Senate Community Affairs Legislation Committee, , 7:51:56 to 7:58:23
The hearing examines how pricing affects diverse providers, from large corporate entities to small regional facilities. IHACPA notes the model is designed to put downward pressure on spending, described as a 'shoe designed to pinch.'
Topics: Health, Efficiency dividend
Speakers: Prof Michael Pervan, Senator The Hon Anne Ruston
So your your pricing obviously has to take into account um the various different business models that operate across the sector from you know your your charitables, your small little tiny regional ones, um, your not-for-profits, and obviously your big for profits. Um you've obviously got um if you if you try and average everything out across you know those sectors, um you know it's a bit like asking you what the average temperature in Australia is going to be today, you know, it'd be 33 degrees in Darwin and 12 degrees in Hobart. So you know, saying that the average is 24 degrees is a pretty useless number. Um so sort of going back to how you actually do that assessment. I mean, what factors do you take into account apart from obviously the weightings for the different levels in terms of understanding the the differentiation between various homes? Because I mean you've just gone out with a 2.55% change. It's pretty blunt instrument.
It is a pretty blunt instrument. Um but that's the instrument that we're directed to produce. So under that same direction, uh we are um we don't provide advice on viability or on any of those broader issues that we're discussing. We are directed to stay in our lane, as they say, on examining the costs and using that approach that we use for hospitals to produce pricing advice for the minister and for the department. So there are, of course, there are price weights and there's all sorts of other considerations, but uh it's one of the things that yes, we we discuss often that we have everything within that group of private for profit providers with hundreds, if not thousands of beds, and then uh my favourite from WA, uh a residential care facility that's run by the local ACO in Robin that has six beds and the funding model has to work in some way across all of those. So we have to be confident that the ANAC at its various classes will provide sufficient funding for our person at that ANAC class for that day.
So to that point, your direction through the instrument under which you make these assessments and so you've based it on 2324 data because that's the latest full data that you've got. If the viability of the age care sector in 2324 was not sound, if you are using so is the way you have to calculate it based on that's what the 2324 cost premise was, even if people were going broke in 2324, we then build all our indexation because you're not taking into account viability, profitability, etc. You're just taking into account this is what the cost was in 2023.
This is what they spent, yeah.
Yep. And now we're gonna it they might have spent it, but they could have been losing money. They so it is it not a flawed premise that you should be building a system without taking into account the fact or sort of making recommendations about the financial the financing of a system. Um, you know, if you're building a you know a a financial model on a broken system without actually recognising the viability of that system where you start, aren't you just perpetuating the problem? I can't speak for government or for No, no, I'm just asking you in terms of your your your academic requirement or your requirement to make the I mean if they were losing money in 2324, you've based all your figures on the the what they spent in 2324. Um if you're indexing on the back of that, you're just indexing them into continued no viability or lack of liability.
So yes, the model does put downward pressure on spending because it uh it's meant to. I mean, to quote former Prime Minister, this shoe was designed to pinch. Um and in fact that's why the model was developed in the butt it wasn't designed to cut the circulation, so your foot. No, it was not. But um it's it's why this model was uh instigated in 2011 for the hospital sector was to put downward pressure on hospital price growth, which at that time was in the order of 14%. So it will put that downward pressure on, but there is um you know a mechanism by which with feedback with people providing us with that information, um we can if there's data to support an adjustment, then we can make an adjustment. What we have at the moment is a lot of narrative and what we're seeing from the ACFR and uh from the other data sources is that while a lot of providers are reporting that they're not viable, and I don't disbelieve what they're reporting, the data shows that they are functioning, that they're still operating. So there's nothing, there's no source that I can put my hands on to say the price is too low or we're not capturing the right data to ensure viability.
So is that a maybe a call to the sector and come up with a better evidence base to show that you're going broke if you want me to take that into account? Or can you take it into account that they're going broke?
Um well, it's never been raised, so um to be honest, I'm not particularly um sure how we would do that. Um but if their costs are going higher than the price, we will see that. So if when we get the next lot of data, that will be that the 2425 data will cover a year where our price was in place. So if the cost data is higher than the price that we were recommending to government, the government accepted, then that differential shows us that the price was wrong.
Yeah, but it's two years late. So um can I just ask you how do corporate administrative costs get allocated across care accommodation in everyday living?