Show me the money!

Industry asking for more funding

The Combined Pensioners and Superannuants Association have been particularly critical:

Whenever providers have to confront failures in care, they turn it around to the need for more money or blame government for the problems.  In 2015, when they have received a massive boost in bonds and additional funding via larger contributions from consumers themselves, the industry is still complaining and asking for more handouts. 

The first quote is from the response of the industry to serious allegations about the services provided by a Queensland not-for-profit:

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A very profitable industry

Plenty of money for consolidation

Analysts have been increasingly glowing about the income the companies are generating, the opportunities for entrepreneurs and the prospects on the share market. When banks talk about performance, they are talking about money and not care. They are interested in things that show that the industry is making money or growing and investing with the prospect of doing so. The NAB described the sector as a strong performer and this was before the Living Longer Living Better additional funding. The financial boom in the sector that started in 2013 is addressed in depth on the Aged Care Marketplace section of this website. 

A few reminders

• Aged care the place to be, says Deutsche Bank - The Australian, 28 Jan 2015 (Paywall)
• Age of change as big players expand in aged care sector Sydney Morning Herald, 24 June 2015
• 3 ways to profit from the ageing population The Motley Fool 9 March 2016

Betrayal

Citizens who have looked feel betrayed. We are all vitally affected, but the information we need to sort out these contradictions is all in confidence and behind closed doors. That our concern is justified is revealed in a number of reports and surveys.  We have to search to find government and industry reports.

Annual survey of nursing home profitability

2014

Crikey online news, obtained a copy of this report prepared by Bentleys Chartered Accountants. Crikey reported that the industry itself knows that it has increased its profits by 159% while at the same time, the time spent actually caring by registered nurses decreased and that by PCA's increased. 

The figures given for the hours of care are unclear because it is not clear what the percentage refers to. If the figures reflect all of the care given, then it looks as if residents are getting about 1.6 hours of care each per day.  If this is so, then it raises the issue of what these staff are doing with the other 48% of their time.  If on the other hand the percentage indicates that 52% of care is given by these staff, then we need to ask who is giving the remaining 48% of care and what training have they had. In the latter situation we can calculate that residents are getting 3 hours of care per day.

This can be contrasted with the 4.5 hours recommended in the USA and the findings there that  4.1 hours was the minimum below which harm to the residents was likely -  and that below 2.9 hrs most residents needlessly suffer harm.  Note that the figures for Australia are hypothesis based on the figures available in the Crikey article. Even if the correct figure is 3 hours then it suggests that a little under half will be providing below 2.9 hrs of care per resident per day  nd so placing most of the residents in these facilities at risk of harm.  Until now, this information has been concealed from us and even now this is a leaked document.

The report also revealed that only 46% of daily operating revenue was spent on nursing and care in the average nursing home.  The most profitable 25% of nursing homes spent less, only 40%. 

2015

The Sydney Morning Herald obtained a copy of the confidential Bentley Report a year later and published in January 2016.  Profits had increased another 40%. Time spent on care decreased by another 7%.

More money from bonds

CPSA have looked at the figures for bonds. By making both low and high care residents pay bonds and increasing the size of the bonds and accommodation payments “at the rate the market would bear” the government gave the industry a massive boost to stimulate growth and provide better care. Average bonds increased by $37,000.

Providers who ignore the requirements that 40% of residents must be lower paying concessional payers (supplemented by government) are able to charge higher bonds and accommodation fees. Government is not prosecuting them for this.

• Nursing home bonanza CPSA 1 Oct 2015

The Aged Care Financial Authority (ACFA) confirms this

The ACFA has revealed that these changes have added $3.3 billion to the bond pool increasing it to “almost $20 billion” They indicated to a LASA conference that “Further growth in the amount of bonds was almost certain given only a third of residents had entered the system since 1 July and were therefore affected by the new payment arrangements.”

The report on the conference said '“Ms O’Grady said that for these new residents coming into the system, comparisons of their payment options against what they would have been under the old regime were “irrelevant and frankly not constructive” yet a number of financial planners, providers and assessors were “tinging their communications with those perspective residents with comparisons which were of no relevance.”'

Why this was not relevant was not explained. I would have thought that these increased charges would be very relevant for residents and families. They would like to know where the extra $37,000 in bond money and/or accommodation fees they are paying (that fellow residents who entered a year earlier have not paid) is going and what the benefits for them will be.  This will be especially so given the concerns many have about the adequacy of staffing.

• Providers told to expect greater scrutiny over rising bonds Presentation to LASA Conference, Australian Ageing Agenda, 13 Oct 2015

The risks to funding using bonds

But a bonanza can be a threat. Some are more concerned about the risks bonds might pose for the industry when companies go under and the bonds are lost.

The article claims that the value of bonds “has risen 20 per cent – from $16.7 billion to more than $20 billion – since new rules governing how consumers pay for their accommodation in aged care were introduced on 1 July last year”.  They will “will further increase to $36 billion by 2025”. Government have guaranteed this, should nursing homes go under, and “ 20 per cent of providers were not generating a positive EBITDA”.

The article indicates that “With the move towards deregulation of aged care it was counter-intuitive that government would continue to provide free security for providers when it had less control over how they operated”. This would mean “shifting obligation from government back to the industry”. The study had found that “The profitability of the industry is declining,” and that “In 2014 the bottom quartile of providers represented a drain of over $400 million or 31 per cent of industry EBITDA.”

Under the current system, the Australian government would be heavily exposed if massive corporate collapses like those that have decimated the UK's aged care system were to occur.

• Providers could be charged new fee, as government liable for rising bonds - Australian Ageing Agenda Australian Ageing Agenda 20 April 2016

The industry responds to criticism

As revealed in the 19 Years of Care section, during late 2015 and in 2016 there were a series of critical articles claiming that money was being taken from care to fuel profits, principally by understaffing, and care was being compromised.  The industry responded by using the larger and publicly available Stewart Brown Report to refute these claims.

The December 2015 Stewart Brown report was based on a larger sample. It showed that it was “business as usual with respect to the overall financial performance of the residential aged care sector”. But it also found that while the upper quartile were doing much better “then logically the results of those outside of the top quartile have declined.” 

They commented that “many of these not‐for‐profit organisations are mission or faith based, and while there will often be a cost to the bottom line associated with mission- - -“. The report indicates that “they will need to improve financially if they are to remain viable”. If care goes with mission as seems likely, then it may be those with a mission that are less profitable.  The report and the market could he unwittingly insisting that care be compromised in order to remain profitable and viable.  It can also be concluded that some are doing this. 

• Beyond the headlines: a closer look at the sector’s finances Australian Ageing Agenda 13 Jan 2016
• Sector Results Briefing AGED CARE FINANCIAL PERFORMANCE SURVEY Stewart Brown 2015
• AGED CARE FINANCIAL PERFORMANCE SURVEY Stewart Brown Dec 2015

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Surveys of staffing

Trained nurses replaced by cheaper "lower skilled workers"

Cepar Population research:  In Part 2 of a research report carried out for the Australian government by Cepar (Population Research) in February 2014.

The report indicates that "The (aged care) sector employs about 350k staff and has seen a growth in lower skilled workers in place of nurses. Care workers tend to be older" and that while nurses are often in demand "their shortage and higher cost has meant that lower skilled community care workers or (residential) personal care assistants make up a vast majority of the direct care workforce".

In other words, costs (read profit) is an important determinant of staff numbers and skills. If the share market is so attractive for investors, then is it because money is not spent on staff - particularly the skilled registered nurses?

The report found that, although it is more difficult to get qualified nurses at the current pay rates, the lower quality carers are mostly part time. Many have other part time work and would like to do more aged care.

The study revealed that "30 per cent of direct care workers in community care would like between one and ten more hours of work" and that rather than providing care "23 per cent of direct care workers in community care and 16 per cent in residential care spend less than a third of their time caring. Time spent caring differs by skill level since certified nurses take on more managerial roles".

So, there are carers looking for work and care staff are being used for administration rather than care.  The nurses the residents need to closely supervise and help in providing their care do even more of this administration.

The nursing unions have been tracking what was happening and have surveyed nurses:

As part of some restructuring by FPCompany NewnameC “standardised rosters are being introduced” in order to “improve services to residents” and increase registered nurses hours. “Casual worker hours and shifts are being decreased, nursing jobs are being advertised online, stating 457 visa holders are welcome to apply”.

The union is concerned that the company is “cutting back hours for local workers, with a long term plan to flood in overseas 457 workers”. “There are FPCompany NewnameC job ads for 457 workers springing up all over the country”. The union’s concerns relate to the visa holders being “vulnerable to being overworked and taken advantage of” and “don't speak up when they (are) overworked or underpaid”.

• FPCompany NewnameC aged care introduces roster overhaul, job cuts and 457 nurses ABC radio Gippsland 24 June 2015.

The industry is reluctant to employ less experienced newly qualified trained nurses preferring to recruit overseas. The nurses union believes it is essential to do so so that they have the experience when the real aged care bulge starts in a few years time. There is “maldistribution of staff and little increase in productivity or clinical roles has created a fractious environment”’. The government had “ rejected a union push to alter the “blanket approach” that ­allows overseas-trained nurses to work in Australia". The union indicated that “the worst pay and conditions for nurses were in aged care, a growth industry, where employers sought 'a more compliant workforce' from overseas”.

• Nurses lured by holidays, pay hikes as shortages bite The Australian 17 Sept 2016 (Paywall)

Conclusions

Whilst companies are becoming ever more profitable, the number of skilled staff on whom the standards of care depend are being reduced and less well trained untrained staff are replacing them.  Worse still, it is abundantly clear that the industry's claims that they can't find nursing staff to employ are hollow.  Large numbers of nurses are being trained to a high Australian standard but they are not being employed, using a variety of excuses. 

Instead, nurses whose standards of training we don't control are brought in on temporary visas and paid much less. But there is another issue.  There are the level 3 and level 4 nursing staff, many of them from overseas being given qualifications by shonky training groups under contract with government. 

The recent scandal exposed in this industry is described on the Contracting government services to the market web page.  One company, Vocation Limited, has been forced to withdraw the qualifications of 1,100 students already out in the workplace because their training was inadequate.  It is likely that many of these are on temporary visas.

Aged care is not the only sector where the exploitation of employees and customers has occured. The web page Failed markets and culturopathy describes multiple examples to show that this is the norm and not an exceptopn in those sectors where people are vulnerable. Employees on temporary visas and international students doing part time work have been targeted. We simply don't have the sort of information about staffing we need. We don't know how many international nurses brought in to care for residents are being similarly exploited, but we do need to consider it.  In fact, we have almost no accurate information about staffing and this is a disgrace.  The proposed hub would address this issue.

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The consequences

The problems of morale and skills

On the web page Conflicting Cultures I explained how the sort of conflicted aged care system we have destroys motivation and creates alienation.  Not only do staff become disinterested and their emotions blunted, but they can lose patience and take out their frustrations by abusing residents or even playing cruel jokes and games on them. 

The report below is prior to the additional funding in 2014, but this is an industry that the NAB report indicates has been making plenty of money since 2008 and strong job creation. But this is a sector where many question the claims by industry about the number and the skills of the people employed.  The many reported failures in care over the last 19 years of supposed job creation have been blamed on inadequate staffing numbers and skills.

The study below done at the end of 2013 is representative - but this has been happening progressively for 19 years. While the NAB reports that the industry has been booming since 2008 there is much to suggest that numbers of staff are inadequate and that skills have fallen steadily over the years.

The problem of supervision

Rarely mentioned is the difficulty for trained staff when the care they are responsible for is being done by untrained staff or by agency staff whom they don't know.

There is a similar problem in acute hospitals when there are too many agency staff who are unfamiliar and need supervision. Hospitals examine the training, the experience and the records of staff before they appoint them.  Agency's do business by filling vacancies and are far less discerning. The busy staff in charge in hospitals simply have to delegate and cannot supervise everything that is done.  They cannot cope. Several of the avoidable complications that I have seen and at least one lawsuit were due to blunders by agency staff.  The more agency staff, the greater the problem.  I suspect that it is little different in nursing homes.

Summary

All of the available information that we have (and much of it the industry would rather we did not have) shows that both the extra money from government and the extra funds the elderly pay goes to top up the coffers of the companies to drive the market and consolidate it. 

It has not gone to pay for better care by employing more and better trained nurses.  Instead, the industry has been cutting trained nurses and when it employs staff at all levels it is employing the cheapest it can find regardless of the consequences for care.

We have been deceived

It was money we thought was provided to care for us - or so we were told.  Companies issuing their reports on the first quarter after floating attribute their success in generating profits and floating successfully to the increased funding made available by the mid-2014 funding changes.  These were made by government as a result of the recommendations of the Productivity Commission.

At the same time, these companies are treating sicker patients and spending less on staff.  It is clear that the money we were persuaded was being provided to improve care and which we were being asked to pay more ourselves, was not intended for that at all. 

Are providers deliberately reducing staffing?

In the USA, the big commercial groups have been shown in court to have deliberately reduced staffing and not replaced vacancies on instructions from management. We have no means of finding out if staffing levels are being deliberately kept low and whether many staff, who should be providing care, are being used for administration because this saves on the costs of employing others to do this. The care of residents is getting much less nursing time that the number of people capable of providing it suggests. Creative people can always find ways of justifying this so that they can claim it is in the interests of the people being cared for.

The only way to resolve this to anyone's satisfaction is to have people both in the nursing home looking at care and at the financial data. This the proposed hub would do.

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Doom and Gloom

The government finally had enough. In 2016 it not only threatened large fines but it abolished the funding in those areas where it considered funding was being rorted. Profits were markedly reduced and shareprices collapsed. The big companies responded by increasing the fees that residents had to pay in order to maintain their profits. They cried poor, blamed the government for poor care and mounted a public campaign to pressure the government to restore their funding.

Information about the rorting/maximising can be found here and here, both on the "Consequences of marketplace thinking" web page

There is information about the response to the reduced funding under the Update 11 June 2016 heading at the end of the slider Australian Private Equity Investors on the web page “Private Equity”

Share prices crumble and industry responds: Faced by a drop in funding, listed company’s share prices have plummeted. “One of the reasons why the listed operators are facing this challenging situation is they have to take a profit maximisation motive, which may require different priorities and approach”. Apparently “an increasing number of providers have been charging, or proposing to charge additional services fees, including 'capital refurbishment fees', 'asset replacement contributions' and similar other fees”. It seems that many of these are not legal.

When the government indicated that “several payments would not be permissible” and that “additional service fees charged by providers would not be supported by the Aged Care Act if the fee did not provide a direct benefit to the individual or the resident cannot take up or make use of the services”.  This requirement that the care given actually be beneficial and be given before money was paid was enough to “smash confidence”. Share prices were falling and analysts “expect margin decline in fiscal 2018”.

• Aged care sector hit by govt fee changes SBS 5 SEP 2016
• More pain ahead for aged care operators: Morgan Stanley in "Live coverage of financial markets and companies, plus analysis and opinion" Australian Business Review 6 Sept 2016
• 5 things you need to know today Switzer Daily Business News 6 September 2016

A gloomy future: Some analysts see nothing but financial doom and gloom as they look into the future. They see massive need with “little evidence that sufficient supply can be created to meet the most optimistic forecasts of demand during the next decade” and “even if supply could be created to meet demand that there is insufficient appetite for this within the sector”. They see “the profitability of the industry is declining’ and “return on assets and equity continue to decline”.

• Aged Care Sustainability Review 2016 RSM Global 18 April 2016
• Mid-tier firm points to dire outlook for aged care SMSF Adviser 19 April 2016

The not-for-profits many of whom probably were putting money into care seem to be suffering and perhaps genuinely complaining. There are suggestions that these are the 20% that have difficulty in keeping afloat.

• Government clamps down on ACFI claims Australian Ageing Agenda, 18 Dec 2015

Some claim that these cuts and the changes to the funding will impact directly on the poor who will not be able to pay for what they need.

• Risk of a two-tier aged care system emerging after ACFI cuts: CEO Australian Ageing Agenda, 10 June 2016

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