Consultants have advised aged care providers to exploit the system by considering which residents generate “higher profit margins” and urged them to “get your money now” before new regulations are introduced.
Mirus Australia, which provides advice to around one-quarter of the aged care industry and manages about $5bn in revenue for clients, has quantified which older Australians are the most commercially valuable.
The consultants warn reclassifying residents to reflect their deteriorating health, which would result in more mandated care minutes, could hurt a provider’s budget bottom line as increased subsidies won’t cover costs.
Andrew Farmer, a Mirus Australia partner, said in a video briefing that many providers were not prepared for a key recommendation of the royal commission, which will require a sector-wide average of 200 minutes of daily care for each resident, from October.
The change also requires an average of 40 minutes of care from a registered nurse. But some residents who have underlying health conditions, including cognitive problems or mobility challenges, will require a up to 53 minutes of care.
When residents are admitted to residential aged care they are placed into one of 13 categories that determine what subsidy the government pays to providers. Residents that require more care tend to generate higher subsidies. This is designed to ensure all residents get the care they need.
Mirus Australia has modelled how these subsidies are affected by the cost of the new mandated care minutes. The company’s senior manager of data and analytics, Tyler Fisher, said class one residents, who are immobile and could be in respite care, are the least profitable.
“A higher profit margin is always desirable since it means the company is more successful and more efficient in terms of the revenue generated compared to the costs,” Fisher told providers.
Operating result ‘the deciding factor’
Mirus Australia told providers that residents can be reclassified strategically, “in a way that benefits the business”. The provider can determine when this reclassification occurs, but independent assessment is still required.
“In aged care, we can’t control who departs and most facilities want to be able to admit residents based on need and not their subsidy classification,” Fisher told providers.
“On the other side of the piano, it is not easy to change rosters and it’s very difficult to acquire new resources. That operating result is ultimately the deciding factor in who we should reclassify and when.”
Mirus Australia also told providers that reclassifying residents to receive higher government subsidies may not always be the best business decision.
Fisher used the example of moving someone from class seven to nine, which would move the resident from the assisted-mobility category to a non-mobile category. This would increase the government subsidy by $10 a day and require an extra 11 minutes of care be provided. A registered nurse would need to provide seven of those minutes.
“The cost to the business to meet that new level of care that we are mandated to [provide] means that ultimately, we are moving backwards in our sustainability,” Fisher told providers.
At the end of the briefing, Farmer told providers Mirus Australia could help them optimise their spread of resident classifications to maximise revenue.
“Get your money now while your care minutes are not mandatory. This is the transition year, as the government designed it,” Farmer said.
How to balance funding ‘with the costs of care’
In a statement to Guardian Australia, Farmer said Mirus Australia was helping aged care providers ensure more money was directed to care rather than administration costs.
“We do not provide advice that would in any way negatively affect the provision of care to any resident in an aged care facility,” Farmer said.
“The technology and advice we provide to aged care providers is aimed at helping them reach the same decisions they would otherwise reach, more efficiently.”
Farmer said it was important that residents classifications were regularly reviewed as their needs change and that balancing government funding with the costs of care was “one aspect of managing an aged care business effectively”.
But other industry analysts were concerned by the advice given to providers.
Jason Ward, of the Centre for International Corporate Tax Accountability and Research, which is primarily funded by unions including from the aged care sector, said the Mirus Australia briefing revealed the business models of many providers.
“The training video strips the soft veneer off of the aged care industry and shows that for many of the large operators it is about gaming the government funding mechanisms to maximise profits at the expense of residents,” Ward said.
“The reason why small community-based providers are failing is because they have a heart and don’t view residents merely as income streams to be managed.”
Dr Erin Twyford, a senior lecturer at the University of Wollongong researching the use of consultants in aged care, said business advisers tended to focus on increasing profits rather than providing care as a public good.
“It is with this view of financial gain that services such as resident assessments, clinical audits, care management system reviews and data transfers are provided,” Twyford said.
“This could result in instances where beds are left empty despite need and demand, as it may impact financial modelling or budgets for organisations.”
