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Economics References Committee
Financial and tax practices of for-profit aged-care providers

POWER, Ms Bronagh, Policy Officer, Combined Pensioners and Superannuants Association

VERSTEEGE, Mr Paul, Policy Coordinator, Combined Pensioners and Superannuants Association

ACTING CHAIR: Welcome, and thank you very much for appearing before the committee today. I invite you to make a brief opening statement if you wish to do so.

Ms Power : Thank you for the opportunity to contribute to today's hearing. The Combined Pensioners and Superannuants Association represents pensioners and low-income retirees. As such, our primary concern is that Australia's aged-care system is able to deliver high-quality care. CPSA is concerned by the Tax Justice Network's recent report that found a number of large for-profit aged-care companies were actively minimising tax whilst making big profits. Whilst the tax aspects of this inquiry are concerning, in CPSA's view what is of most concern is that for-profit aged-care providers are making profits whilst the quality of care they are providing is substandard. The Tax Justice Network's report begs the question: if for-profit aged-care have the financial capacity to provide world-class care for older Australians, why is there almost daily a news story in the media, or from the people we talk to, of inadequate care and abuse of vulnerable older people living in Australia's aged-care homes? Why is it that we hear that residents in one facility are showered every two days as standard but when they are short on staff they are showered on the fourth or fifth day? Why is it that a facility that employed a full-time physio who had a dramatic effect on the quality of life of residents cut that to one physio across five nursing homes, meaning exercises had to be completed daily by already stretched care staff and dedicated family members who would come in every day? In another facility, kitchen staff were told they were no longer to deliver or collect meal trays and that was now the duty of care staff. But as residents needed to use the toilet straight after a meal, the care staff were too busy to assist them.

These might seem like small problems, but they are all the result of cost-cutting measures and all affect the quality of care that is provided to residents. When you boil down the abstractions of figures on profits, funding allocations and scorecards of reaccreditation, what lies at the base of it is people's quality of life, health and dignity. Because nearly 40 per cent of residential aged-care places are provided by for-profit providers the relationship between profits and quality of care must be examined. All older Australians should have access to safe, dignified care and taxpayers' contributions to funding aged-care companies must be directed to ensuring the provision of that care. CPSA believes that the accountability of aged-care providers and the quality of care for residents can be ensured by tying the provision of subsidies to adequate staffing ratios and the delivery of quality care. Profits must not come before the dignity, safety and wellbeing of older Australians.

ACTING CHAIR: Thanks very much, Ms Power. Thanks also for your submission. It is very useful to have a consumer voice in this conversation. You observed in your written submission that the changing nature of care for older people means that within residential care the care needs are intensifying from what they were in the past. Could you explain that briefly.

Ms Power : Over time, there has been more emphasis on people staying in their homes longer. Once people enter residential aged care they are much older, much more frail and have more complex care needs. As a result of that, the cost-cutting measures I talked about in my opening statement—like lack of staffing—are a big issue because people have more complex care needs than they used to have.

ACTING CHAIR: I think your evidence is that the system as a whole is not adequately meeting this increasing complexity and acuity of care requirements.

Ms Power : Yes.

ACTING CHAIR: Does your organisation lobby or advocate for improvements to care? Aside from participating in this committee, do you have other advocacy work?

Mr Versteege : We do. We do it whenever we can, whenever there is an opportunity—and this is one of them. Obviously, our advocacy centres on quality of care and also, as we perceive it, the lack of quality of care in a lot of facilities. We share with other organisations the belief that mandatory staff to resident ratios should be imposed, in the belief and conviction that if you put adequately qualified staff in nursing homes, in adequate numbers, that will solve a lot of the quality-of-care problems.

ACTING CHAIR: When you make the argument for essentially increased resources in the form of additional staff, what is the answer from the providers generally about why that can't happen? Is it that it is not necessary, or is it that would be desirable but it is not affordable?

Ms Power : Their answer can be that they don't have enough money to hire more staff or more highly qualified staff. There can also be the argument that they need flexibility with who they hire because sometimes there are people with higher care needs or lower care needs. Those are two of the arguments. But over this inquiry we have been hearing that they do in fact have enough money to hire enough staff and it is possible to have flexible staffing ratios to make sure residents do get good care.

ACTING CHAIR: I think you note in your submission the same proposition that has been put by witnesses earlier today, which is that, where you see aggressive processes around tax, you might culturally also be likely to see aggressive practices around cost-cutting measures, including, as you say, employing too few staff with lower levels of qualification. Do you want to talk about that?

Ms Power : I think the link between the tax practices and the cost-cutting measures is reasonably clear. We are not tax experts but, in order to make profits, you have to create them somehow. The funding they are making should be going towards care, so where are the big profits coming from if they are not cutting costs to deliver that care in terms of nurses or other resources?

Mr Versteege : The aged-care providers, the nursing homes, derive their profits not just from subsidies; a big part of their profits would also come from the investment return they get from accommodation bonds, which they manage. Generally there is plenty of money but providers tend to say that the subsidies are not sufficient to cover care. So there is an artificial separation between the money flows and what comes in related to accommodation. It is not used for care.

ACTING CHAIR: In relation to the resources available to companies to deliver care, it is argued that one ought to only consider the revenue provided by government. But, in fact, there are revenue streams elsewhere.

Mr Versteege : Yes, that's right.

ACTING CHAIR: The operating margin is of course different from the taxable profit, because there are a whole range of deductions and payments that might reduce the cited profitability of the facility.

Mr Versteege : Yes. It is generally not clear which part of the profit comes from accommodation bonds, to put it simply, and what comes from subsidies. But the expectation on the part of the government should be that those subsidies are used predominantly to pay for care—to adequately pay staff and to have adequate numbers. We also recognise that there probably needs to be a profit element in it. But if you read the report from the Tax Justice Network it becomes apparent that big profits are being made. The question is: where does it come from? If it comes from those subsidies predominantly then action is needed.

ACTING CHAIR: Your submission argues that companies that receive government money ought to be held to a higher level of transparency than other companies. Why is that?

Mr Versteege : This money goes to caring for people. That is fundamentally different from a subsidy that is given to another industry: they may not use it properly or there may be fraud involved, but there is no human victim to the extent that there would be in nursing homes.

ACTING CHAIR: So in part it arises from some unique characteristics of the aged-care sector, where the harm might be done to quite vulnerable people if impropriety takes place.

Mr Versteege : That's right. You can't be hard-headed about care for elderly people.

ACTING CHAIR: Your organisation also argues for 'ring fenced' funding. Can you explain what ring fenced funding would mean practically?

Ms Power : It means it could only be given if the aged-care provider can demonstrate that it is meeting the requirement for a certain number of nurses. For example, that funding would only be implemented if they implemented mandated staff to resident ratios or met a certain standard of clinical care outcomes in the facility.

ACTING CHAIR: Recommendation 4.3 in your written submission is that a nationally consistent methodological approach to data collection and research on the financial status of the aged-care sector be established to enable a comparative understanding of provider performance. This committee will have to make some recommendations at the end of our process. It would be helpful to understand what you mean by that particular recommendation.

Ms Power : Currently there isn't much transparency around the financial status or financial practices of aged-care providers. You can't access data. There is some from some years ago that is de-identified so you can't see where the individual aged-care companies are putting their money or spending the subsidies. I think it would be useful to have that alongside something that measures care outcomes for residents to be able to start to properly link the financial practices to care outcomes. This inquiry is about how they are linked, but it is difficult to see without having data on that.

ACTING CHAIR: A number of witnesses have been asked to provide data that demonstrates that. Your contention, I assume, is that that is almost impossible to establish given the secrecy of the financial practices.

Ms Power : Yes.

ACTING CHAIR: You also recommend that audited accounts of homes be acquitted against actual expenditure and be made publicly available. Do you wish to elaborate on that recommendation?

Ms Power : I think that would be similar. It is about having financial data available and transparency.

Senator HUME: Some of those stories of mistreatment that you mentioned in your opening statement are genuinely shocking. You didn't actually mention the providers where those instances occurred. Can you provide the committee a list of evidence of mistreatment in for-profit aged-care centres?

Ms Power : I am not sure of the specific place where that took place. I was provided that information by someone who didn't want to tell me where it was. They weren't comfortable with identifying where it was from.

Senator HUME: This inquiry is about the for-profit aged-care sector, and I don't want to impugn the activities of the for-profit aged-care centre by implying that those instances, which you can't identify the location of, occurred in for-profit aged-care centres. Is there any evidence of mistreatment in the for-profit aged-care sector?

Mr Versteege : Most of the contacts we have with residents or families of residents is on a confidential basis because there is a great fear of retribution in nursing homes. Certainly the case studies that we have used in our submission and opening statement were obtained under a promise of confidentiality.

Senator HUME: Is there any way you can provide evidence to the committee that is potentially de-identified—we can take that information in confidence—just so we can ensure that the evidence you have given is relevant to the for-profit residential aged-care sector?

Mr Versteege : We can certainly go back to the people who provided us this information and ask them if they are prepared to release their name and the location of the nursing home.

Senator HUME: I think that is going to be necessary. Otherwise, it is potentially misleading evidence, because this is about the for-profit sector.

Mr Versteege : It is not that we don't want to mention providers by name—although we are obviously very wary of doing that outside a parliamentary inquiry. We have received a number of stories of quite shocking practices in Opal facilities.

Senator HUME: I am happy to have them de-identified or taken in confidence, but we probably do need some hard evidence rather than anecdotes or hearsay.

Ms Power : As I said, we'll try.

Senator HUME: Thank you. Can I also ask about staff to resident ratios—again, this has nothing to do with tax avoidance at all. In which sector are staff to resident ratios the highest now.

Mr Versteege : In child care.

Senator HUME: I meant in aged care—for profit, not for profit, state run?

Mr Versteege : We have no idea. This is part of the problem.

Senator HUME: Is there any evidence that higher staff to resident ratios provide a better standard of care?

Ms Power : There is a lot of evidence available that shows it does have a big impact on the care that residents receive and also on their health outcomes.

Senator HUME: If you don't know which sectors have higher staff to patient ratios now, how do you assert that they have better levels of care?

Ms Power : This is based on research—

Mr Versteege : We don't actually assert that they have better levels of care.

Senator HUME: That is one of your recommendations.

Mr Versteege : Which recommendation are you referring to?

Senator HUME: Staff to patient ratios.

Ms Power : There is research showing that higher staff to resident ratios result in better care for residents in Victorian publicly owned aged-care facilities. That has had a good result for clinical and health outcomes and it results in lower levels of hospitalisation, better weight management and things like that.

Senator HUME: One of the most shocking cases of mistreatment of the aged was in the Oakden centre. I am sure you are familiar with that case. That was a state run centre, wasn't it?

Ms Power : That was South Australian. I don't believe they have those ratios in South Australia. It is a Victorian state regulation.

Senator HUME: Because this inquiry is about the for-profit sector, I don't want to conflate issues of quality of care, staff to resident ratios and tax. I think it is drawing a long bow to say that, because there is a profit motive, the standard of care is poor. There doesn't seem to be any evidence of that.

Ms Power : Part of the inquiry is financial practices and tax avoidance. We have considered the financial practices, which includes cost-cutting in order to increase profit.

Senator HUME: Not-for profits cut cost too. They have to work within a budget, don't they?

Mr Versteege : They do. The issue here is that, when we are talking about staff to resident ratios, we have no clue as to what is happening in the for-profit sector and the not-for-profit sector in detail. Both sectors try to cut down on costs—in the for-profit sector and in the not-for-profit sector—but we don't know exactly how they do it. The complaint we get from staff is that there is not enough people to do the job—and that cuts across sectors. When there is evidence of extreme tax management on the part of for-profit aged-care providers—who are the ones who pay tax—part of the profit they make as a result of cutting staff filters through to the tax minimisation practices that they have. That is all we are saying. We are not saying that the for-profit sector employs fewer staff—although they may well do so—

Senator HUME: You are not implying that the standard of care in the for-profit sector is poorer than it is in the not-for-profit sector?

Mr Versteege : Again, it is very hard to assert that on the basis of objective evidence—although there is anecdotal evidence aplenty.

Senator HUME: If you could provide some genuine evidence, not just anecdotal evidence—and it can be de-identified—that would demonstrate that there is a connection between for-profit aged-care facilities and a poorer standard of care, that would be useful to the committee.

Ms Power : You should note, though, that there isn't actually hard objective data available, and it needs to be collected nationally before any direct links can be made.

ACTING CHAIR: And that is your recommendation 4.3?

Ms Power : We recommend that data needs to be collected if we are able to begin to really have some hard evidence about what is happening.

Senator HUME: I am just wondering whether there is actually evidence to suggest that nurse to resident ratios would be beneficial to—

Ms Power : There is already evidence suggesting that nurse to resident ratios are beneficial.

Senator HUME: Is there evidence on nurse to resident ratios in for-profit versus not-for-profit?

Ms Power : I don't believe research has been done in that area.

Mr Versteege : We will take that on notice. We have made submissions on that. We will have a look and let you know.

Senator HUME: Your constituents are pensioners and low-income superannuants. Do you get a sense of the types of aged-care facilities that your constituents tend to gravitate towards? Are they state owned, not-for-profit or for-profit?

Mr Versteege : Our membership is mainly in regional areas, where there is less choice. Although we have not surveyed our members, to a large extent they have to take what is available.

Senator HUME: And choice would be an important thing in the aged-care sector.

Mr Versteege : It is, yes. And because they are pensioners and low-income retirees that further limits the choice they have. Obviously if you have a house that is worth $250,000 it is going to be hard to pay a good bond for a good home—a well marketed home.

Senator HUME: We wouldn't want to limit the choice of sectors or offerings available.

Mr Versteege : Absolutely not. In recommendation 4.3 we talk about the unavailability of financial data. You have to see that in combination with an almost total absence of performance on quality by nursing homes. They are all audited every three years but there are 43 criteria and the audit report comes back with either 'met' or 'not met'—and you don't really know what that means. This is the lack of objective data; we don't really have that.

Senator HUME: I would imagine that the announcement of the new Aged Care Complaints Commissioner, which combines the different services, will make aged care complaints—

Mr Versteege : I don't want to stray too far from the terms of reference.

Senator HUME: It will be something the Aged Care Complaints Commissioner will deal with.

Mr Versteege : We have a position on that, but maybe that is for another time.

Senator SIEWERT: I want to continue with the issue of the availability of data. Some of the other submissions point to the fact that the Department of Health collects financial data. I don't know whether you were in the room when I asked one of our previous witnesses about the sufficiency and adequacy of that data collection. Can I ask you to comment on that issue. Is the amount of data that the Department of Health collects sufficient, and what is your opinion on its availability?

Mr Versteege : We don't exactly know what the department collects. Obviously it provides a lot of money to providers. The vast bulk of that money is provided under the Aged Care Funding Instrument. The department knows how much money it's paying out and it knows what it's paying it out for, so it should have some idea about what the specific care components should cost and there should be a relationship with the subsidy. Our recommendation 4.3 makes it clear that there is no complete picture at the moment.

Senator SIEWERT: As an association that works on these issues, you don't get access to the data that the Department of Health collects, in terms of reporting against the instrument, or any reporting on the expenditure of public funds through the department?

Mr Versteege : The short answer is no. I have to add that the aged-care sector is very much protected by the provisions of the Aged Care Act regarding protected information. Protected information is a notion that you would expect more in intelligence services and stuff like that, but it applies to the aged-care sector and it is very difficult to get that information. It can't be released, even by the department, except under specific conditions and, if those conditions aren't met, there's actually a risk of imprisonment. It's a criminal offence to release that sort of information. We've been calling for the idea of protected information as it applies to the aged-care sector to be lifted or at least modified so that we get better access to information. Just to give you an example, the Department of Health collects statistics on reportable sexual and physical assaults in nursing homes and annually publishes a figure. That covers all nursing homes. If you ask a specific nursing home or the nursing homes of a specific provider, 'How many reportable sexual and physical assaults took place?' the answer is that they can't find that information because it is protected. That is a very good example of how the notion of protected information works against residents.

Senator SIEWERT: Thank you. As an organisation, there are the issues you deal with in aged care. What percentage of the issues that are raised with you would these issues make up?

Mr Versteege : I don't have a percentage in my head.

Senator SIEWERT: I'm happy for you to take it on notice.

Mr Versteege : That might be the best thing to do.

Senator SIEWERT: Generally, though, would it be a high proportion of the issues that are raised? I know that other organisations also cover this area, but, in terms of your members—

Mr Versteege : Yes, it could be a meaningful figure for you because we deal with a lot of issues and a lot of people contact us about a lot of issues. We'll provide that information in the context of the attention we give to other issues as well.

Senator SIEWERT: Thank you.

ACTING CHAIR: We really appreciate you taking the time to give evidence to the committee. If you have follow-up information that you'd like to provide, you're very welcome to. Senator Hume has asked for some specific material. If you can assist, that would be terrific. Thank you.

Mr Versteege : Thank you.

Ms Power : Thank you