Home' Australian Ageing Agenda : AAA Spt-Oct 2013 Contents Sound financial management in aged care
By Cam Ansell, Ansell Strategic
1. Manage your growth strategically
When growing your aged care business,
build your portfolio and services around your
defined target market. Always make sure
your acquisitions are consistent with your
strategic objectives and don't let chance
opportunities dictate your organisation's
direction. There will be plenty of prospects in
the future that will align to your own strategy.
When building new facilities, design
them with your intended client base in mind
and never leave it solely to the architects.
Ensure input from your care team and
look for a balance between innovation,
homeliness and service efficiency.
2. Maximising subsidy revenue
The maximisation of subsidies must be
embedded in the organisation's internal
processes -- and not heavily dependent
upon the work of external consultants.
Unless the organisation invests in its own
ACFI champions and internal processes,
strong subsidy levels cannot be sustained
and the organisation will not withstand
3. Resident deposits, fees and charges
Structure your bonds (refundable
accommodation deposits) and periodic
payments (daily accommodation
payments) to meet your financial priorities
and the preferences of your clients. This
might mean packaging and incentivising
your RAD/DAP alternatives to best meet
your liquidity and return on capital targets.
In the future user-pay environment, it will be
critical to understand the difference between
services people say they want and what
they are actually prepared to pay for. We
can learn from international experience in
developing the additional service offerings
most desired by consumers.
4. Effective roster management
This can be one of the most daunting
experiences for anyone without a clinical
background, but care wages will represent
most of your direct costs, so you are going
to have to face it. Ensure your care team
is aware of the financial impact of the
decisions they make and that this a focus of
your ongoing reporting and accountability
frameworks (see rule 9).
5. Culture management
The attitude and satisfaction of your facility
staff can mean the difference between
success and failure in this industry.
Defining your signature behaviours and
monitoring staff culture against those targets
not only improves morale, it increases
profits. Most importantly, it reduces the
turnover of staff you want to keep and
shortens the careers of those you don't.
6. Measure and monitor your mission
For mission based organisations (and those
developing new areas of specialisation),
measure the impact of your mission on
your financial performance and monitor
it. Importantly, make sure that others
recognise your investment and the value of
your service outcomes. This can improve
your reputation and brand as well as attract
alternate revenue streams from those that
benefit from your good work.
7. Quality catering and client activities
Residents usually care about two things
above all else -- the amount of human contact
they receive and their meals. Skimping on
your catering service and activities may
save some costs initially, but you'll risk
losing much more on
managing complaints and a
8. Corporate office value
A healthy head office is
mobile, proactive and
responsive. It will reduce costs by leveraging
shared resources and will support the service
centres to improve clinical outcomes and
increase client satisfaction.
Conversely, an unhealthy corporate
team is office-bound, reactive and has little
connection with sites and their clients. They
make the services less viable by charging
administrative overheads that don't reflect
true value. Regular review and site feedback
can help you assess the real value delivered
by your head office.
9. Management reporting
Management reports are often either too
detailed or too summarised for effective
decision-making. However, there are a number
of fundamental key cost and revenue drivers
that most directly influence performance in
aged care. By providing adequate but efficient
reporting detail on these elements, decision-
making can be supported with the information
most relevant for each level of management.
10. Benchmark your performance
Benchmark your operational and financial
performance internally and against industry.
Be careful using generic benchmarks --
make sure you are comparing your results
to like services operating under similar
Be cautionary in claiming huge profits.
In our experience, those that outperform
the market are generally careful not to
boast about it. n
Dos and don'ts in the new environment
By James Underwood, James Underwood and Associates
• Do prepare a marketing plan for your
service. It is not going to be enough to
just be a good service and rely on word of
mouth. Increased accommodation fees,
increased co-payments and means-
tested fees from 1 July 2014 will impact
negatively on occupancy rates.
• Do prepare a clear business plan.
• Do look at consumer directed care (CDC).
This is the biggest change we have seen
in decades in our sector. It is all good
news for retirement villages but a serious
challenge to many existing home care
providers with higher overheads.
• Do have regard to the impact on part-
pensioners and self-funded retirees of
the very large co-payments and means-
tested care fees in home care from 1
July 2014. For many self-funded retirees,
we may find they elect to self-fund much
of their home care instead of accessing
expensive packages. This gives rise to
new service provider opportunities.
• Do consider whether you should stay
on as a residential care or home care
provider. A time of positive changes, like
right now, can be also a good time to
successfully exit the sector.
• Don't diversify unnecessarily. There will
always be a place for good residential
aged care providers who do just that.
Most of the 2754 residential care facilities
in Australia today will not also become
home care hubs, health clinics, or other
• Don't be coy about charging a large DAP
from 1 July 2014. It really does cost more
to provide better quality accommodation,
services, meals and
staffing. Residential care
fees will still be fully-
regulated and federal
funding will still be based
on acuity only. So, set a
higher DAP that reflects your overall worth
and be worth it.
• Don't think that you have to grow to 140
places to be an efficient -- and effective
-- sized service. A 60-place service can
make an excellent return by charging just
a little higher DAP. Extra services facilities
have been proving this for two decades.
• Don't delay considering how your
retirement village should be set up to assist
residents to access the enormous and
growing levels of home care packages.
Don't worry. The future is brighter than
ever in our sector. n
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