After attending the recent NZACA and HCHA conferences, INsite editor JUDE BARBACK reflects on the collective challenges facing the residential aged care and home care sectors and what it all means.

Like others attending the New Zealand Aged Care Association (NZACA) conference, I gasped in disbelief when Ryman Healthcare’s co-founder John Ryder described how over 30 years ago, rest homes needed car parks to accommodate their residents’ cars. The thought of today’s rest home residents behind the wheel is almost outlandish.

More incredulous snorts were heard as Ryder shared his experience of the residential aged care sector in the 1980s. The Ministry of Health was critical of single rooms back then, he said. They were sceptical about nurses running facilities and the need for activities coordinators. My, how things have changed.

Since then we’ve had various reports and experts signal that our population is getting older and we need to get ready. You’re not allowed to call it a grey tsunami anymore, but we’re all well-versed with the looming demographic picture. The Grant Thornton Aged Residential Care Service Review – better known as the GT report – tells us that between 2006 and 2026 New Zealand’s population aged 65 and over will increase by 84 per cent (in comparison with the overall population’s increase of 20 percent).

This being 2016, we find ourselves at the half way mark.

The squeeze on rest home level care

But things aren’t panning out exactly as we thought. Instead of increasing demand for rest-home level care, Stephen Ridgewell from Craigs Investment Partners tells us we’re actually seeing falling penetration of rest-home level care, although hospital level and dementia level remains steady. National care bed count has grown very slowly in contrast to the demographics.


For starters, the government’s emphasis on ‘ageing in place’ has had an effect on this. Technological advances – sensors, alarms, medication alerts and the like – combined with increasing in-home care provision and community support offerings are certainly part of this.

The other contributing factor is the increasing acuity thresholds of needs assessments. These days an older person must be very frail indeed to be admitted to residential care. So frail in most cases that the assessment for rest home-level care is often overridden months, or even weeks, later by another assessment for hospital-level care. It is not hard to see why New Zealand’s small facilities are struggling – particularly those delivering only rest home-level care. Many families are understandably opting for facilities that offer a continuum of care, to avoid the need for change.

Premium charging vs ORAs vs bonding

Another reason is that trends are changing. Many baby boomers are set to approach the retirement village industry with heavy wallets off the back of a booming property market. With the ORA (occupational right agreement) model now well established, boomers are arguably less hesitant to buy into the retirement village lifestyle. The thought that care can be provided on site – whether through the village’s aged care facility or in-home care provision – when the time eventually comes, is appealing.

This set of circumstances opens the doors for providers – essentially the larger integrated organisations – to be creative with how they approach aged care, particularly in the absence of any meaningful increase to government residential aged care subsidies.

Under the ARRC (age-related residential care) agreement, providers are permitted to charge for premium rooms. Some currently charge around $75 per day. Of course this hinges on basic demand and supply – there has to be a population willing and able to pay for a premium room, and the provider must have the means to provide the appropriate standard of product.

The ARRC contract also allows for the ORA model to be extended into aged care. By charging residents for a licence to occupy a bed, the resident is helping to offset the operator’s capital investment spent building that bed, essentially freeing up more capital to spend on building the next bed. Ridgewell estimates that if 40 per cent of a facility’s beds attract an ORA, then the operator’s capital investment falls by 50 per cent.

Great for the provider, but what about for the resident?

The ORA model, when applied to aged care, seems quite harsh for the resident, given that despite the likelihood of a relatively short stay – the average is around two to three years – the resident’s family are still likely to be charged a rather hefty 20 per cent deferred management fee.

Cam Ansell of Ansell Strategic views the Australian bonding system, introduced in 2012, as somewhat fairer for the resident. The resident’s bond paid upon entering the facility is paid back to the resident’s family in full when the resident leaves the facility. The provider can use the bond to retire bank debt and expand its operation – assuming it retains enough liquidity to repay bonds as needed. The resident is protected through a stringent government guarantee system, which will see the government repay the bond if the provider defaults. However, what happens when difficult times strike and providers begin to default en masse? The level of risk for the government appears significant.

The premium charging vs ORA vs bonding dilemma certainly delivers options for providers catering for the chunk of the population that can afford to buy into these sorts of schemes. But what about the rest?

Politicians need to engage with providers

Of the many politicians who spoke at the NZACA and Home and Community Health Association (HCHA) conferences, all agreed there needs to be more funding for aged care – both residential and in-home. They were all quick to identify the problems facing the sectors – the staffing challenges, the inconsistency between the DHBs, the need for better palliative care funding, and so on – yet no one could clearly articulate what areas of the Budget might miss out at the expense of aged care.

I always find myself wishing the ministers, politicians and policy makers would remain at the conferences instead of hastily delivering their speech and legging it back to the Beehive. The promise of ‘working with the sector’ always rings a little false as they dash out the door, speech delivered, passing up the chance for discussion and engagement, that yes, might make them a little uncomfortable, but will ultimately be invaluable for driving policy forward. They would benefit so much from hearing the issues the sectors are working through.

Equal pay negotiations

Take the equal pay negotiations, for example. Politicians are understandably tiptoeing around the subject. Perhaps it would be unfair to expect some clarity on equal pay when it is being thrashed out in a lengthy negotiation process behind closed doors. On the other hand, perhaps more could be gained from some discussion with providers on the subject. At the very least, some indication of the government’s readiness for the implications of what a wage increase might mean for providers would be of some reassurance.

I don’t think we should understate the far-reaching consequences of the equal pay case. Like most, I struggle to comprehend how the government will afford the funding increase required to enable providers to pay their staff more. Remember, the unions’ rate of $26 an hour is not off the table yet.

I have a hunch – and I hope I’m wrong – that these negotiations are not going to end well for smaller aged care and home care providers. From where I sit, all signs seem to point to a system that will increasingly lean on the larger integrated organisations that are able to rely on their profits from their retirement village operations to cross-subsidise their care operations –including any wage obligations. These organisations are also more likely to take advantage of the aforementioned premium charging and ORAs options and as a result, continue to thrive.

But the small players? Many of the smaller standalone rest homes that define our Kiwi communities will continue to suffer in the absence of adequate government funding that allows them to pay their staff the required rate, and meet compliance costs and deliver quality care.

Issues facing the home care sector

The outcome of the equal pay negotiations will affect home and community support services (HCSS) providers too. In fact, the HCSS sector is facing some big issues at present.

While the government has worked with the sector to resolve the issues around in-between travel time, the negotiations also included an agreement from the Ministry of Health to help the sector transition to a regularised workforce, including the implementation of guaranteed hours and training-related pay.

The move to regularisation is compounded not only by the outcome of the equal pay negotiations, but also by the new Employment Standards legislation, which place yet further demands on providers. Like their counterparts in residential aged care, the HCSS sector is crying out for change to its current contracting system. E Tu’s Sam Jones’ condemnation of the status quo was met with applause by HCSS providers attending the HCHA conference.

“The level of funding, disparity of funding and the insecurity of funding all have a detrimental impact on the employment of the workers in this sector,” he said.

Karina Kwai from the Ministry of Health vaguely suggested that a remedy may be found in the next Budget, but this did little to quell the fears and frustrations of providers attending the conference.

Great things happening at the coalface

The picture I’m painting here is not intended to be one of doom and gloom. In highlighting the challenges the sectors are facing, I do not wish to gloss over the wonderful things happening in care facilities and homes around New Zealand. The Excellence in Care Awards celebrated at the NZACA conference was proof enough of the compassion and innovation that permeates our aged care industry. Pacific Homecare’s exemplary approach to staff training and development as shared at the HCHA conference was proof enough of the dedication and care shown towards the workforce. You don’t need to look far to find evidence that there are good people in good organisations doing good things.

But just how far are we prepared to stretch this good work? With a national election looming, I can only hope that some of the issues confronting aged care are pushed further up the agenda and tackled head-on. I hope that in 30 years’ time, just as we struggled to fathom the existence of single rooms in rest homes 30 years ago, people are shaking their heads in disbelief when I tell them some of the funding and workforce issues we faced in 2016.


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