Juggling Act

 As a leader in the health and human services sector I’m often asked how we continue providing sound care while maintaining financial sustainability. There is a delicate balance to be managed each day, working with aged care residents while also being challenged by staff shortages, resourcing, limited budgets and the ongoing impacts of the COVID-19 pandemic.

Our customers and their families assume that aged care providers are adequately compensated for the services they provide. Client expectations around levels of care have continued to increase over the past few years, sadly there hasn’t been a corresponding increase in funding.

There is also greater accountability, transparency and participation in the design and delivery of services than ever before. I believe this is necessary to ensure commitment from service providers to improved quality of care, however it doesn’t mitigate the fiscal challenges we face.

The Royal Commission recommended the establishment of an independent body to cost/price a fair price for the provision of aged care services. There has never been a “cost of care” study into the provision of aged care services undertaken, despite providers/peaks and others calling for such a crucial study. This is a foundational piece that is needed by our sector.

This month, following the passing of the Aged Care and Other Legislation Amendment (Royal Commission Response) Bill 2022, the Aged Care Pricing Commissioner’s functions were transferred to the Independent Health and Aged Care Pricing Authority. It is encouraging to see they are now consulting across the sector, and it is paramount that we get pricing right, to support our sustainability.

The recent federal election generally, has seen the challenges in the aged care sector come to the fore. The new government, introduced two bills focused on general aged care reforms and care/ quality commitments in the opening day of parliament. For providers like us we welcome the sentiment of the bills, however we need politicians to understand the macro factors impacting us. For example, one of the bills is proposing 24 X 7 enrolled nurses at every residential aged care home. This target is challenging for providers to meet given there are workforce shortages generally, and if they are available, the nurses can choose to work in other health sectors for more money.

How do we get the balance right?

We use a framework to make decisions, and this determines how we allocate funding and resources. The framework, is set through the interplay of our board and our executive team, setting and reviewing priorities.

1. The Board and Committees of the Board

This group is responsible for setting and overseeing the strategic directions of the business along with ensuring financial sustainability, managing risk (including reputation) and meeting accreditation standards.

2. The Executive and leadership team is the “engine room”. They have a system in place to regularly scan the environment and provide advice to the Board. This includes updates about the regulatory environment, social and economic factors, and importantly the trajectory of issues, and how these may affect the strategy and operations of the organisation.

A current and relevant example for many aged care providers at the moment is seeing business drivers being impacted by the COVID-19 pandemic as well as the recommendations of the Royal Commission into Aged Care Quality & Safety.

In this case, these factors have led to:

• Reduced confidence in the sector by the public resulting in residential care occupancy reducing and an increase in the desire to receive a range of services to remain in the home/community. Therefore irrespective of quality of care, people don’t want to move into a residential care home.
  
  

• Inability to attract and retain an adequate suitably qualified workforce to both meet demand and provide the standard of care required. This impacts service delivery and associated revenues, and finally;
  
  

• ● Inadequate payment by Government to providers for the level of care provided (in relation to the actual cost to provide ‘good/sound’ care). This provides dilemmas for providers when striving for financial sustainability, whist also needing to meet accreditation standards and consumer expectations.

Boards need to look at immediate, medium and long term goals and likelihood of risk to care. Without quality care, you will not have long term financial sustainability. This tiered consideration of goals, and underlying need to commit to quality, will assist them make choices about what to put down now, pick up later, or continue with.

Reputational risk is crucial. For example, if you have unclear policy direction from government regarding the long term funding of a particular program and there is decreasing demand for the service, you may decide to continue providing the service or to gradually scale down the service until further notice. To continue an underfunded service, is a greater risk over time, than disappointment from customers if the service is cancelled.

In any event, an impact analysis, stakeholder management and communication strategy will need to be developed. It is always much easier to discontinue a service if it is not totally aligned with your strategy, has decreasing need, is making a financial loss, and if similar services are available elsewhere.

In short, Directors need to have their eyes on the organisation’s vision and mission, both long term and short term outcomes they wish to achieve and balance this with risk. A difficult deliberation for Directors and Executive teams indeed.