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Wednesday, 2 February 1994
Page: 210


The DEPUTY PRESIDENT —Pursuant to the resolution of the Senate of 13 February 1991, I present the government's response to the report of the Standing Committee on Community Affairs on validation of CAM and SAM funding of nursing homes which was presented to the President on 23 December 1993. With the concurrence of the Senate, the response will be incorporated in Hansard.

  The response read as follows—

PRELIMINARY REPORT OF THE SENATE STANDING COMMITTEE ON COMMUNITY AFFAIRS—VALIDATION OF CAM AND SAM FUNDING OF NURSING HOMES

GOVERNMENT RESPONSE

1.  Background

1.1  The Senate referred the validation program to the Senate Standing Committee on Community Affairs on 30 September 1993.

1.2  The specific terms of reference for the Committee's inquiry were:

(a)the timeliness of validations;

(b)the consistency of decisions made by Health, Housing, Local Government and Community Services validation teams;

(c)miscalculations of negative loading made by validation teams;

(d)the retrospective application of reinterpretations and redefinitions of the financial principles;

(e)the impact of validations on the continued financial viability of nursing homes;

(f)new proprietors being made financially liable for CAM and SAM funding spent prior to their purchase of a nursing home;

and to ascertain whether a further inquiry is warranted.

1.3  In the context of these terms of reference the following points need to be kept under consideration. The first is the nature and purpose of the validation program. As an audit program it plays two primary roles. The first is to ensure that $1.1 billion of the nursing home budget, which is provided specifically for nursing and personal care of residents, is expended in the provision of this care. The program also ensures the integrity of expenditure of taxpayers' funds and thus fulfils obligations within the framework of audit responsibilities placed on the Department by the Parliament and the Government.

1.4  The second issue is that the validation program is decentralised in its administration. Operating with 50 field staff working out of 8 State Offices in a complex area it is not unreasonable to expect that there will be some errors. Where there are complaints, these are examined and rectified. The number of complaints received by the Department, including those presented to the Committee, are not considered substantial for a program of this size and complexity. Nonetheless, the Government remains absolutely committed to the integrity of administration and fulfilling its commitments under the National Health Act, the Audit Act and under administrative law.

1.5  Thirdly, there has been substantial improvement to the legislative base of the program. From December 1992 proprietors selling nursing homes must give 90 days notice to give the Department enough time to validate and for a financial settlement to be finalised prior to the completion of the sale. On 1 July 1993 debt recovery provisions came into effect. These provisions provide a mechanism for the vendor of a nursing home to provide for any liability to the Commonwealth out of the sale price of the home, which is held in trust while the validation is completed. These provisions also require the Department to complete validations within three years of the end of a financial year from 1993-94 onwards. In addition to these provisions, a bill is before Parliament that will enable recovery of monies owing to the Commonwealth from a vendor of a nursing home at time of sale for benefit paid in financial years prior to 1 July 1993.

2.  Current Review and Development of the Nursing Home Program

2.1  The nursing home program is currently under examination by a number of review processes and these should be considered by the Committee in any further examination of the validation program.

2.2  The Nursing Home Consultative Committee, chaired by Sir William Keys, is examining the outcomes of a number of reviews that have recently been completed and will recommend to the Minister on these issues. In this regard the report by Professor Gregory on the Structure of Nursing Home Funding is particularly relevant. This report addresses a number of issues related to nursing home funding that have been referred to the Senate Standing Committee. These include:

administration of the boundary issues between CAM and SAM and the need to ensure that funds provided for resident care are used for that care;

the issues surrounding the validation of nursing home expenditure and the possibility of expanding risk management techniques

2.3  The Ombudsman is investigating complaints about the nursing home program a number of which are about the validation program. The Ombudsman is expected to report on her findings in February or March 1993. Some of the complaints relate to aspects of the Committee's terms of reference and the Committee may wish to give consideration to the report.

2.4  I have also asked the Australian National Audit Office (ANAO) to examine the future directions I and the Keys Committee have been considering for the validation program as part of their current examination of aspects of the nursing home program and to provide advice on options for risk management that could be adopted.

3. Responses to Specific Points Made by the Committee

3.1  I note that the Committee has not concluded its considerations and has not drawn conclusions in relation to its terms of reference, instead noting the activity of the Ombudsman and the ANAO and proposing to keep a watching brief until April 1994. Nonetheless in relation to a number of the Committee's summary of possible issues, I would draw the Committee's attention to aspects of my Department's submission and make the following comment.

3.2 Retrospectivity and delays

Committee Finding

The Committee found that "While retrospectivity is inevitable . . . it is possible that some validation processes have been delayed and that this is a concern and, possibly direct expense to the nursing home."

Response

Concerns about timeliness and retrospectivity are being addressed by accelerating the schedule of validations, completing 1986-87 validations by June 1994, and limiting time delay to three years. The provision of additional resources for validation in the 1990-91, 1991-92 and 1992-93 Budgets has allowed the backlog to be substantially reduced. Over the past three years, since the provision of additional resources, 2330 individual year validations have been completed covering 790 nursing homes and 8 financial years. Recoveries over the last three financial years have been $12.5m in 1990-91, $22m in 1991-92 and $20m in 1992-93. During the period 1 July 1993 to 31 October 1993, $2.5m has been recovered.

Nonetheless it is not the case that time delays have caused financial loss to proprietors. Nursing homes have had the use of the funds on an interest free basis for a significant period of time. This would be to the financial advantage of nursing homes rather than be a direct expense.

Further, claims of retrospective policy making results from the nature of the funding system that was initially established with CAM expenditure being defined on the basis of first principle. This first principle was clear and agreed between the Department and the industry organisations. The flexibility inherent in this approach allows some proprietors to test the limits of this flexibility by claiming that staff performing SAM duties were performing nursing and personal care duties. This leads to conflict because there is a strong profit motive for infrastructure or SAM costs to be claimed against care funding, or CAM. Under the legislation the Department has no option but to reject such duties, when claimed as CAM.

3.3  Inconsistency in Decision Making

Committee Finding

The Committee noted that "from evidence available, it would appear that each instance would need to be examined separately to determine if situations were comparable. If the situations were not comparable, Departmental officers may have been quite consistent."

Response

The Committee is correct in its comments. The cases provided in relation to claims of inconsistent decision making do not on examination sustain the concern that there is inconsistent decision making. Each case when examined displays integrity in decisions with the differences relating to the individual circumstances of the nursing home.

Committee Finding

The Committee also commented that "It is also possible that nursing homes are seeking to extend the boundaries of funding and allowable CAM duties or CAM/SAM crossover."

Response

Some nursing homes have sought to extend claims under the acquitable CAM component of the fee that are clearly non-nursing and personal care duties. Such activities ultimately lead to declining resident care and are proscribed under the legislation which the validation teams administer.

3.4  Incorrect Information being Given

Committee Finding

The Committee noted that ". . . the question of inaccurate or misleading information is serious. The Committee would wish to determine what has occurred in these cases."

Response

Where such instances occur appropriate action will be taken. However no evidence has been provided that supports the contention that the provision of misleading information is widespread or commonplace.

3.5  Legislative changes

Committee Finding

The Committee commented that although changes to the legislation affecting sales of nursing homes would eliminate many concerns, ". . . some major negative loadings appear to be linked to claims of lack of access to data, it is important that some form of data on financial operation of homes sold earlier be available.".

Response

The Committee findings are accepted and, subject to the provision of Section 135A of the National Health Act 1953 (the secrecy provision), the Department will facilitate access to information in those situations where it is of concern. In one case, raised by the relevant industry organisation, the Department is already in the process of facilitating access to such records which should be successful very quickly.

3.6  Other legal issues

Committee Finding

The Committee noted that "Matters being investigated by the Ombudsman may include issues of appeals against administrative decisions, the operation of natural justice . . . and other matters not directly related to validation decision such as decisions regarding funding that are not appealable."

Response

The program is administered under specific and comprehensive legislation. Should instances of denial of natural justice and lack of appeal rights be identified, then the legislation will need appropriate amendment by the Parliament.

However the Committee should note that the recent amendments to the National Health Act have clear appeal provision to the Administrative Appeals Tribunal (AAT) and also that a legislative review that is currently being undertaken in conjunction with the Australian Law Reform Commission will specifically address the issue of appeal rights.

In addition, in response to the Administrative Review Council (ARC) review of administrative law provisions in the portfolio, my Department has supported an increase in appeal rights and access in appeal to AAT.

3.7  Inappropriate judgements about funding levels

Committee Finding

The Committee noted complaints that reasonable costs have not been allowed when records have not been available as the Department believes that this ". . . could encourage poor record keeping."

Response

While good record keeping should be encouraged, this understates the concern that an incentive could be created for records to be mislaid where they show costs lower than that which would be allowed as a "reasonable cost".

Committee Finding

The Committee noted that there ". . . may be grounds for recreating records or establish that residents were provided with appropriate levels of care in the past."

Response

In some cases attempts have been made to recreate the records of a nursing home where these have been lost or destroyed. In such situations it is important to ensure that the funds were expended and the funds were necessarily expended in providing resident care. Provided that the recreated records can establish that funds were used in such a manner then the recreated records will be accepted and have always been accepted.

3.8  Discrimination against some proprietors

Committee Finding

The Committee noted that ". . . any charges of discrimination and harassment of individual proprietors would need to be examined in some detail."

Response

Any complaints received will be taken seriously. However there is no evidence to suggest there has been such discrimination.

3.9  Inconsistent use of the AFP

Committee Finding

The Committee has commented that there are complaints that the Department has requested the AFP to impound material. The Committee has indicated that it may ". . . consider if there has been unnecessary use of the AFP in this matter, given that the Department has powers to access records in the first instance."

Response

The Committee fails to note the comments in the Departmental submission on this matter. It can be unequivocally stated that the Department does not use the AFP for obtaining records for a validation.

There are sufficient powers under the National Health Act for the Department to access records. Involvement of the AFP is in those instances where information becomes available that indicates there is possible fraudulent activity. In these cases the matter is referred to the AFP who take the steps necessary to investigate the matter at their own discretion. It should be noted that seizure of records can only occur under a duly authorised search warrant.

3.10  Other investigations into validation and related matters

Committee Finding

The Committee noted the inquiry by the Ombudsman of a number of complaints about the validation program and also that it is ". . . possible that the ANAO may wish to examine validation as part of its work on the aged care program."

Response

The Department has provided the Committee with its responses to the Ombudsman complaints and will continue to provide comprehensive responses to any further Ombudsman concerns. I have asked the Australian National Audit Office to consider examining the future directions of the validation program.

4.  Committee Conclusions

4.1  I note that the Committee will maintain a watching brief on the program and will report to the Senate by April 1994. I would advise that the report of the Keys Committee into the recommendations of the Gregory, Braithwaite and Macri Reviews is likely to be available at this time. The Report of the Nursing Home Consultation Committee chaired by Sir William Keys, will cover matters being considered by the Committee. The Ombudsman is also expected to report on the cases that have been referred to her within this time frame.

4.2  The Committee recommends that the Department provide access to information relating to a former proprietor where failure to do so would result in a denial of natural justice. The Department has already taken steps to facilitate access to documents where this has been possible. All cases where this has been a concern will be reviewed with a view to ensuring if possible that documents are available.