From April 2026, the base care tariff (BCS) will be split into two parts: the existing BCT as well as a new care minute supplement (CMS). The value of the CMS will be determined by care minute performance.
The CMS, discussed in a government webinar on 1 May, is the latest attempt by the Department of Health and Aged Care to cajole providers to adhere to their care minute regime. From star rating systems to mandated targets, the implementation of this supplement will mark the first time providers will suffer financial disadvantage.
Its introduction is deeply troubling and highlights an acute lack of understanding of the operational requirements of aged care labour management.
Labour rosters are created based on the acuity of the resident cohort, evident through Australian National Aged Care Classification care minutes, multiplied by the expected occupancy of a facility. While the AN-ACC care minute target is consistent each quarter, frequent variations in occupancy create a challenge for rostering.
As an example, take a 100-bed facility with a total care minute target of 215 minutes per resident. When occupancy decreases to 90 beds, total care requirements are reduced by 25 hours per day, or three full time shifts. When occupancy increases back to 100 beds then these three full-time shifts must be reinstated.
To smooth out the effect of these occupancy variations on labour, rostering practices use and average expected occupancy, in this instance 95 residents, to apportion labour.
Using an average expected occupancy is effective because changing rostered shifts or staff count has a major staffing and human resource impact, not to mention significant lag time for implementation.
Even though averaging out staffing levels meets care minute requirements in the long term, the consequence of using this method is periods when the facility is either under or overstaffed in relation to the care minute target.
The introduction of the CMS upends how providers roster. When a facility has higher occupancy, and lower care minutes, funding will be reduced. Yet, no additional funding, or the ability to recoup lost funding, is available when a provider has lower occupancy and higher care minute performance.
The only option to avoid an occupancy-related reduction in the CMS is to create rosters based on maximum available occupancy. Yet, this will mean an overstaffed roster for half the time, incurring costs for the provider greater than the department’s own recommended care minute target.
It is hard to believe that rostering to maximum occupancy is not the department’s intended design as it aligns with their moral imperative of care provision in spite of the financial impact on providers.
Even if rostering to maximum capacity, providers are not fully insulated from potentially losing part of their CMS supplement. Other factors, like staff shortfalls could lead to reduced funding as providers are unable to achieve their care minute target.
While all providers should aim to meet their care minute targets, it is essential they understand the net financial impact of CMS.
While a provider may receive decreased CMS due to care minute performance, they will conversely make a saving by reducing their labour expense.
The table above shows the net impact of the CMS matrix. For example, if a 100-bed provider achieves both 95 per cent delivery for registered nurse total care minutes, the result will be a reduction in CMS funding by $280 per day. Labour savings will equal $1,002 providing a net daily benefit of $722.
Between 90 per cent and 97.5 per cent of total care minutes generates large enough labour savings to offset any lost CMS revenue and a net daily benefit is assured.
But it is not all pureed peaches and heavy cream. Some scenarios will lead to a net loss indicated as a red percentage on the matrix. For example, a total care deliverable between 84.03 per cent and 85 per cent could result in a net loss of up to $149 per day.
Each provider will have different results based on their unique individual variables yet, generally speaking, providers may be better off financially if they are unable to meet their care minute target.
Even still, the introduction of the CMS is damaging as it bleeds funds from an already revenue starved industry.
The department continues to ignore the main reason providers are not meeting care minute targets: the AN-ACC funding/care minute structure is inadequate, making it difficult to maintain a sustainable aged care business.
Yet even in a world of devilish policies, there are pathways for providers to meet care minute requirements and be profitable.
Labour management is now the main driver of financial performance. Simple and effective solutions are available that support an innovative, accessible and strategic approach to labour management.
The AN-ACC funding structure is driving small providers and not-for-profits to the wall. It is of vital importance that we collaborate by sharing knowledge to maintain provider diversity across the industry.
Steven Hughes is executive director of Financial Shepherd Consultancy
The slides, and recording when its ready, for Thursday’s Residential aged care financial reporting and care minutes funding update webinar slides, are available here
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