Transformational reform required: Significant changes ahead for the aged care sector

The final report of the Royal Commission into Aged Care Quality and Safety was published on 1 March 2021 (the Final Report). The Final Report's conclusions are stark: substandard care is widespread in Australia's aged care system. The system is unacceptable and unsustainable in its current form and "is not worthy of our nation". The Commissioners believe that transformational reform is required to ensure the protection and promotion of the rights of the people who need support and care. 

Both Commissioners propose a systemic redesign of the aged care system. However, they disagree on how the new system should be governed:

• Commissioner Pagone concluded that an independent statutory body should be responsible for aged care; and
• Commissioner Briggs favoured a "governmental leadership model", with a newly named Department of Health and Aged Care where a senior cabinet minister would remain responsible for the aged care sector.

Fully implemented, the Commissioners’ recommendations will have a considerable impact on the industry. Operators will be required to fund significant investment into technology, training of staff and regulatory compliance. The Commissioners accept that many of their recommendations will have financial implications in the order of hundreds of millions of dollars per year.

In its initial response, the Government has agreed to invest $452.2 million into the sector and replace the Aged Care Act 1997. The Government's proposed legislative and regulatory changes focus on increasing transparency, oversight and accountability. Further Government reforms will be announced in May 2021.

The Commissioners are critical of the current enforcement regime. They recommend introducing more stringent enforcement tools, including civil penalty proceedings and banning orders against companies or key personnel, to assist in ensuring high quality and safe care. They also recommend that where a court has found that a provider or person has contravened a civil penalty provision, the court should have the power to award compensation to people that have suffered harm as a result of unsafe or poor quality care, with the regulator or the person harmed able to bring proceedings. If implemented, aged care providers and their insurers would see an increased risk of proceedings for civil penalties and compensation, likely resulting in higher premiums.

In this article, Clyde & Co partners JP Wood, Ganga Narayanan, Nicole Wearne and Lucinda Lyons look at the Royal Commission's key recommendations and consider some of the consequences of the proposed changes.

Background

The Royal Commission into Aged Care Quality and Safety was established on 8 October 2018. The Commissioners conducted 23 hearings, heard from 641 witnesses, received 10,574 public submissions and produced 38 reports and research publications, over two and a half years.

The Final Report contains 148 recommendations and was released on 1 March 2021. It follows the Interim Report: Neglect, issued on 31 October 2019 and Aged Care and COVID‑19: a special report published on 1 October 2020.

The Commission's key term of reference was to inquire into:

The quality of aged care services provided to Australians, the extent to which those services meet the needs of the people accessing them, the extent of substandard care being provided, including mistreatment and all forms of abuse, the causes of any systemic failures and any actions that should be taken in response.

Key Findings

While the Commissioners have acknowledged the many excellent people that work in aged care, as well as their dedication and passion, the Final Report describes a plethora of problems, including:

• a system difficult to access and navigate;
• inappropriate use of restrictive practices;
• an understaffed system, with an underpaid and undertrained workforce resulting in people not consistently receiving the health care they require;
• systemic problems, including inadequate funding, variable provider governance and behaviour and an absence of system leadership and governance;
• the failure of the Aged Care Quality and Safety Commissioner to exercise strong and effective regulation; and
• a lack of clarity regarding the responsibility of aged care providers and health care providers to deliver health care for people in aged care.

Key Recommendations

The key recommendations of the Commissioners are:

• to replace the Aged Care Act 1997 (Cth) with a new Act coming into force no later than 1 July 2023;
• to establish a new regulatory body, either an independent statutory body or a new Government department led by a senior member of Cabinet;
• to impose a general duty on approved providers to ensure the quality and safety of its aged care services so far as is reasonable;
• to ensure the delivery of accessible, safe and high-quality age care services, including by:
  • approving home care packages within one month from the date of a person's assessment and clearing the waitlist by the end of 2021;
  • appointing a new senior leader to the Aged Care Quality and Safety Commission to reduce the use of chemical and physical restraints;
  • putting the power to prescribe anti-psychotic drug in the hands of a psychiatrist or a geriatrician, to restrict their use in residential aged care;
  • establishing a national registration scheme for the personal care workforce, with key features including mandatory minimum qualifications, ongoing training, minimum levels of English language proficiency, criminal history screening and a code of conduct;
  • using indicators to measure service quality, benchmarking for continuous improvement and a star rating system for comparing the performance of providers; and
  • introducing new regulatory powers to impose civil penalties, award compensation, accept an enforceable undertaking, impose an infringement notice, ban individuals from providing services, limit a provider's ability to expand, and appoint an external manager to a provider;
  • improving data collection and availability; and
  • requiring the universal adoption of digital technology, including digital care management systems, telemedicine and My Health Record; and

• to establish an independent Pricing Authority body to determine appropriate funding levels. The Pricing Authority would consider funding by reference to the following objectives: ensuring the availability and continuity of high-quality and safe aged care and promoting the development and retention of a highly motivated and skilled workforce.

Government Response

The Australian Government’s initial response announced several key reforms and committed an additional $452.2 million in funding to address home care, residential aged care quality and safety, residential aged care services and sustainability, workforce and governance issues.

The Government has agreed to commence work to replace the Aged Care Act 1997 immediately. It will review applicable quality standards, focusing on the central issues raised in the Final Report, including governance, diversity, dementia, food and nutrition. It will also implement specific changes (obligations and guidelines) concerning chemical and physical restraints used in aged care facilities, a key focus area for the Commissioners in preparing the Final Report.

Implications for the Aged Care Industry

The Commissioners acknowledged that their proposed path to reform is difficult. The Aged Care industry has been subject to 72 reviews, inquiries and reports in the past 11 years, with little meaningful reform to show for it. Given these concerns, it is not surprising that the Final Report included recommendations for the monitoring, oversight and implementation of those recommendations, including a recommendation that the Government report to Parliament by 31 May 2021 on its response to each of the recommendations in the Final Report. As the Government has already agreed to replace the Aged Care Act 1997, significant regulatory and structural reform seems likely to occur, despite the difficulties flagged by the Commissioners.

A primary concern of the Aged Care industry will be how much the recommendations are likely to cost and who will pay for the reforms. The Final Report does not calculate the total costs of the proposed reforms but suggests that more than $30 billion of taxpayer funds annually will be needed to support a reformed aged care system. 

Higher costs for Aged Care providers are likely to result from many of the reforms, including the introduction of a non-delegable statutory duty to provide personal and nursing care of high quality and safety. The proposed duty to ensure that workers are appropriately experienced, qualified, trained and skilled, will make the hiring and retention of staff more difficult and expensive. Recommendations around the adoption of digital records and reporting will require significant IT investment by operators. The introduction of a more robust enforcement regime, including civil penalties and compensation claims, will lead to an increased risk of regulatory action and civil proceedings against operators and their directors and officers. As a result, operators will be required to revisit their risk management frameworks and compliance obligations carefully. 

In addition, Aged Care providers will need to review their Medical Malpractice and Management Liability (including Employment Practices Liability) covers, with a view to ensuring the wordings and limits are appropriate, given the potential for an increased claims environment. Should the enforcement regime be changed as recommended, insurers may wish to revisit their civil penalty and compensation covers.

Will the Final Report's handing down lead to an increase in class action risk for Aged Care providers? The handing down of the Banking Royal Commission report in 2018 triggered a wave of class actions in the financial services sector, and several Australian providers are currently the subject of class actions, or proposed class actions, including in relation to the management of COVID 19 related risks. 

The chances of the same level of class actions being prompted by the Final Report seem lower. The Aged Care Royal Commission unearthed numerous complaints of neglect and substandard care by Aged Care providers.  However, the Commissioners highlighted the difficulties in bringing civil actions and the general reluctance of residents and their families to proceed against operators, including the time, costs and stress associated with litigation. It may generally be more challenging to find common issues among group members due to the different circumstances surrounding the care provided to individual residents. Funding such cases may be more difficult, as some litigation funders have indicated they are averse to funding personal injury class actions, because of the discomfort of taking commissions that may impact on group members obtaining their full entitlement to medical treatment costs or other special damages.

Equally, as indicated above, several class actions against Aged Care providers are currently underway or in preparation in Australia. Those class actions do not appear to be supported by litigation funders but are funded by the plaintiffs’ law firm with a litigation loan to cover disbursements. So the risk of further class actions should not be discounted. 

Conclusion

Overall, the Final Report has highlighted the complexities and failings of an aged care system that is well overdue for reform. The Aged Care industry can expect a tumultuous period of structural and regulatory reform over the next several years, together with increased enforcement action and rising costs, as the Government responds to the Commissioners’ recommendations.