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Wednesday, 5 September 1984
Page: 448

Senator MACKLIN(10.24) —The proposal before the Senate to disallow the regulations refers to a set of principles which are proposed to be placed in regulations, and have been so placed by the Minister for Health (Mr Blewett). The idea is to set certain limits in relation to the profit that can be made by private geriatric hospitals. Senator Baume in his remarks referred to a recent case before Mr Justice Woodward, and I think it is important to look at that case because it tends to spell out in fairly clear detail the problem with which we are dealing.

Essentially, the action was taken by the Alexandra private nursing home asking the Federal Court to say that the practices followed by the Department of Health in fixing the nursing home fees were contrary to the Act. Those principles have been used for quite some time. Indeed, in the judgment handed down by Mr Justice Woodward he refers to the fact that in 1972, amongst other things, a provision for the approval of nursing homes and the fixing of the fees they would be permitted to charge was inserted in the National Health Act. In other words, when one sought approval for a nursing home one had to undertake certain obligations in relation to the setting of fees. Those principles were informal. They were put forward as working principles within the Department upon which private nursing homes could rely in the establishment of their fee structures.

Of course, it is well to remember that private nursing homes, and indeed all nursing homes in Australia, are subsidised to a very large extent from Consolidated Revenue. It is an important area of community concern. I believe that every senator in this place, and certainly every member in the other place, would have received representations from time to time from senior citizens who find themselves unable to secure accommodation in nursing homes or, if not from them, from their children who find that they are unable to place their parents in the type of care they want for them. Hence the establishment of private nursing homes, which currently provide about 35 to 40 per cent of beds in this area, is an extremely important issue for the community. If nursing homes are to be established-certainly the Government through Consolidated Revenue and State governments through their own revenue do not seem to be able to keep pace with the demand that exists-it is necessary for there to be an economic climate which makes it an attractive proposition for people in the private sector to establish such homes. In doing so they provide the additional beds which are demanded by the community.

The proposition put by the Alexandra private nursing home to the court was that the current way the fees are structured left it with quite negligible profit margins. I quote from the judge's summing up:

I agree that it-

in other words, viability in relation to profit margins-

is from the applicant's point of view, quite unfair that it should have to accept a profit in 1984 that is little different from that which it was receiving in 1972.

Therein lies the difficulty. While it is accepted, and I think it has to be accepted in terms of the judge's ruling, that what the Department is doing is perfectly legal, on the judge's summing up the situation in relation to the profit margins one could expect seems to be unfair. The judge went on:

In the light of this evidence, there can be little doubt that the Department is taking a hard line with the proprietors of established nursing homes.

Hence I think it ought to be accepted that a situation exists which requires redress. That situation applies quite specifically to existing nursing homes because, as the judge pointed out:

A new nursing home, by way of contrast, would have its fees fixed to include a profit element based on the notional fair rent of the premises, to be determined by the Department after valuation together with a 12.5 per cent allowance for other assets. Such a nursing home would, of course, be much better off than the applicant-

that is, than the existing nursing home-

because the valuation would have to be at current prices.

But its profits would in its turn be eroded with the passage of time, and with inflation, in the same way as the applicant's.

Of course, it is not a proposition which is all one-sided. On the other side we must be concerned about the costs in nursing homes. Whether the cost is paid from people's own pockets or paid from consolidated revenue it is still a cost. I think that it is important for the Government to seek to contain those costs. Most of the cases in this area were conducted at a time when the current Government was not in power. Indeed, they were conducted against the honourable member for Mackellar (Mr Carlton) when he was the Minister for Health. Of course , the previous Government also used these principles which the Minister now is seeking to put into regulations. The previous Government used these very same principles as a means of informing the nursing homes as to how they were to set their fees. We are not talking about a new situation or one that has come in with this Government, it is a continuing situation. That continuing situation can be shown by reference to the court case because at the time the court case was conducted the regulation was not in place. We are not talking about something that the current Government has thought up; we are talking about a continuing policy. I think it is very important to bear that in mind.

I do not think that the Senate or, indeed, the Government can allow the current situation to continue. Therefore, we are then confronted with the question of what is the best course of action. I mention here a number of problems on which I would certainly like some information when the Minister for Social Security ( Senator Grimes) replies on the disallowance motion. I mention first of all the situation in relation to the sale of nursing homes which I think is extremely important. What information does the Government have on the sale of such homes, particularly in the last 12 months to 18 months? What is the current situation? Are people able to sell nursing homes if they wish to do so? If one looks at the evidence presented by the applicant in this court case it presents a pretty clear picture of the inability of many nursing home owners to put the nursing home on the open market with the expectation of a fair and reasonable return for investment.

Again I want to emphasise that we are not seeking to make it more difficult for people to find beds in nursing homes but rather to make sure that nursing homes are being built and operated to take up that area of need which the Government is not able to fulfil, an area it has not been able to fulfil for quite a considerable time. We need the private sector nursing homes because of the demand. Therefore, if we are to have a private sector in the nursing home area there has to be a return for investors. I think that that is all the people who operate these homes are looking for. I think the national association is making a very clear and reasonable case for a reasonable return. I am not at all sure that that is always the case put by other people who make representations in this area. Certainly the national association has made a reasonable and moderate case for a reasonable profit return. Whether nursing homes are able to be sold, and have been able to be sold in the recent past, is an important element and certainly will weigh with us in determining how we will vote on the disallowance motion.

Senator Peter Baume —They would have to be homes established for some time in order to be consistent with the argument you have been advancing.

Senator MACKLIN —Yes. I certainly take up the point which Senator Baume raises by interjection. These would have to be homes which have been operating for some time. This is where the real market problem is arising. It is a problem arising out of unrealistic returns on previous assets. If a person is going to make a pretty heavy investment-as it would be to buy a home of 50 to 100 beds-then that person would certainly be looking at a reasonable market return on that asset. Again, we are looking not only at this problem, but also the problem of leases. I would certainly be interested in ascertaining what range of goodwill is available in those types of sales at the moment. What are the current rates that people are able to get per bed on goodwill? Part of the argument of the people in this situation is that they cannot get that return. I think it is important, certainly for my Party, to be able to understand what type of return people are currently able to get on goodwill.

Also of importance is what the Government intends to do in this particular area . I understand that it has established an inquiry and that this inquiry is due to report some time in the very near future. However, I think that is no longer acceptable. We will be supporting the disallowance motion unless we can get an undertaking from the Government before this Parliament rises-in other words, we do not have, on all the current indications, all that much longer to sit-of what will be the situation with profit margins. What will be the decision? Will the Government give an undertaking to this Senate that those announcements will be made before the Parliament rises? If one looks at the judgment of Mr Justice Woodward one would have to say that that unfair situation can no longer continue and that it is no longer possible to have that situation in existence. Hence, the Australian Democrats will require the Government to give an undertaking to this chamber that its determination and the changes made to these principles will be made public. I do not expect the Government to be able to give such a guarantee but hopefully this issue will be able to be enacted before we rise. The reason why the Government cannot give a guarantee is that it does not have total control over the legislative program that operates in the Parliament. Insofar as it is possible, we hope that the issue can be legislated for before we rise. If that is not possible, I think the Government, in making its announcement, will be able to give a starting date for the new procedures. We do not expect that the Government will be able to go to the total extent that the Private Geriatric Hospitals Association of Victoria might like. Indeed, probably most governments find themselves unable to implement every proposition that is put forward. The Government has to acknowledge that the situation is unfair and that the high level of cost recoveries and the profit levels are not attractive to people coming into the industry and that changes must be implemented. When Senator Baume made his speech he stated:

The case for disallowance is made not on the basis of assertions by politicians alone and not just because the Opposition has a view on these nursing home guidelines . . .

It is important to emphasise the point that if the disallowance motion were carried the Democrats would have a concern about the increased litigation which, undoubtedly, would arise. That litigation would be costly not only to the hospitals involved but also the Government and Consolidated Revenue in terms of the defence the Government would have to offer. The Government would be required to tie up considerable resources in defending those particular cases. We feel that that is an argument on the other side. it gives us a reason to pause. If the Government is able to give an undertaking now that those changes will occur we believe that that would be preferable to launching everybody into a new round of litigation. I am quite sure that Senator Baume would not want to promote a new round of litigation. What Senator Baume is attempting to do by his disallowance motion-this is the way in which we read it-is to put pressure on the Government to come up with a decision, to come forward with a proposition and to make a move towards the position that has been put forward by the associations in the various cases that they have conducted. I believe that they have right on their side; it might not be a legal right, but they certainly have moral right on their side. It is not a situation which we would be willing to allow to continue.

I wish to make clear what our position is. If the Government is unable to give an assurance to this Parliament that it will make such an undertaking to have those guidelines revised and its new profit situation announced before the Parliament rises for the coming election, we would certainly support Senator Baume's disallowance motion.