Home | Opinion | 2020 ACAR: a time to reposition in residential aged care – opinion

2020 ACAR: a time to reposition in residential aged care – opinion

The Department of Health announced the 2020 ACAR late last year. The next ACAR is expected to open in March 2020, and this time the department has given some notice to providers to get a head start on preparing their ACAR applications. 

ACAR is a process through which the Department of Health allocates residential aged care bed places and capital grants for providers so they can offer new services which respond to the need of their local communities.

Challenges

The announcement came at a time when the aged care industry was facing arduous challenges. One of these is financial pressure which constrains providers’ capacity to deliver services without compromising on quality.

According to the Aged Care Financing Authority (ACFA) 2019 report, occupancy has dropped to around 90 per cent in 2017–18, down from around 92 percent in 2016–17.

The majority of residential aged care facilities are now making a net loss (StewartBrown, September quarter, 2019 survey). StewartBrown commented that it is becoming increasingly difficult to remain sustainable at facility level with average earnings before interest, depreciation and tax reducing to $5,829 per bed per annum.

Given financial and other challenges, some providers will be less motivated to expand.

For providers with an intent to expand their residential aged care offering, it is imperative to view the big picture and take into consideration longer term factors.

Current quantitative supply

For residential aged care, the government provision target ratio is 7.8 per cent for people over the age of 70 (78 residential places per 1000 people over the age of 70) to be achieved by 2021–22 nationally.

According to Australian Institute of Health and Welfare as at June 2019, the operational ratio (operational places for per 1000 people over the age of 70) is 77.5, which almost aligns with the target provision ratio.

Interestingly, the total allocated places ratio (total places allocated per 1000 people over the age of 70) is significantly higher at 93.8 per 1000 people. The gap reflects unoccupied beds and non-operational places.

Projected statistical demand

The older-old population will more than double

The 70 years of age plus population is projected to increase significantly from the year 2019 to the year 2066 by around 140 per cent.

The chart below shows the projected change in the 70 years of age plus population from 2019 to 2066:

Source: Australian Bureau of Statistics (ABS) – population projections, Australia, 2017 (base) – 2066 – Series B (Series B largely reflects current trends in fertility, life expectancy at birth and migration) and The Ageing Equation analysis.

More relevant for residential aged care, the projected population of 85 years of age plus persons is projected to more than double, as shown below:          

Source: ABS – population projections, Australia, 2017 (base) – 2066 – Series B and The Ageing Equation analysis.

More of us will be old

Over the period to 2066, the proportion of the Australian 70 plus population and 85 years of age plus are projected to grow from 11 per cent to around 16 per cent, and from 2 per cent to over 3.5 per cent respectively:


Source: ABS – population projections, Australia, 2017 (base) – 2066 – Series B and The Ageing Equation analysis.

Other factors aside, the projected ageing of Australia’s population over the next four to five decades suggests demand will grow significantly for intensive residential aged care.

Projected statistical demand based on the current utilisation rate

Projected statistical demand based on the planning target ratio of 7.8 per cent for people over the age of 70 is shown in the chart below:

Note: Supply includes flexible residential aged care places in the: Multi-Purpose Service (MPS) Program, Aged Care Innovative Pool Program and the National Aboriginal and Torres Strait Islander Flexible Aged Care Program. The analysis is based on ABS population projections, Australia, 2017 (base) – 2066 – Series B and supply data from Australian Institute of Health and Welfare (AIHW).
Source: ABS, AIHW and The Ageing Equation analysis.

As shown in the chart above, there is a projected statistical demand for 523,151 beds by the year 2066. As at 30 June 2019, there were a total 262,680 beds allocated, including provisionally allocated (36,958 beds) and unused/offline places (8,655).

Based on statistical demand analysis, there will be a requirement for 260,471 additional beds to meet the projected statistical demand indicating a requirement for over 5,500 beds to be added on average each year to 2066. 

It is noted that this is a statistical projection based on the current utilisation rate of residential aged care facilities.

One thing is certain – other demand drivers will materially impact the eventual demand

Other demand drivers may be expected to have positive or negative effect on statistical demand for residential aged care services and will impact the future utilisation rate (presently around 78 beds per 1000 people over 70). These include:

Positive

  • Societal changes:
    • ACFA notes that informal care provided by family members delays entry into residential aged care. As ACFA notes, more and more women are participating in the workforce, the divorce rate has risen over the years and families are having fewer babies. These changes point to more older people being ‘home alone’ and potentially an increased need for higher level care outside of the family home.
    • The needs of diverse groups may be better responded to in future residential aged care settings. These may include people from Aboriginal and Torres Strait Islander communities (ATSI); people from culturally and linguistically diverse backgrounds (CaLD), people who live in rural or remote areas (R‐R), people who are financially or socially disadvantaged (FSD), veterans (VET), People who are homeless or at risk of becoming homeless (HOM), care leavers (CLV); parents separated from their children by forced adoption or removal (PSC), lesbian, gay, bisexual, transgender and intersex people (LGBTI). The Department of Health encourages providers to develop communities within their aged care homes.
  • Allied health services on site will support the frail elderly effectively in residential aged care.
  • Responses to social isolation for frail elderly may be met more effectively in a residential care setting.
  • Complex care needs including dementia may be met more safely, effectively and cost efficiently in an environment with 24/7 on site specialist care. 
  • Medical advances resulting in people living longer with higher levels of frailty and resulting complex care needs.
  • Innovation in individualised accommodation, care and services may overcome some of the present perceived and real deficiencies in residential care.

Negative

  • Generational change and greater resistance to living in institutional aged care settings exacerbated by the much-publicised failures in care which led to the present royal commission.
  • Government policy:
    • An increased proportion of government funded home care
    • Ongoing funding pressures impacting residential aged care staff ratios and the public perception of residential aged care facilities
  • Technology such as artificial intelligence and robotics enabling people to be supported longer in their smart home.
  • Medical advances deferring entry to residential aged care can be expected to create shorter lengths of stay in residential care.
  • Substitution through innovation of alternatives to funded residential aged care such as assisted living and private aged care environments.

On balance, we expect that in the longer term residential aged care facilities will be more specialised, providing complex care to a much larger cohort of frail, elderly Australians.

ACAR applications

ACAR gives providers the opportunity to expand their presence and cater to their local communities. Each year, the places are allocated on a priority basis. In ACAR 2018–19, the focus was on providing more supply to remote, regional and rural communities and the places were allocated based on the remoteness of area. In the previous ACAR (2016-17), the places were awarded on the need/demand basis.

An evidenced-based application is more compelling

Previous studies by The Ageing Equation has revealed catchments across the country which require significant urgent residential aged care supply to meet the demand. To support an evidenced-based application, it is important that providers conduct detailed research to study their local market to gain insights into market environment and competition.

While there are many factors which make an application successful, the Department of Health may consider while assessing the applications:

  • The Aged Care Act 1997.
  • Which priority category area the proposed facilities are located in (yet to be announced by the Department).
  • Tailoring the provision of care particularly to residents in the Special Needs Group and with key issues such as dementia, respite and mental health.
  • Financial capacity to undertake the capital works.
  • Demonstration that the places will be operational in a timely manner.
  • Compliance history.
  • Provider’s track record of previous provisionally allocated places.
  • Track record of provision of care and information on operational/clinical processes to adequately meet clients’ care needs.
  • Research on local area and services and provider’s understanding of need based on evidence.
  • How the provision ratio of the geographic area the facility/facilities are located compared to the national target provision ratio of 78 people per 1000 over the age of 70.

Conclusion

The fall in residential aged care service occupancy in the last few years appears to reflect greater availability of government-funded home care services in combination with a greater desire by potential residents and their families to avoid residential care. The latter has been exacerbated by the much-publicised failures in care.   

Although residential aged care services continue to face significant challenges, the projected growth in the population of older Australians can be expected to underpin strong medium and long-term demand. Diminished availability of family for informal at home support and people living longer in frailty will contribute to demand.

It is likely that there will be particular catchments across the country which require significant urgent residential aged care supply to meet the demand. It is important that providers conduct detailed research to study their local market to gain insights into market environment and competition.

On the supply side, much of the existing stock of residential aged care facilities will not meet the needs of future residents who will seek more individualised, home-like accommodation.  Likewise, future residents and their families will demand more personalised care and tailored services.

For residential aged care providers with an intent to expand their services, 2020 ACAR will provide the opportunity to reposition with accommodation, care and personalised services to meet the higher expectations of residents who will be very different to those that have gone before.

Safdar Ali and Peter Hoare are directors of The Ageing Equation, a consultancy whose services include ACAR application preparation, market catchment studies, financial feasibility analysis and acquisition advisory services. The Ageing Equation’s clients achieved a success rate of 74% in their residential aged care 2018 ACAR applications.

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