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STANDING COMMITTEE ON FINANCE AND PUBLIC ADMINISTRATION
13/03/2009
Residential and community aged care in Australia

CHAIR —Welcome. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. The committee has copies of your submission. 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 Young, I assume that you will make the opening statement.

Mr Young —Thank you. Aged Care Association Australia believes that there are areas requiring immediate attention. They are maintenance of the conditional adjustment payment; appropriate operation of income and the development of an appropriate industry-wide index; adequate capital income, particularly for residential high care; ability to attract and retain a suitable, qualified workforce; substantial reduction in compliance and regulation; and dealing with demand, supply and price regulation. In addition, we strongly believe that there is a real need for long-term structural reform and that that dialogue needs to commence very, very shortly between the Australian community, the Australian aged care industry and the Australian government.

In respect of the conditional adjustment payment, as the hearing is probably aware, Professor Hogan in 2004 recommended that an additional 1.75 per cent be paid to the industry in recognition of the lack of funding flowing through the Commonwealth’s Own Purpose Outlays annual index. That was set and agreed to by the former government at 1.75 per cent for a four-year period. Unfortunately, the previous government did not undertake a review of that conditional adjustment payment at the end of the four-year cycle; and the current government extended its provision for the current financial year only, with a review being undertaken by an interdepartmental committee. Funding for aged care providers over the last 12 years has forced the aged care industry to rationalise and restructure its workforce, and the loss of an additional index, such as the CAP index, would be catastrophic for us as an industry. We have little opportunity for providers to achieve further efficiencies and we believe that we have gone as far as we can.

In respect of the operational income and annual index, the industry operates on about a $108 per day subsidy from government. This compares fairly unfavourably with the rest of the Australian health and other forms of care and service environments of a similar nature. Two immediate ways in which the Commonwealth could remedy this situation would be to allow the full ACFI subsidy for high care to be paid to recipients immediately rather than to defer it over a four-year time frame. In addition, consumers who pay an income tested fee should be allowed to exercise choice as to how those funds are applied. Currently, where a resident pays an income tested fee, the Commonwealth reduces the subsidy paid to an aged care provider by an equal amount. The value of this clawback by the Commonwealth is approximately $370 million per annum and it goes straight into consolidated revenue.

In addition, the association would strongly recommend that the Senate commission a study into the benchmark cost of care for the provision of quality aged care services, as part of a longer term review of industry structure and quality deliverables. Until this exercise is undertaken, it will be difficult to know what providers are expected to provide, what the community expects us to provide and what government expects us to deliver. In considering what the index for the industry should be, ACAA is persuaded that it should be done using the index that applies to age pensions, which is made up of either 25 per cent of average male weekly earnings or the CPI, whichever is the greater.

In respect of capital income—I know that there has been much discussion about this—the association has developed the aged care annuity, which we believe provides the flexibility that the industry requires whilst allowing the maximum level of choice to be exercised by clients as to whether they make a daily contribution to their hostel and accommodation services or a lump service contribution, or a combination of both. We would be more than happy to make a copy of a description of that paper to you.

In respect of workforce, the Productivity Commission report regarding aged care in 2007 accepted an industry estimate that the cost of putting aged care in a position to pay wages similar to those in the acute hospital sector would be a one-off payment of $450 million and an annual additional payment of $100 million to maintain parity between the two systems. We would be relatively supportive of those sorts of numbers to achieve some form of parity between aged care and the rest of the health system.

In respect of compliance and overregulation, we believe that the accreditation agency has shifted from its educative and support function. As an industry we have been highly supportive of the whole accreditation process to achieve and maintain quality in the industry, but we feel that the balance between compliance, regulation and quality improvement in the industry has shifted too far to the compliance framework.

In respect of controlling demand and supply, we are very concerned that the data made available to the industry up until 2001 has not been in place since that time. That data allowed detailed analysis of the department’s planning for the future to be made and put into the public domain, which helped aged care providers to significantly support their planning for future allocations.

CHAIR —Thank you very much.

Senator HUMPHRIES —You have just said that the data has not been in place since 2001; do you mean ‘published’?

Mr Young —Published; that is correct.

Senator HUMPHRIES —Is there an indication from the department as to why it has not published that information?

Mr Young —I understand that it was an instruction from the minister of the day, who at that time was Bronwyn Bishop, because you had put out in the public domain the number of places that had been allocated, the number of places that were operational and claims of phantom beds. However, unfortunately for us, that has meant that providers have had to operate partly in the dark. We believe that, if that information were back in the public domain, it would significantly improve the level of planning capability for the industry and it would effect a more transparent relationship between departmental planning for the future and industry planning.

Senator HUMPHRIES —Have you approached the present minister about publishing this data?

Mr Young —I do not believe that we have done it formally; we certainly have done it informally.

Senator HUMPHRIES —Just to clarify the graph on page 4 of your submission—I have a black and white copy—I take it that the bottom of those two lines refers to hostels. Is that correct? They both look the same from here.

Mr Young —Page 4 is the graph depicting the ongoing care costs as a percentage of total income. Yes, it is hostels. It reflects the gradated ageing in place activity across the hostel environment as opposed to the nursing home environment, which is the top line.

Senator HUMPHRIES —You record rising costs in the hostel part of the sector.

Mr Young —I think the important learnings from that graph have come from its use of data from Stewart Brown; they have been doing a financial benchmark for the industry for well over a decade now, so we are able to track their data. That data clearly indicates that, whatever income the industry is getting, the same proportion is going towards salaries and wages. Then the trend data reflects quite closely the change in high care residents accommodated in low care facilities through ageing in place.

Senator HUMPHRIES —A graph on page 10 records profit per bed per annum. Can I be clear? Is that profit across the whole sector or profit only on the basis of information provided to you from your members?

Mr Young —That was the estimate from the Grant Thornton report going across those reporting periods. I understand that part of that information was across the whole industry because, from the period 2003 through to 2005, Grant Thornton, as they were formally known—or Bentleys MRI WA office—undertook analysis of the audited general purpose financial accounts submitted by the whole of the industry.

Senator HUMPHRIES —What proportion of the aged care sector does your membership represent?

Mr Young —About 1,000 sites across the continuum of service.

Senator HUMPHRIES —As a proportion of the—

Mr Young —About a third.

Senator HUMPHRIES —I have looked at your submission and the fairly bleak picture you paint about the continuing deterioration in the profit levels for beds, particularly without other funding sources. I have been looking at the submission from the department of health to see what it says about the general profitability of the sector. It does not directly address the same points that you raise, so it is a bit hard to match up the figures. But in its submission it points out that, in March last year:

... changes also included initiatives that increased accommodation funding for high care services ... Commonwealth residential aged care payments are set to total around $6.7 billion in 2008-09, which represents an increase of almost 11 per cent over 2007-08. The average residential care subsidy paid for each day a resident is in care in 2008-09 will be more than 8 per cent higher than 2007-08.

What can we extrapolate from those raw figures? This is a very crude comparison but, according to Thornton, if you are working on a return on investment of about 1.1 per cent, will an eight per cent increase in Commonwealth subsidies lift that figure significantly?

Mr Young —I think we need to ask the department to extrapolate from those figures what is growth, what the annual index is and what actually reflects any real increase in funding to the industry. Given that we moved to a new funding instrument on 20 March 2008, which included a revised capital infrastructure model—which, we can continue to argue, was quite inadequate but, nonetheless, it did include such a provision—I think you would find included within that would be the forward estimate provisions for growth in the industry as well as the CAP index and the COPO index.

Senator HUMPHRIES —Which of the two areas of recurrent funding and capital funding do you think is the most important and the most urgent to be addressed?

Mr Young —I might ask Mr Dorman to make a comment there, but I think it is really much of a muchness because they both impact upon each other. But there is no doubt, given the current trends in the industry, that repairing the capital capability for residential high care is certainly an absolutely urgent priority. If you look across the industry and talk to providers, the number of them who are completing construction work that is in train but who have clearly indicated they will not continue to invest any more until there is restitution to some sort of financial viability is alarming. In my opinion, we will see an almost total halt in the industry over the next two years if that is not repaired. So you would have to say that is fairly urgent; nonetheless, the operating income for the industry, given the current level of returns, is of almost equal importance. However, I think capital needs to be addressed as the first priority. Mr Dorman might have a further comment to make.

Mr Dorman —I will summarise in very simple dollar terms. To build single-bed, ensuite accommodation now costs about $200,000; and a twin-share with two beds and one ensuite is about $150,000.

Senator HUMPHRIES —They are metropolitan figures, presumably, and not for the back of Bourke.

Mr Dorman —Yes. Give or take the land component change, it might be $130,000 or it might be $250,000, but roughly it would be those numbers. If you take the interest and the depreciation costs on, let us say, the $150,000 figure and not the $200,000, that is about—

CHAIR —I am sorry but just to clarify: does that include the land cost?

Mr Dorman —No.

Senator MOORE —So you have the land; this is just construction.

Mr Dorman —Yes, construction, permits, council processes and what-not. That land cost varies considerably across Australia. The interest and depreciation costs—let us say that the $150,000 figure is roughly $30,000 a year—would be 10 per cent on each account; it could be eight per cent, give or take a little bit. We spend roughly about 70 per cent of our funding on our staff. The average funding for a resident is about $108 a day and the resident contributes roughly $32 a day, so that is about $140. If I multiply that out and correlate the numbers, we get $50,000 a year, but it costs us about $75,000 to $80,000 a year to fund that building and to staff the home, et cetera.

Senator HUMPHRIES —If the department, when it appears here this afternoon, says to us, ‘Look, putting aside the capital position, the recurrent funding is now substantially boosted so that an 11 per cent raw increase and an eight per cent per place increase on last year is more than enough to cope with; you haven’t got an argument on recurrent costs and it is just capital we’re arguing about,’ would we be forced to agree with that?

Mr Dorman —I think Rod explained that the recurrent figure that was or may have been quoted needs to be explained in more depth. With the way Rod described it, there might be some natural growth, some indexation and some increase in terms of demand.

Mr Young —Perhaps I could just add to that. Access Economics were commissioned by the department to undertake a review of the expected impacts of the new aged-care funding instrument, ACFI. Their estimate over the full four-year implementation phase of ACFI was that additional funds flowing to the industry by way of estimated additional subsidy were 2.9 per cent.

Senator HUMPHRIES —Can you say that again? I am sorry.

Mr Young —The estimated increase in subsidy flowing to the industry by virtue of the implementation of ACFI over the four-year implementation phase—accepting that at the end of four years the preserved rate will almost have disappeared—is 2.9 per cent. So it is very difficult for us with our resources to analyse the department’s claims regarding growth in subsidy to the industry lined up against their own consultancy, Access Economics, that has looked at the expected additional income stream for the industry running at 2.9 per cent over the full four-year implementation period.

Senator HUMPHRIES —The department further says on page 14 of its submission:

The average daily Australian Government contribution towards the cost of providing residential care to a resident has increased by 20.8 per cent over the last 5 years from $86.01—

presumably, that means per resident and I suppose that is per day.

Mr Young —It would be per day.

Senator HUMPHRIES —It continues:

… in 2003-04 to $103.85 in 2007-08. This reflects price indexation and … the increasing frailty of residents.

I am not clear from that whether that means the price takes those things into account or it has grown because of indexation and the increased frailty of residents. We will have to ask the department that question when they are here. Are you aware of any analysis of those figures to determine what the real level of Commonwealth government subsidy has been against those costs over any period of time?

Mr Young —One of the recommendations that we made in our opening statement and that we feel quite strongly needs to be undertaken—Hogan did not do it, the implementation to 1997 did not do it and the major review of the industry in the mid-80s did not do it—is to come up with a benchmark of care analysis. What is it actually costing? If we expect the industry to provide this level of service at this level of quality, what should we be paying for that to be achieved? All we have ever done in any of our reviews is look at what the current subsidy is and accept that. When you look at what Hogan did, there were over 700 providers participating in a financial survey. Then what was accepted was: ‘These are our average costs across the various parts of the accounts of those providers and we accept that as being a reasonable assessment. This is the subsidy being paid by government and the income being paid by residents, and we accept that as being a reasonable payment for those care services. We never really analysed it.

I will give you two perfect examples. One is that, if we go back to the early nineties, the use of incontinence aids was almost nonexistence in the industry and now it is almost 100 per cent throughout the industry, and there is a cost differential. There is no doubt that there are improved outcomes: improved management for staff and improved outcomes for residents. Nobody would want to go back to the old days, if they could avoid it.

In a number of the reports that are before you, particularly the work that Grant Thornton did, they have looked at the difference between single-room, ensuite accommodation and multibed wards often without ensuites. The returns that you get on those different types of accommodation run at about two to one, which is quite significant. The whole industry has or is moving to a single-room, ensuite framework, and that is considerably more expensive to operate. There is nothing in any of the subsidy reform processes that we have looked at for the last nearly 20 years now—other than the lump sum contributions in hostels—to actually reflect that changing cost burden for the industry.

Mr Cook —Perhaps I could just add to that answer. One of the other issues is the increase in acuity in the residents. When the scheme came in back in 1997, the planning ratios were around 44 per cent high care; the current figures are around 70 per cent high care. So over that 10-year period there has been a massive growth in the number of high care residents. It will be interesting how the department, as has been alluded to, could pull out how much of that 21 per cent related to increased acuity over that period and people moving up the care scale. I think the raw figures do not compute with just the COPO index that we have been given.

Senator HUMPHRIES —Presumably the Grant Thornton survey was an attempt to work out, at the other end of the scale, what was happening to the viability of providers; that was the attempt to analyse that question. It does not appear as though the answer was especially satisfactory with respect to current levels of funding. Are you aware of any systematic analysis or published analysis of Grant Thornton by the department of health?

Mr Young —We are not aware of any systematic publication by the department. In fact, the department were fairly critical and negative about the Grant Thornton material when it first appeared. Fortunately, that seems to have diminished in recent times.

Senator HUMPHRIES —What do you mean by ‘diminished’?

Mr Young —Criticisms of and comments about the Grant Thornton report that it did not reflect the industry or was a self-selecting group have not been made now for some months, but they certainly were initially.

Senator HUMPHRIES —But you are not suggesting that the department has changed its view about it?

Mr Young —I could not speak on behalf of the department; I can only observe from a distance that those comments have not been made now for some months, where they were initially. However, the material that is available and that is not before us is that, as part of the conditional adjustment payment that was introduced in 2005-06, the industry reached agreement with the department to undertake audited general purpose financial accounts and have those then lodged with an external independent third party, which happened at the time to be the precursor to Grant Thornton, which was Bentleys MRI. The agreement was that that material would be released to the providers—I cannot remember the actual number, but there were no more than about six providers who did not participate in that process; it was a very comprehensive undertaking—and the information then would be de-identified and made available to the industry and to the department, and to the government more broadly, so that we could all know how we were faring and use that information to ensure the long-term viability of the industry.

We received the data then produced by Bentleys MRI for 2003-04 as the precursor year to 2004-05. The 2005-06 material was not released to the industry; we received some information from Grant Thornton, the then annual surveyor for this purpose. 2006-07 has not been released, although we know that KPMG and Access Economics were engaged to undertake that task; nor has 2007-08 been released, although its close-off date was 31 October for the lodgement of accounts for providers to maintain their CAP index.

Providers are a little peeved about this because we are still lodging our accounts. The assurances from the department initially were that those accounts would be lodged with a third-party neutral organisation to undertake the analysis, last year they insisted upon them being lodged with the department themselves and we have not received the benefit of any benchmarking exercise, either at provider level or industry wide. That material is being held by the department and is certainly available, hopefully, to inform both the department and the information being put before this hearing. We believe that it will confirm quite substantially what we found in Grant Thornton.

Senator BOYCE —Looking at your suggestion of the annual profit per bed per annum of $12,000 to $15,000 a year, which is a huge multiple of the current profits, there would obviously be those who would suggest that that was far too high. Would you like to justify why that figure is a reasonable figure for the industry to be aiming for?

Mr Young —I will ask Mr Dorman to speak to that question.

Mr Dorman —Going back to my very brief statement before, the capital cost to provide a bed on the ground is about $200,000. In an economic sense, $12,000 is a six per cent return; $15,000 is a 7½ per cent return. I think, in general business or surplus environments, one would expect those sorts of percentages and that sort of number to apply.

Senator BOYCE —We took evidence earlier today about the implementation and introduction of ACFI. I think the question was whether ACFI posed a risk to the future of the industry. What have your members been telling you about ACFI?

Mr Dorman —In a practical or technical sense?

Senator BOYCE —Both the implementation and the focus of ACFI were criticised.

Mr Dorman —In a practical sense, we are finding that providers are discriminating against low care residents—in other words, not offering places to them—because of the funding levels. Whether that is part of the overall desire or plan to offer a high level of accessibility to the community care environment or not, I suspect it might be. But in the short-term a lot of potential residents, people who have been assessed by the ACAT teams, are not able to get accepted, because of the funding levels. That is the immediate impact of the current ACFI transition process.

There is another dynamic in there that the cut-off for bonds, which goes to the capital issue, is probably skewed too far in the wrong direction, which then makes it another decision-making process for providers as to who they select. In other words, the high care residents could get access to a place but they cannot pay a bond, because they are excluded by the high care and low care definitions.

Senator BOYCE —We were also told that just training staff how to use ACFI had been a major cost and that ACFI was far too focused on a medical model rather than on a holistic care model. Do you have any comment in response?

Mr Dorman —That is a fair comment. I think Rod can add to that in more detail.

Mr Young —In respect of training, other than a short burst of educating the industry in what this new thing would look like—and also limited numbers only could attend that per most facilities—the industry basically has had to carry the cost of implementing ACFI on its own bar one other additional component, which was a $3 million budget allocated to support usually small rural and remote facilities that were having difficulty adjusting or may have needed some business support; KPMG are actually managing that contract. So the whole implementation has substantially been undertaken by the industry from its own resources.

The only additional component of government assistance was the 2005 $150 million support to the industry for the advancement of information technology and e-claiming through Medicare Australia. Certainly the transition of the industry into the IT space is moving quite rapidly. At my last meeting with Medicare, which was last night, 65 per cent of providers are now transacting with Medicare for their ACFI assessment and claiming process; about 82 per cent, I think it was, of providers are now registered with Medicare to start transacting electronically at some future date. That again—other than that $150 million contribution which converted to $1,000 per bed throughout the industry as a one-off payment—is the only real support that the government has given to the industry to make this very costly and enormous implementation.

As for the other comments that have been made to you, it is probably still too early to tell in some respects, although there certainly is risk at the low end in the areas that Mr Dorman has referred to. We always said to the department, ‘Please don’t bring the scale down to zero’—which is what they did, contrary to our advice—‘because, if you go down to zero, how do we accept a resident’s $32.50 per day?’—as that is the only income they are paying. You simply cannot accommodate someone and provide them with food, power electricity and domestic support for that sort of fee. We are back in discussions with the department that we have to overcome that bottom-end coverage; there has to be something more than zero at the bottom of the scale.

The other component of that is where the department determines to draw the boundary between high care and low care. Part of the reason it is still there is simply the fact that there are bonds in low care and no bonds in high care. For care service purposes, the differentiation between low and high care is just a fiction. It is not necessary. We could negotiate the care and services that sit within the various care categories and the various payment points along the ACFI scale and have a much more practical and sensible way of delivering that, putting aside for the moment whatever government may finally decide about lump sum contributions from residents in the future.

Mr Dorman —Apart from the determination of bond points of entry and exit, high care and low care serve no purpose in the current environment. They are a thing of the past.

Senator BOYCE —It possibly even serves a negative purpose.

Mr Dorman —Absolutely.

Mr Young —Yes. The other aspect with the cost is that there is something in excess of 6,000 people in the industry who undertake input to the ACFI assessment process, and we probably turn over about 20 per cent of those a year. So we have a fairly large ongoing training exercise, which we need in order to maintain the skills of our staff so that they understand what the ACFI is, how to undertake the assessments and then how to reflect them and claim appropriately.

Mr Cook —Perhaps I could add to that point. I was talking to one of the directors of nursing yesterday about this exact issue. She said that the documentation has actually increased, firstly, because of the high acuity of residents coming into our high care facilities because they have been neglected at home, basically, or they have been at hospital and have come in very late in the process after doing the round robin of home care, community care and back to hospital. We have all these extra ACFIs to do and to pull all the documentation together. At the same time, the staff have to put together all the normal care plans and dot every i and cross every t because they are terrified of the Aged Care Standards and Accreditation Agency coming in and giving them a noncompliance in one of the care standards. So the documentation for care is still there, which is necessary, but all the documentation for ACFI, due to turnover of residents at the high end in particular, is an additional burden on the industry staff.

Senator MOORE —There is not much time to ask many questions, so I will ask a couple and there may be things that come out of that. I am interested, Mr Young, with interaction between your organisation and the department and between your organisation and the minister. Your organisation has been around, it is a key industry body, and consistently we are having issues about just how we interact. For the record, is there anything you can say about the consultation process, access and also whether there are any issues with openness?

Mr Young —Thank you. Yes, there are certainly some comments I would like to make. Perhaps I could make a general statement first. I find the dialogue between us as an industry and the aged care division of the Department of Health and Ageing fairly restricted. As an industry, we need to be making some long-term strategic decisions over the next few years and working with government to achieve some of those objectives. In addition, as a preliminary to that in order to assist in the decision-making process, we need to be working through what those options are. That ability to dialogue with the department does not exist in that long-term strategic process. It is very much, ‘This is the system; that’s all we are interested in; we really don’t want to go beyond that.’

In the context of narrower consultation, yes, some consultation occurs. We have various consultative processes with the department. But I think, if you spoke to most of the stakeholders, it would be, ‘Yes, we go and talk to the department about issues. We often say, “No, we don’t want to do that; we want to do it differently.’ The department will take that on board and say, ‘We have consulted with the industry,’ but then make their own decision anyway.

Obviously, I cannot talk at any depth about the relationship between the department and the minister. But certainly I think there is a need again, because of those sorts of issues about how we actually structure this industry in the future, to have a better dialogue with the minister of the day about how those really substantial structural reform policy issues are dealt with in the future. Unfortunately, at the moment, I do not see that happening. Again I think advice to the minister is being restricted by the department to those issues of the day rather there being any endeavour to widen those out to give the industry and other stakeholders a broader opportunity. I will mention two of the things that we as an association would like to work towards—and they certainly are not covered in our report in this instance. One is that some form of working plan is needed between us as an industry. Heaven forbid I use the pharmacy four-year agreement with the department, but certainly the opportunity—

Senator MOORE —It is a model.

Mr Young —It is certainly a model and it is one that I think is worth exploring. There needs to be some opportunity of that nature so that the industry can have a work plan. It may not be fixed in concrete, but a work plan that we want to work at over the next four to five years on these issues. I will go back to one of my pet subjects—and you can probably tell that it is—and that is IT. It took us from 2001 to 2005 to move the payments system out of the department and into Medicare Australia. You have to have some long-term views on some of these things. That sort of long-term strategic or even medium- or short-term strategic planning with a four- to five-year time frame, I think, would be very healthy for us as an industry and the department to actually be working on. The other thing we have been calling for for quite some time is the opportunity to have some exchanges between the industry’s senior executives and the department’s senior executives, because there is often very little dialogue and very little experience about the department’s world and our world.

Senator MOORE —Would that be some kind of formal, regulated structure?

Mr Young —Yes. Something would be worked out between the industry and the department. We might have only 20 or 30 opportunities a year and we would agree upon who the placements would be and where they would go. We understand there are sensitivities on both sides of the equation, but they can be dealt with. Both groups are dealing with highly sensitive and highly confidential information both within the department and within the industry on a daily basis.

Senator MOORE —I have just two other points, Chair, and it may well be that I will put something on notice. One is on regulation and the balance between regulation and operational efficiency, and the other is on your concept of benchmarking; I have heard you speak before on this issue of benchmarking. From your perspective, what would be the process for establishing such a benchmark? I think everyone is a little concerned about re-creating another Hogan experience. While Hogan has been very valuable, the time that it took post-Hogan to have any action, I think, has almost devalued people’s confidence in such a system. Do you have any suggestions about how you would be able to come to some kind of agreement around such a very core issue? It is very well to have that as a plan but, if that is not done well, it makes things worse.

Mr Young —I would agree. If you are going to do it, it has to be a well-researched, well-analysed and structured process. We are looking at a couple of options. The first is the Rowntree Foundation in the UK. Rowntree have now done a couple of similar exercises across the aged care system in that country. The other is some PricewaterhouseCoopers work that was done in New Zealand in, I think, 2002 and I do not believe it has been repeated since. The third is to take the work that we have done with Grant Thornton already and then some of the clinical benchmarks that have been done—about a thousand providers or sites across the country participate in a clinical benchmark exercise—and put some of those detailed analyses of our performance together and use them to develop a benchmark cost of care. There are three options that we are looking at at the moment. I do not pretend that they may be necessarily all that we could look at and other people may have other ideas. But certainly we are seriously exploring those and how we can finance the undertaking of the work, because we estimate that it would probably take at least $250,000 or $300,000 to do it properly.

Senator MOORE —Do you think a benchmark could then be carried into community care as well?

Mr Young —There is reason why it could not be.

Senator MOORE —If you are looking at the whole aspect of care in our community and you are going to do that kind of work—

Mr Young —Correct.

Senator MOORE —it would seem to me that, as we focus so much on residential care sometimes not realising that the two things work so closely together, the differentiation between low and high care could almost be extended to community care as well, when you look at the process.

Mr Young —Yes.

Senator MOORE —You have already mentioned this—it is in your submission—but we have the dilemma with regulation where increasingly, consistently, governments and oppositions are demanding effective regulation and scrutiny of service, but then we hear back from providers that it impacts on them, making them feel that they are under pleasure and threatened; rather than aiming to reach a high level of service, they are fearful of the whole process. Do you have any ideas about how we create an appropriate balance in that way? I am very much aware that for many years, as a member of the opposition, I was consistently asking for more spot checks; that it is all on record in various Senate estimates, which I know that you look at. I favour the idea of having the spot check process so that things are seen without necessary preparation, but has any work been done on what would be an appropriate balance as opposed to concern about how the current system works?

Mr Young —I might ask Mr Dorman to add to this in a moment as well, given that he has had some personal experience within his organisations on these issues. We believe that we really do need to go back to talks. As an industry, we have been highly supportive of accreditation and we believe that it has had some considerable positive benefit for the industry.

Senator MOORE —Looking back over 10 years, you can see that there has been.

Mr Young —Yes. But our difficulty now is that there is a real greying of the boundaries between quality improvement and compliance. The agency, if the quality improvement were to be maintained as an exclusive role for it, needs to have its role better defined and better separated from the compliance component. Our view is that the agency role should not be a monopoly; it should be brought under JAS-ANZ or some other framework and allowed to be provided by a number of quality improvement organisations.

Senator MOORE —Yes, and you have put that forward at previous inquiries.

Mr Young —Yes. We are not suggesting you move away from quality, but the boundaries are becoming more and more blurred. I think our real difficulty in the complaints environment is one of attitude. There is often little recognition of the impact from departmental officers coming into aged care domains. The anxiety they create amongst staff and amongst residents and the time that they take. Their attitude to staff is often quite poor. I would compare the agency’s training processes and the improvement in the attitudinal approach. We do not deny for a moment that the assessor has a job to do, but they can do it in a courteous and efficient way—

Senator MOORE —And a professional way.

Mr Young —and a professional way. In our opinion, the department has been less successful at achieving that—in fact, considerably less successful. There really needs to be some development and training of those departmental officers to recognise the influence they are having. Both in accreditation and in complaints management, there is no positive feedback in most of this system. Yes, we passed accreditation, so what does that do for us? We might have a little sort of hurrah over afternoon tea or something. But people come in from the complaints investigation service and examine a complaint. They discover there is no cause to answer. The response is a letter from the department, usually weeks and weeks later, saying, ‘We have found that you have not failed to comply with the act,’ or words to that effect. It is a hugely negative environment.

When we report to a state health service that we have a gastro outbreak, that gets lodged by the Department of Health and Ageing as a complaint. It is not a complaint, but that is the way they are treating the system at the moment. If we go to health in the state and say, ‘We have a gastro event and we are doing X, Y and Z,’ and they will say, ‘Fine’. They have an arrangement where they now report that to health. We usually report it as well these days; we are obligated to do so. Instead of saying, ‘Great, guys, you’ve done well,’ you will get correspondence weeks later saying, ‘You have not failed not to comply with your obligations under the Aged Care Act.’ It just is a punitive environment. But I might pass to Mr Dorman to add a few comments, if I may.

Mr Dorman —For 12 years now, since 1997, I have been working in what originally was more correctly described as a cottage industry. In terms of continuous improvement, we are not there yet, but I do not think we have been encouraged to go there. My objective in my organisation is to have 24-seven continuous improvement. But we still have this punitive process where you are either wrong or you are right. There is no value adding. There is no educational component to it all. We are ready for a next-generation compliance process. The next generation is where the staff engage with getting better at what they are doing and the system works in favour of that, not just whether you are good or bad. There are a lot of other industries that work it very effectively. There is no reason why it would not work in our space.

Senator MOORE —Have you raised this with the department?

Mr Dorman —Yes, and with numerous ministers. I have had eight ministers—so I have raised it with numerous ministers. Maybe in 2001 it was a little premature, but we are very ready for it now.

CHAIR —Thank you very much. As usual, we have run out of time. I thank you for appearing before us and also for your submission.

Mr Young —Perhaps I can make one comment. We did mention our aged care annuity idea. Can we forward the committee a copy of that in outer session?

CHAIR —Yes, that would be good. If you could provide that to the secretary, we would greatly appreciate it.

Proceedings suspended from 12.32 pm to 1.21 pm