Village operators are capitalising on consumer demand for “premium” aged care accommodation by charging an “accommodation supplement” for premium rooms, which is in turn providing sufficient economic returns for operators to build more aged care beds.
Earl Gasparich, CEO of one of the country’s largest village operators, Metlifecare, told the latest issue of SATURDAY that the evolution of New Zealand’s continuum of care model has seen operators develop a ‘user pays’ premium fee structure for premium aged care accommodation which is incentivising the development of new aged care beds as villages are brought online.
Provides can charge “accommodation supplement” for better-than-standard rooms
Around 15 years ago, village operators realised that they could create a more attractive value proposition for customers by building aged care on their sites and providing a continuum of care for residents.
However, the poor funding from Government into the aged care sector has meant that operators have had to turn to charging for “premium” accommodation to improve their bottom line.
“What operators can do, in the event they are offering more than a standard room (a room with ‘additional features’), is charge a premium accommodation charge on top of the Government daily care fee. For example, if a room has an ensuite, or an ensuite and a balcony, or is located near a nurse station, an additional premium accommodation charge can be made,” said Earl.
“It is obviously up to the resident whether they are prepared to pay for the premium charge and, if they do not, they in theory have the option to look for other operators who offer standard rooms. The level of the premium charge is also unregulated and set largely by supply and demand in local markets.”
A number of operators have also pioneered the idea of an accommodation bond with a Deferred Management Fee (DMF) – effectively the retirement village model operating in aged care.
Under this model, premium rooms are provided under an occupation right agreement – the equivalent of paying a RAD, however with a deferred fee deducted from the deposit at the end of the resident’s occupation.
Smaller Not For Profits at a disadvantage
There are challenges with this model. Only larger operators have the capital to develop new aged care facilities and charge premium accommodation supplements.
This results in significant underfunding for operators that only offer standard accommodation, explains Earl (pictured right).
“Well over half of the aged care beds in New Zealand are now provided through retirement village operators, but what is lost on our Government is that they are all largely premium beds.
“There is no extra funding coming into the industry for operators who may be operating facilities that are in locations where they can’t charge premiums, or the population can’t afford any further payments.”
This could be resolved, however, by a user pays system – where care is funded by the Government and accommodation and everyday living is funded by the customer.
“I have often advocated that the accommodation cost should be either funded by the resident completely or through a means test, or if the resident does not have the financial means, it should be funded out of the Government’s housing budget, not the health budget,” said Earl.
Despite its shortfalls, the New Zealand model, its financial returns provide a compelling case for village operators to support a ‘Plan B’ to introduce user pays.
Read the full story in the latest issue of SATURDAY HERE. SATURDAY is moving to subscription-only from 2 April – subscribe HERE for full access.
Hear Earl speak at the LEADERS SUMMIT, Thursday 24 March and Friday 25 March, in Sydney. Register HERE.
