Aged care operators, Regis Aged Care and Japara, are being forced to repay millions of dollars to aged care consumers for fees that were collected illegally.

The Federal Court handed down a decision on to disallow Regis and Japara from levying an “Asset Replacement Charge” on aged care residents.

Charged at $16-17 a day, some costs were capped at as much as $15,000. The money was collected for the refurbishment of existing facilities or for capital works, often for new buildings that residents would never see.

The “Asset Replacement Charge”, or ARC, was charged when a resident dies or leaves the facility – which the Federal Court found was “unfair”.

Other operators also charged its clients similar fees but stopped when, in September 2016, the Department of Health warned that the practice was not supported by legislation.

After that, Regis then sought an interpretation of the Aged Care Act, in the hopes that it would allow them to continue requesting the fee.

Federal Court judge Debra Mortimer found there was no legislative basis for such a fee, especially considering it would facilitate upgrades that the resident would never benefit from.

“There are no monetary limits on the level of such additional fees and charges, nor on how many of them a provider might impose,” Justice Mortimer said.

“It is an additional price extracted by Regis from all who wish to enter one of its facilities.”

“It is imposed as an integral part of any entry by a person to one of Regis’ facilities, on a take-it-or-leave-it basis. It is not a fee from which the individual resident derives any benefit: it does not secure for the resident better living conditions, additional services or more one-on-one care.”

“Further, because on Regis’ contention these fees are simply a matter of private contract, there is no accountability or supervision to ensure that the moneys received under such fee arrangements are actually expended for the purposes for which they were levied. The secretary would have no power to inquire about this, as on Regis’ argument it is a matter outside the statutory scheme.”

A spokesperson from The Aged Care Guild, who represents both Regis and Japara, told HelloCare, “the Aged Care Guild (the Guild) notes the Federal Court’s decision in relation to the Regis Aged Care case.  The Guild welcomes the clarity that this gives aged care providers in relation to charges for asset replacement costs.”

“However, we emphasise that there remains a need for the Government to provide greater clarity as to what is actually covered by ‘specified care and services’ under the Aged Care Act so that both providers and residents have more certainty about what constitutes permissible fees and charges.”

In a statement from the Aged Care Minister, Ken Wyatt, he said, “this ruling confirms the Department of Health’s interpretation of the relevant legislation.”

“The decision is a reminder to aged care providers to ensure that they adhere to the legislation in regards to fees charged to residents.”

Pat Sparrow, CEO of aged care peak body ACSA told HelloCare, “it’s an important and interesting ruling for the sector as the ability to offer residents choice as well as the ability to increase revenue through user charging is an important principle for providers.”

“ACSA will be closely examining the details of the ruling to determine whether there are any implications for providers, and any knock-on effect on their ability to enforce fair charging for any additional services more broadly.”

The Federal Court’s decision has a 28-day appeal period.

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