Some home care providers are about to reap the unpleasant consequences of poor management, poor insight and poor delivery of essential services to their client consumers, writes DAVID POWIS.
The recent release of the Federal Government’s Consultation Paper – improving home payment arrangements has determined that unspent funds will need to be returned to the government, which has caused the industry to question how it let itself get into a situation where the outcome of this decision will surely be a financial win for the government and a significant loss for the provider and consumers.
Home care has traditionally been funded by the Government based on an independent ACAT assessment for each approved consumer. This consumer-based subsidy plus additional supplements to meet other targeted areas, when combined with a co-contribution from the consumer, has been deemed sufficient to meet the cost of the care provision. Where financially able, consumers have been charged an additional income-tested fee (ITF), which reduced the government subsidy allocated.
In addition, like most government funded programs, the subsidy arrangement has always erred on the side of underfunding rather than overfunding, obviously meant to ensure providers are obliged to operate effectively and efficiently while minimising costs, thus allowing recovery of overheads and an operating surplus to be achieved.
What is being proposed is a fundamental and extremely significant change in the funding model.
To date, the government has provided this funding “in advance”, which reduced the need for working capital, thus reducing the need for providers to generate working capital from other sources.
The following industry drivers have resulted in the prospect of an infinitely worse arrangement, financially:
- Provider misunderstanding of government policy and treasury thinking, which led to the belief that government will allow providers to retain and use unspent funds that had been allocated for the provision of care.
- Providers misleading themselves that they are in control of their business and therefore in charge of the business model that delivers services to their respective clients. The truth is that providers are in place to provide an alternative to the more costly and inefficient system of government delivering those services. The government has retained absolute control over how the arrangement will work and how providers will comply.
- Providers negotiating and determining service models with their clients, irrespective of whether it meets departmental and/or government expectations on how programs are to be delivered.
- Providers delegating broad decision-making powers to junior employees and/or lower level management personnel without appropriate checks and balances. Poor business decisions made in the name of compassion can have far reaching consequences, often at the lethal expense of the business they represent.
Where to from here?
The industry needs to respond effectively to the Consultation Paper and in addition, undertake a full review of current practices to determine whether providers are:
- providing the appropriate services to consumers based on independent ACAT assessments of needs and desired outcomes.
- driving current business practices at the correct level of management, with delegation being monitored carefully.
- adopting a professional approach to the calculation of their pricing model since 1 July 2019, based on sufficient financial knowledge and an understanding of impacts on future viability.
- able to successfully operate home care businesses without the current level of “unspent funds” being available as working capital to the business.
- investigating how their business and financial plans will be impacted if future funding is provided in arrears, only on services delivered, as opposed to in advance.
- charging consumers an appropriate level of co-contribution to allow the service to operate effectively in the absence of “unspent funds”, that being the reason some providers have not charged consumers the full co-contribution.
- implementing staff education programs to adequately train staff and ensure that decisions are made at the appropriate levels of management.
- using sufficiently sophisticated computer systems and programs that will let them know the extent of these issues and assist them to monitor corrective action.
The extent of negative impacts on providers will depend on what preparatory action and forward planning are undertaken now to restructure operational models. It is recommended that at risk providers seek support and good advice on how best to proceed.
The Department may agree to minor amendments such as funding for capital purchases, but any significant variation from what is proposed in the outline is unlikely, based on historical departmental policy changes.
In conclusion, what is being proposed is a fundamental and extremely significant change in the funding model. To call it “…improving home care payment arrangement” can only be described as an attempt at humour in an effort to allay any fear or suspicion by the industry that its ongoing funding arrangement is about to undergo a cataclysmic change.
* David Powis is an industry aged care consultant and Managing Director at e-Tools Software.