely said.

“In adapting to these changes, we will need to ensure we continue to provide services that meet the needs of clients and regularly seek their feedback and insights on how we can improve.”

Ms De Ronchi said St Ives would continue to operate and deliver high-quality services to its clients and hoped the government would reassess its treatment of the aged care sector.

“We should be focusing on elderly Australians as people we really need to look after,” Ms De Ronchi said. 

“To me they’ve been our taxpayers, they’ve grown this country.”


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