Catholic Health Australia – Submission on the proposed new Financial and Prudential Standards

Executive summary

Catholic Health Australia (CHA) is Australia’s largest non-government grouping of health, community, and aged care services accounting for approximately 12 per cent of aged care facilities across Australia, in addition to 20 per cent of care provision in the home. Catholic aged care providers have a vital interest in working with the Australian Government to ensure the sustainable provision of aged care and support services for older Australians meet community expectations of safe and quality of care.

CHA appreciates the opportunity to provide input into the Aged Care Financial and Prudential Standards 2025 Exposure Draft (ED) and to the guidance and consultation document The new Financial and Prudential Standards | Aged Care Quality and Safety Commission (the guidance and consultation document). We look forward to working with the Aged Care Quality and Safety Commission (the Commission) during the drafting period to ensure the new Standards achieve their intended outcomes. Our goal is to ensure they fully support a high-quality and safe aged care system for all Australians irrespective of their wealth or geography.

CHA is supportive of the intent of the new Standards in addressing the Royal Commission recommendations that the Australian Government has an interest in managing its prudential risk. CHA also appreciates the work undertaken by the Commission to address the Royal Commission recommendations on ensuring financial viability of the aged care sector.

However, as drafted, the proposed Liquidity Standard would have a significantly detrimental impact on providers’ operations and the investability of the aged care sector to little discernable benefit on the sector’s financial and prudential health. This is unwarranted given that it is the understanding of CHA and its members that there have been very few prudential failures in the aged care sector. The proposed standard unduly penalises providers who have been financially responsible and prudent. CHA and its members have serious concerns relating to the scope outlined in the proposed new Liquidity Standard, with extensive unintended consequences noted on investing in property and refurbishments; on retirement villages, independent living units and other entities of the provider; and on the ability of CHA members to invest in our Mission work. The transition timeframe is also far too short and would be extremely hard for many providers’ Boards to comply with.

Instead, assets of an aged care entity that are not related to the residential aged care service should be out of scope (e.g. retirement living or other social services) and providers should be required to identify and report on their own minimum liquidity amounts based on their own individual circumstances. If this is not possible, set an agreed percentage between 5-10% (as clarified with the sector) of the residential aged care asset refundable accommodation deposits as the minimum liquidity amount.

We have also recommended changes to wording in the ED and to the guidance document to better align with the Royal Commission’s findings and the scope of what is required to perform prudential management compared to financial management of residential aged care services.

Other observations and issues related to the new Standards articulated in our submission include:

1. Financial and Prudential Management Standard: CHA and its members are concerned with the language contained in the Exposure Draft (ED) of the financial and prudential management standard. In the main, members are concerned with the lack of objectivity being used in outlining the requirements to implement and maintain a financial and prudential management system.

2. Investment Standard: Most providers are already undertaking the activities set out in the Investment Standard. CHA and its members are concerned about the inconsistency in wording, and therefore, potential misinterpretation, between supporting guidance documents about the Standards and the ED of the Aged Care Financial and Prudential Standards 2025. There is a need for greater consistency and alignment between future factsheets and the finalised Aged Care Financial and Prudential Standards 2025 to support its implementation.

3. Implementation: Given the significant compliance changes impacting the sector, and other reforms in parallel, CHA recommends that implementation of the new Standards is deferred until business impacts are better known, or at least to 1 July 2026. It is equally important that the sector has access to the funds required to better support implementation of the changes