Aged care is at risk of being sidelined by hospitals in the government's health reform plan, according to a senior industry figure.

Although the government has announced its agenda for hospital reform, it still has not outlined the terms of reference for the Productivity Commission's aged care review which was first announced almost eight months ago.

The CEO of Aged Care Association Australia, Rod Young, said there was a “real danger” that the aged care reform process would be jeopardised.

“If the Productivity Commission's referral does occur, it will take at least a year before they report,” he said.

“And there is a concern that what is being proposed for the other parts of the health system will go ahead and aged care will get ignored.

“If it doesn't end up being part of the final solution, that will be a tragedy.”

Without an improvement in the industry's capacity to raise capital, Mr Young says there will be a bed shortage within a few years.

“If we are not careful, the government's policy of providing consumers with choice will disappear quickly and we will return to the days of waiting lists in aged care,” he said.

“By 2012-13, we could be seeing many areas with 100 per cent occupancy and that would clutter up hospitals across the country.”

The head of Aged and Community Services Australia (ACSA), Greg Mundy agreed that it was important to maintain the momentum for aged care reform.

“The government has made what looks like a reasonable announcement for hospitals but now lets get to work on some of the other parts of the healthcare system,” he said.

“The rest of the reforms won’t work properly without aged care reform. It is a fundamental part of the healthcare system.

“I don’t see any reason for delaying the terms of reference for the Productivity Commission review."