Key points

• The Bill proposes amendments to the Aged Care Act 1997 to:
  • require residential aged care and some flexible care approved providers to always have a registered nurse on site and on duty, starting from 1 July 2023
  • enable the Government to limit prices associated with home care packages and remove the approved provider’s ability to charge an exit amount and
  • require the publication of information about aged care services.
• These amendments respond to Recommendations 86 and 88 of the Final Report of the Royal Commission into Aged Care Quality and Safety and implement election commitments of the new Labor Government.
• Questions exist as to the number of registered nurses who will need to be recruited to work in aged care facilities to meet the new requirements.
• The proposals will impose a regulatory burden on aged care providers.

Introductory Info

Date introduced:  27 July 2022
House:  House of Representatives
Portfolio:  Health and Aged Care
Commencement:
Sections 1–3: Royal Assent
Schedule 1: 1 April 2023
Schedule 2: 1 January 2023
Schedule 3: 1 December 2022

The Bills Digest at a glance

The Final Report of the Royal Commission into Aged Care Quality and Safety (Royal Commission) was publicly released 1 March 2021 by the Morrison Government.[1] The Final Report recommended a fundamental and systemic shift in aged care and provided 148 recommendations outlining the Commissioners’ vision for the future of aged care. To implement some of these recommendations, legislative change is required.

Since the release of the Final Report 4 pieces of legislation have been introduced into the Parliament:

• Aged Care and Other Legislation Amendment (Royal Commission Response No. 1) Act 2021  
  • the Bill for this Act passed both Houses on 24 June 2021
• Aged Care and Other Legislation Amendment (Royal Commission Response No. 2) Bill 2021
  • this Bill lapsed at dissolution of the 46th Parliament in April 2022
• Aged Care and Other Legislation Amendment (Royal Commission Response) Bill 2022
  • this Bill passed both Houses on 2 August 2022
• Aged Care Amendments (Implementing Care Reform) Bill 2022 (the Bill), the focus of this Bills Digest.

The Bill is designed to partially respond to 2 of the Royal Commission’s recommendations:

• Recommendation 86: Minimum staff time standard for residential aged care
• Recommendation 88: Legislative amendments to improve provider governance.[2]

In addition, it is also designed to meet several of the Australian Labor Party’s aged care election commitments.[3]

To achieve this, the Bill contains 3 schedules that will amend the Aged Care Act 1997 and enable additional requirements to be introduced in delegated legislation:

• Schedule 1 – Registered Nurses
  • this Schedule will introduce a requirement for residential aged care and some flexible care approved providers to have at least 1 registered nurse on site, and on duty, at all times at the facility from 1 July 2023, unless the approved provider has been granted an exemption in accordance with the Quality of Care Principles 2014.
•  Schedule 2 – Capping home care charges
  • this Schedule will introduce a power enabling the Government to limit (cap) the fees that approved providers can apply to home care package recipients and remove the ability of approved providers to charge the care recipient an exit amount.
• Schedule 3 – Transparency of Information
  • this Schedule will require the Secretary to make information on aged care services publicly available, in accordance with the Information Principles 2014.

Purpose of the Bill

The purpose of the Aged Care Amendment (Implementing Care Reform) Bill 2022 (the Bill) is to amend the Aged Care Act 1997 (the Act) to:

• require residential aged care and some flexible care approved providers to always have a registered nurse on site and on duty (Schedule 1)
• enable the Government to limit prices associated with home care packages and remove the approved provider’s ability to charge an exit amount (Schedule 2)
• require the Secretary to publish information about aged care services (Schedule 3).

Background

Schedule 1–Registered nurses in aged care homes

The Centre for Health Services Development was requested by the Royal Commission to undertake research into international and national staffing portfolios for residential aged care to better understand how staffing can be improved in Australia.

The Centre for Health Services Development observed that there was limited evidence on the relationship between staffing and quality in residential aged care (unlike in hospitals), and stated that the ‘methodological, definitional and cultural challenges within aged care have limited its capacity to routinely measure quality’, as ‘the measures of quality to date have primarily focused on relationships between inputs (dollars, staff numbers) and outputs (client numbers, incident rates) rather than client outcomes (quality of care)’.[4] Using a nursing home quality rating system from the United States, the CMS 5 star system, which assigns a rating based on mandatory staffing levels and minutes per resident, the authors found that 57.6% of people living in Australian residential aged care homes received care in services that rated 2 stars or less. In other words, more than half of people living in residential aged care in this study received less than 215 minutes care minutes and/or less than 30 minutes with a registered nurse (RN) per day.[5]

In response to these findings, the Royal Commission stated that ‘this is entirely unacceptable and partly explains the extent of substandard care’ and made Recommendation 86, which is made up of 8 parts and focuses on:

• introducing a requirement for residential facilities to meet a quality and safety standard on minimum staff time
• from 1 July 2022, the minimum staff standard should be at least 200 minutes of staff time per day for the average resident, with at least 40 minutes being provided by a RN
  • this standard should require, at a minimum, a RN to be on site for the morning and afternoon shifts (16 hours per day)
• from 1 July 2024, the minimum staff time should increase to 215 minutes per resident per day, with a minimum of 44 minutes being provided by a RN
  • from this date, a RN should always be required to be on site
• the minimum staff time standard should be linked to the casemix-adjusted activity based funding model
• some exemptions to the staff skills mix requirement should be available by application.[6]

Broader financial considerations

StewartBrown, a chartered accountancy firm, undertakes quarterly aged care financial performance surveys with aged care services. In the most recent, publicly available, report for the 9 months to March 2022, the authors state:

The Survey for the 9 month period ending March 2022 continues to highlight the declining financial sustainability of the sector, with residential aged care now being at a critical financial sustainability position.

The average operating results for residential aged care homes in all geographic sectors was an operating loss of $12.85 per bed per day (March 2021 $6.10 pbd loss) despite the additional Basic Daily Fee supplement of $10 per bed day…

It is the opinion of StewartBrown that after 5 years of significant aggregate operating losses in the residential aged care sector, that structural funding reforms (including care recipient co-contribution) are essential. However, to avoid closure of homes and reduced service delivery, especially in regional locations, an emergency funding package needs to be delivered in the short term to ensure current viability and allow for the necessary funding reforms to be properly implemented.^[7] [emphasis in original]

The report provides a summary of the income and expenditure for residential care, including the average expenditure on direct care wages, which was $163.48 per bed day (85% of direct care revenue).[8] The report goes on to state that services provide an average of 179 direct care minutes per resident day.[9]

The EBITDAR (Earnings Before Interest, Taxation, Depreciation, Amortisation and Rent) averaged at $2,679 per bed per annum (this includes the $10 basic daily fee supplement) and is a decrease from March 2021, which was $4,733.[10] Nationally 38% of residential facilities are making an EBITDAR loss.[11]

Researchers from the University of Technology Sydney undertook work analysing the results of the first 6 months of the 2020–21 financial year using the StewartBrown data, providing commentary on the financial position and the major challenges for the aged care sector. In their discussion on the implementation of the Australian National Aged Care Classification (AN-ACC) funding model into residential aged care,[12] the researchers stated that that the impacts of the announced increase in funding ‘may not be as significant as the level of increase suggests’, as:

It is expected that the funding uplift will be largely consumed by increases in total direct care staffing minutes to meet the minimum staffing standards in force by October 2023. In the intervening period, the sector will need to increase total direct care by an average of 22 minutes per resident per day (approximately 12.4%) and RN minutes by 11.8 minutes (41.8%).

The AN-ACC amount already includes the $10 uplift in the Basic Daily Fee announced as part of the 2021–22 Budget, which will need to be allocated against everyday living costs to help reduce the losses on that activity.

In the coming 18 months, providers potentially face further increases in staffing costs if award rates are raised as a result of the Fair Work Commission case and if new requirements to have an RN on-site 24/7 are introduced. That is, these two factors have not been incorporated into the initial AN-ACC price and would have to be funded separately if implemented.[13]

In a recent journal article that considered the anticipated minimum staffing standards for introduction into residential aged care (as committed to under the Morrison Government), the researchers identified several policy considerations that should be factored into the implementation of minimum staffing standards, drawing on international evidence:

• the cost associated with complying with new staffing standards
• the possibility of input substitution where the regulation of one type of staff may be offset by reducing the number of another type of staff, which can have a negative impact on the quality of care and on the workload of the regulated staff
• the adequacy of the local labour market to meet the staffing requirements.[14]

Schedule 2–Home care package costs (care and package management)

The Home Care Package program aims to support older people with complex care needs to live independently in their home.

In February 2017, the Government introduced stage 1 of the Increasing Choice in Home Care reforms, which, among other things, resulted in home care packages being allocated to the consumer (rather than the home care provider).[15]

With the shift away from home care packages being allocated to the provider, the Department of Health released guidelines for exit amounts:

An exit amount is a charge that a provider can deduct from a client’s unspent home care package funds if the client leaves their care (either because the client decides to change to another home care provider, or the client leaves home care). The exit amount is intended to allow providers to recover administrative costs associated with determining and making payment of unspent home care amounts.[16]

An approved provider is required to enter into a home care agreement with the person who will receive care (or their representative) before they can provide services to that person. The agreement sets out the services the organisation will provide (or organise to be provided) and how much it will cost, including the exit amount. The requirements of the agreement are outlined in the Act and the User Rights Principles 2014.[17] Alongside the home care agreement, the approved provider also needs to provide a care plan and an individualised budget.

Administration costs

In 2019, the Government mandated pricing transparency for home care package costs and charges with all approved providers required to publish information on common services and costs using a standardised format on the My Aged Care Service Finder and also provide a copy of their pricing schedule to potential consumers, with costs also being required to be outlined in the home care agreement.

The Department provides information on the price transparency requirements for home care packages, including administration fees charged by the provider:

• Care management (or case management), is a component of every home care package, with the cost of care management services to be included in the pricing schedule. Care management may include services such as:
  • reviewing the Home Care Agreement and care plan
  • ensuring care is culturally appropriate
  • ensuring the care is aligned with other supports.
• Package management is a fortnightly cost to cover the ongoing organisational activities associated with the delivery and management of the home care package. It does not include business associated costs (e.g. marketing, office rent). Business associated costs need to be included in the unit price for specific care services rather than being a separate cost, and ‘must be reasonable’.[18]

Table 1 provides a sector wide overview of home care provider income per care recipient per day and indicates that in 2019-20, management and administration fees formed almost 30 per cent of provider income per care recipient.

Table 1      Home care provider income per consumer per day, 2017–18 to 2019–20

Source: Aged Care Financing Authority (ACFA), Ninth Report on the Funding and Financing of the Aged Care Sector, (Canberra: DoH, 2021), 47.

In 2021, the Department started releasing national summaries of home care prices. The national median price for select fees are summarised in Table 2 from 31 December 2021, the most recent report. In addition, the report indicates that 41% of services publish an exit amount of more than $0 with the median exit amount for these services being $400.[19]

Table 2      National summary of select home care package prices (31 December 2021)

Pricing types and package level	National median prices
Care management (cost per fortnight): fully managed by provider
Level 1	$58
Level 2	$103
Level 3	$212
Level 4	$310
Care management (cost per fortnight): self-managed
Level 1	$37
Level 2	$52
Level 3	$95
Level 4	$125
Package management (cost per fortnight)
Level 1	$35
Level 2	$61
Level 3	$133
Level 4	$199

Source: Department of Health (DoH), National Summary of Home Care Package Prices – 31 December 2021, (Canberra: DoH, 2022).

Concerns were raised to the Royal Commission about the (in)adequacy of funding through the home care package program, including ‘that a considerable portion of an older person’s Home Care Package allocation often goes to care management and administration fees, rather than its intended purpose of direct care’.[20]

Schedule 3–Information available to the Department

Approved providers have responsibilities under the Act and the Aged Care Quality and Safety Commission Act 2018 to submit different types of information to the Department and the Aged Care Quality and Safety Commission. Some of these reporting requirements are briefly outlined below.

In addition, the Aged Care and Other Legislation Amendment (Royal Commission Response) Bill 2022, which recently passed the Parliament, will make changes to the governance of approved providers (under Schedule 5), including changes to the key personnel requirements and a new obligation for an approved provider to prepare an annual statement that meets the requirements to be outlined in the Accountability Principles 2014 and provide a copy to the Secretary of the Department.[21]

The Explanatory Memorandum provides a list of proposed items for inclusion in the annual statement, which include:

• details of key personnel
• information on staffing
• financial information
• complaints.[22]

In addition, an Information Technology solution is being developed to, where practicable, prevent duplication where information is reported elsewhere.[23]

Financial reporting

As part of their obligations, approved providers are required submit an Aged Care Financial Report to the Department of Health and Aged Care at the end of each financial year, with the specific requirements dependent on the type of service provided. As outlined by the Department, residential aged care providers are required to supply:

• information on income and expenses for care services and other activities for each facility, including information on labour costs and hours
• an approved provider level balance sheet, income statement and cash flow statement (non-government providers only)
• movement schedules to accompany the financial statements
• a consolidated parent level segment report covering all residential services (non-government providers only)
• an Annual Prudential Compliance Statement.[24]

As of the 1 July 2022, approved providers are also required to submit quarterly financial reports to the Department. As part of these reports, providers will be required to report the care staffing minutes provided by RNs, enrolled nurses and personal care workers.[25]

Reporting on key personnel

Key personnel is defined under section 8B of the Aged Care Quality and Safety Commission Act 2018 and generally refers to:

• a person who is responsible for the executive decisions of the organisation (this will include members and directors of boards)
• a person who has authority or responsibility for, or significant influence over, planning, directing or controlling the activities of the organisation
• a person who is responsible for the nursing services provided by the organisation (if they hold a nursing qualification)
• a person that is responsible for the day-to-day operations of an organisation.

As part of the 2016 deregulation reforms, the key personnel requirements were scaled back and the Department advised that key personnel did not generally need to be reported. However, this was later modified and in late 2019 the Department of Health advised providers they would need to notify the Secretary of any changes to key personnel that could materially affect the provider’s suitability to provide aged care.[26]

Royal Commission recommendation

The Royal Commission stated that the governance requirements in the aged care legislation were insufficient for the governance and leadership of aged care providers. As part of the changes, it recommended to enhance the governance of the aged care system, the Royal Commission made Recommendation 88 (see Figure 1), which Schedule 3 of this Bill is designed to partially respond to.

Figure 1     Royal Commission’s Recommendation 88

Source: Royal Commission into Aged Care Quality and Safety (Royal Commission), Final Report: Care, Dignity and Respect, Volume 3B: The New System, (Adelaide: Royal Commission, 2021), 456.

Committee consideration

Senate Community Affairs Legislation Committee

The Bill has been referred to the Senate Community Affairs Legislation Committee for inquiry and report by 31 August 2022. Details of the inquiry are available on the inquiry homepage.

Position of major interest groups

The interim CEO of Aged & Community Care Providers Association, Paul Sadler, has said the Association supports the Bill in-principle and looks forward to having the opportunity to scrutinise the implementation of the measures. One of the Association’s concerns is how the changes to home care charges will impact both consumers and service providers.[27]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.

The Government considers that the Bill is compatible with human rights, noting that ‘the extent that the Bill may limit human rights…is reasonable, necessary and proportionate to protect the rights of older Australians’.[28]

Parliamentary Joint Committee on Human Rights

The Committee had not reported on the Bill at the time of writing.

Key issues and provisions

To achieve the proposed changes for all 3 schedules, the Bill will amend the Aged Care Act 1997.

Schedule 1–Registered nurses

Current staffing requirements

The Act requires aged care providers ‘to maintain an adequate number of appropriately skilled staff to ensure that the care needs of care recipients are met’.[29]

The Aged Care Quality Standards, which approved providers must comply with, require the approved provider to have ‘a workforce that is sufficient, and is skilled and qualified, to provide safe, respectful and quality care and services’, but the Standards do not prescribe the qualifications needed nor the number of staff required.[30]

The Aged Care and Other Legislation Amendment (Royal Commission Response) Bill 2022, which recently passed the Parliament, changes governance arrangements for approved providers (see Schedule 5), including a new responsibility for the approved provider to require the governing body to ensure the provider’s staff:

• have appropriate qualifications, skills or experience to provide the care and/or services offered by the provider and
• are given the opportunity to develop their capability to provide care and services.[31]

New responsibility relating to registered nurses

Section 54-1 of the Act outlines the responsibilities of approved providers in relation to the quality of aged care that must be provided and includes requirements such as complying with the Aged Care Quality Standards (paragraph 54-1(1)(d)). Item 1 of Schedule 1 inserts proposed paragraph 54-1(1)(ba), which provides that if a provider meets the criteria set out in proposed section 54-1A then they must comply with the requirements in proposed subsection 54-1A(2).

Item 2 inserts proposed section 54-1A, which outlines a new responsibility for some approved providers in relation to RNs.

Proposed subsection 54-1A(2) will require certain approved providers from 1 July 2023, to ensure at least one RN is on site, and on duty, at all times at a residential facility. This subsection draws on the definition of ‘registered nurse’ from the Health Insurance Act 1973, which defines registered nurse as ‘a person who is registered under the National Law [Health Practitioner Regulation National Law] in the nursing profession as a registered nurse’.[32]

Proposed subsection 54-1A(1) identifies the providers that will need to meet this new responsibility:

• providers that provide residential aged care to care recipients in a residential facility
• providers of flexible care of a kind specified in the Quality of Care Principles 2014 who provide care to care recipients in residential aged care.[33]

Proposed subsection 54-1A(3) allows for the Quality of Care Principles to provide a mechanism for granting an exemption to certain providers in relation to the requirement to have an RN on site, and on duty, at all times at a residential facility. Without placing restrictions on this power to provide exemptions, proposed subsection 54-1A(4) allows the Quality of Care Principles to provide for any or all of the following:

• the process for the making of applications for the grant of an exemption in relation to a residential facility
• the circumstances in which an exemption may be granted
• the conditions that apply to an exemption.

Estimated impacts

The financial impact statement suggests that the indicative financial impact of Schedule 1 will be $450.7 million over the forward estimates.[34] However, additional information on potential financial support for approved providers to meet this new responsibility does not appear to be available.

The Government has estimated that approximately 80% of residential facilities already fulfil or nearly fulfil the proposed responsibility of having a RN on duty and on site 24 hours a day, 7 days a week.[35] In addition, the Government has estimated that this proposed responsibility would require an additional 869 RNs in aged care.[36] The Aged & Community Care Providers Association has estimated that the sector will need an additional 1,440 RNs to fill the gap.[37]

The Explanatory Memorandum includes the supplementary regulatory impact analysis for the introduction of Schedule 1 and the increased minimum care minute requirements, which outlines the following implementation timeframes:

• from 1 October 2022: providers will be funded for a care minute target of an average of 200 minutes, including 40 minutes with a RN, per resident per day
• from 1 July 2023: through this Bill, it will become mandatory to have a RN on site and on duty at all times
• from 1 October 2023: providers will be required to provide an average of 200 care minutes, including 40 minutes with a RN, per resident per day
• from 1 October 2024: providers will be required to provide am average minimum of 215 care minutes, including 44 minutes with a RN, per resident per day.[38]

The Explanatory Memorandum state that ‘the care minute targets will form new care minute standards that will be mandatory from 1 October 2023’ and ‘this requirement will be set in subordinate legislation’.[39]

The implementation timeframe deviates from the Royal Commission’s recommendation, that providers be required to have a RN onsite 16 hours per day (morning and afternoon shifts) by 1 July 2022, and an RN onsite at all times from 1 July 2024.[40]

In the 2021–22 Budget, the Morrison Government provided $3.9 billion in funding for providers to meet the minimum staff time standard that it had planned to introduce, with its implementation plan at the time going as far as October 2023, when it would introduce a new standard that would require an average of 200 care minutes, with a minimum of 40 minutes with a RN, per resident per day, along with a RN being on site for a minimum of 16 hours per day.[41]

It is anticipated that care minutes and the requirements to have a RN onsite at all times will inform the new star rating system, set out in Schedule 2 of the Aged Care and Other Legislation Amendment (Royal Commission Response) Bill 2022, which passed the Parliament on 2 August 2022.[42]

In addition, the supplementary regulatory impact analysis states that the Department is planning a multi-level evaluation strategy for the AN-ACC reforms, which will use qualitative and quantitative metrices to measure the ‘success against the objectives of the 24/7 RN and average minimum care minutes reforms’.[43]

The Department will monitor the financial implications of these new requirements through the payment system data from Services Australia. No offsets were identified to offset the regulatory burden for affected stakeholders with the Department predicting a total change in cost of $131 million (see Table 3).[44]

Table 3      Estimated regulatory burden for 24/7 RN and minimum 215 care minutes per resident per day

Source: Explanatory Memorandum, Aged Care Amendment (Implementing Care Reform) Bill 2022, 26.

Schedule 2–Capping home care charges

The User Rights Principles 2014 currently enable approved providers to charge an exit amount to home care package recipients exiting their service and specifies the rules and responsibilities around home care pricing.

Section 56-2 of the Act outlines the responsibilities of approved providers in relation to the provision of home care to a care recipient. Item 1 of Schedule 2 will insert proposed paragraphs 56-2(aa) and (ab) into the Act, creating 2 new responsibilities for home care providers that will:

• prevent them from charging a care recipient an amount for ceasing their service and
• require them to comply with the prices that can be charged, which will be specified in the User Rights Principles.

In effect, this will prevent home care providers from charging an exit amount and limit the prices a provider can charge for home care packages.

Item 2 specifies that the 2 new responsibilities are to be applied from the day of commencement. As such, some arrangements agreed to in people’s existing home care agreements may no longer be applicable from 1 January 2023.

Schedule 3–Transparency of information

Division 86 in Part 6.2 of the Act provides for the protection of information acquired under or for the purposes of the Act or the Aged Care (Transitional Provisions) Act 1997 that is either:

• personal information (as defined in the Privacy Act 1988)[45]
• information that relates to the affairs of an approved provider or
• information that relates an applicant for a grant under Chapter 5 of the Act.

Item 1 inserts proposed section 86-10, which requires the Secretary to make information in relation to aged care services publicly available, in accordance with the Information Principles 2014. Without limiting the information that may be required to be made publicly available,  proposed subsection 86-10(2) enables the Information Principles to provide for any or all the following:

• information about the aged care provided through an aged care service that must be made publicly available
• information about the approved provider that must be made publicly available
• the way the information is to be made publicly available
• the period in which specified information must be publicly available.

Proposed subsection 86-10(3) specifies that personal information must not be made publicly available, with the exception of personal information about an individual who falls within the definition of key personnel (discussed above).

According to the Explanatory Memorandum, the information that is expected to be published following the introduction of these changes will include:

• financial information, including expenditure on care, nursing, food, maintenance, cleaning, administration, and profits
• care time provided
• key personnel details
• information about the staffing of the service.[46]