industry & policy
Do your own disruption
M @ HynesLegal
Business models in the sector must evolve to survive; better to be proactive about it and have a voice as consumers and demographics change.
By Julie McStay
The Australian aged-care sector needs to take inspiration from the disruption that is taking place in the online economy and become more creative in its pursuit of growth and new revenue streams.
The immediate future of the sector will bring the emergence of new business models that place the consumer at the centre of services.
Early examples of this can be seen in the changing concept of what is community living, as well as innovative approaches to sourcing land close to city centres for aged-care and retirement developments.
More and more, aged-care providers are seeking advice on how they can diversify their sources of revenue. A variety of approaches are being taken to levying fees for a broader range of care and services.
At the centre of all this is the customer – aged-care providers must design their offerings with the purchaser in mind. And the purchaser is often not the resident but the resident’ s children.
What will become more commonplace is the whole-of-service concept, in which a person pays to enter accommodation while they are independent but on the understanding they can stay in the one spot, with service delivery increasing as their care needs change.
Successful aged-care providers of the future will be the ones agile enough to be responsive to changing consumer demands.
One of the greatest challenges facing the sector is access to attractive land close to major population centres. Consumers are reluctant to give up regular access to popular community facilities, even when they are transitioning into retirement accommodation. When you are facing limitations on land and funding, how do you deliver facilities that meet consumer wants and needs? One concept that has proven highly successful in other markets and is rapidly gaining traction in Australia is the idea of co-location. With prime development property close to amenities proving scarce, providers are negotiating with community groups that have underused facilities, such as sports and services clubs.
In exchange for a long-term lease on centrally located real estate, aged-care providers offer to refurbish club facilities with a view to developing an integrated community on the site that offers a range of accommodation options and aged care services.
In many cases, the approach from the provider is a financial lifeline for the community clubs. Not only do the clubs benefit from updated facilities, they have a potential new membership base living on top of them.
These so-called vertical villages often offer better investment returns than larger greenfield developments built further out from city centres, with higher yields and greater ongoing consumer demand as population densities increase.
The boutique approach to development, with smaller sites hosting clusters of villas, ticks a lot of the boxes to meet changing demands from consumers who regard community living as a priority over the traditional broad-acre retirement village.
The liberalisation of home-care services will also pose a challenge to the sector. Shalain Singh, national director and head of healthcare and retirement living at Colliers International, says the number of home-care places is forecast to increase to 157,823 by 2025.
Singh notes that this will lead to operators of retirement village and land lease communities – formerly known as manufactured housing estates – providing increasingly higher levels of care. In short, they are progressing to levels of care traditionally the domain of residential aged-care providers.
Singh observes that some small- to medium-sized operators don’ t understand the changes and the effects on their operations.
Now is the time for these operators to be discussing their strategic options with their advisers, to best position themselves to adapt to these changes. In particular, there is potentially a greater role for merger and acquisition, as well as joint-venture activity across the continuum of care.
There is nothing as certain as demographics. With a slow-moving inevitability, Australia’ s age profile is changing. Federal Treasury estimates show that, over the next 40 years, the proportion of the population over 65 will almost double to 25 per cent.
This is no statistical blip; the change is structural and permanent. And it is unlikely to be uniform. Geographic regions attractive to retirees, such as south-east Queensland, are likely to see a disproportionate rise in age profile as people move into the area. Equally, the profile of regional areas is likely to change, as workingage people move to metro centres to advance their careers.
The result is an inevitable increase in demand for aged-care and community living facilities that will prove a challenge to meet.
This is where disruption of existing models will need to take place for aged-care providers to benefit from changing patterns of demand. And as businesses in the old economy have discovered, it is better to disrupt your own enterprise than to have a competitor do it for you. ■
Julie McStay is a director of Hynes Legal in Brisbane, and leader of their aged-care and retirement living practice. � hyneslegal. com. au
20 agedcareinsite. com. au