The 3% Rule: Reducing the Risk of Care Minute Penalties
The recent introduction of AN-ACC funding penalties for care minute underperformance in MMM1 homes fundamentally changes how residential aged care providers should approach workforce planning.
A base roster designed to deliver exactly 100% of the required care minutes leaves virtually no margin for normal workforce disruption. Short-notice personal leave, vacancies, training and other unexpected absences mean the roster that is planned is rarely the roster that is ultimately worked. It is also much harder to address a care minute deficit down the track.
Why 103%
In our review of rosters, we have seen that an additional 3% provides sufficient capacity to absorb the gap between rostered care minutes and care minutes actually delivered.
In our experience, a home will typically lose 3% of rostered hours through short-notice absences that cannot be replaced. Therefore, a home with a base roster set at 103% should be able to deliver 100% of its required care minutes.
Conversely, a home rostered at exactly 100% has no such protection. Every unfilled shift immediately creates a care minute deficit. The provider must then either accept the shortfall or attempt to source a replacement through overtime or agency staff, at a significant premium that is financially unsustainable.
Agency labour typically costs 30% more than your own employees and this approach is less reliable than building reasonable resilience into the base roster.
What does the 3% insurance policy cost?
In the best workforce scenario, virtually every rostered shift is worked or successfully replaced. The home would therefore deliver approximately 3% above its care minute requirement and incur the full additional labour cost.
For a 100-place home with a 215-minute care target and blended direct-care labour cost of $43 per hour, the maximum gross cost of the 3% buffer is approximately $160,000 per annum.
This should be considered against the potential cost of a care minute shortfall. For example, a 100-place MMM 1 home at 95% occupancy, operating 5% below its care minute target could face a penalty of $325,945 p.a.
The provider is therefore balancing the maximum gross cost of the 3% buffer against the potentially much greater cost of a care minute shortfall.
Importantly, the actual cost of the 3% buffer may be considerably lower than its maximum gross cost. Where the buffer absorbs unfilled personal leave, vacancies or other absences, those additional rostered hours are performing precisely the function for which they were intended.
Plan for the workforce you actually have
Leave should be treated as a predictable workforce requirement rather than an unexpected event. Based on an average of four weeks' annual leave and the average of 9.7 days of personal leave per employee p.a, a 100-place home will have 5.8 employees unavailable on any given day. While much of this leave will be replaced, some short-notice absences will inevitably remain unfilled.
This highlights an important distinction:
A 103% base roster creates a modest margin between the two, allowing everyday workforce variability to occur before the home falls below its required care minutes.
Building an effective base roster
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The right buffer will vary between homes
The 3% rule is essentially a form of workforce insurance against agency costs, overtime, unfilled shifts and potentially much greater care minute funding consequences.
Ultimately, the right percentage will vary between homes. Providers should test the 3% assumption against their own historical leave, vacancies, agency use, overtime and unfilled-shift data. But the underlying principle remains the same:
Contact us if you would like to discuss how we can help you build an effective roster.
Join next week's webinar
You’ve updated the policies. Have you updated the business model?
Join us on 24 September for this webinar hosted by Inside Ageing and Pride Aged Living, where Stephen Rooke and Jason Howie will compare notes from across residential aged care and home care on what separates the providers who have adjusted from those still running the old model with new paperwork on top.
Who should attend: Board members, CEOs, CFOs and senior executives across residential aged care and home care.
Learn more and register here
To discuss building a roster that delivers your care minute requirements, contact James.
James Saunders
02 9068 0777
james.saunders@prideagedliving.com.au
