Government reforms will leave ‘no business untouched’ in the aged care sector

The coming 18 months will be extremely challenging as all aged care providers adapt to a competitive market and cope with the changes to their revenue base, write Louise Greene and Fiona Somerville.

The coming 18 months will be extremely challenging as all aged care providers adapt to a competitive market and cope with the changes to their revenue base, write Louise Greene and Fiona Somerville.

The implementation of the aged care reforms moving aged care to a consumer focused competitive market has required providers to change their business and operating models.

Fiona Somerville and Louise Greene
Fiona Somerville and Louise Greene

The changes that will be implemented in 2017 in both residential and home care will leave no aged care business untouched.

Over the past three years we have seen providers respond in a range of ways. For some it has been opportune to exit the aged care sector or to merge with another like-minded organisation – with both scenarios providing growth and consolidation opportunities.

The coming 18 months will be extremely challenging as aged care providers adapt to operating in this competitive market environment and cope with the changes to their revenue base.

To survive in the changing aged care environment, and to respond to societal changes, providers need to strengthen their business.

Strategic market review pays off

Understanding the market is achieved by undertaking a strategic review that critically analyses your place in the market and the market position that can realistically be achieved. Firstly, evaluate supply and demand in the current market, use demographic data to understand the market characteristics, look at published data sets and analyse your own data.

By turning data into information, the organisation can develop a strategy that is based on facts that are relevant to the business. Through clearly identifying the potential market position, providers have identified opportunities for accommodation price uplift and strategies to maximise occupancy. Market position changes because of factors outside of the providers’ control and we recommend regular re-evaluation – say every six months.

A short timeframe to make an impact

To achieve a competitive advantage a facility needs to standout from its competitors by creating a point of difference. One third of people move to residential aged care within one month of an ACAT assessment and over half move to aged care within three months.

So a major life change needs to occur in a very short space of time. To achieve the optimal accommodation price, occupancy and revenue a facility needs to have a point of difference that is valued by prospective consumers.

Smart builds

The most obvious point of difference is built form. Designing a new facility provides the opportunity to maximise the accommodation pricing based on the space available to a resident. The 2015 Let’s Talk survey, run by Ideal and DPS Publishing, clearly identified the major attractors as personal space available to the resident and amenities relating to usable and enjoyable spaces; 93 per cent of respondents had a preference for a single or larger room.

Financial benchmark studies and some consultants highlight the efficiency of shared rooms, however they are very difficult to market and in a competitive market achieving sustained high occupancy is a challenge for shared room accommodation, but not impossible. For those building a new facility, steer clear of shared rooms.

Differentiate through your care model

Care and the way it is delivered, and the skill of staff, can all be a point of difference. Many providers have a care philosophy or care model but fail to explain its benefits. People come to residential aged care because they need care; recent AIHW data shows that one third of residents have a high rating across the three ACFI care domains and over 50 per cent of residents have a diagnosis of dementia.

Prospective families need to hear about how you provide care and why you are best placed to care for their family member. If you have specialist services, participate in additional programs or invest in education and training then explain the benefit of this.

Increasingly, providers are articulating their point of difference, developing and naming specific programs that focus on increasing choice and decision making. For example, Australian Unity has its Better Together initiative aimed at creating a home-like environment for residents where they have greater control and choice over their activities. CaspaCare at Emerald Hill’s Household model fosters and encourages independence and choice around routine, interests, preferred meals, activities and social gatherings for as long as possible.

It all comes down to service

Provide a superior service. Over recent months there have been an increasing number of providers who have introduced an additional fee to cover hospitality, recreation and hotel services.

Fees range from a little as $5 per day to over $100 per day and cover the cost of providing additional meal choices, superior linen, entertainment and other services that consumer’s value.

If you are offering a higher level of amenity regardless of whether this is at an additional charge you need to be able to articulate this offering in a way that resonates with the resident and their family.

Ensure the experience matches the brochure

Finally, having worked out the product and service offering, providers must engage with prospective consumers and those influencing their decisions and articulate their value proposition.

Many providers focus on brochures, information packs and websites, and many create centralised sales teams that are disconnected from the facility. The marketing collateral can be beautifully set up but fail to convey the value proposition.

Word of mouth is one of the most important marketing tools a facility can have. Informal communication based on people’s experience of a facility is extremely influential.

Ultimately, while there is currently a lot of concern and uncertainty, there are practical steps that providers can take to ensure they identify, define and market their service whether it’s a broad-based appeal or a particular niche.

Louise Greene is director of business improvement and Fiona Somerville is commercial director at The Ideal Consultancy.

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Tags: acfi, aged-care-reform, finance, fiona-somerville, funding, ideal-consultancy, louise-greene, slider,

3 thoughts on “Government reforms will leave ‘no business untouched’ in the aged care sector

  1. All of this assumes there is choice of location related to assessment of facilities and capacity to pay.

    What of those who have no choice because places, ie available rooms are not available for the prospective resident currently in hospital and awaiting urgent discharge, or, they are on a pension and have no capacity to exercise any financial discretion.

    Though it is possible to move locations, how much is this seen as a realistic proposition by residents or their family?

  2. I agree that there is very little choice of location available ,particularly in regional and remote areas. If you are awaiting placement after a period of time in hospital, choice is extremely limited as you can find yourself being offered placements 50 to 100 kilometres away from your family .You cannot say ”no” too many times and eventually you have to say” yes’.

    quality care is the most important need but with the funding cuts envisaged in the near future will residential facilities prioritise their placements on care requirements or capacity to pay.

  3. Putting the most obvious point of interest as “built form” is very concerning. In my family’s experience it is quality of care that overrides all other variables in importance, and unfortunately is becoming a rarity. What is advertised to the public and what occurs in reality are poles apart.

    Government funding cuts and for- profit providers wanting to line their shareholders’ pockets are resulting in a broken system.

    And yes, there is not always a lot of choice in each area.

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