The devil is in the details: AN-ACC funding changes and complexities

Major changes to AN-ACC funding present a much-needed victory for certain pockets of the aged care sector. Regional and rural providers should be especially excited over funding boosts after being lumped together with metropolitan providers in some scenarios.

Updates to the AN-ACC Base Care Tariff (BCT) structure and funding are arguably the most important change with providers in Modified Monash (MM) locations 1 to 4 no longer receiving the exact same amount. Instead, MM 2 and 3 will be funded the same, as will MM 4 and 5. 

Aged care entrepreneur and FicusBridge Founder/CEO, Tanvi Dalal, told Hello Leaders this was one of several unexpected but very positive changes announced by the Government. 

“Regional providers were categorised in the same level of funding as a metro facility but the cost of service for those facilities is much higher. So these facilities were getting the same amount of fixed funding as metropolitan ones which was impacting them,” she shared.

“This has changed in the new model. For example, the MM 4 facility will see a difference in about 8% of funding which is a big difference for them. That’s going to be a big relief.”

Alongside an increase to the AN-ACC price – this will be $280.01 from October 1 – the other notable change occurred to AN-ACC class funding through updates to National Weighted Activity Unit (NWAU) weightings. Funding for AN-ACC classes has changed to reflect the actual cost of delivering care, with some classes actually seeing a drop in funding.  

Ms Dalal highlighted classes 7 and 8 where residents have low to moderate cognition but are ambulant. She said these residents often have quite high care needs and require more time from staff, yet she felt the previous funding rate failed to recognise those requirements.

“It’s interesting to see numbers. We work with an organisation that has two facilities: one has more non-ambulant residents and the other one has a dedicated memory support unit with a lot of class eight residents,” she explained.

“Previously there was a difference of about $10 between their average variable funding and now it’s the same. The one with that dedicated dementia area has increased in overall funding and the other has reduced a bit.”

AN-ACC classes that have seen their funding drop include class 1 (requiring palliative care) and classes 10-13 (not mobile, various levels of function and compounding factors). 

These changes, as Ms Dalal added, show that the devil’s in the details as the money has increased but many providers might receive a “little bit less”. 

“From 1st October the overall industry NWAU is going to reduce by 2%. The MMM BCT structure and funding, even for the metro facilities, is increasing by 1%,” she said.

Changes = financial management burden

While there’s always a sigh of relief when funding is increased, it’s often paired with a sigh of frustration over additional management burden. 

In this instance the added complexity of dealing with the No worse off principle means providers will be juggling AN-ACC classifications, care minutes, co-contributions, means testing and more, all while trying to balance rosters, direct care wages, back pay and adjustments. It makes an already complicated funding mechanism even more so.

“Any organisation that does not have a dedicated person or team that’s managing AN-ACC funding, they’re losing hundreds of thousands of dollars. For a small standalone organisation half a million dollars is a lot,” Ms Dalal said.

With the AN-ACC funding model being highly analytical, Ms Dalal said management needs to have a balanced approach with both clinical and financial experience. Otherwise, providers risk missing out on key details or opportunities for revenue. 

“Executives need to understand that it’s become even more important to manage their funding operations well,” Ms Dalal added. 

“The mindset will have to change across the industry. We can’t operate the way we’ve been doing for many years. We have to be a bit more business savvy. The industry needs to take more risks and not hesitate in implementing these changes. Managing these changes well is also going to be important.”

One risk the Government is taking is the introduction of user co-contributions from wealthier Australians. This will see non-direct care partially funded by older people, providing aged care organisations with additional revenue through accommodation and everyday living services. 

Another risk is the increase in maximum room prices with the current $550,000 threshold to be replaced by a $750,000 maximum room price.

Although both initiatives have been welcomed by aged care providers, they are risky because the current aged care consumer base will have even higher care expectations.

Ms Dalal said this is already evident with some providers sharing concerns over public perception if they suddenly bump up room prices and other fees. 

But these additional revenue streams are critical, “The industry needs more funding and it needs more avenues of revenue” she added. 

“The commercialisation of aged care needs to change along with all these changes. If we are asking for co-contributions and the consumers are contributing more they will also expect more so the facilities can increase the price of the rooms.”

This is just another burdensome responsibility for providers to take on during a period of constant change.