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This report examining the costs of aged care degerated into an argument between providers who cried poor and claimed there was a crisis in aged care on the one hand, and the department who claimed that funding was adequate. What was revealed was a lack of data.

 Australian section   

Residential and Community Aged Care in Australia

The Senate Standing Committee on Finance and Public Administration

April 2009







This report examining the costs of aged care degenerated into an argument by providers, on the one hand, that they did not have enough money and that the system was in crisis, and the department, on the other, arguing that there was enough money in the system and that efficient operators were doing well. The department apparently were not cooperative in responding and were heavily criticised by the committee.

What the report revealed was that the information on which to base opinions and decisions was simply not there. Each protagonist snatched snippets from various reviews done by commercial agencies and used them to support its position.

The providers called for reform of the aged care system. We should see that as both a threat and an opportunity for us to make sure that we get the sort of changes we want. If providers want more money then we want accountability as regards staff numbers and expenditure on staffing etc.

Issues addressed included the need for reform, the lack of information, funding levels, building new facilities, problems with accreditation, reduced services, and the indexation formula. Very concerning for the community are the revelations that cherry picking is occurring.

The next step in this competitive marketing process is for providers to start paying incentives (kickbacks) to assessors and then link these to the size of accomodation bonds. This is not illegal in Australia (except for doctors). Financial advisers have for example given those referring customers payment linked to the investment package customers accept. It is only a small step from there to hiring bounty hunters to go out into the community to find wealthy seniors who can be persuaded that they would be better off in a nursing home than in their own homes. That would be illegal in Australia. Sections of the market can see such business practices as legitimate. They have been used to target vulnerable groups in health care.

The committee recommended the formation of an ongoing national aged care forum drawn from all interested parties. That forum it was suggested should be responsible for collecting information and planning reforms to the system. It was recommended that most of the unresolved issues be referred to that forum. I believe that as a community we should set up the sort of not for profit community structure that can represent the community at any such forum.

To see the full report go to the following web page

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The Brief


In October 2008 the senate asked this committee to look at the "funding, planning, allocation, capital and equity of residential and community aged care in Australia with particular reference to" funding levels, the indexation formula, regional variations in cost, inequality in user payments, planning ratios and the implications for community care places - a broad brief.


The Report


There were 125 submissions. Public hearings were held in 5 cities.


The inquiry ended in a slanging match between providers and the department as to whether funding and procedures were adequate or not. The department followed Hogan's 2004 mantra and maintained that funding was adequate and processes appropriate. What was revealed was the absence of any solid information on which any real assessment could be made. Each side snatched at fragments from various commissioned reports to justify its position.


The department it seems was uncooperative, did not respond to the criticisms and made its submission long after the due date. The labor dominated committee's introductory comments were scathing.


However, the committee wishes to express its considerable disappointment with the level of the department's assistance to the committee. Not only was the department's submission received some two months after the due date, it also provided only factual information and did not address or comment on the major issues of concern raised by providers and other interested stakeholders many of which are longstanding and well-known. - - - Senior officers also displayed a less than forthcoming attitude to the committee and as a consequence the committee required a further submission from the department and held a second hearing with officers on 21 April.


It is unfortunate that in this instance the department's initial response to the inquiry was inadequate and its approach less than helpful. As a result, the committee's final deliberations were delayed and undermined and the capacity of the committee to effectively review the matter has therefore been compromised. The direct consequence of this has been to impede the committee's capacity to report to the Senate on the matter. (Page 2)

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Cries for Reform


The cries for reform coming from the providers almost echoes what advocates for the residents and the community have been saying. Their focus however is financial. It is critical that we ensure that the community are at the table and have input into the reform they are calling for. The community must see that the reforms conform to their requirements and that the community secures the sort of "leverage" needed. It is essential that we balance the power of the providers - and their financial interests - with new power for the community and their interest in service and quality of life. If they want money then we want to know how it is spent; how much on nurses, staff ratios etc.


From the inquiry's inception, it became overwhelmingly evident that aged care providers and involved stakeholders across the country recognised a need to reform the aged care sector in Australia. Witnesses commented on the 'bandaid' approach that has been taken to problems within the aged care sector and of the fact that they have been calling for reform for many years. It was argued that the significant problems currently facing the sector and the need to meet future demand must be addressed immediately and in a comprehensive and coherent manner. (Page 15)


The committee extended an invitation to us and we should seize it by plenty of input. at this time. Their first recommendation was for an ongoing national aged care forum If that ever happens we should make sure that the right people are represented. At the current time we do not have a body representing the community in regard to nursing home issues.


The committee considers therefore, that all stakeholders including all levels of government, residential and community aged care providers, professional bodies, lobby groups, involved individuals, and clients of aged care services and their families need to be engaged in ongoing dialogue. (Page 16)


Recommendation 1

3.6 The committee recommends the establishment of a national aged care forum, reporting directly to the Minister for Health and Ageing and coordinated by the Department of Health and Ageing, to consider, on an on-going basis, current and future challenges to the aged care sector.


Recommendation 2
The committee recommends that the national aged care forum establish a taskforce (or equivalent body) representative of all involved aged care stakeholders including clients to action and where possible implement determinations of the national forum.

(Page ix)


and from Baptistcare

The Aged Care Act 1997 is now entering its twelfth year of operation and with the exception of the Hogan 2004, there has been no systematic review into its operations, nor has there been any evidence based data to suggest that the quality of care has improved since its inception. (Page 17)

Lack of Information


The committee was critical of the lack of information, about both costing and care, on which to base decisions and advice - referring particularly to benchmarks'. It demanded benchmarks for "care costs" and quoted from previous reports such as the 1999 productivity commission report. We should not confuse these benchmarks about money with benchmarks for standards of care. You cannot of course have benchmarks using standards unless you also measure and record positive markers and negative markers like pressure sores and weight loss - measures which the accreditation review at the end of 2007 thought unnecessary.


The providers including not-for-profit providers clearly felt that "care costs research" would show clearly that the funding is inadequate. They are probably correct but that is not the whole problem for us. We need more than this - much more.


A recurring theme throughout this inquiry was the need to establish benchmark of care costs in order to understand the relationship between subsidy allocation and indexation. (Page 17)


According to Mr Cam Ansell of Grant Thornton Australia, there is a 'mismatch' between recognition of the need for care and the subsidy levels resulting from the fact that:


...we have never actually done the amount of research to work out what it does cost to look after a resident, not just in terms of their care and their clinical cost but what does it cost to accommodate them? - - - -

(Page 19)


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Department of Health withholding information

Grant Thornton Australia noted that the Audited General Purpose Financial Reports, which providers submitted to the department (although they did not provide the in depth information needed) had not been publicly released by the department since 2005-06. They quoted that this makes "this important piece of industry financial benchmarking data unavailable to aged care providers for site specific benchmarking and to the industry more broadly."

This according to the department was because of "concerns about the methodological soundness" and "noncompliance with accounting standards" in the reports.


The committee found "it very difficult to understand the delay in fixing such a vital tool" and advised that it should be published "to ensure that the information available provides a clear and comparative understanding of provider performance".


Moreover, where such data is not publicly available, public scrutiny and discussion across the sector is all but impossible. (Page 23)


Comprehensive nationally agreed data sets and application across the sector have the potential to provide a clear picture of the financial health of aged care providers, their efficiency in meeting client needs, to inform ongoing debates in the sector, and the policy decisions emanating from them. (Page 24)


Funding levels


When it came to the current funding levels providers were vocal in crying poor. The department denied this and argued that the top quartile were providing good care as reflected in accreditation reviews and still making a fair profit. They pointed out that insolvency was extremely rare. The department


  - - - noted that while some providers 'find the going very hard indeed for a variety of reasons', those reasons are not because of current funding levels. - - -

"I think I have made clear that as to a crisis, we would say no. There is not a present crisis. (Page 28)


Mr Stuart also noted that returns per resident for efficient providers, defined as the top quartile, increased between 2006-07 and 2007-08. (Page 30)


One of the problems for aged care providers was that the community was demanding single rooms with ensuite but compensation did not allow for the extra cost of this.

The survey (Grant Thornton) also commented that older, institutional facilities with shared rooms consistently out-performed modern, single-room facilities which are most preferred by consumers. (Page 30)


The survey revealed that earnings achieved in dated, institutional facilities were almost double those achieved in the modern facilities that meet consumer demand for privacy, dignity and comprehensive care (Page 31)


The department replied that they did if they were efficient. They did not discuss the fact that no one has tried to examine the impact of marketplace efficiency on communication with residents and so on quality of life.


Moreover, Dr Cullen (from Department) stated that the Bentley survey demonstrated that 'efficient providers of single-bed facilities and of shared facilities make the same level of return' (from Department Page 31)


"What the top quartile shows you is what an efficient provider can achieve. The entire industry could be efficient if it wished to be. If the entire industry behaved efficiently, like the top quartile does, it would be able to achieve the result, and then the average result across the industry would be the average result achieved by the top quartile". (Page 32)


Building to meet demand


When it came to building new facilities to meet future demands then providers and the department once again contradicted each other. The providers claimed their returns were too small to justify development.


I think we are now getting to the point where, when aged-care providers are not bidding for free resources from the Commonwealth government that they can put on their balance sheet, at no cost to themselves, then I think that should be a really, really powerful warning sign. (Page 34)


The department argued that building activity in the sector did not support the argument that the sector was under strain. Dr Cullen commented that the level of building activity in the industry is higher now than at any stage in the decade since aged care construction statistics have been collected - - - (page 34)


Dr Cullen (department) commented:

As long as people are willing to enter the industry and build, then you can make a judgment that the return must be sufficient. (Page 35)


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Need for data


The disputes all came back to the absence of solid data.


The committee received contradictory evidence in relation to the financial wellbeing of the aged care sector, and therefore the preparedness of the sector to meet growing demand. On one hand, providers argued that the sector is in crisis, or at the very least facing a crisis in the near future. On the other hand, the Department of Health and Ageing argued that there are significant government resources going into the sector and that there is evidence of increasing returns for providers and other indicators of strong financial viability including the level of building approvals.


The committee considers that at the heart of the matter is the question of methodological approach and definitions of key terms. In the previous chapter, the committee has addressed the need for nationally consistent aged care data. (Page 39)


Unhappiness about Accreditation


It was interesting to see the complaints from industry about accreditation and contrast this with the claimed consensus about the benefits of accreditation in the 2007 inquiry into accreditation.


The not-for-profit Catholic Health was interested in a system which worked to separate the good from the mediocre - something that actually measured. Even the ACAA spoke of "next generation compliance" so we as a community should make it very clear what we think that should be. The department opted for more of the same but less burdensome. The committee suggested that this be overhauled. This is an opportunity to come up with something different.


Of these pressures, the Share & Care Community Service Group noted:

There is pressure on all HACC providers to meet escalating demand within existing resources...The increase in quality standards, expectations of accountability and transparency, requirements for continuous consumer feedback and the massive increase of staff time to implement, monitor and evaluate all these items is in no way presently reflected in the funding. (Page 40)

Whilst providers recognised the need for regulatory and compliance regimes, concerns focused on the rigidity of the system. Mr Martin Laverty of Catholic Health Australia argued in this regard:


We think there should be a greater opportunity for incentives for good performance balanced with the requirement for strong accreditation standards

(Page 42)

Mr Bryan Dorman of the ACAA

We are ready for a next-generation compliance process. The next generation is where the staff engage with getting better at what they are doing and the system works in favour of that, not just whether you are good or bad. (ACAA Page 43)

In addition, the committee considers that there is a need to identify and implement more cost effective measures of meeting compliance measures and to put in place support for smaller providers in relation to the compliance regime. It believes that the recommended advisory taskforce in association with the Department of Health and Ageing could undertake such a review. (Page 44)


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Reduction in Service and staffing


That there had been a reduction in services and so in "quality" was readily apparent. Predictably there had been "cherry picking" of those who were profitable. This means that those who can pay more get a bed sooner than those in greater need who can't pay. This is totally unethical from a professional perspective and would be illegal if this were a doctor. Its occurrence was blamed on funding. Whatever happened to providing care according to need and charging according to means. This is what sets us apart from the USA.

Aged and Community Services SA & NT commented that not only were there less after hours service provision and a loss of real hours of direct care, but also a loss of diversity, loss of matching and 'cherry picking' of waiting lists. Anglicare noted that the rationing services impacts particularly on older people with limited means and limited alternative supports. (Page 45)

There was a workforce shortage across the sector "affecting all care providers including personal care workers, general practitioners and allied health professionals as well as nurses." The department pointed to staff shortages at facilities that failed accreditation but claimed that the top quartile could do it without cutting staff.


Many witnesses commented that the quality and quantity of services has diminished and that this was further evidence of the crisis within the sector. (Page 44)


Aged and Community Services SA & NT commented that not only were there less after hours service provision and a loss of real hours of direct care, but also a loss of diversity, loss of matching and 'cherry picking' of waiting lists. (Page 45)


The Australian Medical Association took the view that older Australians in residential aged care facilities 'do not have access to medical care equal to the standard enjoyed by the rest of the population' (Page 45)



"Our own experience is that since...2000 a CACP package was able to provide an average of seven hours per week with the capacity to increase to 10 hours per week for short periods of increased need. In 2008 this has reduced to five hours per week with limited capacity to increase hours to seven per week for increased need" (Page 46)



The LHMU also has the privilege of negotiating on behalf of staff at the Perth Zoo. - - - - - This is what we pay people to care for animals at the Perth Zoo. What we pay staff to care for the elderly is significantly less. You would have to ask yourself, 'What does that say about the value that we attribute not only to the staff but to the elderly?" (Page 49)


Department of Health and Ageing

I know of some of the providers. I know their enterprise bargaining agreements and I know that they are generous compared with the award and at a benchmark of what is done elsewhere. I do not want to be misquoted. There is no evidence that I am aware of, and I do not believe any evidence has been given to the committee, that the top quartile achieved that by cutting costs. (Page 51)


The committee summed it up as follows



The committee received evidence and submissions from aged care providers and stakeholders from all parts of Australia which put a similar view: that the aged care sector is facing difficulties with the level of funding that it receives. That level is viewed as being inadequate to provide the services required, to meet increased costs such as wages and to implement the expansion needed to meet future demand. The Department of Health and Ageing's evidence did not accord with the provider's view of the sector. The committee considers that given the importance of the issues raised, that it is time for an all encompassing review, as recommended by the committee, to be undertaken. (Page 58)


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The indexation formula


The committee went on to look at the current indexation formula. There was the same conflict between providers and departments.


Witnesses raised grave concerns about the adequacy of the indexation formula used by the Commonwealth for both residential and community aged care, particularly in relation to addressing wage increases. The committee considers, on the balance of the evidence before it, that the current indexation formula may no longer be appropriate for the aged care sector. The committee therefore considers that the formula needs to be reviewed and modified if required. The suggested review of the benchmark of care costs, as detailed in Chapter 3, should inform this review. (Page 70)


Other issues


The committee went on to look at special social and demographic needs, at the question of inequity in user payments, and finally at the allocation of funding for community care. While these are very important issues they are not central to the arguments I am making about the core problems. It remains only to finish with the quote made at the beginning of this part of the report.


It was once said that the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.

Hubert H. Humphrey 1911-1978


To see the full report go to the following web page


Click Here to go back to the main report page

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This page created June 2010 by Michael Wynne