The creeping costs of compliance and care delivery are pushing some residential aged care providers to breaking point. JUDE BARBACK questions whether the sector can continue to keep pace without a corresponding increase in Government funding.

Ascot House Retirement Home in Devonport is about 5km down the road from North Shore Hospital.

Yet it costs the 27-bed rest home $200 to get a resident there in an ambulance.

“I don’t even get paid that for a day for a resident. So all of a sudden, I’m at a loss,” says owner-operator Shona Rishworth, “We’re behind the eight-ball before we’ve even begun.”

It’s not just ambulance charges that are hurting rest homes like Ascot House. It’s a raft of things. Keeping up with minimum wage increases, for example. Immigration visa renewals for staff. GP call outs. Specialist clinical equipment. Compliance with new legislation. Audits. InterRAI. Increasing prices of power, food, insurance and so on. It all begins to add up – particularly for facilities that don’t have the luxury of a corporate comfort blanket or an adjacent independent living arm from which they can cross-subsidise.

“It is the accumulative effect of all these costs that is having an impact on people’s businesses,” says New Zealand Aged Care Association (NZACA) chief executive Simon Wallace. “It is not just one thing – they all add up.”

However, one thing isn’t increasing at the same rate as everything else: government funding. The balance sheets of many residential aged care facilities will show that funding simply isn’t keeping pace with the expenses which are slowly creeping up.

Compliance creep

Rest homes have become weary campaigners at this game.

“The increasing costs of compliance are nothing new. It’s been going on for years, without any increase in funding to compensate,” says Peter Mathyssen, owner and manager of Glenbrook Rest Home in Waiuku.

Take audit costs, for example. Rishworth says the meagre annual increases in funding do not cover the Government-imposed cost for audits which continue to climb year on year. A spot audit costs her facility $6,000, and then there are the costs and staff hours involved with meeting the various compliance measures.

Changes to the Food Act and the Health and Safety Act mean many facilities have to fork out more money to comply with the new legislation. Under the new Food Act, aged care providers will be required to register with Ministry for Primary Industries and be verified on a regular basis.The NZACA has expressed frustration at these changes, stating that the sector is already regulated through the Health and Disability Act.

St Andrews Village in Glen Innes, Auckland has brought forward a major kitchen renovation in order to meet the new legislative requirements and contracted Asure Quality to undertake an audit and gap analysis to ensure that they were ticking all the right boxes. Chief executive Andrew Joyce says they also spent $20,000 getting a health and safety contractor in to make sure all their new development was meeting requirements.

The Government’s proposed new Fire and Emergency NZ (FENZ) Bill could also result in a significant increase in levies for providers as it proposes to treat residential aged care facilities as commercial property, instead of residential property as it is under existing law. Again, the NZACA has lobbied hard against the change.

The impacts of new legislation on the humble rest home shouldn’t be understated.

Rishworth can recall years ago when new fire safety requirements resulted in rest homes having to install costly sprinkler systems. For some, the cost was too much to bear and they were forced to go under. She is certain that if some new sweeping legislation is brought in that requires a big cost or outlay, there will be some providers that will have no choice but to close.

“The reality is, how long are we going to be around? It’s a very real concern,” says Rishworth.

Wage worries

With so many costs creeping upwards, what will be the straw that breaks the camel’s back?

It is hard to predict what the proverbial straw will be for the rest homes.  The facilities INsite spoke with each had a different bone of contention, although one area cropped up every time as a major cost concern: staffing.

Cecily Munro, owner of Malyon House in Mount Maunganui says her facility hasn’t seen new costs associated with complying with the new legislation as they were already in compliance – however, the 50 cents increase to the minimum wage will certainly have an impact. While everyone at Malyon is paid above the minimum wage, the increase will have the knock-on effect of increasing everyone’s pay.

Similarly Andrew Joyce describes the ambulance fees as “a drop in the ocean” for his facility, yet is concerned about the ramifications of the equal pay case for the sector. St Andrews already pays well above the industry average and has a higher staffing roster than most, but Joyce says an increase in wage levels resulting from government-union negotiations could still have an impact. For smaller standalone providers, however, the repercussions could be dire, even with a corresponding increase in funding.

One small standalone provider that feels the pinch is Mitchell Court Rest Home, a 35-bed facility in Tauranga.

“Wages are of course our main expense and increasing every year. Unfortunately the increases we get on 1 July from the Ministry do not cover the minimum wage increase – last year we got 1%,” says manager and owner, Linda Rodrigues.

“We cannot charge extra for stat holidays unlike other businesses,” she adds.

Rishworth agrees. She says things like the Mondayisation of public holidays really hurt small facilities.

Immigration visas

On top of wage concerns, many rest homes are grappling with the time and cost spent on processing immigration visas.

Despite the push to employ Kiwi workers, many facilities are finding it difficult to find New Zealanders who are willing and able to take on the job at hand.

“You’re dreaming if you think you can get a New Zealander to do the job,” says Rishworth. “We typically advertise on TradeMe. Of 60 applicants, two will be Kiwi and they won’t even show up for the interview.”

Out of necessity facilities look to migrant workers to fill their vacancies, only to be met with policy roadblocks, lengthy documentation requirements and positions to cover temporarily while visas are being processed.

St Andrews Village employs approximately 44 migrant workers, which equates to two or three work visas to process each month. Human resources manager Lee Keegan says it is difficult to quantify the costs associated with processing immigration visas. Most of the costs lie in the many hours spent by senior staff on filling in the required documentation and satisfying Skills Match Report requirements that they’ve tried to find New Zealand workers through advertising with WINZ. Then there are the costs associated with filling the role with temporary agency staff while a decision is made.

The process used to take four to six weeks but it has gradually lengthened to take up to 12 weeks, and in some cases longer. Keegan shares an example where it took 15 weeks to process a visa.

End-of-life care provided for a rest-home level price

For all facilities, it is well worth the effort to get the right staff in place for the job at hand. Residents entering residential aged care now have such high-level care needs that it is essentially end-of-life care that is being carried out.

“In the last five years the new residents have been increasingly frail, with multiple co-morbidities and needing palliative care,” says Keegan.

She is understandably frustrated that the Government has failed to deliver palliative care funding to facilities.

“We haven’t seen a cent,” she says. “The cost of caring for someone requiring end-of-life care is most definitely not met under current funding allocations.”

Cecily Munro says years ago residents would typically live longer than a year, but now it isn’t uncommon for some to die mere days after they are admitted.

“We were referred a gentleman for whom we had to buy a bed extender as he was 6 foot 8. He died two days after admission.”

This is just one example of the sort of expensive equipment required to look after the increasingly frail residents being admitted into residential care. Munro estimates they’ve spent around $25,000 in the last year on upgrading equipment.

“We have 25 bell mats,” she says, “Once upon a time we only needed one or two.”

Older people are remaining in their homes for longer. However, Keegan says many become so socially isolated that by the time they are admitted to hospital-level care in a residential facility, they have developed serious mental health issues.

“Many die very shortly after admission, which shows that they have probably been at hospital-level for some time,” she says.

Keegan is sceptical about the rationale for keeping people in their homes for so long before they are assessed as needing to move into a residential facility.

“It’s sold as a philosophy, but it is actually a monetary saving for the Government,” she says.

Peter Mathyssen agrees that Government’s social policies are out of touch.

“It shows in the faulty funding of aged care. Large facilities make a healthy profit (which then sometimes disappears overseas), while smaller ones close down. Government must look into this and adjust funding so that no health dollars go overseas and small facilities can survive.”

He says small providers who can and do provide much more personalised care, are slowly forced out of business, despite the fact that many more aged care beds will be needed in the near future.

“National and Labour governments seem to only worry about finances and taxes. There is more to life. New Zealanders generally are in favour of raising taxes to provide everyone with a decent living standard.”

Minister says costs will be taken into consideration

The new Associate Minister for Health with responsibility for the health of older people, Hon Nicky Wagner, acknowledges that “as with all health sectors, aged residential care is subject to ongoing pressures from increased costs”.

She says the various cost factors affecting rest homes will “no doubt be taken into consideration in discussions between DHBs and providers on future residential care prices”.

“The sustainability of the aged care sector is a high priority for this government, as is the quality of care provided in facilities,” she told INsite.

Simon Wallace is encouraged by the Minister’s comments.

“We welcome the Minister’s remarks and her intended commitment to the sector,” he says.

The annual negotiation of the Age-Related Residential Care (ARRC) agreement between aged care providers and district health boards is always somewhat fraught. With an election looming in less than eight months, a pay equity case that must be resolved and an aged care sector roaring “enough!”… perhaps this year’s negotiations will result in a funding increase that acknowledges the creeping costs of compliance and care delivery borne by our rest homes?



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