Funding cuts to the aged-care sector threaten to kill much needed investment in new beds and push sick and frail residents into hospitals, industry players warn.
There are also private mutterings that the redesigned funding formula for complex healthcare – in some cases cutting funding from $46 a day per resident to just $16 a day from July 1 2017 – could drive some businesses out of the aged care industry altogether.
In the May budget Treasurer Scott Morrison unveiled $1.2 billion of cuts to aged care. The latest cuts came after $600 million was stripped in the mid-year update last December.
The government unveiled $1.2 billion in cuts to aged care in the latest budget. Photo: Wolter Peeters
The matter has been raised privately with Mr Morrison this week by aged care providers, amid concerns the saving measure could have unintended financial consequences that dwarf the forecast budget impact.
"My immediate reaction is shocked and dismayed that we would be facing such major instability in our funding," SummitCare chief executive Cynthia Payne said. "This is a very high impact for us."
SummitCare has 884 aged care places across nine nursing homes in Sydney and the Hunter Valley in NSW. The first tranche of funding changes alone could hit the company's revenue by as much as $2.3 million, or almost 3 per cent of its $80 million annual turnover.
Cuts: Treasurer Scott Morrison unveiled $1.2bn of cuts to aged care funding. Photo: Alex Ellinghausen
SummitCare is building a 180-room site at Baulkham Hills in Sydney at a cost of $55 million.
"This hits the revenue which is the basis for supporting the outlays," Ms Payne said. Our financiers want confidence in the industry around cashflows to support debt. We want confidence as a business that we can meet the care needs of our residents."
Ms Payne fears a report by industry specialist Ansell Strategic, that warns the cuts could be much larger than revealed, may be right.
Aged care providers warn high-care patients will suffer from budget changes. Photo: Simon O'Dwyer
Ansell Strategic estimates that changes to the complicated Aged Care Funding Instrument (ACFI), , mean the sector will take another $350 million funding hit on top of the announced $1.8 billion.
It warns that the changes could discourage admission of high-dependency people, ultimately resulting in their displacement to hospitals.
At the time of the budget, Health Minister Sussan Ley said spending on the instrument would otherwise "blow out by $3.8 billion from 2016-20".
Ms Ley said the budget was designed to reduce "significant unplanned growth" by $1.2 billion over the next four years.
"There will also be a natural movement upwards based on 'frailty' of residents over the time the measure is implemented," Ms Ley said.
"Residents with the highest level of health care needs will continue to receive the highest level of government funding available."
Ansell Strategic managing director Cam Ansell, a former Grant Thornton accountant, said that these were the biggest cuts he'd seen in 20 years.
"In order for them to find their savings they've gone for the complex care component of the instrument. That's the one that deals with severe arthritis, chronic pain, stroke, and dementia. In other words, they've gone for the most high-acuity residents you can get," he said.
Kerri Rivett, the chief executive of non-profit aged care group Shepparton Villages, said that around 40 per cent of her 271 residents could not afford to pay for any of their care.
She said that residents that come in are sicker and sicker, and the government has now made it "near impossible" to get the maximum funding for high-needs care.
She worries that profit-focused providers, which comprise about 37 per cent of the industry, will become less inclined to accept the neediest people.
"The not-for-profits are going to end up having to look after the sickest and the most difficult," she said.
"We're still going to deliver care because that's what we have to do, but the impact will be around the type of service."
Allied health services such as physiotherapy and speech pathology are likely to be dispensed with first.
Shepparton Villages estimates it will be $340,000 worse off every year.
The cuts come amid concerns about rorting in the industry. Before the budget the government introduced fines of $10,800 for every false claim.
A survey of aged-care homes by Bentleys Chartered Accountants released in January found profits surged 40 per cent in the past year.
Some industry participants prefer to characterise the changes as "reduction in forecast growth" rather than "cuts". They argue that the change is consistent with the government's long-term objective to shift more of the payment to the residents.
Read more: http://www.smh.com.au/business/aged-care-investment-will-stall-due-to-funding-cuts-20160512-gotfq6.html#ixzz48lQyciTH
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