Looking ahead to 2017, home care providers face new for-profit competitors, uncertainty as to client intentions, and serious financial and strategic challenges, writes Michael Roberts.
The reforms giving clients greater financial control over their services are a watershed moment for the aged care industry. While there are some uncertainties as to how clients and the industry will respond to these changes after February 2017, the genie will be out of the bottle. Once people are given genuine options for control and autonomy, it cannot be taken back. There will be no return to the days of predictable block funding.
Current service providers now face new nimble for-profit competitors, uncertainty as to client intentions, and serious financial and strategic challenges.
Many emerging competitors have new business models and ways of connecting and interacting with clients and their carers. New providers are likely to have minimal overheads, easy to use mobile apps, systems of rating care workers and customer satisfaction, as well as sophisticated marketing – that is, a simple low-cost business model that enables them to focus on one aspect of care delivery.
Unlike many of the sector’s existing providers, they do not have to manage the complexities of multiple service streams such as community aged care, residential care, disability services, or assisted living. New operators are also less constrained by the structures and mission-related activities of not-for-profits.
So what choices can clients make in this environment? Those clients already receiving services may choose to stay with their provider because they have established positive relationships with the people delivering care and are satisfied with the service. Perhaps they fear change and don’t want the fuss involved with changing providers. However, these factors won’t influence new potential clients who are likely to be more focused on price, flexibility of the service offering, and the ability of the provider to engage and collaborate regarding care and support needs.
One thing is for sure, if you don’t know how your clients feel about you, it is impossible to respond appropriately and you risk losing them. Are your staff responsive, friendly, competent and reliable? Are you providing what people want or what you think they need? In a new market-driven model the ability to understand client needs, perceptions and outcomes will become a survival issue. The recent experience with the introduction of CDC and NDIS shows that consumers are likely to push back against high administrative overhead costs and choose providers that offer better choice and value for money – exactly as the reforms intended.
In the new “cash-for-care” retail market, management and administrative overheads need to be competitive. The large not-for-profit organisations that deliver the bulk of our community aged care and disability services have to successfully leverage the scale of their services to reduce overhead costs. At the moment, many providers operating within an overarching faith-based structure still maintain independent, local administration, procurement, finance, HR, payroll, IT, marketing, and other head office functions. In this configuration they have none of the advantages that scale should bring, and are highly constrained in terms of their ability to rapidly innovate and provide flexible market-driven services at reasonable cost. The challenges of attracting and retaining the future workforce in a highly competitive and price sensitive market have also been well described.
The financial impacts will be profound and it isn’t clear whether all providers will be able to successfully transition from block funding to a new retail model where payment is made in arrears (after the work is done). Traditionally a somewhat flexible approach to budget management was often used to ensure that surpluses in one service stream could be used to subsidise revenue shortfalls in others. Actual costs of care delivery are often not well understood. The introduction of client-controlled activity based funding closes the door on cross-subsidisation forever. Each service stream and geographical area will need to be viable in its own right. The changes in working capital that result from being paid in arrears will also need to be well understood and managed.
Insights from overseas
The overseas experience provides some interesting insights into how the “cash for care” approach might evolve in Australia. In the UK, where direct payments for aged care and disability services via individualised client budgets were introduced in 2005-2006, there has been a major increase in both utilisation and spending over time. The UK’s Health and Social Care Information Centre reported costs of direct payments have risen to £1.4 billion in 2013-2014 (8 per cent of total spending) – a 103 per cent increase in real terms since 2008-2009, when the cost of direct payments was £680 million (4 per cent of total expenditure). In terms of uptake, the number of people receiving self-directed support has increased to 62 per cent of clients in 2013-2014, compared to 28 per cent in 2010-11. The early Australian experience of implementing consumer directed care for home care packages is that initially a relatively small proportion of clients (15-20 per cent) are opting to manage their own services, but this will increase over time.
Getting to the facts in terms of outcomes of these reforms can be difficult. In 2011, the UK academic Jason Powell said: “the evidence base in relation to the critical success factors of personalisation is extremely scarce”. Volumes have been written on the policy context and strategic purpose for the reforms, but there is much less research on the impacts and outcomes.
The 2008 UK evaluation report on the pilot of individualised budgets includes an interesting analysis which compared a group of 504 people managing their own services via an individual budget to a group of 439 people supported by traditional service models. In terms of quality of life, wellbeing and met needs, the outcomes were very similar for both groups. For older people and people with mental illness the costs of care were also almost identical in both groups. The weekly costs of care for people using individual budgets were slightly lower for people with learning difficulties and physical disabilities. Interestingly, the cost of care management was higher for people using individual budgets, £18 per week compared to £11 per week for traditional services.
There are some cautionary lessons from the overseas experience. Research indicates that older people are likely to experience fewer benefits from self-directed care. The author of a recent study from Coventry University, Dr John Woolham, reported: “People like the idea of personal budgets, but having the cash to spend directly doesn’t always give people more control – and we think many older people may be less interested in choice than in reliability and continuity of care.” Provision of services via personal budgets did not always improve the outcomes for clients in terms of aligning the timing of services with individual preferences, or providing continuity of caregivers. Some older clients and carers find that the process of arranging and managing services can be stressful and burdensome.
The lessons for Australia are that these changes are likely to have a profound impact on the provider market as increasing numbers of people choose to direct their own care and new financial arrangements come into play.
Some key observations:
- Consolidation of some existing providers, exits from the market and the introduction of new providers is inevitable.
- There is a critical need for providers to understand their client’s needs and preferences, engage effectively with them over the journey and have the flexibility and technology to deliver services accordingly.
- Services must be cost effective and have low overheads – a major change for many providers.
- Providers need to have the capability to demonstrate benefits by measuring and monitoring the outcomes of services.
Michael Roberts is a senior health advisor with Grant Thornton.
This article appears in the current edition of Community Care Review magazine (November edition). Watch out for the February issue out soon.
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