Providers that have been collecting asset refurbishment fees from clients will have to repay the funds, following a Federal Court judge ruled last week that such charges have no legal standing.

The Australian has reported the liability of providers is “tens of millions of dollars”, with two the biggest ASX-listed providers – Regis Aged Care and Japara – amongst those who will owe reimbursements.

The full extent of the financial liability across all aged care providers is unknown.

The Federal Court decision was handed down on Friday 2 March after the case was brought by Regis Aged Care seeking to change an “Asset Replacement” fee on aged care residents.

In September 2016 the Department warned providers that ”‘capital refurbishment fees’, ‘asset replacement contributions’ and similar fees would not be supported by the legislation where the fee does not provide a direct benefit to the individual or the resident cannot take up or make use of the services, or where the activities or services subject to the fee are part of the normal operation of an aged care home and fall within the scope of specified care and services.”

In response to the decision, the Department issued a statement in which it said:

“This ruling confirms the Department of Health’s interpretation of the relevant legislation.

The decision is a reminder to aged care providers to ensure that they adhere to the legislation in regards to fees charged to residents.

An information sheet regarding the legislation can be found at the Department of Health’s website.

The Department notes the Federal Court’s decision has a 28-day appeal period.”

Federal Court judge Debra Mortimer found there was no legal basis for an aged care provider to charge a fee for a service or infrastructure from which a resident would never benefit, especially given the way in which the market operates.

“There are no monetary limits on the level of such additional fees and charges, nor on how many of them a provider might impose,” Justice Mortimer said.

“It is an additional price extracted by Regis from all who wish to enter one of its facilities.

“It is imposed as an integral part of any entry by a person to one of Regis’ facilities, on a take-it-or-leave-it basis.

“It is not a fee from which the individual resident derives any benefit: it does not secure for the resident better living conditions, additional services or (for example) more one-on-one care.

“Regis’s senior counsel submitted that the market will regulate such matters, but as I have explained above, the way in which persons who need aged care are able to select which facility they enter is not necessarily ‘free’ in a market sense.

“Further, because on Regis’ contention these fees are simply a matter of private contract, there is no accountability or supervision to ensure that the moneys received under such fee arrangements are actually expended for the purposes for which they were levied. The secretary would have no power to inquire about this, as on Regis’ argument it is a matter outside the statutory scheme.”