The costs of a facility being sanctioned under the Aged Care Act

When a facility is sanctioned it means there is a serious risk to the health and well-being of residents. However, the effects of being sanctioned are far-reaching and include;

  1. The potential loss of access to care for people who need it during the period of sanction
  2. Creates stress for the residents and their family
  3. Stress on staff within the facility
  4. Reputational damage that takes a long time to recover from
  5. Financial stress on the aged care provider

Case study

We obtained the following publicly available information on a provider that was sanctioned for a period covering the 2014 & 2015 financial years. The Provider was not a client of PrideLiving, and we have no in-depth knowledge of the circumstances surrounding the sanctioning of the facility.The facility is a community-based Provider operating a single facility in a regional location.

201220132014201520162017
Revenue$5,008,000$4,921,000$4,464,000$4,680,000$5,079,000$5,358,000
Costs$3,865,000$4,099,000$4,545,000$5,425,000$5,179,000$5,555,000
Operating surplus / (deficit)$1,143,000$822,000$(81,000)$(745,000)$(100,000)$(197,000)
Per place$15,875$11,416$(1,125)$(10,350)$(1,389)$(2,736)
Impact of sanction on operating result1$1,063,000$1,728,000$1,082,000$1,180,000

Based on the above information it appears that:

  1. Before the sanction was imposed, the facility was highly profitable. Based on the report this facility would have been in the highest performing group of providers nationally.
  2. There appears to have been a change in 2013 that impacted revenue/occupancy and at the same time costs were rising
  3. Based on publicly available information the cost increases were in employee benefits which may indicate some significant changes to staffing
  4. While the sanction covered both the 2014 and 2015 years the main period covered by the sanction was the 2915 year.
  5. Comparing the results of these years to the average of the two prior years suggests that the immediate financial impact of the sanction was in the order of $2,800,000
  6. Looking at the 2016 and 2017 years, the continuing impact of the sanction appears to be in the order of $2,200,000

Sanctions have a crippling long-term effect on operating outcome

About the sanction

The following information was taken from the My Aged Care Website

The Australian Aged Care Quality Agency (the Quality Agency) provided the Department of Social Services (the Department) with a report that identified serious risk at the Service.

The Department identified serious issues of concern, including

  1. Residents’ challenging behaviours are not appropriately managed
  2. Staff have insufficient knowledge and skills to care for residents.

Sanctions applied:

Revocation of approved provider status, unless the approved provider agrees to provide relevant training within 6 months, at its expense, for its officers, employees and agents to support them in meeting the needs of care recipients.

Revocation of approved provider status, unless an advisor who is approved by the Commonwealth, is appointed by the approved provider for a period of 6 months, to assist the approved provider to comply with their responsibilities in relation to care and services.

The approved provider is not eligible to receive Australian Government subsidies for any new care recipients for a period of 6 months.

This case study is based on publicly available information, the observations and conclusions drawn are those of PrideLiving and are not based on any in-depth understanding or knowledge of the circumstances of the Approved Provider. Accordingly, readers should consider these observations as indicative as to the sorts possible financial implications of having a facility sanctioned. Furthermore, every situation needs to be considered on its unique circumstances.