Aged care sector under fresh funding pressure as government updates fee guidelines

September 5, 2016

Aged care provider Estia Health has come under renewed pressure on the Australian market today, with shares tumbling more than 20 per cent after the government updated fee payment guidelines.

Estia (EHE) and its listed rivals Japara Healthcare (JHC) and Regis Aged Care (REG), already under pressure because of Federal Government cuts to aged care funding, have hit a new hurdle following Friday’s announcement of updated guidelines for charging additional fees in residential aged care.

The Department of Health outlined in its update on additional fees for aged care residents that they would not be supported by the legislation where the fee did not provide a direct benefit to the individual or the resident cannot take up or make use of the services, or where the activities or services subject to the fee were of the normal operation of an aged care home and fall within the scope of specified care and services.

“Based on over 30 conversations with listed aged care facility managers for Regis, Estia and Japara, and conversations with the senior management of the listed aged care companies, we understand that the capital charges of $15 per day charged by Regis, Estia and Japara are similar to those fees examples — and do not represent payment for any additional service,” Bank of Merrill Lynch analyst William Dunlop said.

“If that is correct, the Department of Health is saying that these types of fees would contravene Aged Care legislation.”

Mr Dunlop warned that the Department of Health had noted that it was aware that an increasing number of providers were charging “capital refurbishment fees” and “asset replacement contributions”, which he said was the similar terminology used by Japara and Regis. He added that Estia called theirs “asset replacement fees”.



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