industry & reform comparison , you can sort of see that the customers are choosing to live there in New Zealand . They ’ re actually like the model whereby a care option is available to them as they age , and are actually making that choice to move into a village , and a continuum of care village in particular , much earlier in their healthy ageing cycle .
So , kind of acts like an insurance policy for your care going forward , and you can really do that one move into a village , and then know that your care needs or the care needs of your partner , even more importantly , will be looked after as they age . The difference in Australia , of course , is that the legislation for retirement villages and aged care is quite separate . So , retirement village legislation is state based , and each state has quite different rules around the retirement village acts , which makes operations in that sector quite difficult . But to make matters worse is the aged care and home care systems are actually federally governed and funded . So , what that has meant of course is that operators and businesses have tended to align themselves to either be one or the other and not both . So , many operators in the retirement village sector have just avoided care altogether , as it ’ s too hard .
And likewise , on the aged care side , they ’ ve been really great at care , but haven ’ t focused on a lifestyle or the accommodation side . But the blend of the two actually creates a lot of advantages in lots of different areas . So , from an operator ’ s investment perspective , you can build one village , create one community , which actually becomes a fairly efficient use of capital . You only have to build one reception area , one kitchen , one car park , essentially . And so a lot of the physical assets can be shared across the whole community , but also , from an operating perspective , you can share the costs across the whole site . So , again , staffing can be shared across all parts of the business . And also , the residents end up a lot happier as well because they can partake in and invest in different parts of their ageing journey themselves and actually get to choose to live in a community that will look after their needs as they age .
It ’ s also great for staff because there ’ s more training opportunities at different ways you can move in and around the village . And even with the addition of home care now , care workers can actually have the option to extend their hours and have different experiences , not just in the residential aged care side , but in the village as well through the home care operations .
So , look , there ’ s quite a number of benefits , but the New Zealand model is a little bit peculiar to the New Zealand financial system , obviously . So , there is a slightly different funding model over there , and the way they operate the villages is slightly different , but they do allow a capital return and for residents to contribute more to their accommodation side . But similarly to Australia , the care side is completely funded by the government . There ’ s lots of benefits to the model .
In what way does the differences in government funding affect how aged care is provided in New Zealand compared to Australia ? In New Zealand , they still provide a similar sort of care funding base , about $ 170 a day , which in comparison to Australia ’ s average fee numbers is probably a little bit on the low side , but the costs in New Zealand , obviously , are lower as well . But this sort of drove a lot of action about 10 to 15 years ago within the industry because it wasn ’ t sufficient to cover either the daily sort of service needs , so the food and beverage and all that sort of stuff , and all wasn ’ t enough to cover some sort of quality accommodation the residents were increasingly asking for . So , what they did was they added a couple of features . One was a sort premium fee option , which allowed residents to pay more to get better food and service during the day . So , that ’ s quite similar to our basic daily care fee if you like , which is pegged at 85 % of the pension .
But the key difference is that operators can change the value of that . It ’ s unregulated , so they can actually set whatever fee they think customers can afford and will want to pay , and therefore , adjust the quality of the service to meet it .
How likely do you think it is that Australia will adopt a similar care model as New Zealand in the future ? There is quite a lot of discussion about it . And it gets called different things , from user pay models to co-contribution models , whatever , but there ’ s a lot of chatter about it . There ’ s been a number of reports from Stuart Brown recently , but also from the DCM Group and other operators . Even the University of Technology of Sydney have recently released a paper about the financial sustainability industry . And what they ’ re all saying is , if we want to solve for both the sustainability issues that are in aged care at the moment , the fact that we ’ ve got rapidly increasing demand for aged care over the next 20 to 30 years , but there ’ s absolutely no investment going into the sector , because the returns should start there and operators are losing money , then someone ’ s going to have to pay for the services that are coming . And it can ’ t be the government , because the costs are far too high and they ’ re already funding far too much , and particularly on the care side .
So , governments should continue to fund the care side , and that number will just increasingly grow as more people age . But in general I think where the conversation industry is going is that residents should be able to , if they want and if they have the means , to contribute more to their accommodation side . So , there is chatter about it .
Are you aware if New Zealand ’ s experiencing any major issues in their aged care services ? New Zealand hasn ’ t had a real commission , but one of the things that they did have quite a while ago was really more from the operators actually coming together and talking to the government about a better way to operate the industry , and that ’ s where the continuum of care model was really born . But part of that story really was , and one of the things and one of the reasons why I liked the model is that if you offer a retirement village and aged care on the same site , no one will buy into the retirement village unless there is a very high quality care operation on that site . So , the operators are incentivized to drive a high quality care outcome , because if they don ’ t , no one will buy in . So , what that means is incentives for quality are aligned directly in the business model .
It ’ s not a punitive action from a state government regulator or a federal government regulator . And that ’ s important , I think , because the Australian system is very much after a punitive , sort of audit approach to quality . It is not built into incentives for the operator to do a better job yet . And I think when you ’ ve got the residents living with you already in a retirement village who are looking over the reception desk into the care area and wondering , “ Okay , well , I ’ m going to be there one day . They better be high quality .” There are built-in incentives for operators to do the best job they possibly can , because you just won ’ t get the customers in the first place . So , I think that sort of aligned incentive is really important . That ’ s the key lesson they learned in New Zealand . ■ agedcareinsite . com . au 17