It is fair to say that the prolonged Government Regulatory Agencies overzealous policing of regulations and media scrutiny have fundamentally shaken confidence in the sector. While the immediate attention in 2017 seemed appropriate, following the events surrounding South Australian State Government run, Oakden Older Persons Mental Health Service’s abuse scandal, however it is apparent the regulating bodies have continued to significantly increase pressure on the industry with a zero tolerance policy. This is causing uncertainty with operators about achieving standards under the Consumer Directed Care model. Since uncertainty is the archenemy of any market, this needs immediate rectification to boost   investment into new construction of aged care facilities to meet future demand.

Post the Federal election and more importantly the subsequent rate cut by the RBA we anticipated a slight recovery in the sector along with other sectors but it appears that there are more hurdles ahead before we see the light at the end of the tunnel and a normalisation of the current situation.

The implementation of the New Aged Care Quality Standards at the 1^st of July 2019 has kept the focus of most providers firmly on their corporate governance and preparation for the new standards. Given the current sentiment of regulators, we have no doubt that the new standards will be vigorously enforced by the Aged Care Quality and Safety Commission from day one. It appears that in this climate the Aged Care Quality and Safety Commission and the Complaints Commission are out to cover their own backs with a zero-lenience approach.

Whilst we are not experts in Accreditation and clinical Care outcomes / Standards , we do regularly deal with experienced operators who provide constant feedback on the practicalities of meeting the new regime and an initial assessment of the new standards gives the appearance that this might be a political knee-jerk reaction and the standards have been developed and implemented on the fly.

We are aware of experienced Aged Care Operators who have very successfully operated Facilities with an immaculate record when it comes to meeting Care Standards. These providers are seriously concerned about the lack of direct funding for the adequate implementation and maintenance of the new standards before they are being enforced. If the top tier operators are this concerned, how are the majority of operators travelling?

There is no aged care operator we know, that debates residents must be cared for in a dignified caring manner, with their needs catered for. The real issue is creating the framework to achieve this in an effective and sustainable manner.

There is an ‘elephant in the room’ with the new standards, that operators are reluctant to voice concerns for fear of being targeted by the Commission and/ or the Department and all the Aged Care Associations talk about behind closed doors but not publicly, is the fact that they appear to be written by people with no practical aged care experience in the delivery of care to consumers (formerly knowns as residents).

It is apparent from the Department and Commission’s own web page video information that they portray an image of aged care residents, that look more like young cognitive retirement living residents at a holiday resort. Just take the time to look at the video link and see how unrealistic the image is of a staff member taking a meal order!

https://www.agedcarequality.gov.au/resources/altura-learning-standards-educational-video

The vast majority of residents in an aged care facility are there because their care needs have become so complex their families can no longer look after them and they need 24 hour care in the most basic of human needs. The feedback from aged care operators to the new Standards, is that they simply do not deal in a practical way with providing care to complex needs.

While we understand that the regulators wish to address some obvious short falls in the sector, it should not be forgotten that the majority of Approved Providers provide good care and more importantly, that the adherence to new and additional standards takes a significant amount of resources. Resources which are finite within any organisation.

This fact is compounded for Aged Care Providers who do not have a charter to run profitable Aged Care Facilities. The extra resources required for this significant exercise combined with the penalties invoked for not immediately meeting the new standards might very well tip a commercial or break-even operation into the red.

It appears that the regulatory pendulum has now swung too far and will not commence it’s swing back until a multitude of operators have their backs against the wall and are on the verge of closure. This may well be the case already with the latest Stewart Brown Report showing that 45% of facilities are having negative Earnings before Tax (EBT). Afterall, let’s not forget that looking at the whole picture there is a surplus demand for Aged Care Places anticipated for the future. So, the question is what percentage of “good” Approved Providers can the Regulators afford to lose with an overzealous approach before the media outcry changes from “abuse” to “No Care available for our Elderly?

As this is probably the last time you will hear from us before the financial year is out, we thought that a quick review of our year might be of interest:

Against all expectations stemming from the above, we have had a successful year and were able to partake in some quality transactions this year. A couple of highlights in these were

1. East West Health Care, a portfolio of high performing facilities in Sydney’s North and West.
2. An additional portfolio of High Care Facilities in ACT and NSW and,
3. The Mornington, a large and well-established Retirement Village on Victoria’s popular Mornington Peninsula. Run by a local not-for profit organisation, we were able to place the village with an interstate Not-for-profit Operator of excellent reputation.

While the continuous media scrutiny and regulatory pressure remains a concern in the short term, the lower cash rate, lower Australian Dollar and underlying fundamentals of both the Retirement Living and Aged Care Sector have us remaining bullish in our industry. Luckily and as last year has proven, we are not the only ones in the sector, as many operators and investors see the opportunity in the current situation and are willing to step up.

We wish you all the best for the next financial year. Should you have any questions regarding the above, please do not hesitate to contact our office.

Regards,

The Team at AMICUM.