Monday 7 May 2018

Elder abuse and profit shifting go hand-in-hand in the age care sector?


Any regular reader of online news would have seen mentions of elder abuse, neglect and sub-standard health care over the years.


Elder abuse is a critical issue in aged care homes, with thousands of cases reported to the Health Department every year…. In 2016-2017, there were 2853 reports of “reportable assaults’’ and 2463 allegations of “unreasonable use of force”.

Australian Law Reform Commission, Elder Abuse (DP 83), Abuse and neglect in aged care, 12 December 2016:

1.34   Stakeholders reported many instances of abuse of people receiving aged care. These included reports of abuse by paid care workers[55] and other residents of care homes[56] as well as by family members and/or appointed decision makers of care recipients.[57] For example, Alzheimer’s Australia provided the following examples of physical and emotional abuse:

When working as a PCA [personal care assistant] in 2 high care units, I witnessed multiple, daily examples of residents who were unable to communicate being abused including: PCA telling resident to ‘die you f---ing old bitch!’ because she resisted being bed bathed. Hoist lifting was always done by one PCA on their own not 2 as per guidelines and time pressures meant PCAs often using considerable physical force to get resistive people into hoists; resident not secured in hoist dropped through and broke arm—died soon after; residents being slapped, forcibly restrained and force-fed or not fed at all; resident with no relatives never moved out of bed, frequently left alone for hours without attention; residents belongings being stolen and food brought in by relatives eaten by PCAs.[58]

1.35   The ALRC also received reports of other forms of abuse, including sexual[59] and financial abuse.[60] Restrictions on movement[61] and visitation[62] were also reported. Many submissions also identified neglect of care recipients.[63]

The Sydney Morning Herald, 15 October 2017:

Across NSW, 58 per cent of aged care workers surveyed said they have not been able to provide the level of care residents deserved because of budget cuts. Of those, 80 per cent said staff shortages were the main barrier to providing proper care.

The Courier-Mail, 19 April 2018: 

PROFIT-HUNGRY aged care companies are charging fat “administration fees” to skim up to 40 per cent of government payments for in-home nursing care.

More than 100,000 elderly Australians are on a waiting list to receive as much as $50,000 a year in a “homecare package” to pay for nursing, housekeeping or companionship at home. But an investigation by The Courier-Mail has revealed that some home-care companies are pocketing as much as $19,000 of the taxpayer cash through hefty “administration” or “case management” fees.

The fees are billed on top of hourly charges for home help – leaving clients with less cash to spend on in-home care such as nursing. And if clients want to switch to a cheaper provider, they are being slugged up to $1000 in “exit fees”.

The Age, 3 May 2018:

Scandals, including a recent national audit showing 600 aged-care homes failed in the past five years to provide minimum standards, prompted a government review. The Coalition, accepting a key recommendation, has ended the ridiculous practice of alerting operators to spot checks. The review also urged the streamlining and strengthening of the regulator.

If one does a simple online search many of the big ‘for profit’ aged care providers are named in relation to such abuse, neglect and sub-standard health care allegations.

Now in May 2018 the Tax Justice Network[1]  is looking at aged care provision from another angle. One which shows that the budgetary meanness which sees these big companies expect elderly residents to remain in sodden incontinence pads or live-off meagre meal rations occurs in spite of the millions in profit made on the back of billions in taxpayer funding of the age care sector.

It has released A Tax Justice Network – Australia Report, TAX AVOIDANCE BY FOR-PROFIT AGED CARE COMPANIES: PROFIT SHIFTING ON PUBLIC FUNDS.

Sadly, this report only confirms the fact that corporate greed runs rampant through all major aspects of Australian life, including aged care.

Executive Summary, Background, p.5:

Older people are a growing proportion of Australia’s population; in 2016, 15% (one in seven) Australians were aged 65 years or older. By 2056 this percentage is expected to grow to 22% (8.7 million).1 The need for aged care services is increasing. Between 2015– 2016 almost 214,000 people entered aged care in Australia. On average, older people in Australia spend three years in permanent residential care, just over two years in home care, and one and a half months in respite care.2 The Australian tax payer, via the Commonwealth Government contributes around 75% of the expenditure in aged care in Australia, which is around 96% of the total funding on aged care from Commonwealth and State Governments. Government recurrent spending on aged care services in Australia was $17.4 billion Australian dollars (AUD) in 2016- 2017, with residential aged care services accounting for 69.3% ($12.1 billion AUD).3 Some of this funding is provided as subsidies to aged care provider companies including those that operate for profit. In 2018 the Australian Nursing and Midwifery Federation (ANMF), Australia’s largest national professional and industrial nursing and midwifery organisation with over 268,500 members, commissioned the Tax Justice Network - Australia to analyse possible tax avoidance by for-profit aged care companies and to provide recommendations for improving transparency on Government spending on for-profit aged care.

Key points from the report

* By number of beds, not-for-profit providers are the largest aged care provider group in Australia (52% in 2013-2014), however there has been a rapid growth in the size and spread of for-profit companies; Bupa, Opal, Regis and Estia are the largest aged care providers nationally. If Japara and Allity are included, these 6 for-profit companies operate over 20% of residential aged care beds in Australia.

* In the most recent year (mostly the 2017 financial year) the six largest for-profit companies were given over $2.17 billion AUD via government subsidies. This was 72% of their total revenue of over $3 billion. These companies also reported profits of $210 million AUD (2016-2018).

* Companies can use various accounting methods to avoid paying tax. One method is when a company links (staples) two or more businesses (securities) they own together, each security is treated separately for tax purposes to reduce the amount of tax the company has to pay. Aged care companies are known to use this method as well as other tax avoiding practices. Another practice is by “renting” their aged care homes from themselves (one security rents to another) or by providing loans between securities and shareholders.

* The six largest for-profit aged care providers have enormous incomes and profits:

* The largest company, BUPA, had almost $7.5 billion in total income in Australia (2015-16) but paid only $105 million in tax on a taxable income of only $352 million.
* BUPA’s Australian aged care business made over $663 million in 2017 and over 70% ($468 million) of this was from government funding.
* Funding from government and resident fees increased in 2017, but BUPA paid almost $3 million less to their employees and suppliers.
* The second largest, Opal, had total income of $527.2 million in 2015-16 but paid only $2.4 million in tax on a taxable income of only $7.9 million.
* 76% ($441 million) was from government funding in 2016.

* Allity had total income of $315.6 million in 2015-16 and paid no tax.
* 67% ($224 million) of Allity’s revenue was from government funding in 2016-17.

* Regis, Estia, and Japara are listed on the Australian Securities Exchange (ASX) but appear to be using methods to reduce the amount of tax they pay while earning large profits from over $1 billion of government subsidies.

* Family owned aged care companies (Arcare, TriCare, and Signature) receive between $42-$160 million each in annual government subsidies but provide very little public information on their operations and financial performance and may use accounting methods to avoid paying tax.

 * (All figures quoted above are in AUD)

* The Australian Government and the Federal Opposition (the Australian Labor Party) have proposed several ways to fix the problems with companies avoiding tax by using trust structures and other methods but there are still loopholes.

* It is difficult to get a detailed and complete picture of the full extent to which these heavily subsidised aged care companies are avoiding paying as much tax as they should, because Australian law is not currently strong enough to ensure that their financial records and accounting practices are publicly available and fully transparent.

Conclusion

The six largest for-profit aged care providers in Australia received over $2.17 billion AUD in annual tax payer funded subsidies which provided after tax profits of $210 million AUD. The actual operating profits were much larger. These providers only paid around $154 million AUD in tax in 2015-16. Companies that receive millions of tax payer dollars via Australian government subsidies must be required by law to meet higher standards of transparency in financial reports and be publicly accountable. The report calls upon the Government, Opposition, and cross-bench Senators to work together to make laws to stop aged care providers from avoiding the taxes they should pay and provide clear records of their business dealings.

The Tax Justice Network – Australia strongly supports recent government legislation that has been introduced to close loopholes in the Multinational Anti-Avoidance Law and government reforms to stapled structures. However, there is still a need for additional transparency measures. The Tax Justice Network – Australia also strongly supports a policy proposed by the Australian Labor Party to introduce minimum taxation of discretionary trusts. These reform measures are examined in more detail by this report in the section: Current Reform Measures.

This analysis of tax payments and corporate structures of the largest for-profit aged care companies provides clear evidence that simple common-sense reforms are needed immediately to restore integrity to the tax system and to ensure public accountability on billions of dollars in government spending.

RECOMMENDATIONS FROM THE REPORT

Any company that receives Commonwealth funds over $10 million in any year must file complete audited annual financial statements with Australian Securities and Investments Commission (ASIC) in full compliance with all Australian Accounting Standards and not be eligible for Reduced Disclosure Requirements. Public and private companies must fully disclose all transactions between trusts or similar parties that are part of stapled structures or similar corporate structures where most or all income is earned from a related party and where operating income is substantially reduced by lease and/or finance payments to related parties with beneficial tax treatment.

Australia’s Largest For-Profit Aged Care Companies

In Australia, non-profit providers collectively operate a majority of residential aged care beds. However, the market share of large for-profit providers continues to grow rapidly. Likewise, the influence of for profit providers on shaping government policy and influencing broader trends in the aged care sector has never been greater. Ranked by the number of government allocated residential aged care places (beds) in 2017, the six largest for-profit aged care companies in Australia are; Bupa, Opal, Regis, Estia, Japara, and Allity. Combined, they operate over 20% of all residential aged care beds in the country. These companies continue to expand market share through new developments and acquisitions. These companies are also expanding to provide more retirement living and home care services, which allow access to additional government funding. In the most recent financial year (2016-2017), these six for-profit aged care companies combined received over $2.17 billion in government subsidies.4 This made up 72% of their combined total revenue of over $3 billion.5……

COMPANY SNAPSHOT

Bupa: A United Kingdom-based mutual insurance company with global operations including aged care services. Australia is Bupa’s largest and most profitable market.

Regis, Estia, and Japara: Public aged care companies listed on the ASX.
Opal: A private aged care company owned by subsidiaries of two listed companies, AMP Capital and Singapore-based G.K. Goh.

Allity: controlled by Archer Capital, an Australian private equity firm with large foreign pension fund investors.

Arcare, TriCare and Signature (formerly Innovative Care): three family-owned, for-profit aged care companies.

NOTE:
1. The Tax Justice Network - Australia is the Australian branch of the Tax Justice Network (TJN) and the Global Alliance for Tax Justice. TJN is an independent organisation launched in the British Houses of Parliament in March 2003. It is dedicated to high-level research, analysis and advocacy in the field of tax and regulation. TJN works to map, analyse and explain the role of taxation and the harmful impacts of tax evasion, tax avoidance, tax competition and tax havens. TJN’s objective is to encourage reform at the global and national levels.
Membership of the Network can be found here.

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