Proposed aged care funding model summarised

Report and consultations open

On Friday 15 March the Department of Health released a report on the Resource Utilisation and Classification Study (RUCS) which was undertaken by The Australian Health Services Research Institute (AHSRI) at the University of Wollongong in December 2018[1]. The purpose of the study was to determine the characteristics of residents that drive residential care costs, and use this information to inform the government’s consideration of future reform options. It proposes a new Australian National Aged Care Classification (AN-ACC).

The department is now seeking targeted feedback on proposed residential aged care funding reform options. Consultation on the proposed funding model closes 31 May 2019. To view or download the consultation paper or provide a submission to this go to the department’s consultation hub.

Ideal provides a high level summary of the intentions and recommendations.

In considering the results and recommendations included in “Report Six: AN‐ACC: A national classification and funding model for residential aged care: synthesis and consolidated recommendations”, it is necessary to distinguish between three key ideas:


The cost of care for people living in residential aged care is in scope for RUCS. Capital accommodation and ‘hotel’ services are out of scope, as is respite care for non-permanent residents.

Funding (payment) model and policy

Funding and payment issues are in scope. The role of the RUCS research team is to develop the funding model and provide policy advice on its potential implementation.


Price is out of scope for RUCS as price is ultimately a decision for payers (both government and consumers). But the RUCS has generated significant evidence that can aid decision-making about pricing.

summary of the Key elements of the AN-ACC assessment and funding model

The new assessment and funding model presented in this series of reports has been termed the Australian National Aged Care Classification (AN-ACC) system. The AN-ACC assessment and funding model is based on six key design elements:

  • Resident assessment for funding to be separate from resident assessment for care planning purposes.
  • Assessment for funding purposes to be undertaken by external assessors capturing the information necessary to assign a resident to a payment class.
  • Assessment related to care planning to be undertaken by the residential aged care facility based on resident needs and underpinned by consumer directed care (CDC) principles.
  • Provision of a one-off adjustment payment for each new resident that recognises additional, but time-limited, resource requirements when someone initially enters residential care.
  • A fixed price per day for the costs of care that are shared equally by all residents. This may vary by location and other factors.
  • A variable price per day for the costs of individualised care for each resident based on their AN-ACC casemix class. There are 13 classes identified that account for end of life needs, frailty, functional status, cognition, behaviour and technical nursing needs.


The following recommendations have been summarised from the report.

  1. That the AN-ACC Version 1.0 (AN-ACC Assessment Tool) be adopted as the national standard classification for residential aged care.
  2. That the AN-ACC Assessment Tool be adopted as the national standard funding assessment for residential aged care.
  3. That all new residents be assessed by an independent assessor using the AN-ACC Assessment Tool within four weeks of entering residential aged care.
  4. That residents requiring reassessment be assessed by an independent assessor using the AN-ACC Assessment Tool.
  5. That aggregate de-identified data captured in the AN-ACC assessment be released in the form of an annual public report on the needs of residents in the residential aged care sector.
  6. That the new AN-ACC funding model allow for reassessment based on significantly increased needs as indicated by (1) a significant hospitalisation (2) a significant change in mobility and/or (3) a standard time period; twelve months for Classes 2 to 8 (those classes with lower mortality rate) and six months for Classes 9 to 12 (classes for people who are not mobile and are expected to deteriorate at a higher rate).
  7. That the Commonwealth consider the introduction of reassessment charges for any home that routinely triggers unnecessary reassessments.

There is no requirement for reassessment in the new model. If the capacity of the resident improves after entry into residential care, the payment rate does not change and there is no need for a resident to be reassessed or assigned to a lower paying class. This is an explicit incentive for high quality services with a focus on restorative care and reablement.

  1. There be no requirement for reassessment in the AN-ACC funding model.
  2. That a best practice needs identification and care planning assessment tool be developed for use by residential aged care facilities.
  3. That, as a condition of subsidy, each resident undergo a care planning assessment at least annually and that the outcomes of this assessment be discussed with residents and carers and be used as the basis of an annual care plan.
  4. That the subsidies payable to homes for the care of residents consist of three components (base care tariff, AN-ACC payment and adjustment payment), each of which is expressed for funding purposes as a National Weighted Activity Unit (NWAU).
  5. That there be a specified table of base care tariffs reflecting the structural costs of delivering care in different types of facilities.
  6. That, in residential care facilities in remote areas (MMM 6 or MMM 7), the base tariff be based on approved beds (capacity) with all other base tariffs being based on occupancy.
  7. That, in addition to the base tariff, homes receive a daily subsidy for each resident based on their AN-ACC class. The AN-ACC classes are set out in Error! Reference source not found..
  8. That the tariffs, classes and NWAUs set out in Error! Reference source not found. be adopted in the first version of the AN-ACC funding model for residential aged care.
  9. That residential aged care facilities not be advised of the resident’s exact AN-ACC class until after the person is in care.
  10. That the default payment class at entry be Class 2. Payments are retrospectively adjusted to the date of entry once the assessment is undertaken.
  11. That the one-off adjustment payment be set at 5.28 NWAUs.
  12. That the Commonwealth, working through the Department of Health and the Aged Care Quality and Safety Commission, build strong accountability into the system to ensure that the adjustment payment be used for the intended purpose, not added to the bottom line and not contracted out to third party providers.
  13. That existing Commonwealth subsidies be addressed in three different ways:
  14. The homeless supplement and the adjusted subsidy reduction be discontinued once the AN-ACC model is introduced.
  15. RCS payments for grandparented residents be progressively phased out with all current RCS recipients to transition to the AN-ACC within two years.
  16. The daily residential respite subsidy, the oxygen supplement, the enteral feeding supplement and the veterans supplement be the subject of supplementary RUCS studies with current recipients being grandfathered until the results of the supplementary study are available.
  17. That the Commonwealth develop a national transition strategy with progressive implementation of the AN-ACC over two years.

The AN-ACC funding model is designed as a funding distribution model which applies price weightings (NWAU) to different types of facilities and residents. It does not determine the price that the Commonwealth pays. The price is a policy decision for government. The government could decide to implement the AN-ACC funding system so that it is cost neutral at the system level. Likewise, the government could use the AN-ACC to distribute a growth budget.

Irrespective (and as demonstrated in Report 4), there will inevitably be some homes that will experience a funding increase with the introduction of the AN-ACC and some that would experience a funding decrease.

In transitioning to the new AN-ACC model, it is critical that no home experience the sudden loss of significant income as the result of the new funding model. Viability and sustainability are critical issues for the whole sector.

It is therefore proposed that, as part of the transition strategy, the Commonwealth implement a stop-loss policy for homes that would experience a funding decrease to give those homes time to adjust to their new income level. An initial stop-loss threshold of 5% is proposed. If a home were to experience financial losses by the introduction of the AN-ACC model, any income reduction of less than 5% will be carried by the home. Any loss greater than 5% would make a home eligible for a transition payment up to the 95% threshold for a period up to two years from the date of transition.

This threshold applies at the level of the home as a whole rather than the individual resident. Every home will have some residents who would be funded more under AN-ACC than ACFI and vice versa. The transition payment strategy applies only to homes where the net effect is negative for the home as a whole.

Given that implementation of AN-ACC will be incremental, homes would not be able to apply for a transition payment until such time as at least 25% of their residents have transitioned to AN-ACC funding.

  1. That the Commonwealth adopt a stop-loss policy for any home that would experience a significant funding decrease under the AN-ACC model with an initial stop-loss threshold of 5% and transition payments payable for up to two years from the date of transition.
  2. That a national implementation plan with indicative time lines, costs, consultation strategy and communication plan be developed by the Department of Health.
  3. That the Commonwealth undertake an annual residential aged care costing study and, informed by that, determine the dollar value of an NWAU each financial year. More detail about the costing process is included in Report 3.
  4. That, in the context of broader reform proposed for aged care assessment, the Commonwealth adopt a national networked external assessment model for the AN-ACC funding assessment.
  5. Irrespective of the broader organisational aspects, external assessment be undertaken by credentialed registered nurses, occupational therapists and physiotherapists who have experience in aged care, complete approved AN-ACC assessment training and comply with continuing professional development requirements.

Information technology

The AN-ACC assessment can be recorded by the assessor using either a paper or digital form. Either way, the results of the assessment then need to be fed into a software ‘grouper’, a software program that assigns each resident to one of the thirteen AN-ACC classes.

This information then needs to feed into the Department of Human Services (DHS) payment system, along with the fixed care subsidy rate for the specified facility. The grouper can be part of the DHS IT system or it can be a standalone system which can feed data into the DHS payment system.

Once the AN-ACC data are fed into the DHS system, the IT and payment issues are handled in the same way as the current system.

  1. That the Commonwealth develop an Information Technology strategy for the progressive implementation of the AN-ACC funding model.

Culture change and sector education

This funding model represents a significant change for the residential aged care sector and planning for its incremental implementation needs to commence as soon as government announcements are made.

Planning for the technical implementation of the model needs to be accompanied by an investment in change management. The government and the sector need to enter into a partnership to implement the new model, recognising that this is in the interests of residents, providers and government.

At the same time, there will inevitably be the need to fine-tune the model as implementation progresses. The Department will need systems in place for sector engagement and consultation as implementation progresses as well as access to technical expertise.

This includes access to expertise on how to use the data to better measure the needs and changing needs of residents, the measurement of resident outcomes and adverse events and the use of the data to predict future demand for residential aged care.

  1. That the Commonwealth work with peak bodies to develop and implement a change management strategy.
  2. That Government commit to an ongoing aged care research and development agenda that builds on the work of the RUCS and that includes assessment, classification, costing and outcome studies.
  3. That a study equivalent to RUCS be undertaken in the community aged care sector with a view to expanding AN-ACC so that it includes aged care delivered in all settings.


Base care tariff and AN-ACC Version 1.0 NWAUs

Base care tariff Facility description Base care tariff NWAU
Tariff 1 Indigenous, MMM=7 1.80
Tariff 2 Indigenous, MMM=6 0.78
Tariff 3 Non-indigenous, MMM=6-7, < 30 beds 0.68
Tariff 4 Non-indigenous, MMM=6-7, 30+ beds 0.52
Tariff 5 Specialised homeless 0.92
Tariff 6 All other RACFs 0.49

MMM = Modified Monash Model. A measure of geographic remoteness where 7=most remote and 1=major metropolitan

AN-ACC class Resident description AN-ACC NWAU
Class 1 Admit for palliative care 0.96
Class 2 Independent without CF 0.18
Class 3 Independent with CF 0.30
Class 4 Assisted mobility, high cognition, without CF 0.20
Class 5 Assisted mobility, high cognition, with CF 0.36
Class 6 Assisted mobility, medium cognition, without CF 0.34
Class 7 Assisted mobility, medium cognition, with CF 0.47
Class 8 Assisted mobility, low cognition 0.51
Class 9 Not mobile, higher function, without CF 0.52
Class 10 Not mobile, higher function, with CF 0.83
Class 11 Not mobile, lower function, lower pressure sore risk 0.80
Class 12 Not mobile, lower function, higher pressure sore risk, without CF 0.78
Class 13 Not mobile, lower function, higher pressure sore risk, with CF 0.96
Other payments Payment description One-off NWAU
Adjustment payment Payment on entry into residential aged care



CF = Compounding Factors (refer Report 1)





Funding reform is not an end in itself. In addition to a more efficient and equitable funding model, this funding reform provides an important opportunity to drive fundamental improvements in resident experiences and outcomes. It also provides the evidence base necessary to evaluate the value for money that the sector achieves.

The results presented in this series of reports suggest the potential of the AN-ACC classification to provide a meaningful system for measuring and benchmarking resident outcomes. Mortality rates and rates of outcome measures, such as falls, vary significantly by AN-ACC class. Reporting resident outcome measures by AN-ACC class allows for resident outcomes to be routinely evaluated, taking into account the mix of residents in each facility.

This will allow (for the first time) consumers, providers and government to make meaningful judgements about the quality and outcomes of residential aged care and to fairly compare the quality of care provided at different facilities. This is the ultimate measure by which the aged care sector should be judged.