The problem of unspent funds is self-imposed by providers who are failing to operate the home care program properly, an industry expert says.
Aged care consultant and managing director at e-Tools Software David Powis spoke about what he termed “the scourge of unspent funds” during an online presentation at the Leading Age Services Australia (LASA) Congress last week.
He also warned that the recovery of unspent funds by the government and the introduction of a new funding model would leave a significant number of providers financially damaged.
“Imagine if the department took back unspent funds, reduced future funds because of your history and insisted the full dollar value be provided to the consumer – potential disaster confronts you”.
Mr Powis said unspent funds, currently totalling more than $1 billion nationally, are the biggest threat facing the home care program.
“Ultimately the department will recover unspent funds and adjust the funding model which will result in a significant number of providers being financially damaged,” he said.
However, much of the problem is self-imposed, Mr Powis believes.
Mr Powis says providers are contributing to the problem by failing to ensure proper pricing, training and reporting.
The biggest contributors to unspent funds, he says, include services not being delivered because of poor care planning, consumers not taking up services, poor staff training, failure to reschedule cancelled services and failure to apply markups to third party services.
Many providers also don’t fully understand how home care funding works, and rely on anecdotal data rather than formalised pricing systems as well as failing to factor price increases into consumer agreements.
“Providers who are not operating the home care program correctly and as a result generating unspent funds are creating problems that will cause financial difficulty into the future,” he said.
While unspent funds contribute to a short term positive cashflow the benefit is illusiory.
Providers with unspent funds risk loss of government funding and consumer contributions, as well as paying tax on profit that doesn’t exist. Many providers will also find themselves under pressure not to charge full consumer contributions and income tested fees (ITF) – something Mr Powis warns can have severe long term ramifications for the provider.
“I have noticed recently a significant number of providers are deciding not to charge the full consumer contribution, if at all, and the full ITF if at all,” he said.
Unspent funds potentially represent a major loss of what Mr Powis estimates could be up to 50 per cent of a provider’s value.
He says it’s crucial for providers monitor unspent funds in real time and for care plans to make sure all funds are utilised.
Care also needs to be taken that on discharge, fees that aren’t actually unspent funds are not refunded Mr Powis said.
Mr Powis told Community Care Review that “naive and misguided” home care providers were their own worst enemy.
“They could clear the problem up before the government takes it back if they were smart.”
This story first ran on Community Care Review.