Alternative residential aged care funding models – from ACFI to ‘Option 5’ is the path right to get us to world-class care?

The Alternative Aged Care Assessment, Classification Systems and Funding Models Report, AKA the Wollongong Report, has created a lot of discussion and debate within the industry.  So, we thought we should wager in on the discussion.

The report was commissioned by the Government to look at alternative approaches to determining residential aged care funding that delivers more stable funding arrangements (read: addresses budget blowouts).  The current Aged Care Funding Instrument (ACFI) was deemed to no longer be fit for purpose. It was considered to not adequately focus on what drives the need for care among the increasingly frail population it services, and no longer satisfactorily discriminates between residents based on their care needs 1.

Here at Positive Practice we agree – it’s time for a new funding model. Actually we, as health professionals who believe in the old adage ‘use it or lose it’, have never felt that the ACFI was fit for purpose. It lacked a strong enough focus on evidenced-based practice, wellness, & restorative practice.

So, we were excited to see how the Government would move on this. It’s fair to say however that we are somewhat disappointed with the Wollongong Report. Why? Well, first let’s just lay out the five models proposed in the report, they are:

  1. Refinement of the current ACFI model
  2. A simplified model with four funding levels (i.e. like the current home care package model)
  3. Option Two plus supplements subject to external assessment
  4. An Activity Based Funding (ABF) model with a branching classification
  5. A blended payment model with fixed and variable costs1

Option 5 is the recommended model identified in the report.  This model moves away from an ‘additive funding model’ (like the current ACFI where you score each care need and it add up to a total score and subsequent funding level), and utilises a ‘branching classification model’. Essentially this means rather than ‘adding up’ care needs, it groups people with similar levels of care needs together, based on typical drivers of care and resource utilisation. This then correlates to a set amount of funding for each individual in that group.

Option 5 is also characterised by a blended payment model with fixed and variable payments.

‘Fixed’ care payments (determined by the number of residents in care) are intended to cover operational costs and the cost of standard/basic care needs.

‘Variable’ payments are intended to cover the cost of individualised care needs of each residents. The branching classification will be used to determine funding levels for the ‘variable’ payments.

Photo by Oliver Thomas Klein on Unsplash


Whilst from a business management perspective this funding approach makes a lot of sense, the devil is always in the detail. We have two main concerns about this funding approach: 1) this payment structure does not appear to actively support Consumer Directed Care, and 2) where is the line drawn between what is fixed and variable? Let’s look at this in a bit more depth.

Consumer Directed Care

 The fixed and variable payments of Option 5 do not align with or actively support Consumer Directed Care (CDC). Essentially it would appear that should this model rollout the CDC model used within Home Care Packages will not be possible in residential aged care. This is in despite of the report’s acknowledgement of the Aged Care Roadmap which highlights the importance of:

  •  ‘…a sustainable, consumer-led aged care market, where consumers have increased choice and control of what care and support they receive, as well as where, how and when they receive it’ 2 p6
  • Seamless movement between home based and residential care with true consumer choice of care and provider across the spectrum’ 2 p6 and
  • The distinction between care at home and residential care should be removed, creating a greater consumer choice ‘driving quality and innovation’ and ‘increased competition. 2 p6

We fail to see how Option 5 achieves this – rather its design could in fact hinder it. Perhaps it is too early to make a call on how CDC would work in Residential Care – we know there is a lot of debate about this. Surely though a future model should at least actively enable the possibility, rather than be structured in a way that impedes consumer choice and control.

Fixed & Variable Rates

What is fixed? What is variable? What rate will the fixed care payments be paid at? Will this sufficiently cover a holistic wellness model as ‘core’ practice? During the consultation the indication was given that wellness should be considered as core business and therefore fall under the ‘fixed care payments’. We don’t disagree, but in order to do this well, it will need to be appropriately funded (which it isn’t in the current model) – it will be interesting to see how this plays out. In order to better understand the funding levels the authors recommended the undertaking of a ‘Resource Utilisation and Classification Study’. This Resource Utilisation and Classification Study has now been awarded to the Australian Health Services Research Institute at the University of Wollongong (the same group who researched and produced the Report) and is due to be finished in approximately Aug 2018.

It is encouraging to see the move away from the current relatively prescriptive ACFI model. We hope that the funding model that comes in its place truly supports a future state of world-class residential aged care in Australia, where older people can live well in their last phase of life. We believe this can be achieved through innovation, technology and truly challenging what it means to live in residential care. We have made shifts in community care to address a paternalistic, ageist approach to service delivery – now let’s see that happen in residential care. Let’s remember only the location is different – people should not lose the choice and control they have living in the community just because they move into residential care.

Read the full Wollongong Report here or watch the webinar



1 McNamee J, Poulos C, Seraji H et al. (2017) Alternative Aged Care Assessment, Classification System and Funding Models Final Report, Volume 1: The Report. Centre for Health Service Development, Australian Health Services Research Institute, University of Wollongong.

2 McNamee J, Poulos C, Seraji H et al. (2017) Alternative Aged Care Assessment, Classification System and Funding Models Final Report, Volume 2: Attachments to the Report. Centre for Health Service Development, Australian Health Services Research Institute, University of Wollongong.