Stop the world – I want to get off is the title of a musical created in the 1960s.
Some 55 years later as we become globally enmeshed in a pandemic the like of which none of us has experienced before, one could be forgiven for wanting to shout those words from the roof tops.
I don’t need to remind you of the enormity of the task ahead of every organisation in every industry sector – particularly those in a sector I am so fond of and have given over half of my career to. I won’t belabour the size of the task ahead of you. But I do want to ask the rhetorical questions in this group – are we doing enough in our aged care sector to make an impact?
For providers – if you could get hold of adequate supplies of personal protective clothing and equipment, are you considering gloving, gowning, and masking all your front-line care staff? Are you having a skilled Registered Nurse meet and greet every visitor and taking a temperature prior to allowing a visitor, contractor, family member, Aged Care Quality and Safety Commission staff member enter the facility?
For the Australian government – Department of Health and Aged Care Quality and Safety Commission – have you increased the ACFI rate per resident per day, or introduced a coronavirus supplement to cover the cost of additional medical supplies, staffing supplies, and loss of revenue when facilities empty due to untimely death of residents? Have you considered the financial risk and impact of failure of the RAD scheme?
Why these specific questions?
At a time when all sectors are under extreme pressure to function, what we hear across the news media is that our elderly are more likely to die than most – is it 14 times those adults in their 30s – if they contract coronavirus (COVID-19, SARS-COV-2). Today I received a message from an industry colleague that some 20% of all aged care residents might die as a result of contracting this quite communicable disease. Folks that is around 20,000 elderly Australians.
Let’s bring that down to your facility – if you have a 100-place facility, that is 20 of your residents who might perish as a result of coronavirus. For a fifty-place facility, that’s around 10 residents.
Imagine if you have one resident who has a positive test result for this infectious disease. If you thought you were busy now with the almost majority lockdown situation, your work life just ramped up. More precautionary and preventative practices are added into place to ensure the disease does not spread at you home. Additional involvement with and reporting to both Federal and State health officials. Additional costs for which, currently, there is no additional income. And should, regretfully, one or more of your residents die as a result of an outbreak, it is unlikely that you will change your staff mix – perhaps you might for five or six residents, but not for one or two. But, unless it is to admit another resident who may have already tested positive for coronavirus and perhaps is occupying a needed place in a hospital, you may find that you cannot admit a replacement resident under the current circumstances.
How are you going to keep the lights on, the food being served, the staff level as rostered (if you can find an increasingly scarce resource, also likely affected by the same infectious virus) engaged and paid, without additional recurrent funding? Whilst this pandemic is of course a majority public health and acute hospital driver of resources, even that is not possible to achieve in, dare I say it, isolation from our age care sector.
More recurrent funding is required for this next six months or so for all aged care providers whilst we learn to live with, and beyond, this disease.
If some twenty percent of all current aged care residents die as a result of this disease, how is the RAD (Refundable Accommodation Deposit) component of the sector affected? Again, let’s imagine that in your fifty-place facility that twenty percent of residents die as a direct result of this virus. Of that number (10 residents), fifty percent (5) require a repayment of RAD to their Estate. Being conservative, let’s assume that the average RAD holding is $250,000. That is, over the next six months, 5 residents die as a direct result of coronavirus infection. There is no replacement of resident under the RAD payment scheme and the organisation has $1.25 million owing to various Estates. Sadly, during this same six-month period a further fifteen residents decease, of non-specific disease related to ageing. But because your facility has active coronavirus infection, and in spite of the Australian Department of Health permitting admission, there is no family willing to have a loved one admitted. Again half, say 8 of these residents have a RAD refund due – again each of average $250,000 adding a further $2 million to the RAD debt.
Your organisation is indebted to the total of $3.25 million and will likely struggle to meet that debt repayment. For twenty percent of the total in residential aged care in Australia today that overall debt is astonishingly frightening – a $5to $6 billion sum that likely does not exist in liquid funds.
So, whilst the Australian Government is recognising potential insolvency events as they pertain to businesses over the next six months, now is the time for you to check the financial risk exposure of your organisation, and your capacity to manage liquidity over these next six months or so. Governing boards in particular should be most concerned with this liquidity matter as the current law imposes financial responsibility upon directors personally when they allow business to incur debt while insolvent. The law defines insolvency as being unable to pay debts as and when they fall due. A RAD debt is due for repayment upon the termination of the residents stay in a residential aged care facility. The law also allows a board, faced with technical or real insolvency, to appoint an Administrator to initially remove the directors from this financial impost while the business continues to trade and to assess its likelihood to be able to trade itself back to liquidity. Failing this a Receiver is appointed to liquidate the business. Directors of incorporated associations should be particularly concerned right now. It may not be open to them to appoint an Administrator and thus these organisations might only be able to go (directly) to receivership and liquidation.
For incorporated associations, some separate legal advice on how such insolvency events might affect your aged care service, whether by individual organisations or via peak body groups, should be urgently sought and highly regarded.
While the government is moving to amend the rules pertaining to insolvency and directors’ liabilities to manage through these extraordinary times, the issue of the RAD debt repayments still looms a large unresolved matter. Providers and residents may take so comfort that the Australian Government has guaranteed the RAD if an aged care provider defaults, but that is a complicated matter of its own. With a total RAD debt of around $30 billion, a 20% loss of resident lives who are owed a RAD equates to $6 billion – a significant financial impost on the system throughout this year if the coronavirus impact is realised.
Sorry to be so sombre on this occasion, but as always, nice chatting!