The way rest homes are currently funded could be set to change after the much-anticipated release of the Aged Residential Care Funding Model Review. The review is suggesting a move away from the current funding mechanism to a new model based on interRAI clinical assessments.

The review, carried out over the last 18 months by advisory firm Ernst & Young on behalf of the Ministry of Health and District Health Boards, found the existing funding model no longer fit for purpose, as residents are presenting with increasing frailty and acuity.

Currently around 90% of aged care residents fall within rest home and continuing hospital care categories, with providers expected to manage a diverse range of needs within a single category price, providing a disincentive for providers to admit more costly residents.

Keriana Brooking, Deputy Director General Health System and Improvement, Ministry of Health says the characteristics of people in aged residential care are changing.

“People are going into care later than in the past at an average age of 85. They frequently have complex needs involving long-term conditions and disability-related dependencies requiring specialist, around-the-clock care,” says Brooking.

The review report outlines seven primary recommendations for change. Among them is a new model: the interRAI Resource Utilisation Group (RUG) approach, which allocates people into more targeted care categories based on the needs that best predict the level of resource they require.

DHB Chief Executive for older people Chris Fleming says this will enable providers to target
resources more specifically to a resident’s individual needs.

“For example, currently one resident in the rest home category may have physical limitations, whereas another resident in the same category may have physical limitations and impaired cognition, requiring a higher level of care. The proposed new funding approach would make it easier to identify the resources required to support these different needs,” says Fleming.

While the review has clear suggestions for how to formulate the care element of funding, there is less clarity on how the accommodation element would be calculated, with a range of options outlined for discussion. These included increased use of accommodation deposits; introduction of targeted mechanisms to support strategically important providers to invest in capital stock; and the requirement for ARC facilities to publicly report their premium charge rates.

The New Zealand Aged Care Association (NZACA) is welcoming the review but says additional investment must follow if there is to be a sustainable future for the care of older New Zealanders.

“We welcome some of the report’s recommendations, but in not recognising that the increased acuity of residents requires a quantum increase of funding, it can only be viewed as a shuffling of deck chairs on the Titanic,” says chief executive Simon Wallace.

Wallace supports the recommended RUG approach and says it echoes the findings of NZACA’s Caring for Older Kiwis research which advocated for standardised case mix funding.

“This focus on case-mix directly picks up on our research last year showing the regional disparities in how DHBs are assessing eligibility for care, meaning some older people are not getting access to the care they need because of their post code.”

The sector also welcomes the recommendation of a “rurality adjustor” as it recognises the financial sustainability challenges faced by aged care facilities in more rural and remote areas.  There is also support for the recommendation of a turnover payment, reflecting the time and cost involved in the increasing number of short stay and respite residents.

However, while the NZACA is pleased to see suggestions for smarter allocation of funding, it has serious concerns about the level of that funding. The aged residential care sector currently receives about $1.95 billion in funding, of which $1.2 billion comes from District Health Boards.

Wallace points out that the report does not address the insufficient level of funding to support investment in new aged residential care facilities and the upgrading of older facilities.

The report also fails to address workforce and immigration issues affecting the sector and the financial impact these issues are having on providers, says Wallace.

However, Keriana Brooking says the focus of the review was not the level of funding.

“The Review was an opportunity to examine how things are working and to see what if any changes we could make for the future. It focused on the way funding is currently allocated, it did not review the amount of funding provided to the aged care sector,” she says.

The report hints at a lack of strategic direction for aged care within the context of the wider health system. It suggests that the Ministry of Health, DHBs, and providers should find more common ground about the intended future role of aged residential care in the New Zealand health system and seek new ways of working together.

Wallace agrees the aged residential care sector needs to be recognised as a mainstream function of the health system working as partners with DHBs.

“We are providing a moat that protects public hospitals from being flooded with high-needs aged care residents. Take away even half of the 39,000 beds in aged residential care facilities across New Zealand and our already overcrowded public hospitals would not cope,” says Wallace.

He says there is scope for aged care providers to work in partnership with DHBs to help manage entries to public hospitals.

In terms of next steps, the Ministry and DHBs have accepted the recommendations of the review have merit and will now work with the aged residential care sector.

“Considerable work is now needed to fully understand the feasibility of adopting the Report’s recommendations, including health system and cost implications and any legislative changes that may be required,” says Chris Fleming.


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