Top 5 viability tips for aged care providers
Providing financial transparency is among key elements required to remain financially viable in residential aged care, writes Mark Sheldon-Stemm.
Providing financial transparency is among key elements required to remain financially viable in residential aged care, writes Mark Sheldon-Stemm.
The recent release of data from StewartBrown on the financial health of residential aged care indicates many providers are operating at a loss. It predicts a grim future for providers.
The interim report from the aged care royal commission followed. It too indicates funding is an issue for the sector.
The many years of decline in real funding is now starting to bite. Faced with this prospect, there are five elements – quality, trust, pricing, transparency and value – residential aged care providers need to master to operate a viable service.
Providers can achieve this by:
- Setting budgets that reflect living within the means available and constantly updating data in the financial system so performance can be monitored against the budget.
- Introducing a system that splits the costs into the major components, including overheads and margins, to form the basis for charging for services.
- Discussing with residents and their families* on the funding received, the service charges and how funds are used, to establish funding transparency.
- Providing ongoing transparency of funding and charges to the residents and their families through regular statements, normally monthly.
- Negotiating with residents about additional charges when their choices for services are over and above the funds available to them. This requires full consultation with the resident and families and a demonstration of value for money.
The new Aged Care Quality Standards require choices to be met. In correspondence with the Aged Care Quality and Safety Commissioner Janet Anderson, she indicated where there is no funding transparency then residents’ choices should be met with no connection to the funding available.
However, where there is funding transparency, as long as the consumer understands the funding and the provider supplies up-to-date information, then choices can be made within the funding available.
A comment from the royal commission interim report reflects the need for funding transparency. “The aged care system also lacks transparency. The aged care sector behaves like an industry, but this masks the fact that 80 per cent of its funding comes directly from Government coffers,” the commissioners wrote.
This transparency applies to all areas of aged care including its finances. The government has already signalled its intention to place the funds in the hands of aged care residents and their families. When it does, providers will be fully accountable.
However, there is an upside for residential aged care providers. Once the resident is aware of the funding and the charges, it paves the way for them to understand how funds are used and if more services are requested they will need to pay for them.
The fact that residential aged care providers have never had to disclose funding or be transparent in the past is often seen as a major hurdle.
But where providers have done this, residents and their families are grateful. They understand the flow of funds and are often willing to contribute more for services. In some cases, they become an advocate for the provider.
Importantly, in this type of system, no one misses out on the services they need each day but if they want more they are available by paying for them.
Charging for additional service without full financial transparency is difficult. Often the resident and their families are unsure how their money is being used or the basis for any additional charges.
Having a system in place sets the ground rules for additional charges, allows the resident and families to determine value for money and the provider to recover additional costs.
Finally, the five elements of operating a viable service are underpinned by cultural change. This can be achieved by:
- developing a service environment where there is trust between all parties including the resident, families, staff and the provider
- operating a service that partners with and values residents, families and staff.
Nobody wants to be sold anything and providers do not want to be sales people. People want access to services and choices. But they need to understand there is a price to be paid.
If the service operates in an environment of trust, openness and partnership, then the issue of paying for additional services becomes secondary to the service itself.
Determining whether the taxpayer or residents should pay for high quality aged care services is an ongoing debate. But to remain viable a provider must be the best at what they do, build trust, understand their pricing, be transparent and provide value for money.
* The word families includes a person’s relatives or other representatives
Mark Sheldon-Stemm is principal at Research Analytics.
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What a lot of bloody nonsense.
The Government has failed in its duty of care to provide adequate funds for mandated minimum services to residents.
The government has broken its contract and has deliberately brought the residential care industry to unviable levels.
Associations like LASA and ACSA have also failed the residential care industry, many believe that the conflict of interest within associations has paralysed them into inaction. Whatever the reason they have continued to have useless dialogue and they continue to fail because they won’t fight for the people that pay their wages. In fact the only viable section of aged care is these associations.
Residential care operations need to be taking legal action to seek compensation for the chronic underfunded system that sees them in danger of closing.
There is undeniable evidence presented to the government over years and more recently the Royal Commission that demonstrates the callous cuts to funding and this needs to be rectified. But, with associations unwilling to even put this suggestion to its members, who will do it?
It has also been raised that investors should form a class action for their losses in their aged care portfolio. These losses are not from bad management but deliberate funding cuts to facilities that have seen their value plummet and as a direct and disgraceful consequence ruined many retirement plans.
If you are a law firm that has a social conscience and a big set of balls then get on this before it’s too late.
Thanks Anton for your comments and you bring an interesting perspective. I notice that you often comment on articles. I am sure those referred to in your comments will take some offence at what you say but not myself. The sites I have under the Consumer Directed Care for residential care have great outcomes and I regularly talk with residents and their families and they love being in control, able to choose what they want and when they want it. So, sorry, rather than being a “lot of bloody nonsense” it has been very liberating for these people. I am enjoying transforming residential aged care from an institutional model into one that is genuinely their home.
And yes there are many that are doing it tough and when I visit these it normally only takes a couple of hours to work out where the problem is.
So, all I can do is feed back to you those who have made a success of aged care and while funding has always been a point of discussion my final comment in the article outlines the issue. It is not about asking for more money but rather who should pay? As a society we are yet to have an open conversation about this. The sooner we do the quicker we will get to where we want to.
Where you finish is based on where you start. Can I suggest that you may be starting in the wrong place and therefore ending up at the wrong location.