Aged Care Facility Acquisitions: Legal Considerations and Best Practices

In Short

• Aged care facility acquisitions can be made via asset or share purchases, each with distinct legal implications.

• Conduct thorough due diligence, including checking approved provider status, regulatory compliance, and personnel suitability.

• Ensure the facility’s governance structure and director responsibilities align with legal requirements for smooth integration.

Tips for Businesses

Before acquiring an aged care facility, ensure compliance with the Aged Care Quality Standards and review all necessary regulatory frameworks, including director responsibilities and approved provider status. Plan due diligence early to identify potential issues, and consult with legal experts to navigate the complex acquisition process effectively.

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Table of Contents

• Types of Acquisitions
• Due Diligence
• 1. Approved Provider Status
• 2. Regulatory Compliance
• 3. Director Responsibilities
• 4. Key Personnel Suitability
• 5. Annual Assessments
• Key Takeways
• Frequently Asked Questions

Acquiring an aged care facility in Australia is a complex process that requires careful consideration of numerous legal and regulatory factors. Whether you’re an experienced operator looking to expand or a new entrant to the aged care sector, understanding the key legal considerations and best practices is crucial for a successful acquisition. This article aims to guide you through the essential aspects of purchasing an aged care business.

Due Diligence Guide for Purchasing a Business

Before buying a business, it is important to undertake due diligence, to verify the information supplied by the seller. This guide will walk you through the due diligence process.

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Types of Acquisitions

When considering an aged care facility acquisition, it’s important to first understand that there are two primary methods of purchase: 

1. an asset purchase, where you buy the business assets directly; or 
2. a share purchase, where you acquire shares in the company that owns the facility. 

Each method has its own set of legal implications and regulatory requirements that must be carefully navigated.

Due Diligence

Due diligence is a critical step in any acquisition, but it takes on added importance in the aged care sector due to the stringent regulatory environment. For both asset and share purchases, you should verify the business structure with ASIC, conduct credit checks, investigate any legal disputes or unethical trading history, and review the facility’s compliance history with aged care regulations. 

In relation to ages care specifics, it is important to conduct due diligence on the following:

1. approved provider status;
2. regulatory compliance;
3. director responsibilities;
4. key personnel; and
5. annual assessments.

1. Approved Provider Status

One of the most critical concepts in aged care acquisitions is ensuring that the business is an “approved provider.” This designation, granted by the Aged Care Quality and Safety Commission (ACQSC), is essential for receiving government subsidies and operating within the Australian aged care system. 

Approved providers have responsibilities concerning the quality of care provided, user rights for care recipients and accountability and suitability of personnel. The Aged Care Quality Standardssets out eight standards in this regard:

1. respect for consumer dignity and choice;
2. assessment and planning for care is done in partnership with the consumer so that their needs, goals and preferences are taken into account;
3. personal care and clinical care are safe and effective;
4. services and supports for daily living optimise the consumer’s independence, health, well-being and quality of life;
5. a safe and comfortable service environment is available;
6. there is a process for continuous feedback and complaints that actively solicits input from consumers and takes appropriate action;
7. human resources are competent and of a high standard; and
8. organisational governance is accountable for their performance.

If you’re pursuing an asset purchase, you’ll likely need to apply for new approved provider status. On the other hand, for a share purchase, you must ensure that the existing approval can be maintained under your new ownership. 

2. Regulatory Compliance

Regulatory compliance is another crucial area that requires thorough attention. The Aged Care Act 1997 (Cth) and its associated regulations form the backbone of the regulatory framework. Key areas of focus include:

• quality of care standards;
• user rights and dignity of residents; and 
• financial and governance obligations. 

Familiarising yourself with these regulations and ensuring that the facility you’re acquiring is compliant (or developing a plan to bring it into compliance) is essential.

3. Director Responsibilities

Directors must ensure that the organisation has appropriate systems and processes in place to monitor and improve the quality of care provided to residents. This includes regular reporting on key performance indicators related to care quality, resident satisfaction, and compliance with regulatory requirements.

When acquiring a facility, directors should:

1. conduct a thorough review of existing quality assurance systems;
2. assess the need for improvements or upgrades to these systems;
3. develop a plan for integrating the acquired facility’s processes with the acquiring company’s standards; and
4. ensure a smooth transition that maintains or enhances the quality of care.

Additionally, at least one member of the governing body must have experience in providing clinical care. This ensures that there is always a voice on the board that understands the practical aspects of care delivery and can advocate for high-quality care standards.

In the context of an acquisition, directors should:

1. evaluate the current board composition of the facility being acquired;
2. plan for any necessary changes to align with legislative requirements;
3. identify and recruit suitable board members if needed; and
4. ensure a smooth transition of governance that maintains compliance and enhances oversight.

4. Key Personnel Suitability

The Aged Care Quality and Safety Commission requires that all key personnel of an approved provider, including directors, are suitable to be involved in the provision of aged care. Key personnel are individuals who have significant influence over the management and operation of an aged care service. They play crucial roles in ensuring the quality and safety of care provided to residents.

This involves considering factors such as the person’s experience in aged care or other relevant forms of care, their understanding of approved provider responsibilities, and their history in terms of regulatory compliance and ethical conduct. When acquiring an aged care facility, it is important to review each of the key personnel and make sure they are suitable.

5. Annual Assessments

Approved providers are required to conduct annual assessments of the suitability of their key personnel, including directors. This involves considering various suitability matters, such as whether the person has been subject to any adverse findings or enforcement actions by regulatory bodies or whether they have been involved in any misconduct related to the provision of care services. Always review the annual assessments before you proceed with purchasing the business.

Employee Considerations

The transfer of employees is another important consideration in aged care acquisitions. You’ll need to review existing employment contracts and entitlements and plan for potential redundancies or restructuring. It’s crucial to handle this aspect with care to maintain staff morale and ensure continuity of care for residents.

Resident Agreements

Existing resident agreements should also be carefully examined. Ensure that these agreements comply with current regulations and plan for how you will transition or update these agreements post-acquisition. Remember, the well-being and rights of residents should be at the forefront of your considerations throughout the acquisition process.

Best Practices for Acquisition

To navigate these complex waters successfully, talking with specialised lawyers with experience in aged care acquisitions is highly recommended. They can provide invaluable guidance on regulatory compliance, due diligence, and transaction structuring.

Comprehensive due diligence is a best practice that cannot be overstated. This should include thorough financial audits, compliance reviews, and operational assessments. Early engagement with the ACQSC is also advisable, particularly if you apply for approved provider status or transfer existing approvals.

Developing a detailed transition plan is another crucial best practice. This plan should cover operational continuity, staff retention and training, and maintaining consistency in resident care. It’s also important to develop a strategy for ongoing compliance with Aged Care Quality Standards, including implementing robust governance systems, ensuring staff are trained in compliance requirements, and establishing quality assurance processes.

Post-Acquisition Considerations

Post-acquisition, there are several important steps to take. Notify relevant authorities, including the Department of Health and ACQSC, of the change in ownership or control. Review and update all policies and procedures to ensure they align with current regulations and best practices. Invest in staff training and foster a culture of compliance and quality care. Implement systems for ongoing monitoring and improvement of care quality and regulatory compliance.

Key Takeways

Acquiring an aged care facility involves navigating a complex legal and regulatory landscape. By understanding these key considerations and following best practices, you can mitigate risks and set the foundation for a successful acquisition and operation. 

Remember, each acquisition is unique, and while this guide provides valuable general information, it’s crucial to seek professional legal advice tailored to your specific circumstances. With careful planning and the right professional support, you can successfully navigate the acquisition process and position yourself for success in the Australian aged care sector.

If you would like assistance with legal compliance for the aged care industry, our experienced aged care lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is “approved provider status” in the context of aged care acquisitions?
Approved provider status is a designation from the Aged Care Quality and Safety Commission that allows a business to receive government subsidies and operate within the aged care system. Ensuring the business maintains or acquires this status is critical during an acquisition.

What key areas should be reviewed when acquiring an aged care facility?
Key areas include regulatory compliance, director responsibilities, the suitability of key personnel, employee entitlements, and resident agreements. Conducting comprehensive due diligence ensures the acquisition meets legal and quality standards.