Making Aged Care Model Work Is Crucial

It should come as no surprise, given the findings of many recent royal commissions, that good governance, not sunshine, is the ultimate disinfectant.

The finding and recommendations of the Aged Care Royal Commission made clear that abuse and neglect by service providers of elderly people they looked after were most prevalent in organisations without proper governance.

In response to findings, the federal government has introduced legislation to address governance arrangements for aged care providers.

Generally, the thrust is to increase the sophistication of aged care provider boards (for profit or otherwise) by improving leadership and culture, improving transparency and accountability and orientating them towards a consumer focus (not financial performance).

All worthy objectives, but providers are now left to mull over how this will be achieved.

They are faced with some big questions.

Particularly those in rural and regional areas which, by virtue of their missions, choose to operate in lean markets (markets no-one else wants to serve) where employees and board members are thin on the ground. How do they move to a true consumer focus?

While conceptually simple, it is no easy feat to change a mindset focused on financial viability and crisis management (a succinct summation of the past two COVID-19 years) to the consumer.

This is a change which needs to be made from top to bottom in the organisation, often across a workforce in the thousands.

Most providers have been working on this for years but it’s a big step and it does not happen overnight.

Take the banks after their moment in 2019 with a royal commission and the new accountability processes and consumer focus.

They are still on the journey.

How do aged care providers meaningfully increase the capacity and skills of their boards?

Many board members are there on a volunteer basis (often unpaid), they don’t work in the sector, and they don’t hold the skills mix or qualifications you would normally expect of a board (this is particularly the case in rural and regional areas).

The government’s own governance training acknowledges this gap, but it remains to be seen whether the suggested solution of ‘training programs’ and ‘outsourcing’ to build capacity is going to be affordable, practicable and effective, particularly in rural and regional areas.

How will they find the right skills mix? Boards will be required to include at least one director with clinical care experience.

Boards are also required to establish a separate quality care advisory body and it seems likely that clinical care experience will be required here as well.

People with clinical expertise are as rare as hens teeth right now – particularly when they are being poached by public health systems.

Assuming a person with clinical experience can be found, will that clinical experience translate to an aged care context and a boardroom?

How will this be funded?

These changes will cost money.

Financial benchmarking by advisory firm StewartBrown indicates that with an estimated aggregate loss of $1.53 billion for the 2022 financial year (on top of previous years), the financial sustainability of the sector has reached a critical point.

Clearly, if there is to be extra diligence, reporting and skills this must be built into funding.

First signs are that it won’t, with the indexation required to meet the increased award (4.6 per cent) and related staff costs and the current CPI (5.1 per cent) not being fully reflected in the starting prices under the new AN-ACC (Australian National Aged Care Classification) funding model.

You can’t squeeze blood out of stone and there is no benefit in setting up the sector to fail.

In a world where margins are slim and aspiring aged care provider directors with the right skills are thin on the ground, we need to see a more collaborative approach from the regulator and government.

While the government-funded Governing for Reform program is useful, it has limitations given the lack of detail released by the government on the specifics around the governance reforms.

The regulator is making noises about encouraging providers to build their capacity and bolster their capability through information sharing and continuous improvement, but to date this has been through an aggressive, punitive approach to audits and the relationship between the regulator and providers all but destroyed.

The ultimate question is, how is government going to support providers in the pathway to good governance? We all love a good disinfectant, but someone needs to pay for it.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.