Federal Court bans Regis Aged Care from charging asset replacement fee

The Federal Court has handed down a decision that disallows Regis Aged Care, one of Australia’s largest providers of health and aged care services, from continuing to slap its elderly residents with a $15 a week “asset replacement charge”.

But Regis says that it’s consider whether to appeal decision, which was made on March 2. Back in September 2016, the federal Department of Health issued guidance in relation to fees and charges that aged care providers could charge under the Aged Care Act 1997.

The asset replacement charge was explicitly banned, with the department’s statement about the fee update noting, “The department considers that ‘capital refurbishment fees’, ‘asset replacement contributions’ and similar fees would not be supported by the legislation where the fee does not provide a direct benefit to the individual or the resident cannot take up or make use of the services.” *

According to a report in The Australian, Australia’s aged care providers sustained a huge financial blow in 2016 as a result of the fee update, with the prospect of lower income from fees wiping millions off the value of listed companies including Estia Health, Japara Healthcare and Regis itself.

But Regis defied the ban and continued to charge the fee, saying that it did not believe the government had interpreted the aged-care legislation correctly and was taking legal action to have the legislation interpreted by the courts. In April 2017, Regis applied to the Federal Court of Australia for clarity around the interpretation of the Aged Care Act 1997, in order to determine whether Regis’ asset replacement charge was consistent with the act.

The application was heard by the Court in October and November 2017, and the decision handed down this week was that the Department of Health was correctly interpreting the legislation. 

But Regis has continued (and still continues) to charge its residents the fee.

“Pending a decision from the Court, Regis continues to charge the ARC [Asset Replacement Fee] to residents, but made a provision in its FY17 financial accounts reducing profit by an amount equal to the ARC revenue recognised,” a company statement said – in effect saying that it had accounted for the potential cost of refunding the fees to residents. 

“The Court delivered the judgement in the matter this afternoon and has decided that the ARC is not consistent with the Act. The court will be making a formal declaration after receiving submissions from the parties, following which Regis will consider its appeal rights and actions necessary to comply with the declaration.

Once again, the company was quick to assure investors that its profit for the current financial year would not be impacted – but made no mention of the steps it would take to refund the elderly patients in its aged care facilities.

Regis, which has a market capitalisation of $1.2 billion, reported net profit after tax of $27.9 million in the six months to December 31. 

* What types of services cannot attract additional fees?

This list from the government’s website states which services aged care providers cannot charge additional fees for:

• other services or activities that would form part of the general operation of the aged care home; or
• services that are required to be delivered as part of a provider’s responsibilities.  

Examples of ‘other care and services’ for which charging of additional fees to residents is not permitted include, but are not limited to:

• maintenance inside and outside the aged care home;
• any repairs or replacements necessary because of normal wear and tear;
• general refurbishment of the resident’s room after they have left the aged care home;
• services or activities that would form part of the general operation of the aged care home, or are required in order to deliver residential care to the individual;
• employment of administration staff where the staff member is primarily undertaking activities related to the general operation of the aged care home; and
• capital costs, asset management or replacement.

Have you reviewed your parents’ or your own aged care fees recently? Have you been charged the asset replacement charge?

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.