industry & reform
Decisions, decisions
Aged sector’s
transformation
prompting
providers and
government
to make tough
choices.
By Steve Teulan
“In the middle of every transformation
there is the perception of failure.”
T
his observation, articulated by a wise
colleague, manifests itself in many
contexts. Right now, it applies to
the aged care system as it grapples with the
necessary changes highlighted by the aged
care royal commission.
In their interim report, the commissioners
found that aged care in Australia fails to
meet the needs of older, vulnerable citizens.
“It does not deliver uniformly safe and
quality care, is unkind and uncaring towards
older people and, in too many instances, it
neglects them,” the commissioners said.
But we must keep in mind that the system
is in the midst of a transformation that has
the potential to vastly improve it.
This transformation started before the
commission began its work. It was prompted
by the rapid rise in people needing care, the
increasingly sophisticated lifestyle needs
and preferences of those people, and the
shortage of suitably skilled workers.
A major feature of the ongoing
transformation is the shift in the primary
locus of long-term care. Large-scale
institutional settings are being replaced by
home and community-based care, as well
as non-institutional residential settings,
including retirement villages and smaller
care homes.
The growing availability of Home
Care Packages is enabling the change;
government home care subsidies of up
to $50,000 a year are available to people
depending on their circumstances.
Unfortunately, though, consumer demand is
overwhelming supply, leading to community
frustration about the length of the waiting list
10 agedcareinsite.com.au
for Home Care Packages and slowing down
the transformation. Consumers are making
it clear that they want to avoid institutional
care for as long as they can.
As aged care consumers become
more empowered, and concerned by
stories of neglect, they are seeking greater
professionalism from the workforce. No
qualification is legally required to be a paid
aged carer in Australia, and more than
seven in 10 aged care workers hold only a
Certificate III VET qualification and work as
personal carers.
Amid this transformation, residential aged
care providers are encountering falling
occupancy and wage cost increases that
outpace the indexation of government
subsidies. With the government regulating
consumer charges, these operators are
having their margins squeezed. Some will
battle to stay profitable and be forced into
closure or mergers.
As consumers and the royal commission
explore options for improving the aged
care system, aged care providers and the
government face some critical decisions.
Providers are deciding how much to invest
in existing models. They may justify new
developments on the basis that these will
out-compete many older facilities, which
are most susceptible to market changes.
They may also adapt their building designs
and operating models to differentiate their
offerings and will explore how to increase
consumer contributions. It is not known if
previous assumptions about demand, cash
flow and profitability will hold during and
after the transformation.
These are the critical questions for aged
care providers:
1. How do we invigorate our existing
residential aged care models to achieve
acceptance by consumers and overcome
the progressive decline in industry
occupancy rates?
2. How do we apportion our investment
between enhancing existing models and
developing alternative models of care and
accommodation?
3. How can we increase the proportion
of revenue contributed by consumers
to offset the reducing share of revenue
provided by government subsidies?
4. What level and type of specialisation by
customer grouping will we pursue as the
market matures and the requirement for
differentiation increases?
5. How can we use technology to improve
productivity and quality of life, and
empower consumers?
For government, the critical decisions are
how much it needs to invest in additional
subsidies to support the diminishing
profitability of existing residential aged
care services. It also needs to consider the
relative quantum and timing of investment
in community-based care, and what level of
additional consumer contributions should
reasonably be expected from older people
in need of care, perhaps considering their
ability to pay.
These are the critical questions for
government:
1. How does government apportion its
expenditure between sustaining relatively
expensive traditional residential aged care
services and the growth in less expensive
home care services?
2. How can demand from consumers for
aged care services be reduced or delayed
through the promotion of wellness
strategies?
3. How can consumer contributions be
expanded in a politically acceptable way?
4. What market, regulatory and funding
structures and levers should be used in
different contexts (such as metro/rural/
regional/remote and for groups of people
with special needs) to assure access,
consumer choice, skilled workforce and
quality of care?
5. How can the productivity of home care
services be increased to address the large
shortfall in supply?
Overall, the challenge for government is
to manage a transformation that achieves
better outcomes for consumers and a
more efficient system, while not disrupting
a service vital to many very vulnerable
older people.
The royal commission is due to deliver its
final report in November this year. It is likely
that its conclusions will align with the broad
sentiments in the interim report. Regardless
of the detail of the report, the future trends
in aged care are becoming clear.
How providers and governments respond
to these questions will determine whether
older Australians receive the care and
support they need and desire. n
Steve Teulan is a Sydney-based principal at
management consultancy Nous Group.