Community aged care providers should not underestimate the degree of change required to successfully respond to the government’s reforms to the sector, the head of a major disability service provider and early adopter of the NDIS has warned.
Glenn Rappensberg, CEO of Novita Children’s Services, said organisations needed to consider if their governance, strategies and business models were all equipped to enable them to respond to the changes and grow. They also needed to critically evaluate if mergers, acquisitions or alliances were an option for commercial success.
Speaking at the ACSA/IAHSA Joint International Conference on Wednesday, Mr Rappensberg said that his organisation was still a charity and driven by altruistic motives, but this had to be balanced against the “commercial reality” it now found itself in.
Novita Childen’s Services’s participation in the NDIS trial prompted the organisation to undertake a massive overhaul of its operations and strategy, which was informed by an external review it commissioned. “That process helped the beginning of our change agenda. It helped to shape new strategies that would enable us to respond to the new commercial paradigm,” he said.
Through the development of a new business model and growth strategy, and a series of acquisitions, his organisation had grown and now provides services to 3,750 children and young people with disabilities, with an annual turnover of $35 million, Mr Rappensberg told the Perth audience.
Drawing parallels between the disability and community care sectors, he said that the Productivity Commission had found the aged care system was difficult to navigate, had limited choice for consumers and variable quality, while its report into the disability sector found it was underfunded, fragmented and inefficient, with little consumer choice and no certainty of access to supports.
The fact the funding for the NDIS was increasing from $8 billion to more than $22 billion over the next three years “speaks volumes about how underfunded the sector was,” Mr Rappensberg said.
In developing organisational strategies to respond to the increasing competitive landscape, Mr Rappensberg said that providers needed to objectively consider their appetite for risk, whether they could afford to invest via loss leaders to capture market share, whether they were a takeover target, and what competitor organisations could do to negatively impact them.
Discussing sector trends more broadly, Mr Rappensberg said it was now clear that consolidation of service providers was likely to continue, the system would be market driven but with some regulation, that service innovation was likely, and greater diversification of revenue streams may be required.
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