Transparency and financial control of aged care providers

This submission has been written in response to the Department of Health’s February 2019 discussion paper “Managing prudential risks in residential aged care”.

Complex structures, and uncontrolled reporting procedures, can

• greatly increase the risks of provider failures

• make it impossible to judge the overall profitability of aged care

• make it impossible to provide meaningful information to prospective residents.

Since the start of the guarantee scheme in 2006, there have been 11 or 12 for-profit provider failures leading to claims on the scheme, and no not-for-profit failures leading to claims.  Failure of a large provider could involve about 7000 residents, and $1000 million in deposits.

To meet EY’s proposed 20% equity requirement, providers might need extra capital of about $11 billion at 30/6/18.

There can be protracted delays before the guarantee scheme is triggered, causing severe distress to residents and their families seeking deposit repayments.  Changes are needed to provide repayments earlier than formal insolvency.