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Funding of Aged Residential Services Consultation Document Disability Issues Directorate Ministry of Health September 2001 Aged Residential – Consultation Document Page 1

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Page 1: Funding of Aged Residential Services

Funding of Aged Residential Services

Consultation Document Disability Issues Directorate Ministry of Health

September 2001

Aged Residential – Consultation Document Page 1

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Table of Contents 1.0 Introduction............................................................................................................. 3

The purpose of this consultation................................................................................ 3 Why the consultation is important............................................................................. 3 The process for the consultation................................................................................ 3

2.0 A different way of funding residential care for older people...................................... 5

Current purchasing arrangements.............................................................................. 5 Proposal to move to a section 88 Notice ................................................................... 5 What is a section 88 Notice? ..................................................................................... 5

3.0 How things will change for providers......................................................................... 9

Access to a section 88 Notice.................................................................................... 9 National consistency................................................................................................ 11

4.0 How things will change for residents........................................................................ 13

Standard of Care ...................................................................................................... 13 More Choice ............................................................................................................ 13

5.0 Things that won’t change.......................................................................................... 14 6.0 Process from here...................................................................................................... 15

7.0 Give us your views.................................................................................................... 16

Appendix 1 - Prices for Aged Residential Care Services. ................................................ 23

Background.............................................................................................................. 23 Pricing Summary ..................................................................................................... 23 Some Key Results.................................................................................................... 25 Indicative Prices ...................................................................................................... 27 Prices to apply from 1 December 2001. .................................................................. 29

Appendix 2 – Performance and Service Issues................................................................. 32

Quality audit and monitoring................................................................................... 32 Summary of Service Requirements ......................................................................... 34

Appendix 3 – Sections 88 & 89 from the NZ Public Health and Disability Act 2000..... 36 Appendix 4 - Draft Section 88 Notice .............................................................................. 37

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1.0 Introduction The purpose of this consultation The purpose of this consultation is to seek your comments on a proposal to change the way the Ministry of Health funds state subsidised residents in aged residential care facilities. In the first part of the document we explain the proposal in some detail and discuss what it will mean for you and your residents. We ask you to think about a number of questions that are repeated later with an opportunity for you to respond. Background information and documents relevant to the proposal are included in five appendices. There is a detachable booklet at the end of the paper for your submissions. Submissions must be in by 5 October 2001.

Why the consultation is important This consultation is important because the proposal will affect the way you do business with the Ministry of Health as the funder of state subsidised residents in your facilities. The Ministry is therefore interested in your views on the proposal.

The process for the consultation Providers have three ways of obtaining information on the Ministry’s consultation proposal:

1. This consultation document contains comprehensive information on the section 88 funding proposal. It includes a series of questions on key issues.

2. Consultation material will be posted onto the MoH website (www.moh.govt.nz). 3. Public meetings will be held around the country to allow providers to hear the issues

directly from Ministry of Health staff Providers will be able to give their comments and feedback on the consultation proposals by:

1. Responding in writing to the questions asked in the consultation documentation. 2. Responding by e-mail. ([email protected]) 3. Asking questions or making comments at the meetings. A record of the issues arising at

the public meetings will be made as part of the consultation feedback process. Key dates for the consultation

Action Due Date All printed material posted on MoH website 3 SeptemberMail out of all material begins Start 3 SeptemberPublic meetings commence 10 SeptemberPublic meetings end 18 SeptemberFinal date for lodging submissions 5 OctoberSubmission analysed 24 OctoberMinistry decision announced 31 OctoberSubject to the outcome of the consultation, the Ministry intends to have new arrangements (section 88 Notice or contracts) in place by:

30 November

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Meeting timetable

Town / City Venue Time Date 1 Whangarei Quality Hotel

Riverside Drive 10 am 10 Sept

2 Auckland (2 meetings)

Springs Garden Restaurant 956 Great North Road Western Springs, Auckland

10 am & 2 pm

11 Sept

3 Hamilton Quality Hotel, Garnett Avenue

10 am 12 Sept

4 New Plymouth Devon Hotel 390 Devon St East

10 am 13 Sept

5 Christchurch Holiday Inn – Bealey Road 356 Oxford Terrace

10 am 14 Sept

6 Wellington Sharella Motor Inn 20 Glenmore St, Kelburn

10 am 17 Sept

7 Nelson Ocean Lodge 20 Muritai St

10 am 17 Sept

8 Hawkes Bay Kennedy Park Storkey St, Napier

10.30 am 18 Sept

9 Dunedin Dunedin Centre Harrop Street

2 pm 18 Sept

These meetings are expected to last between 2 – 2.5 hours.

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2.0 A different way of funding residential care for older people

Current purchasing arrangements The Ministry of Health spends nearly half a billion dollars annually on aged residential services. The sector includes over 800 facilities delivering care to nearly 19,300 state subsidised residents. This is a significant and important sector for the government. As you will be aware, at present the Ministry contracts with each individual provider for the delivery of services. As a result of this contracting regime there are currently four separate service specifications in use for what is essentially the same service, and over 500 different prices applying. Providers of aged residential care in the North Island and in the Nelson-Marlborough area currently provide services under a letter of agreement which came into effect from 1 June this year and rolled over the existing terms and conditions of providers until 30 November 2001. Providers in the remainder of the South Island have continued on their ‘evergreen’ contract.

Proposal to move to a section 88 Notice The major proposal that we seek your view on is:

The Ministry of Health proposes using a Notice under section 88 of the NZ Public Health and Disability Act 2000 as a means of funding state subsidised residents.

This means that the Ministry of Health is proposing to move away from having individual contracts with each provider of aged residential care services. The current contracts with providers are a means of paying a resident subsidy for individuals who are assessed as needing residential care. The Ministry is now proposing to pay that resident subsidy through a section 88 Notice. Section 88 Notices are explained below. A draft section 88 Notice is attached to this document in Appendix 4. The Notice incorporates the service requirements which are normally contained in the service specification which is attached to all contracts for aged residential care. The Ministry proposes that the s88 Notice should come into effect on 1 December 2001. Your feedback on the content of the section 88 Notice is welcomed.

What is a section 88 Notice? Section 88 of the New Zealand Public Health and Disability Act 2000 allows the Crown to give notice of the terms and conditions on which the Crown will make payments for specified health and disability services. Where a provider accepts such payment, the terms and conditions in the Notice govern the provision of those services.

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This would give the Ministry a straightforward mechanism for dealing consistently and efficiently with all providers of rest homes and private hospitals. Once the Ministry has given notice to the sector in accordance with the Act of the terms which will govern the provision of rest home and private hospital care, all providers who accept payment for that care must provide the care on those terms. This would remove any contractual inequalities that may have previously existed and will ensure consistency across the country. It also makes administering the agreements much easier for both the Ministry and providers. Rather than requiring all 800 providers to sign up to a written agreement, a section 88 Notice comes into force between the Ministry and each provider when the provider accepts payment for the services. Section 88(3) of the Act stipulates that a section 88 Notice comes into force only when it has been published in the New Zealand Gazette. The Gazette is the official newspaper of Government (http://www.dia.govt.nz/DIAwebsite.nsf/URL/TheNewZealandGazette-WhoWeAre ). In addition, the Ministry will send copies of the Notice to all authorised providers (see below for information about authorisation). For your information, the full text of sections 88 & 89 of the New Zealand Public Health and Disability Act 2000 (NZPHDA 2000) is included in Appendix 3. How do I become covered by the Notice?

Providers of aged residential services will apply to the Ministry of Health to become ‘authorised’ to claim funding under the notice for state subsidised residents. Certain conditions will need to be met before a provider becomes authorised. If the section 88 Notice is adopted, existing providers will be automatically authorised to claim for their state funded residents. Providers can of course surrender their authorisation if they choose. Similarly the Ministry can withdraw an authorisation if providers do not meet the terms of the Notice. The grounds on which the Ministry can revoke authorisations are contained in the Notice. Will I see any changes?

On a day to day basis, providers will not notice any change in how they do business. The only exception to this is that there will be no annual contracting round requiring negotiation with Ministry staff. Outline of the proposed Notice

A full (but still draft) version of the section 88 Notice is included in Appendix 4 for your information. The Notice is divided into four parts: Part A – Purpose and Entitlement to Claim

Defines how a provider seeks ‘authorisation’ to claim under the Notice. Defines eligible person etc

Part B – General Terms and Conditions

Similar to the General Terms & Conditions in a normal contract.

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Part C – Service Description Schedules

Schedule One – General Service Specifications Schedule Two – Specialised Dementia Services Part D – Payments

D1 - Payments D2 - Claims Process D3 - Ability of Ministry to withhold payments D4 - Reimbursement of overpayments D5 - Penalties for excess claims Why is the Ministry proposing the change?

The Ministry sees three main advantages in moving to a section 88 Notice. These advantages are outlined below. i) National consistency of price, service specification and quality

Section 88 of the NZPHD Act is designed for situations where national consistency is desirable. A section 88 Notice will provide the ability for the Crown to implement nationally consistent funding arrangements, service specifications and quality requirements that will be more equitable than current arrangements. The Notice will mean that the price a provider receives will be set, and not based on their ability to negotiate well with the Crown. Conversely, providers less well equipped to negotiate will not be prejudiced. ii) Administrative simplicity

A section 88 Notice will be administratively simpler for both the Ministry and providers and save transaction costs for all. iii) Compatibility with the New Zealand Positive Ageing Strategy and the draft Health of

Older People Strategy

When the state pays for the care of an older person who can no longer live independently it is paying for the care of an individual who has been assessed as needing care. Current contracting arrangements do not reflect that the subsidy is linked to the person. A Section 88 notice which clearly establishes residential care funding as a subsidy for individual older people is consistent with the direction of the New Zealand Positive Ageing Strategy and the draft Health of Older People Strategy. In particular it supports the Positive Ageing Strategy health goal of equitable, timely, affordable and accessible health services for older people. It supports the principles that effective positive ageing policies will: • empower older people to make choices that enable them to live a satisfying life and lead a

healthy lifestyle and • ensure older people ..... live with confidence in a secure environment and receive the services

they need to do so. These concepts are developed further in the draft Health of Older People Strategy: Health Sector Action to 2010 to Support Positive Ageing. The focus in the draft strategy is on developing a framework for planning, funding and delivering health and support services for older people to provide an integrated continuum of care to support positive ageing. One of the pieces of work

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signalled in the draft Health of Older People Strategy is analysis of options for funding long-term care. This will lead to advice to Government in 2002.

Questions 1. Are you clear about what a section 88 Notice is? 2. Do you have any comments on the contents of the section 88 Notice?

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3.0 How things will change for providers

Access to a section 88 Notice In general, a provider will be required to seek authorisation from the Ministry of Health to be able to claim for payments under the Notice. Providers will need to meet certain criteria to be authorised, and these are listed in Part A of the Notice (see Appendix 4). In general: • each authorisation applies only to the provider, facility, and category or categories of

residential care specified in the authorisation; • authorisations are not transferrable (between facilities or between providers). The Ministry proposes that providers who currently hold a contract with the Ministry of Health will automatically be authorised to claim under the Notice from 1 December 2001. That is, for each facility a provider owns, the facility will be authorised for the current level(s) of care provided from those facilities. The following providers will need to seek a new authorisation if they wish to receive payment for state subsidised residents. a) Any new providers entering the sector. b) Providers currently in the market but without a Ministry contract for subsidised residents. c) Providers with a Ministry contract wishing to deliver service(s) from a new facility. d) Providers with a Ministry contract wishing to deliver services (from a currently authorised

facility) other than those they are currently providing. e) Providers who purchase a facility or facilities from another provider (who may or may not be

authorised). Some examples will clarify the situation. a) Facility A has 20 licensed resthome beds and 20 licensed hospital level beds. The facility

has a contract with the Ministry for 10 resthome beds and 20 hospital beds. Facility A will be authorised from 1 December 2001 to claim payment for resthome level care for up to 20 state subsidised residents in its licensed resthome beds, and claim payment for hospital level care for up to 20 state subsidised residents in its licensed hospital beds.

b) If the owner of Facility A wishes to build a further 10 resthome beds onto Facility A, the

owner will not need to seek further authorisation because Facility A is already authorised to provide resthome care.

c) Facility B has 30 licensed resthome beds. The facility has a contract to provide 10

resthome beds and 10 dementia beds. Facility B will be authorised to provide resthome care for up to 30 residents, of whom no more than 10 can be dementia residents.

d) If the provider with Facility B wishes to convert 5 resthome beds into hospital beds, the

provider must seek a new authorisation or seek a variation of the existing authorisation, because it will be providing a kind of service it has not previously provided.

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e) If the provider with Facility A wishes to add on a dementia annex, then the provider must seek a new authorisation (for the same reason as in d).

f) If the provider with Facility A wishes to build a new facility, he/she must apply for a new

authorisation for the new facility. g) A Provider who operates an authorised Facility X in Wellington, purchases an existing

authorised Facility Y in Auckland. The Provider must apply to the Ministry for a new authorisation for Facility Y, because authorisation will not be transferrable.

Authorisation Options

As the Notice is presently drafted, the Ministry has the ability to limit authorisations under the Notice. The only foreseeable reason why the Ministry would choose to limit authorisations under the Notice is in an effort to support occupancy levels in the sector. The aged residential sector is overbedded in many parts of the country, despite efforts by the Ministry to limit the number of government contracts over recent years. While there is arguably no financial advantage to the Ministry in limiting the supply of beds, it is arguable that the number of facilities does influence the financial viability of the providers and this may have an impact on care quality. The Ministry seeks your views on whether being restrictive does assist in achieving appropriate standards of care quality across the sector. Essentially there would appear to be two main options. Option 1

The first option is the one currently included in the draft notice included in Appendix 4. This is worded so that the Ministry will grant a new authorisation except where the Ministry decides, and having regard for the number of authorised beds already in the region, that doing so would be detrimental to the quality of care provided in the relevant region. This option will require the Ministry to devise a transparent process and clear guidelines by which to administer the provision, including how it will determine whether increasing the number of authorised beds will be detrimental to the quality of care. One approach may be for the Ministry to use occupancy as a proxy for quality of care so that the Ministry will not authorise new providers in a region if the average occupancy in the region is less than a certain percentage. Under this option the Ministry will also need to have appropriate processes by which some providers would be authorised and others not authorised in the event that there was more applications for authorisation in a region than the Ministry considers necessary to maintain occupancy levels. Also under this option, providers have some protection from competition in their region (but note that the Ministry cannot control the entry of providers targeting private paying residents).

Advantages of Option 1

• Reduced business (occupancy) risk for providers will assist provider viability and may support care quality in the sector.

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Disadvantages of Option 1

• There will be some costs for the Ministry in administering whatever ‘controls’ are put in place.

• Some restriction of choice for residents. • Private paying residents in a non-authorised facility (resthome or dementia unit) will need to

move out of that facility when they run out of funds and become state subsidised. • Reduced competition may reduce innovation in the sector and induce provider complacency. Option 1a

This option is similar to Option 1 except that the Ministry would require that a provider wishing to add new beds to an existing authorised facility would need to seek a new authorisation (or a variation to an existing authorisation) for these extra beds. Option 2

The second option is a more open authorisation process whereby any provider who is able to satisfy the quality, regulatory and legislative requirements for authorisation will be authorised. With this option, the Ministry does not assume that the entry of a new provider will automatically have a negative impact on service provision elsewhere in the sector.

Advantages of Option 2

• Transparent and simple to administer. • Maximises resident choice. • Providers may need to compete more rigorously for residents on the basis of service and

quality.

Disadvantages of Option 2

• Provider financial viability may be affected in regions where the number of new authorised beds entering the market exceeds demand.

It is debatable whether limiting authorisations under the Notice will have a signficant effect on the supply of beds in the market. Past experience with the Ministry’s so-called ‘managed bed policy’ seems to indicate varying levels of effectiveness in limiting the supply of beds around the country. Your views on this issue are welcomed. Whichever option is adopted, the Ministry will need to focus on rigorous quality audit and monitoring to ensure that quality standards are met and enforced.

National consistency As has been mentioned earlier in this document, a move to a section 88 Notice will help ensure national consistency in both pricing and service delivery. So for example, the new notice (if implemented from 1 December 2001) will automatically bring the entire country onto a single service specification. A similar immediate move to consistency in pricing is not feasible for affordability reasons. However, the adoption of the section 88 notice will facilitate the movement to nationally consistent pricing to begin.

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Service specification

A single, nationally consistent service specification is included as part of the Section 88 Notice. This specification has been developed with input from representatives from the sector and while there is substantive agreement on many issues, several areas of disagreement remain. You are referred to Appendix 2 for a discussion on the more important changes between current specifications and the proposed new section 88 notice. The need to bring the entire country onto a single service specification will mean that some providers will see differences with the new specification compared to their existing specification. In some instances this may mean increased costs and obligations while in other instances it may mean a decrease. Pricing

As most providers know, the Ministry (and previously the Health Funding Authority) has been working for nearly two years with representatives of the sector to determine nationally consistent prices for the provision of resthome, dementia and hospital level care. PricewaterhouseCoopers (PwC) assisted with this work. This process has produced good costing data on which to base prices. While no final agreement has been reached between the Ministry and your representatives, you will appreciate that the Ministry must move to give some certainty to the sector about the prices it is prepared to pay for services. The Ministry has determined Indicative Prices for the services it wishes to purchase. The Indicative Prices are unaffordable currently and the Ministry could only move towards these prices over a number of years. The Ministry has also determined the prices it will pay from 1 December 2001. Issues relating to pricing and the prices themselves are included in Appendix 1 for your information. Information

The Ministry has revised the information that it will require from authorised providers under the proposed new service specification. The Ministry is asking only for information that it is not able to collect from other sources. Furthermore this information will be valuable to the Ministry and to the wider sector for future planning. The Ministry undertakes to feed this information back to the sector.

Questions 1. Do you prefer Authorisation Option 1, 1a or 2? Why? 2. If you prefer Option 1 or 1a, how should the Ministry decide when a new provider is

Authorised in a particular region? 3. If you prefer Option 1or 1a, how should the Ministry determine between two or more

providers seeking authorisation in a particular region? 4. Can you see any advantages for providers in moving to a section 88 Notice? 5. Can you see any disadvantages for providers in moving to a section 88 Notice?

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4.0 How things will change for residents Standard of Care The section 88 Notice will allow the Ministry to implement a nationally consistent level of service. The proposed description of the service required has been developed with input from the sector but ultimately the final service description contained in the draft Notice is the Ministry’s as complete agreement could not be reached on all aspects. The auditing provisions of the section 88 Notice will further strengthen the Ministry’s ability to ensure good quality care from the small minority of providers who do not currently provide it.

More Choice A move to section 88 Notices could mean an increase in choice for residents depending on whether the Ministry opts to manage access to the Notice through the authorisation process. We discussed this in the previous section and we seek your views.

Questions 1. Can you see any advantages for residents in moving to a section 88 Notice? 2. Can you see any disadvantages for residents in moving to a section 88 Notice?

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5.0 Things that won’t change Many things will not change under a section 88 regime and providers will continue to operate their business as usual. It is expected that the manner in which providers claim payment under the Notice and receive payment will be no different from the current payment process. The way in which residents are assessed and are placed in residential care will not change.

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6.0 Process from here If, after the consultation process, the decision is taken to proceed with the move to a section 88 Notice, the Notice will come into effect throughout the country on 1 December 2001. In order for this to happen, the following steps need to occur.

1. The Ministry of Health will consider responses to the consultation and feedback to the sector.

2. The Ministry of Health will produce the final the section 88 Notice after taking into account valid issues raised during the consultation process.

3. The Notice must be published in the Gazette before it becomes effective and providers are able to claim under the Notice.

4. The Minister is required to lay a copy of the Notice before the House of Representatives. This is not necessary for the Notice to take effect, but it is a statutory requirement and must be complied with.

5. South Island providers are on evergreen contracts. Before these providers can shift to a section 88 notice, they will need to receive 3 months Notice of Termination of their current contract. Consequently, South Island providers may not move to the section 88 notice until February 2002 (unless they choose to move earlier).

6. Only one Notice will be issued for the whole country. Providers will receive individual notification of authorisation.

Questions 1. Do you foresee any difficulties in moving from the current contractual arrangements to a

section 88 Notice?

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7.0 Give us your views 1. Are you clear about what a section 88 Notice is? Please circle one:

Yes No If no, please tell us what your questions are:

2. Can you see any advantages for providers in moving to a section 88 Notice? Please circle one:

Yes No If yes, please tell us what the advantages are:

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3. Can you see any disadvantages for providers in moving to a section 88 Notice? Please circle one:

Yes No If yes, please tell us what the disadvantages are:

4. Do you prefer authorisation Option 1, Option 1a or Option 2? Please circle one:

Option 1 Option 1a Option 2 (i) Please tell us why you made this choice:

(ii) If you prefer authorisation Option 1 or 1a, how should the Ministry decide when a new provider is authorised in a particular region.

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(iii) If you prefer authorisation option 1 or 1a, how should the Ministry determine between two or more providers seeking authorisation in a particular region?

5. Can you see any advantages for residents in moving to a section 88 Notice? Please circle one:

Yes No (i) If yes, please tell us what the advantages are:

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6. Can you see any disadvantages for residents in moving to a section 88 Notice? Please circle one:

Yes No (i) If yes, please tell us what the disadvantages are:

7. Do you foresee any difficulties in moving from current contractual arrangements to a section 88 Notice? Please circle one:

Yes No (i) If yes, please tell us what those difficulties are:

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8. Do you have any comments about the content of the section 88 Notice? (i) Part A – Purpose and Entitlement to Claim

(ii) Part B – General Terms and Conditions

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(iii) Part C – General Service Specifications

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(iv) Part C – Specialist Dementia Services

(v) Payments

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Appendix 1 - Prices for Aged Residential Care Services. Background Providers will be aware that the Ministry of Health (and previously the Health Funding Authority) has worked with representatives of the aged residential sector for over two years to determine appropriate prices for the sector. The parties commissioned PricewaterhouseCoopers (PwC) to assist with this work. PwC facilitated a co-operative process between the Ministry and the sector representatives which was aimed at identifying the costs incurred by providers in the sector. The approach taken (a “greenfields” approach) was to examine the costs to construct and operate a brand new aged care residential facility in various parts of the country. PwC were instructed to look at resthomes, continuing care geriatric hospitals and dementia units. Pyschogeriatric residential services were not considered. PwC produced a final report in June 2000 that outlined the costs to construct and operate a new aged residential facility. The PwC report does not recommend prices. PwC considered many variables while looking at typical costs. These included:

• Size and type of facility • Occupancy • Location within NZ • Return on investment

As providers will appreciate, the costs to build and operate a facility will depend on the size, occupancy and location. Providers will also appreciate the great diversity of facilities that currently make up the aged residential market. Prices cannot take full account of this diversity and some assumptions need to be taken to come up with a consistent set of prices. The Ministry has always taken the stance that it wishes to pay ‘efficient’ prices for aged care residential services. Consequently, the Ministry has used assumptions which reflects this stance. Put another way, the Ministry wants to get the best value for money, as a major (indeed majority) purchaser. Balancing this, the Ministry has a vested interest in seeing a strong market for aged care residential services. The Ministry wants to see financially secure providers who are providing quality care in sufficient numbers that older people have reasonable choice of provider.

Pricing Summary Current Prices

Table 1 below shows the current average prices applying nationally. The actual range of prices is much wider than this. Some variation in price is justified on the basis of differing land costs around the country. So for example, a $7-$8 per bed day price differential between Auckland and Westport is legitimate.

Current Average Prices $/bed day (ex GST)

Resthome (Stage 2) Dementia Hospital

Auckland $68.35 $88.92 $131.02 Midland $71.88 $91.31 $126.91

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Current Average Prices Resthome (Stage 2) Dementia Hospital $/bed day (ex GST) Central $70.10 $86.63 $124.68 Southern $67.94 $82.59 $130.36

Table 1. Current average prices by Ministry Region Indicative Prices

The Ministry has derived Indicative Prices for each of the 72 Territorial Local Authority districts based on the Ministry’s interpretation of the costing data which came out of the PwC work. These Indicative Prices are tabled in full in Table 6 and summarised in Table 2 below. Average Indicative Prices $/bed day (ex GST)

Resthome (Stage 2) Dementia Hospital

Auckland $83.32 $100.11 $122.64 Midland $79.02 $96.18 $118.24 Central $79.24 $96.20 $118.93 Southern $78.86 $96.01 $118.03 Table 2. Average Regional Indicative Prices The costing work has highlighted the fact that the current relativities between Stage 2 resthome and hospital prices are inappropriate. Currently hospital prices are 170 - 190% of resthome prices. This differential should only be 150% at most. Implementation of Indicative Prices

The Ministry does not have the resources to implement the Indicative Prices. Neither can the Ministry commit to paying the Indicative Prices at any date in the future. However the Ministry will endeavour to adjust Stage 2 resthome and dementia prices towards the Indicative Prices over time. This is entirely contingent on future budget availability. The Ministry will endeavour to progressively increase the lowest prices applying in the market towards the Indicative Prices. Providers who are above the minimum will see no increase. Providers will only see increases when their current price at the time is ‘overtaken’ by the minimum price to apply at the time. Then their price will be raised to the minimum. The advantage with this approach is that it directs any increased funding to the lowest prices applying in the sector. Even though current hospital prices are generally above the Indicative Prices, the Ministry will not reduce any hospital prices. Hospital prices will be held constant until (for any given region) the proper relativity between Stage 2 resthome and hospital prices is attained. At such time, hospital prices may then be increased in line with Stage 2 resthome and dementia prices. So for example, hospital prices in a region will not increase until the Stage 2 resthome price has risen to the point where the hospital price in that region is no more than 150% of the resthome price. The average prices to apply from 1 December 2001 are shown in Table 3 below .

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Average Prices for 1 Dec. $/bed day (ex GST)

Resthome (Stage 2) Dementia Hospital

Auckland $73.91 $91.67 $131.02 Midland $73.24 $91.39 $126.91 Central $71.38 $87.90 $124.68 Southern $70.53 $87.70 $130.36 Table 3. Average Regional Prices from 1 December 2001 Removal of dependency based funding in Southern and Midland

The Ministry’s Southern and Midland localities both have two prices for resthome care depending on the level of dependency of the resident. Southern also has multiple prices for hospital level care. It is proposed that these multiple prices will be progressively abandoned as the Ministry moves to nationally consistent prices. The rationale for this move is twofold. Firstly, the removal of this multi-level pricing will bring Southern and Midland into line with the rest of the country. Secondly, the Ministry believes that the increased dependency levels of residents in recent years means that in future only two levels of prices are justified; a single resthome price and a single hospital price. A separate price will still apply for dementia level care. All resthome prices (excluding Stage 1 prices) will be treated equally and adjusted if they are below the minimum resthome prices to apply from 1 December. Thus the lower resthome prices which apply in Midland and Southern will be moved towards the higher resthome prices in these regions.

Some Key Results Some of the key results from the PwC report are outlined below for your information. Operating costs

Operating costs are chiefly labour costs and account for two thirds of the costs in a resthome and three-quarters of the costs in a hospital. The numbers quoted in the table below are directly from the PwC report and relate to a 45 bed resthome or hospital. The dementia costs are based on a 15 bed unit annexed to a larger resthome or hospital.

$/resident Resthome Dementia Hospital Staff costs: Personal Care 22.70 32.65 30.47 Staff costs: Nursing 3.83 5.36 23.55 Staff costs: Therapies 1.81 3.56 2.61 Total Care Staff 28.34 41.57 56.63 Non-care staff: (Food & support) 6.18 7.59 8.91 Admin staff 3.66 3.77 4.29 TOTAL STAFF COSTS 38.17 52.93 69.85 Non-staff costs (food, medical 16.51 19.38 22.68

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$/resident Resthome Dementia Hospital supplies etc) TOTAL OPERATING COSTS 54.68 72.31 92.53

Table 4 Operating Costs Staffing Assumptions

The staffing assumptions used to determine the costs in Table 4 are shown in Table 5 below on a Full Time Equivalent basis.

Staff Category Modeled Full Time Equivalents (FTEs) Resthome Annexed Dementia Hospital Direct Care 16.1 7.7 28.7 Therapies 1.0 0.7 1.5 Food and support 4.0 1.7 5.9 Administration 1.6 0.5 1.9 Total FTEs 22.7 10.6 38.0

Table 5. Staffing Assumptions Notes 1. Full time equivalents based on a 45 bed resthome, 45 bed hospital and a 15 bed annexed

dementia unit. 2. An occupancy rate of 95% 3. Resthome staffing assumptions include the following:

• Excluding night shift, resthome direct care is set at 1.7 hours per resident. • Two night staff assumed to be present at night.

4. Hospital staffing assumptions include the following: • Excluding night shift, hospital direct care is set at about 3.2 hours per resident. • Three night staff (one nurse and 2 personal care assistants) assumed to be present

at night in a 45 bed hospital. 5. Dementia staffing assumptions include the following:

• Two staff assumed to be present at night. Capital Costs The two major components of capital costs are: • Capital investment per bed • Return on investment Capital investment per bed

The Ministry has acknowledged that land costs vary significantly around the country and consequently that it is appropriate that prices also vary around the country. The table below shows how the required capital investment per bed varies around the country with Auckland being the most expensive region and regions such as Westland being the cheapest.

Resthome Annexed Dementia Hospital $/bed $/bed day $/bed $/bed day $/bed $/bed day Auckland $63,000 $31.55 $63,000 $29.82 $66,000 $31.98 Palmerston Nth $51,000 $25.31 $51,000 $23.63 $54,000 $25.77

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Westland $46,000 $23.50 $46,000 $21.83 $50,000 $23.96 Table 6. Capital Investment Assumptions Rate of Return on Capital Investment The rate of return was determined by PricewaterhouseCoopers to be 12.9% after tax.

Indicative Prices Based on the costing data outlined above, an indicative resthome, dementia and hospital price has been determined for each of the 72 Territorial Local Authority districts in the country. Prices differ by TLA because of varying land costs and this affects the level of capital investment required. The use of TLA based prices is to avoid any dispute over the appropriate price to apply. Table 7 below shows the Indicative Prices by TLA district for the services it purchases. The Ministry does not have the resources to implement the Indicative Prices. Neither can the Ministry commit to paying the Indicative Prices at any date in the future. The Ministry will endeavour to move resthome and dementia prices towards those indicated below over time as funding allows. (The prices to apply for the first year of implementation are included in Table 7 later). Note however that hospital prices that are currently above the Indicative Prices, will not be reduced. Note also that the Indicative resthome prices do not cover Stage 1 beds.

Capital Charge Operating Cost Total Price ($/bed day) Territorial Local Authority Districts

Rest home Hospital Dementia Rest

home Hospital Dementia Rest home Hospital Dementia

Ashburton 23.53 24.86 22.91 54.68 92.53 72.31 78.21 117.39 95.22 Auckland City 30.15 31.83 29.82 54.68 92.53 72.31 84.83 124.36 102.13 Banks Peninsular 24.56 25.97 23.99 54.68 92.53 72.31 79.24 118.50 96.30 Buller 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 Carterton 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Central Hawkes Bay

22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50

Central Otago 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Christchurch City 25.25 26.69 24.71 54.68 92.53 72.31 79.93 119.22 97.02 Clutha 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 Dunedin City 24.22 25.61 23.63 54.68 92.53 72.31 78.90 118.14 95.94 Far North 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Franklin 24.66 26.05 24.05 54.68 92.53 72.31 79.34 118.58 96.36 Gisborne 23.02 24.35 22.37 54.68 92.53 72.31 77.70 116.88 94.68 Gore 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 Grey 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 Hamilton City 25.59 27.05 25.08 54.68 92.53 72.31 80.27 119.58 97.39 Hastings 24.56 25.97 23.99 54.68 92.53 72.31 79.24 118.50 96.30 Hauraki 23.19 24.53 22.55 54.68 92.53 72.31 77.87 117.06 94.86 Horowhenua 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Hurunui 23.19 24.53 22.55 54.68 92.53 72.31 77.87 117.06 94.86 Hutt City 26.25 27.74 25.75 54.68 92.53 72.31 80.93 120.27 98.06 Invercargill 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Kaikoura 24.66 26.05 24.05 54.68 92.53 72.31 79.34 118.58 96.36

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Capital Charge Operating Cost Total Price ($/bed day) Territorial Local Authority Districts

Rest home Hospital Dementia Rest

home Hospital Dementia Rest home Hospital Dementia

Kaipara 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Kapiti Coast 24.90 26.33 24.35 54.68 92.53 72.31 79.58 118.86 96.66 Kawerau 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Mackenzie 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 Manawatu 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Manukau City 29.12 30.74 28.74 54.68 92.53 72.31 83.80 123.27 101.05 Marlborough 24.22 25.61 23.63 54.68 92.53 72.31 78.90 118.14 95.94 Masterton 23.02 24.35 22.37 54.68 92.53 72.31 77.70 116.88 94.68 Matamata Piako 23.19 24.53 22.55 54.68 92.53 72.31 77.87 117.06 94.86 Napier 24.56 25.97 23.99 54.68 92.53 72.31 79.24 118.50 96.30 Nelson 26.62 28.14 26.16 54.68 92.53 72.31 81.30 120.67 98.47 New Plymouth 24.56 25.97 23.99 54.68 92.53 72.31 79.24 118.50 96.30 North Shore City 29.81 31.47 29.46 54.68 92.53 72.31 84.49 124.00 101.77 Opotiki 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Otorohanga 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 Palmerston North 24.22 25.61 23.63 54.68 92.53 72.31 78.90 118.14 95.94 Papakura 27.23 28.76 26.75 54.68 92.53 72.31 81.91 121.29 99.06 Porirua 24.90 26.33 24.35 54.68 92.53 72.31 79.58 118.86 96.66 Queenstown Lakes 26.28 27.78 25.80 54.68 92.53 72.31 80.96 120.31 98.11 Rangitikei 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Rodney 27.23 28.76 26.75 54.68 92.53 72.31 81.91 121.29 99.06 Rotorua 24.90 26.33 24.35 54.68 92.53 72.31 79.58 118.86 96.66 Ruapehu 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Selwyn 24.66 26.05 24.05 54.68 92.53 72.31 79.34 118.58 96.36 South Taranaki 23.19 24.53 22.55 54.68 92.53 72.31 77.87 117.06 94.86 South Waikato 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 South Wairarapa 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Southland 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 Stratford 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Tararua 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Tasman 24.22 25.61 23.63 54.68 92.53 72.31 78.90 118.14 95.94 Taupo 24.90 26.33 24.35 54.68 92.53 72.31 79.58 118.86 96.66 Tauranga 26.10 27.60 25.62 54.68 92.53 72.31 80.78 120.13 97.93 Thames Coromandel

23.19 24.53 22.55 54.68 92.53 72.31 77.87 117.06 94.86

Timaru 23.19 24.53 22.55 54.68 92.53 72.31 77.87 117.06 94.86 Upper Hutt City 24.22 25.61 23.63 54.68 92.53 72.31 78.90 118.14 95.94 Waikato 23.19 24.53 22.55 54.68 92.53 72.31 77.87 117.06 94.86 Waimakariri 24.66 26.05 24.05 54.68 92.53 72.31 79.34 118.58 96.36

Waimate 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 Waipa 23.19 24.53 22.55 54.68 92.53 72.31 77.87 117.06 94.86 Wairoa 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Waitakere City 27.75 29.30 27.30 54.68 92.53 72.31 82.43 121.83 99.61 Waitaki 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 Waitomo 22.85 24.16 22.19 54.68 92.53 72.31 77.53 116.69 94.50 Wanganui 23.19 24.53 22.55 54.68 92.53 72.31 77.87 117.06 94.86

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Capital Charge Operating Cost Total Price ($/bed day) Territorial Local Authority Districts

Rest home Hospital Dementia Rest

home Hospital Dementia Rest home Hospital Dementia

Wellington 27.79 29.36 27.37 54.68 92.53 72.31 82.47 121.89 99.68 Western BOP 24.66 26.05 24.05 54.68 92.53 72.31 79.34 118.58 96.36 Westland 22.50 23.80 21.83 54.68 92.53 72.31 77.18 116.33 94.14 Whakatane 24.22 25.61 23.63 54.68 92.53 72.31 78.90 118.14 95.94 Whangarei 24.90 26.33 24.35 54.68 92.53 72.31 79.58 118.86 96.66 Table 7. Indicative Prices ($/bed day, ex GST)

Prices to apply from 1 December 2001. While the Ministry cannot move directly to the Indicative Prices, the Ministry intends to increase funding to the sector by approximately $11.4m annually from 1 December 2001. The schedule of prices to apply from 1 December 2001 is contained in Table 8 below. As mentioned above, the new funding will be targeted at lower priced Stage 2 resthome and dementia prices. Specifically, Stage 2 resthome and dementia prices which are less than 89% of the Indicative Price for the relevant TLA district will be increased so that they are at 89% of the Indicative Price. Stage 2 resthome and dementia prices which are above 89% of the Indicative Prices will see no increase. However the Ministry estimates that 75% of all facilities in the country will see some increase in funding. Admittedly, this increase will be small in some cases. In summary, providers should note the minimum resthome and dementia prices to apply from 1 December 2001 are shown in Table 8. If your current resthome or dementia price is less than that shown in Table 8 you will receive the price indicated in the table. If your current resthome or dementia price is higher than those shown in Table 8 you will see no change in your current resthome or dementia price from 1 December 2001. As mentioned earlier, hospital prices will remain unchanged from 1 December 2001. Territorial Local Authority Districts

Resthome Prices from 1 Dec 2001 ($/bed day, ex GST)

Dementia Prices from 1 Dec 2001 ($/bed day, ex GST)

Ashburton Max of 69.61 or your current price Max of 84.75 or your current price Auckland City Max of 75.50 or your current price Max of 90.90 or your current price Banks Peninsular Max of 70.52 or your current price Max of 85.71 or your current price Buller Max of 68.69 or your current price Max of 83.78 or your current price Carterton Max of 69.00 or your current price Max of 84.11 or your current price Central Hawkes Bay

Max of 69.00 or your current price Max of 84.11 or your current price

Central Otago Max of 69.00 or your current price Max of 84.11 or your current price Christchurch City Max of 71.14 or your current price Max of 86.35 or your current price Clutha Max of 68.69 or your current price Max of 83.78 or your current price Dunedin City Max of 70.22 or your current price Max of 85.39 or your current price Far North Max of 69.00 or your current price Max of 84.11 or your current price Franklin Max of 70.61 or your current price Max of 85.76 or your current price Gisborne Max of 69.15 or your current price Max of 84.27 or your current price Gore Max of 68.69 or your current price Max of 83.78 or your current price Grey Max of 68.69 or your current price Max of 83.78 or your current price Hamilton City Max of 71.44 or your current price Max of 86.68 or your current price Hastings Max of 70.52 or your current price Max of 85.71 or your current price

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Territorial Local Authority

Resthome Prices from 1 Dec 2001 ($/bed day, ex GST)

Dementia Prices from 1 Dec 2001 ($/bed day, ex GST)

Districts Hauraki Max of 69.30 or your current price Max of 84.43 or your current price Horowhenua Max of 69.00 or your current price Max of 84.11 or your current price Hurunui Max of 69.30 or your current price Max of 84.43 or your current price Hutt City Max of 72.03 or your current price Max of 87.27 or your current price Invercargill Max of 69.00 or your current price Max of 84.11 or your current price Kaikoura Max of 70.61 or your current price Max of 85.76 or your current price Kaipara Max of 69.00 or your current price Max of 84.11 or your current price Kapiti Coast Max of 70.83 or your current price Max of 86.03 or your current price Kawerau Max of 69.00 or your current price Max of 84.11 or your current price Mackenzie Max of 68.69 or your current price Max of 83.78 or your current price Manawatu Max of 69.00 or your current price Max of 84.11 or your current price Manukau City Max of 74.58 or your current price Max of 89.93 or your current price Marlborough Max of 70.22 or your current price Max of 85.39 or your current price Masterton Max of 69.15 or your current price Max of 84.27 or your current price Matamata Piako Max of 69.30 or your current price Max of 84.43 or your current price Napier Max of 70.52 or your current price Max of 85.71 or your current price Nelson Max of 72.36 or your current price Max of 87.64 or your current price New Plymouth Max of 70.52 or your current price Max of 85.71 or your current price North Shore City Max of 75.20 or your current price Max of 90.58 or your current price Opotiki Max of 69.00 or your current price Max of 84.11 or your current price Otorohanga Max of 68.69 or your current price Max of 83.78 or your current price Palmerston North Max of 70.22 or your current price Max of 85.39 or your current price Papakura Max of 72.90 or your current price Max of 88.16 or your current price Porirua Max of 70.83 or your current price Max of 86.03 or your current price Queenstown Lakes

Max of 72.05 or your current price Max of 87.32 or your current price

Rangitikei Max of 69.00 or your current price Max of 84.11 or your current price Rodney Max of 72.90 or your current price Max of 88.16 or your current price Rotorua Max of 70.83 or your current price Max of 86.03 or your current price Ruapehu Max of 69.00 or your current price Max of 84.11 or your current price Selwyn Max of 70.61 or your current price Max of 85.76 or your current price South Taranaki Max of 69.30 or your current price Max of 84.43 or your current price South Waikato Max of 68.69 or your current price Max of 83.78 or your current price South Wairarapa Max of 69.00 or your current price Max of 84.11 or your current price Southland Max of 68.69 or your current price Max of 83.78 or your current price Stratford Max of 69.00 or your current price Max of 84.11 or your current price Tararua Max of 69.00 or your current price Max of 84.11 or your current price Tasman Max of 70.22 or your current price Max of 85.39 or your current price Taupo Max of 70.83 or your current price Max of 86.03 or your current price Tauranga Max of 71.89 or your current price Max of 87.16 or your current price Thames Coromandel

Max of 69.30 or your current price Max of 84.43 or your current price

Timaru Max of 69.30 or your current price Max of 84.43 or your current price Upper Hutt City Max of 70.22 or your current price Max of 85.39 or your current price Waikato Max of 69.30 or your current price Max of 84.43 or your current price Waimakariri Max of 70.61 or your current price Max of 85.76 or your current price Waimate Max of 68.69 or your current price Max of 83.78 or your current price Waipa Max of 69.30 or your current price Max of 84.43 or your current price Wairoa Max of 69.00 or your current price Max of 84.11 or your current price Waitakere City Max of 73.36 or your current price Max of 88.65 or your current price Waitaki Max of 68.69 or your current price Max of 83.78 or your current price

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Territorial Local Authority

Resthome Prices from 1 Dec 2001 ($/bed day, ex GST)

Dementia Prices from 1 Dec 2001 ($/bed day, ex GST)

Districts Waitomo Max of 69.00 or your current price Max of 84.11 or your current price Wanganui Max of 69.30 or your current price Max of 84.43 or your current price Wellington Max of 73.40 or your current price Max of 88.72 or your current price Western BOP Max of 70.61 or your current price Max of 85.76 or your current price Westland Max of 68.69 or your current price Max of 83.78 or your current price Whakatane Max of 70.22 or your current price Max of 85.39 or your current price Whangarei Max of 70.83 or your current price Max of 86.03 or your current price Table 8. Prices to apply from 1 December 2001 ($/bed day, ex GST)

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Appendix 2 – Performance and Service Issues The proposed section 88 Notice has several new or amended features in the area of provider performance. One of these areas which has some significant changes for providers is quality audit and monitoring.

Quality audit and monitoring It is in the area of quality audit and monitoring that providers will see the most change resulting from the proposed move to a section 88 Notice. Why make any changes to the Ministry’s audit capacity?

Currently, routine audits indicate that the majority of providers are meeting the requirements of their contracts. Those who are not complying generally make improvements and reach compliance within reasonable timeframes. A minority of providers however are either unable or choose not to make the required changes. The new audit provisions under the section 88 Notice will allow the Ministry to effectively evaluate and then encourage any provider to improve their performance as required. The strengthened audit capacity will have little impact on the majority of providers who are meeting required standards. However, it is in the interests of the aged-care sector that the Ministry has effective mechanisms to evaluate and ensure compliance with providers who don’t meet standards, as the actions of these providers can create a misleading impression about the quality of aged-care services in general. At present, the Ministry carries out routine quality audits of providers to ensure that they are meeting the requirements in their current contracts. The audit process is transparent and is applied consistently across the country, however it has had to accommodate the different service specifications. Moving to a single service specification under the section 88 Notice will allow the audit process to be standardised across the country. Routine audits

Currently, the Ministry contracts inherited from the four HFA regions provide for differing periods of notice ranging from 10 to 15 working days notice of its intent to carry out a routine quality audit. Under the section 88 Notice, a minimum of 10 days notice will be required before the Ministry can undertake a routine quality audit (B5.3 (a)). In practice, the Ministry may elect to give a greater period of notice than ten days, if it is determined through discussions with the aged-care sector that this will benefit the entire audit process. Routine audits must be carried out in reasonable working hours, unless otherwise agreed to by the provider and the Ministry (B5.4 (a)). Exceptional audits

Previous contracts have had provision for Issues Based Audits if the Ministry had significant concerns about the quality of service being delivered by any provider. Currently, the Ministry is required to give a provider 24 hours notice of its intent to carry out an Issues Based Audit. Under the section 88 Notice, this will change. If the Ministry has reasonable concerns about the quality of service being delivered it will be empowered to carry out an Issues

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Based Audit without prior notice. Notice will be given in writing at the time of the audit visit, but the previous 24 hours prior notice will no longer be required (B5.3(b)). This change is designed to bring the access provisions related to contractual compliance into line with the current access provisions related to regulatory compliance, and those that will be in place under the Certification regime proposed in the Health and Disability Services Bill. The section 88 Notice also allows Ministry auditors to enter the premises of a provider at any time to conduct an Issues Based Audit (B5.4 (b)). This means for example, that quality auditors will now be able to visit a facility at night if there are concerns about nighttime staffing levels. Publishing of reports

It is clearly in the interests of the aged-care sector that the public should know which providers are delivering good quality services, and should be suitably informed when exercising choice around residential care options. At present, audit reports requested by any person under the Official Information Act 1982, must be released. Such requests are becoming increasingly common and processing them is a considerable drain on administrative resources. Under the section 88 Notice, providers will be obliged to release audit reports to anyone who requests them (B5.12 (c)). In addition, the Ministry will have the discretion to routinely publish audit reports on the Ministry’s website or any other medium as determined is appropriate (B5.12(a)). Discussions will be held with the aged-care sector to ensure that this is managed in a fair and equitable manner, before any routine publishing of reports is initiated. Ensuring the audit is an accurate evaluation of the service

Under a section 88 Notice the audit process allows for provider feedback, including on the content of the draft findings report. It is the Ministry’s intention to ensure that the final audit report is an accurate record of the provider’s compliance with their contractual requirements. If for some reason after all reasonable efforts on the part of the Ministry and the provider, agreement cannot be reached on the outcome of an audit, the section 88 Notice provides for a review of the audit by the Ministry of Health’s Chief Internal Auditor (B.6). If the outcome of this review is not satisfactory to the provider, then an appeal may be made to the District Court. The consequences of not moving to comply with requirements following a quality audit

As is the case currently, any provider who does not make the necessary improvements within the timeframes outlined in an audit report, will be issued with a notice of default (B5.10). The notice of default will stipulate a further period within which compliance must be achieved (B5.10 (b)). If compliance is not reached within the period given under the notice of default the Ministry may action any of the remedies available to it which include varying the compliance requirement, extending the timeframe, withholding payment, or withdrawing a provider’s authorisation (B5.10 (c) (iii)). Withdrawal of authorisation would be a last resort as the Ministry’s preference is to find a way to encourage all providers to improve their service quality. If the Ministry holds serious concerns about the well-being of residents

If it was considered that a provider was in serious breach of their contractual obligations previous contracts provided for the Ministry taking direct intervention. This could include appointing a

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temporary manager to work with a facility to ensure that residents are safe. The cost of any such action could be recovered from the provider. Under the section 88 notice, this ability remains (B9.1 (d)). A new provision exists now, which allows the Ministry to notify family members of residents as to the content of a final audit report (B5.13). This may be actioned when the Ministry holds significant concerns about the wellbeing or safety of residents and wishes to ensure that families are appropriately informed. It will be a requirement that Providers support the Ministry as requested, to contact families for this purpose.

Summary of Service Requirements The service requirements contained in the section 88 notice have been developed from the 4 current service specifications. This appendix discusses areas of difference between the new service requirements and the current documents. An attempt has been made below to highlight some of the major changes in the new service specification and briefly compare each of the 4 existing service specifications with the new service requirements. The comparisons do not claim to be exhaustive but it is expected that the main issues have been captured. Some requirements have not been agreed with the sector. General Issues for all regions.

In the service specification: • Emphasis is on the provision of services that meet the assessed need of the residents. • There is an explicit requirement that all residents are assessed by the Needs Assessment and

Service Co-ordination service. • Staffing levels are not specified as staff to resident ratios. The provider has responsibility for

ensuring sufficient staff are available to meet the identified needs of the resident. Specification is made for minimum staff numbers.

• There must be at least one care staff member on duty in a Dementia unit at all times. • Previously all contracts required staff training for Dementia level care. The level of training is

now more specific in that reference is made to specific Unit Standards that are to be met within a given timeframe by all staff.

• Maori Health Plans are to be submitted for review. This is an additional requirement for all regions Previously providers were required to have a Cultural and Spiritual policy in place.

• The responsibility for provision and payment of medical and pharmaceutical costs has been clarified.

• Providers are required to meet travel costs and provide staff (if family members not available to do so) to accompany resident to attend health / medical services / appointments. This includes ambulance transfers. Residents are to pay for travel to social, personal, recreational activities.

• GP prescribed allied health is the Provider’s cost. Where a GP refers a resident for a specialist allied health assessment, the Provider is not liable for the cost of the assessment.

• Providers are required to meet the full cost of continence products. Reference is made to the role of Nurse Practitioner in anticipation of nurses being approved for that role by the Nursing Council.

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Further Changes for the Northern Region

• Provision of supplies for personal hygiene, soap hair shampoo etc is now specified to be a cost of the resident.

• Accreditation no longer recognised in pricing. Further Changes for the Midland Region

• Content of care plan no longer stated in the service specification. • Annual review of the activity programme by an OT is now not specified. • Transport to social services is now a resident cost. However transport to essential and

health/medical services including emergency ambulance services remains a cost to the provider.

• Physiotherapy services previously specified for the SMG model are now not specified. It is now as prescribed by General Practitioner.

• Dietitian input now as prescribed by a GP. Further Changes for the Central Region

• Registered Nurse responsibilities are now specified. • Personal laundry services now required to be provided. • Dietary supplements, formula and equipment for long term conditions are now not specified;

these are available on Specialist prescription. • Provider responsible for the cost of all General Practitioner visits as described in the

specification. • Dietitian input now as prescribed by a GP. • Provision of clinical equipment now specified. • Written orientation package for residents is now specified. • No requirement to provide Key worker; the R/N takes on these responsibilities. • Handover report now required. • Staff training hours now specified – minimum 8 hours annually. • First aid training for staff not now specified. Further Changes for the Southern region

• Care plan review now 6 monthly unless there is a change in the resident’s health status. • Registered Nurse role in the review of plans not as specific but is stated in the R/N

responsibilities. • Review of Resident’s medications by GP not specified; it is presumed this would be part of

the medical review. • The “special” payment of $300 in the event of death within 60 days of admission to a long

stay hospital has been deleted.

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Appendix 3 – Sections 88 & 89 from the NZ Public Health and Disability Act 2000

88 Arrangements relating to payments – (1) Where the Crown or a DHB gives notice of the terms and conditions on which the Crown or the DHB will make a payment to any person or persons, and, after notice is given, such a payments is accepted by any such person from the Crown or DHB, then – a) acceptance by the person of the payment constitutes acceptance by the person of the terms

and conditions; and b) compliance by the person with the terms and conditions may be enforced by the Crown or

DHB (as the case may be) as if the person had signed a deed under which the person agreed to the terms and conditions.

(2) Any terms and conditions of which notice is given under subsection (1), unless they

expressly provider otherwise, are deemed to include a provision to the effect that 12 weeks’ notice must be given of any amendment or revocation of the terms and conditions. (3) Every notice, and every amendment, or revocation of a notice, must be published in the Gazette before the notice, amendment, or revocation takes effect; and, as soon as practicable, the Minister must present a copy to the House of Representatives. 89 Principles of national consistency applicable to notices under section 88

(1) The principles stated in subsection (2) apply to the Crown and to a DHB whenever the Crown or a DHB proposes to issue a notice under section 88.

(2) The principles are – (a) that it is desirable to maintain national consistency in the terms and conditions set in

respect of the same or substantially the same service; but (b) that it needs to be recognised that there are circumstances when there is good reason

to depart from terms and conditions set in respect of the same or substantially the same services, including, without limitation, - (i) special circumstances relating to a geographical area; or (ii) the need to adjust the amounts payable for services; or (iii) the need to update standards set for services.

(3) A DHB may not issue a notice under section 88 without the written approval of the

Minister if the proposed notice – (a) relates to services in respect of which the DHB has not previously issued a notice; or (b) sets terms and conditions in respect of particular services that depart from terms and

conditions set out in an existing notice in respect of the same or substantially the same services; or

(c) differentiates between persons or classes of person accepting payment under section 88.

…… (5) Any notice under section 88 that departs from an existing notice in the manner referred to

in subsection (3)(b) or differentiates in the manner referred to in subsection (3)(c) must include a statement of the reasons fro the departure or differentiation.

(6) In this section, existing notice, means a notice issued under section 88, or continued by section 112(3), that is for the time being in force.

……

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Appendix 4 - Draft Section 88 Notice A full (but still draft) version of a proposed section 88 Notice is attached.

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