A strategy for profitability in aged care

May 7, 2024 | AN-ACC

By Tyler Fisher, Senior Manager

Financial sustainability for aged care providers is an enabler of the quality of care they offer. With the bulk of funding sourced from AN-ACC, providers face the necessary challenge of finding other revenue streams to ensure long-term viability.

Traditional funding avenues are no longer sufficient

Relying heavily on AN-ACC funding leaves aged care providers vulnerable to evolving government policies and funding fluctuations. As resident preferences evolve and regulatory demands intensify, the status quo of funding no longer cuts it.

As one of our clients told us “We need help to find new revenue. We are looking at additional services, but I don’t want to put us in a worse financial position than we are already in.”

Today’s residents and their families are more discerning than ever, seeking personalised care experiences and amenities that align with their lifestyle choices. This shift towards consumer-centric care demands a re-evaluation of traditional service offerings and a willingness to innovate. By understanding and adapting to these changing dynamics, providers can not only attract new residents but also cultivate lasting relationships built on trust and satisfaction.

A strategic approach to profitability from non-care revenue

To overcome these challenges, aged care providers can take a proactive stance towards profitability from non-care services. This means not just tweaking existing revenue streams but actively seeking out new opportunities. By effectively managing capital, adjusting accommodation pricing, and offering in-demand services, providers can carve out a path towards sustainable financial health. It’s about being strategic, agile, and willing to explore avenues beyond the traditional funding model.

1. Capital management and accommodation pricing

Refundable Accommodation Deposits (RADs) represent a significant opportunity for aged care providers to optimise capital management. By leveraging RAD investments strategically, providers can access a pool of capital that can be utilised to fund facility improvements, expand service offerings, or even invest in technologies. Moreover, the flexibility offered by RADs empowers providers to tailor accommodation pricing to market demand, maximising revenue potential while ensuring affordability for residents. Effective capital management goes beyond simply securing deposits; it requires careful planning, monitoring, and strategic allocation of funds to support long-term growth and resilience.

2. Additional services

Many aged care providers recognise the value of offering additional services that go beyond traditional care models to meet the expectations of residents. These supplementary services, ranging from wellness programs and recreational activities to specialised therapies and hotel services, play an important role in enhancing the overall quality of life for residents. Offering a comprehensive suite of additional services not only enriches the resident experience but also serves as a competitive differentiator, attracting discerning consumers in an increasingly crowded market.

There is much speculation about rules changing in this area when the response to the recent task force recommendations and new Act become known. When offering additional services currently however, providers must navigate a complex regulatory landscape to ensure compliance and mitigate risks. Several key regulatory aspects need to be considered:

  • Accreditation and standards: Additional services need to align with the accreditation standards set by regulatory bodies such as the Aged Care Quality and Safety Commission (ACQSC) . Providers need to ensure that these services meet quality and safety requirements outlined in the Aged Care Quality Standards.
  • Funding and reimbursement: Providers need to understand the funding mechanisms associated with additional services. Some services may be eligible for government subsidies or funding under specific programs, while others may require private payment from residents.
  • Legislative compliance: Providers must comply with relevant legislation governing aged care services, including the Aged Care Act 1997 and associated regulations. This includes adhering to requirements related to privacy, discrimination, consumer rights, and duty of care.
  • Clinical governance: Providers will need to establish robust clinical governance frameworks to oversee the delivery of additional services. This includes ensuring appropriate staffing levels, staff training, and supervision to maintain the quality and safety of care.
  • Risk management: Risk assessments for each additional service offered is required to identify and mitigate potential risks. This may include risks related to health and safety, infection control, financial viability, and reputational damage.
  • Documentation and reporting: Maintaining accurate records and documentation related to the provision of additional services, including care plans, consent forms, incident reports, and complaints registers is important. Regular reporting to regulatory authorities may be required to demonstrate compliance with standards and regulations.
  • Consumer choice and consent: Providers must respect residents’ rights to choice and autonomy when offering additional services. Residents should be informed about the availability of services, their costs, and any alternatives. Informed consent must be obtained before providing any additional services, and residents should have the right to refuse or discontinue services at any time.

Looking for alternative sources of revenue is often seen as too daunting a task, and providers have expressed to us their concerns regarding compliance impacts. Many feel overwhelmed by the prospect of navigating the regulatory landscape or implementing new systems and processes to offer additional services and finding the right time to introduce them.

Despite these challenges however, with the right guidance, support, and a proactive approach, providers can gain autonomy and flexibility in funding decisions, allowing them to tailor services to meet resident’s preferences more effectively. Moreover, by tapping into additional revenue streams, providers can enhance the overall quality of care, attracting residents and families alike. It’s a win-win that ensures both financial viability and exceptional care delivery. If you’d like to have a conversation about your non-care revenue strategy, please get in touch.