The University of Queensland was commissioned by the Royal Commission into Aged Care Quality and Safety (the Royal Commission) to conduct this analysis to:

1. Estimate the efficient cost of delivering residential aged care for the range of output quantities and care qualities observed historically, accounting for the degree of care required by residents and other relevant factors that impact on service delivery costs.
2. Assess the historical level and distribution of inefficiency across service providers, using the estimates.
3. Determine the efficient costs required to achieve the different care qualities for all aged care facilities, using the estimation model(s).

To the best of our knowledge, this is the first time a large-scale and national study on residential aged care (RAC) facilities has been conducted in the world. It is also the first efficiency analysis that has been conducted that includes measurements of both quality and efficiency in the sector. The study used a comprehensive set of quality indicators, ranging from clinical outcomes of residents, process quality standards and service experience indicators.

Key findings:

• The facilities or providers with poorer quality of care (Q3, 11%) had lower customer experience ratings, failed to comply with accreditation standards more often, and received a higher number of complaints and issues.
• Government-owned and small-sized facilities were more likely to demonstrate higher quality of care. The correlation between size and quality of facilities was strong and consistent across ownership and provider types.
• A positive association was found between the level of quality care delivered and the cost required to deliver that care at the small-sized (200 beds) facilities.
• There is statistical evidence that inefficiency was associated with total cost and with direct care cost.