MANAGEMENT DISCUSSION AND ANALYSIS The aged care industry has been undergoing reform since the establishment of the Royal Commission into Aged Care Quality and Safety in October 2018. Additionally, Labor Party won the general election in May 2022 and has introduced new legislation to hasten the reform and usher in a new funding model for aged care. This has resulted in higher compliance cost and affected the financial performance of aged care operators in Australia: a. Implementation of New Standards and Reporting Systems for Aged Care Providers. The Aged Care Amendment (Implementing Care Reform) Bill 2022 requires a qualified registered nurse to be on site in every residential aged care home 24 hours a day, seven days a week, in order to ensure older Australians living in residential aged care receive immediate care when needed. Additional measures introduced include the Star Ratings System, which will see the Department of Health and Aged Care publish a comparative rating for all residential aged care services. Furthermore, the Serious Incident Response Scheme will be extended to all in-home care providers from 1 December 2022, providing increased protection for older Australians from preventable incidents, abuse and neglect. Lastly, a new Code of Conduct has been established for approved providers, their workforce and governing persons. This has resulted in higher compliance cost for the residential aged care providers and affected the financial performance of Jeta Gardens. b. Residential Aged Care Funding Reform. The Royal Commission Response Bill provides the legislative framework for the new Australian National Aged Care Classification (AN-ACC) funding model for residential aged care homes, which replaced the outdated Aged Care Funding Instrument in October 2022. The Bill introduces measures to monitor the costs associated with aged care, placing greater responsibility on providers to be transparent and fair. This will see the publication of more information about providers’ operations including what they are spending money on. The low interest rate environment throughout fiscal years 2020 to 2022 has provided KPJ Group, our primary sponsor, with an alternative financing option instead of injection into Al-`Aqar. However, the Manager managed to complete the acquisitions of KPJ Pasir Gudang, the extended building of KPJ Seremban and the extended building of Taiping Medical Centre by offering competitive rental package to KPJ Group without compromising future distribution to unitholders. Continuous uncertainty in the aged care industry in Australia. Balancing asset growth and competitive rental. 2022 KEY CHALLENGES In 2022, the Manager faced the challenge of balancing between asset growth opportunities and competitive rental rates. Additionally, the ongoing uncertainty in the aged care industry in Australia persisted. 02 01 AL-`AQAR HEALTHCARE REIT ANNUAL REPORT 2022 48
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