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Standard 8 – A New Liability for Directors of Aged Care Providers?

On 28 November 2018, the Minister for Senior Australians and Aged Care, Ken Wyatt AM, released the new Aged Care Quality Standards (Standards), contained within the Quality of Care Amendment (Single Quality Framework) Principles 2018.

All organisations providing aged care services in Australia will continue to be assessed against the current standards until 30 June 2019, with assessment and monitoring against the new Standards commencing on 1 July 2019.

The new Standards are undoubtedly the most significant change to the regulation of Australian aged care in 20 years, placing governing bodies of aged care providers under increasing pressure and scrutiny.

The new Aged Care Quality Standards

The new single consolidated Standards, which replace the four previous sets of aged care standards, are centred on ensuring that appropriate quality and safety is provided in all aged care services including residential care, home care, flexible care, and services under the Commonwealth Home Support Programme.

The new Standards and the Royal Commission into Aged Care Safety and Quality hails a new era of aged care quality in Australia. Taking effect from 1 July 2019, the new Standards emphasise consumer outcomes and requirements – focusing on higher quality of care for consumers by, and promising greater accountability and responsibility of, governing bodies and operators in the aged care industry.

Each new Standard consists of three elements:

(1) a consumer outcome;

(2) an organisation statement; and,

(3) requirements to meet the Standard.

Standard 8 – A New Liability for Directors of Aged Care Providers?

Standard 8 provides that the governing bodies of aged care providers will be accountable for the safety and quality of care of every one of their consumers.

Minister Wyatt noted that Standard 8 is not intended to duplicate the requirements of the Corporations Act 2001 (Cth) (Corporations Act) or other requirements related to organisational governance. Rather, Standard 8 places additional duties and responsibilities on governing bodies, including (but not limited to):

  • being informed of best practice, update their knowledge on current and emerging standards and practices in relation age care, and ensure the implementation of such standards and practices;

  • being aware of the organisation’s compliance with all aspects of its operations, including effectively managing risk (i.e. managing high-impact or high-prevalence risks), implementing a clinical governance framework, and managing financial performance; and

  • demonstrating that they are closely engaged with consumers, their families and representatives in the development and delivery of quality services and the evaluation of such care and services.

Like the duties under the Corporations Act, governing bodies of aged care providers cannot delegate the new responsibilities under Standard 8. (see 1 below).

If, for example, a resident of an aged care facility suffers a grade four heel wound resulting from a staff member’s neglect due to a lack of effective risk management systems and practices, it is not hard to see, under the new Standards, a governing body being held accountable and liable for:

(1) their part in the suffering endured by the resident, and

(2) their failure to meet Standard 8.

To protect themselves from liability and ensure that they provide safe and quality care and service as per the Standards, directors must educate themselves on, and familiarise themselves with, the legislative framework surrounding aged care as well as standards and practices common to the provision of aged care.

Note 1. This can be analogised with the Centro decision (ASIC v Healey & Ors [2011] FCA 717), which identifies limits on the extent to which directors can rely on management and external advisers. The Federal Court found that the Corporations Act imposes special responsibility on directors for approving financial statements, which directors cannot delegate. Where directors know enough to spot a possible error in draft financial statements, they must question management and their external advisers.

Considerations and Recommendations

1.       Governing bodies should establish systems and processes for good clinical governance.

Governing bodies will need to design and implement a clinical governance framework for the new Standards which will provide them with a mechanism to measure their performance and test the measures against consumer outcomes. This can include formal reports or presentation and discussion of staff surveys, satisfaction surveys from consumers, or conversations the governing body may have about its own performance.

Governing bodies should ensure there is a clear accountability framework for all staff, consumers and stakeholders about what is expected, and their roles and responsibilities in meeting the organisations commitment to the provision of safe and quality care and services.

By establishing systems and processes for good clinical governance, with a focus on improving consumer outcomes, governing bodies should be confident to meet the new Standards and make informed decisions in the interests of consumers.

2.       Governing bodies should be informed of best practice.

There is a community expectation, as evidenced by these new Standards and the Royal Commission, that the quality and safety of aged care services are of an uncompromisingly high standard. To avoid any potential liability, successful aged care providers will need to establish a culture of quality to not only meet but exceed the new Standards.

Governing bodies will need to prioritise and address any real and potential risks and implement plans for continuous improvement. Moreover, directors should ensure that they are capable of making informed decisions by keeping up to date with best practice.

3.       Director & Officer Insurance (D&O Insurance).

Governing bodies should have a good look at their D&O Insurance. Typically, such insurance will pay out against liabilities arising from any wrongful act committed by the director by reason of them serving in their capacity. It would be a sensible discussion to have as to whether your insurers are across Standard 8 and the exposure it could have for them.

For further information, please contact:                                                                                         

Peter Francis

Partner, Melbourne

Ph: +61 9642 2252

pf@fal-lawyers.com.au