More choice on the menu, but at a cost

Continuing AAA’s series exploring CDC in residential aged care, David Sinclair argues there is no reason that concepts from the hospitality sector cannot be adopted within the existing funding model, but providers must understand the costs of individual activities and price them appropriately.

Continuing AAA’s series exploring CDC in residential aged care, David Sinclair argues there is no reason that concepts from the hospitality sector cannot be translated to residential aged care within the existing funding model, but providers must understand the costs of individual activities and price them appropriately.

With the move to consumer directed care (CDC) in the delivery of home care packages now a reality, it seems an appropriate time to start thinking about how CDC might impact on current residential aged care business models.

David Sinclair
David Sinclair

In one respect CDC is already having an impact on the business models of residential aged care providers. Consumers now have a real choice in how they pay for their accommodation. Providers are now taking a more market orientated approach to their accommodation offerings. This is observed in the way accommodation is being priced and in the design and standards of accommodation being offered. Providers are looking to refurbish or rebuild many of their existing facilities, and while the increased accommodation supplement will provide some motivation for this course of action, the bigger picture is that a higher accommodation price will be able to be charged after the refurbishment or rebuild is complete.

One of the lessons to be learned from this first glimpse into consumer choice in residential aged care is that it is built around the relationship between price and the service (accommodation) being offered. Even in home care, each client has a budget and they choose the services they want, which is paid from the budget. To some degree it does not matter who funds the budget. With means tested fees being introduced to home care the consumer is likely to pay for a larger proportion of these services over time.

What we don’t know at this stage is what consumer directed care in a residential setting will actually look like. Currently residential aged care is extremely heavily regulated and the standards of care, including the services to be provided, extremely prescriptive. But even within the existing rules there is some room to provide choices to residents. This is particularly the case in relation to hotel services.

So, for the moment, let’s leave the more clinical aspects of care out of the equation because if CDC is going to impact on these areas then there will need to be a look at how the additional risks associated with consumer choice and the provider’s duty of care are to be balanced.

Hotel services, as defined by part 1 of schedule 1 of the Quality of Care Principles 2014 covers a range of services that must be provided to all care recipients who need them. Among other things it includes furnishings, bedding, cleaning services, laundry, toiletry goods, meals and refreshments and social activities. In respect to cleaning and laundry services, there is already the scope for the resident to participate in the activity, in other words doing it themselves if they are able and choose to do so.

Similarly, clause 3.9 of the Accreditation Standards talks about the care recipient or their representative participating in decisions about the services they receive and that they should be enabled to exercise choice and control of their lifestyle while not infringing on the rights of other residents.

What does this mean for service providers? The major fear is around staffing models, and the cost of providing individualised services in a funding model that is largely built around institutionalised care.

Lessons from the hospitality sector

In this regard, the sector could probably learn some lessons from the hospitality industry. If a person goes to a hotel, the relationship starts with an understanding around price and services levels. There is a base level service for a standard price and there is an understanding that anything extra comes at an additional cost. Most hotels also have restrictions about the level of service available at different times of the day.

There is no reason that these concepts cannot be translated to a residential aged care setting within the existing funding model and by using the optional services rules that currently exist.

What will be critical for providers is that they understand the inherent costs associated with individual activities so that they can price them appropriately. A key lesson that has been learned during the implementation of CDC in home care was that current information systems did not capture information about costs and activities in a manner that allowed managers to properly assess the cost of individual activities. It meant that for many providers the task of costing activities of service, and applying an appropriate margin, was a very menial exercise. Residential aged care providers are likely to have a similar experience.

Picturing greater choice

Let us imagine entering an aged care facility in the future where our choices start from the choice of our accommodation. I can choose to go into a standard room which comes with the standard furnishings and ensuite bathroom; I provide my own TV and for this I pay the standard price. I will get my standard complimentary breakfast, lunch and dinner supplemented by a cup of tea and coffee and a few biscuits at morning tea, afternoon tea and supper.

Alternatively, I might choose to go into a deluxe room, which comes with a balcony or courtyard that has outdoor furnishings supplied. I have the choice of the in-house supplied furnishings which includes a large flat screen TV or I can furnish the room myself, at my cost. This deluxe room carries an extra cost, but I am willing to pay so that I can bring some of my favourite furniture. I might like the outside courtyard because I can sit in the sun and read the daily newspaper that is delivered to my door each morning, at a cost.

Each day I sit in the dining room and choose to have my lunch around 1pm, although others in the facility choose to have their lunch a little earlier or later. The dining room is open from 7am to 9am for breakfast, from 12pm and 2pm for the lunch sitting and from 5pm to 7pm for dinner. I choose my meal from a menu each night for the following day and also mark down when I will be having that meal, although if I want the basic choices they are available throughout the siting time. If I wake up in the middle of the night and want a snack, I can get something from one of the vending machines or I can ring the concierge and they will bring me something from the late night room service menu. Similarly, I can get some room service during the course of the day from the menu which is slightly more expansive. Of course, these things will be added to my bill.

There is a wide variety of daily activities to choose from, as well as a selection of optional others which come at a cost. These include a day out at the pictures or the theatre. I can also choose to go on activities with a carer, such as to the beach or a particular show I might want to see, or a trip to see my grandchildren, although these cost a little bit more again.

Making it possible

That might be how it looks from a consumer point of view. From a service provider’s point of view, this is possible, as long as they understand the costs of doing each activity and pricing the activity accordingly. There may be some cross subsidisation between activities, but this should be kept to a minimum. There might also be some relationship between accommodation process and service levels but again this should be kept to a minimum, although the ability to offer a choice of services is likely to enhance the ability to charge a higher accommodation price.

The bottom line is that hotels are providing these services every day and offer choice to consumers in how and when these services are delivered. There is an implicit understanding between the consumer and service provider about choice and price. Lastly, there is an understanding by the service provider of the costs of providing these services and pricing them accordingly. These are the principles that need to be translated to the residential aged care sector if CDC in a residential aged care setting is to work well.

David Sinclair is a director with StewartBrown where he specialises in providing advice to the aged care and community services businesses.

Related AAA coverage: Special report: putting residents front and centre

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Tags: activities, cdc, CDC in residential care, choice, david sinclair, menu, pricing,

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