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STANDING COMMITTEE ON FINANCE AND PUBLIC ADMINISTRATION - 27/03/2009 - Residential and community aged care in Australia

CHAIR —We welcome our next witnesses from Meercroft Care, Mount St Vincent Nursing Home and Therapy Centre and The Freemasons Homes of Southern Tasmania. Good morning and welcome. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. The committee has copies of your submissions. I now invite you to make a short opening statement. At the conclusion of your remarks I will invite members of the committee to put questions to you.

Mr Burgess —Thank you for the opportunity to speak to our submission today. Key areas that we would like to elaborate on are ACFI and the losses that we are experiencing from the introduction of that system; the ACAR timing and, indeed, the costs involved in preparing those submissions; Commonwealth own-purpose outlay, COPO—it is insufficient and there needs to be an indexation system that recognises and provides for the CPI and cost of providing care to our residents; the access to capital, in particular bonds and the discriminatory nature of bonds being able to be able to charged for low care, not in high care; and the issue of separation of care from accommodation, which we have heard about earlier from ACST representatives. I think one overriding issue or overriding fact, though it has not been brought out today, is that as not-for-profit organisations we are providing a service on behalf of government, and I genuinely believe there needs to be a stronger partnership for that service to be provided in a fair, equitable and compassionate manner to our residents. Thank you.

CHAIR —Thank you very much.

Mr DeWeys —I have a prepared statement. Are you happy for me to read that?

CHAIR —Yes, if it is a short statement, that would be good. Thank you.

Mr DeWeys —You have our written submission, and I would like to highlight and elaborate the key elements of the submission. Our submission is in particular about the current inadequate level of funding. The current level of funding directly affects our ability to employ adequate numbers of caring staff. It is our current level of staffing that directly relates to the identified stresses which exist in our own facility—namely, the number of call bells and the length of time it can take to answer them, especially the length of time it takes before we can take residents to the toilet and assist them back when finished.

This is not a reflection of the inefficiency on the part of our facility; it is purely a staffing matter. Our limited staff can be in only one place at a time. We firmly believe that, because we develop a good relationship with our residents and their support, any complaints that arise generally do not reach the official complaints system. This is a direct result of an understanding by the residents and their support of our real situation, which is beyond our control. We need to be in a financial position where we can afford an increase in the number of caring staff. We have a great appreciation of the workloads of our caring staff and their ability to prioritise their work. We feel that our caring staff are insufficiently rewarded for the expectations that we place on them, especially considering that they need to deal with unrealistic workload pressures. Even without the current added pressure of workloads, there is an insufficient relationship between the skills and the remuneration required for this work. We are talking here about patience and self-control when dealing with difficult people in a kind and compassionate way. These skills cannot be taught and are not found in every worker in the general work force. This needs to be recognised in the form of a financial reward in the rate of payment. We need to be in a financial position where we can afford to increase the rate of pay for our caring staff.

There is really one simple answer to the indexation of funding, which is that the indexation needs to be in relation to the operating cost of the aged-care facilities. Under the current indexation system there is no recognition for industry related cost such as wage increases, the increasing cost of medical equipment and supplies and the additional requirements which continually are placed on the industry, such as the recently introduced food preparation standards and police checks for staff and contractors. The government now has access to accounting reports that comply with required standards and is in a position to use the figures that we provide on an annual basis to calculate a relative indexation figure for an industry based on industry figures.

In conclusion, the conditions that apply to the conditional adjustment payment in my opinion need to be absorbed in the accreditation standards and the payment needs to be absorbed in the standard funding and conditional payment. Thank you.

CHAIR —Thank you very much. Mrs Shearer, are you going to make an opening statement on behalf of your organisation?

Mrs Shearer —No, I was not going to. We liaised with Greg and he has made our opening statement and has mentioned everything we were going to mention in our opening statement. I just want to add one thing that affects Meercroft and other facilities: we have a dementia unit which exposes our staff to increased risk of injury. Our insurance premiums do not reflect the risks that apply to our staff and are, therefore, quite high. That was something that we wanted to add.

CHAIR —Thank you very much. We will go to Senator Bernardi.

Senator BERNARDI —Thank you. I will address the first brief questions to you, Mrs Shearer, in relation to your role as chief executive. Could you elaborate, please, on the workers compensation insurance and perhaps tell us how much greater the insurance premiums are for the high dependency dementia unit, including WorkCover?

Mrs Shearer —Certainly. I might hand that over to Paul, our finance manager at Meercroft Care.

Mr Stephenson —Thank you. We negotiated our insurance in January this year. In Tasmania we do not have WorkCover like the mainland states do. We go to insurance companies for quotes and to supply the service. In the last 12 months our insurance premiums were 3.5 per cent of wages. This year our broker sought seven quotes for us. The lowest was 4.8, which we accepted. The highest was between 13 and 14 per cent of wages.

Senator BERNARDI —Do you believe that accurately reflects the additional risk that your staff are under? Do you have a history of staff incidents?

Mr Stephenson —There is a history of staff incidents in relation to our dementia unit where the majority of our claims exist.

Senator BERNARDI —There would be a large additional cost on your facility, then, for managing staff safety issues?

Mr Stephenson —Yes.

Senator BERNARDI —For the proportion of residents, is it a disproportionate additional cost?

Mr Stephenson —We have 29 residents in our dementia area, which is a mixture of high care and low care. I am not quite sure whether it would be disproportionate or not, but the majority of our claims are in that particular area with resident aggression to staff.

Senator BERNARDI —Thank you. I just want to jump to another area in your submission. You mentioned you received a $300,000 grant for a new kitchen. Was that a Commonwealth government grant?

Mr Stephenson —Yes, it was.

Senator BERNARDI —Was that the entirety of your application or did you, as the previous witnesses suggested, apply for $3 million and get a small proportion of it?

Mr Stephenson —I may need some support on that from Wendy. I have only been with Meercroft since July last year, and the building was done in that financial year.

Mrs Shearer —I will hand that over to Garth.

Mr Murphy —The Commonwealth government grant of $300,000 was based on kitchen equipment as a grant application. The actual building itself cost another $200,000.

Senator BERNARDI —So there was no grant given for the building itself?

Mr Murphy —No.

Senator BERNARDI —Just equipment. Thank you. Would you like me, Chair, to direct a few more questions to the other witnesses?

CHAIR —You have the opportunity to ask the other witnesses.

Senator BERNARDI —I will address this to Mr Muir as the chair of the Mount St Vincent Nursing Home and Therapy Centre. Do you believe that your facility could survive without volunteers?

Mr Muir —No, I do not believe that we would survive without our volunteers. We have a regular basis of volunteers coming in to help with feeding, et cetera, for meal times, for visitation of people who do not have family because it is important to have people around to visit, et cetera, but most of them are in the area of doing chores, not just visitation.

Senator BERNARDI —Would you be able to tell me how many volunteers you have out of your total staff numbers?

Mr Muir —I might have to ask Peter this one.

Mr DeWeys —I cannot give a completely accurate answer to that one, but it would be in the vicinity of about 20.

Senator BERNARDI —Compared with staff numbers of?

Mr DeWeys —Ninety-eight full-time equivalents. The last calculation came up with about 68 hours.

Senator BERNARDI —It would be prohibitive to employ those 20 people to come in to assist. I am expressing this to all of you, and further witnesses may want to take it on notice as well. Does anyone have an idea of what adequate funding is in the region now? Silence, I notice, again.

Mr DeWeys —I can attempt some form of answer: if the funding could be in relation to, say, four or five years ago when we seemed to manage to stay in the black, whereas this year is going to be our first year where we will be operating in the red.

Senator BERNARDI —Does that mean you are suggesting that the indexation has been inappropriate over the past five years?

Mr DeWeys —Very much so.

Senator BERNARDI —Had it been maintained as to the cost? I think you said in your opening statement that to reflect the cost of services it would be sufficient.

Mr DeWeys —That is correct.

Senator BERNARDI —Is there a head nodding across the table? Hansard cannot record head nodding.

CHAIR —Mr Murphy is trying to respond.

Mr Murphy —I just want to make a comment that in aged care—and this is the situation that Meercroft has experienced in the past two to three weeks in looking at our assets and getting a valuation of our assets, the valuation relates to today’s finances—we are seeing our assets eroded. For how long a period it is hard to determine but it also affects our ability to borrow finance to build. I think it is a fairly relevant situation that is current in Australia at this particular point of time, where, in one sense, it is no better time to build when the competitive issues are there, but also we have the paradox of having devaluation in the assets and the ability to borrow.

Senator BERNARDI —Mr Murphy, are you suggesting that there is a reticence on the part of commercial financial institutions to lend money to aged-care facilities?

Mr Murphy —It is very much a reality that I think the industry will experience.

Senator BERNARDI —Is that something that is reflected by the other financial officers that are here?

Mr DeWeys —We have a loan which we obtained through the Catholic Development Fund, which was the only organisation that was willing to come on board to allow us to build our extensions.

Senator BERNARDI —That is interesting. Is this a product, do you think, of the global financial crisis or is it just a product of the market sector that it is not attractive to commercial lending institutions?

Mr Murphy —I think it is the global financial market, and I guess that with ACAR this would have quite an impact on how a facility would look at developing an application.

Senator BERNARDI —I may come back to this after everyone else has had a chance to ask questions.

CHAIR —If time permits, yes.

Senator BILYK —You have mentioned experiences with the department in regard to indexation, so I was just wondering if someone could elaborate on the concerns you have had in dealing with the department.

Mr DeWeys —There are two areas that I see as a concern. One is that the indexation on average over the last few of years now has come in at approximately two to 2.2 per cent, which is totally inadequate when compared to the rate of cost increases that the aged-care facilities face. Another major concern, certainly to us—and I am sure the other organisations would agree with me—is the uncertainty of knowing where the future lies. We do not get even our increased amounts until about one or two weeks before the end of the financial year, which makes budgeting somewhat difficult.

Senator BILYK —Is there any consultation? Are you involved in the process of indexation?

Mr DeWeys —I certainly am not, no.

Senator BILYK —Are any of the organisations?

Mr Stephenson —No.

Senator BILYK —Can you tell the committee about the problems you have in recruiting and retaining staff.

Mr Burgess —We have gone to the length of developing relationships with registered training organisations in trying to streamline our ability to train and recruit appropriately skilled staff. There is a cost involved in that, not only from the relationship that we have to develop with a training organisation, which we are pleased to do, but in monitoring and in the initial outlay of putting staff through that training program. Obviously we want to ensure, as I am sure all providers do, that we have adequately skilled and trained staff who are capable of carrying out their duties and providing the care and services in a compassionate and caring manner to all of our residents, but with that comes a cost. Certainly one of the retention issues is that staff are often asked to do a little more, and many volunteer to do a little more. It is not uncommon to have particularly the nursing staff work a nine- to 10-hour day but be paid for an 8¼- or 8½-hour day. We have that goodwill. Certainly we are very reliant on volunteers. We have 22 at one of our facilities and nine at another. Without their assistance—and I include staff volunteering that extra time—we would certainly be struggling more than we are.

You heard Mrs Parr from ACST mention earlier on a facility that ran at a loss of $1.89 million last financial year. I put my hand up. And, yes, there was an accelerated write-down of some old assets included in that, but so far this year we are running at a loss of $904,000. We have some very big decisions to make. One of the decisions that the board has made already is that it is going to try to put any future development into non-regulated income and concentrate on building independent living units, not on expanding the aged-care facility because it just does not pay. At the moment we have 40 independent living units, which cross-subsidise our aged-care operations. Yes, it was only to the tune of a little more than $30,000 last year, but that is $30,000 that we pulled from a separate cost area to cross-subsidise our aged-care facility operations.

Senator BILYK —Just going back to the staffing issues, do you have any suggestions on solving the problem of recruitment and retention?

Mr Burgess —We often hear that people are not worried about pay. I would suggest that people do consider pay and their value. I believe that the workers in the aged-care industry appear to be undervalued and certainly the remuneration that is offered is base rate. You cannot express the value of that work in words when you see somebody who develops relationships with vulnerable, frail aged people and gives them the comfort that they deserve in the autumn of their life. It is very real and it is very touching, and it needs to be valued more than it is. I believe that is certainly one of the issues. The second issue is adequate remuneration, which is very, very difficult for us to advance as much as it should be with our heavily regulated income.

CHAIR —Before I go on to someone else, in relation to the age of our facilities in the state, I think it would be fair to say that even the department acknowledges that we do have old stock in terms of infrastructure. Could each of the representatives tell the committee what sort of money would have to be injected to bring up to standard those facilities that can be brought up to regulation. One of the issues that we have to confront is that some of the older facilities cannot be improved. What sort of money are we looking at?

Mr Murphy —The general formula, I understand, for constructing a single bedroom with an ensuite is anything between $110,000 and $130,000. It is questionable whether it is worth upgrading existing buildings or demolishing and rebuilding. Generally, the best outcome is to rebuild at a cost of between $110,000 and $130,000 per bed. Multiplied by the number of beds—and we have 59 low-care beds at Meercroft Care—it would cost a considerable amount to upgrade that particular asset.

CHAIR —Would anyone else like to comment?

Mr Burgess —Between 2003 and 2005 my organisation underwent a total redevelopment of a 130-bed facility. The cost was just under $9.8 million. I would not like to be embarking upon that now, firstly, to try to raise those funds and, secondly, to service the loans, which I might add we are still doing. I certainly would not want to be starting that exercise now.

Senator SIEWERT —Did any of you apply for beds in the last ACAR?

Mr Stephenson —No.

Senator SIEWERT —None of you applied for beds. Are any of you holding licences for beds that you cannot build at the moment?

Mr Stephenson —Yes. We are holding 19 beds at the moment. Fifteen were allocated in 2006, and we applied for a zero real interest loan. We were granted $500,000 plus four additional beds. So we are basically holding 19 beds at the moment.

Senator SIEWERT —Will you be able to build those beds?

Mr Stephenson —We are.

Senator SIEWERT —Will you be able to provide those beds?

Mr Stephenson —We are doing our level best at the moment. As Garth mentioned earlier, the building revaluation has not helped us because part of the building revaluation was that they looked at our financial figures for our trading history, and our trading history is not that good. We are trying to do our level best. We are talking to a number of different finance providers at the moment and we are hoping that we will be able to build those beds. We do not really want to hand them back. Ours is a 109-bed facility. A 109-bed facility today is recognised as not being viable. A 130- to 140-bed facility is. We will be coming in at the bottom end of that 130 and we hope that we will be viable, but we do not really know the answer just at the moment.

Senator SIEWERT —Thank you. Do any of your organisations also provide community care through the community care packages? That is residential care.

Mr Stephenson —No.

Senator SIEWERT —I do not need to ask the next question then. I think all of your submissions, or certainly a couple of them, address the ACFI issue. Meercroft Care Inc. in particular comment on the fact that with the change in ACFI, and this is a common thread throughout Australia, fewer people are now able to be funded for low care. That seems to be a significant issue across Australia. Is it a significant issue for all of your organisations?

Mr Burgess —Senator, if I can respond, we have done an analysis of our subsidy income from the government for the period July 2007 through to January 2008 and compared that with July 2008 to January 2009, so the last seven months of the financial year compared with the corresponding seven months of the previous financial year. Our subsidies were $3,246,000-odd in 2007-08. In the corresponding period, July 2008 to January 2009, they were $3,124,000-odd, a reduction of $122,070.

Senator SIEWERT —That is as a direct result of the change in the ACFI funding?

Mr Burgess —We believe so. We have tried our best to replace like with like, but when you replace like with like, a resident with similar classification with a resident of similar care needs, then the ACFI funding is actually less. That is clearly demonstrated by the need for and the retention of the grandparenting arrangement. If people were going to get similar or the same funding when they moved across for ACFI, we would not have people staying on grandparenting arrangements. So obviously it is apparent that the funding under ACFI for similar persons is less or else they would moved across.

Senator SIEWERT —So there is an issue with ACFI, but the evidence that we have received again throughout Australia is that there has been a shift from low care to high care in terms of people coming into high-care facilities care now and people are staying at home more. Is that the situation in Tasmania as well?

Mr Burgess —Indeed.

Senator SIEWERT —And then moving into high care? So there is an issue around the ratios as well.

Mr Burgess —Indeed, yes.

Senator SIEWERT —I think, Mr Burgess, it is your submission that argues that the ratio should be consumer driven or customer driven. Is it your submission that I was—

Mr Burgess —Yes, it should be the bed place allocation that has a ratio. I am suggesting that the way to look at that should be on demand. Certainly the ratio that we currently have in place can be used as a guide, but demand would seem the obvious way to be allocating bed places. There needs to be a close examination of that, and where there is a demand that would seem to be the appropriate place to allow beds to be developed.

Senator SIEWERT —A number of people who have appeared before the committee and also a number of submissions argue that, instead of having low care and high care and the issue related to bonds et cetera, there should not be high care and low care; there should just be basically a continuum, and depending where you are assessed is the level of subsidy that you get. What would be all your organisations’ reactions to that particular approach?

Mr Burgess —If I can answer first, certainly if all residents are to be treated on that basis, then one would hope that the artificial barrier between high and low care and the inability to be able to charge accommodation bonds would flow with that as well. But I also suggest that there would appear to be some basis, a very sound basis, for having a bottom level subsidy; that is, the lowest ranked person for care needs who comes into the facility has a base subsidy that is provided. At the moment we have residents admitted to facilities who are getting nothing or $6.24 or $8.58 a day. That really is nonsense. There needs to be a base level.

Senator SIEWERT —Thank you for that. So you get rid of the boundaries between low care and high care, you have just a continuum, you are basically then assessed as you move up that continuum, and then you adjust ACFI. Would ACFI then need alteration?

Mr Burgess —ACFI does need alteration.

Senator SIEWERT —It needs it?

Mr Burgess —Have no fear of that. It needs alteration.

Senator SIEWERT —Okay. Could you tell us a little bit more or maybe take on notice how you think it needs to be changed, because a lot of people have been highly critical of the way the rankings are coming out but are not being specific about where it is deficient and how it needs to be changed. I accept, because everybody has said it, that there are huge issues with it. I have read all your submissions, and I cannot remember which one I have read that says what, so I apologise for that. ACFI was supposed to make things simpler and it has not; it has made them more complex and you are seeing problems with the low-care assessments. How specifically, then, does it need altering? What should we be saying to government about how to fix it?

Mr Burgess —I would certainly like the opportunity to take that on notice. I am not a clinician, and in that area my senior nursing staff are saying to me that the assessment process is just too difficult to be able to provide adequate funding for the needs that they have assessed for particular residents. They are not getting adequate funds to meet those needs through the assessment process. The level of funding may well be fine, though I am not suggesting it is fine, but that assessment process is where the difficulty seems to lie, to be able to climb up that ladder to gain extra points, to be able to gain adequate funding. I would like to take that back to get advice from my senior nursing staff to give back to this committee.

Senator SIEWERT —That would be much appreciated. I have one last question in terms of the aged-care assessment team, ACAT. There has been a lot of criticism around reassessments by ACATs of people going into facilities. When they go in they are found not to be going in at the level that they need and then it is about getting the ACAT to come back and do a reassessment. There is an issue about time. Then, of course, if the person is in care, is admitted at low care and should be at high care, the providers are not recompensed for the amount of time that the people are in care assessed at low care but actually receiving high care. Is that an issue in Tasmania?

Mrs Shearer —We have not had a great issue at Meercroft. We have had a couple of residents who were assessed as high care, dementia care, but were requiring a lower level of care. So they were not adequately placed. But I know some of the other facilities on the coast have had problems.

Senator SIEWERT —Is that a problem with the timeliness in terms of ACATs coming back to do the reassessment?

Mrs Shearer —There has been a time delay recently, yes.

Senator SIEWERT —Thank you.

CHAIR —Can I just ask one question in relation to funding before I go to Senator Brown. Would you perceive that it would be a better option to deal with only one level of government, so that funding for home care right through to residential care would be under the umbrella of the federal government? Would that make things easier and hopefully streamline things?

Mr Burgess —I cannot comment on that because I only deal with one level of government; I do not have any state programs.

Mr Stephenson —We at Meercroft have a day centre, which is state funded, so I guess ultimately it would be better if everything was at one level.

Senator CAROL BROWN —I just wanted to go back to the discussion about ACFI. This new ACFI has only been in place for about 14 months. I just wanted to know, and maybe you are not the right group of providers to ask, about the consultation that went on around the new funding instrument and whether you were involved through your peak body. Did you have any involvement at all?

Mr Burgess —Yes, the peak bodies were involved in the consultative process. I cannot give any more details other than to say that, yes, there was a consultative process that took place between ACSSA and the department.

Senator CAROL BROWN —What was the initial reaction from the sector? Again, I probably should have put these questions to ACST. Were they happy with the outcome and then as things moved forward they did not turn out as they might have liked?

Mr Burgess —I think your last statement is fairly accurate: things have not turned out as we may well have liked. The devil seems to be in the detail. I do not want to get full of cliches, but certainly it is this assessment process that seems to be driving down the level of funding that can be obtained through ACFI. There is also this cap that is sitting on ACFI at the moment. My file on this contains examples from the department’s own papers, which make for interesting reading. This was when ACFI was being introduced. There is an example of an assessment in the three areas of activities of daily living—a high-care assessment, $86.19; behavioural, high, $28.51; complex health care, $52.87—giving a total daily subsidy, when ACFI was first introduced on 20 March 2008, of $167.57. However, there is a cap that sits on top of that that says, ‘No, the maximum you will get is $135.23. That will not be lifted until 30 June 2010, when it will go up to $145.23, and then it will not be lifted until 30 June 2011, when it will go to $155.23, though in today’s figures we should be paying you $167.57.’ They are documents that the department itself has provided as examples. So this cap that is sitting on top is one impediment to adequate funding which is recognised through the figures that the department has produced that is limiting the funding that should be flowing to the industry.

Senator CAROL BROWN —Have you done any work on the effect of the removal of those caps?

Mr Burgess —It would be very positive. Sorry, I did not mean to be flippant. No, I have not done a full assessment on that and applied that to my own residents. But certainly from that simple example one can see that the cap is limiting funding. The department is saying from its own figures, its own funding allocations: ’This is what you should be getting but we are going to put a cap on it, so you are not going to get all that now. In that case, it is going to take three years before you get to the highest level that we are saying you should get for it.’

Senator CAROL BROWN —At today’s value?

Mr Burgess —At today’s value, yes.

Senator CAROL BROWN —I would like to ask a question now of Meercroft. I visited your facility a couple of years ago. Your submission does not bode well. It is basically saying, and your evidence here today is saying, that you are finding it increasingly difficult to remain viable.

Mrs Shearer —That is correct.

Senator CAROL BROWN —Do you receive a viability supplement or are you not eligible as it stands today?

Mr Stephenson —No, we do not receive a viability supplement.

Senator CAROL BROWN —So under the current circumstances what do you think the future of Meercroft is going to be?

Mrs Shearer —We are certainly hoping to build on our 19 beds. If we can manage to do that, and we are looking at every possible avenue of funding we can, we will certainly be heading into the future, but I may hand that over to Garth to answer as a board member.

Mr Murphy —As far as the board at Meercroft Care are concerned, we are committed to operating Meercroft Care. We have assets which are allowing us to trade in a legal sense, if you like, and we are also going through a restructuring of our financial systems at Meercroft. This will involve a staff restructure and investigating other cost savings in the services side of Meercroft. For the last six months we have been very proactive as a board in investigating and starting to initiate what we would like to change at Meercroft. From that perspective we believe that Meercroft does have a future, but it is a fairly fine line and it is not going to be easy.

Senator CAROL BROWN —Another comment in your submission is about the government trying to encourage the aged-care facilities to operate in the business framework. Have you had direct discussions with the department about operating in the business framework? What do you mean by that comment? How are they encouraging you?

Mrs Shearer —I guess to be sustainable and to function on our own and to manage on our own.

Senator CAROL BROWN —How are they going about doing that? Do they write you a letter or come and see you?

Mrs Shearer —No.

Senator CAROL BROWN —I am just trying to get some detail of how the department is working with providers.

CHAIR —If there is any assistance.

Senator CAROL BROWN —Yes, is there any assistance provided?

Mr Stephenson —We have regular visits from the department.

Senator CAROL BROWN —Are they just inspections?

Mr Stephenson —No, the state managers of the Commonwealth department come to see us on a regular basis. We have had a number of visits to them. You mentioned our viability. For the last 3½ years we have had an operating loss, and that is after taking into consideration all the supplements that we are meant to be putting aside for our future building programs. If you look at our operating deficit from an operational point of view, which is not including those supplements, the figures I have today show that for the last three years to the end of February we have an operating deficit of $2.1 million cumulative over those four years. There is some concern as to how we could continue to be viable. After allowing for those supplements to come back in, the net result is a loss of about $575,000. We cannot sustain that.

Senator CAROL BROWN —My other question is about the planning ratios. They currently stand at fifty-fifty for low care and high care. What does anyone at the table believe the reality is in Tasmania of the ratios between high care and low care?

Mr Burgess —I could not give accurate figures, but a guesstimate would be somewhere between 75 high care to 25 low care. It does not matter what ratio you use, and it has been evidenced in the latest ACAR. If there is not adequate funding to go with the operation of beds, providers just will not—as I say again, as evidenced in the latest ACAR from Tasmania—take them up. They are just not taking them up. That has to start to send a signal of, ‘Hang on, there is something wrong with the system.’

Senator CAROL BROWN —Which is why the whole of Tasmania is listed as having long waiting lists and people wanting to get in because there are not enough beds—is that right?

Mr Burgess —I can only speak for our facility. We certainly do have a good waiting list but, again, the vast majority are high-care residents. There are very few low-care residents. Again, that has a direct impact under the current system on being able to raise capital. I cannot emphasise that enough. Senator Bernardi asked a question earlier on what the figure would be that we would need to continue to operate and that may allow us to be sustainable. That is a very complex question because we need to factor into that capital and operating expenses, and we cannot pluck a figure out of the air and say, ‘We need $30 a day extra per bed or $50 per extra bed or $12 a day per extra bed.’ My suggestion is that it has to be an individual exercise and then be done collectively to be able to give you that particular accurate figure. But certainly one thing is for sure: the funding we are receiving at the moment is not adequately covering our operating costs.

CHAIR —Before I go to Senator Bernardi, in relation to bonds for high-care patients, I believe previously when there was a move to introduce bonds that both the industry and the community was opposed to such a measure and, consequently, in the 11½ years of the former Liberal government it was never introduced. Now we are seeing a change within the industry and certainly even some of the church organisations believe that there needs to be a bond. I think the reality is that it is still the government’s policy that it will not introduce bonds into high care. What alternative strategy do you as representatives of the industry have for overcoming the funding shortfall? If you talk to people in the community about a bond for high care, as I do going around the community now when they want to know what we are doing in this hearing, people just run. They do not want to know about it because there is the issue of what happens to patients who are in facilities for maybe two months, two weeks or two days? So if someone has some suggestions, whether you can give that evidence today or you want to take it on notice, it would be most beneficial for the committee.

Mr Burgess —Madam Chair, in the statement you have made about someone having a short-term stay, is there a suggestion that the bond is not refunded?

CHAIR —No, I am not suggesting that at all. I am just saying in terms of the paperwork and the red tape involved some would question whether or not that is the best option.

Mr Stephenson —I could answer that because we have some data. Last year in low care in our facility we admitted three low-care residents, each of whom paid a bond. They were all discharged within three months. I think the scenario is that if they do come in for low care there is an amount that we could charge for a short stay which is over and above what the normal retentions would be. I cannot see why exactly the same thing could not apply to high care. It happens when people come into low care and are there for less than two or three months.

Mr Burgess —There is negligible difference in the administrative paperwork involved in the admission process for a high-care or a low-care person. It would amount to minutes. So I really cannot see that as being an issue.

CHAIR —No. I do not believe that the industry has been in distress since there has been a change of government. I think it is fair to say, and it is on record and it has been there for some time—

Mr Burgess —Absolutely.

CHAIR —that the previous government did it for political reasons. Whether the community support a proposal or not is what gets people elected. It would be very hard to get this current government to change its longstanding view as far as bonds are concerned. We are looking for an alternative strategy that we as a committee can consider to put into recommendations in the report.

Mr Burgess —ACST suggested—and our organisation has in its submission—that the separation of care and accommodation should be considered. The deregulation or the market forces would then look at the accommodation issues. Certainly there would need to be a safety net built into any process to cater for supported residents, as there is now with rental assistance, for example, for low-income pensioners with rental payments. Allowing market forces to determine and for the industry to provide options as to the quality and size of accommodation may well be a very reasonable option to be pursued across all areas of resident classification—high and low. But I stress there would need to be a safety net for supported residents.

Senator BERNARDI —I have a question of clarification, firstly, which I will address to you, Mr Murphy. Some of the submissions we have received and earlier evidence we have heard have suggested that there is a cost attached to a single room with an ensuite of up to $200,000. I think you referred to somewhere between $100,000 and $130,000.

Mr Murphy —Yes.

Senator BERNARDI —How do you account for the differences there?

Mr Murphy —It depends on the region. North-west Tasmania has a different rate for the cost of building from the rate in southern Tasmania. It depends also on how much you put into the particular single room and ensuite as a fit-out. I have based the comment on the cost per bed, responding to the bed licences we were granted through the Commonwealth earlier in the year where we have four beds at $500,000, which equates to $125,000 per bed.

Senator BERNARDI —So for the 19 beds that I think you are referring to in the facility, you are budgeting somewhere between $1.9 million and $2.5 million or thereabouts versus one of your competitors who may have to budget up to $3.8 or $4 million?

Mr Murphy —Yes. And also it depends on the access to site and the terrain of the site. In Meercroft’s case, it is a level site. That makes it fairly economic for building. But other sites I am aware of, particularly in high density areas, do not provide easy access for getting equipment—concrete trucks and things like that—on to the site, so you pay a premium for that in the rates bill contractors charge.

Senator BERNARDI —So there is a standard variability in any building contract?

Mr Murphy —Yes.

Senator BERNARDI —I accept that. The difference seems a lot, but I accept that that is the case.

Mr Burgess —Can I also add that we are talking about room cost for a standalone room. One also needs to factor into that—and this certainly does allow for the variation—the supporting infrastructure, things like kitchens, laundries, dining areas. When all that is added up and applied to the room cost, that creates a great variance. If you already have that supporting infrastructure in place then the costs that Mr Murphy has put forward are very real, but if you have to add that other support infrastructure—kitchens, laundry, dining facilities—as well, then that expands that cost on a per room basis.

Senator BERNARDI —Mr Burgess, what I am trying to get to is that the government could not sit up the top and say, ‘It is going to cost us $150,000 per room,’ because that is not a reasonable average as there will be much higher costs in some areas.

Mr Burgess —There will be variables, indeed.

Senator BERNARDI —So any capital support or expenditure would have to be determined by the variables rather than just a wholesale policy decision at the top-of-government level.

Mr Burgess —Agreed.

Senator BERNARDI —Mr Burgess, because you made the last comment I am going to address this question to you.

Mr Burgess —Good.

Senator BERNARDI —One of the groups we are going to hear from later on talks about in its submission a contestable electricity market in Tasmania. I am not from Tasmania. Could you explain to me the implications of the contestable electricity market in Tasmania for your facility?

Mr Burgess —Contestability, obviously, is opening up the retail sector of the energy market to players other than, in our case, Aurora, and electricity is the main one. I can only speak so far as electricity is concerned because we do not have any gas consumption in our facility at all. My finance manager was at a meeting or a presentation on Wednesday evening given by Aurora—the main energy supplier in Tasmania—where it was suggested that not just because of contestability but also because we have had a 16 per cent energy cost increase over the past 12 months in 2009-2010 there will be a 30 to 50 per cent increase in energy costs in Tasmania. That information was delivered by Aurora Energy at a public presentation as late as on Wednesday night.

Senator BERNARDI —Thank you. I do not doubt that. Does anyone else have a comment to make in that regard?

Mr Stephenson —Only to agree.

Senator BERNARDI —Okay. In a similar vein, have you undertaken any modelling or are you aware of the implications of the proposed emissions trading scheme on the costs of operating your facilities?

Mr Stephenson —No, not at this stage.

Senator BERNARDI —Is it that you have not done any modelling or that you are not aware of any potential increase in costs?

Mr Stephenson —Both.

Senator BERNARDI —Do you intend to look at the implications of this?

Mr Stephenson —I certainly will when I have time to, yes.

Senator BERNARDI —Does anyone else have a comment in this regard? Mr Burgess, I can tell you are dying to say something!

Mr Burgess —Yes, but it probably would be much better if I held back my comments on that one.

Senator BERNARDI —I will wait for morning tea! The final issue I would like to raise, and it was raised in another submission, is about the turnover of beds. When a patient ceases to be within a facility—either through death or a change of facility, but particularly through death—there is often a period during which their room cannot be occupied because things need to be cleared out or there is an issue of showing sympathy for the family by waiting until after the funeral and things. You do not receive payments for that period of time.

Mr Burgess —True.

Senator BERNARDI —How big a deal is that for your bottom line? How many bed days are you losing as a consequence—is there a rule of thumb?

Mr Burgess —We try to limit lost bed days in our facility to four per turnover. We have just done an exercise on this. We are currently running at 6.3; we want to get back to four. The average loss per lost bed day is $131.82 at our high-care facility and $89.17 at our low-care facility. That is a cost that we are bearing.

Senator BERNARDI —It is roughly $600 to $1,000 per turnover.

Mr Burgess —Per turnover.

Senator SIEWERT —Per bed per year, what would be the average days lost?

Mr Burgess —The average days lost are 6.3.

Senator SIEWERT —I mean per year.

Mr Burgess —We work on a turnover of around 50 residents per year, so one week.

Senator BERNARDI —So there are 300 days lost per year.

Mr Burgess —Yes. This year we will lose 300 days.

Senator BERNARDI —So it is $50,000-odd at the upper end of that estimate. It is quite significant. Is that proportion consistent across your other facilities?

Mr Stephenson —I think it would be, yes.

CHAIR —Hansard should note there are a lot of nodding heads in the audience.

Mr Stephenson —Another thing that should be included in that is that, if the resident deceases at 11.50 on that particular day, we do not get any subsidy. So it is not only the days following the death but it is the day to death.

Senator BERNARDI —Even if you have provided 23 hours and 55 minutes worth of care?

Mr Stephenson —We can provide 23 hours of not only the care but cleaning, meals and looking after the family while they are there. We do not get anything.

CHAIR —I was tempted to make some comments in relation to timing of death but I will not.

Senator MOORE —I just want to put two questions on notice for people who wish to respond because I know you are all very busy. One is on regulation, in terms of the question I asked the previous witnesses. We consistently hear that you feel you are overregulated, and the response has been that the regulation has come in as a result of issues that have come out. I do not think there is any arbitrary regulation; you may disagree. I would like any comments you have on the degree of regulation and what you think is over the top. Secondly, I invite any of you who care to to have a look at the Hansard of the department’s evidence two weeks ago to see whether there is anything you would like to comment on in terms of viability and business modelling. That is clearly on the website.

CHAIR —We should put on the record as well that we are calling back the department. They will appear before us on 21 April. If you can get any comments to us as soon as you can, that would help us in drilling down into the issues as far as the department is concerned. Also, we will be handing down our report on 29 April.

I thank each and every one of you for appearing before us today and for your submissions. We know that you are pressed for time, so giving up your valuable time to appear before us is greatly appreciated by the committee.

Mr Burgess —Thank you.

Mr Stephenson —Thank you very much.

Proceedings suspended from 10.45 am to 10.59 am