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Retirement Living and Aged Care Services

Lois

Updated: Jun 27, 2024

Industry commentators often argue that it makes logical sense for retirement living operators to deliver aged care services to residents in their properties. They also acknowledge that this delivery is less popular than logic would dictate. Examining the issue of delivering aged care services (Home Care Packages) to retirement living residents reveals obstacles to operators including executive skills and governance requirements plus upgrading the human resources function.



Retirement and Aged Care Services


Retirement Living and Aged Care Services


Retirement living comprises independent living in retirement villages and manufactured home estates (MHEs), these are the two most popular forms of communal retirement living in Australia. There are two main types of operators, for-profit and not-for-profit (NFP). The

combination of different types of retirement living and operators further complicates the delivery of aged care services. The current situation is summarised in the table below.



Retirement Villages

Manufactured Home Estates

For-Profit

Some operators deliver care services and co-located residential aged care.

Some larger operators have

commenced delivering care services.

NFP

Many, if not most, operators deliver care services and co-location with aged care is common.

There are few NFP operators of this housing type.

An operator’s history influences whether both retirement living and care services are provided. Australian for-profit retirement village operators traditionally have provided independent living without care services. There are some exceptions to this, including listed New Zealand operators Ryman Healthcare and Summerset Holdings. Both are based in Melbourne with co-located residential aged care. There are also villages with serviced apartments where housekeeping, linen change and meals are provided. Not-for-profit retirement village operators have traditionally come from a model of providing accommodation and residential care. Most operators have a combination of independent living, care services and residential aged care, with campus style co-located developments becoming more popular.


As the MHE industry has expanded, some for-profit operators have commenced delivering care services, however this is the exception rather than the rule. The focus is on independent living, as many have come from a caravan park background where limited facilities and services are provided. There are some NFP operators of MHEs, they are smaller (single property), in regional areas and deliver services specific to residents’ requirements. Looking at these different operators there are two main business models for delivering retirement living and aged care services. One comprises an integrated organisation where independent living and care services are delivered through a single organisation, there is one executive team and board for all operations. The other comprises two separate organisations with separate executive teams and boards, although some personnel may be involved with both. They usually have similar names, branding and business addresses. These business models are influenced by the legislative oversight of delivering aged care in Australia.


Legislative Oversight


In Australia, the main legislation of aged care is at the Commonwealth level with the Aged Care Act 1997. The Commonwealth government provides funding, approves providers and determines the level and eligibility of recipients. To receive funding for delivering residential aged care and home care packages an operator needs to be an approved provider. The organisation must have financial resources plus policies and procedures for delivering care. There are further requirements on key personnel, namely the executive team and independent Non-Executive Directors (NEDs). In addition to security clearances, the key personnel must have experience in delivering aged care or other forms of care. For for-profit operators this requirement for independent NEDs with experience creates challenges.


Executive Skills and Governance Requirements


Established NFP organisations providing residential aged care and care services, already have executive teams and boards in place. Some larger organisations remunerate their NEDs, however most smaller organisations do not remunerate their NEDs (except for expenses).


Examining the company structures of for-profit retirement living operators has revealed that many have boards made from the executive team and consultants to the organisation (who are already being paid). To deliver care services using the company structure of an integrated organisation would require them to recruit and pay independent NEDs for clinical care and governance, which could prove financially difficult.


The executive team for the delivery of care services would have their salaries covered by this business activity. Understandably, independent NEDs are unlikely to provide their services free for a for-profit organisation. In regional areas finding appropriately qualified NEDs may be even more difficult. Retirement living operators could provide care services using a separate organisation. The retirement living operator would keep their existing structure and the care business would be run as a separate entity. This doesn’t remove the requirement for independent NEDs, however as it is technically speaking a smaller organisation the remuneration may be lower.


This creates a grey area of responsibility and liability. As the two companies present as a single entity with similar branding and addresses, it can be argued that the overall business has responsibility and liability for the care services. This raises the issue if elder abuse being committed by care staff to residents in the retirement living property. While some state retirement villages legislation requires policies to prevent elder abuse, retirement living directors have a duty of care to all residents. This would require oversight to ensure elder abuse didn’t happen.


Smaller retirement living operators with one or two properties would find establishing care services within an integrated organisation or two separate organisations difficult. Larger organisations have greater balance sheet strength and a wider pool of potential NEDs to draw from.


Employing Care Workers


Operators of retirement villages and MHEs do not require significant levels of personnel, maintaining grounds, cleaning common areas and building maintenance are the main activities. Many retirement village and MHE operators come from a property background and are familiar with the property management side of the business. It is common for operators to use external contractors for much of this work. Depending upon the size of the village or community there may be an on-site manager (full or part-time), or management may be undertaken remotely.


Many villages operators provide domestic assistance to residents via home care packages or fee for service and this creates more staff . The real issue is the salary/wage tax benefits available to NF versus for profit operators.


Adding care services adds a requirement for appropriately qualified care workers. Operators attempting to manage care services in-house would need to expand their head office human resources department. The assumption behind delivering aged care services into retirement living is that such a business would be sustainable and would not have ongoing losses. Recruiting and managing care workers, managing rosters and ensuring that there is sufficient demand for this care service requires management and governance oversight. Smaller operators with one or two properties may find the additional costs cannot be met through anticipated revenue. NFP organisations are able to use their taxation status to package salaries, providing an incentive to staff which is not available to employees in for-profit organisations.


Some retirement villages and many MHEs are noted for being in regional lifestyle locations. Delivering care services would require care workers to travel from the population centres where they usually reside. Regional areas report greater difficulty in attracting care workers compared to capital cities, attracting care workers to travel to lifestyle locations is likely to be challenging. This is in addition to the overall shortfall of care workers across Australia.


Retirement living operators wanting to deliver care services may find that the additional resourcing requirements to head office plus the difficulty in sourcing care workers in the locations of their properties too difficult. Again, bigger organisations have a better chance of achieving this than smaller ones


Conclusion


While providing care services into retirement villages and MHEs may appear logical, the practicalities for operators can be challenging. This is being further heightened by the increasing age and frailty of residents entering retirement living. Larger operators can be expected to have the balance sheet strength plus the ability to integrate care activities into their business model. For smaller operators, particularly those in regional and more remote locations, delivering such care creates challenges.

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