On 18 February, the Aged Care Quality and Safety Commission quietly released an ‘Exposure Draft’ for the Aged Care Financial and Prudential Standards 2025. In it the Federal Government crossed the line into retirement villages. 

See the wording above. In simple terms it means village operators will have to hold in cash 10% of all potential payouts to departing residents. 

Given the average resident stays nine to ten years, this would mean all the ‘profit’ for the year must be kept as cash. This does not work at so many levels. 

Why? And what can this mean? Village legislation is state based; aged care is federal based. But the federal Commission’s draft regulations wants to in effect control the liquidity of village operators that also deliver aged care.  

The two predominant reasons are, first, the Federal Government funds aged care to the tune of $38 billion a year, and wants to know the businesses receiving that cash are liquid (meaning stable and can meet their financial responsibilities). 

Second, this is the third time the Department of Health and Aged Care has recognised that villages have a future in delivering aged care at scale. 

Its exposure draft for the Aged Care Bill 2023 published on 14 December 2023 says if a village has aged care bed like facilities and claims aged care like fees, those facilities (and the operator) will have to comply with all aged care regulations. 

Second, the federal Department has agreed to pilot and fund ‘shared care’ in 30 villages, where home care packages can be ‘shared’ to pool cash to fund care related services for all village residents, like a registered nurse on site. 

And now this liquidity requirement. Note, in the draft, it applies only to operators that also have residential aged care services, but they don’t have to be on the same physical site. If you have a separate stand alone village, you are still caught. 

Is this liquidity call a fair and reasonable demand? We asked the Department how many aged care operators have gone bust and had to be baled out. Their response to us yesterday: 

Response:  

• Two aged care providers have ceased operating in last three years and triggered the Accommodation Payment Guarantee Scheme.  

• In these instances, the Australian Government repaid residents' Refundable Accommodation Deposits (RADs). 

• Neither provider is understood to have delivered retirement village services. Retirement villages are subject to state and territory-based legislation under the Aged Care Act 1997. 

Two providers in three years, out of 750, with nearly 50% operating at a loss (according to the StewartBrown Quarterly Survey). That actually sounds like a positive result. 

Our view is that customers will increasingly insist on staying in their village home receiving very high levels of home care and hospital in the home, rather than moving to residential care, if they can get a bed. 

This means more federal cash will be flowing into the village and with it, more regulation. 

This liquidity move was not discussed with the sector before it appeared in the Draft. Do we want policy formed by bureaucrats in isolation? 

Last Wednesday the new Aged Care Quality and Safety Commissioner Liz Hefren-Webb told Senate Estimates "I've had some robust feedback". 

Peter Edwards, Acting Deputy Commissioner ACQSC, maintained the regulator had consulted broadly when developing the liquidity ratios, including with the Older Persons Advocacy Network (OPAN), Council on the Ageing (COTA), Ageing Australia, McGrathNicol, StewartBrown, and the Aged Care Workforce Remote Accord. 

There are no providers mentioned here, and we checked with StewartBrown – they did not know of the village liquidity inclusion. 

Ageing Australia and its members were taken by surprise on the direct aged care liquidity requirements. 

We are aware that the Retirement Living Council has gathered the CFOs of its members to shape a response.  

They all have until 7 March; that is this Friday, 15 working days since the Draft was quietly released for comment. 

The question then: is this the canary in the coal mine for the retirement village sector, warning that increased federal regulation is likely as the sector supports more care delivered in its independent living units?