Top five governance issues for the aged care sector

The government is establishing a royal commission into Australia’s aged care sector as issues — non-compliance and care failures for our most vulnerable — continue as demographic trends place even more pressure on the sector’s affordability and sustainability.

Similar to the learnings from the banking royal commission, aged care providers need to put the consumer first and ensure they find the right balance between societal purpose and sustainability.

The aged care sector in recent years has experienced unprecedented pressure to evolve to meet the needs of an increasing number of people who are living longer thanks to improvements in health care.

Here are my top five governance challenges for aged care organisations.

Governance and risk management frameworks

There are key issues emerging for the aged care sector that point to the need to investigate whether providers have the necessary governance and risk management frameworks in place.

The new Aged Care Quality Standards aim to simplify regulation for providers and encourage innovation, excellence and continuous improvement. The changes affect Australia’s 2,700 aged care providers and 366,000 staff. Under the draft new regulations, aged care providers’ governing bodies and boards will be legally accountable for safety and quality. Does your aged care organisation have an effective governance framework in light of the new Standards?

Workforce planning

There is currently a workforce and skills shortage and the work is highly labour intensive. As a result, the costs of labour are significant. Also, over 50% of people living in aged care homes currently have a diagnosis of dementia and have complex care requirements. Filling roles with less skilled workers may result in a board not meeting its duty of care obligations. A more responsive, better skilled and flexible workforce enables providers to deliver higher standards of service and care.

Regulatory compliance

The legislation requires aged care providers to meet certain requirements relating to the provision of care and services. A culture of compliance with legislative requirements surrounding the health and safety of patients is the ultimate responsibility of the board.

Financial sustainability

Board members of for-profit and not-for-profit organisations must clearly understand the provider’s finances, balance sheet and the sensitivity of the business to changes in the funding model. Ensuring the solvency of the provider must be top of mind for directors so they can continue to provide quality services to those in their care.

Non-financial risks

Boards of aged care providers require a broadening of risk definitions beyond those with a financial focus.

APRA’s Prudential Inquiry into the Commonwealth Bank of Australia emphasised the importance of identifying and managing non-financial risks to include areas such as operational risks, conduct and reputational risks, as well as risks arising from conflicts of interest.

It also raised the importance of the question “Should we?” over the ‘Can we?’ question when assessing dealings and decisions regarding customers, across all levels of an organisation — from the board to the coalface.

Practical support

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