Adding it up in the CDC world

Providers should use the transition period to consumer directed care to review and recast their strategic and business plans.

Providers need to use the transition period to consumer directed care to review and recast their strategic and business plans, paying particular attention to their financial management strategy, writes Marisa Galiazzo.

Whether you operate 1,000 home care packages or 50, it is likely you have begun the task of transitioning to the consumer directed care (CDC) delivery model in order to be ready for its full implementation on 1 July 2015.

Experienced approved providers know what it costs them to operate packages, having actual past financial statements to refer to. New providers to the market are in a position to take a new slate perspective and build up a finance model maximising the amount of subsidy available to the client.

Many providers have invested heavily in training their staff in wellness, enablement and person- centred approaches. This is central to CDC and we have already seen the tremendous social, mental and physical health outcomes this can have for clients. However, a person-centred approach in itself does not a make a sustainable CDC model.

There are many considerations providers need to start working through now in order to transition their financial and operational systems to the new CDC world. Chief among them is: How are you going to ensure your clients receive the best value for their subsidy over the length of time they are on the program? Any transition to the CDC model involves an honest assessment of where you are at today and where it is you aim to be in the future.

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The starting point for developing any budget is to ascertain your income, which for current providers will essentially be the known full year effect of package subsidies you receive for the financial year.

From 1 July 2014 new income testing arrangements, including hardship provisions, will apply. (For more, see the Home Care Packages Program Guidelines – August 2013). Clients will be means tested to assess how much they are deemed able to contribute towards to the cost of a package of care. The department will then adjust down the amount of subsidy paid to providers accordingly. This may pose cash flow issues for those providers who don’t have the reserves to carry them through operations whilst waiting for client to pay their contributions.

Once income is established the next step is to determine your costs, charges or percentage charges you will apply to the three broad categories of expenditure outlined in the home care packages guidelines:

  • administration
  • core advisory
  • direct care in the home

As a consultant, I have talked to a number of different stakeholders in the sector about the various models emerging against the backdrop of a set of guidelines that are silent on costs and charges, except for a 10 per cent contingency amount to cover unexpected care requirements.

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Within this article are some examples of how some providers are considering setting up their CDC budgets (see boxes). Another option, in addition to the three examples detailed, may be a combination of both fixed and variable charges.

Once you have defined your CDC financial model and budget, so the task of realigning your operations and service delivery model begins. How will you shape your operations to realise efficiencies to fit your new budget? Will your staffing and case management model need to change?

What is your risk management strategy to mitigate the effects of unpredictable cash flow post 1 July 2014?

The clues are already out there and are being implemented by leading providers today. These providers have based their service delivery models on remote methodologies, such as telehealth,  telemedicine and telecare, fully integrated client procurement financial database solutions, client self-service portals, centralisation of systems and a more mobile and technology-equipped workforce.

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Make use of this transition time to review and recast your strategic plan and associated business plans including your financial management strategy, technology and marketing needs, staff education and training needs and your client engagement and education strategy.

CDC is all about client, as opposed to provider, directed care. Clients currently rely on your business sustainability but in the future, your sustainability may well rely on their custom.

Marisa Galiazzo is a former executive officer with the Commonwealth Department of Health and former general manager with Care Connect. She is principal of Green Sea Shell Consulting, a consultancy firm specialising in consumer directed care in the aged and disability sectors.

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