Residential Aged Care Funding Reform – Transitioning from ACFI to AN-ACC and Care Minutes

This video provides information about the transition from the Aged Care Funding Instrument (ACFI) to the Australian National Aged Care Classification (AN-ACC) funding model and the separate care minutes policy.


[Opening visual of slide with text saying ‘Ageing and Aged Care’, ‘Residential Aged Care Funding Reform’, ‘Transitioning from ACFI to AN-ACC and Care minutes’, ‘May 2022’, ‘’]

[The visuals during this webinar are of Mark Richardson appearing via video and speaking with reference to PowerPoint presentation being played on screen]

Mark Richardson:

Before I start the presentation, I would also like to acknowledge the traditional owners across the lands on which we are meeting. I pay my respect to Elders past, present and future, and to all Aboriginal and Torres Strait Islander peoples with us today.

I would also like to note that the Government is in caretaker mode and in accordance with caretaker conventions, I will be limiting my statements today to factual issues and matters of administration.

Online sessions are being held with aged care providers in each state and territory. Feedback from these sessions and this one will be used to inform a public webinar after the election. All providers and stakeholders will be welcome.

Today, I’ll provide you with an understanding of what the Australian National Aged Care Classification or AN-ACC means for you and an explanation of care minutes, which is a separate policy to AN-ACC. As Liz mentioned, in order to achieve this, I’ll take you through the AN-ACC funding model including recent announcements, progress on shadow assessments, the AN-ACC starting price and how this is applied to estimate funding, and financial support through the establishment of the Transition Fund.

I’ll also take you through care minutes, including what the care minutes requirements are from the 1st of October 2022, for each AN-ACC class and how to estimate your care minute targets at the facility level.

After this I’ll respond to some of your questions, if not all hopefully, but I should also remind you that we’ll be updating our FAQs and fact sheets based on the feedback and the questions we receive from you today.

So let’s get started with the AN-ACC funding model.

Firstly, some of the recent AN-ACC announcements in the 22-23 Budget included the AN-ACC starting price of $216.80 from the 1st of October 2022 for the 22-23 financial year. This price will be used to determine the amount of funding you will receive based on facility characteristics and the needs of individual residents.

The release of completed shadow assessments for residents in the My Aged Care Service Provider Portal. You can find instructions on how to view this data on page 72 of the User Guide in the Provider Portal.

Refinements to the base care tariffs, the fixed funding component of AN-ACC, the increased funding and support to regional, rural and remote services that reflects their additional costs of care delivery.

And finally an extra $20.1 million for the AN-ACC Transition Fund, taking this to a total of $73.4 million so no residential aged care facility will receive less funding under AN-ACC compared to ACFI.

I’ll discuss each of these in more detail later in this presentation.

But before I go any further I should say that all the information in this presentation can be accessed from a funding reform resources web page to help you plan for the new funding arrangements that take effect from the 1st of October 2022.

This includes fact sheets covering various AN-ACC topics including an AN-ACC Transition Support Plan.

In relation to this, we have also set up a specialised helpdesk to assist you in understanding and estimating the funding for your facility. This helpdesk includes targeted outbound support for vulnerable providers such as regional, remote, Indigenous and homeless services that may require additional assistance.

To prepare for the transition to the new funding model independent assessors are conducting shadow assessments with all aged care residents to determine the AN-ACC classification that reflects a resident’s care requirements. The outcome of the assessments will determine the variable component of AN-ACC funding, which I’ll go through in some detail in later slides.

There are six independent assessment management organisations with over 300 assessors located around Australia to conduct assessments. So far, over 170,000 AN-ACC classifications have been conducted, over 5,600 AN-ACC respite classifications have been conducted, and almost 800 providers have had at least one facility assessed. That is around 2,470 facilities out of around 2,680.

COVID-19 continues to cause major difficulties with access to facilities and has slowed our progress down. However, we believe based on current progress that we’ll have completed all shadow assessments by the end of June well before the AN-ACC go live date on the 1st of October 2022. I encourage you to work with the independent assessors to conduct assessments in your facility during the shadow assessment period. This will ensure all assessments are completed well before the implementation of AN-ACC.

The Department is committed to ensuring the quality of the AN-ACC assessment process so that classifications assigned to residents are consistent, accurate and repeatable across the aged care sector. We’re using a continuous improvement approach to achieve this that includes the following components. Recruitment of experienced and highly qualified assessors, mandatory assessor training in the assessments and the AN-ACC assessment tool, built in validation rules in the AN-ACC assessment tool, a statistical data analytics tool to analyse shadow assessment data, and dual assessment checks to ensure consistent outcomes are recorded across independent assessors. Dual assessment checks are where two independent assessors undertake an assessment of the same resident at the same time with the results of the assessment compared.

The Department has engaged an independent actuary organisation, Taylor Fry, to undertake the statistical analysis of the shadow assessment data. This occurs on a weekly basis with Taylor Fry providing a weekly report to the Department highlighting anomalies. It is important to note that highlighted anomalies are a material statistical difference between expected and actual results. They are not a flag for incorrect assessments. They flag results that are different from what was expected and require further investigation.

So far, only four assessors have been found to show inconsistent results and importantly our dual assessment results show a 90% consistency of assessment outcomes. 90% is an extremely good result for human assessments with 70% being the standard for most industries. This shows that our assessments are reliable and consistent.

You can now request a reclassification of a resident if a resident’s needs have changed significantly. You can make this request through the My Aged Care Service Provider Portal for residents that have an existing classification. No fees will be charged for reclassification requests during the shadow assessment period.

I should highlight though that during the shadow assessment period, the Department will prioritise assessments of residents who are yet to receive an initial classification over scheduling assessments relating to reclassification requests. However if any of your residents require a reclassification I do encourage you to provide them early to help ensure that they are completed as soon as possible. It is more efficient for the independent assessors to attend a facility and complete initial assessments and reclassifications at the same time.

A reclassification will require a new AN-ACC assessment of the resident to be completed. Any new AN-ACC classification will be effective from the 1st of October 2022 or the date of the reclassification request whichever is later.

For permanent residents to be considered for a reclassification during the shadow assessment period, at least one of the seven criteria in the table in this slide must be met. Data collected from the reclassification assessment will be used to determine if any of the first three criteria, change in mobility, are met.

This slide provides some analysis of the AN-ACC shadow assessment results that go to cognition and our quality assurance process. We often hear that AN-ACC assessments do not consider cognition issues. They do and the results show it. Facilities with more than 70% of residents assessed under ACFI as having low cognition have been estimated to receive an average of approximately $197 per bed day under ACFI compared to an estimated average per bed day of $231 under AN-ACC.

In relation to quality assurance, the difference between the AN-ACC trial and shadow assessment periods has shown a decrease in AN-ACC classes 2 and 3 and an increase in AN-ACC classes 7 and 8. This can be attributed to a change in assessor training to score residents with dementia as assisted mobility and was driven in part by quality assurance work.

The AN-ACC will provide a more equitable funding outcome particularly for facilities in remote and rural areas as well as those facilities with a focus on providing aged care to the homeless by better matching resident funding with the cost of delivering care.

I’ll outline this in coming slides, but first this slide shows the funding elements that will make up total AN-ACC funding. AN-ACC funding will roll together the existing basic subsidy, that is, ACFI funding, the amounts currently provided through the basic daily fee supplement, the homeless supplement and viability supplement and the additional funding for care minutes that commences from the 1st of October 2022. Effectively AN-ACC is a bigger funding pie compared to ACFI.

Supplements such as oxygen, veterans and accommodation supplements will continue with some minor rationalisation of the overall structure of these supplements. This presentation does not deal with these minor changes which will come into effect in parallel with the introduction of AN-ACC.

From the commencement of AN-ACC the adjustment subsidy reduction will cease. As a result services currently subject to the adjusted subsidy reduction for all or some of their beds will receive an increase in funding and will be funded on a consistent basis to other Australian Government funded aged care facilities.

The AN-ACC funding model consists of three components. First, a fixed component or base care tariff reflecting the characteristics of the facility such as the location and any specialisation, including homelessness or remote Indigenous. This fixed component is not recognised in ACFI and it allows for a more equitable distribution of funding as I mentioned earlier. Second, a variable component or AN-ACC classification reflecting the case mix classification of all residents through an AN-ACC assessment.

And finally, a one-off adjustment component to cover the extra costs associated with transitioning a resident into a facility.

The base care tariffs and the AN-ACC variable funding each represent around 50% of funding with the one-off adjustment component representing a relatively small proportion of funding.

As I mentioned before the AN-ACC starting price is $216.80. Funding under the AN-ACC is determined by multiplying the National Weighted Activity Units, or NWAUs, by the AN-ACC price for base care tariffs and AN-ACC classes. The tables in this slide show the funding outcomes of this.

It is important to note that from July 2023, the AN-ACC price will be indexed based on advice from the Independent Health and Aged Care Pricing Authority. The Independent Health and Aged Care Pricing Authority may also refine the NWAU values, base care tariffs and AN-ACC classifications over time.

So what are NWAUs? NWAUs facilitate more equitable funding distribution. They allow payments to be weighted to reflect the variation in costs of providing care due to the different structural characteristics of care homes and the different individual care needs of residents. You can also think of an NWAU as relative values that determine the amount paid for each AN-ACC funding component with an NWAU of 1 being a single measure of price or $216.80.

In the first table on the left, we have base care tariff funding. As mentioned base care tariff funding covers costs that are considered fixed and do not change significantly with changes in individual resident care needs or with small changes in occupancy. For example, the costs of providing general oversight of residents eating in common areas are determined by the overall needs of the facility and the number of residents rather than the needs of any specific resident.

The amount of base care tariff funding varies based on the NWAU value recognising the higher fixed care cost and often low and/or variable occupancy levels experienced by remote and very remote facilities in MMM 6 and 7 areas, the increased cost of providing care in small rural towns in MMM 5 areas, and the additional cost of providing specialised care to vulnerable groups such as Indigenous residents in remote communities and individuals with a history of homelessness.

There are six base care tariffs under the AN-ACC. Changes to base care tariffs announced as part of the 22-23 Budget include a new higher base care tariff for facilities in MMM 5 areas (small rural towns), and changes to the way base care tariff payments are calculated for MMM 6 remote and MMM 7 very remote facilities.

Facilities located in MMM 5 areas will now receive an NWAU of 0.55 per resident per day compared with a previous NWAU of 0.49. This reflects the higher costs of delivering care in these communities as evidenced from facility level data collected through the 20-21 Aged Care Financial Report.

A two stage payment calculation for facilities located in MMM 6 and MMM 7 communities has also been introduced removing a previous disincentive for facilities to increase bed numbers beyond 29 beds.

In the second table on the right, you can see the different weightings attributed to each of the 13 AN-ACC classes of care. The classes requiring more intensive care are weighted with the highest NWAU and consequently receive a higher funding amount.

You can also see the one off adjustment payment for new residents entering a facility in the bottom right hand side of the slide. One off adjustment payments have an NWAU of 5.28 which is equal to $1,144.70. As in the previous slide, this is to cover the extra costs associated with transitioning a resident into a facility.

So to calculate the total payment for the delivery of a single day of care, you will need to multiply the base care tariff funding by the number of approved or occupied beds based on the base care tariff you belong to plus multiply the number of residents in each AN-ACC class by the relevant funding price. I’ll now take you through some basic examples in the following slides.

In this example, the provider is a standard metropolitan MMM 1 to 4 facility. Base care tariff funding for standard MMM 1 to 4, standard MMM 5 and specialised homeless facilities is calculated based on occupied beds. This means the base care tariff component for the facility in this example will be funded only on the basis of the number of beds that were occupied.

So, although the facility has 28 beds, the provider will only be paid for the 25 beds that were occupied on the 1st of November 2022. To determine the funding for the 1st of November 2022, we multiply the 25 beds by $106.23 to derive base care tariff funding of $2,655.80. The variable funding is derived by multiplying the number of residents in each class and adding the results together to derive an AN-ACC variable funding component of $2,059.60.

To demonstrate to you how the one-off new entrant funding works, five of the residents are also new residents meaning the facility would also receive $5,723.52 for the one-off adjustment payment.

Adding each of these together, the facility would receive total funding of $10,438.92 for the 1st of November 2022.

To calculate total funding for the month of November, and assuming there are no more new residents or changes in resident classifications, you would multiply the total base care tariff and AN-ACC variable funding for the day of $4,715.40 by 30 days to derive a total of $141,462.00. Adding the new entrant adjustment funding, the facility would receive a total of $147,185.52 for the month of November.

In reality the amount of funding each day over a monthly payment period will vary based on changes to a facility’s resident cohort including the number of residents and their classification.

In this example, the provider is a specialised Indigenous MMM 6 facility, and unlike the previous example, base care tariff funding for standard MMM 6 to 7, specialised Indigenous MMM 6 and specialised Indigenous MMM 7 facilities is based on approved beds. This means regardless of the number of beds that were occupied at any given time, the provider will be paid for all approved beds for the payment period. So, in this example, the provider will be paid for all 28 beds even though only 25 were occupied on the 1st of November 2022. Apart from this, the total daily and monthly funding calculations are the same as example one.

Based on the AN-ACC starting price of $216.80, we have undertaken some sector analysis on AN-ACC funding compared to ACFI. At a high level, one of the key findings is that average funding per bed day in 21-22 is expected to be approximately $225 under AN-ACC, compared to an estimated average funding per bed day under ACFI including viability and homeless supplements of approximately $192.

As mentioned previously, under AN-ACC, more equitable care funding is provided to regional, remote, Indigenous and homeless facilities recognising their additional care costs. Our analysis shows that on average, standard MMM 5 facilities are expected to receive $233 per bed day under AN-ACC compared to $182 under ACFI. Standard MMM 6 and 7 facilities are expected to receive $290 per bed day under AN-ACC compared to $207 under ACFI. And specialised homeless facilities are expected to receive $303 per bed day under AN-ACC compared to $227 under ACFI. There’s currently insufficient data to determine funding results for specialised Indigenous facilities, however, residents located in specialised Indigenous facilities in remote and very remote areas are likely to be better off under AN-ACC given their NWAU weightings.

This slide outlines residential respite funding arrangements under AN-ACC. Once again respite care funding will consist of two components. The AN-ACC fixed component or base care tariff reflecting the characteristics of the facility, identical to the base care tariff funding for permanent residents, and a variable component which is based on the care recipient’s respite classification. As you can see there are three respite classes compared to 13 for permanent residents. The respite classes were derived based on the resource utilisation and classification study finding that mobility, as measured by the Modified de Morton Mobility Index, counts for the majority of cost differences between residents.

As with AN-ACC permanent residents respite care funding is expressed in terms of the NWAU and the AN-ACC starting price of $216.80. The first table on the right outlines the respite classes, NWAUs and corresponding funding for each class.

The second table outlines the respite accommodation funding that will be provided for all respite care recipients. The funding rates are identical to the higher amount a facility would receive under the existing accommodation supplement for permanent residents. In other words, it is assumed they meet the 40% low means care recipients threshold.

Together, this means that the new residential respite funding model will increase respite funding by $441.4 million over three years and align it to permanent residential care funding. This provides increased incentives for residential care providers to offer respite care, improving access to respite care and supporting senior Australians to stay longer in their own home.

Given that respite funding is now under the same model as permanent residents, it will ensure that it is indexed or priced by the Independent Health and Aged Care Pricing Authority ensuring ongoing equivalence.

I should say that facilities will be able to access their respite shadow assessment outcomes through the My Aged Care Service Provider Portal from late June 2022. A respite care recipient who does not have an AN-ACC respite classification in place by the 1st of October 2022 will be assigned a class 101 classification if they have a low respite approval; or a class 102 classification if they have a high respite approval or if they have both a low respite and high respite approval.

Care recipients and providers will be able to request a reclassification that may lead to a new classification level. Information on the reclassification process for respite residents including criteria will be available later in 2022 prior to implementing the new funding arrangements.

Now, let’s have a look at an example of how respite funding will be calculated. I want to point out again that base care tariff funding is calculated identically to permanent residential care. This means in this example the base care tariff component will be funded on the basis of the number of beds which are occupied only because the facility is a standard metropolitan MMM 1 to 4 facility. As a result, in this example, the facility would receive $743.62 in base care tariff funding.

The variable funding is determined based on the number of respite days for each resident’s respite class. Once again, similar to how permanent residential care funding is determined, in this example, the facility would receive $868.93 in variable funding.

In this example, the provider’s facility has been significantly refurbished therefore they will also be paid an accommodation funding of $60.74 for each resident or a total of $425.18.

As a result the total variable and accommodation funding this facility would receive for the 1st of November 2022 is $2,037.74.

As I explained earlier, the base care tariff funding for standard MMM 6 to 7, specialised Indigenous MMM 6 and specialised Indigenous MMM 7 facilities is based on approved beds. As the provider in this example is a specialised Indigenous MMM 6 facility, this means the base care tariff funding for respite care will have already been included in the overall base care tariff funding for the facility based on the number of approved beds as part of their permanent residential care funding calculation. As a result, in this case, the facility will only need to determine the amount of variable and accommodation funding for respite care. This is calculated in the same way as the previous example.

A $73.4 million Transition Fund over two years from the 1st of October 2022 has been established to ensure that residential aged care providers can adjust their business operations and transition smoothly from ACFI to AN-ACC. Providers with residential aged care facilities that will receive less funding under AN-ACC than ACFI will be eligible to access the AN-ACC Transition Fund.

Some key points in relation to the Transition Fund.

The Department will determine the list of providers that will be eligible to apply for the AN-ACC Transition Fund once all AN-ACC shadow assessments have been completed which is expected to be in June this year.

Eligible providers will be invited to apply to access the AN-ACC Transition Fund through a non‑competitive grant opportunity.

We expect to finalise the eligibility for the AN-ACC Transition Fund in June 2022 once shadow assessments are complete. The AN-ACC Transition Fund will open for applications in July.

Applications to access the AN-ACC Transition Fund will be assessed individually against a criteria that will be outlined in the grant opportunity guidelines and include a check for any compliance action.

AN-ACC Transition Fund payments will be paid monthly in arrears based on actual AN-ACC data submitted and would be paid separately to AN-ACC funding payments. This means the AN-ACC Transition Fund payment amount will vary month to month depending on the actual AN-ACC funding claimed.

That completes our overview of AN-ACC. The next part of this presentation will focus on care minutes.

A $3.9 billion funding boost will be provided to the sector to allow you to increase staffing levels to meet the new care minute requirements. This additional funding will be distributed through AN‑ACC to ensure that there is a connection between funding and your quarterly care minutes requirements. Once again, it is important to note that care minutes is a separate policy to AN‑ACC. AN-ACC is simply the funding mechanism by which to distribute the care minutes funding.

The care minutes requirements will become mandatory from the 1st of October 2023 in recognition that it may take some time for providers to attract and retain sufficient staff to be able to achieve the care minute requirements.

Consistent with the Royal Commission recommendations, the initial care minute requirements will be set at an average of 200 minutes per resident per day including an average of 40 minutes of registered nurse time per day and based on care provided by registered nurses, enrolled nurses and personal care workers. In addition, each residential aged care facility will be required to have at least one registered nurse on site for a minimum of 16 hours per day. Only the worked hours of registered nurses, enrolled nurses and personal care worker staff will count towards care minutes with this excluding staff leave time and training.

It is important to note that the 200 minute and 40 minute requirements are an average target across the sector that will be determined and assessed on a quarterly basis at the facility level, based on the average total resident case mix for each facility, and not for each resident at a facility.

In practice, this means that both the funding and care minute requirements will vary between individual facilities and change over time as a resident profile changes.

Higher resident care needs will result in higher level of funding being provided to a facility for them to meet higher care minute requirements.

Following the completion of all AN-ACC shadow assessments, you’ll be able to access your quarterly care minute targets for each facility from the My Aged Care service Provider Portal. It is expected this will occur after June 2022.

Since October 2021, you have been required to report your annual financial report care staffing minutes per facility, moving to quarterly reporting from the 1st of October 2022. This is how we will measure and publicly report on your quarterly care minute outcomes so it is important that you focus on the accuracy of these quarterly reports.

While you do not yet have access to your quarterly care minute target, you can access your residents’ AN-ACC classifications in the My Aged Care Service Provider Portal once their assessments have been completed and use this information to estimate the average care minute target for each facility. I will take you through a basic example on how to estimate your care minute targets shortly.

This slide shows the care minute requirements that will apply for each AN-ACC class from the 1st of October 2022 and will become mandatory from the 1st of October 2023. The targets are based on data from the resource utilisation and classification study, and as mentioned, are matched to the level of funding provided under the AN-ACC model. Study one of the resource utilisation and classification study involved a service utilisation or staff time data collection and found that close to 50% of staff time was spent delivering care tailored to the specific needs of the resident while the remaining 50% was spent delivering shared care across all residents.

In recognition of this, the care minute targets are calculated using 50% of the base care tariff and 50% of the AN-ACC classification. The base care tariff component is derived using the standard MMM 1 to 4 base care tariff so that specialised or remote facilities will not need to deliver more care minutes than metropolitan facilities, all else being equal.

The minutes allocations for the AN-ACC classifications are based on what was found to be delivered in the relativities in the RUC study. As you can see in the table, residents in class 1 and those with higher AN-ACC classifications, and therefore higher care needs, will trigger more minutes towards a facility’s average targets.

This slide shows analysis around the adequacy of the $3.9 billion in care minute funding. A StewartBrown survey from 2021 identified that registered nurses’, enrolled nurses’ and personal care workers’ wages accounted for 78% of provider costs. The green line on this chart shows the average funding per resident per day using 78% of AN-ACC funding.

The grey line represents the average of funding needed to meet the case mix adjusted care minutes.

As you can see the green line is always above the grey line indicating that there is adequate funding to meet the case mix adjusted care minute targets.

This slide provides an example of how you can estimate your average care minute targets. However, you should note that the care minute targets you may estimate should be treated as indicative only as your final target may change with reclassifications and changes to your resident case mix.

Imagine a facility has three residents as listed on the slide. Each of these residents have different care minute requirements based on their AN-ACC classification and have a different number of days spent in care. The average care minutes requirements can be determined by calculating the sum of the resident’s care minutes divided by the sum of the resident’s total number of days in care during the quarter.

Based on this example, the facility is required to deliver an average of 204 care minutes including an average of 43 minutes of registered nurse time.

So hopefully that gives you the update you were hoping to receive. But before we move to the questions that you submitted, I want to quickly go through a couple of other things that you need to be aware of for the transition. First we will continue to update our website with additional fact sheets and FAQs based on the feedback and questions we get from the sector. As a result I’d encourage you to keep on visiting our web page for new information. And second we also intend to develop an AN-ACC user manual which is expected to be available later in 2022. This should consolidate and provide all the information you need to understand in regards to AN-ACC.

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