What's next for governance in aged care?

Governance has been a hot topic for aged care providers and regulators in the aftermath of the Royal Commission into Aged Care Quality and Safety. This process culminated in the government taking the extraordinary step of mandating a single governance and business ownership model for all providers that came into effect in December 2023. G5Strategic Principal Consultant STEPHEN ROOKE unpacks the current expectation behind these new rules and the types of questions that providers can expect during the next wave of site audits.

What went wrong?

The overall theme of criticism levelled against providers arising from the Royal Commission — and the name of the report — was ‘neglect’. This allegation takes aim at systemic failures within those providers who were responsible for the worst examples tabled during the Commission process.

Whilst funding and staffing challenges are real for many providers, it was also true that many of the examples of substandard events presented to the Royal Commission had their roots in poor governance and poor management.

The governance solution put forward by government was to add Sections 63-1D to the Aged Care Act and S63D of the Aged Care Quality and Safety Commission Act. These include requirements for providers to:

• only operate through a company structure
• have a minimum number of company directors with at least 50% independent of daily operations
• meet a minimum clinical skillset within the director group
• operate formal advisory bodies providing and receiving written responses from the board on matters of quality care and consumer outcomes.

Why was this model chosen?

1. Structural accountability: Companies come with robust obligations for office holders such as directors and executives. Statutory requirements and case law precedents make it very clear who is accountable to stakeholders under corporate structures, with public facing directors required to be accountable for the actions of their board and management. This responsibility was not as clear and direct within the private, trustee, association and body corporate diaspora that were permitted under the old rules.
2. We can’t govern what we can’t understand: This measure seeks to improve the contribution of boards to robust discussions with management in terms of accountability and support for consumer outcomes. There were many examples of substandard care events from providers who looked like they have robust corporate governance frameworks, but their boards were comprised entirely of finance, legal and property professionals, or local business people who had no prior clinical or aged care experience.
3. What gets measured gets done: When companies have a material and complex element to a business, boards typically form a subcommittee for those directors who are subject matter experts to take the time needed to get into the detail without derailing main board meetings. Specifying the two advisory committees is a direct response to two sets of empirical evidence gathered through Royal Commission and regulator audit activities:

• Markedly better outcomes observed amongst providers who already had advisory bodies.
• Lack of evidence amongst providers with poor outcomes that their boards were regularly seeking and reviewing information on the quality of care and lifestyle outcomes for their consumers.

Was that enough?

Taken at face value, it looks like all providers need to do is make sure they are operating through a company, hire a few more directors and set up any missing advisory bodies.

However, Australian private and charitable companies have obligations to meet ongoing regulatory requirements, including specific governance requirements that are set out in the Corporations Act, the Australian Charities and Not-for-profits Commission Act, and in relevant governance regulations.

Forcing providers to trade through companies and to appoint suitably skilled, independent directors is not the last step in the process. Instead it is the first step of an ongoing governance cycle.

The corporate governance cycle requires boards and governance personnel to take on defined roles. Active, skilled and independent boards participate in the traditional areas of strategic planning and review, but are also responsible for ensuring that management have enough staff and resources to ensure that strategic objectives are met in the areas of consumer care, mission, growth, sustainability, workforce management, legal compliance and business development.

Boards have a tendency to delegate too much responsibility to management in areas where they lack experience. In the formal governance cycle, the inclusion of requirements to receive and respond in writing to quality care and consumer advisory reports puts more of the onus back on directors.

Boards are also responsible for choosing which information they wish to see when holding management accountable for performance. Management reporting packs should be tested to make sure they are complete and contain enough information to inform directors.

What’s next for providers?

The next round of governance audits has started already, and ACQSC surveyors are armed with 30 questions testing the involvement of the board in governance of the organisation.

Recommendations for boards getting ready for these audits include:

• Attendance by directors and governance personnel at the facility outside of audit periods is expected. Residents, families and staff will be asked if they have seen a board member recently, and in what capacity.
• Board members are expected to attend audits and talk to the management of the business. All board members are eligible to talk, but spare some thought for who is best placed to address specific questions on clinical trends and customer feedback matters.
• Boards should set the strategic plan. This document is the position description for the CEO. While it would be foolish not to consult with management, board members should be able to talk to the board’s plans and the guidance or support given to the management team to help them manage and improve the business.
• The GPMS (Government Provider Management System) report lodged each October is not a once-a-year document. Board members should always be able to talk to the most common complaints, compliments, issues and priorities in each part of the organisation, including recent trends and what support or guidance has been provided to management.
• Quality and consumer advisory body reports should be top of mind. When did you last receive these reports? Were they discussed by the whole board? What have you been looking at between reports to keep on top of management efforts to address challenges or lift performance?

The governance reforms that were implemented over the past 18 months are not going to result in good governance by themselves. For many organisations, they can be the chance to rebalance the conversation, including a strong voice for the board and clearer expectations about expectations for management.

Stephen Rooke is a Principal Consultant with G5Strategic. He works closely with managers, boards and owners of aged care, retirement living and charitable organisations to connect strategic goals with key business systems and processes.

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