Last Friday, 2 March 2018, the Federal Court of Australia handed down its decision in Regis Aged Care Pty Ltd v Secretary, Department of Health  FCA 177 concerning the validity of the “Asset Replacement Charge” (ARC) charged to residents in many Regis Aged Care facilities.
The Court found that the ARC is inconsistent with the Aged Care Act 1997 (Cth) (“the Act”) and associated Principles.
- Regis charges many of its residents the ARC, which is a fixed daily fee (between $16.69 and $17.98) which increases on 1 February each year.
- The ARC is described as being to “fund reinstatements of fixtures, fittings and infrastructure, rebuilding and construction of, or at, Regis’s residential care facilities across Australia”.
- On 2 September 2016, the Department of Health published guidelines which state that ‘capital refurbishment fees’, ‘asset replacement contributions’ and similar fees are not supported by the legislation where the fee does not provide a direct benefit to the individual or the resident cannot take up or make use of the services.
- Regis applied to the Court for a statutory interpretation of the Act and whether it contains an explicit or implied prohibition on the imposition of charges that are not for the direct benefit of the care recipient such as the ARC.
- Regis sought declaratory relief to the effect that the ARC is a charge that it can lawfully impose without contravening the Act or associated principles.
The Court has confirmed the Department of Health’s interpretation of the law as set out in its guidelines published on 2 September 2016; that aged care providers should not charge care recipients any fees which are unrelated to the care and services provided to those individuals.
For this reason, the ARC, ‘capital refurbishment fees’ and other similar charges are not permissible under the Act as these fees and charges do not provide a direct benefit to the care recipient.
The Take Away Message
Formal Court orders are yet to issue and it is also not known at this stage if Regis proposes to appeal the decision.
Subject to that, the decision provides clarity to aged care providers and care recipients as to the fees and charges that can be validly charged for their care and services.
It would also seem that the decision would apply both prospectively and retrospectively meaning that Regis may now have to consider amending their residents’ agreements and refunding any resident who has paid the ARC.