Embattled retirement village operator Aveo is spruiking a 1960s "casino fun night" at one of its NSW sites at the end of this month to celebrate the success of the listed giant's new Freedom Aged Care business – some residents, though, are in no mood to party.

Aveo is in the process of turning much of its portfolio of pure retirement villages – the second largest in the country – into ones that offer Freedom Aged Care, a new venture for Aveo which runs facilities similar to nursing homes.

Despite the casino party's pitch that Freedom "loves" to see happy residents and that it encourages "them to remain young at heart", many Freedom customers have told Fairfax Media that the reality of life in the villages does not match the sales pitch, while retirement village residents they feel pressured to take up the expensive aged care package – whether they need it or not.

The complaints have common themes: confusing contracts, high costs, and uncertainty about future liabilities at the point of signing a contract. There is also concern that the levels of care fall short of the marketing spin.

The fancy-dress party at Banora on Friday night to celebrate Freedom follows a string of visits by senior Aveo management across the country to hose down allegations made in a joint Fairfax Media and Four Corners investigation that the company is engaged in questionable practices.

These allegations included excessive charges, opaque contracts and a business model that profits from "churning" residents. Aveo makes most of its profit when a resident leaves or dies as they have to pay an exit fee of up to 40 per cent on the sale price of a unit which is kept by Aveo. This fee is unique to the multi-billion dollar retirement village industry.

For its part, Aveo says it does not churn residents and that it has developed a new contract for its retirement villages (known as the Aveo Way) that is simpler and provides more certainty and that its fees are fair.

The revelations though have sparked an investigation by the Australian Competition and Consumer Commission and led to a significant 18 per cent fall in Aveo's share price despite the company launching a $145 million share buyback in an attempt to prop up the share price.

At the same time, the Minister for Aged Care Ken Wyatt has said he will review recommendations set out in a 2007 parliamentary committee inquiry into retirement villages, while Opposition Leader Bill Shorten has flagged a willingness to work with the government for bipartisan reform in a sector that largely falls through the regulatory gaps.

And at state level, the Victorian government is yet to release its response to a 2016 inquiry into the retirement village sector which featured Aveo residents prominently, while in NSW the government has rejected a petition by almost 2000 retirement village residents to appoint an ombudsman.

Since the media investigation, hundreds of emails and phone calls have poured in from residents, most voicing concerns about Aveo and the broader industry. Some relate directly to Freedom, a business Aveo bought last year for $215 million to tap into the ageing crisis and $4.6 billion of annual government funding, following deregulation of the sector.

Fee trap

Judith Currie, whose mother lives in an Aveo retirement village in Victoria and has chronic kidney problems, questions the fees.

They have basically been sold a lemon.

Darren Pitt

Besides paying $2000 a month in maintenance and assisted living fees, her mother now pays an additional $270 a week as a Freedom customer. She will also face more than $100,000 in exit fees when she leaves.

One of the major issues is that the Freedom fees can change year to year, regardless of the client's needs, because they are set to cover the care of all residents in a village.

"I feel like my mother has an open cheque book and has little control over what she is being charged for due to lack of transparency. She is trapped in her original contact with Aveo because the exit fees take so much of her savings. Now she has uncertainty if her needs increase and her unit multiple increases she will have no savings left ... My mother has less freedom now than she ever had."

Under the new legislation older Australians are assigned funding which they can then use to decide who provides their care. This means they can direct the estimated $4.6 billion a year in government funding to private institutions such as Aveo's Freedom.

Aveo Group chief executive Geoff Grady and chairman Seng Huang Lee. Photo: Jessica Hromas

Aveo says Freedom offers care at the same level as a nursing home but it is not an accredited nursing facility. Instead it has set up its own governance framework. It says Freedom allows people to age in their own home – living in a unit in the village – with more freedom than in a traditional nursing home but more care than a suburban house.

"The Freedom Aged Care model is a premium product, where people wish to experience their final years in their own home, receiving care on their own terms – and for this service to be a reality, Aveo has created a product/service they are willing to purchase," the company said in a statement to Fairfax Media.

But despite protestations by Aveo that Freedom is not compulsory, some retirement village residents say they are feeling pressured to shift to the new Freedom contracts.

A current Aveo retirement resident whose village is being converted to Freedom Aged Care says she has developed shingles "which is a nervous complaint because of the pressure to sign up ... it's going to cost a lot of money".

Another says she was accosted by a nurse in the village's common room.

'Mind-blowing'

Others are aghast at the cost.

"The prices would blow your mind," Darren Pitt, who was quoted more than $900 per week, including costs and maintenance fees, to transfer his mother from an Aveo retirement arrangement into a Freedom customer.

There are also two lots of exit fees if she made the move even though she would be a customer of Aveo throughout.

She would pay more than $100,000 in exit fees to leave her unit, leaving her with less than $250,000 to put towards a one-bedroom Freedom unit, priced at $550,000, in the same village.

When she leaves that Freedom unit in the same village in Berwick in Melbourne, she would then have to pay a second exit fee of 40 per cent or $220,000 if she was there for two years.

ACCC chairman Rod Sims had launched an investigation. Photo: Pat Scala

According to the company, existing residents receive a 10 per cent discount if they transition to a Freedom apartment.

Freedom contracts obtained by Fairfax Media show residents under the Freedom program show recurring weekly costs, including maintenance fees and basic meals, as high as $950 per week.

So expensive is the program, Aveo allows residents to defer up to 50 per cent of the costs until their departure – creating a massive financial sting for family members.

Residents or their families also have to share 50 per cent of capital gains and take 100 per cent of any loss on the sale of a unite as well as paying 50 per cent of refurbishment and reinstatement costs.

Confusing contracts

Aged and Disability Advocacy chief executive Geoff Rowe described the Freedom agreement as "vague, long, complex, lacking in transparency and not in plain English"

He said it was not in the spirit of the government's reforms of home care.

He said it was time for the government to step in and standardise contracts. He is one of a growing line of people calling for industry reform.

According to Aveo's own material, Freedom is a program that supplements the government-funded home care packages.

It uses a pooled funds model whereby residents fees are pooled and then distributed on a needs basis.

"The standard fee paid by everyone in the Freedom Care Program is independent of care needs. Freedom assesses all new entrants to determine their suitability for the standard rate and may ask entrants to pay a multiple of the standard rate if care needs are significant at the time of entry," it says in a statement.

Alan Kohn, aged care auditor and advocate, has concerns about Aveo contracts. Photo: Penny Stephens

It means a resident with little or no care requirements who pays into the fund, is effectively subsidising a person with higher care needs. However, if a resident doesn't sign up to the fund by the set deadline, they can't join in the future.

The contracts show that individuals are required to "exhaust" all government subsidised services, including home care payment packages available to the participants. If they don't, they must pay a top-up amount to the Freedom fund equal to the government subsidy.

Uncertain liability

A reading of several service agreements obtained by Fairfax Media raises questions about certainty of costs. The fees are capped for a year and after that there is a clause that enables them to vary them on a fortnightly basis at the manager's discretion.

It says the resident acknowledges and agrees that "the Freedom Care Program share may increase or decrease due to an increase or decrease in the number of participants, and the Freedom Care unit multiples applied in respect of some participants."

Aveo denies the contracts are complex or confusing and says participants enter and leave the fund throughout a financial year.

"The fortnightly mechanism is designed to ensure that the costs of the Freedom Care Program are apportioned fairly in regard to entry and exit timing."

Another clause in the contract that has raised eyebrows is warns that residents "may end up paying more" under the Freedom program than under the fee for service model – where they pay only for services they use.

But the biggest criticism is the lack of certainty about how much it actually costs at the time of signing.

The contract refers to a reconciliation cost at the end of the year. Aveo says in a statement the reconciliation process arises because the final total cost of care will vary to the initial assessments conducted at time of entry.

Band-aid solution

Despite the high fees, residents complain that they are still expected to pay for bandaids, incontinence pads and $15 to change a light bulb.

Under the contracts, "wound management" means you pay for the dressing but not for the person to apply the dressing; "palliative care" includes management of palliative care but equipment, beds and medicines are excluded and cost extra; and while wheelchairs for mobility issues are at an additional cost, the fees do cover the cost of someone pushing you.

Aveo says if it didn't charge for these things, the weekly costs would be higher.

Then there is the question of care, which is heavily spruiked in the glossy brochures, TV ads and in the sales pitch of sales reps.

An inquiry from an interested party sent to a sales representative comes back with an answer that suggested the Freedom program has a registered nurse on site at all times.

"Our carers are there 24/7 and we are able to care for residents from low care, high care, palliative care. We are run by our registered nurses," the Aveo sales representative is recorded as saying.

But Judith Currie and others disagree. Currie, who asked to use her married name to protect her mother's identity, said her 95-year-old mother couldn't even get her blood pressure monitored despite paying hundreds of dollars a week after signing up for a Freedom Aged Care package at a retirement village in Melbourne.

Care factor

She told Fairfax Media that her mother was unwell a few weeks ago and asked one of the staff to take her blood pressure.

"The attendant said she was not allowed to take blood pressure," she said.

Currie said she rang the manager to inquire whether a nurse was in attendance. The answer was no.

Currie was later told by management in correspondence that the personal care attendants on site should be able to take "non-invasive observations ... though at no time are they able to provide comment on or assess the results."

Currie said she was shocked because when she signed her mother up for Freedom at a weekly cost of $270 a week, plus more than $500 per week in maintenance fees and for assisted living, she had been told there would be nurses on site 24/7.

"The word 'nurse' has a totally different understanding to me than a domestic attendant. A nurse has medical training and authority to act in a medical event," she said.

The best she was told was that in future personal care attendants would be allowed to take blood pressure and other simple observations, "where they feel competent to do so".

She said when she inquired about a support person accompanying her mother to a doctor's appointment she was told this service wasn't yet being implemented so she had to make other arrangements.

Gwyneth Jones, a resident at Aveo's The George village in Sandringham, said she refused to sign up with Freedom because she doesn't trust what's on offer.

Gwyneth Jones, one of the residents who says she has was pressured. Photo: Penny Stephens

"They promise a registered nurse 24 hours a day. This is not happening. I check up, I have been checking up every night, half past eleven, one o'clock in the morning, there is never ever a registered nurse on overnight. All we have on overnight, is personal care attendants, and all they ever do is wash linen from incontinent patients who are now, been living at The George, because it's been turned into an old aged home."

Jones' advocate Alan Kohn, says he asked four secret shoppers to inquire about Freedom by visiting villages.

He said all four mystery shoppers told him that the sales consultant was very vague and could not answer questions relating to how the Freedom care program works in unison with the Commonwealth Funded Home Care Packages.

"All mystery shoppers were provided promotional material, but however, were not provided a copy of the Fact Sheet relating to the retirement village as required by the Retirement Villages Act 1986. A copy was only provided when a follow-up call was made a few days later requesting this," he said.

Aveo says the villages are staffed 24/7 with nursing and personal care staff, including during the night, weekends and public holidays. It says registered nurses will be on site overnight if the assessed care needs of patients "warrant that level of care". It says it does not have to provide a registered nurse on overnight if the care needs of the residents don't require it.

Purchase point

Aveo purchased Freedom in early 2016 for $215 million.

According to analyst reports and transcripts of company briefings, Freedom Aged Care is supposed to take Aveo to the next financial level.

"Aveo management believes rolling out the FCP to existing villages will boost the price incoming residents pay for units and will also result in slightly higher average occupancy," wrote Morningstar analyst Tony Sherlock in February this year.

The company has also described the acquisition as "materially" earnings per share accretive to analysts.

Aveo's acquisition of Freedom came just ahead of a major reform to how the federally home care packages are administered.

From February this year, Australia switched to a consumer directed care model.

According to the federal government's literature on the program, consumer directed choice is designed to give more choice and flexibility to consumers.

Yet at Freedom that choice disappears, according to experts.

Ronda Held, chief executive of the Victorian branch of the Council of the Aged (or COTA) and an expert in home care, says she has several concerns about the Freedom program.

"There's so much control in the hands of the care manager," Held says.

"They're pooling the risk to support people with higher needs and they're guaranteeing you can stay there for life and we'll deliver up to high care," she adds.

"But they're doing that at the expense of other people using their services which was the old model of home care that the government has just thrown out."

COTA chief executive Ian Yates says it would be concerning if residents were pressured. Photo: Penny Bradfield

COTA, which has a contract with the government to run a website explaining home care, has other concerns about the Freedom program, according to its national CEO Ian Yates.

"I would be very concerned if residents were being pressured into entering the program," Yates says.

Shanny Gordon, senior retirement housing worker at Housing for the Aged Action Group Inc, says the variability of costs on a fortnightly basis was particularly concerning.

"It is really unreasonable. How can you have somebody not know how much their care will cost. They would not be able to budget. This could really blow somebody's budget out. It seems really odd to include this," Gordon says.

"I think this should be challenged, there should be a certain cost throughout the year and then it goes up annually by CPI," she says.

Gordon also questioned why there was a need to include an exit fee at all considering the ingoing contribution could be around $600,000.

"The fact that they can take a unit that is supposedly worth $250,000 and make it worth $600,000 is incredible. The reasoning that they gave behind charging a deferred fee in villages in the first place was that they were charging below market value for the unit."

Fairfax has seen Aveo offer documents pricing one-bedroom apartments under the Freedom program in the outer suburb of Berwick in Melbourne at $550,000, with an exit fee of 40 per cent after two years and a share in any capital gain. At the same time Domain.com.au is advertising a four-bedroom house in the same suburb for $540,000 to $590,000. Meanwhile, at Aveo's The George in Sandringham, two-bedroom apartments are selling for $700,000, while down the road a brand new two-bedroom apartment is on the market for $650,000.

Aveo says the higher ingoing contribution is not reflective of house price growth but aligned with the cost of nursing home bonds in the same area. But critics say a key difference is nursing home bonds do not incur an exit fee, which in Aveo's case can add hundreds of thousands of dollars to the overall cost of the product.

For Darren Pitt's mother, paying two exit fees and moving into a smaller unit at a higher price to access Freedom isn't an option. "The residents originally brought into the village with the assurance that they and their families would have an affordable option if they required more assistance. They have basically been sold a lemon."