Consultation Process on the Definition of ‘Significant Refurbishment’

Page last updated: 16 September 2014

The Aged Care Financing Authority sought and was granted an extension on providing the Minister for Mental Health and Ageing with its recommendations on the definition of significant refurbishment.

Introduction

The Minister for Mental Health and Ageing has requested that the Aged Care Financing Authority (the Authority) provide him with recommendations on the appropriateness of the proposed definition of ‘significant refurbishment’ set out in the Authority’s Interim Operating Framework.

Background

The Government intends to draft amendments to the Residential Care Subsidy Principles 1997 to provide for a higher level of the Accommodation Supplement to apply (from 1 July 2014) in respect of aged care homes that commence operations or that are significantly refurbished on or after 20 April 2012.

In order to inform this amendment, the Government tasked the Authority with providing advice on the proposed definition given in Schedule B of the Authority’s Interim Operating Framework, specifically:

‘A refurbishment is a ‘significant refurbishment’ if it meets the following criteria:

  1. the refurbishment includes changes, updates, upgrades or other improvement that mean that the aged care home after refurbishment is different either in form, quality or functionality than before refurbishment; and
  2. the costs of the refurbishment are on capital account – that is, they are either capitalised as structural improvements where they are integral to the structure or depreciated if they relate to fixtures, fittings or anything removable intact1; and
  3. the refurbishment requires approval by a building authority as a major refurbishment.’

Consultation process on the definition of ‘significant refurbishment’

In order to inform itself of the views of the sector and to assist in its deliberations the Authority distributed a discussion paper to relevant stakeholders.

Discussion Paper

The ‘Discussion paper: Definition of criteria to meet the ‘significant refurbishment’ standard’ (Attachment A) was distributed by email on 14 August 2012 and uploaded onto the Authority’s webpage located on the Department of Health and Ageing website on 16 August 2012.

The groups that the discussion paper was distributed to were:

  • aged care homes;
  • approved providers of residential care;
  • aged care stakeholders (peaks and industry groups);
  • religious and charitable organisations;
  • government departments;
  • financiers with ongoing involvement in the aged care;
  • the Australian Building Codes Board;
  • architecture, design and construction companies with an interest in aged care;
  • the Australian Institute of Architects; and
  • the Australian Local Government Association.

Discussion Paper Responses

There were 50 unique responses received in response to the discussion paper. A summary of the results is given in the ‘Report of feedback received on ‘Significant Refurbishment’ criteria’ (Attachment B).

Considerations

The Authority considered all submissions on the matter. In undertaking its deliberations the Authority had regard to a number of key factors including:

  • the need to encourage refurbishment and investment in the sector and ensure refurbishments are for the benefit of residents, consistent with the Government’s broad policy objectives;
  • ensuring the criteria applies to refurbishments that are significant, rather than routine maintenance works;
  • the need for objective criteria allowing aged care providers to determine if a refurbishment is likely to meet the criteria;
  • the need to keep regulatory and compliance costs to a minimum.

Taking the feedback from consultation into account, and considering the above factors, the Authority considered changes to the originally proposed definition of ‘significant refurbishment’ would be desirable. In particular, the Authority considers:

  • the criteria should clearly reflect that the refurbishment is for the benefit of residents, including supported residents;
  • to ensure the refurbishment is ‘significant’, and to provide broadly objective and simple criteria, the refurbishment should be required to meet a minimum monetary threshold;
  • it is not appropriate to require the refurbishment to have building approval, noting that building requirements are not consistent across states and territories and that a monetary threshold provides a simple and measurable test of the ‘significance’ of the threshold.
  • that there should be some requirements for providers to provide a basic level of information when claiming the higher supplement to ensure proper compliance with the requirements.

A number of submissions proposed that refurbishments completed before 20 April 2012 be eligible for the higher supplement. The Authority notes that the start date has already been settled by Government and that the focus of the consultation was instead on the detail of the definition.

Recommendation

After consideration of the feedback from the consultation process and its own deliberations the Authority proposes the following definition:

‘A refurbishment is a ‘significant refurbishment’ if it meets the following criteria:

  1. the refurbishment includes alterations, updates, upgrades or other improvement that mean that the aged care home after refurbishment is significantly different either in form, quality or functionality than before refurbishment, the refurbishment predominantly provides benefit to residents and provides significant benefits to supported residents;
  2. the costs of the refurbishment would be capitalised consistent with Australian Accounting Standards– that is, they are either capitalised as structural improvements where they are integral to the structure or depreciated if they relate to fixtures, fittings or anything removable intact1;
  3. the refurbishment involves a significant refurbishment to a minimum of 40% of the beds in the facility;
  4. the percentage of beds available for supported residents as a proportion of the total beds in the facility is not reduced as a result of the refurbishment; and
  5. the refurbishment is of (or greater than) a prescribed minimum monetary value.

The prescribed minimum monetary value would be determined by calculating: 40% of the total beds in the facility and multiplying that number by $25,000. For example, for a 100 bed facility the prescribed minimum monetary value would 40% x 100 x $25,000 = $1,000,000.

In recommending this methodology the Authority has taken an aggregate view of what would be considered a significant refurbishment of a facility in order to provide as simplified and objective test as possible. The Authority has taken into account a number of submissions from industry and financiers on what would be the required capital investment per bed to provide an appropriate reward for the amount of the increased supplement in determining the $25,000 amount in the formula.

The Authority recommends that it would be appropriate for providers to be required to provide, after refurbishment has been completed, some appropriate level of substantiating information to Government when applying for a higher supplement.

Lynda O’Grady
Chair
12 October 2012

Attachments

Attachment A: Discussion paper: Definition of criteria to meet the ‘significant refurbishment’ standard

Submission due 31 August 2012

Introduction

This paper presents a proposed definition of ‘significant refurbishment’ which an aged care home will be required to meet to qualify for a higher level of the accommodation supplement. It aims to generate discussion about the proposed criteria and seek feedback on the scope of the criteria.

Background

On 20 April 2012, the Prime Minister, the Hon Julia Gillard MP, and the Minister for Mental Health and Ageing, the Hon Mark Butler MP unveiled a comprehensive 10 year package to reshape aged care. It will build a better, fairer, sustainable and nationally consistent aged care system to meet the social and economic challenges of the nation’s ageing population. The Government recognises the need for fundamental reform of the aged care system in order to ensure that it continues to provide high quality care and can respond to future challenges. Information on the comprehensive reform package can be found on the Aged Care Reform webpage.

As part of these reforms, from 1 July 2014, the Australian Government will significantly increase the maximum level of the accommodation supplement it pays in respect of care recipients who cannot meet their own accommodation costs. This will apply to aged care homes that were built or significantly refurbished since the announcement of the aged care reforms on 20 April 2012. The maximum level of the accommodation supplement will increase from $32.58 per day (currently) to an estimated $52.84 per day (on 1 July 2014).

A new Aged Care Financing Authority (the Authority) has been established, which will provide independent advice to the Minister for Mental Health and Ageing on pricing and financing issues. The Authority has an independent chair, and comprises a committee of members with expertise in provision of aged care services, consumer and worker representation and finance, as well as Government representatives. In completing its responsibilities the Authority is required to ensure that its advice is evidence based, its operations are transparent and it consults widely with the aged care sector, the finance sector and consumers (or their representatives) as appropriate. The Interim Operating Framework (IOF) for the Authority can be found on the Aged Care Reform webpage.

The first topic that the Authority is required to provide advice on is the definition of the level of refurbishment required for an aged care home to be eligible for the higher level of the accommodation supplement. The interim definition is given in Schedule B of the IOF. The Government intends to include a definition of ‘significant refurbishment’ in the Residential Care Subsidy Principles 1997 based on advice from the Authority on the interim definition given in the IOF.

Outline of consultation process

The Authority will be consulting with key stakeholders on the proposed definition of ‘significant refurbishment’. The feedback will be considered by the Authority when formulating its advice to the Minister. The consultation process will be coordinated by the Authority’s Secretariat based in the Department of Health and Ageing.

Proposed definition

The proposed definition of ‘significant refurbishment’ is a refurbishment that meets the following criteria:

  1. the refurbishment includes changes, updates, upgrades or other improvement that mean that the aged care home after refurbishment is different either in form, quality or functionality than before refurbishment; and
  2. the costs of the refurbishment are on capital account – that is, they are either capitalised as structural improvements where they are integral to the structure or depreciated if they relate to fixtures, fittings or anything removable intact1; and
  3. the refurbishment requires approval by a building authority as a major refurbishment.

Routine repairs, the maintenance of premises (such as painting, plumbing, electrical work or gardening) and the replacement of furniture are not refurbishments and would be expected to be funded through the operational budget of the service.

Feedback sought

The Authority has asked for feedback from key stakeholders on the definition of significant refurbishment including the scope and structure of each component of the definition.

The Authority is also seeking input on practical examples of the types of refurbishment which would be appropriate to consider as being within the scope of the definition or outside the scope of the definition. In providing practical examples, the respondent is requested to focus on how the aged care home after refurbishment is different either in form, quality or functionality than before refurbishment.

How to provide input

In order to have your feedback considered it needs to be submitted by 31 August 2012.

Feedback can be submitted by email to ACFA Secretariat

or by post to:
ACFA Secretariat
MDP 550
GPO Box 9848
CANBERRA ACT 2601

Attachment B: Report of feedback received on ‘Significant Refurbishment’ criteria.

September 2012

The report has been prepared by the Finance and Funding Branch of the Aged Care Division of the Department of Health and Ageing for use by the Aged Care Financing Authority.

Contents

  • Executive summary
  • Introduction
  • Respondent summary
  • Main themes of responses
  • Theme 1: Discussion around clause (a)
  • Theme 2: Discussion around clause (b)
  • Theme 3: Discussion around clause (c)
  • Theme 4: Discussion around how the Government will manage the higher accommodation supplement
  • Theme 5: Additional matters that the Authority may wish to note

Executive summary

The Aged Care Financing Authority (the Authority) is required to provide advice to the Minister for Mental Health and Ageing on the definition of the level of refurbishment required for an aged care home to be eligible for the higher level of the Accommodation Supplement.

The Authority circulated a discussion paper on the definition of the criteria to meet the 'significant refurbishment' standard.

There were 50 unique responses received in response to the discussion paper distributed on 13 August 2012. The majority of responses were from aged care providers in Queensland and Victoria.

This report is based around five themes:

Theme 1: Discussion around clause (a)

The terminology and form of this clause have been generally well accepted however more clarity is requested around what would be covered and who is the intended beneficiary.

Theme 2: Discussion around clause (b)

This terminology has been generally well accepted, however the feasibility and impact of the clause has been questioned.

Theme 3: Discussion around clause (c)

This aspect of the definition was not well received. There were concerns with regard to the use of the terminology ‘building authority’ and ‘major refurbishment’ and the complexity in achieving national consistency. Further, there were arguments put forward as to whether a ‘significant refurbishment’ would necessarily require a building permit.

Theme 4: Discussion around how the Government will manage the higher accommodation supplement

While respondents have acknowledged that having the criteria confirmed will increase certainty, they are calling for measurable criteria before making investment decisions. The next level of uncertainty surrounds the application, approval and payment processes that will be employed by the Government in implementing the ‘significant refurbishment’ criteria and higher accommodation supplement. Techniques for measurement that have been proposed by the industry include the use of a points based system, having minimum financial expenditure requirements, links to the number of beds impacted or floor space affected, benchmarking and a rating system.

The potential refurbishments that may be encompassed by the criteria has generated a lot of comment. Of significant interest is spending mandated by legislation with the topical reference of fire sprinklers. There is a comprehensive list of refurbishments that the Authority may wish to take under consideration.

Theme 5: Additional matters that the Authority may wish to note

There has been significant discussion around the perceived ‘fairness’ of the cut-off date of 20 April 2012. Providers have suggested that this could result in inequities within the industry with the potential for high quality facilities completed just prior to 20 April 2012 receiving lower accommodation supplement amounts than facilities completed or refurbished after 20 April 2012 but to a lower quality. There is also concern this cut-off date may reward providers who have not previously maintained their facilities to high standards.

There have also been a number of questions raised for which answers have already been determined.

Introduction

On 13 August 2012 a discussion paper on the definition to meet the significant refurbishment criteria was sent to approximately 4000 aged care stakeholders. These stakeholders included Aged Care Homes, Approved Providers, Peak Industry Groups, Government departments, health professional and aged care consumer representative bodies, financiers and building groups with significant experience in the aged care industry.

This report presents a summary of the parties who responded and a discussion of the key themes presented.

Attachment A1 contains excerpts from responses categorised by theme.

Respondent summary

There were 50 responses received.

The majority of responses are from aged care providers in Queensland and Victoria.

Table 1 – Breakdown of received submissions by respondent category and state

Respondent Category Australia Wide Multiple States Australian Capital Territory New South Wales Northern Territory Queensland South Australia Tasmania Victoria Western Australia Grand Total
Approved Provider 3 2   4   9 1   10 3 32
Building Industry 1     1         1   3
Financial Industry       3             3
Government   2 2         1 1 1 6
Peak Body 5     1             6
Grand Total 9 4 1 9 0 9 1 1 12 4 50

Main themes of responses

This report is based around five themes. These themes are:

  • Theme 1: Discussion around clause (a)
  • Theme 2: Discussion around clause (b)
  • Theme 3: Discussion around clause (c )
  • Theme 4: Discussion around how the Government will manage the higher accommodation supplement
  • Theme 5: Additional matters that the Authority may wish to note

Theme 1: Discussion around clause (a)

‘the refurbishment includes changes, updates, upgrades or other improvement that mean that the aged care home after refurbishment is different either in form, quality or functionality than before refurbishment’

The terminology and form of this clause have been generally well accepted however more clarity is requested around what would be covered and who is the intended beneficiary.

Table 2 – Breakdown of received submissions by respondent category and state for Theme 1.

Respondent Category Australia Wide Multiple States Australian Capital Territory New South Wales Northern Territory Queensland South Australia Tasmania Victoria Western Australia Grand Total
Approved Provider 2     1   5 1   2   11
Building Industry 1     1             2
Financial Industry                     0
Government   1             1   2
Peak Body 3                   3
Grand Total 6 1 0 2 0 5 1 0 3 0 18

More clarity required for what would be covered by ‘form, quality and functionality’

There have been requests for more information as to what would be defined as a change in ‘form, quality and functionality’. Theme five contains a list of potential refurbishments that the Authority may wish to take under consideration.

  • We would only suggest adding ‘size’ to clarify that a refurbishment can include an extension or a reduction in the number of places to a home.
  • The structure of (a) is appropriate however the scope needs narrowing as in its current form it does not specifically address the living environment

Request a change in terminology from ‘changes’ to ‘alterations’

It has been noted that ‘alteration’ would be a more appropriate term to use based on the existing definitions in the Victorian building regulations.

  • Alterations is a more common term used within the building Industry and this would also be more consistent with the definitions under the Regulations and would cover the majority of building work that maybe carried out in an existing building.
  • The term “Updates” would appear to cover fixtures and fittings or equipment and would not in most cases require approval from a building approval authority

Request for increased specificity in defining who the refurbishment is intended to benefit

There have been several comments about the current criteria not reflecting if the main purpose of the refurbishment is the benefit of residents

  • Is refurbishment for clients or staff?
  • It is not clear whether these changes need to be resident focused.
  • Part (a) of the definition is quite open and seems to allow any scale or scope of work. It also doesn’t seem to require that the changes generate improvement in the quality of life for the residents.
  • The refurbishment of an aged care facility would result in a flow of benefits to stakeholders such as residents, their families, staff and the local community.

Suggestions of how to modify the existing definition to indicate residents as the intended beneficiary:

  • The refurbishment results in a substantially different form or function than before refurbishment and a demonstrable enhancement of amenity for residents

Concerns about whether the criteria will be able to ensure access for people with fewer means

  • The proposed application of an increased accommodation supplement in no way guarantees improved access to aged care for older Australians with limited means.

Theme 2: Discussion around clause (b)

  • the costs of the refurbishment are on capital account – that is, they are either capitalised as structural improvements where they are integral to the structure or depreciated if they relate to fixtures, fittings or anything removable intact1;
  • Routine repairs, the maintenance of premises (such as painting, plumbing, electrical work or gardening) and the replacement of furniture are not refurbishments and would be expected to be funded through the operational budget of the service

This terminology has been generally well accepted by the industry

Table 3 – Breakdown of received submissions by respondent category and state for Theme 2.

Respondent Category Australia Wide Multiple States Australian Capital Territory New South Wales Northern Territory Queensland South Australia Tasmania Victoria Western Australia Grand Total
Approved Provider 2     1   6 1   2   12
Building Industry 1                   1
Financial Industry       1             1
Government                     0
Peak Body 3                   3
Grand Total 6 0 0 2 0 6 1 0 2 0 17

The ability for the clause to be applied in practice has been questioned

There have been some questions raised as to the legitimacy of the criteria when considered in conjunction with the exclusions listed in the footnote and whether, if taking accounting standards into consideration, the intention of the criteria will be achieved.

  • The definition does not adequately differentiate between refurbishment and routine repairs and maintenance.
  • In connection with the footnote attaching to clause (b), which seeks to exclude ‘routine repairs’, general maintenance and replacement of fixtures and equipment, we are reliably informed the both the ATO and Accounting Standards allow some items and works so defined to be capitalised.
  • The definition of capital costs should be made consistent with the definition of capital expenditure as outlined in the post 1 October 2011 permitted uses of accommodation bond funds.
  • ACFA should apply Australian Accounting Standard terms in defining capital expenditure and the definition of capital in nature should be based on Australian accounting standards.
  • That (b) be refined to remove ambiguity

The relevance of the criteria has been questioned:

There have been questions raised as to why the Government is concerned with the accounting methodology.

  • The accounting methodology of the works should not be a relevant factor considered by the Commonwealth when it comes to improving a service for the benefit of resident and increasing funding for same
  • To require the relevant expenditure be on capital account, this of itself will not address the key policy issues of:
    • cost of providing accommodation
    • ensuring that the definition will promote building and refurbishment
  • We propose that part (b) of the definition needs to recognise that any refurbishment may involve both capital and recurrent/operating costs.

Suggestions of how this clause may be altered:

  • The costs of the Refurbishment are on the Capital Account. This is by definition amounts allowable under the International Accounting Standard 16 and AASB 116; clauses 16 and 17.
  • The costs of the refurbishment are on capital account – that is, they are capitalised and depreciated, in accordance with current accounting standards, as structural improvements where they are integral to the structure or if they relate to fixtures, fittings or anything removable intact
  • the refurbishment is capitalised based on current Accounting Standards. As a guide, this broadly means the capitalisation on improvements that have an economic benefit of more than 12 months.

Theme 3: Discussion around clause (c)

  • the refurbishment requires approval by a building authority as a major refurbishment.

This aspect of the definition was not well received. There were concerns with regard to the use of the terminology ‘building authority’ and ‘major refurbishment’. Further, there were arguments put forward as to whether a ‘significant refurbishment’ would necessarily require a building permit.

Table 4 – Breakdown of received submissions by respondent category and state for Theme 3.

Respondent Category Australia Wide Multiple States Australian Capital Territory New South Wales Northern Territory Queensland South Australia Tasmania Victoria Western Australia Grand Total
Approved Provider 3 1   2   7 1   5 3 22
Building Industry 1     1         1   3
Financial Industry       2             2
Government   1 1         1 1 1 5
Peak Body 3                   3
Grand Total 7 1 1 5 0 7 1 1 7 4 35

There is not a single, National Building Authority

Several responses have highlighted that there is not a National Building Authority to apply to for a building permit. The subsequent question has then been ‘who would be considered a building authority for the purpose of meeting the criteria?’. In conjunction with the variable requirements of local building authorities (such as State Governments and Local Councils), this has also raised the question of how national consistency will be achieved.

  • "Building authority approval" has different meanings in different states… Where is the consistency with this definition?
  • In rural and remote Western Australia, the Building Act 2011 indicates that for some refurbishments a building authority may not be required
  • There are a number of authorities involved in the approval of building works in the aged care sector. The definition must be clear in this regard.
  • The proposed definition should provide a definition of the term building authority and should take into account the role of private certifiers.
  • That (c) be refined to ensure it incorporates sufficient flexibility to deal with diverse planning and approval processes in different jurisdictions.
  • Identical refurbishment work may be undertaken in Facilities in Victoria and NSW by one provider and one job would qualify under this definition and the other not simply because of differing Building Approval regimes in different states ie in Victoria the work may require a building permit whilst in NSW it doesn't.

Suggestions of how this clause may be altered to account for not having a clear building authority:

  • The refurbishment requires the provider to receive an approved building permit by a registered and licensed building surveyor or inspector
  • The refurbishment has an approved Development Application, Construction Certificate or Complying Development or Fire Order as major refurbishment
  • The refurbishment requires approval by the relevant building authority
  • Or
  • The refurbishment must be of sufficient extent that the whole facility is required under the NCC to comply with current code obligations.
  • The refurbishment requires approval by a building authority except in those jurisdictions where building approval is not required by a building authority for internal alterations.
  • The refurbishment will require approval by an appropriate building or statutory or equivalent Authority as an applicable refurbishment under relevant State or Territory building and/or planning legislation. Where this Authority approves the refurbishment, the requirements of Criteria (c) will be deemed to have been met in full.
  • For the purposes of Criteria (c), a relevant authority will include, but not be limited to a planning or building Authority, a local council or an independent expert certifier, including a principle certifying authority.
  • In the event the refurbishment does not require approval by an appropriate building or statutory or equivalent Authority, the Approved Provider will engage an independent expert Certifier or equivalent, including a principle certifying authority to confirm the refurbishment is applicable.

Current Building legislation does not define ‘Major Refurbishment’

The use of the term ‘major refurbishment’ which is not currently otherwise defined has increased the level of uncertainty from the perspective of the industry.

  • The definition should objectively identify what constitutes a ‘significant’ or ‘major’ refurbishment.
  • There is currently no definitive test as to whether what would commonly be identified as a ‘major refurbishment’ requires approval from a building authority. Currently, it is legislated by each state with variations between state legislations
  • We have concerns about the vagueness of the term ‘major refurbishment’. We have consulted numerous experts and none of these are aware of the use of this terminology when defining works, therefore leaving the interpretation open to subjectivity and potentially being inconsistently applied.
  • The word ‘major’ will lead to very inconsistent outcomes as it requires judgment that in reality cannot be defined
  • Paragraph (c) of the definition appears to increase the threshold from ‘significant’ to ‘major’. This raises the question of whether the ACFA has the authority to make this change.
  • We are not aware of any specific definition of ‘major refurbishment’ in the National Construction Code
  • Our investigation identified that the term ‘major refurbishment’ is not a recognised term in the local government authorities in WA.

It has suggested that the word ‘major’ is removed from the clause.

  • The refurbishment requires approval by a building authority.

The requirement to obtain a building permit has been questioned

The responses have ranged from questioning whether to make criterion (c) optional or removing the criterion entirely. This has been raised because of concerns over national consistency, the large number of works that the industry considers could be classified as significant refurbishment but would not require a building permit and superfluous nature of legislating a practice that is already required under the building regulations.

  • By the reference to "Building Authority" it would seem that the definition is intended for building works only. Would refurbishment of say IT or Electronic systems be considered?
  • The last component be removed from the definition of significant refurbishment as a consistent approach to the component can never be achieved
  • It is particularly important not to impose additional red tape or duplicate existing approval processes.
  • The requirement of a certifying authority of itself does not provide any guarantee that the two policy objectives will be met
  • [We] undertake many significant projects designed to improve resident amenity. These can amount to many hundreds of thousands of dollars, but would not fit the current definition as they do not necessarily require building authority approval.Theme 4: Discussion around how the Government will manage the higher accommodation supplement

Theme 4: Discussion around how the Government will manage the higher accommodation supplement

While respondents acknowledged that having the criteria required for eligibility to attain the higher level of accommodation supplement confirmed will increase certainty, they note that it may not be enough to commit to making high levels of financial commitment. The next level of uncertainty surrounds the application, approval and payment processes that will be employed by the Government in implementing the ‘significant refurbishment’ criteria and higher accommodation supplement.

Table 5 – Breakdown of received submissions by respondent category and state for Theme 4.

Respondent Category Australia Wide Multiple States Australian Capital Territory New South Wales Northern Territory Queensland South Australia Tasmania Victoria Western Australia Grand Total
Approved Provider 1 2   2   6 1   6 1 19
Building Industry       1         1   2
Financial Industry       2             2
Government   2 1             1 4
Peak Body 4     1             5
Grand Total 5 4 1 6 0 6 1 0 7 2 32

Approval

There is a great call for more information on how a determination will be made as to whether or not the ‘significant refurbishment’ criteria have been achieved. A number of different techniques that could be employed as part of the assessment have been suggested including a points based system, minimum financial expenditure, thresholds relating to floor size or bed number, benchmarking and a facility rating system. These are discussed below.

Points system

  • We think that given the myriad of issues which we have only touched on above, a similar points system for the application of this proposed higher accommodation supplement, may be the answer.

A points system could comprise of any of the below assessment methods.

Minimum financial expenditure

  • A definition could state a dollar amount eg any refurbishment costing over $50,000 is major
  • The Refurbishments Minimum Cost to the Provider is $24,000 per bed (as adjusted by an index aligned to construction costs) for whole or a separable part of the facility to qualify for the additional Accommodation Charge
  • Using the mid-point of the above range [Deloitte and Productivity Commission estimates] suggests that capital expenditure on refurbishment of $50,000 per bed (ie $63,408 x (1-20%)) is funded by the incremental accommodation supplement.
  • If a provider were to spend $50,000 per bed on a refurbishment, [we] consider that this level of expenditure ought to entitle a provider to be eligible for the higher accommodation supplement and that the provider ought to be relieved of meeting the form, quality or functionality test.
  • It is important to note there is a view that Government may, in addition to the definition and criteria noted above, consider setting guidelines to specify a minimum level of capital financial outlay required in order for approved providers to access the maximum level of accommodation supplement from 1 July 2014
  • The total refurbishment cost when calculated with reference to the current of proposed on line places after completion of the refurbishment of the facility will not be less than the number of those places multiplied by $28,000.

Floor size threshold

  • Not sure how you define significant unless you put a percentage of the existing building affected
  • It could be a percentage of the building size or floor plan, eg a development covering over 10% of the floorspace is a major refurbishment.
  • Whether the floor area of the facility has been increased relative to the number of residents (ie has the average space per resident been improved – note that this could also mean a reduction in resident numbers)
  • if no change to the number of permitted occupants, then an increase to the floor area available per approved occupant

Bed number threshold

  • a change in the number of residents that the building owner may allow to occupy the building at any one time
  • Some consideration should also be given as to any thresholds in terms of additional bed capacity obtain through the completion of an extension to an existing facility.
  • changes to bed numbers, eg reducing the overall number of beds due to more single rooms being created
  • We would recommend that one or more thresholds might be included in the definition so that a minimum number or proportion of rooms need to have been refurbished and within a certain timeframe before it would be considered to be a significant refurbishment.
  • Something along the line of 25% over no more than a five year period to qualify.

Benchmarking

  • The announced policy offers no proposed benchmark or standard of accommodation quality that ought to be achieved in order to qualify for the additional subsidy
  • That ACFA consider developing (with industry consultation) a suitable minimum benchmark reasonable access to the additional accommodation supplement rather than applying the announcement date.

Rating system

  • ACFA should establish a facility rating system to provide an equitable level of access of existing facilities to the higher accommodation supplement

Who would conduct the approval

It has been raised that there will need to be a system in place for providers to dispute their ineligibility for the higher accommodation supplement

  • Options discussed by the industry include some role for the Department’s own building certifier (CH Group) or an independent expert certification body, or a panel of experts to review applications that might be on the borderline

Appeal

It has been raised that there will need to be a system in place for providers to dispute their ineligibility for the higher accommodation supplement

  • a process to appeal a refusal to accept the application
  • There should be some mechanism whereby an approved provider would be able to make an application to either ACFA of the Department of Health and Ageing directly for their particular circumstances to be taken into consideration in having their refurbishment declared to be significant

List of potential refurbishment activities that could be applied for

The scope of what could potentially be covered under the guise of ‘significant refurbishment’ is large. This includes whether spending mandated by state governments should be captured.

  • What about spending that has been mandated by a state government
  • Some capital works are mandated by law. Some of these laws change yearly, and need capital expenditure to complete and satisfy statutory requirements

Consideration has been requested as to whether certain components that should be mandatory are covered including the installation of fire sprinklers and clinical treatment rooms.

  • The vast majority of residents are classified as high care. They are frail and have complex medical conditions. It is essential that residential aged care facilities provide adequately equipped clinical treatment areas. The provision of clinical treatment rooms would also allow isolation of a patient where the treating medical practitioner has concerns regarding possible risk of airborne spread infection
  • [We] recommend that the retrofitting of nursing homes with fire sprinkler systems be explicitly classified as a possible component of a “significant refurbishment”.
  • We consider that the definition should automatically provide for entitlement to the high supplement where capital expenditure is required as a result of required fire and resident safety works to be completed as a result of Government regulation changes.
  • It would be a very significant concern to aged care operators in other States where sprinklers were the norm if the bulk of these funds were used to fund the retrospective installation of what is now accepted as sensible fire safety in homes that were not willing to install them until mandated to do so

Below is a list of other types of refurbishment that the industry would like further clarity on:

  • Additional storage
  • Building a lecture theatre
  • Cleaning or partially upgrading or checking watertightness of façade
  • Complete change of décor
  • Door widening
  • Facility drainage replacement
  • Facility roof replacement
  • Fence replacement
  • Improved security
  • Installation of automatic fire doors
  • Installation of ceiling hoists
  • Installation of environmental controls
  • Installation of generators and surge protection
  • Installation of monitoring systems for wandering residents
  • Installation of new carpet
  • Installing or upgrading nurse call systems
  • Installing or upgrading Resident down-alarm systems
  • Landscaping and outdoor features
  • Professional fees directly relating to the refurbishment works
  • Provide amenity for private dining experience
  • Provision of single rooms with private ensuites
  • Reconfiguration of internal layouts
  • Refurbishing of rooms or common areas
  • Refurbishing of toilets or bathrooms or new tiling and fixtures
  • Relocation of nursing stations
  • Remodelling of main entry and lobby
  • Renovation to reduce room capacity
  • Sustainability measures in relation to energy, waste and water
  • Upgrade to kitchen amenities
  • Upgrade to laundry amenities
  • Upgrading of finishes
  • Upgrading of staircases and core components
  • Widening of doors

Theme 5: Additional matters that the Authority may wish to note

Refurbishment completed prior to 20 April 2012

There has been significant discussion around the perceived ‘fairness’ of the cut-off date of 20 April 2012. Providers have suggested that this could result in inequities within the industry with the potential for high quality facilities completed just prior to 20 April 2012 receiving lower accommodation supplement amounts than facilities completed or refurbished after 20 April 2012 but to a lower quality. There is also concern this cut-off date may reward providers who have not previously maintained their facilities to high standards.

  • With the eligibility backdated to only 20th April 2012 it is considered discriminatory against facilities that have invested their own Capital in recent years
  • Another point that needs to be made is that this provision does not seem to allow any retrospective funding.
  • An older facility, say 30-40 years old may qualify for the funding by undertaking an upgrade that, whilst costing a considerable amount and worthy of additional funding nonetheless, may not produce a building of the same quality as the newly build or renovated facility.
  • Will there be “retrospective arrangements” for aged care providers who have had to upgrade in the last 5 years and have had to borrow from financial institutions or accommodation bonds.
  • The industry is concerned that providers who invested in facility refurbishments prior to the arbitrary activation date of 20 April 2012 are ineligible to receive the increased accommodation supplement, regardless of the quality of facility resulting from the refurbishment.
  • The arbitrary cut-off date should be reviewed, allowing providers who have been systematically upgrading their facilities to access the higher supplement.
  • We believe that the time scope should be widened, we would recommend 2008
  • We were disappointed with the Australian Government’s decision to restrict the higher accommodation supplement to facilities that are newly built or significantly refurbished after April 2012
  • The institute also raises the broader question as to whether aged care facilities that have been meticulously maintained over a long period should be denied the higher level of accommodation supplement, simply because they have been able to avoid the need for an extensive and costly capital refurbishment. At the same time, poorly managed facilities may gain a windfall for having deferred work that might actually have been needed many years earlier.
  • A number of [our] members have questioned the policy decision to limit eligibility only to those residential aged care providers who have built new or significantly refurbished on or after 20 April 2012.
  • Through the application of the proposed definitions of Significant Refurbishment there is likely to be many refurbishments undertaken post 20th April 2012 that will be inferior in the standards of accommodation, choice and amenity for care recipients than high quality facilities that were in place prior to 20th April 2012.

Suggestions for how the defined cut-off date could be modified:

  • Can the definition extend the work done up to 10 years before the announcement?
  • I believe that the 'definition' be back-dated, even on a sliding scale, to recognise significant investment over the last few years.
  • I suggest a retrospective timeframe (say, 10 years) be added to the scheme so that the additional subsidy applies to new or significantly refurbished buildings completed after or 10 years prior to the 20 April 2012
  • The increase Accommodation Supplement should be restricted to homes that meet a defined standard of accommodation either because:
  • The Home has built or significantly refurbished since 20 April 2012: or
  • The Home was already operational and at 20 April 2012 did not require a significant refurbishment to meet that defined standard of accommodation.
  • [We] propose that the policy be amended so that eligibility be extended to those providers that meet the definition and where the significant refurbishment or new facilities have been completed between 20 April 2011 and 19 April 2012 for whom the Supplement would be at 80 per cent of the new maximum rate. For those that meet the definition and where completion occurred between 20 April 2010 and 19 April 2011 the Supplement rate would be at 60 per cent of the maximum rate.

Note – the policy is designed to encourage future investment.

Does the 20 April 2012 cut-off refer to the commencement or completion date?

There have been several queries as to whether 20 April 2012 refers to the commencement or completion date.

  • It is assumed that this refers to the completion date.
  • If this is the case this needs to be mentioned in the proposed definition
  • What does ‘carried out’ mean? Completed or commenced
  • Will a significant refurbishment which achieved design completion, received building authority approval and had construction commenced prior to 20 April 2012 but achieved practical completion post 20 April 2012 be entitled to the higher accommodation supplement on 1 July 2014 ?

Note: 20 April 2012 is the completion date.

Duration of higher accommodation supplement period

Given the facility has been assessed at meeting the criteria for significant refurbishment, there is question as to how long they will be eligible to receive the higher accommodation supplement.

Note: once a facility is deemed eligible to receive the higher accommodation supplement amount, this amount will be sustained for the life of the facility while the facility remains certified, without the requirement for reassessment.

Whether the physical aspect of the facility should be considered in isolation

The level of performance in all areas of service for each organisation should also be considered when talking about providing a higher level of accommodation supplement

Objections to the timeframe for responses

I wish to lodge an objection to the timeframe that has been set for a response. I don't believe this is an appropriate manner in which to conduct business and more consideration needs to be given to response times to gain wider and more in depth information

1 - Routine repairs, the maintenance of premises (such as painting, plumbing, electrical work or gardening) and the replacement of furniture are not refurbishments and would be expected to be funded through the operational budget of the service.