Bupa hit with $6 million penalty by ACCC over ‘extra services’ charged to residents after voluntarily reporting issue – how will it impact on their bottom line?

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The operator will pay out $18.3 million to repay residents and families plus $6 million in penalties after reaching a settlement with the Australian Competition and Consumer Commission (ACCC) over non-clinical ‘extra services’ provided to residents in 20 of its 72 aged care homes.

An internal review in 2018 of the extra ‘hotel-type’ services being offered to residents – such as gardens or rooms for those living with dementia, separate buildings for leisure activities and individual heating and cooling system – had found that some had not been provided.

Bupa voluntarily reported the issue to the ACCC and other regulators and began a remediation program – with around 85% of the affected residents paid back with interest since July 2018 or in the process of receiving final payments.

The remainder is still waiting to be paid out because of outdated contact details for former residents, with attempts to contact next of kin being prioritised – with a total of around $18.3 million being returned to residents and families.

Bupa will also be required to implement an Australian Consumer Law compliance program.

Suzanne Dvorak, Managing Director Bupa Villages and Aged Care Australia, says the operator has since strengthened its internal processes and training.

“We have since voluntarily revoked ‘extra service status’ in all of our care homes, which means we no longer charge extra for these services where we offer them,” she added.

The question now is: how will this impact on Bupa’s bottom line?

As we reported in March, the operator was already facing down a $72 million loss for its Australian aged care homes on the back of sanctions at 15 of its homes and an occupancy rate that fell to 83% before climbing up to 89% at the end of 2019.

If you compare this $24 million to another large operator Estia, and its half-yearly profits for FY19-20 of just $14.3 million, it gives you an idea of how big this hit will be.