Over the horizon: Are recent aged care sector reforms a signal of where governance expectations are headed?

The recent Parliamentary passage of new governance and management obligations for aged care providers will have significant implications for the board composition and governance arrangements in this crucial sector. Importantly, the changes may also signal where governance obligations and expectations are headed across the community services sector.

The Aged Care and Other Legislation Amendment (Royal Commission Response) Bill 2022 passed by the new Parliament on 2 August 2022 made several amendments to the Aged Care Act 1997 (Aged Care Act).

The amendments are a part of a continuing set of legislative and funding reforms that seek to address recommendations by the Aged Care Royal Commission. These reforms commenced under the previous government. The changes address recommendations 88 to 90 of the Aged Care Royal Commission, which focused on the importance of sound provider governance arrangements to the provision of high-quality care for aged care residents. The explanatory memorandum notes:

These measures are aimed at improving transparency and accountability and ensuring the focus of approved providers, from the top down, is in the best interests of care recipients.

At a glance:

• New legislation implements governance recommendations from the Aged Care Royal Commission.
• Providers will need to review existing governance structures and current director expertise.

Directors in the broader community services sector should be monitoring these reforms closely as they may be more widely applied over time.

New governance obligations for aged care providers

The new governance and key personnel obligations are significant, and providers will need to review their existing governance arrangements and Board composition, including the skills of existing directors.

The key governance changes require that:

• A majority of members of the board are independent non-executive members;
• At least one member of the board has experience in the provision of clinical care;
• A quality care advisory body be established to provide ongoing feedback and advice (including a written report every six months) on the quality of the aged care service; and
• The board ensures staff have appropriate qualifications, skills or experience to provide aged care services, and are given development opportunities.

There are limited exceptions for these obligations for smaller providers and Indigenous community organisations.

In addition to new governance obligations, there are new requirements in respect of key personnel. Key personnel of an aged care provider include directors and senior executives of the provider. The main changes are:

• To consider on an annual basis that key personnel are suitable to be involved in the provision of aged care; and
• To notify the Aged Care Quality and Safety Commissioner of any changes to key personnel, or changes to the suitability of key personnel. Key personnel will also be required to notify the provider if they become aware of changes in their circumstances relating to a suitability matter.

For new approved providers entering the system, the new governance responsibilities will apply from 1 December 2022. For existing approved providers, the changes will apply from 1 December 2023 to ensure sufficient time to meet the new requirements.

Implications of governance reforms for other sectors

The aged care reforms will have a significant impact on providers with regard to board composition, staff, and reporting obligations. Beyond the aged care sector, early education and disability loom as the next sectors that may grapple with governance reforms, noting the ALP’s key election commitments and the current Disability Royal Commission.

Early education: One of the ALP’s key election commitments was to ‘improve transparency in the child care sector, by requiring large providers to publicly report revenue and profit, provide real time fee data and quality ratings to families, and ban non-educational enrolment inducements’. Additionally, the Minister for Social Services, Amanda Rishworth, noted the government’s commitment to the National Early Years Strategy and the need to put children and their families at the centre of policy and decisionmaking. This may result in more formalised obligations on providers to consider the ‘voice of the child’ in education and governance decisionmaking.

Disability: The Disability Royal Commission will deliver its Final Report by 29 September 2023. The recommendations could be even more far-reaching than the Aged Care Royal Commission as disability care is embedded across many industries including schools, correctional centres, mental health facilities, housing and health care.

The ALP went to the election with National Disability Insurance Scheme (NDIS) policy commitments, including sharing ‘governance with people with disability and their families and State and Territory Governments’. If they have not already, boards should start considering how they would integrate and elevate the lived experience of people with disability within their governance structures, as this is likely to be a focus of Royal Commission recommendations.

What’s next?

The AICD will continue to engage with our membership, government and stakeholders on the impact of the recent aged care reforms and future governance proposals across community services sectors. For practical resources on effective aged care governance, we encourage you to access the Toolkit for governing the aged care sector on AICD’s website.