Study into alternative aged care assessment, classification system and funding models

Alternative Aged Care Assessment, Classification Systems and Funding Models

Australian Government Department of Health
Duration: September 2016 – February 2017


The residential aged care sector has experienced considerable change since the introduction of the Aged Care Funding Instrument (ACFI) in 2008. There were some concerns that the ACFI-based funding model has been unable to account for the shift in demography, and the increased frailty and medical complexity of residents. Over this time, the Department of Health has reported growth in residential aged care expenditure that regularly exceeds budget expectations. Changes to the ACFI funding system over time have been reactive, resulting in funding uncertainty for both government and providers.

In line with the recent efforts towards aged care funding reform, the Australian Government Department of Health commissioned AHSRI to undertake a review and develop options for an improved funding model for residential aged care.

What we did

The project involved a review of international models, consultation with government, provider and consumer stakeholder groups and analysis of trends in the ACFI assessment data. Based on these reviews, AHSRI presented five alternative funding system options and recommended one as the preferred option.

The recommended option is a blended model with fixed and variable payments. The variable daily payments are proposed to be based on a branching classification system that better accounts for the individual needs of aged care residents. This model also includes a number of options for resident assessments, which may be undertaken internally or by independent assessors, for the determination of the fixed payment amount, and for the allocation of a one-off adjustment payment when a new resident enters a facility.

The proposed model has the key benefit of recognising the drivers of cost in aged care with the payment levels to be informed by a resource utilisation study. This model will also be more aligned with consumer needs and care planning than the current system.

This work was completed in 2017 with the delivery of a formal report in February containing recommendations for ongoing development work. AHSRI was subsequently engaged by the Department of Health to undertake the Resource Utilisation and Classification Study and progress the recommendations of this report. 

Download the report

Information on residential aged care reform, including AHSRI's report, is available from the department's website.


Project team: Jenny McNamee, Chris Poulos, Habibur Seraji, Conrad Kobel, Cathy Duncan, Anita Westera, Peter Samsa, Kathy Eagar

Last reviewed: 3 August, 2018

CHSD thumb

Contact Us


Annual Professor Alan Owen Lectures AHSRI Education Program2018 

Rugrats in Residence - The Feed (SBS VICELAND)

 AHSRI 2017 Annual Report Cover