Frequently Asked Questions

The Independent Health and Aged Care Pricing Authority (IHACPA) has developed the following frequently asked questions (FAQs) to further clarify the several major areas of work we undertake to inform the annual determination of the national efficient price.

Health care

The Independent Health and Aged Care Pricing Authority (IHACPA) is an independent agency established under the National Health Reform Act 2011.

IHACPA was formerly established as the Independent Hospital Pricing Authority (IHPA) as part of the National Health Reform Agreement to contribute to significant reforms to improve Australian public hospitals. A major component of these reforms is the implementation of national activity based funding through the annual determination of the national efficient price and national efficient cost. 

These determinations play a crucial role in calculating the Commonwealth funding contribution to Australian public hospital services and offer a benchmark for the efficient cost of providing those services as outlined in the National Health Reform Agreement.

On 12 August 2022 amendments to the National Health Reform Act 2011 came into effect changing IHPA’s name to IHACPA and expanding its role to include the provision of advice on aged care pricing and costing matters to the Commonwealth and the performance of certain functions conferred by the Aged Care Act 1997.

The Independent Health and Aged Care Pricing Authority sets the national efficient price (NEP) and the national efficient cost (NEC) and price weights based on national data provided by the state and territory governments.

The NEP is a major determinant of the level of Commonwealth Government funding for public hospital services and provides a price signal or benchmark for the efficient cost of providing public hospital services. The NEC is for services that are not suitable for activity based funding, such as small rural hospitals. IHACPA undertakes several major areas of work designed to inform the annual determination of the NEP and NEC including ongoing consultation with all Australian health departments, expert advisory committees and key stakeholders.

We work in partnership with the Australian Commission on Safety and Quality in Health Care to ensure that pricing, quality and performance measures for public hospitals are complementary and facilitate a strong national framework for the delivery of public hospital services.

IHACPA’s work also covers policy development to resolve disputes on cross-border issues between the states and territories and provides advice and reporting to all Australian governments and the public.

Activity based funding (ABF) is a way of funding hospitals whereby they get paid for the number and mix of patients they treat. Put simply, if a hospital treats more patients, it receives more funding. However, because some patients are more complicated to treat than others, ABF also takes into account various adjustments.

A key aim of the National Health Reform Agreement is to move as much funding as possible to an activity basis and away from block funding to provide more transparency in regards to where funding is going and to improve efficiency. ABF aims to empower the health sector to drive continuous improvement and value for money in the delivery of public hospital services.

IHACPA is governed by a Pricing Authority, whose membership is agreed through the Council of Australian Governments. Members of the Pricing Authority bring significant expertise and skills to the role, including substantial experience and knowledge of the health care needs and the provision of health care for people living in regional and rural areas.

The Pricing Authority is supported by a Chief Executive Officer, who is responsible for the day-to-day running of the agency.

IHACPA works closely with a range of expert committees including a Clinical Advisory Committee, a Jurisdictional Advisory Committee, a Stakeholder Advisory Committee and a Technical Advisory Committee. These committees ensure that the underlying principles applied to setting the national efficient price and the national efficient cost are both clinically relevant and technically appropriate.

The national efficient price (NEP) is a set amount that is used to work out the funding for a public hospital activity.

A public hospital service operating at the NEP will be able to:

  • Provide episodes of patient care (on average, across all types of care, as measured using agreed classifications) and other services (including teaching, training and research) at or below the national benchmark price.
  • Respond to evidence based initiatives to improve patient care including new technologies.
  • Provide services at a quality level consistent with national standards, and to minimise negative consequences that fall on patients (including those attributable to poor quality and safety) or on other parts of the service system.
  • Make choices about how best to deliver services to ensure that people receive the ‘right care at the right time in the right setting’.

IHACPA determines the NEP for public hospital services through the analysis of data on actual activity and costs in public hospitals. Costing information used to determine the NEP is drawn from the National Hospital Cost Data Collection (NHCDC). This data is submitted to IHACPA by state and territories.

The national efficient cost (NEC) determines the Commonwealth funding contribution to block-funded hospitals. It represents the average cost of block-funded hospitals across Australia.

IHACPA determines the NEC and the criteria for which public hospitals or public hospital services are eligible for block grant funding in its Pricing Framework for Australian Public Hospitals.

The national efficient price (NEP), the national efficient cost (NEC) and the national weighted activity unit (NWAU) are determined annually. The NWAU is the unit of measure of the activity based funding system. Each year, IHACPA publishes a Pricing Framework for Australian Public Hospital Services (Pricing Framework) – a key policy document which helps guide the development of the NEP and NEC.

The Pricing Framework is developed in consultation with the Commonwealth, state and territory governments, IHACPA's key health stakeholders and the general public prior to being finalised. IHACPA uses this consultation process to ensure all needs are met when delivering the NEP and the NEC.

In determining the NEP and NEC, IHACPA considers the need to ensure reasonable access to public hospital services, safeguard clinical safety and quality, and the efficiency, effectiveness and financial sustainability of the public hospital system.

In very simple terms, the national weighted activity unit (NWAU) multiplied by the national efficient price provides the total cost of a hospital service.

The NWAU allows activity across a range of settings to be compared – for example, inpatients, outpatients and emergency patients. It provides a scale that identifies the relative measure of resource use of each public hospital service. Specific examples of costs are available.

The annual Pricing Framework for Australian Public Hospital Services outlines the scope of public hospital services eligible for Commonwealth funding.

The National Health Reform Act 2011 and clauses A9–A17 of the National Health Reform Agreement, defines public hospital services eligible for a Commonwealth funding contribution to be:

  • all admitted services, including hospital-in-the-home programs
  • all emergency department services provided by a recognised emergency department service
  • other outpatient, mental health, subacute services and other services that could reasonably be considered a public hospital service.

If a service is not suitable for activity based funding, such as a small rural hospital, it will receive block funding through the national efficient cost.

IHACPA uses an indexation methodology to account for the time lag between the costing data used and the price to be set. IHACPA reviews the indexation methodology each year in preparation for determining the national efficient price.

Activity based funding is an episodic funding model – this means that for the vast majority of patients, a single payment is made for their stay in hospital – which means that the hospital has a strong incentive to ensure that patients are kept in hospital only as long as they need to be.

The model also recognises that some patients require more care/treatment and makes additional payments to these patients to ensure that the hospital is not disadvantaged by treating them.

No. Block funding still exists for some hospitals which have been recognised as unsuitable for activity based funding.

The National Health Reform Agreement stipulates that the Commonwealth will provide block-funding amounts for relevant services in regional and rural communities via a state managed fund.

Both the Commonwealth, states and territories are committed to maintaining a flexible approach to health and community services delivered to small, isolated communities and funding agreements will reflect this.

IHACPA determines the national efficient cost for block-funded services.

No. The national efficient price determines only the Commonwealth contribution to public hospital funding. As system managers, the states and territories will set the volume of services to be provided by each local hospital network via a service agreement. States and territories can also choose to pay a price that is higher or lower than the national efficient price or national efficient cost if they choose to.

No. This is why IHACPA was also given the role of determining adjustments to reflect legitimate and unavoidable variations in the costs of delivering healthcare services. The full list of adjustments can be found in the national efficient price section of the IHPA web site.

These include an adjustment for:

  • Indigenous patients
  • patients who required treatment in an intensive care unit
  • patients treated in specialist paediatric hospitals
  • patients who live in outer regional, remote and very remote areas of Australia
  • subacute paediatric patients
  • specialist psychiatric care.

No. The National Health Reform Act 2011 specifies that the national efficient price is only applied to public hospital services in Australia. IHACPA does however consult closely with private health stakeholder groups which sit on IHACPA's stakeholder advisory committee.

Classification aims to provide the health care sector with a nationally consistent method of classifying all types of patients, their treatment and associated costs in order to provide better management, measurement and funding of high quality and efficient healthcare services.

Classifications are comprised of codes that provide clinically meaningful ways of relating the types of patients treated by a hospital to the resources required. They enable hospital and health service provider performances to be measured by creating a link between the patients treated and the resources consumed for providing those treatments. This allows hospital and health service provider output to be measured, which forms the crucial data for policies on funding, budgeting and setting costs.

Effective clinical classification systems ensure that hospital data is grouped into appropriate classes, which in turn contributes to the determination of the national efficient price and national efficient cost.

There are six patient service categories in Australia currently which have classifications being used nationally or in development stage.

More information is available in the Classification section of the IHACPA website.

The AR-DRG and ICD-10-AM/ACHI/ACS products and licences that can be purchased include:

  • ICD-10-AM Alphabetic Index
  • ICD-10-AM Tabular List
  • ACHI Alphabetic Index
  • ACHI Tabular List
  • Australian Coding Standards
  • AR-DRG Definitions Manual (Volumes 1-3)
  • Mapping tables between ICD-10-AM/ACHI editions
  • Electronic Code Lists (ECLs)

You may purchase any of the AR-DRG and ICD-10-AM/ACHI/ACS products and materials by visiting the AR-DRG Classification System Product Sales website.

Please note that purchasing of the ECLs requires entering into a licensing arrangement with IHACPA, which sets out the terms and conditions for the use of the ECLs.  To enquire about the ECL licensing arrangement, please contact us.

Further information on the AR-DRG Classification System is available on the IHACPA website including:

  • international licensing arrangement
  • licence Agreement for governments
  • Software Developer Licence Agreement
  • how to purchase classification system materials and products.

Please note that if you are from outside Australia, your country must be licensed for the AR-DRG classification system before you can purchase any the materials and products above. Please see ‘How to purchase a Licence Agreement’ for more information on entering into a licence for the AR-DRG classification system.

If you have any questions regarding how to purchase the AR-DRG products and materials, please contact us here.

To calculate the national efficient price and national efficient cost, activity and cost data is provided by state and territory jurisdictions.

IHACPA receives activity data from each jurisdiction on a six-monthly basis. This data includes inpatient admissions, emergency department presentations and outpatient appointments as well as a range of mental health and rehabilitation services.

In addition to activity data, each year IHACPA receives cost data from jurisdictions via the National Hospital Cost Data Collection (NHCDC). The NHCDC collates the vast majority of health system costs at a ‘product’ level.

Further information is available in IHACPA’s Three Year Data Plan.

IHACPA’s activity and cost data collections provide the primary input for the national efficient price (NEP) and national efficient cost (NEC). Once data is collected it is analysed by IHACPA using a pricing model. This price model is then used to produce the NEP and NEC Determinations for each financial year.

You contact us by email enquiries.ihacpa@ihacpa.gov.au or by calling +61 2 8215 1100.

Aged care

Following the passage of the Aged Care and Other Legislation Amendment (Royal Commission Response) Act 2022 (the Act), the Independent Hospital Pricing Authority (IHPA) was expanded and renamed to become the Independent Health and Aged Care Pricing Authority (IHACPA). In addition to IHPA’s existing functions in the pricing of public hospital services, the newly formed IHACPA will take on the role of providing advice on the costing and pricing of aged care services to the Commonwealth Minister for Health and Aged Care.

IHACPA may also benchmark cost and activity data for aged care services and will provide an annual recommendation for an Australian National Aged Care Classification (AN-ACC) price to the Commonwealth Government. This will inform Commonwealth Government decisions on residential aged care and residential respite care funding from 1 July 2023. IHACPA will provide advice on the costing and pricing of home aged care following future reforms.

The passage of the Act also saw the transfer of functions from the Aged Care Pricing Commissioner to IHACPA. IHACPA therefore has the power to approve changes to extra service fees and residential aged care accommodation prices above $550,000.

IHACPA determines the national efficient price and national efficient cost for delivering public hospital services each year. This calculation determines the amount of Commonwealth Government funding for public hospital services. In contrast, IHACPA’s role in aged care pricing is advisory only. The Commonwealth Government will continue to have responsibility for determining the pricing and funding for Australian aged care services.

IHACPA's role in aged care pricing aims to ensure that funding for residential aged care and residential respite care is informed by the actual costs of delivering care.

IHACPA will provide annual pricing advice to the Commonwealth Minister for Health and Aged Care regarding the costs of care and how changes in the cost of care may be considered by the Commonwealth Government when making funding decisions.

The Department of Health and Aged Care will continue to be the aged care system operator. This includes responsibility for the operation and implementation of the Australian National Aged Care Classification (AN-ACC), determining how AN-ACC assessments are undertaken and reviewed, and the requirements for re-evaluation.

The Australian National Aged Care Classification (AN-ACC) funding model was developed by the University of Wollongong, commissioned by the Commonwealth Department of Health and Aged Care.

IHACPA will provide advice to the Commonwealth Government regarding decisions on the pricing of residential aged care and residential respite care from 1 July 2023. This advice will include recommendations for the national AN-ACC price as well as the national weighted activity units (NWAU) or price weights that determine the relative prices of different AN-ACC classes.

The ongoing implementation of activity based funding in residential aged care will be an extended, multi-year process involving evolution and refinement. IHACPA will work alongside stakeholders to:

  • Develop, review and refine the Pricing Framework for Australian Aged Care Services.
  • Review the distribution of residents across AN-ACC classes to provide advice on the price and the AN-ACC NWAU weightings.
  • Conduct cost studies to gather the relevant data required to make recommendations on appropriate adjustments.
  • Review and propose refinements to the cost components in the AN-ACC funding model including those involving Indigenous status, Modified Monash Model classifications, homelessness and other identified adjustment categories.
  • Explore future areas of reform and priority and consider how these can be appropriately captured in classification, costing, pricing and funding model development.

IHACPA does not determine a resident’s Australian National Aged Care Classification (AN-ACC) class.

Independent assessors will use the AN-ACC assessment tool developed by the University of Wollongong to evaluate a resident’s functional, cognitive and physical capabilities and assign them an AN-ACC class.

For more information about AN-ACC assessments, refer to: AN-ACC assessment process and classification on the Australian Government Department of Health and Aged Care’s website.

IHACPA’s provision of independent aged care pricing advice to the Commonwealth Government will aim to ensure that aged care funding, including through the new classification model for residential aged care and respite care, the Australian National Aged Care Classification (AN-ACC), is directly informed by the actual costs of delivering care.

IHACPA will seek to support a range of policy objectives through the Pricing Framework for Australian Aged Care Services, including enabling aged care providers to deliver the person-centered, quality care expected by the community and increased safety, efficiency and sustainability of the aged care system over time. Some objectives may be achievable in the short to medium-term. Other objectives, such as improved efficiency of the sector, are longer-term objectives.

IHACPA will consider any cost differentials by facility size, type or location and the costs associated with specific resident groups and the Australian National Aged Care Classification (AN-ACC) classes.

To support this, IHACPA will undertake regular costing studies, consider other available cost and activity data such as the Aged Care Financial Report and Quarterly Financial Report data, and seek input from stakeholders through annual public consultation and advisory committees. IHACPA invites stakeholders to make submissions relating to these issues in response to the Towards an Aged Care Pricing Framework Consultation Paper.

IHACPA’s established role in public hospital pricing relies on a consultative, transparent and evidence-based approach. IHACPA is committed to these same principles in developing its aged care costing and pricing advice.

However, IHACPA acknowledges the need to ensure its aged care costing and pricing advice is developed specifically for the aged care system. IHACPA is committed to transparency and accountability in making impartial, evidence based and timely policy decisions that are appropriate for the aged care system.

While IHACPA will build on and draw from the principles adopted for public hospital pricing, the technical aspects of costing studies and the modelling used to develop pricing advice will be developed specifically for the aged care system. IHACPA seeks feedback on these methods through the Towards an Aged Care Pricing Framework Consultation Paper.

IHACPA will provide pricing advice to the Commonwealth Government that considers the impact of wage increases on costs, only where these have been determined by the Fair Work Commission in the prior year. Where a wage determination is made and takes effect outside of IHACPA’s advice cycle, the Commonwealth Government may seek additional advice from IHACPA. IHACPA will not assess the appropriateness of wages within the aged care system.

IHACPA will develop and provide annual advice to inform Commonwealth Government decisions on the costing and pricing of residential aged care and residential respite services from 1 July 2023. IHACPA may also provide advice at other times if requested by the Commonwealth Government.

As part of annual pricing development, IHACPA will review the Pricing Framework for Australian Aged Care Services on an annual basis, to reflect new costing and pricing developments.

As part of this process, a consultation paper will be released annually to engage stakeholder views on the proposed approach to costing and pricing of aged care services.

IHACPA’s advice will inform Commonwealth Government decisions on the pricing and funding of residential aged care and residential respite care using the Australian National Aged Care Classification (AN-ACC) from 1 July 2023.

IHACPA will not provide advice on means testing arrangements or the appropriate level of resident contributions in aged care. This will remain the responsibility of the Commonwealth Government.

The Pricing Framework for Australian Aged Care Services 2023–24 will initially focus on pricing advice for the Australian National Aged Care Classification (AN-ACC) funding model in the context of residential aged care and residential respite care.

The Commonwealth Government is developing reforms to home care services, and it is anticipated that IHACPA will advise on costing and pricing matters once these reforms take effect.

IHACPA is committed to ongoing and transparent consultation with a wide range of stakeholders in the aged care system. The Towards an Aged Care Pricing Framework Consultation Paper is the primary opportunity for all stakeholders to contribute to the development and refinement of the Pricing Framework for Australian Aged Care Services 2023–24.

In the Towards an Aged Care Pricing Framework Consultation Paper, IHACPA outlines the proposed principles and approach for developing costing and pricing advice for residential aged care and residential respite care. The paper also highlights key issues and future priorities.

Public consultation will provide stakeholders with an opportunity to provide feedback on a range of matters, including:

  • the proposed pricing principles, which will underpin the Pricing Framework for Australian Aged Care Services 2023–24
  • the key challenges for aged care costing and pricing, and how best to address them in the development of the Pricing Framework for Australian Aged Care Services 2023–24
  • the Australian National Aged Care Classification (AN-ACC) funding model in the context of residential aged care and residential respite care.
  • the mechanisms that support activity based funding in aged care.

Yes. IHACPA is focused on ensuring that submissions are representative of the whole system and the community. IHACPA therefore seeks submissions reflecting the diversity of stakeholders, including people receiving care, their representatives and a wide range of organisations, roles, backgrounds and perspectives.

Feedback submissions close at 5pm AEDT on 14 October 2022 and can be submitted via:

  • Online submission questionnaire
  • Email in PDF or Word format to submissions.ihacpa@ihacpa.gov.au
  • Mail to:

    Independent Health and Aged Care Pricing Authority

    PO Box 483

    Darlinghurst NSW 1300

If you have further questions about the Towards an Aged Care Pricing Framework Consultation Paper, or require assistance with the submission process, please contact IHACPA via email at submissions.ihacpa@ihacpa.gov.au or by phone at (02) 8215 1100.

A good submission will generally include:

  • your name and organisation (if applicable), as well as information about your role and area of expertise to help IHACPA understand your perspective and ensure we are obtaining submissions that are representative of the whole aged care system
  • a focus on your area of expertise—stakeholders are encouraged to respond to questions in their area of expertise or specific of interest or relevance. Stakeholders do not need to answer all questions
  • evidence to support your recommendations, including well-reasoned and evidence-based arguments, and the use of supporting references and/or data (if possible)
  • feedback related to IHACPA’s five-year vision for the development of aged care costing and pricing advice
  • feedback related to the AN-ACC funding model for residential aged care and residential respite care.

Unless respondents specifically request that their submission or parts of their submission should not be released, all submissions will be published on the IHACPA website. IHACPA retains, at its absolute discretion, the right not to publish any submissions or part thereof, where it considers it appropriate to do so.

Personal contact details for all submissions will be removed or redacted from each submission before they are published on IHACPA’s website. Your information will be stored securely and used in accordance with IHACPA’s Privacy Policy.

The Pricing Framework for Australian Aged Care Services 2023–24 will be published on the IHACPA website in early 2023. IHACPA will also publish a consultation report in early 2023, which will summarise all the feedback received and the decisions made by IHACPA based on these submissions

Aged Care Accommodation – for consumers

IHACPA is an independent government agency. We determine the annual national efficient price and  national cost for public hospital services and provide pricing advice for aged care services nationally.  We also have responsibility for assessing and approving applications from approved providers of residential aged care to:

  • increase or decrease their extra service fees 
  • charge refundable accommodation deposits (RADs) above the maximum amount of accommodation payment determined by the Minister, currently set at $550,000.

IHACPA has no regulatory powers or policy setting responsibilities in relation to extra service fees or RADs under the Aged Care Act 1997.

A refundable accommodation deposit (RAD) is the lump sum payment you pay for a room (or part of a room) at an aged care home if you are not eligible for Australian Government assistance

Each residential aged care provider sets their own price for different kinds of rooms in their service. However, they cannot charge you a RAD price over $550,000 without first obtaining approval from IHACPA.

You can find more information about accommodation payments in aged care on the Department of Health and Aged Care website and in My Aged Care.

The most a provider can charge you for a room or part of a room is $550,000 (or the equivalent daily payment), unless they have a valid approval from IHACPA or the former Office of the Aged Care Pricing Commissioner to charge more.

If your provider has an approval from IHACPA or the former Office of the Aged Care Pricing Commissioner to charge more than $550,000, they can charge you no more than the amount listed in their approval letter plus allowable indexation applied since the date of approval. 

Approvals expire after 4 years. Your provider must reapply to keep their approval up to date. 

No. Under the Aged Care Act 1997, providers can charge a refundable accommodation deposit (RAD) up to and including $550,000 for a room in a service without approval from IHACPA.

If your provider has approval to charge a refundable accommodation deposit (RAD) above $550,000 for rooms in its service, they will have an approval letter from IHACPA or the former Office of the Aged Care Pricing Commissioner. The letter will confirm the maximum price that can be charged for a given room.

You can request to see a copy of the approval letter from your provider.  The approval must be current for the date you agreed to your room price in writing.

If you believe your provider did not have a valid approval to charge the amount you paid on the date you agreed to your room price, you should contact the aged care regulator the Aged Care Quality and Safety Commission or refer to the Commission’s fact sheet Overcharged accommodation payments – Your rights

The sample approval letter on our website explains what you should look for in the approval letter from IHACPA or the former Office of the Aged Care Pricing Commissioner. It shows how to confirm that the price you have paid for your room is no more than the approved price for that room.  

When reviewing your provider’s approval letter you should check that:

•    the name of the service aligns with the service where your room is located
•    the approval date covers the date you agreed to your room price in writing
•    the room number you are paying for is listed in the table at page 2. Some letters may not list room numbers
•    you are not being charged more than the price listed in the approval letter or the price listed in the letter with allowable indexation
•    if you are sharing a room, that the price you have agreed to is no more than the price listed in the approval letter for a dual occupancy room.

You may find that the approval letter is issued by the Office of the Aged Care Pricing Commissioner (ACPC). This is because, before August 2022, assessment and approval of RADs higher than $550,000 was the responsibility of the ACPC. Your provider’s approval letter is still valid even if it on ACPC letterhead as long as the date of approval is current.

If you have any questions about approval letters please contact IHACPA at applications.accommodation@ihacpa.gov.au or on (02) 8215 1193.  
 

Providers may apply indexation to an approved RAD. This means adjusting the price to be in line with inflation.

Under the Aged Care Act 1997 providers can apply indexation to approved RADs using the All Groups Consumer Price Index each year without approval from IHACPA. There is a calculator on our website to assist them to do this. After 4 years they must apply for a new approval.

If your provider has applied indexation to an approved RAD they should publish the new amount on their website, on My Aged Care, and in their written materials to prospective residents. They should do this before they enter into any new accommodation agreements. They can only charge the indexed amount to new residents who enter care on, or after, the day the indexation was applied. 

Your provider may have received a ‘conditional approval’ to charge a RAD higher than $550,000 from IHACPA or the former Office of the Aged Care Pricing Commissioner (ACPC).  This means their approval is subject to conditions, such as completion of a refurbishment or construction programme. 

Your provider cannot publish or charge you the amounts listed in a ‘conditional approval’ letter until IHACPA has verified that the conditions of the approval have been met. Your provider must receive a ‘Satisfaction of Conditions’ letter confirming that they can commence charging the higher amount. 

If your provider shows you a ‘conditional approval’ letter, ask to see the ‘Satisfaction of Conditions’ letter too. This way you can make sure that they have a valid approval to charge a higher RAD price.

If your provider did not have a valid approval on your room price agreement date, they cannot charge you more than $550,000 while you reside in that room. 

If you think your provider may have charged you a RAD above $550,000 without a valid approval, talk to your provider about your concerns first.  If you need help to do this, you can contact the Older Persons Advocacy Network (OPAN) for free advocacy support on 1800 700 600 (free call) or visit www.opan.org.au.  An advocate can support you to exercise your rights and resolve your concerns.

If you cannot resolve your concerns by talking with your provider or need other support, contact the national regulator of aged care services, the Aged Care Quality and Safety Commission. Call them on 1800 951 822 or visit their website at www.agedcarequality.gov.au.

You can find more information about what to do if you think provider overcharged you is available in the Commission’s fact sheet, Overcharged accommodation payments Your rights

If you need more information about accommodation costs and payments, contact My Aged Care on 1800 200 422 or visit www.myagedcare.gov.au/understanding-aged-care-home-accommodation-costs

To learn more about RAD assessment and approvals, contact the Aged Care Policy (Accommodation) team at IHACPA on (02) 8215 1193 or visit www.ihacpa.gov.au

If you have a concern or complaint about your RAD that you can not resolve by talking to your provider, or need other support, you can contact the Aged Care Quality and Safety Commission on 1800 951 822 (free call) or visit www.agedcarequality.gov.au.  The Commission can also help you if you need to translate information.

For free advocacy support, or if you need help to raise a concern with your provider about your RAD, you can call the Older Persons Advocacy Network (OPAN) on 1800 700 600 (free call) or visit www.opan.org.au.  

Application and Approval

The maximum amount an approved provider can charge a person as a RAD (or equivalent daily amount) without approval is $550,000. This is based on the Minister’s maximum amount

You must apply to IHACPA for approval if you are an approved provider of residential aged care services and:

  • you want to charge more than $550,000 as a RAD (or equivalent Daily Accommodation Payment)
  • you want to charge an amount that is higher than your currently approved amount
  • your current approval is expiring.

Approvals are valid for 4 years. You must reapply to IHACPA at least 60 days before your existing approval expires if you wish to continue to charge RAD prices above the minister’s maximum amount.

To apply for approval to charge RADs above $550,000 you will need to:

It is important that you use the currently approved form published on our website.  Submitting an older version of the form could delay our assessment of your application. 

Once completed, you should email your application form, RAD data sheet and any supporting attachments to: applications.accommodation@ihacpa.gov.au.

You should submit your application at least 60 days before the date you wish to start charging your higher RAD price. 

It is important you submit your application at least 60 days before your existing approval expires if you wish to continue to charge RAD prices above the Minister’s maximum amount. If you do not receive a new approval before your current approval expires, you must go back to charging $550,000 until you receive a new decision from IHACPA.

Approvals cannot be given retrospectively or backdated. They can not cover the period between when one approval expires and the next approval begins (the lapsed approval period).

No. The form to apply for a higher RAD is the same whether you have applied for a RAD approval before or not. 

You need to respond to all of the questions in the application form and provide all relevant supporting documents. This applies whether you are seeking approval to charge higher RADs for the first time or if you are reapplying for a previously approved RAD amount at the same price or above. For all applications, you should provide enough information to inform the delegate of the Pricing Authority to make a decision in accordance with the Fees and Payments Principles 2014 (No.2).

For all applications you should provide the following:

  • your completed application form including a clear and detailed pricing rationale. The rationale should explain how your proposed price provides value to care recipients (Question 14)
  • your completed RAD application data sheet
  • a list of RADs received over the past 12 months for the proposed accommodation groups (your RAD history) if this information is not captured in your data sheet
  • photographs of:
    • representative rooms and ensuites for each accommodation group in the application
    • any key room features that support your pricing rationale 
    • representative common areas
    • any key common area features that support your pricing rationale
  • floorplans which clearly show the room numbers and identify the accommodation groups in your application 
  • evidence of the building value
  • evidence of the land value.

Please ensure that you redact personally identifiable information from all supporting documents submitted with your application.  This means removing images of residents, staff, contractors or visitors from photographs. It also means redacting data sets that contain resident names or numerical identifiers.

You can find instructions about how to answer each question in the application form.  The completed examples of the RAD application form and RAD data sheet on our website also show what you need to provide in your application response.   

It is important that you provide the correct information and supporting documents. This will help us process your application in a timely way. If we need to contact you to submit further information our decision could be delayed.

If you need to speak to someone about your application, contact us at applications.accommodation@ihacpa.gov.au or call us on (02) 8215 1193.

We will send you a decision letter within 60 days of receiving your complete application. It is important that you provide all the information requested in the form and the accompanying RAD data sheet to facilitate timely processing of your application.

We may send you a Request for Information (RFI) if we require more information to process your application. If you receive an RFI the 60-day statutory assessment period is paused until you provide your response.

A Request for Further Information (RFI) is a formal request for additional information. It is used to help us decide the outcome of your application.

We may issue you with an RFI if:

  • there is insufficient information in your application 
  • the information you have provided requires clarification 
  • you have not provided evidence for specific factors considered in our assessment and requested in the application form, for example cost factors.

If you receive an RFI related to a Refundable Accommodation Deposit (RAD) Approval Application, the 60-day statutory assessment period is paused until you provide your response. 

You must respond within 28 days of receiving our request, or in accordance with the timeframes set out in the RFI. If we do not receive a written response from you by the due date, your application will be taken to be withdrawn and you will have to submit a new application if you wish to charge RADs above $550,000.

 If you are unable to respond in time, please contact us at applications.accommodation@ihacpa.gov.au or call us on (02) 8215 1193. 

To avoid delays, you should carefully follow the instructions in the application form.  Please take care to provide your responses and supporting documents in the format requested. 

IHACPA complies with the Privacy Act 1988 and the Australian Privacy Principles. We are committed to the protection of personal information.

To ensure the privacy of individuals is maintained it is important that the photographs and data you submit in support of your application don’t contain personally identifiable information. This information could be about residents, visitors, contractors or staff.

Before submitting your application please make sure you:

  • review all photographs. If your submission contains images of residents, staff, visitors or names (for example on labels or other documentation captured in the photograph) you must redact the photograph before submitting it 
  • review your RAD data sheet and other documents you are providing to support your application.  If your submission contains any identifying information, like care recipient names, bank details, client reference numbers or addresses, you must redact the document before submitting it.

If you provide images or documents containing personally identifiable information, we will delete them and you will need to resubmit your application. This may delay our decision.

More information about IHACPA’s privacy policy is available on our website.

If your aged care service is under construction or refurbishment works have not been completed, you can apply for ‘conditional approval’ for RADs above $550,000.

Conditional approval provides an indicative price you can charge as an accommodation payment subject to you meeting certain conditions as set out in the Fees and Payments Principles 2014 (No 2)

Conditionally approved prices cannot be published on My Aged Care.

After your construction or refurbishment programme is completed, you must write to IHACPA to submit the information specified in your conditional approval letter. This includes evidence of your final costs, occupancy certificate (if applicable) and photographic proof of completion. We will verify the information you have provided and, if satisfied, issue you with a ‘Satisfaction of Conditions’ letter. You should allow 28 days for completing this process.

You cannot charge your conditionally approved price until you receive a ‘Satisfaction of Conditions’ letter from IHACPA to charge a higher RAD amount. You cannot charge the approved amount until you have published the new amount on your website, on My Aged Care, and in your written information provided to residents.

Under Section 26(3) of the Fees and Payments Principles 2014 (No 2), if you have a conditional approval to charge RADs above $550,000 you must write to IHACPA to have your conditional approval verified before advertising your prices on My Aged Care, your website or in written information provided to residents.

Your submission for verification should include evidence that:

  • your construction or refurbishment has been completed
  • the costs of construction or refurbishment estimated in your application reflect the actual costs incurred 
  • the quality and condition of rooms is equivalent to or better than the proposal described in your application 

You must not charge or advertise higher prices until you have received this letter. We will process your application for verification of your conditional approval within 28 days and if satisfied, issue you with a ‘Satisfaction of Conditions’ letter confirming that the conditions attached to your conditional approval have been met.

A ‘Satisfaction of Conditions’ letter is issued to an approved provider after we have verified that they have met the conditions attached to a conditional approval.

If you have a conditional approval to charge RADs above $550,000 you must write to IHACPA to obtain final approval, as indicated by a ‘Satisfaction of Conditions’ letter before charging or advertising your prices on My Aged Care, your website or in written information for residents.

Approvals to charge a RAD higher than the Minister’s maximum amount of $550,000 are valid for 4 years.

You must reapply to continue to charge higher RADs at least 60 days before your existing approval expires if you wish to continue to charge RAD prices above the minister’s maximum amount.  If you do not receive a new approval before your current approval expires, you must go back to charging $550,000 until you receive a new decision from IHACPA.

Approvals cannot be given retrospectively. They can not be backdated to cover the period between approval dates (the lapsed approval period). 

Your approval letter documents the new maximum RAD amount you can charge residents as an accommodation payment. It also has the date on which you can start charging that amount (the approval date).

You may charge a resident the approved amount or less than the approved amount.  However, you cannot charge more than the maximum RAD amount you have advertised on your website, My Aged Care (MAC) and any published materials for residents. 

It is your responsibility to update your website, MAC and any published materials provided to residents before you start charging higher maximum RADs.

No. The approved higher RAD amount can only be charged from the approval date shown in your approval letter from IHACPA. You can not start charging the approved higher RAD amount until you have published it on your website, on My Aged Care and in your written information provided to residents.

It is important that you submit your application at least 60 days before your existing approval expires if you wish to continue to charge RAD prices above the Minister’s maximum amount. If you do not receive a new approval before your existing approval expires, you must go back to charging $550,000 until you receive a new decision from IHACPA.

Approvals cannot be given retrospectively. They can not be backdated to cover the period between approval dates (the lapsed approval period).

If you have charged an amount above $550,000 for a RAD without a valid approval in place you should:

  • Notify the Aged Care Quality and Safety Commission (the Commission) that you have charged a RAD more than $550,000 without valid approval in place (overcharged)
  • Tell the affected resident and/or their representative that you have overcharged their accommodation payment, and
  • Refund the amount you have overcharged the resident including any interest in accordance with s75 of the Fees and Payments Principles 2014 (No 2)

For more information about what to do if you have charged a RAD above $550,000 without a valid approval please contact prudential@agedcarequality.gov.au. You can also review the Commission’s fact sheets for providers Overcharged accommodation payments – protecting residents’ financial interests.

We endeavour to send reminder letters to providers with existing approvals before they expire. However, it is your responsibility to ensure your approvals are current. 

You should ensure you have robust governance systems in place to record your approval expiry dates so that you do not inadvertently continue to charge a higher RAD after your approval has expired. If your approval lapses you must revert to charging and advertising the statutory amount of $550,000. You must do this until you receive a new approval from IHACPA. 

Approvals cannot be given retrospectively. They can not be backdated to cover the period between approval dates (the lapsed approval period).

You should make sure your contact details with IHACPA are up to date so that we can get in touch with you. If you need to update your contact details please email us at applications.accommodation@ihacpa.gov.au or call us on (02) 8215 1193. You can also subscribe to our mailing list.

If you have acquired a new aged care service that has rooms advertised above $550,000 you should check that:

  • you have approval letters from IHACPA or the former Aged Care Pricing Commissioner (ACPC) to charge RAD prices above $550,000 and that those approvals are valid (current)
  • you have a final approval for any conditional approvals transferred to you as indicated by a Satisfaction of Conditions letter. You need this before you start charging or advertising the approved amount.

If you charge, or have charged, a RAD over $550,000 without a valid approval in place, you must notify the Aged Care Quality and Safety Commission (the Commission). You must also refund the amount you have overcharged the resident including any interest. This is in accordance with s75 of the Fees and Payments Principles 2014 (No 2).

If you do not have access to approval documentation from IHACPA or the former ACPC, you will need to submit a written request to us at applications.accommodation@ihacpa.gov.au.

You should submit your application to charge higher RADs to IHACPA at least 60 days before opening your new aged care service. 

Alternatively, you can apply for ‘conditional approval’ to charge higher RADS at any time before the completion of your build. 

If you have received a conditional approval for higher RADs, you will need to apply to IHACPA to have your conditionally approved RAD price/s verified. You should do this at least 28 days prior to the date you wish to start charging the higher amount. 

Importantly, you cannot charge or advertise conditionally approved prices on your website, in your published materials or on My Aged Care (MAC), You must wait until you receive final approval from us as indicated by a ‘Satisfaction of Conditions’ letter.

No. You can not include additional services in your proposed RAD price if you charge and additional service fee. For example, if you charge an additional service fee for an in-room television, you cannot use the cost of providing this feature to justify your proposed higher RAD price.

You can find more information about additional service fees on the Department of Health and Aged Care’s website.  Additional service fees cannot be charged for:

  • services outlined under Schedule 1 of the Quality of Care Principles 2014
  • services required as part of your provider responsibilities 
  • services already covered by the paying of an extra service fee or 
  • services included in the accommodation (RAD) price.

Before you can start charging an approved higher RAD amount, you must publish the amount:

  • on the My Aged Care website
  • on your own website
  • in your published material provided to residents and their representatives.
     

The information you provide is classified as protected information under the Aged Care Act 1997 (the Act).  We will only use it to assess your application.

If required, under section 86-4A of the Act we may share protected information about your application and approval to support the legislative responsibilities of:

More information about the arrangements in place to support the coordination, cooperation and information sharing between Agencies can be found on our website.

Application form

The Fees and Payments Principles 2014 (No.2) set out what the delegate of the Pricing Authority (IHACPA) must consider when deciding whether to approve a higher RAD amount.

Your pricing rationale should clearly explain why you are seeking higher RAD prices for rooms in your home, how you established your proposed prices and a detailed justification for the difference in prices between accommodation groups. 

Your response to Question 14 of the RAD application form should include:

  • an overview of why you think the proposed RADs represent value for the residents
  • how you worked out the RAD amounts
  • the business considerations or strategy which support the proposed RADs
  • the costs of construction or refurbishment that you want to recoup through the proposed price
  • the benefits provided to residents from any improvements to infrastructure (such as renovations, refurbishments or new construction)
  • information about innovative aged care practices or design excellence
  • unique features of the accommodation or location that provide value to residents
  • how you have maintained the quality and condition of the service since the previous approval (if relevant)
  • how the history of RADs obtained previously supports the proposed price/s
  • your analysis of competitors and where your aged care service fits in with the local market.

Importantly, when calculating your proposed price you should not include:

  • the cost of specified care and services (as set out in the Quality of Care Principles 2014
  • maintenance costs
  • extra services provided under an Extra Service fee
  • additional services provided under an Additional Service fee.

Pricing justification / business case

No. The delegate of the Pricing Authority (IHACPA) must consider a range of factors as set out in section 26 of the Fees and Payments Principles 2014 (No.2) when deciding whether to approve a higher RAD amount. 

Your pricing justification (question 14 in the application form) tells us why your rooms represent value to residents at the proposed price.  It should address all factors in enough detail for the delegate to decide in accordance with the requirements of the Aged Care Act 1997.

An increase in the MHP in your area alone is not enough to show us that a higher RAD provides value to residents. You need to show us how the quality and amenity of the accommodation on offer at your service supports the charging of an above threshold RAD price.

Under the Fees and Payments Principles 2014 (No.2) you can apply to charge a higher RAD for a room or a part of a room. If you are applying for part of a room, that is where a room is shared, you must clearly explain how the part of the room is worth more than the Minister’s maximum amount of $550,000. Be sure your application addresses all the factors the delegate must and may consider when deciding to approve a higher RAD amount.

Indexation

No. You can only apply indexation to an approved RAD price that is above the Minister’s maximum amount.

Yes. Under section 29 of the Fees and Payments Principles (no.2) you can apply indexation to approved RADs annually (from the second year of approval) using the All Groups Consumer Price Index. There is a calculator on our website to assist you to do this.

You do not need to seek approval from IHACPA to apply indexation to your approved price. If you decide to index, the indexed price substitutes your existing approved price. However, if you wish to charge a RAD higher than the indexed price you must make a new application to IHACPA.

If you have applied indexation to an approved RAD you should publish the new amount on your website, on My Aged Care and in your published materials for prospective residents. Do this before you enter into any new accommodation agreements. You can only charge the indexed amount to new residents who enter care on, or after, the day the indexation was applied

You can apply indexation to your approved RAD price any time after the one-year anniversary of your approval date.  If you have previously indexed, you can apply indexation to the indexed amount after every anniversary of your approval date up to 4 years.  If you are uncertain, your approval letter shows the dates from which you can apply indexation. After four years you must apply for a new approval to charge higher RADs. 

You do not need to apply to IHACPA to apply indexation to your approved price. The indexed amount substitutes the existing approved price.   

No, you can only apply indexation for the current year. If you have not applied indexation for one or more years you cannot catch up by applying indexation retrospectively. 

Indexation can be applied to the maximum approved RAD or, if you have previously indexed, the indexed amount.

Once you index your maximum approved RAD, you are not locked into applying indexation each year of your approval after.  You can apply indexation one year and not the next. 

Your approval letter lists the annual anniversary dates you can start to apply indexation from.  After 4 years you will need to re-apply for a new approval.

No. You can apply indexation annually at any time from the anniversary date of your approval. After 4 years you will need to re-apply for a new approval.

If you decide to index, the indexed amount substitutes your existing approved price. If you continue to apply indexation in subsequent years, you should use the previous year’s substituted indexed price (the indexed amount) to calculate it.

The indexation date starts on the date you choose to start charging the indexed RAD. You can  start on the anniversary date or within the anniversary year. However, the anniversary date of the original approval remains the date on which you can start to apply indexation in subsequent years.  You can only apply indexation from the anniversary dates listed in your original approval letter.

Each time you apply indexation, you should publish the new amount on your website, on My Aged Care and in your published materials for prospective residents. You should do this before you enter into any new accommodation agreements. You can only charge the indexed amount to new residents who enter care on, or after, the day the indexation was applied.

Extra services

If your home has extra service status you can offer residents a bundle of extra services and charge an extra service fee.

An extra service fee is an amount you can charge for the provision of significantly higher than average hotel-type services.  This can include a higher standard of accommodation, a wider range of higher quality food or better non-care services like recreation and personal interest activities.

You can only charge an extra service fee if you have extra service status. This status is given by the Department of Health and Aged Care.  If you are unsure whether your service has extra service status or if you have questions about the extra service programme, you should contact the Department directly.

If you wish to increase or decrease your extra service fee you must apply to IHACPA.

You can apply to increase your current extra service fee at any time. However, IHACPA cannot consider your application unless at least 12 months has passed since the date on which your last approval took effect.  That is, the date on which the current fee was last increased (or decreased) for residents at your service. It is not the date the approval was given.

You must submit your application to IHACPA at least 60 days before you want to start charging the proposed new extra service fee.

The maximum increase allowed is 20% plus the percentage change in inflation over the last 12 months.

We use the All Groups Consumer Price Index (CPI) (weighted average of eight capital cities) as the measure of inflation.

For example, if your current fee is $40 and the CPI change is 3.8%, the maximum increase allowed is 23.8% (20% plus 3.8%) of $40, which is $9.52.

Yes. You must give residents at least 30 days written notice of the proposed change to their extra service fee.

The Extra Service amount (as distinct from the extra service fee) is the extra service fee plus 25%. The Extra Service amount is the maximum you can charge continuing care recipients. The extra s fee is the maximum you can charge new residents. When IHACPA approves an extra service fee, you will also be advised of the relevant Extra Service amount.

Continuing care recipients are residents who entered residential aged care prior to 1 July 2014. These residents may be charged for Extra Services up to the Extra Service amount (that is, the approved Extra Service fee plus 25%). If a continuing care recipient takes up an Extra Service place after 1 July 2014, they will still be governed by this arrangement.

However, if a continuing care recipient is out of residential care for 28 days on unapproved leave or moves to a new facility, then they may only be charged up to the maximum approved extra service fee.

New residents are those residents who entered care on or after 1 July 2014. New residents may only be charged up to the maximum approved Extra Service fee.

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