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Compliance Management Insights - January 2024


Peter Edwards, Executive Director, Financial and Prudential Regulation

How does compliance impact an aged care provider’s star rating

Happy new year to you all! I decided to start 2024 by broadening the scope of what is discussed in these posts, hence the name change! Through this we hope to build a clearer understanding about the relationship between all aged care obligations, financial and non-financial, and how compliance with them is designed to support better outcomes for older Australians.  

This post will give you an overview of how we manage non-compliance we detect and how the decisions we make about our regulatory actions influence the star rating that a service receives. I will lead with that topic, as I have read some commentary about the star rating system that suggests there may be some confusion about how identified non-compliance impacts a service’s star rating.

The star rating system is administered by the Department of Health and Aged Care (DoHAC) and is designed to rate services in a way that assists older Australians and their families to understand how a residential aged care service is performing.

The measures used to assign the star rating to a residential service include data about resident experience, staffing, quality measures and compliance. Each of these is given a different weighting from which an overall star rating is then calculated. It’s the Commission’s role to provide the data about compliance.

Under the rules for the star rating system, there is a difference between non-compliance and a non-compliance decision. Non-compliance is defined as the failure of an aged care provider to meet one or more of the regulations and standards as set out in the Aged Care Act 1997, whereas a non-compliance decision is when the Commission uses one of its formal regulatory powers in response to identified non-compliance. A finding of non-compliance in itself does not impact a service's star rating; rather it is only where the Commission then uses its formal powers to require a service to take corrective action that a service’s star rating will be impacted. 

That makes sense because most of the Commission’s regulatory powers are designed to be used where a provider fails to take seriously their obligations to address identified non-compliance. How and when we use our powers, and what powers we use will depend on the level of risk that the non-compliance is posing to older Australians.  When assessing risk, we factor in our level of trust in a provider. Specifically, we consider evidence that demonstrates their willingness and ability to remediate the identified non-compliance in a timely manner. An example of such evidence, in lower risk matters, is a provider responding to non-compliance being brought to their attention by giving the Commission a revised continuous improvement plan. This is a plan that sets out how the provider will address the non-compliance. If we assess the plan to be suitable, then there is usually no basis in such lower risk matters for us to use a formal power requiring a particular provider response because the provider has already taken the necessary steps. Instead we will monitor the provider’s implementation of their continuous improvement plan.

In situations where we do find it necessary to use our formal powers, a service’s star rating will be impacted by which power we use. Further information about this is found on page 13 of the Star Ratings Provider Manual on the DOHAC website as well as My Aged Care. For those of you who are interested, additional information can also be found in our Regulatory Bulletin 2023-18 Publication of Provider Performance Information.

As a risk-based regulator, this approach is important because we want to create an environment where providers are incentivised to actively engage with us and demonstrate that they are willing to take necessary action to self-correct as soon as possible when things go wrong. That’s obviously much more efficient for the provider and the Commission, but most importantly it produces the best outcome for older Australians. That’s because it creates an incentive for providers to get ahead of the regulator and start to address non-compliance in advance of the Commission needing to intervene.  This then leaves us to focus on active case-management of higher risk providers and /or those that have had a pattern of non-compliance until we are satisfied that risks related to the non-compliance have been satisfactorily managed. 

This outline of our regulatory approach highlights the Commission’s low tolerance for providers who fail to take their obligations seriously.  How and when we intervene and what formal powers we use will relate to the risks we are managing and the provider’s regulatory posture (which may change over time). 

Our overall approach to managing non-compliance means that there will be times when a service on My Aged Care has non-compliance recorded against it that has not influenced its overall star rating. Where that is the case, it does not mean that the Commission is ignoring the existence of the non-compliance. Rather, it indicates that the Commission has determined that for that provider at that time, use of a formal regulatory power is unnecessary because the provider has responded promptly to the non-compliance finding and is already demonstrating their commitment to fixing the problem. The provider’s actions are monitored and if at any point this situation changes, such as evidence of a failure to implement their agreed continuous improvement plan, and we identify a risk to residents at a service, we will not hesitate to take further action which could well include formal regulatory action. 

I will address in a future post the Commission’s use of one of its most significant powers, the revocation power. Although this power is exercised rarely, it is the ultimate end point where a provider fails, despite being given the opportunity to do so, to implement fit-for-purpose systems and controls to manage risk.

Until next time...

Peter Edwards

Executive Director, Compliance Management Group

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