Kew Gardens

Application Form and Application Guide

A message from the Aged Care Pricing Commissioner on issues raised during public consultation on the draft Application Form and Application Guide for accommodation prices that are above the maximum amount determined by the Minister.

  I would like to thank those who have responded to the invitation for comments on the draft Application Form and Application Guide for accommodation prices that are above the maximum amount determined by the Minister. A number of the changes that have been made to the Application Form and Application Guide are set out below. In addition, the submissions received highlighted a number of areas where further clarification would be beneficial, and these are also set out below. Where issues raised relate to matters that are within the purview of the Department of Social Services or the Minister, those issues will be communicated to the Department. In particular, I would like to clarify the following points:

Grandfathering of existing arrangements

Amendments to the Aged Care Act 1997 which commence on 1 July 2014 allow for the ‘grandfathering’ of agreements to pay accommodation payments entered into with residents before 1 July 2014.  In particular, from 1 July 2014, the Aged Care Act introduces the concept of ‘continuing residential care recipients’.  Generally speaking, continuing residential care recipients are individuals who entered residential care before 1 July 2014 without a break in residential care for more than 28 days in a row. However, this ‘grandfathering’ does not apply to agreements to pay accommodation payments that are entered into with residents on or after 1 July 2014. Where providers seek to enter into agreements on or after 1 July 2014 which involve charging residents more than $550,000 as a Refundable Accommodation Deposit (RAD), or its equivalent as a Daily Accommodation Payment (DAP), they must have approval from the Aged Care Pricing Commissioner. In the event that providers do not have this approval, they will not be able to charge more than $550,000.

I strongly encourage providers who seek to charge prices above this amount in new arrangements after 1 July 2014 to make an application shortly.

The arrangements for existing residents continue under their existing provisions, unless the resident re-enters care after leaving care for a period of 28 days or more, or if they move aged care homes and decide to enter under the new arrangements. This is not a decision at the discretion of the Pricing Commissioner, but is a legislative requirement of the Aged Care Act.

Approval of maximum price

Where providers seek and obtain approval to charge a price for a group of rooms that is above the threshold, this price is the maximum price that can be charged only. It does not limit the provider from charging prices below that maximum, at their discretion.  

Timeframes

A number of submissions drew attention to the statutory timeframes applying  to the consideration of applications. It is my intention that the actual time taken to consider applications will be a great deal shorter than the statutory limits. In particular, I acknowledge that in many instances notification will be required within a short timeframe. The application process allows an applicant to nominate a critical date by which notification is required. For example, a critical date may be necessary for an application that relates to a proposed facility which requires an approval to secure finance or to acquire land. In a previous exposure draft of the Fees and Payments Principles, applicants were not able to make a new application to the Pricing Commissioner (following either an approval or a refusal to approve) within a 12 month period of a previous decision. Given the difficulty that this may have presented to providers, I have asked, that this timeframe be reduced to 4 months.

Re-applying

While providers will be given approval to charge prices above the threshold for a four year period, this does not limit their ability to re-apply within that four year period. Provided that an application is made four months after the date of an original decision, a provider may re-apply at any time. If approval is given for a new price, providers do not have to wait for the expiry of the previous approval period to charge that price. Accordingly, should particular business factors emerge which influence pricing, including price indexation, applicants are able to reapply after a period of 4 months from the previous decision. The proposed four year approval period is not at the discretion of the Commissioner, but is a requirement under the draft Fees and Payments Principles 2014. While approvals will be given for a four year period at this time, and it is envisaged that this four year approval period will apply in the future, I will ensure a streamlined approach for subsequent approvals is provided. Where  an initial approval has been given, and  where  there  have  been no substantial material  changes to the condition  of rooms  to which prices  above the threshold are  proposed to apply then a simple certification process will be established.

Publishing of prices

Providers are reminded that the date on which approved prices should be published from is 19 May 2014.  This date has been revised from earlier requirements that prices be published by 1 April 2014,  in order  to provide additional  preparation time for providers while still allowing some time for adjustment to the new regime  before 1 July 2014.

Cost of supply and financial information

While some submissions questioned the need for seeking cost and financial information, others have welcomed the opportunity to explain their business models and the impact of cost and financial elements on their proposed pricing. In these circumstances, and given the opportunity for applicants to explain their proposed pricing in a way that is as non-prescriptive as possible while still allowing for consistency in assessment, I see this approach as having an overall benefit.  In using this information as one factor for consideration (and not as the only factor for consideration), assessment by the Pricing Commissioner is not undertaken to query substantiated costs or to set parameters in a way which interferes with the market or sets artificial parameters that do not relate to market conditions, but to understand the significance of cost and financial considerations and other business imperatives as they apply to pricing. I reiterate that any information submitted by providers will be held confidentially by the Office of the Aged Care Pricing Commissioner, and will not be shared with another person or agency.

External reference information

Where references are made to external reference information, this includes but is not limited to data on median house prices by locality and provider bond levels in geographical regions. This is not information that providers are expected to include. This information will not be used in a deterministic manner, but is one factor that the Commissioner may have regard to in making a decision.

Assessment

A copy of the Aged Care Pricing Commissioner’s Assessor Manual will be published shortly on the website at www.acpc.gov.au While the Application Guide should contain all information required for applicants to complete the Application Form, reference to the Assessor Manual will give providers further information about  how applications will be assessed.

Specific issues

The following issues raised will be reflected in the final versions of the Form and Guide.

Risk margins

The Guide contains reference to risk margins, where relevant, at s 3.2.1.  This section intends to capture all relevant factors influencing a proposed price. This could, for example, be relevant in respect of the risk in operating in a certain geographic location, or where a provider engages with any other particular risk in establishing or maintaining a facility.

Valuations

The Guide indicates that in the case of applications for prices in existing facilities, applicants should include information relating to land and/or building valuation. An exception may be made where the applicant is a not-for-profit provider who is entitled, for accounting purposes, to prepare financial statements according to the historical cost convention (cost less depreciation and impairment). In this instance, applicants should provide a statement of land and building value as reflected in financial statements. In seeking valuations, the intention has been to derive cost information that would be generally available to applicants without incurring substantial additional cost or onerous requirements, but which would still allow applicants sufficient scope to justify their proposed price. Accordingly, it has been assumed based on advice that valuations will have been obtained for normal business purposes in a significant number of cases. Where not-for-profit applicants are of the view that the historical cost convention will disadvantage them, an insured value may be provided. Alternatively, applicants may obtain a valuation. In general, it has been recognised that there  will be a degree of variance in costs of supply for existing facilities, proposed refurbished facilities and  proposed new facilities, and that particular  cost factors  may have  more  relevance in particular applications, in the same way as different capital  structures and  business models are of relevance. In particular, valuations for existing facilities may have a lesser degree of relevance in some cases. For this reason, historical bond prices and median house prices by Local Government Area are additional factors for the Commissioner to consider.

Proposed price and cost considerations

A number of submissions have queried whether particular costs can be included as part of the justification for a proposed price. In simple terms, these factors should be included where they are a relevant factor in the proposed accommodation price, and where they are not provided for by another source of revenue or, for example, are care and services provided for in the Quality of Care Principles. This may include, for example, a proportion of centralised services (such as human resources or information technology), and facilities that are relevant to the activities of residents. In a similar way, where areas such as gardens have a particular cost or are of significance in determining the proposed price, these may be included for consideration. It is reiterated that, while the Commissioner seeks cost of supply information where relevant, an assessment of the degree to which the proposed price is reflective of cost is one consideration amongst a number.

Applications for multiple room configurations

It is observed that in some cases rooms may be offered in a range of configurations in different circumstances i.e. where a room (or an interconnected set of rooms) may be offered as a double room in some circumstances, or a room for a single occupant in others. Some configurations may not require approval because the maximum accommodation payment amount will be below the threshold. However, where different possible configurations mean that an applicant wishes to seek more than one approval for a price above the threshold for the same room, depending upon the configuration, different configurations should be treated as different accommodation groups for the purpose of the application. The Guide at 1.8 has been amended to reflect this.

Total floor area

The requirement to provide the total floor area of the accommodation group has been removed from the Form.

Description of common areas

To ensure there is no duplication, the requirement to “describe” the common areas at Table A.1 (v) has been amended.

Location

The requirement to provide a description of the location of the accommodation group in the facility has been removed from Table A.1. However, applicants should include enough information for the Commissioner to identify rooms in the accommodation group.

Information and Communications Technology

The Guide will be amended to indicate that ICT facilities, whether included in the room or in accessible areas, may be included as part of a justification for a price.

Format

A number of headings have been revised to ensure there is congruency between the Form and Guide.

Attachments and word limits

Business cases or extracts from relevant documents can be attached to the form in addition to the 2000 words provided for at Table 2.1. The provision of documents such as floor plans for the relevant accommodation group, while not a requirement, will obviously enable applicants in many cases to further support their proposed price and to ensure that applications are dealt with in a timely manner. Provision of information in this manner will also remove the requirement for applicants to supply this information in the body of the Application Form. Where provided, these documents or images should be supplied at the same time as the completed Application Form (but not included in the body of the Form itself). I have very much appreciated the feedback and look forward to ongoing consultation with industry. Yours faithfully, Kim Cull Aged Care Pricing Commissioner