Consultation Paper on the Pricing Framework for Australian Residential Aged Care Services 2026–27

Abbreviations

Abbreviations	Full term
ACFI	Aged Care Funding Instrument
ACFR	Aged Care Financial Report
AN-ACC	Australian National Aged Care Classification
BCT	Base care tariff
Consultation paper	Consultation Paper on the Pricing Framework for Australian Residential Aged Care Services 2026–27
Consultation report	Pricing Framework for Australian Residential Aged Care Services 2026–27 Consultation Report
Commission	Aged Care Quality and Safety Commission
Department	Department of Health, Disability and Ageing
Government	Australian Government
IHACPA	Independent Health and Aged Care Pricing Authority
MMM	Modified Monash Model
MPSP	Multi-Purpose Services Program
NATSIFACP	National Aboriginal and Torres Strait Islander Flexible Aged Care Program
NWAU	National weighted activity unit
Pricing framework	Pricing Framework for Australian Residential Aged Care Services 2026–27
QFR	Quarterly Financial Report
RACCS	Residential Aged Care Costing Study.
RN	Registered nurse
Royal Commission	Royal Commission into Aged Care Quality and Safety

Consultation questions

Number	Question
1	What could IHACPA do to support improved provider participation and increased representation in our cost collections?
2	A. For the Multi-Purpose Services Program, what activity and cost data points should be considered when developing recommendations for any new future funding model? B. For the Multi-Purpose Services Program, what methods of data collection should IHACPA consider when developing recommendations for any new future funding model? Please provide examples or supporting evidence.
3	A. For the National Aboriginal and Torres Strait Islander Flexible Aged Care Program, what activity and cost data points should be considered when developing recommendations for any new funding model? B. For the National Aboriginal and Torres Strait Islander Flexible Aged Care Program, what methods of data collection should IHACPA consider when developing recommendations for any new future funding model? Please provide examples or supporting evidence.
4	For approved providers receiving supplements to fund subsidised aged care, are there any cost variations associated with resident complexity or meeting specific resident care needs that need to be accounted for in the Australian National Aged Care Classification funding model? Please provide examples or supporting evidence.
5	What factors, if any, contribute to variations in the cost of providing required hotel services to residents? Please provide examples or supporting evidence.

1. Introduction

1.1 About IHACPA

The Independent Health and Aged Care Pricing Authority (IHACPA) was established under the National Health Reform Act 2011 (Cth) to promote improved efficiency in, and access to, public hospital services through the annual determination of the national efficient price and national efficient cost.

In 2022, under legislative amendments, the scope of IHACPA’s functions were expanded to include:

providing advice about aged care pricing and costing matters to the Australian Government
assessing applications for higher maximum accommodation payment amounts and extra service fees for residential aged care.

As part of these functions, IHACPA provides annual pricing advice to government to inform decisions on the Australian National Aged Care Classification (AN-ACC) price and price weights for each AN-ACC class and base care tariff (BCT) category.

In undertaking our work, IHACPA is guided by the government’s Expectations Setting Paper and IHACPA’s Statement of Intent, which outline IHACPA’s aged care pricing and costing functions, including responsibilities and scope when developing aged care pricing advice.

1.2 About this consultation paper

The Consultation Paper on the Pricing Framework for Australian Residential Aged Care Services 2026–27 allows us to hear from the residential aged care sector and enables your views to inform the development of the Pricing Framework for Australian Residential Aged Care Services 2026–27 and the Residential Aged Care Pricing Advice 2026–27.

The pricing framework is the key policy document to underpin IHACPA’s approach to developing residential aged care pricing and costing advice to government. The pricing framework is updated annually and supports transparency and accountability for residential aged care pricing by making the decisions and pricing principles we use publicly available.

IHACPA is seeking your feedback on consultation questions that focus on the following topics:

IHACPA’s cost collections
the Multi-Purpose Services Program funding model
the National Aboriginal and Torres Strait Islander Flexible Aged Care Program funding model
residential aged care supplements
required hotel services.

1.2.1 Supporting documents

This consultation paper builds on IHACPA’s previous work. The following documents support this year’s consultation process:

Consultation Paper on the Pricing Framework for Australian Residential Aged Care Services 2025–26
Pricing Framework for Australian Residential Aged Care Services 2025–26
Pricing Framework for Australian Residential Aged Care Services 2025–26 Consultation Report
Residential Aged Care Pricing Advice 2025–26.

IHACPA is calling for submissions to this consultation paper until 22 August 2025. Details on the submission process can be found on this page in section 8 – Consultation process and next steps.

Key dates

Release of the consultation paper: 10 July 2025
Submissions close: 22 August 2025
Release of the consultation report consolidating stakeholder feedback: 2026
Release of the Pricing Framework for Australian Residential Aged Care Services 2026–27: 2026

1.3 IHACPA’s role in residential aged care and residential respite care

IHACPA is an independent government agency providing evidence-based aged care pricing and costing advice to inform government decisions on the pricing of residential aged care and residential respite care services.

Informed by the advice from IHACPA, the government is responsible for determining and announcing the AN-ACC price (Figure 1). Where requested by government, IHACPA also provides advice on other elements of residential aged care pricing.

Figure 1 – IHACPA’s residential aged care pricing advice development process

IHACPA: Annual public consultation on the Pricing Framework for Australian Residential Aged Care Services
IHACPA: Publishes the Pricing Framework for Australian Residential Aged Care Services
IHACPA: Provides Residential Aged Care Pricing Advice to the Australian Government
Australian Government: Determines and announces the AN-ACC price for residential aged care and residential respite care funding
IHACPA: Publishes the Residential Aged Care Pricing Advice.

1.3.1 What does IHACPA’s pricing advice cover?

IHACPA’s residential aged care and residential respite care pricing advice is intended to cover the cost of care incurred by approved providers of residential aged care when delivering care to residents. Elements of care that are in-scope for the AN-ACC funding model are set out in the Quality of Care Principles 2014 (refer Part 2 and 3 of Schedule 1 – Care and services for residential care services under Section 96-1 of the Aged Care Act 1997 (Cth)) (Figure 2). This includes administrative costs directly related to care.

Figure 2 – In-scope areas for IHACPA’s pricing advice (specific content on each care or service is set out in the Quality of Care Principles 2014)

Care and services – to be provided to all care recipients who need them
- Daily living activities assistance – excludes hairdressing.
- Meals and refreshments – special diets not normally provided.
- Emotional support – emotion support to, and supervision of, care recipients.
- Treatments and procedures – treatments and procedures that are carried out according to the instruction of a health professionals or person responsible for assessing a care recipient's personal care needs.
- Recreational support – recreational activities suited to care recipients, participation in the activities, and communal recreational equipment.
- Rehabilitation support – individual therapy programs designed by health professionals that are aimed at maintaining or restoring a care recipient's ability to perform daily daily tasks for himself or herself.
- Assistance in obtaining health practitioner support – making arrangements for speech therapists, podiatrists, occupational or physiotherapy practitioners to visit care recipients, whether the arrangement are made by care recipients, relatives or other persons representing the interests of care recipients.
- Support for care recipients with cognitive impairment – individual attention and support to care recipients with cognitive impairment (for example, dementia and behavioural disorders).
Other care and services
- Furnishings – over-bed tables.
- Bedding materials – Bed rails, incontinence sheets, ripple mattresses, sheepskins, tri-pillows, and water and air mattresses appropriate to each care recipient's condition.
- Goods to assist care recipients to move themselves – Crutches, quadrupled walkers, walking frames, walking sticks, and wheelchairs. Excludes motorised wheelchairs and custom made aids.
- Goods to assist staff to move care recipients – Mechanical devices for lifting care recipients, stretchers, and trolleys.
- Goods to assist with toileting and incontinence management – Absorbent aids, commode chairs, disposable bed pans and urinal covers, disposable pads, over-toiler chairs, shower chairs and urodomes, catheter and urinary drainage appliances, and disposable enemas.
- Nursing services
- Therapy service such as recreational, speech therapy, podiatry, occupational and physiotherapy services – excludes intensive, long-term rehabilitation services required following, for example, serious illness or injury, surgery or trauma.

1.3.2 Areas out-of-scope for IHACPA’s pricing advice

There are a number of areas considered outside the scope of, and thus excluded from, IHACPA’s pricing and costing advice for residential aged care and residential respite care, as outlined in Section 1.4 and shown in Figure 3. Where requested, IHACPA may provide advice to government on the areas where it is related to IHACPA’s functions.

Figure 3 – Out-of-scope areas for IHACPA’s pricing advice

AN-ACC class and branching structure
Appropriate care minute targets for the sector
Appropriate wage rates for the sector
Hotelling supplement policies
Other supplements and grants
Policies regarding permanent resident contribution and fees
Private self-funded aged care residents
Residential care service accreditation, audit and related processes
Retirement village pricing and regulation
The level and eligibility thresholds for the means-tested care fee
Transition care costs

Informed by the advice from IHACPA, the government remains responsible for determining and announcing the price for residential aged care and residential respite care.

1.4. Our key stakeholders

1.4.1 Australian Government

The government provides subsidies to approved providers of residential aged care through the AN-ACC funding model. Informed by the advice from IHACPA, the government is responsible for determining the AN-ACC settings, including the AN-ACC price and price weights, for residential aged care and residential respite care.

1.4.2 Department of Health, Disability and Ageing

The Department of Health, Disability and Ageing is the aged care system operator and has responsibility for aged care subsidies, supplements and grants; policy setting; broader aged care funding; and system management (Figure 4). These responsibilities are outside the scope of IHACPA’s pricing and costing advice.

Figure 4 – Department of Health, Disability and Ageing responsibilities

AN-ACC class and branching structure refinement
Operational aspects of the AN-ACC funding model:
- determining how AN-ACC assessments are undertaken
- the requirements for reassessment
- Single Assessment System for aged care
Aged care subsidies, supplements, and grants
Approval and classification of older people for Australian Government funded aged care services
Approved provider obligations and responsibilities
Quality of care
Care minutes and 24/7 registered nurse requirements in residential aged care
Appropriate level of financial contributions by residents
Financial viability of the sector

1.4.3 Aged Care Quality and Safety Commission

The Aged Care Quality and Safety Commission is responsible for regulating residential aged care approved providers, as outlined below.

Figure 5 – Aged Care Quality and Safety Commission responsibilities

Approval of providers to deliver aged care services
Assessing and monitoring the quality of care and services provided against government policy and legislation
Aged care regulation including compliance, investigations and complaints resolution
Financial and prudential regulation

1.4.4 Other government organisations

IHACPA also engages with each of the following government organisations (Figure 6) in the delivery of our residential aged care work.

Figure 6 – IHACPA’s work with government organisations in residential aged care

1.5 The new Aged Care Act

In response to the key recommendation in the final report of the Royal Commission into Aged Care Quality and Safety (Royal Commission), the government has developed the new Aged Care Act 2024 (the Act) to strengthen Australia’s aged care system. This Act is due to start on 1 November 2025, setting out how the aged care system will operate and is designed to:

change how aged care providers deliver services to older people in residential aged care homes
support approved providers to deliver high quality care and be more accountable
cover aged care services the government funds, including programs such as the National Aboriginal and Torres Strait Islander Flexible Aged Care Program and the Multi-Purpose Services Program
have a new regulatory model to manage aged care
replace the former Aged Care Act 1997, Aged Care (Transitional Provisions) Act 1997 and Aged Care Quality and Safety Commission Act 2018.

The Act will include the introduction of a Statement of Rights within the strengthened Aged Care Quality Standards. The introduction of a Statement of Rights will outline what rights older people have when accessing aged care services funded by the government. This will embed an older person’s right to culturally safe and inclusive aged care.

Information on the new Aged Care Act 2024 can be found on the Department of Health, Disability and Ageing website.

1.6 Why is consultation important?

IHACPA conducts annual data collections and public consultations on a range of areas related to its pricing and costing advice to ensure the development of this advice is informed by a diverse range of stakeholders who are representative of the aged care sector.

In the development of the pricing framework, IHACPA is committed to ensuring that pricing advice is informed by regular, open and transparent consultation. IHACPA considers information gathered through consultations through all stages of developing and finalising its pricing advice to government.

1.6.1 Diversity in IHACPA’s stakeholder engagement strategies

As part of IHACPA’s aged care stakeholder engagement strategy, we will continue to prioritise stakeholder engagement that enhances sector understanding of the scope of work conducted by IHACPA and opportunities for contribution. Figure 7 illustrates the diversity of IHACPA’s engagement strategies.

Figure 7 – Stakeholder engagement strategies

The consultation paper
Research and development
Committee and working groups
IHACPA’s annual conference
Conference and spokesperson
Educational webinars, materials and resources.

1.6.2 Why IHACPA values diversity in our public consultations

It is important that IHACPA’s pricing advice is reflective of the diversity in the aged care sector. IHACPA values all feedback to our annual consultations. Through the consultations, stakeholders have the opportunity to tell IHACPA what is important to them in developing our pricing advice.

IHACPA seeks feedback from people representing:

culturally and linguistically diverse backgrounds
Aboriginal and Torres Strait Islander peoples
providers in regional, rural and remote locations
Multi-Purpose Services Program providers
National Aboriginal and Torres Strait Islander Flexible Aged Care Service Program providers
residents and their families, carers and people representing those utilising residential aged care.

2. Pricing principles

When developing residential aged care and residential respite care pricing and costing advice, IHACPA balances a range of Australian Government policy objectives. These objectives include, but are not limited to, promoting the standard of person-centred, high-quality care expected by the community and required by government policy and legislation, and supporting improvements in the sustainability and efficiency of the aged care system over time.

IHACPA’s residential aged care principles underpin our commitment to government policy objectives, while providing transparency and accountability when making decisions on the development of pricing and costing advice.

The pricing principles do not have a hierarchy. They are used to inform decision making where IHACPA is required to exercise judgement as part of our work.

IHACPA continues to regularly review the pricing principles to ensure the principles reflect the overall approach taken to develop pricing advice and on the basis of changes to government policy and legislative reform.

In recognition of the refinements to the pricing principles in response to stakeholder feedback over the previous 3 consultations, a separate consultation question has not been asked this year.

IHACPA’s residential aged care pricing principles are outlined in Figure 8.

Figure 8 – The residential aged care pricing principles

Overarching principles that articulate the policy intent behind the introduction of funding reform for aged care services.
- Person-centred: Funding should be, as far as is practicable, based on characteristics of the people receiving care, rather than those of providers.
- Access to care: Funding should support timely and equitable access to appropriate aged care services, for all those who require them.
- Quality care: Care delivery should meet the standard of care required in government policy and legislation, reflect continuous improvement, support resident wellbeing, and deliver outcomes that align with community expectations.
- Fairness: The Australian National Aged Care Classification (AN-ACC) funding model generated payments should be fair and equitable, based on resident needs, promote the provision of appropriate care to residents with differing needs, and recognise the cost variations associated with this care. Equivalent services should otherwise attract the same price across different provider types.
- Efficiency: The AN-ACC funding model should facilitate the sustainability of the aged care sector over time and optimise the value of the public investment in aged care.
- Maintaining agreed roles and responsibilities: The design of the AN-ACC funding model should recognise the complementary responsibilities of each government agency and department in the funding and management of aged care services. It should also recognise the role of providers in delivering aged care services and residents as contributors to their care.
Process principles that guide the implementation of the AN-ACC funding model and any fixed funding arrangements.
- Administrative efficiency: Funding arrangements should promote effective and efficient processes and should not unduly increase the administrative burden on aged care providers.
- Stability: The payment relativities of the AN-ACC funding model should aim to achieve stability in the aged care sector over time.
- Evidence-based: Funding should be based on best available information and reflect justifiable variations in costs.
- Transparency: All steps in the development of pricing and costing advice should be clear and transparent.
System design principles that articulate the detailed elements of the AN-ACC funding model design.
- Fostering care innovation: Pricing of aged care services should respond in a timely way to the introduction of evidence-based, effective new technology and innovations in the models of care that improve resident outcomes and service efficiency.
- Promoting value: Pricing should support innovative practices and systems that deliver efficient, person-centred care.
- Promoting harmonisation: Pricing should facilitate best practice, person-centred provision of care in the appropriate setting.
- Minimising undesirable and inadvertent consequences: Pricing should minimise susceptibility to gaming, inappropriate rewards and perverse incentives.
- Using the AN-ACC funding model where practicable and appropriate: The AN-ACC funding model should be used for funding residential aged care services wherever practicable and compatible with delivering value in both outcomes and cost.

3. The Australian National Aged Care Classification funding model

The Australian National Aged Care Classification (AN-ACC) funding model provides a meaningful way to relate resident care needs, residential aged care service location and service specialisations with the cost to deliver care to residents. AN-ACC funding is provided for aged care services and, consistent with Australian Government policy, is not intended to support hotelling and accommodation expenditure.

More detailed information about the AN-ACC funding model can be found on the Department of Health, Disability and Ageing website.

3.1 AN-ACC basic daily subsidy

For a residential aged care resident, the AN-ACC basic daily subsidy is calculated in 2 stages:

First, the AN-ACC national weighted activity unit (NWAU) per resident per day is calculated. This includes adding together 2 components, the price weight for the resident’s AN-ACC class (AN-ACC class NWAU) and the price weight for the base care tariff (BCT) category (BCT NWAU).

The AN-ACC class NWAU is based on the assessed AN-ACC class for each resident.

The BCT NWAU is dependent on service characteristics, such as location and resident specialisation. Service location is currently defined using the Modified Monash Model (MMM). The MMM measures remoteness and population size of areas on a scale of Modified Monash categories. More information about the MMM is available on the department’s website.

Secondly, the AN-ACC NWAU is multiplied by the AN-ACC price to calculate the total AN-ACC basic daily subsidy per resident per occupied bed day (Figure 9).

Figure 9 – AN-ACC basic daily subsidy calculation

The sum of AN-ACC class NWAU and BCT NWAU, multiplied by AN-ACC price = AN-ACC basic daily subsidy.

3.1.1 Adjustment payments

Adjustments refer to additional elements within the AN-ACC funding model that are intended to account for variations in the cost of delivering care within specialised groups, or to address unavoidable service factors.

In addition to the AN-ACC basic daily subsidy, an initial entry adjustment payment may also be added. This is a one-off adjustment to cover the additional costs incurred to transition a new resident into a residential aged care service.

3.2 AN-ACC classification system

The key building blocks for a successful AN-ACC funding model are:

a robust classification system that accurately groups residents according to resource utilisation and cost in a meaningful way
nationally consistent activity data
nationally consistent cost data at a resident level
pricing services that are regularly updated to reflect the latest activity and cost data.

3.2.1 Classification of permanent residents

Classification systems enable the grouping of residents into predefined classes.

The AN-ACC funding model includes the independent assessment of aged care residents using the AN-ACC assessment tool. The assessment outcome assigns an AN-ACC class to each resident based on the functional, cognitive and physical characteristics that drive the costs of their care (Figure 10).

Residents are assigned into one of 12 permanent classes or 3 respite classes. This does not include Class 1 – ‘admit for palliative care’, where services are instead required to submit a Palliative Care Status Form, which includes an independent medical assessment of their palliative care status.

When certain criteria are met, an approved provider may make a request of the department to reclassify a permanent resident. The reclassification assessment criteria are outlined in the AN-ACC funding guide. The AN-ACC class after a reclassification may be different from, or be the same as, the previous class.

Figure 10 – AN-ACC branching structure and classes

The branching structure begins with a general category “All residents” and branches into:

Class 1: Admit for palliative care.
Independent mobility
- Class 2: Without compounding factors.
- Class 3: With compounding factors.
Assisted mobility
- Higher cognitive ability:
  - Class 4: Without compounding factors.
  - Class 5: With compounding factors.
- Medium cognitive ability:
  - Class 6: Without compounding factors.
  - Class 7: With compounding factors.
- Class 8: Low cognitive ability.
Not mobile
- Higher function:
  - Class 9: Without compounding factors.
  - Class 10: With compounding factors.
- Class 11: Lower function and lower pressure sore risk.
- Lower function and higher pressure sore risk:
  - Class 12: Without compounding factors.
  - Class 13: With compounding factors.

In addition to the 13 AN-ACC classes for permanent residents and 3 respite classes, there are default classes for both new permanent and respite residents who do not have an existing AN-ACC class.

Information on the AN-ACC assessments and the 13 AN-ACC classes and default classes can be found on the department’s website.

3.2.2 Classification of residential respite care

There are 3 respite classes reflecting residents who are assessed to:

be independently mobile (Respite Class 101)
have assisted mobility (Respite Class 102)
have limited mobility (Respite Class 103).

Residential respite funding comprises the BCT subsidy, which is the same as the BCT for permanent residents, and AN-ACC subsidy according to their respite class.

Unlike permanent residential aged care, there is no initial one-off entry adjustment payment for respite care as these costs have been incorporated into the daily AN-ACC subsidy.

3.2.3 Classification refinement

The refinement of AN-ACC classes and branching structure is the responsibility of the department. Classification refinement is standard practice and is necessary to capture and account for:

improvements in data quality from activity and cost collections
changes in cost and complexity profiles over time
refinements to improve classification soundness.

In addition, classification refinement enables pricing to be more closely aligned to the care costs for residents in each group.

IHACPA will continue our commitment to support the department in any future classification refinement that it undertakes, providing evidence-based advice that ensures any refinements are mindful of data burden and consider funding model stability. IHACPA provides the department with stakeholder feedback to each public consultation which helps inform classification refinement decision making.

IHACPA values the wealth of stakeholder feedback to the AN-ACC classification funding model in each of the 3 previous public consultations. IHACPA will continue to consider feedback received and potential implications for our pricing advice. A discrete consultation question has not been asked this year.

Importantly, IHACPA continues to refine our data collections that enable the consideration of the impact of cognitive impairment, mental health and complex care needs in AN-ACC classes 2, 3 and 8. This has been guided by extensive feedback to our previous public consultations.

4. Activity and cost data

4.1 Activity and cost data sources

Under the Australian National Aged Care Classification (AN-ACC) funding model, financial data from approved providers of residential aged care is reported to the Australian Government through the Aged Care Financial Report (ACFR) and the Quarterly Financial Report (QFR).

In preparing pricing advice to the government IHACPA relies on 2 main data sources: the most recently available year of validated ACFR data and a current cost collection. The ACFR data only captures aggregate expenditure at the service level. To provide robust pricing advice for aged care, IHACPA undertakes resident level cost collections to supplement the ACFR.

IHACPA continues to work with the Department of Health, Disability and Ageing toward improving the timeliness and quality of the reported data to ensure it is optimal for use in the development of pricing and costing advice. The department’s Data Quality Review Project will consider any potential refinements to the data reported in the ACFR.

IHACPA also considers additional data sources when developing residential aged care pricing advice, including data on the assessed AN-ACC classes of the residents, claims and payments data from Services Australia, as well as demographic and service data.

Activity data informs the development of IHACPA’s advice on the AN-ACC and base care tariff (BCT) subsidies paid by the government to providers, and government refinements of the AN-ACC classes for residents.

Activity measures how much work is required to deliver aged care services and is typically measured in minutes or hours.
Cost relates to the monetary value required to deliver aged care services and is typically measured in Australian dollars.

In addition, the Residential Aged Care Pricing Advice 2026–27 will be informed by data collected through the
2025 Residential Aged Care Cost Collection.

4.2 IHACPA’s cost collections

IHACPA undertakes annual cost collections from residential aged care services. This supports IHACPA to provide the government with evidence-based pricing advice to refine the AN-ACC funding model and to supplement other data sources. IHACPA’s cost collections also assist in identifying new and emerging trends.

Cost collections are a resident level study of care delivery in residential aged care. IHACPA continues to refine and develop our cost collection methodology as more data is collected each year. IHACPA’s ongoing work on the allocation methods of administrative costs across care, hotelling and the accommodation components of residential care continue.

To ensure that IHACPA’s pricing advice reflects the variation in care requirements and costs across the diverse aged care sector, IHACPA seeks a representative sample of aged care residents and providers to participate in its cost collections.

Consultation question 1

What could IHACPA do to support improved provider participation and
increased representation in our cost collections?

IHACPA is also interested in understanding the unique costs associated with providing aged care services in underrepresented geographical locations, provider and service types.

How to participate in IHACPA’s cost collections

Help shape government pricing advice for aged care services.

Participation in cost collections ensures that the costs of aged care are accurately captured, and that pricing advice is directly informed by the actual costs of delivering care.

To express your organisation’s interest in participating or for more information, visit the aged care costing web page or email agedcarecosting@ihacpa.gov.au.

5. Developing pricing advice

IHACPA provides residential aged care pricing advice to support Australian Government decisions on the Australian National Aged Care Classification (AN-ACC) funding model.

The key elements of IHACPA’s pricing advice include:

the recommended AN-ACC price
the recommended price weights for each AN-ACC class, measured in national weighted activity units (NWAU)
the recommended price weights for each base care tariff (BCT) category, measured in NWAU
adjustments to the BCT categories
information on the gap between the costs of delivering required hotel services and specific types of revenue received.

5.1 Standard considerations

5.1.1 AN-ACC price definition

The recommended AN-ACC price is the price of a unit of care, or 1.00 NWAU.

The AN-ACC funding model works by multiplying the AN-ACC NWAU value by the AN-ACC price to determine the subsidy amount for each AN-ACC class, BCT category and the initial entry adjustment payment.

Examples:

An NWAU of 1.2 would mean that the price of the AN-ACC class is 20% higher than the AN-ACC price.
An NWAU of 0.5 means that the price is 50% lower than the AN-ACC price.

5.1.2 What the AN-ACC price covers

The recommended AN-ACC price is intended to cover the cost to deliver care to residents in a residential aged care service.

Elements of care in-scope for the recommended AN-ACC price are specified in the Quality of Care Principles 2014 (outlined in Part 2 and 3 of Schedule 1—Care and services for residential care services). This includes administrative costs directly related to care.

5.1.3 Pricing model

IHACPA recognises the need for providers to deliver services that meet the Aged Care Quality Standards. Therefore, IHACPA’s pricing advice adopts a blended best practice and data-driven approach and is based on services meeting the standard of care required in government policy and legislation (Figure 11).

5.1.4 Indexation and adjustments

IHACPA’s pricing advice is based on historical activity and cost data. Indexation is required to inflate underlying costs, so that they are aligned to the expected cost of care delivery in the relevant funding year.

IHACPA’s indexation methodology is informed by feedback received from advisory committees and through public consultation.

Other labour cost adjustments may also be included at this point in the methodology (Figure 11).

Specific detail on the pricing methodology, including indexation, can be found in the Residential Aged Care Pricing Technical Specifications, which are published alongside the Residential Aged Care Pricing Advice.

Figure 11 – Pricing advice methodology overview

Step 1: Activity and cost data preparation
Step 2: Pricing model
Step 3: Indexation and adjustments
Outcome: Residential aged care pricing

5.2 Approach to adjustments

5.2.1 Adjustments for services eligible for specialised status

The AN-ACC funding model considers the impact of 2 specific resident-related factors that significantly influence the costs of their care, which are represented by specialised BCT categories. These are the provision of specialised care to:

Aboriginal and Torres Strait Islander peoples in remote and very remote locations (Modified Monash categories 6 and 7)
people with complex behavioural needs and social disadvantage associated with their background as a person who has experienced or is at risk of homelessness.

Eligibility is dependent on 50% of non-respite care residents within the residential aged care service meeting one of the 2 requirements listed above, and the approved provider has demonstrated experience in providing the relevant type of specialised care.

Approved providers of residential aged care may apply to the department for a determination that a residential aged care service has Specialised Aboriginal and Torres Strait Islander status or Specialised Homeless status.

The AN-ACC – Specialised Status Guide for Residential Aged Care Providers published by the department provides further information on these programs.

While being related to resident characteristics, these additional costs are captured in the AN-ACC funding model through differential BCT categories at the service level.

For the Specialised Aboriginal and Torres Strait Islander status, the adjustments provide block funding that is independent of actual occupancy and provides funding inclusive of multiple elements, rather than separate supplements.

5.3 Other related costs

5.3.1 Care minutes

The government introduced mandatory care minutes requirements for residential aged care from 1 October 2023. The initial care minute requirement was a sector-wide average of 200 minutes of care per resident per day, including 40 minutes from a registered nurse. From 1 October 2024, there was an increase to the mandatory care minutes to a sector-wide average of 215 minutes, including 44 minutes of registered nurse time.

The care minute requirement applies at the service level over each quarter. From 1 October 2024, services have the flexibility to meet up to 10% of their service-level registered nurse targets with care time provided by enrolled nurses.

The government funds approved providers through the AN-ACC funding model to cover the cost of providing care minutes to residents by aged care workers, including their wages. The care minutes requirements are funded through both the AN-ACC and BCT subsidy payments.

Care minutes are the amount of direct care that people living in residential aged care receive from:

registered nurses
enroled nurses
personal care workers or assistants in nursing.

Each service has average per resident per day care minute targets that reflect their residents’ AN-ACC classes.

The government is responsible for determining the care minute targets associated with each AN-ACC class based on IHACPA’s recommended class weights. This will allow the government to continue to align care minutes with the care requirements of each AN-ACC class over time.

IHACPA notes that some providers are eligible to receive the 24/7 registered nurse supplement for residential aged care.

5.3.2 Allied health

Allied health professionals play an important role in the restorative care of older Australians in residential care and residential respite care.

Providers are funded for, and required to provide, allied health care services to residents who require them under the Quality of Care Principles 2014 (outlined in Schedule 1 – Care and services for residential care services). The AN-ACC funding model allows residential aged care services and allied health professionals to provide the treatments that are most beneficial to the resident and consistent with their individual care plan.

Although the AN-ACC funding model does not link specific health treatments to funding, the 2023 Residential Aged Care Costing Study captured the costs of care provided by allied health professionals. In addition, the Quarterly Financial Report outlines the difference in expenditure between allied health professionals. This helps IHACPA to better understand the costs of care provided by the different types of allied health professionals when undertaking future cost collections.

IHACPA values the comprehensive feedback to each of the 3 previous public consultations and continues to work with the department in investigating allied health as a strategic priority.

5.4 Developing advice on the hotel cost gap

While the costs related to the delivery of required hotel services are out-of-scope for IHACPA’s AN-ACC pricing advice, the government has requested that we provide separate advice on the gap between the cost of delivering required hotel services and the revenue received for hotel services (hotel cost gap) (Figure 12).

Elements in-scope for IHACPA’s advice on the hotel cost gap are outlined in the Quality of Care Principles 2014 (outlined in Schedule 1 – Care and services for residential care services), with the exception of service maintenance costs, as per advice of government.

The revenue received for required hotel services includes the basic daily fee (BDF) and the hoteling supplement. The BDF is a contribution from the resident and is set at 85% of the aged care pension. The hoteling supplement is financial assistance provided by the government to approved providers of residential aged care.

Figure 12 – Calculation of the hotel cost gap

Required hotel services cost minus the sum of basic daily fee plus hotelling supplement = hotel cost gap.

Services provided in addition to required hotel services are covered under the payment of additional service fees and extra service fees by some residents. Fees for the delivery of additional services and extra services is also out-of-scope for our pricing advice.

Approved providers are required to complete an annual Aged Care Financial Report, which includes data items related to the cost to provide hotel services, and the revenue received for related services.

Specific detail in calculating the hotel cost gap will be found in the Residential Aged Care Pricing 2026–27 Technical Specifications, which will be published alongside the Residential Aged Care Pricing Advice 2026–27.

6. Funding model reviews

6.1 Pricing and costing for other aged care programs

The government currently provides block grant and subsidy funding to a range of aged care programs, including the Multi-Purpose Services Program (MPSP) and the National Aboriginal and Torres Strait Islander Flexible Aged Care Program (NATSIFACP).

As part of broader funding and regulatory reforms to the aged care sector, government has requested IHACPA undertake an assessment of the funding models for these 2 programs over the coming years. IHACPA’s analysis will evaluate the most effective future funding arrangements for the MPSP and NATSIFACP services designed to operate in thin markets.

Informed by IHACPA’s analysis and advice, government will make a policy decision as to the future funding arrangements for the MPSP and the NATSIFACP.

6.1.1 What do we want to know

IHACPA seeks to understand what it costs to provide each type of activity within both the MPSP and NATSIFACP. This will include the collection of data on:

costs of staffing and resources to deliver services in rural and remote settings and for Aboriginal and Torres Strait Islander peoples
types of services delivered to older people accessing services
administrative information about service users and service providers
any other cost drivers.

Additionally, IHACPA wants to draw on the experience of providers in the development of the most appropriate method of collecting activity and cost data from the MPSP and the NATSIFACP providers following the recent provider census.

6.1.2 Multi-Purpose Services Program

The MPSP provides integrated health and aged care services for small rural and remote communities in areas that are unable to support both a hospital and a separate residential aged care service. MPSP are not funded using the AN-ACC funding model.

MPSP providers receive a combination of funding, including:

flexible aged care subsidy from the government for aged care services
state and territory government funding for health services, capital and infrastructure costs.

Australian Government and state and territory government funding is pooled and used flexibly to achieve economies of scale in health and aged care service delivery. To access Australian Government funding under the MPSP, a service provider must have an agreement in place with the Australian Government. In most cases, MPSP providers are state or territory health agencies, and the agreement is also signed by the relevant health department on behalf of the relevant state or territory.

The subsidy for each MPSP is calculated based on the number of allocated places that are in effect and includes relevant supplements.

Consultation question 2

A. For the Multi-Purpose Services Program, what activity and cost data points should be considered when developing recommendations for any new future funding models?

B. For the Multi-Purpose Services Program, what methods of data collection should IHACPA consider when developing recommendations for any new future funding model?

Please provide examples or supporting evidence.

6.1.3 National Aboriginal and Torres Strait Islander Flexible Aged Care Program

The NATSIFACP provides culturally appropriate aged care services to older Aboriginal and Torres Strait Islander peoples. These aged care services are mainly delivered in rural and remote areas and funded by government, subject to parliamentary appropriation.

Payments are provided quarterly in advance to the service via a block funded grant agreement, based on an allocation of places and not occupancy of those places. NATSIFACP providers receive a daily base rate. This rate depends on whether the person receiving care is allocated to a residential place or a home care place.

In addition to the daily funding rate, services may receive several financial supplements or equivalent amounts. This includes the:

Veterans’ Supplement
Residential Concessional Supplement
Respite Supplement
Residential Aged Care Viability Supplement.

In addition to the daily funding rate, services with an allocation of home care places may also receive the following supplement equivalent amounts:

Dementia and Cognition Supplement for home care
Veterans’ Supplement for aged care
Home Care Viability Supplement.

Consultation question 3

A. For the National Aboriginal and Torres Strait Islander Flexible Aged Care Program what activity and cost data should be considered when developing recommendations for any new future funding model?

B. For the National Aboriginal and Torres Strait Islander Flexible Aged Care Program what methods of data collection should IHACPA consider when developing recommendations for any new future funding model?

Please provide examples or supporting evidence.

6.2 Supplements and grants

Separately to AN-ACC funding, government pays a range of supplements and grants to approved providers to deliver aged care.

Government also pays supplements to approved providers on behalf of each person receiving government-subsidised aged care to help with the cost of meeting specific care needs. For example, supplements are provided for residents who have a medical need for continual oxygen therapy or enteral feeding, or for residents who are veterans.

In addition, several grant funding opportunities are available. Eligibility to apply and receive grant funding is determined on a round-by-round basis.

IHACPA will continue to work with the department to understand the diversity of the existing supplements and grants available to providers, and how these may be factored into future pricing advice.

Consultation question 4

For approved providers receiving supplements to fund subsidised aged care, are there any cost variations associated with resident complexity or meeting specific resident care needs that need to be accounted for in the Australian National Aged Care Classification funding model?

Please provide examples or supporting evidence.

6.2.1 Review of the hotelling supplement

Approved providers of residential aged care must deliver required hotel services to residents as outlined in the Quality of Care Principles 2014 (outlined in Part 1 of Schedule 1 – Care and services for residential aged care services) which includes services such as catering, cleaning and gardening (Figure 13). Required hotel services are funded by the basic daily fee (BDF) and hotelling supplement.

The hotelling supplement was introduced on 1 July 2023, and was established to help meet the costs associated with delivering required hotel services. It is set by the government and is a fixed rate per resident per day which is indexed twice a year to ensure it keeps pace with cost-of-living changes. The hotelling supplement also considers decisions by the Fair Work Commission and includes funding to cover relevant award wage increases.

Figure 13 – Required hotel services to be provided to all care recipients who need them

Maintenance of buildings and grounds – Adequately maintained buildings and grounds.
Accommodation – Utilities such as electricity and water.
Furnishings – Bedside lockers, chairs with arms, containers for personal laundry,
dining, lounge and recreational furnishings, draw-screens (for shared rooms), wardrobe space and towel rails.
Bedding – Beds and mattresses, bed linen, blankets, and absorbent or waterproof sheeting.
Cleaning services, goods and facilities – Cleanliness and tidiness of the entire
residential care service.
Waste disposal – Safe disposal of organic and inorganic waste material.
General laundry – Heavy laundry facilities and services, and personal laundry services, including laundering of clothing that can be machine washed.
Toiletry goods – Bath towels, face washers, soap, toilet paper, tissues, toothpaste, toothbrushes, denture cleaning preparations, mouthwashes, moisturiser, shampoo, conditioner, shaving cream, disposable razors and deodorant.
Meals and refreshments – (a) Meals of adequate variety, quality and quantity for each care recipient, served each day at times generally acceptable to both care recipients and management and generally consisting of 3 meals per day plus morning tea, afternoon tea and supper. (b) Special dietary requirements, having regard to either medical need or religious or cultural observance. (c) Food, including fruit of adequate variety, quality and quantity, and non-alcoholic beverages, including fruit juice.
Care recipient social activities – Programs to encourage care recipients to take part in social activities that promote and protect their dignity, and to take part in community life outside the residential care service.
Emergency assistance – At least one responsible person is continuously on call an in reasonable proximity to render emergency assistance.

Government is seeking IHACPA’s advice on the differentials in the cost to provide required hotel services based on provider, service or resident-specific factors, and the potential impact of interactions between these factors. This may include, but is not limited to, consideration of the following:

geographic location
assessed AN-ACC class of a resident
service size
provider structure.

This review will take place over a multi-year project and the outcomes of the review will form the basis of any recommendations from IHACPA to government, which may include a proposed new structure for the hotelling supplement.

Informed by IHACPA’s analysis and advice, government will make a policy decision as to whether the hotelling supplement could be funded using an alternative approach.

Consultation question 5

What factors, if any, contribute to variations in the cost of providing required hotel services to residents?

Please provide examples or supporting evidence.

7. Priorities for future pricing advice

7.1 Adjusting for safety and quality

Future adjustments for safety and quality through the Australian National Aged Care Classification (AN-ACC) funding model will be considered by IHACPA, where requested by the Australian Government.

Safety and quality adjustments are a long-term objective. This is due to their complexity within residential aged care and could be considered when the AN-ACC funding model is further established.

IHACPA will continue to engage with stakeholders through advisory committees, working groups and public consultations to determine priorities and develop recommendations for the future provision of advice on safety and quality pricing adjustments.

7.2 Thin markets and regional, rural and remote regions

For residential aged care and residential respite care, thin markets are typically where there is an inadequate number of people requiring care and an insufficient number of care providers to drive efficiency. Thin markets can exist in certain populations or in certain remote or rural regions. As a result, in thin markets, there may be inadequate services for people requiring residential aged care, as the provision of those services may not be sustainable in the current market conditions.

The final report of the Aged Care Taskforce made several recommendations on the delivery of aged care services in thin markets. It also indicated that certain thin markets may require specialist funding arrangements.

IHACPA will continue to work with the department when developing recommendations for any new future funding model for the Multi-Purpose Services Program and the National Aboriginal and Torres Strait Islander Flexible Aged Care Program specifically targeted to the delivery of services in thin markets.

8. Consultation process and next steps

IHACPA is calling for submissions on this consultation paper until 22 August 2025.

Key dates

Release of the consultation paper: 10 July 2025
Submissions close: 22 August 2025
Release of the consultation report consolidating stakeholder feedback: 2026
Release of the Pricing Framework for Australian Residential Aged Care Services 2026–27: 2026

While feedback is welcome on any issue, it is of particular value to receive views on the consultation questions asked in this paper. Stakeholders are encouraged to focus on questions and issues relevant to them, and submissions do not need to answer every question. Where relevant, your submission should include examples or supporting evidence to support your responses.

Have your say

Submissions close 5pm AEST 22 August 2025. Submissions can be:

completed via the online submission form
completed and emailed to: submissions.ihacpa@ihacpa.gov.au
mailed to: PO Box 483 Darlinghurst NSW 1300

Enquiries

Enquiries related to this consultation process should be emailed to submissions.ihacpa@ihacpa.gov.au.

8.1 How will your information be used?

All submissions will be published on the IHACPA Engagement Hub unless you specifically identify any sections that you believe should be kept confidential, due to commercial or other reasons.

Your submission will be carefully considered and IHACPA may contact some individuals or entities that make submissions for further information or insights. IHACPA will not contact everyone who makes a submission, but we will ensure that all submissions are recorded, reviewed and used to inform the development of the pricing framework and may be used in other work IHACPA undertakes to fulfill its statutory functions under the National Health Reform Act 2011 (Cth) and the Aged Care Act 1997 (Cth). For further information on how IHACPA uses information see IHACPA’s Privacy Policy.

8.1.1 Stay updated

To stay up to date on the latest aged care news, alerts and consultations from IHACPA, subscribe to our mailing list.

Appendix A: Glossary

Term	Explanation
Basic Daily Fee Supplement (BDF Supplement)	The Australian Government previously provided 2021 BDF Supplement for eligible aged care providers to support the delivery of better care and services to residents, with a focus on food and nutrition. In July 2023, this supplement was replaced by the hotelling supplement (see Hotelling supplement).
Daily accommodation payments (DAP)	Instead of a lump-sum residential accommodation deposit (RAD), residents can pay a rental-style DAP. This DAP is calculated by applying the maximum permissible interest rate, set by the Australian Government, to the RAD associated with the room in an accommodation group.
Determinations	IHACPA's role in health care is to determine the annual national efficient price (NEP) and national efficient cost (NEC) to enable activity based funding for public hospital services. These are known as the NEP and NEC determinations. The annual NEP sets the Australian Government payments for in-scope public hospital services that are funded on an activity basis. The annual NEC provides for services that are block funded, such as for small rural hospitals.
Extra services	Some residential aged care rooms have extra service status. This means that they can charge residents a regular extra service fee to provide residents with a bundle of higher standard hotel-type services. Examples include specialised menus, higher quality linen or particular room furnishings.
Hotelling supplement	The Australian Government provides a hotelling supplement for residential aged care. This supplement is paid to residential aged care providers to help meet hotelling costs from 1 July 2023, this includes costs such as employing staff for services such as catering, cleaning and gardening.
Modified Monash Model (MMM)	The MMM is a geographical classification system that categorises metropolitan, regional, rural and remote locations into 7 levels according to geographical remoteness and population size.
Multi-Purpose Service Program (MPSP)	The MPSP provides integrated health and aged care services to rural and remote communities in areas that cannot support both a separate aged care service and hospital. MPSP are funded through Australian Government subsidies.
National Aboriginal and Torres Strait Islander Flexible Aged Care Program (NATSIFACP)	The NATSIFACP provides Australian Government funding for aged care services to deliver culturally appropriate care to older Aboriginal and Torres Strait Islander peoples and allows them to remain close to home and community. Most of these services are in rural and remote areas. NATSIFACP aged care services are funded through Australian Government grants.
National weighted activity unit (NWAU)	In the context of aged care services, an AN-ACC NWAU is a measure of relative price.
Person/people receiving care	A person who receives aged care or support services in their own home or in a residential aged care service. This care may include support to take part in social activities, help with physical tasks and/or medical and personal care.
Residential Aged Care Costing Study (RACCS)	IHACPA has undertaken the 2023 Residential Aged Care Costing Study (RACCS). This initial cost collection of residential aged care services included the collection of cost, time and activity data.
Refundable accommodation deposit (RAD)	Residents can pay a lump-sum for their accommodation in the form of a RAD, which provides a significant source of funding for capital investment and acts as an interest-free loan to providers. The RAD is fully refundable to the resident when they leave the provider or is returned to the estate if they pass away.
Residential aged care	Personal and/or nursing care that is provided to a person in a residential aged care service, in which the person is also provided with accommodation that includes meals, cleaning services, furniture and equipment. To receive Australian Government funding and government subsidy under the Aged Care Act 1997, a person or body must be an approved provider of residential aged care and they must meet certain building standards and appropriate staffing to supply that care and accommodation.
Schedule of Specified Care and Services	The care and services that residential aged care services must provide to any resident as needed, under the Quality of Care Principles 2014.