Department defends outsourcing of key aged care reform analysis

Department of Health officials have defended the outsourcing of major pieces of research and analysis that will inform the government’s current review of reforms and shape its future plans for the sector.

Under questioning from Shadow Parliamentary Secretary for Aged Care Labor’s Helen Polley at a Senate estimates hearing on Wednesday, health bureaucrats said the external consultants were commissioned to provide “expertise” not currently within the department and a fresh perspective on long-standing issues.

Senator Polley was referring to a series of analyses that have been outsourced to large commercial consultancy firms and were first reported by Australian Ageing Agenda in January (read our report here).

These include a $366,700 tender to Deloitte Access Economics to provide an “analysis of unmet demand and the potential implications of uncapping supply in aged care” and a $583,000 tender to Ernst & Young to conduct a “review of residential aged care legislation.”

AAA can also today report the details of further analyses that have been outsourced to consultancy firms since our initial story:

• Ernst & Young has been awarded a $990,000 tender for an “Aged Care Funding Instrument audit consultancy” for a contract period of 12 January 2017 to 30 June 2019
• Applied Aged Care Solutions has been awarded a $205,084 tender for “the provision of a review of the Aged Care Funding Agreement” for the period 10 February to 24 April 2017
• Matthew Pegg Consulting has been awarded a $50,000 tender for the “provision of legal services on Aged Care Funding Instrument policy development” from 30 January 2017 to 30 June 2017.

Fresh perspectives

On Wednesday, Dr Nick Hartland, first assistant secretary aged care policy and regulation division, said that the analysis on unmet demand had been outsourced as the department sought input from people who are “fresh to the system” and had different ideas and methodologies for testing underlying demand for aged care.

“It was about getting different perspectives and a range of these studies are quite complex; they involve looking at the population surveys,” he told the hearing.

While the department had a lot of expertise it did not necessarily employ statisticians who were experts on sampling methodology so it needed to “buy in some of that,” Dr Hartland said.

Major report on prudential arrangements

Dr Hartland also revealed that the Ernst & Young “review of residential aged care legislation” is in fact a report into the department’s prudential monitoring, which is to assist the aged care reform review’s ongoing examination of the current arrangements guaranteeing the $20 billion in aged care accommodation bonds.

“The reason we didn’t do it in-house is it’s an area of expertise about how you understand risk in commercial entities and how you think about balance sheets and what you might do to minimise risk… There was benefit in getting an external provider to look at that,” Dr Hartland said.

That analysis would provide guidance on how to identify a provider at risk of not meeting their financial duties, he said.

“We wanted a firm that was expert in understanding business flows and structures to help us understand where our legislation should target controlling risk.”

Dr Hartland confirmed the Ernst & Young report would be completed in April, to coincide with the Aged Care Funding Authority’s report on the bond guarantee scheme being handed to government.

Significantly, the department officials could not say whether these key analyses would be publicly released.

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