Nursing homes advised to avoid ‘high-needs’ residents
A consulting firm responsible for a quarter of the agedcare sector has warned its providers to avoid high-needs patients or risk reducing ‘profitability’.
One of the largest consulting firms in the aged-care sector has told nursing home providers to avoid admitting “high-needs” residents under a new funding model or risk the “profitability” of the service.
Mirus Australia, whose clients have some 89,000 beds accounting for $6 billion of funding and one-quarter of the aged-care sector, held a webinar ahead of the October 1 implementation of the new aged-care funding tool. In that session, its consultants noted there is a “higher margin of funding vs staffing minutes for lower-rated residents”.
Alongside the introduction of the Australian National Aged Care Classification (AN-ACC) – which dictates the spread of funding to nursing home residents across 13 distinct “classes” – the federal government has also started the clock on a grace period to invest in more direct-care hours. Within a year, providers must spend an extra $5.4 billion allocated to them to increase the minutes of direct-care staffing for each resident each day by 22 minutes, to 200 minutes a day.
The combination of these two changes, Mirus Australia chief executive Andrew Farmer told providers, will dictate the viability and cash flow of any nursing home operator and offer an “incentive” for providers to take low-needs residents.
“If you have an AN-ACC classification coming in with your new resident, changing your casemix because it changes the average classification of that cohort when they come in, you then have that flowing through to changing your care-minute requirements and changing your rosters,” Farmer said in the webinar last month. “If you want to manipulate those careminute requirements and keep your rosters steady, or build your care minutes up to a higher roster that you want to keep or bring it down to a lower roster that you want to keep … you are going to need to be able to identify reclassifications, hold them – sit on them – and then act on them when you think it is the right time to put somebody up or down based on those movements.”
The introduction of this new funding regime for aged-care and mandatorycare targets of 200 minutes per resident per day – 40 of which must be registered nurse time – from October next year represents the biggest reform in the sector since the arrival of the now defunct Aged Care Funding Instrument in 2008.
In the future, Mirus says, “highest profitability models will select new residents based on projected care needs which closest match to current staff model demand to reduce fluctuation in staffing”.
“We believe the industry will respond and optimise AN-ACC as they have always done with every other new funding model,” the company said in a report this year.
The introduction of this new funding regime for aged-care and mandatory-care targets of 200 minutes per resident per day
– 40 of which must be registered nurse time – from October next year represents the biggest reform in the sector since the arrival of the now defunct Aged Care Funding Instrument (ACFI) in 2008. That tool, a method by which the Australian government determined funding for aged-care operators, was similarly exploited by some of the larger approved providers at the time, which led then treasurer Scott Morrison to cut billions of dollars of taxpayer funding across all nursing homes.
As the Royal Commission into Aged Care Quality and Safety later found, the gap between these “indexation” cuts and inadequate planning ratios was worth about $10 billion of extra funding a year that the sector never saw. Some of that money is slowly being replaced but the government remains privately concerned about the “viability” of aged-care providers and the ability of the sector to meet a crucial reform program.
“I am uninterested in consultation for the sake of box-ticking,” Minister for
Aged Care Anika Wells told the Aged and Community Care Providers Association (ACCPA) national conference in Adelaide on Wednesday.
“I have heard there’s a disconnect between the government and providers, but I am telling you we will work with you and have a genuine relationship. I have also been clear that I want a focus on solutions and work to lift standards of care for our most vulnerable.”
One of the crucial sticking points in aged care has always been the money: How much is enough and are providers spending it on care?
In a briefing to operators published on the Department of Health’s Youtube channel last month, the department’s assistant secretary, Mark Richardson, reminded agedcare providers that “you are funded to provide those care minutes”.
“The funding levels are based upon a Stewartbrown [sector accounting consultancy] analysis, which showed that on average the sector is spending about 78 per cent of their ACFI funding on registered nurses, enrolled nurses and personal care workers,” he said.
“So if you are spending 78 per cent, it’s higher than, I guess, the cost of care and in fact you only have to spend about 75 or 76 per cent of your funding in order to meet the care minutes.
“Our analysis, having a look at different types of facilities and so forth, has shown that there are some facilities out there that will have a bigger jump to make. In other words, they are spending well below 70 per cent on care. There are a number of facilities that are spending 60 or 65 per cent.
“There is going to be a readjustment required for those facilities and, to be quite frank, that was the intention of the royal commission.”
Stewartbrown, the aged-care audit and accounting specialists whose data informed the Department of Health, have long reported a compounding slide into financial instability as a result of funding freezes and the gerrymandering of the ACFI under the previous government.
In an August presentation on sector viability, it noted that operators experienced “significant losses” of $3.88 billion in the 2017-18 financial year, and an estimated aggregate loss of $1.53 billion in the 2021-22 financial year, and that “financial reserves have been eroded, resulting in the ongoing financial sustainability having reached a critical point”.
Stewartbrown surveyed almost half of the aged-care sector to reveal a trend of revenue downgrades. In March this year, for example, providers experienced operating losses on average of $12.85 per bed per day, and this was forecast to hit $15.60 in June. Historically, providers have used revenue to cross-subsidise funding losses on care and lifestyle provisions.
Using the same data relied upon by the Department of Health in its briefing, the accounting specialists found a declining “margin” for aged-care operators under the new AN-ACC compared with the nowobsolete ACFI, despite an increase in the average subsidy. This is due almost entirely to rising costs of care provision.
The margin between subsidy and direct-care costs in the 2019-20 financial year, according to Stewartbrown, was $24.44 per bed per day, or 13.5 per cent. In March this year, however, that had fallen to $17.25, or
8.9 per cent. For many – but not all – providers, surpluses here have helped prop up other parts of the aged-care business that have been losing money.
Stewartbrown estimates a funding shortfall of almost $500 million each year even under the new system and its new price, which itself was an increase on the ACFI.
“The AN-ACC funding model has been designed to ensure a stronger relationship between the resident acuity and funding than is the case with ACFI, and will certainly prove to be a more robust and appropriate instrument,” it says.
“The potential shortfall as calculated
… is not a reflection of the AN-ACC model conceptually. The shortfall is entirely due to the indexation required to meet the increased award (4.6 per cent) and related staff costs and the current CPI (5.1 per cent) has not been fully reflected in the current AN-ACC price.”
The Labor government has committed to the full wage increase resulting from the Fair Work Commission’s ongoing consideration of a lift in the minimum wage for agedcare workers under three awards. That’s in addition to the $5.4 billion over four years to lift average direct-care minutes per resident per day to 200 minutes next year and
215 minutes in 2024.
But there is a quid pro quo, Minister Wells says.
“In this stage of the aged-care reform journey, when we are working together to build a new sector, transparency will be vital,” she told providers at the ACCPA conference on Wednesday.
“You must be prepared to embrace this change and accept the new way of operating. There is no reason the finances of aged care cannot be laid bare for older Australians to judge for themselves whether they are getting what they pay for.
“Likewise, the Australian taxpayer has every right to see if their multibillion-dollar investment is delivering what they expect.”
In major legislation that passed the parliament in August, Wells oversaw the creation of the new funding system – which had been developed over years by the previous government – and the introduction of a new star rating system for aged-care providers that will begin in December. The amendments also create an independent pricing authority that will set the average cost of care from next year.
The Department of Health is adamant that, right now, there is enough funding for providers to do their job properly. Providers disagree in private but are hoping to work collaboratively with the new government while there is a 12-month “amnesty” on care minutes.
“It’s less, I think, about the classes as a whole being wrong, and more that there are types of people that they have not differentiated properly within the classification structure, which will mean there are going to be people who are very clearly going to cost a provider more than they get in terms of funding,” one sector source tells The Saturday Paper.
“It’s less about finding people who are going to be more profitable.”
There are 13 typical “classes” of funding for an aged-care resident under the new AN-ACC tool. Outsourced assessment providers feed data from their face-to-face meetings in a nursing home – such as how mobile a resident is, whether they are at risk of developing pressure sores, what their cognition level is – into a proprietary algorithm from the Department of Health to determine which of these funded classes matches the resident.
These classes are not perfect, however, and appear to have some curious qualities. Take classes 11 and 12, for example. The former is for residents who are not mobile, with low cognitive function but low pressuresore risk. These receive a per day allocation of $179.94. In class 12, however, residents are also not mobile, also have low cognitive function and have a higher pressure-sore risk. They are funded to the tune of $175.61 a day, or $4 less than a resident with apparently lower needs.
“AN-ACC funding is sufficient to deliver the care minutes standards for all classification levels and increase allied health services for residents, and does not provide incentives for providers to select residents based on their care needs,” a Department of Health spokesperson said in response to inquiries from The Saturday Paper.
That is not the view of Mirus Australia, which has repeatedly told its 60 client providers that to implement AN-ACC it will make more “business” sense to admit some residents into a nursing home. That was also hinted by Robert Montefiore-gardner, one of the senior bureaucrats in the aged-care funding reform team within the Department of Health. In a webinar for aged-care providers published last month, he told them they could make an educated guess at the funding that would attach to any incoming resident.
“I think that somebody coming into your facility, you wouldn’t know their exact AN-ACC, but you would have a fairly good idea of the likely class the person might end up in,” he said. “As a result you would use that in considering whether you have sufficient resources to be able to look after that person.”