(Image: AAP/Joel Carrett)

Outsourcing has become central to the aged care business model and regulation has failed to keep up with it, creating an ideal environment both for the spread of infection and the avoidance of responsibility for deaths and illness in the residential care sector.

With private residential care providers expanding their role in the sector over the last decade, and around four out of every five residential provider part of a larger aged care group, the outsourcing of ancillary services such as catering, laundry and cleaning in aged care facilities, as well as more traditionally outsourced services such as accounting and insurance, has become standard.

Governments have encouraged this: following a 2004 review, the federal government established a facility to help single-facility providers band together to obtain greater purchasing power for external services, while the Productivity Commission encouraged outsourcing as a way of reducing costs in a 2008 inquiry.

One firm has even taken advantage of the aged care royal commission to urge providers to “outsource your non core activities to the Philippines” in order to “focus on what’s important”.

A central problem with outsourcing, as one disgruntled New Zealand provider claims to have discovered, is that outsourced providers add a profit margin into services that may offset any efficiency gains, especially if the market for provision of outsourced services is uncompetitive (a particular problem in regional areas). It also does little for in-house staff morale.

Broader trends in the sector encourage outsourcing beyond cost drivers. The push to empower seniors and their families to exercise greater control over what kind of care they receive — consumer-directed care — automatically requires a more flexible and outsourced home and residential care sector in which providers can’t rely on guaranteed funding but — theoretically — must provide more tailored services that might be just one of a range of care services “consumed” by the recipient.

Outsourcing has also played a key role in regulation of the sector. In 2017, industry publication Ageing Agenda showed how the federal Department of Health spent millions of dollars in recent years contracting out major reviews of aged care funding, legislation and policy. That has continued: last year, for example, PWC received over $1.1 million from the Department of Health to develop new aged care quality indicators and review existing ones.

Not merely is providing services to aged care big business; providing services to the agencies that fund and regulate them is big business as well.

Coupled with the shift of many providers to short-hour contracts for staff, outsourcing increases the movement of people between residential facilities, which has proven a key vector for transmission of COVID-19. As late as June 30, the Aged Care Quality and Safety Commission — now under fire for its lack of residential aged care preparedness — was relaxed about people working across multiple facilities in Victoria.

That complements the broader approach of the commission to outsourcing. In its recent guidance to the sector on applying to become an approved aged care provider, the commission absolves itself of any role in ensuring the providers of outsourced services are compliant with aged care standards, placing that burden entirely on the applicant:

“If your organisation currently has, or proposes to enter into an agreement with another entity to deliver care and services on its behalf you must tell us … You must provide a statement outlining how you intend to oversee the delivery of outsourced care including who within your organisation is responsible for oversight of the other entity and how you will ensure that care is delivered in compliance with the Aged Care Act and the principles … Outsourced or subcontracted services will not be separately assessed against the Aged Care Act and the principles. This is because the organisation directly receiving funding from the Australian government is responsible for the delivery of safe and quality care and services…”

This is an elegant way to diffuse responsibility: the regulator has washed its hands of responsibility for ensuring the provision of basic services such as food and clean linen meet legislated standards, outsourcing that burden on the private or non-government provider to act as co-regulator to ensure services provided by another private provider are compliant, when it has a direct interest in cost minimisation.

To intervene earlier than July and declare that staff should not be working across multiple aged care facilities during a pandemic would have contradicted the commission’s co-regulatory model, given it has no responsibility for ensuring outsourced services provided to facilities comply with aged care standards.

The 1000-plus aged care residents who have already contracted COVID-19 in Victoria and the families of more than 120 aged care residents who have died are unlikely to be given clear answers as to who was responsible for the infection-friendly industry model we created.

Peter Fray

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