How do I apply indexation to approved accommodation prices?
You will be aware that under section 29 of the Fees and Payments Principles 2014 (No. 2) (the Principles), providers are permitted to index an accommodation price approved by the Aged Care Pricing Commissioner. The approved amount may be indexed annually to the indexation factor set out in the Principles. This does not require approval by the Commissioner. The indexed price substitutes for the existing approved price.
Note: Providers are required to publish the indexed price on the My Aged Care website and on their own websites (if they have one) before charging the increased price.
For providers approved prior to July 1 2014, the approval took effect on July 1 2014. Consequently, those providers are now entitled to index prices, should they choose to do so (as are any other providers with approvals where 12 months have now passed since the approval date).
The Australian Bureau of Statistics has now released the relevant CPI indices for the June 2015 quarter. These indices are available on the ABS website in the CPI publications at page 12 of the publication 6401.0 – Consumer Price Index, Australia.
The index formula is:
- approved amount x ( most recent index number/previous index number)
where the most recent index number means the index number for the most recent quarter ending before the first day of the current approval year, and the previous index number is the index number for the most recent quarter ending before the first day of the previous approval year (that is, the quarter to June 30 2014).
The indices used in the example below may be applied to all prices approved 1 July 2014 – 30 September 2014, once 12 months have passed since the day on which the approval took effect. Prices approved after 30 September 2014 can be indexed using indices for the September 2015 quarter, which will be released by the ABS on 28 October 2015.
The Commissioner approved an application by a provider for a maximum accommodation payment of $700,000 for accommodation group A on 15 June 2014. The approval took effect from 1 July 2014.
The most recent index number (for the June quarter 2015) is 107.5.
The index number for the June quarter 2014 is 105.9.
Applying the formula $700,000 x (107.5/105.9) = $710,576.00 (rounded to the nearest whole dollar).
Therefore, the provider is now permitted to advertise and to charge a price of $710,576.00 for accommodation group A.
Q. How much can I increase an Extra Service fee by?
The Commissioner cannot approve any proposed fee increase that is more than 20% plus the amount by which the fee would change if it were indexed in accordance with the percentage change in the All Groups Consumer Price Index number (that is, the weighted average of the 8 capital cities) published by the Australian Bureau of Statistics for the 12 months immediately before the application to increase the current fee was made.
This index number can be found on the Australian Bureau of Statistics website. Please note that the relevant index number is the weighted average of the eight capital cities, not the trimmed mean or weighted median.
Q. When can I apply for an increase in an Extra Service fee?
You can apply for an increase in your current Extra Service fee at any time. However, the Commissioner cannot make a decision to approve a proposed increase to an Extra Service fee unless at least 12 months has elapsed since the date on which the last approval took effect – that is, the date specified by you as to when the last fee increase took effect. This is not the date on which the approval was given, but the date on which the current fee was last increased for residents at your facility. When you last applied for an increase in your Extra Service fee, and advised that you would charge the increased Extra Service fee from a particular date, the Commissioner cannot make a decision until 12 months have elapsed from that date.
Q. How much notice do I need to give the Commissioner of a proposed increase to an Extra Service fee?
Applications for approval of Extra Service fees must be lodged with the Commissioner at least 60 days before the Extra Service fee is proposed to take effect. This can include time that is within 12 months from the date on which the last approval took effect, even though the Commissioner cannot make a decision until 12 months have elapsed. This means that if you lodge an application ten months after your last fee increase took effect, and you want your new fees to take effect 12 months and 1 day after the last fee increase took effect, you will have satisfied the 60 day requirement.
Q. Do I need to give notice to residents of a proposed increase to an Extra Service fee?
You must give residents at least 30 days notice. The Extra Service Principles 2014 provide that the Extra Service fee paid by the resident cannot be increased unless the resident is notified in writing of the proposed increase at least 30 days before the proposed increase is to take effect.
This 30 day period can include the period before the proposed increase is approved by the Aged Care Pricing Commissioner. That means if you lodge an application with the Commissioner ten months after your last fee increase took effect, and you advise residents eleven months after your last fee increase took effect, and you want your new proposed fees to take effect 12 months and 1 day after the last fee increase took effect, you will have satisfied the 30 day requirement.
Q. What is the Extra Service amount?
The Extra Service amount (as distinct from the Extra Service fee) is the Extra Service fee plus 25%. The Extra Service amount is the maximum you can charge continuing care recipients (see below). The Extra Service fee is the maximum you can charge new residents (see below). When the Commissioner approves an Extra Service fee, you will also be advised of the relevant Extra Service amount.
Q. What are continuing care recipients?
Continuing care recipients are residents who entered residential aged care prior to 1 July 2014. These residents may be charged for Extra Services up to the Extra Service amount (i.e. the approved Extra Service fee plus 25%). If a continuing care recipient has chosen to take up an Extra Service place on or after 1 July 2014, they will still be governed by this arrangement.
However, if a continuing care recipient is out of residential care for 28 days on unapproved leave or moves to a new facility and chooses to be covered by the new arrangements, then they may only be charged up to the maximum approved Extra Service fee.
Q. What are new residents?
New residents are those residents who entered care on or after 1 July 2014. New residents may only be charged up to the maximum approved Extra Service fee.
Q. Am I required to seek approval if I am not charging residents a Refundable Accommodation Deposit?
The Minister has made a determination that the maximum amount that a provider may charge a care recipient without approval from the Aged Care Pricing Commissioner is $550,000 as a Refundable Accommodation Deposit or its equivalent. This means that, if a resident is to be charged either a Refundable Accommodation Deposit above $550,000, or an equivalent Daily Accommodation Payment, or any equivalent combination of the two, then a provider must seek approval from the Aged Care Pricing Commissioner before entering into an agreement with a resident after 1 July 2014. The methodology for calculating equivalence between a Daily Accommodation Payment and a Refundable Accommodation Deposit is at Part 2 of the Fees and Payments Principles 2014.
Q. Am I required to charge residents the price that I receive approval for?
The price that a provider receives approval for is the maximum price that can be charged for the accommodation. Providers are free to charge this amount, or any amount below this amount, at their discretion. However, they cannot charge more than this amount.
Q. Why is the Commissioner seeking information on business factors? Where the application form seeks this information (at section 2.1 or in an attachment), what sort of information is relevant?
Applicants are required to submit a variety of information in support of their application for a proposed price. Some of this information is required so that the Commissioner may consider whether the quality, condition and amenity of the accommodation supports the proposed price. Cost information is sought so that the Commissioner can consider the degree to which the proposed price is reflective of cost. Information on business factors is sought so that the Commissioner can, in considering the proposed price, be appraised of any factor which leads the applicant to set their price at the level proposed. In the absence of this information, the Commissioner may have insufficient information to decide whether a proposed price is justified.
Given that providers operate in a variety of ways, and in diverse conditions, the Commissioner has not been unduly prescriptive about the way in which such information is provided, or in the factors which are relevant. Instead, applicants are asked to submit information which they believe is relevant. Such information may include, but is not limited to: any cost or price considerations that are not readily attributable to the accommodation, but which are a factor in setting the price at a particular level; any facility-wide cost factors; any considerations such as risk, financing requirements and projected occupancy levels, and any factors specific to the mission or objects of a provider or facility.
Q. What is a refurbished facility? When should I seek approval in respect of a refurbished facility, rather than an existing facility?
In general, applicants should make a proposal for a refurbished facility where they are currently conducting, or are intending to conduct a refurbishment of rooms in that facility, and the refurbishment applies to rooms for which they seek approval of a price above the threshold. Approval of prices in respect of a refurbished facility will be subject to verification of overall costs, and the condition of the rooms.
Where applicants are seeking to decide whether to make an application for a proposed refurbished facility as opposed to an existing facility, applicants should consider whether the refurbishment will make a significant difference to quality, condition and amenity for residents, and is significant enough in its scope to have relevance in the determination of price. If applicants are not of the view that the refurbishment will have this effect, they should include any relevant information in respect of their refurbishment, but make an application as an existing facility.
Q. When will the Commissioner seek further information?
The Aged Care Act 1997 at section 52 G-4 and the Fees and Payments Principles 2014 provide that the Commissioner may require applicants to provide further information for the purposes of determining the application. The Commissioner will seek further information where there is insufficient information to assess an application, where information supplied by the applicant requires further clarification (and is regarded as being of significance for the purpose of assessment) or where particular factors such as, for example, cost factors, require evidence. To ensure that applications are dealt with in a short timeframe, applicants should provide adequate information in their original application. Applicants are encouraged to read the Application Guide and the Application Form for guidance on the type of information that the Commissioner regards as relevant.
Q. Will the information I provide in my application be held confidentially?
Information about the affairs of an approved provider or an applicant is ‘protected information’ under the Aged Care Act 1997 (the Act). Information provided by applicants will be handled in a confidential manner. Under the Act, it is an offence to disclose or otherwise use protected information for a purpose other than what it was collected for.
Q. Do I need to seek approval for each room?
Applicants are not required to submit an application for each room. Where applicants are seeking the same proposed maximum price for a group of rooms or parts of rooms in the facility and where these rooms have equivalent quality, condition and amenity, applicants can identify accommodation groups.
If a provider chooses to create groups of accommodation the:
- description of the accommodation in the group must be applicable to each room, or part of a room, in the group;
- same maximum amount of accommodation payment must apply for each room in a group of rooms, or part of a room in a group of parts of rooms; and
- information provided must support the premise that the rooms have general equivalence in quality, condition, size and amenity.
For further information, please refer to the Application Guide.
Q. What are the statutory timeframes that apply to the Commissioner’s consideration of applications?
The Commissioner operates within the legislative timeframes outlined in Section 52G-4 of the Act and related subordinate legislation.
The Commissioner will advise a decision on your application within 60 days of receiving your application.
If further information is formally requested by the Commissioner to assess your application, you must then provide that information within a specified period of up to 28 days. In this circumstance, the 60 day period does not include the period beginning on the day the request was made and ending on the day the information was received.
Every reasonable effort will be made to process applications quickly.
Q. When can I charge an approved price?
If a provider obtains approval from the Commissioner to charge a price above the Minister’s threshold, they will be able to commence charging the approved price once they have met the publishing requirements outlined in the Act and subordinate legislation.
Applications for a price above the threshold may be submitted from 31 January 2014. Providers will be required to publish their 1 July 2014 accommodation prices and key features statement from 19 May 2014.
For further information, please refer to the Application Guide.
Q. Does an accommodation pricing approval by the Commissioner expire?
Approvals by the Pricing Commissioner are valid for four years. Providers can apply for conditional approval of proposed facilities, subject to meeting any conditions set by the Pricing Commissioner.
Before the end of any given four year period, providers may make a new application for an approved price. If approved, a new four year period will commence. If after the expiration of four years, providers do not apply for, and receive approval to charge an amount above threshold price, providers cannot enter into future accommodation agreements with residents to charge an above threshold price.
Q. Are accommodation prices approved by the Commissioner able to be annually indexed?
Under subordinate legislation to the Act, above threshold prices approved by the Commissioner may be indexed annually by the All Groups Consumer Price Index for the relevant four year period.
Indexation may be applied to the price from the second year of approval. The indexed price will only apply to residents entering care from the day the higher maximum amount of accommodation payment is indexed. Providers must publish the indexed price before entering into any new accommodation payment agreements for that price.
Q. When can I apply to the Commissioner for approval to charge a higher price than I currently have approval to charge?
It is possible to apply for approval to charge a new price after the expiration of four months from the approval date. If approved, a new four year period will commence. While your application is under consideration, the existing approved price continues to apply.
Q. I already have extra service status and charge extra service fees for the accommodation I intend to seek approval to charge an above threshold accommodation price for. If approved, can I continue to charge extra service fees in addition to an above threshold accommodation price?
Providers are still able to offer designated extra services from 1 July 2014. Extra service agreements entered into with residents prior to 1 July 2014 will retain those existing arrangements.
Under the new accommodation payment arrangements, if a designated extra service fee is charged in relation to particular accommodation, it is not permissible to also include the services that are provided for the extra service fee in the accommodation price.
Q. Can I include the cost of providing additional care or services in my application for an above threshold accommodation price?
From 1 July 2014 all residents, regardless of whether they have extra service status, will have the option to purchase additional services, such as entertainment or lifestyle choices, for an extra fee. These fees may be included in the accommodation price or charged through an individually tailored opt-in opt-out agreement between the resident and approved provider.
If an additional service fee is charged in relation to particular accommodation, it is not permissible to also include the services that are provided for the additional service fee in the accommodation price.