How is Government Policy shaping the Aged Care Landscape

The Australian Aged Care Sector Is Changing: What You Need to Know

The Australian aged care industry is on the cusp of its most significant overhaul in decades. Following a damning Royal Commission that exposed systemic failures, the government is rolling out reforms to reshape the sector. These changes aim to create a more consumer-driven, accountable, and sustainable system but also bring uncertainty and challenges. Here's a breakdown of the key changes, what they mean for you, and how to stay ahead.

1. The New Aged Care Act: A Game-Changer in Waiting

The Australian Government introduced the Aged Care Bill 2024 to Parliament on 12 September 2024. It passed both houses of Parliament on 25 November 2024. Following Royal Assent, it will become the new Aged Care Act 2025, coming into effect on 1 July 2025.

This rights-based legislation represents a landmark reform for the aged care sector, emphasizing improved resident protections, greater transparency, and enhanced accountability. A significant feature includes the introduction of civil and criminal penalties for breaches of the Act by providers, directors, and staff.

What This Means

• Governance and Compliance: To meet stricter requirements, providers will need to invest in robust governance frameworks and modern compliance systems.
• Legal and Ethical Responsibilities: Directors, managers, and frontline staff must prepare for heightened legal responsibilities and potential penalties for non-compliance. Comprehensive training and education will be essential.

Action Point: Begin compliance reviews and legal audits immediately to identify and address potential gaps in readiness for the new Act. Proactively preparing will minimise risk and ensure a smooth transition when the Act is implemented.

2. Consumer-Driven Care: Places to People

In a transformative move, the government is shifting aged care places from provider control to consumer choice. The new “Places to People” model empowers individuals to select care that aligns with their specific needs, marking the end of the traditional bed license system by late 2024.

What This Means

• Adaptation to Consumer Demand. Providers must adjust to a competitive, consumer-driven market, prioritising innovation, flexibility, and service quality to attract and retain clients.
• Opportunities for Larger Operators. Providers with scalable models and diverse offerings may gain a competitive edge, leveraging economies of scale.
• Niche Strategies for Smaller Providers. Smaller operators can thrive by focusing on specialised services that cater to unique consumer preferences.

Example: Providers delivering personalised care, such as dementia-specific programs or culturally tailored services, are well-positioned to excel in this environment. These targeted approaches can differentiate their offerings and build strong consumer loyalty.

3. Funding Under the Spotlight

Implementing the Australian National Aged Care Classification (AN-ACC) in October 2022 marked a shift toward funding models tied directly to residents’ care needs. While this approach has improved equity in subsidies, it has not alleviated all financial pressures. Rising operational costs strain providers, prompting calls for short-term government assistance to bridge funding gaps.

What This Means

• Flexible Pricing Models. Many operators advocate for more flexible hotel and accommodation pricing to help offset increasing costs.
• Challenges for Smaller Providers. Financial sustainability may remain critical for smaller or regional providers, who often operate with tighter margins and limited resources.

Action Point: Leverage Technology. Explore efficiency-improving technologies, such as digital care platforms or resource optimisation tools, to reduce operational costs while maintaining care quality and compliance.

4. Transparency and Accountability: Raising the Bar

Transparency sits at the heart of aged care reform. Key measures include introducing a star rating system for facilities and enhanced reporting requirements, both monitored and enforced by the Aged Care Quality and Safety Commission (ACQSC). These changes mean providers will face more scrutiny than ever before.

What This Means

• Consumer Decision-Making. Star ratings will be pivotal in shaping consumer choices, making service quality and resident satisfaction essential metrics for attracting and retaining clients.
• High Stakes for Non-Compliance. Failure to meet new standards could lead to reputational damage, regulatory action, and significant financial penalties, emphasising the importance of proactive management and compliance.

Example: Facilities that implement real-time feedback tools to monitor and respond to resident satisfaction are likely to stand out in the competitive market. These tools can drive continuous improvement and boost consumer confidence, offering a clear advantage.

5. Workforce Challenges: A Critical Pressure Point

Introducing mandatory care minutes in October 2023 is a key initiative to enhance care standards. However, it has placed additional strain on an already stretched workforce, particularly among registered nurses. While pay increases announced by the Fair Work Commission provide some relief, they are unlikely to resolve the workforce crisis in the short term.

What This Means

• Retention is Critical. Providers must focus on staff retention strategies, including offering flexible rosters, professional development opportunities, and mental health support to prevent burnout and improve job satisfaction.
• Rural Challenges Persist. Recruiting and retaining talent in rural and underserved areas remains a significant challenge, requiring targeted and innovative approaches.
• Agency staff can provide critical support in addressing immediate workforce gaps. To maximize the value of these partnerships, consider selectively working with agencies that employ recruiters with a recent healthcare background. Recruitment specialists with firsthand knowledge of the sector understand the unique challenges of healthcare staffing, enabling them to identify the right candidates more effectively.
• Partnering with agencies that offer healthcare-specific expertise, providers can reduce the risk of hiring mismatches and help you gain insights into workforce trends and challenges.
• Avoid overreliance on temporary staffing solutions while managing costs effectively through negotiated agreements or exclusivity.

Action Point: Advocate for Support. Push for government funding to fast-track the recruitment of international workers and invest in local pipeline programs, such as scholarships and training initiatives.

Strategic Use of Agencies. Consider partnering with recruitment agencies to address short-term shortages while developing sustainable, in-house recruitment strategies for long-term stability.

What Lies Ahead?

This is more than a regulatory shift—it’s a complete reimagining of aged care in Australia. While the changes aim to empower consumers and elevate care standards, providers face mounting pressures to innovate, sustain financial viability, and meet workforce demands.

Looking Forward:

• Will larger providers dominate in a deregulated environment, or can smaller operators carve out niches through innovation?
• How can technology play a role in bridging the workforce gap and improving compliance efficiency?
• What steps should providers take now to future-proof their services?

Join the Conversation

The future of aged care in Australia hangs in the balance. Are these reforms enough to fix systemic issues, or do deeper challenges remain? Please share your thoughts below in a conversation about how we can shape a better future for aged care together.

Sarah Hughes Honorary Associate Adjunct Professor

MN (AdvPrac) | MN (Applied Management) | GradCert (NSc) | RN | BN