Forget Soylent Green – let’s make money out of ‘em

The following is a guest post by RHONDA PRYOR, a recently retired senior manager in the Australian aged care sector. We are hoping Rhonda may become a regular contributor to Troppo.

If you woke up to read the Government had announced that they have a totally new approach to State Schooling, which was to use it solely to make a profit for private and faith based organisations, what would you think?

You read on to discover some of the more chilling features of this new approach include no teacher/pupil ratios – just have as many kids in the class as you want. Oh, and yes, in our new approach to education we won’t even have to employ trained teachers, or if we do it will be ok to employ those that no one else wants. And don’t worry if, in this new corporate profit-making model, the kids get out of hand; it will be ok to medicate them into submission. As for the school canteen you can feed them anything or, on some days nothing at all, and make a profit out of that as well. This opening up of the education system for the sole purpose of being a profit-making enterprise will mean that not only private schools can charge fees, but to ensure a place for your kid in this visionary model of schooling, you might have to sell the family home.

If you read this I suspect you would be outraged, and the Education Minister soon looking at their options, yet this is how we operate aged care in this country.

Aged Care in Australia now primarily exists to make a profit for the shareholders of national or international companies, or to fill the coffers of the already rich churches. This only happens because Federal Governments, both Coalition and Labor, incrementally decided it was perfectly reasonable to commodify our aged and vulnerable.

Twenty years ago the number of qualified nurses and staff employed in aged care was codified, as was the amount of money that had to be spent on catering, laundry and cleaning. All this is gone as each aged care home can now employ as many, or as few, nurses as they decide. Sadly, nurses who work in aged care are generally older, not career focused, have not up-skilled and would struggle to get a job working in the hospital sector. I’ve spoken to many enthusiastic young nurses who give aged care a wide berth. Who can blame them as they would inevitably end up working as sole practitioners in minefields of bad practice, working only with staff who have completed a 6-week training programme in aged care at some Mickey Mouse training organisation? These same poorly qualified aged care workers can probably get paid more working in a pizza shop, where they don’t have to change continence pads and feed people slop.

Because every aged care home can spend whatever it likes on food, an aged care provider can spend as little as $5.00 per day on meals for a resident. I’m reminded of a Gary Larson cartoon of two guys who find themselves in Hell; one says to the other “they think of everything – even the coffee is cold”. In most aged care settings, when it comes to food and coffee, this is pretty much how it is.

Then we have the drug of choice in aged care – risperidone. This is an anti-psychotic medication widely used in aged care, particularly to control the “behaviours” of residents with dementia, or any other “behaviours” staff don’t like. Basically, risperidone is a chemical restraint cheaply available on the PBS. Never mind that all the literature around dementia and medication indicates that risperidone actually exacerbates confusion and memory issues for people with dementia – it’s cheap and families don’t know enough to ask questions. When there are too few and not properly trained staff, it’s just easier to drug them up than to provide informed care, support and choice.

If you end up in aged care and you or your family want you to have your own room and bathroom, then in most cases you have to sell the family home to pay the “accommodation price”. Too bad if you don’t have one to sell, or you just have a little bit of money set by, because this means you won’t be able to afford anything more than a substandard room, having to share with someone you neither know nor possibly like and waiting your turn to go to the bathroom.

The Government will tell you that all of this isn’t true; that we have the Aged Care Quality Agency to monitor and police standards in aged care. This is bunkum, what we have is an organisation that is primarily interested in documentation or paper work. If a provider has a document that says it does something, then it’s accepted without the Quality Agency looking at what actually happens. In reality the Aged Care Quality Agency is a paper tiger which rarely visits aged care homes apart from the formalised accreditation visit once every 3 years.

Voluntary or involuntary euthanasia, and that little green pill, sure looks attractive in comparison.

About Ken Parish

Ken Parish is a legal academic at Charles Darwin University, with research areas in public law (constitutional and administrative law) and teaching & learning theory and practice. He has been a legal academic for almost 12 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in he early 1990s.
This entry was posted in Economics and public policy, Ethics, Health. Bookmark the permalink.

30 Responses to Forget Soylent Green – let’s make money out of ‘em

  1. Paul Frijters says:

    Hi Rhonda,

    welcome! The general approach to regulation in this sector that you flag sounds like a carbon copy of what the Crime and Corruption Commission is want to do in Queensland.

    “We have had a complaint. Have you done anything wrong? No? Righto, we’ll dismiss the complaint”.

    Non-enforcement of rules is the linking pin that allows much of the corruption in this country. How did they manage to organise this in aged care? A convenient appointment of the chief regulator? Underfunding of the regulator? Capture of the existing one? Privitisation of the regulator (always a classic)? And who organised it (which minister did the appointing)?

  2. Marks says:

    Maybe this will be the last crusade of the Boomers.

  3. Hi Ronda

    Around three years ago Anglicare informed the Canberra-Goulburn Synod that the high care facilities that we were running were loosing an increasing of money( and were also in need of expensive upgrades and new buildings).
    We were told that if the situation was allowed to continue for much longer the costs of these facilities would start to threaten the financial viability of the whole diocese. After much agonising a motion to de-accession these facilities was passed by the Synod.

    We were also told that a worrying percent of aged care facilities across the whole of the charitable sector, were running at a loss . (From memory the figure was around 50%).

    While I do not doubt you, re the profitability of aged care facilities where the clients have a home or other assets that can be used to pay an accomodation bond of around $500,000 -$600,000(or more) .
    I think the situation for organisations that are providing care facilities for those who have little more than the aged pension may be different.

  4. conrad says:

    I think the problem is that late life care is very expensive as John notes above and no-one wants to pay, and nor does the government want to force people by e.g., considering people’s assets like the houses they don’t live in any more assets, yet the government needs some way of dealing with the part of the aging population with no money.

    Lets work out the numbers — the single pension rate is about $900 per fortnight after all supplements and the couple rate is about $670 each. Let’s say you want a 1-to-4 ratio of carers. I’ll assume most people are single by that stage and say $800 is the average. This means you have $3200 to work with per fortnight. I don’t know what the wage of a nurse is after on-costs, but I’ll assume it is $2600 per fortnight. This gives you $600. Now you have to pay for the rent, food, insurance, etc. . I don’t see how you can do that for $600.

    You could look at the profitability of the sector to see to what extent providers really are rorting the system as Paul alludes to. Perhaps that occurs for the very expensive providers, but it is hard to see how you could actually make money with the cheap ones, and so poor care really is a design feature.

    • Conrad
      “nor does the government want to force people by e.g., considering people’s assets like the houses they don’t live in any more assets, yet the government needs some way of dealing with the part of the aging population with no money.”

      Anne and I have recently had to place her father in an aged care facility . We flew up and inspected 6 aged care facilities ( it was a urgent situation).
      We quickly realised that for widowers and widows that own a home in just about any mainland suburb. Who are in need of an aged care placement. Who don’t have a ‘spare $500,000 parked somewhere'(and there must be a lot of people lot in category ) selling their home to pay the “Accommodation Payment” must be pretty much the norm.

      Compulsory co-contributions are effectively part of the system:

      You will pay an Accommodation Payment if your Means Tested Amount at the date of entry is equal to or greater than the Maximum Accommodation Supplement amount for the day or you do not provide sufficient information to allow your Means Tested Amount to be worked out.

      The interest generated by those Accommodation Payments is paid towards the costs of the facilities. And cumulatively it must add up to a fair amount.
      For example in the case of the 120 room facility we settled on, the Accommodation Payment is either $550,000 upfront or a daily Accommodation Payment calculated as equivalent to 5.73 percent interest on $550,000. ( You can also for example pay $200,000 up front and pay 5.73% on the remaining $350,000).
      For us this works out at out at $78.49 per day ( his home will have to be sold, or possibly rented out, before too long.) There is also an additional government set Daily Care fee of about $49 per day plus an ‘optional’ additional care fee of $20.

      Total daily fee is $147.56 . The Accommodation Payment is a tad more that 50% of that total daily fee.

      The place we eventually settled would not have been cheap to build and it would not be cheap to run. Its is 3 years old. It was built to resemble a large ‘upmarket resort’ and is well staffed . He has his own room , bathroom and balcony on a garden courtyard.
      Because the facility is quite large I would guess that it would have Accommodation Payments totaling something like $40+ million in ‘the bank’. I guess that money invested at around 6% would equal something like $3 million a year in payments towards the costs of the facility.
      Have no argument with such co-payments, can’t see how else we can pay for decent facilities.

      However at the time we were too busy to ask the $64 question:
      What about people who urgently need aged care but don’t own their own home , have little more than the aged pension: How do they fair in this system? where do they end up?

      • Also wondered , the scheme seems to be based on, prices for quite average suburban homes, remaining high enough and there being enough ongoing demand (for quick sales at an OK price); But what would happen if the housing market ‘tanked’.

  5. Rhonda Pryor says:

    Thanks for reading my little piece. From my extensive experience, aged care operated by faith based organisations is profitable. Apart from the Accomodation Price, all residents pay, on top of that, at least 87 percent of the pension and much more if they have the means. Also the Commonwealth tops this up with what is called ACFI funding based on a residents dependency, which is up to an additional $214 per day for each resident. This dependency claiming is again based on what a Provider says and is only occasionally audited by the Commonwealth and when this happens there are invariably downgrades. Aged care funding is complicated and the Accomodation Price is the smallest element of the money that is recieved by Providers. Aged care has become a cash cow for many.

    • Hi Ronda
      How accurate are the figures in this report?
      The report gives the total revenues of the not for profit sector as $8.7 billion and expenses as $8.3billion . And the stated profit margins for the, for profit sector ,don’t look that excessive either.

      Also noticed that the reports figures for the total amount of accomodation payments held by providers( about $10 billion) is based on a ,voluntary survey ,where less that half of all those surveyed responded.

      BTW I would be surprised if Anglicare misled our Synod.

      • conrad says:

        I’d be curious about the answer to that too, because I find it hard to imagine how you could really make large profits with poorer people, and presumably at the higher end, organisations need to do a better and hence more expensive job to keep their reputations (and if they can keep a good reputation across the decades as some of them do, they probably deserve to make more money). Given the presumably ever increasing demand for decades, if it really was so profitable, I also don’t see why you wouldn’t see companies piling into it given it doesn’t require anything really special (e.g., IP etc.) to set up.

        On an entirely different note, I have a anecdote about the irrationality of people and aged care. Where I live, there was an application to build such a place and it was surprising how many people complained. In the decade I’ve been there, I think I’ve seen about 4 people from the centre (despite the perhaps 30 that live here). I can’t imagine quieter and less annoying neighbors.

  6. Phil Clark says:

    Dear Ronda,

    thank you, your the first insider that I have seen come forth and clearly articulate this despicable industry for what it is.

    Geriatrics was once a place of care, for the most part, its not always easy to work in Gods waiting room but people like my mother and her fellow nurses did the best they could in often very difficult situations.

    I grew up with these stories but when I worked in the Aged Care sector in a position that required an understanding of the system at a commercial and operational level my feelings changed dramatically, this industry is fundamentally flawed and corrupt.

    I note the comments regarding the cost of Age Care and respectfully suggest that these are made based on Government figures which are construed and published to support the status quo and not the true funding required for quality Aged Care.

    The fact that we allow a group of extremely clever corporate’s to make massive profits through the manipulation of the vulnerable and public health system at the expense of so much suffering both from the patients and staff is a sad reflection on who we are as a nation.

    I do hope that you will continue to be a part of Club Troppo and again thank you for your contribution.

    Warm Regards,

    Phil Clark

  7. At the time of that Canberra-Goulburn Synod , I was a member of a Synod committee and fairly preoccupied, however I distinctly remember being told that the combined income from the clients and from the government was insufficient to cover the costs involved for Anglicare in running those aged care facilities. I also remember that there was a perception that being a service provider to Government involved both opportunity costs – it was taking up most of Anglicares time- and was to some degree creating potential conflicts between the requirements of Caesar and the requirements of faith.

    On the other-hand those aged care facilities were successfully passed on to another not for profit provider.

    The aged care sector appears to have a lot of providers, many of which are small operations , I’d guess that the 20-80 rule would apply ?
    There are something like nearly 300,000 individual places.
    And total government funding seems to be around $17billion a year .

    Suspect that any accurate representation of such a large complex system would have to have a Rashomon like feel to it.

    • Phil Clark says:

      Hi John, as Rhonda mentioned in her reply the complexity of the funding model and its application can distort the facts. Although its been some time since I was involved I can no see any reason why the scale of a facility, within reason, should impact on its viability. In regards to a representation of the system the best example I can give is the situation of a failing facility being brought back to profit through savage restructuring motivated by greed and a profit first and people second mentality.

      • Hi Phil
        If a facility is failing because its costs exceed its income (and it can’t increase its income) i.e. then its choices are stark ; close down , or significantly cut costs .

        I distinctly remember a senior cleric telling me that :
        the government has capped what we can charge the residents, and at the same time the government has not increased funding enough to keep up with rising costs.

        That’s why it looks to me like a , design feature: a variety of efficiency dividend.

        From what I have seen up on the gold coast there are obvious economies of scale when one organisation runs several (large) facilities within a few ks of each other .

        • Phil Clark says:

          Hi John,
          my comments were not meant to be critical of a singular case but at the industry as a whole. There are definitely benefits in operational scale but this is not always practical, possible or beneficial depending on the nature of the services being provided. What we need to focus on is outcome through a transparent and robust regulatory system that is evidence based driven and committed to protecting, supporting and maintaining the dignity and quality of life for those with in the aged care sector.

          • Hi Phil
            I suspect the the focus of government might be more on ‘sustainability ‘.
            Unfortunately I’d guess that the people most at risk in this system are :
            those who don’t have children to keep an eye on things ( and complain loudly if the service is poor) and also people who are aged and also have intellectual disabilities etc.
            Neither of those groups have much political clout.

    • conrad says:

      Are those figures right? I may have stuffed it up but 17 billion/300K = about 56K per person which I suspect is going to be unsustainable for the government in the long term given current demographic trends. So I can’t imagine things are going to get better.

      Out of curiosity, I looked up one of the big suppliers (Regis) and they made a profit in 2015-2016 of 53 million and have about 5ooo places. So that amounts to about $10,000 per person per year (or $200 a week).

      • Going off that report I linked to earlier- the $17 billion figure is for all aged care services -includes things like home care.
        10.6 billion goes to residential care- about 200,000 places (not 300,000). There are 972 providers of residential care. There are 2681 services( if “services” means individual facilities-complexes that’s an average about 75 places per facility.)

        Total expenditure, is given as $14.9 billion and total net profit before tax is given as $907 million.

        Funding and financing in 2014-15
        The Australian Government is the principal funder
        of the aged care sector. In 2014-15, it contributed
        $15.2 billion to aged care, up from $14.2 billion
        in 2013-14. In 2016-17 it is expected to spend
        $17.4 billion. The proportions of funding across
        the sector are illustrated in Chart iv.
        As discussed in last year’s annual report, Australian
        Government expenditure on aged care is projected
        to nearly double as a share of the economy from
        0.9 per cent currently to around 1.7 per cent of
        GDP by 2055, largely driven by the increasing
        number of people aged 85 and over. In addition,
        the costs of care are expected to rise on account
        of growth in input costs (e.g. wages) and the
        increasing complexity of chronic health conditions
        in ageing populations, tempered by improved
        efficiencies due to advancements in technology
        and service delivery.
        One of the objectives of aged care reform is to
        improve the future sustainability of the aged
        care system in the face of the steadily increasing
        demand resulting from our ageing population.
        Already, a number of measures have been
        implemented or are in the process of being
        implemented which serve to achieve this objective.
        Such measures include the shift in balance of
        care in favour of home care over residential care
        and the increasing level of contribution that aged
        care consumers make towards the cost of their
        care and accommodation. In 2014-15, aged care
        residents contributed some $4.2 billion to these
        costs (excluding refundable accommodation
        deposits). It is estimated consumers of home care
        packages contributed around $147 million to their
        care costs, and consumers of HACC contributed
        around $190 million

      • Conrad
        Re Regis , what are their turnover and their capital investment figures?

        • conrad says:

          I just looked at their latest report, and their Revenue for 2016-2017 was $565,583,000. Their capital expenditure was $136,509,000 (+14,504,000 for investment on land).

          • That’s about $150m in capital investment , if they have 5000 places that’s ( I think)about $30000 per place, which seems a bit low if each of their places has for example it’s own bathroom, no?

            • conrad says:

              I think the amount is even lower than you probably think it is in terms of what it is used for. According to them it is for :”
              The development of new facilities.
              – Significant refurbishment of existing facilities, which has resulted in higher accommodation income at these facilities.
              – Maintenance and other capex”

              For all I know, the places the current people were living in had almost nothing done to them and the expenditure is just for new purchases, especially given they are expanding and buying new places (many of which presumably need to be refurbished etc.).

              You could look at it the other way. If they had revenue of 550 million, and you subtract the capital expenditures and the 50 million profit, you get $350 million in revenue that was used for something.

              So the big question is where that is going — perhaps it is all getting chewed up on bureaucracy, marketing, business advisors etc. or perhaps it really gets used reasonably.

              I suppose another way to look at it is that their P/E is about 18, and they basically give back to shareholders all of their profit. So they look like a slightly more than boring blue chip in an area where there is a lot of growth in terms of demand. This suggests to me there probably is a lot of competition and hopefully this leads to reasonable services. Given this, perhaps all that is needed at least to ensure reasonable standards for the amount paid is like as suggested by Bruce below — transparency so people have reasonable information about what they will pay for (of course your question about what to do with poor people who can’t pay is far less answerable).

              • Going off the Gold Coast there have been a lot of places built in the past 4 years.

                I also wonder re competition, what are the barriers to market entry like?

                • conrad says:

                  I suspect that at least the non-legal ones are a lot like schools — reputation. Once you have it you can charge large amounts and presumably this is the market where you really can make lots of money without large numbers.

                  I think this must be very tough for minority groups who want to speak their first language (which in some cases like dementia is the only one you will be left with). One of my friends is Jewish and apparently there are only a limited number of places for people in Jewish retirement homes (and those that exist seem to be well known), and I remember that they had to pay an incredible amount for a spot. I suspect this would be the case for many minority groups because finding staff would be hard. It will be interesting to see if reputation becomes more of an issue in the future. I don’t think it’s something most people think about a lot until they have to unlike e.g., school quality.

  8. Bruce Bradbury says:

    A solution requires both:
    1) Increasing funding to the sector and
    2) Better regulation and transparency.
    For 1) I suggest death duties hypothecated to aged care funding.
    For the transparency part of 2) I suggest collection and publication of comparable and detailed financial information for institutions as well as a range of statistical indicators such as staff/resident ratios and staff turnover rates.

  9. Conrad that thread has become too long.
    Re reputation
    Going off the facilities we saw on the Gold Coast many of the current residents chose to move in when it opened 3 years ago and many were-are still quite independent. They also seem have a high rate of visits by friends and family. Not sure about the ethnic mix , but the gold coast (over 55) population is pretty much ‘English speaking’.

    However as the government increases support for services aimed at ‘keeping you in your own home’ there will be more people who eventually must find a place at very short notice.

    • Should have added.
      If you have to find a place because your parent is in hospital and really can’t go home, then you simply don’t have the time to be really picky- we felt that it was more by grace than design that a very suitable place happened to be vacant at the time we were looking, a week before or after it could have been a different story.

      And the other group that must be at some risk in this system are people who don’t have children( or friends etc) that are able and willing to keep a close eye on what’s actually happening in the aged care facility that ‘Pop’ is in.

      Perhaps we need to reinvent some kind of , independent official visitor system?

      • conrad says:

        I suspect these at risk groups are also very expensive — presumably many that can’t get into the system quickly go into the even more expensive hospital system whilst waiting. I also think your suggestion of an official visitor is good — probably far better than bureaucratic laws that governments like and surveys given to people, many of whom probably have cognitive decline and others dementia. It reminds me of what used to go on in primary schools a long time ago — as one of my friends who used to work back them put it:”The inspectors would come along and make sure the kids wern’t just happy because we were giving lollies to them”.

        I personally had misfortune relatively recently with the current system as my grand father in law was basically left to die by incompetent nursing staff and useless relatives who may have had other motive$ (simply taking him to hospital would have solved the problem), and if it wasn’t for my mother in law flying up to save him, he would have. The stress of that event did, however, get him a small amount of time later.

        Unfortunately, it isn’t really clear to what can be done to stop such situations (rules or no rules, even at relatively reasonably centers), especially if there is pressure on over worked nursing staff to do nothing and because if you happen die at a very old age, people don’t care as much. I can imagine if the same thing happened to a 20 year old, it would have had legal consequences. But this is a social thing that isn’t really caused by lack of funding of aged care, so it is much harder to fix (I doubt there is a solution).

        • Conrad
          I think if the facilities knew that once a year, but completely at random, an inspector will call, they would be more careful re operating standards .

          And assuming that the government figures re total profit for the whole of the sector are roughly correct it’s obvious that there must be many providers-facilities at the lower end that are at best running at break-even or are running at a loss. Which therefore must be under a lot of pressure to find , efficiencies.

  10. Rhonda
    Could you do a follow up?
    There is so much about the official data that doesn’t make sense.
    The aged care sector( from personal experience) is perplexing, contradictory and in short ‘does not add up’.

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