Researchers from our Faculty of Medicine and Faculty of Business, Economics & Law have co-authored a report on the cost of residential aged care for the Royal Commission into Aged Care Quality and Safety. The report adds more evidence on the performance of the sector, and will ultimately contribute to the final recommendations, due to be handed down in February 2021.
The report was a joint collaboration between the Centre for Health Services researchers A/Prof Tracy Comans, Dr Kim-Huong Nguyen and Prof Len Gray, and Centre for Efficiency and Productivity Analysis (School of Economics) researcher A/Prof Valentin Zelenyuk, and supported by PhD candidates from both centres.
In summary, the research team was given access to five years of de-identified data on quality indicators and costs covering approximately one third of the 2700 facilities currently operating in Australia. This dataset was the most comprehensive available to date for this type of analysis. The quality indicators available covered consumer experience ratings, reported complaints and issues, accreditation standards, and prescription of four high-risk medicines (sedatives, antipsychotics, opioids and antibiotics).
In investigating the quality of facilities, we found that facilities clustered into three quality levels (Q1, Q2 and Q3) based on the composite quality index developed for this project. Costs were provided at facility level and covered care, hotelling, accommodation, administration and other costs.
We found that:
Overall, the sector is considered as relatively efficient with most facilities near the efficiency frontier. Essentially, this indicates for a majority of facilities there is little opportunity to improve the sector with further efficiency gains alone, and additional funding may be required to improve quality.
There is a positive relationship between cost and quality level with small (<30 beds) and very large (>200 beds) facilities where it costs more to provide higher levels of quality.
For small-sized facilities, the average efficient cost to provide the higher level of quality care (Q1) per resident bed day was $274, with Q2 and Q3 levels estimated at $267 and $261, respectively. For facilities with more than 30 beds, the average efficient cost per resident bed day in the financial year of 2018/19 were $235, $224 and $234, respectively.
Larger facilities cost less to run per person than smaller facilities, i.e., there are some scale economies that aged care providers can exploit to lower their average costs.
On the other hand, smaller facilities and those owned by government were more likely to meet the higher quality levels. However, due to the small proportion of small-sized facilities in the current market, the result is only indicative, and warrants further research in the future.
It is estimated that to lift all facilities to the Q1 level it would have cost an additional $621 million in financial year 2018/19. To lift all facilities to Q1 and operate as small homes it would cost an additional $3.23 billion.
To our knowledge, the report is the most comprehensive efficiency analysis to date of an aged care sector internationally. However, as for any study, we recognise there are always some limitations. In particular, the breadth of quality indicators available and the completeness of data across years were among such limitations and challenges. Indeed, currently, very limited measures of quality of care or quality of life of residents are collected and what is done is often sporadic and not collected systematically or at regular intervals. Improving quality measurement and reporting would allow better monitoring of the sector over time and help consumers in choosing facilities for themselves or family members.
Improving the quality of the aged care sector was the key motivation for the establishment of the Royal Commission. This may require an increase in funding for facilities to be able to achieve the expected level of quality. While it was outside the scope of this project, we suggest that the right incentives need to be put in place to make sure the increased funding actually results in the improved quality we expect, while maintaining the same (or higher) level of cost efficiency. Otherwise, additional funding may increase inefficiency without improving the quality of care we all desire to see.
In Australia, we are lucky to have one of the best (though not without problems) healthcare systems in the world, as was confirmed by many international rankings, as well as tested by an unexpected and ruthless auditor--the ongoing pandemic. It is well overdue to have, and we think we can have, a world leading aged care system in Australia too—with a decent quality and efficiency that all Australians deserve.
A/Prof Tracy Comans is a NHMRC Boosting Dementia Research Leadership Fellow in the UQ Centre for Health Services Research, and an adjunct Research Fellow in Metro North Hospital and Health Service. Her current work is focussed on developing new methods to measure quality of life for people living with dementia. This work will ensure that programs of care are targeted at the areas that people living with dementia value the most.