Home' Australian Ageing Agenda : AAA Sept-Oct 2017 Contents Cost pressures on residential aged care
providers are increasing, threatening
profit margins for some, viability
According to StewartBrown benchmarking
data, the gap between the basic daily fee and
providers’ total hotel services, utilities and
administration costs was $31.67 this year, up
from $16.10 in 2007.
If this gap continues to increase and income
via the Aged Care Funding Instrument (ACFI)
continues to fall in real terms, it can only
erode profitability, the aged care financial
At the same time there are new pressures to attract and
maintain customers, who are now in a stronger position than
ever before to demand the products and ser vices they choose
at a price they are willing to pay.
Rather than adding to the problem, meeting consumer
demands, needs and wants by way of extra services could be
part of the solution.
Patrick Reid, director of aged care, community and
disability with StewartBrown, says the revenue drop-off due
to the ACFI changes means residential care providers will
require more focus on increasing income streams.
There is opportunity for providers to improve their
revenue while meeting consumer demand particularly
through offering additional optional services, he says.
“We recommend that providers actively review and
consider appropriate changes to how services are valued,
priced or charged that have traditionally been provided in
the past as part of the base offer or bundle without charge,”
Reid tells AAA .
“Providers must also seek new opportunities to create
revenue streams for supplementary, novel or bespoke services
that meet the needs and wants of current or future residents
and their families,” he says.
An increasingly popular strategy providers are using to fill
the funding gap is through the provision of supplementar y
services such as premium lifestyle and wellbeing
enhancements made available to residents for an extra cost,
These services are provided in addition to the standard
suite of activities and services by agreement with individual
residents for a fee.
Additional ser vices could include beauty treatments,
massages, interstate trips, dental ser vices, art sessions or
personalised fitness programs, says Reid.
“The key to success of these programs is satisfying the
resident desires and wants – in concert with their ongoing
care and accommodation that is required as part of the Aged
Care Act,” he says.
Some supplementary services add a touch of luxury to a
resident’s life while others focus more on clinical, physical,
emotional and social benefits, he says.
Supplementar y ser vice examples include:
• food and catering options
• clinical and care options
• built and landscape environment inclusions
• lifestyle and activity ser vices
• family and visitor options
On which are the best to choose for their revenue
potential, Reid says the prevalence of paid supplementar y
services is still limited in residential care so there are no
definitive high-earners they can point to yet.
“Many approved providers offer ad-hoc paid ser vices in
the form of transport or other low yield activities, however,
Australian Ageing Agenda looks at how supplementary
services could be a solution to eroding profit margins.
the uptake of programmed paid supplementary
ser vices has been relatively slow in Australia due
to a number of challenges,” he says.
Some of those challenges are related to the
grey areas in the legislation.
“There are challenges in implementing these
ser vices and much of the consternation around
charging supplementar y ser vices relates to the
ambiguity that exists within the Aged Care Act
and its subordinate instruments such as the
Schedule of Specified Care and Ser vices,” he says.
However, additional optional services in
line with the legislation are a good option for
providers to pursue, he says.
“Just as the government looks to increase user pay to
underpin aged care expenditure, providers must be looking
to diversify their revenue away from reliance on government
subsidy as it is given that this component will continue to
shrink in coming years,” Reid says.
Therefore, timely and well-structured supplementary
ser vices demanded by residents who are able to pay for them
should be considered by providers, he says.
“Rather than simply focusing on the revenue part of
the supplementary services, many providers are looking to
add further value and satisfaction to the resident or family
experience with their ser vice, delivering an intangible worth
relative to the residents’ expectations,” says Reid.
The aim behind this is to build the organisation’s brand,
value and reputation in the increasingly competitive aged
care market, Reid says.
All of which can impact revenue now and in the future. n
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