Court Slaps Down Illegal Nursing Home Charges

Article published 28 March 2018

Court Slaps Down Illegal Nursing Home Charges

Good News

When it comes to nursing homes the news is rarely good, so CPSA is very pleased to report on a judgment by the Federal Court on nursing home accommodation charges.

You can pay for nursing home accommodation charges by lodging a bond (called a Refundable Deposit Payment or RAD) or by paying a Daily Accommodation Payment (DAP).

Nursing homes set their own RADs. The DAP is then calculated according to a set formula on the basis of the RAD.

The upshot is that the resident does not pay more, whatever they choose as their payment method. This is called price parity.

Some (not all!) nursing home providers thought they had found a loophole.

Those residents choosing the bond option (RAD) were effectively forced to pay a Capital Refurbishment Charge. This charge was not for any additional service or thing. It was simply a charge for the nursing home to make more money.

Residents notched up the Capital Refurbishment Charge against their bonds. In other words, this charge got subtracted from the bond when the resident left the nursing home or passed away.

This charge was not applied if a resident opted for a Daily Accommodation Payment (DAP). The reason for this is not quite clear.

One reason might be that the DAP is calculated using a very good interest rate, one which nursing home providers would struggle to equal when investing bond monies collected.

Another reason might be that the Capital Refurbishment Charge was almost hidden and unnoticed. It got paid typically when a resident passed away.

Charging residents who had opted for the Daily Accommodation Payment would have meant imposing an additional, immediately payable charge.

However, imposing a charge on one resident and not on another meant that price parity went out the window.

The Federal Court has now ruled that this is not on.

CPSA has written to the Minister for Aged Care calling for a financial audit of all nursing home operators to ensure refunds of these illegal charges.

CPSA encourages all residents and their representatives who signed contracts from 2014 onwards to check whether they are entitled to a refund.

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