Funding reforms hit the bottom line
With current average profit insufficient to ensure sustainability, Grant Corderoy urges home care providers to adjust pricing and review business models.
To ensure their sustainability, home care providers should lift their pricing, work with clients to ensure all funding is fully used, and review their business models, StewartBrown senior partner Grant Corderoy has told Australian Ageing Agenda.
A report published this month by aged care benchmarking and accountancy firm StewartBrown has found the current average profit of 3.5 per cent is insufficient to ensure sustainability of home care providers or to encourage further investment.
Support at Home Financial Reforms Impact Analysis is part of an ad hoc series of reports StewartBrown is producing in response to funding and other reforms underway. Among the changes in the incoming Support at Home program is a 10 per cent cap on care management fees plus the removal of the package management fee.
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“The pricing for all home care services needs to increase to include the lost fee revenue,” Mr Corderoy told AAA.
“As there are a range of services, being everyday living, independence and clinical, the margin increase will not be uniform with the low touch services [like cleaning and social supports] having a lower margin and accordingly the clinical services will require a higher margin increase.”
He said: “Providers will need to adjust their pricing to maximise their revenue and improve their financial return.
“With the move to three monthly care budgets and a maximum of $1,000 or 10 per cent of the funding being retained, providers and clients must engage further to ensure that the funding received is fully utilised, rather than the current situation where only 86 per cent is utilised and the majority of unspent funds returned to Treasury and never utilised by the client.”
StewartBrown’s report highlighted that recommendation 1 of the Aged Care Taskforce’s report stated that the Support at Home program should be underpinned by a clearly defined service list with inclusion and exclusion principles.
In the government’s newly released consultation draft on the rules related to the service list, there are “two areas that may cause providers, and consumers, some level of consternation” says StewartBrown. That is the inclusion of some personal care services such as showering in the independence domain rather than clinical domain and the impact of potential clinical requirements on different models of care management.
According to the report, this means that all providers under the SaH program will need to be registered in the Level 4 category for the first two years, which requires compliance with some relevant standards.
In the draft rules there were caps placed on cleaning and gardening, at 52 and 18 hours a year respectively, but the government more recently announced these caps will be removed from the final version of the Rules.
To boost sustainability, Mr Corderoy also recommends providers look at their operating models and make up of clients.
“Further advice is for providers to review their business model, as the lower funding services will continue to have small margins and will require a leaner cost structure. A mix of clients with a bias to the more clinical related services will be beneficial to improve the financial result,” he told AAA.
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The reason that the clients are not using their services is because our hardly- done- by- providers say NO to every request, therefore we are NOT getting the services we should be, so they are not getting the fees. So Mr Corduroy perhaps you could tell the (robbers) providers to let us utilise our funds so we can purchase the services and equipment we need. Just do their jobs that they are … paid for