How can Registered Providers manage debt risk in aged care?

Economic conditions, sustained high inflation and rising costs, including salaries, are also placing increased pressure on both providers and residents. The likely result of these factors is an increased risk of resident and support at home client debt and payment delays.

Further, there is a growing shift away from refundable accommodation deposits and towards daily accommodation payments in residential aged care.

In our experience, the recovery of debt in aged care is often complicated by: 

• identifying the capacity to enter into contracts at the time resident agreements or support at home client agreements are entered into and retaining copies of documents appointing enduring guardians, enduring powers of attorney or tribunal appointments of substitute decision makers;
• resident and support at home client agreements being unsigned or incomplete, giving rise to uncertainty around contract formation and enforceability;
• agreements not adequately capturing relevant property interests or other assets that may otherwise be available to secure outstanding amounts;
• ancillary documents, such as guarantees, not being completed, which can limit recovery options;
• outstanding debts not being identified or addressed early, resulting in inadequate notice of the debt being given to those responsible for payment, and arrears becoming significant by the time recovery action is considered; and
• recovery occurring in circumstances where residents are incapacitated or deceased, requiring complex asset investigations, guardianship proceedings and evidentiary challenges. 

Non‑payment of resident support at home fees is a particularly sensitive issue. Due to the security of tenure requirements under the Aged Care Rules, Registered Providers are often required to continue delivering care and accommodation services even where fees are unpaid, and the circumstances in which a resident can be transferred from the home are tightly regulated. This can leave providers carrying significant unpaid debts, unless issues are prevented through adequate processes and documentation, or issues are identified and addressed early.

A further risk arises in relation to pharmacy arrangements. In many cases, pharmacy fees are met from residents’ surplus income after aged care fees and co‑contributions have been paid. As resident co‑contributions increase, there is an increased risk that residents will have less surplus income available to meet these costs, creating risk for providers where, for example, pharmacies cease supplying medication in the event of default by residents. Given providers’ ongoing obligations in relation to residents’ care, and the constraints imposed by security of tenure, providers may be forced to foot these pharmacy bills.