Aug 20, 2020

Will COVID-19 be the impetus for aged-care reform?


The crisis enveloping aged care at the moment could provide the motivation for reform in the sector that has long been plagued by inaction and intractable debates over key issues.

“Aged care is really at a juncture at the moment,” StewartBrown partner, Grant Corderoy, told HelloCare.

Undoubtedly there are significant problems in the sector and the solutions are not easy, but the horrors of recent months could unite opponents to drive combined efforts to ensure nothing like this can ever happen again.

“Stakeholders have got to really work together to resolve care issues, quality issues, as well as financial issues and governance and compliance,” Mr Corderoy said.

“COVID-19, and all the real negativity that surrounds it, might actually be the impetus for the stakeholders to say, let’s put everything on the table, let’s work together because we’ve all got a vested interest in having a strong aged care system.”

Some operators will not survive

Some aged care operators will not survive in the post-COVID world. 

With more than 60 per cent of providers already operating at a loss, the added cost burden imposed by COVID-19 could see providers experience serious liquidity pressures and be “pushed them over the limit”, Mr Corderoy said. 

“I think there will be a significant liquidity issue for a number of providers… enough to make them concerned about their ongoing financial viability,” he said.

Allambie Heights Village Chief Executive Officer, Ciarán Foley, told HelloCare there’s likely to be an increase in insolvencies in the months ahead.

For-profit providers most at risk

Smaller, for-profit aged care facilities are the most likely to be the most affected. 

“They’re often family owned, they’re the ones that won’t have access to the same lines of credit or the same injections of capital, so it’ll put them under considerable strain,” said Mr Corderoy.

For-profits tend to have lower cash reserves, and “they will have to rely on their shareholders and owners to assist if they do get to a vulnerable situation.”

Not-for-profit providers are generally more conservative and have greater cash reserves. Many are backed by faith-based organisations.

Consolidation in the sector is unlikely

Consolidation isn’t going to be the “panacea” for the future of residential aged care, Mr Corderoy said.

“We haven’t seen [much consolidation] for the last couple of years, and I think it’s because the investment return is not appropriate,” Mr Corderoy said. 

There are also minimal opportunities for economies of scale in aged care, meaning the key advantage for consolidation isn’t there. Some back office functions can be consolidated, but most of the costs in aged care are in the homes.

Some of the larger providers are also experiencing their own problems and aren’t in a position to expand.

Regional aged care homes must stay

Aged care homes in regional centres are among the most vulnerable, with 74 per cent operating at a loss. 

“There’s a smaller cohort of residents to come in, a smaller cohort of staffing, and therefore that puts them in a much more vulnerable situation,” Mr Corderoy explained.

There are a lot of incentives to keep regional aged care providers open. “They’re often one of the largest employees in the town, they’re very important for residents moving in there, they don’t want to have to move to another town or city because they’ve been brought up in that town.

“And often the community’s been very instrumental in the building of the facility in the first place. In many ways they are a community asset.”

“I’d like to think the government would be of mind to do whatever they can to maintain them, unless it becomes totally unviable.”

Sector needs a shake up: provider

Mr Foley said he’d like to see a “shake up” in how the aged care industry operates post-COVID.

He would like to see providers have greater say in how they operate, rather than the government controlling every aspect of their business.

As present, the government determines how many aged care beds there are, where beds are located, how homes are regulated, and how much providers can charge.

As a result, operators tend to treat the government as the “customer”, but Mr Foley said he would prefer to see operators focusing more on the real client, the resident.

For example, operators could put their own price on their services, and “if a customer doesn’t like it, they can go next door.”

Mr Foley would also like to see regulation given a shake up, with regulators rating providers, rather than giving them a pass or fail. That way, the regulator could give the provider an opportunity to improve. 

“I think people would trust that system more,” he said, noting it was not realistic for providers to alway be perfect, and they would benefit from being given advice and the opportunity to improve, rather than the current system which delivers a black and white pass or fail.

As doctors, accountants, and nurses are licenced to operate, Mr Foley said a similar system could be brought in for aged care operators. Those who failed the conditions of their licence could be banned, that way there is a strong incentive for providers to behave well.

The majority of aged care providers do a “good job”, but their reputation is tainted by a small number of operators who bring the industry into disrepute, he said.


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