The Federal Court handed down a decision in Regis Aged Care Pty Limited v Secretary, Department of Health  on 2 March 2018, confirming that the Aged Care Act 1997 (Cth) (Act) disallows approved providers from levying an “Asset Replacement Charge” on aged care residents.
In Regis Aged Care Pty Limited v Secretary of Health  FCA 454 (6 April 2018) the Federal Court made the following declaration:
“The Asset Replacement Charge, provided for by cl 7 of the Regis Residential Care and Accommodation Agreement (in the form set out at Tab A to the Amended Agreed Statement of Facts filed on 10 October 2017), is a charge prohibited by s. 56-1(e) of the Aged Care Act 1997 (Cth).”
The decision is a reminder to aged care providers to ensure that they adhere to legal requirements in charging fees to residents.
Regis imposed upon certain (but not all) individuals who received care in the aged care facilities it operates an “asset replacement charge” to “fund reinstatements of fixtures, fittings and infrastructure, rebuilding and construction of, or at, Regis’s residential care facilities.” Regis sought a direction that the charges were lawful.
A term requiring payment of the asset replacement charge was part of the written residential care agreement between the resident and Regis.
The Department issued notices to Regis under section 9-2 of the Act and the proceedings were commenced as a consequence of the failure of the parties to reach an agreed position.
The Act and the Aged Care (Transitional Provisions) Act 1997 (the Transitional Provisions Act) provide a scheme of fees that aged care providers (receiving subsidies under the Act) can charge to residents. Relevant provisions are found in Division 52C (Residents fees) and Division 56 (What are the general responsibilities relating to user rights?) of the Act and Division 58 (What are the responsibilities relating to resident fees?) and Division 57 (What are the responsibilities relating to accommodation bonds?) of the Transitional Provisions Act.
These provisions require that fees charged for, or in connection with, residential care, or for care and services specified in the Quality of Care Principles 2014 (the Principles) cannot exceed the maximum calculated under Division 52C of the Act and Division 58 of the Transitional Provisions Act.
Fees charged for ‘other care or services’ must be agreed with the resident beforehand and the provider must give the resident an itemised account of the other care or services.
Providers are not permitted to charge fees above the maximum amount worked out under the Act and Transitional Provisions Act for services or activities that are part of the normal operation of an aged care home, or are required to be delivered as part of a provider’s responsibilities. In some circumstances providers may charge additional fees for ‘other care or services’ only where the resident receives a direct benefit or has the capacity to take up or make use of the services.
This differs from extra service fees that are charged for rooms within aged care homes (either individual rooms or across the home) that have been granted extra service status by the Department. Extra service fees are for higher standards of food, accommodation and hotel-type services but not for care.
Mortimer, J of the Federal Court held that the asset replacement charge (ARC) was inconsistent with the scheme established by the Act and its associated regulatory instruments and is prohibited by section 56-1 of the Act.
The Court relevantly referred to Division 52C and section 56-1(e) of the Act. Mortimer J held at para 118 that the prohibition against a fee of the kind levied by Regis through the ARC can be located in section 56-1(e) of the Act.
Division 52C sets out the maximum resident fees that can be charged to residents. Resident fees are fees charged to a care recipient for, or in connection with, residential care provided to the care recipient through a residential care service.
Section 56-1(e) sets out the responsibilities of an approved provider in relation to a care recipient to whom the approved provider provides, or is to provide, residential care, including “to charge no more for any other care or services than an amount agreed beforehand with the care recipient, and to give the care recipient an itemised account of the other care or services”.
The Court at para 124 considered that the phrase “to charge no more than” is a language of prohibition: an approved provider is prohibited from charging more than what is stipulated.
The Court held at para 125, that the text and structure of Division 55, read with the rest of the legislative scheme, discloses an intention that only the fees and charges that approved providers may impose on care recipients are those fees and charges made in return for the provision of care and services to the person who pays the fees and charges.
In return for subsidies (and the use of accommodation payments and contributions, and access to grants), approved providers are to fulfil their responsibilities. Subject to the restrictions outlined, they are not precluded from charging additional sums of money for aged care they provided. What they are precluded from doing is charging recipients of care any fees which are unrelated to the care and services provided to those individuals.
What types of services cannot attract additional fees?
The Commonwealth Department of Health has released an information paper available at:
The paper states that approved providers cannot charge additional fees for:
- items listed in Schedule 1 of the Principles (some exceptions apply for items in Part 3); or
- other services or activities that would form part of the general operation of the aged care home; or
- services that are required to be delivered as part of a provider’s responsibilities.
Examples of ‘other care and services’ for which charging of additional fees to residents is not permitted include, but are not limited to:
- maintenance inside and outside the aged care home;
- any repairs or replacements necessary because of normal wear and tear;
- general refurbishment of the resident’s room after they have left the aged care home;
- services or activities that would form part of the general operation of the aged care home, or are required in order to deliver residential care to the individual;
- employment of administration staff where the staff member is primarily undertaking activities related to the general operation of the aged care home; and
- capital costs, asset management or replacement.
Obtaining agreement for additional services and fees
The provider must obtain agreement from residents before delivering any care or services for which additional fees are chargeable.
Accordingly, the key points taken from the case are as follows:
- for care and services that an approved provider is required to provide to residents under the Act, they are prohibited from charging more than what is stipulated in the Act; and
- for other care and services, an approved provider may only impose a fee if the fee has been agreed beforehand and is related to the care and services provided to that resident and the provider must give an itemised account of the other care or services.