Turning nursing homes into tourist traps – Submission to the Royal Commission into Aged Care Quality and Safety

Additional services are top-ups of the standard services provided in residential aged care services. Such top-ups vary across facilities and can be anything, such as toiletries, upgraded meal choices, massages and entertainment. There is no restriction on what can be provided as an additional service except for restrictions arising as a result of consumer law and other, non-aged-care regulation. User-pays applies to additional services, with residents having the option of paying periodically or accruing additional service fees against their refundable accommodation deposit, or bond. There is no limit on the number or pricing of additional services a resident can sign up to. The terms ‘additional service’ and ‘additional service fee’ do not appear in aged care regulation, where these are referred to as “other care services” and “charges”[1], which points to the largely unregulated nature of these services.

There is evidence that residential aged care providers are increasingly turning to the provision of additional services to generate additional revenue: “There is very limited data available on additional services, however, anecdotal evidence is that this is an area that is receiving increasing attention from providers. (…) It is anticipated that additional data will be available in future years to enable analysis.”[2]

Currently, there are providers offering additional service packages known by various designations. Under the heading “Additional Services”, the website of provider Regis informs prospective residents as follows:

“Different Regis sites offer a range of accommodation choices and services. All include our high quality care.

“We offer three levels of extra services – Regis Club Services, Regis Reserve and Regis Classic.”[3]

The Regis website defines “Regis Club Services” as “our premium service” and describes it as “based on hotel-style offerings”.

“These superior services include:

Club Services Manager

Larger rooms

Menu Choices

Alcoholic beverages with meals

On-site Cafe

On-site Chef

Private Dining Room

Private Cinema

Hairdressing Salon and Day Spa

Personalised Well-Being Program

Foxtel”[4]

Then Regis offers the “Regis Reserve”. It “provides you with a large range of services including

TV and Foxtel in resident room

Dedicated dining and living areas

Access to Wi-Fi

Hairdressing & Barber

Menu choice

And more”[5]

Right at the bottom of the Regis additional services hierarchy is Regis Classic, which “provides a range of extras including:

Daily cooked breakfast

TV in resident rooms

Weekly happy hour”[6]

In many, if not the vast majority of instances, residents who sign up to additional services will be accruing additional service fees against their refundable accommodation deposits.  Japara tells its prospective residents: “You can choose to pay them one month in advance via direct debit, or we can simply deduct the fees from your Refundable Accommodation Deposit …”[7]. No doubt, Japara charges compound interest at a commercial rate on payments accrued against refundable accommodation deposits. At 30 June 2018, the overall pool of money comprising refundable accommodation deposits stood at $27.5 billion.

In light of the size of this money pool and the trend to market additional services aggressively, the proposals for the regulation of additional services and additional service fees presented in the Department of Health’s consultation paper are inadequate for the protection of care recipients’ consumer rights.

It is as if the Department is content to allow residential aged care facilities, where vulnerable residents should receive best-practice care, to divert their attention from the goal of achieving delivering best-practice to quite aggressively exploit residents commercially by turning these facilities into the aged care equivalent of tourist traps.

Additional services and additional service fees form the new revenue frontier for residential aged care providers and it is a certainty that overwhelmingly providers will move aggressively to interpret the scant regulation to their commercial advantage unless they are stopped by effective regulation.

The Department’s proposals go nowhere near offering a realistic basis for effective regulation of additional services and additional service fees (ASF).

Mandatory additional service fees

While Regis appears to offer additional services purely on a voluntary basis, Japara appears to have introduced a mandatory element as part of what it calls “Japara Signature services” and which are described as “available at some of our care homes to actively improve the wellness of our residents”. Japara’s website then refers to “packages” and says these “have been carefully designed around proven benefits that enhance daily life. Services include tablet and technology support, aromatherapy, brain training and a personalised workout routine”. The mandatory element is described as follows: “Your preferred accommodation type determines whether we will ask you to pay these fees.” Obviously, “ask” here means: demand.

It is concerning that the Department acquiesces in providers’ apparent ability to make the purchase of additional services a condition of entry into an aged care facility. This means that the purchase by residents of additional services, i.e. services unrelated to the core functions of residential aged care, can be made mandatory.

The Department’s consultation paper blandly states that “the Department considers [the mandatory purchase of additional services] is acceptable under current legislation”. The Department provides no legislative references to back up its opinion.

It is likely that the only legislative basis for providers’ ability to impose mandatory purchase of additional services upon entry into a residential aged care facility is the absence of any reference to a prohibition of mandatory offerings in the legislation. In other words, the legislation does not prohibit it, it is therefore allowed.

The legal basis for the provision of additional services by residential aged care providers is s56.1(e) of the Aged Care Act 1997, which requires the approved provider “to charge no more for any other care or services than an amount agreed beforehand with the care recipient, and to give the care recipient an itemised account of the other care or services”. This is the extent of the regulation of additional services and additional service fees funded to a large extent from a $27.5 billion pool of money.

It would seem that the s56.1(e) requirement implies that the consumer has a choice whether or not to buy additional services, because the “amount” of the fee needs to be “agreed beforehand with the care recipient”. It stands to reason that before agreeing on a fee a care recipient decides whether they want additional services. If they don’t have that choice between buying and not buying, the power in the negotiation is exclusively with the provider.

Common sense says that the buying of additional services should be voluntary

The principles of consumer directed care say the same. Consumer directed care is a model of service delivery designed to give more choice and flexibility to consumers. Clearly, mandatory additional services are a manifestation of provider directed care.

In March 2018, Regis Aged Care Pty Ltd v Secretary, Department of Health[9]  decided the question whether Regis’ asset replacement charge (ARC) was legal or not. It was found to be an illegal additional service fee. Regis had not set up this fee as an additional service fee, but the court found that if the ARC were to be a legal fee, it could only be an additional service fee. The court found that the illegality of the ARC arose from the lack of any benefit to the person paying it.

The judgment in this case was not concerned with deciding whether the mandatory nature of the ARC was legal. However, the mandatory nature of that fee prompted comments by Mortimer J which suggest it is likely that any mandatory additional services and fees would be found to be illegal if tested in court on their mandatory nature. In his Reasons for Judgment, Mortimer J said inter alia:

“101.  The provisions of the Aged Care Act must be construed in the practical context in which they arise. People need, or wish, to access aged care services in a tremendous variety of circumstances. Sometimes, it is involuntary. Sometimes, it is in circumstances of great urgency. Sometimes there will be real geographic constraints on where a person needs to be cared for, because of family arrangements, but also personal preferences in terms of established networks, access to particular treating medical professionals and the like. Sometimes personal preferences in terms of the nature of a facility will be critical to the continued physical and psychological well-being of a prospective resident. There may therefore be all sorts of reasons why whatever “choice” is being exercised is constrained in a way where people are not able, as in the hypothetical private commercial context, to elect to contract elsewhere and with another party. The facility of the provider who charges an additional fee like the ARC may be the only realistic choice. Or it may be the preferred choice for all or some of the reasons I have set out in this paragraph. When a unilateral, additional fee of no benefit to the prospective resident is presented as a term of entering that facility, what may occur in reality is that the prospective resident may have no “freedom” of contract. To exercise her or his care-related choice (about the facility, location, level of care, access to medical services, family and the like) the prospective resident must agree to pay the additional (non-care related) fee. As I have noted, I see that as antithetical to the scheme, not consistent with it.”

The italicised (by CPSA) passage clearly demonstrates that the court regarded the mandatory nature of Regis’ ARC as being inconsistent with the “scheme”, i.e. with the funding system created by the Aged Care Act 1997.

CPSA urges the Department to rule mandatory additional services and fees out of bounds and, if necessary, seek declaratory relief to put the matter beyond doubt as to its unlawfulness.

Nature of additional services

The actual services provided as additional services can and are also provided as extra services, regulated extensively in the Aged Care Act 1997 and in the Extra Service Principles 2014. Extra services are provided as part of an Extra Service Place in a facility with official extra service status granted by the regulator.

Extra services are provided as a fixed package of upgraded accommodation and hotel services. The resident who opts for an extra service place makes a choice similar to the choice for a five-star hotel rather than a lower-priced hotel. Additional services can be offered as a package or individually and have the effect of – to stay with the hotel analogy – to upgrade from a one-star, budget hotel to anything up to a five-star hotel.

Incidentally, it is entirely possible for an aged care provider of extra service places to also offer additional services, although that could possibly point to a weakness of a particular extra service place offering.

There is nothing to stop an aged care provider from offering a five-star option as a package of additional services, rather than extra services. In fact the trend is towards this: “There was a significant decrease in 2014-15 and 2015‑16 in the number of places with extra service status (…). This was likely because changes made to accommodation pricing on 1 July 2014 reduced the need and motivation for providers to have extra service status, partly because: (…) providers can offer additional care and services for additional fees outside the extra service framework. This led some providers to reconsider their extra service status, with many offering residents ‘additional service’ arrangements instead.”[10] In plain English, why would you bother subjecting yourself to reels of red tape if you can do the same thing without red tape?

The only thing where extra service differs from additional service is the regulation with which the provider has to comply, negligible in the case of an additional services construction, significant in the case of an extra services construction.

CPSA’s argument is that the consumer protections applying to extra services should also apply to additional services. Additional services should be regulated in a similar way as extra services.

That does not mean additional services should be regulated exactly the same way, because that would have the effect of abolishing additional services, which is not desirable. However, pricing, quality and range of additional services should be regulated in exactly the same way as extra services.

The fundamental differences between additional services and extra services are two.

First, extra services are offered in facilities where all residents in the facility or a physically sectioned-off part of the facility receive these services. They are all in the same boat, arguably a luxury cruise ship. Additional services can be offered in any facility and can differ from resident to resident.

Second, entering into an extra service agreement is a mandatory condition of entry for anyone wanting an extra service place. However, the option of an extra service place is a matter of consumer choice. Facilities offering extra service places must be in areas where ‘normal’ facilities are available to take residents unable to afford or not wanting an extra service place.[11] A prospective extra service resident has a genuine choice whether to enter an extra service facility where an extra service agreement is mandatory or to opt for a ‘normal’ facility. The resident who opts for a ‘normal’ facility may have a real choice, but may often have little choice, as noted by Mortimer J in his Reason for Judgment – see above.

These two differences between additional and extra services must remain for there to be any real difference. Abolish these differences and a merged category of services results.

Where additional service and extra service regulation can and should be the same, is in the areas of pricing, quality and accreditation. Additional services are fast becoming an important category of services provided in aged care facilities. They can therefore not be treated as they were still incidental and available on request by the resident rather than marketed actively by the provider.

Pricing – A provider needs approval from the Aged Care Pricing Commissioner for extra service fees.[12]

In contrast, additional service fees are unregulated.

This means that providers can set the fee, change the fee and also are at liberty to set the conditions under which residents can draw down on their refundable accommodation deposits, including the maximum of the total draw down.

The arrangement of accrual of fees against refundable accommodation deposits is very similar to home equity release, where the majority of the value of the home is reserved for the payment of interest, usually a minimum of 75 per cent with only 25 per cent available to be drawn down. Home equity release would appear to be adequately regulated in Australia, with the no-negative-equity guarantee being a key feature.

However, none of the consumer protections applicable to home equity release exist in relation to the accrual of fees and interest against refundable accommodation deposits. This is clearly a recipe for disaster from the consumer point of view, because what happens if the available capital for a resident participating in Japara Signature services program runs out? Do they go back to water and gruel?

Quality – The standard of accommodation, services and food provided as extra service must be “significantly higher than the average standard in residential care services that do not have extra service status”.[13]

In contrast, aged care regulation is silent about the required quality of additional services.

Accreditation – The provider of extra service must have a “very good” record as a provider and meet accreditation requirements.[14]

In contrast, providers of additional services can have facilities operating under as many sanctions and even lose accreditation altogether while still being able to provide and charge for additional services. BUPA Australia is a case in point.

The ACCC instituted proceedings in the Federal Court alleging Bupa Aged Care Australia Pty Ltd (Bupa) made false or misleading representations to its aged care residents in 21 homes about services it did not provide or only partly provided, in breach of the Australian Consumer Law. Between December 2007 and June 2018, Bupa charged thousands of residents at 21 aged care homes across the country a fee for a package of additional services. The ACCC alleges that it did not provide, or only partly provided, some of these services. The fees for the additional services package often amounted to thousands of dollars each year.[15] Eight of these BUPA facilities are currently non-compliant .[16]

Given the overlap and similarity of services provided under s56.1(e) and under Part 2.5 of the Aged Care Act 1997, it would be logical for more detailed regulation of additional services and additional service fees to be broadly the same as the regulation of extra services where relevant. Regulation of extra services offers consumer protections and these same consumer protections should be available to consumers of additional services in residential aged care.

Accordingly, there should be a set of Additional Service Principles under the Aged Care Act 1997. These Additional Service Principles should be modelled on the Extra Service Principles 2014.

Recommendations

1. Aged care regulation should be amended to ensure that the purchase of additional services is voluntary and cannot be a condition of entry into, or of continued residence in a residential aged care facility.
2. Additional services and additional service fees should be regulated along similar lines as extra services and this regulation should be in the form of Additional Service Principles.

Notes:

[1] Aged Care Act 1997, s56(1)(e).

[2] p67, Seventh report on the Funding and Financing of the Aged Care Industry, July 2019.

[3] https://www.regis.com.au/aged-care-facilities/live-with-us/ -accessed on 9 December 2019.

[4] https://www.regis.com.au/aged-care-facilities/live-with-us/#club-services – accessed on 9 December 2019.

[5] https://www.regis.com.au/aged-care-facilities/live-with-us/#regis-reserve – accessed 9 December 2019.

[6] https://www.regis.com.au/aged-care-facilities/live-with-us/#regis-classic – accessed on 9 December 2019.

[7] Aged Care fees and charges, Japara, a PDF document which can be accessed at https://japara.com.au/about-aged-care/fees-and-charges/ . The quotes from this document in this submission were sourced on 9 December 2019.

[9] https://agedcare.health.gov.au/programs/residential-care/charging-fees-for-additional-care-and-services-in-residential-aged-care-including-capital-refurbishment-type-fees

[10] p66, Seventh report on the Funding and Financing of the Aged Care Industry, July 2019.

[11] Aged Care Act 1997 sect 32.4(1)(a).

[12] Aged Care Act 1997 sect 35.1.

[13] Aged Care Act 1997 sect 32.4(1)(b).

[14] Aged Care Act 1997 sect 32.4(1)(c). It’s interesting that in the minds of the authors of the Aged Care Act 1997 being a provider with a “very good” record and being a provider compliant with accreditation requirements can apparently be two different things.

[15] ACCC media release 16 April 2019 – https://www.accc.gov.au/media-release/bupa-aged-care-in-court-for-alleged-misrepresentations-about-services . The ACCC media release refers to “extra services” but clearly additional services are the cause for it taking legal action.

[16] Non-compliant according to the Aged Care Quality and Safety Commission’s website accessed on 9 December 2019: BUPA Dural; BUPA Bankstown; BUPA Berry; BUPA Banora Point; BUPA Coburg; BUPA Tamworth; BUPA South Hobart.