Aged care in Australia: now respected – but now broke

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The day has arrived where the aged care sector is now respected for the work it does.

Indeed, the aged care sector is now an invaluable ‘part of the solution’.

At this time of war on the COVID-19 health and economic fronts, our society needed a safe haven where quality care and support are given to our most elderly and frail, and the aged care sector has stepped up.

COVID-19 has forced the politicians and State and Federal Governments to finally focus on what the sector does, what it really does – and it is seen as ‘good’.

It is timely then to get the politicians and Governments to also focus on the fact that COVID-19 is sucking whatever cash or accounting margin there was out of the system.

Nearly every aged care home, and home care operator, is now either operating at a daily loss, or will be within months.

This is because new customers are either not signing up to aged care or wanting to change, or need to change, the financial deal.

Families are keeping parents out of aged care for longer under COVID-19. They themselves are losing job and investment income and the ability to pay daily fees. The housing market is down ‘by 30%’, forcing RAD price negotiation down or to be abandoned, resulting in lower value DAPs.

Any razor edge surplus margin is evaporating. Despite one-off Government cash handouts, COVID-19 has finally broken the aged care system.

Urgent structural change to create a sustainable business model is required.

How much time is there to achieve this? Our assessment from the sideline is six months.

Short term financial support can likely be leveraged from the Government while we are at war with the virus but as the Government foot is taken off the accelerator and on to the brake, it will get harder to keep politicians’ focus and the delayed Royal Commission report will take us into early next year (or 12 months from now).

 

Meanwhile, according to Ansell Strategic, aged care insolvencies will commence mid-May as boards look to their financial responsibilities.

Now is the time with Government

State and Federal Governments are today focused on what the sector does, the value it contributes and the damage that will prevail if it fails. Witness Italy. They will not allow the sector to fail today.

Outside of aged care the Governments have been forced to say we all have to be prepared to walk away from the old and embrace new solutions, and accept that long term fixes are preferable to short term band aids. They are looking for ‘Team Australia’ to step up. We assume this includes ‘Aged Care Team Australia’.

Who is that? Who is that leadership? Who will identify simply and succinctly the future course for aged care?

We need the peak bodies to do this. They need to show vision, leadership, strength and cohesion now.

Winston Churchill famously asked his admirals: “Pray state, this day, on one side of a sheet of paper, how the Royal navy is being adapted to meet the conditions of modern warfare.”

The aged care sector has to do the same. It has to be a ‘new deal’.

And it has to be a ‘win/win/win/win’ vision, that works for the aged care customer and family, the Government, the operators (and equity holders) and staff.

The ingredients are easy. Assured quality care that is financially sustainable.

Operators know how to deliver aged care. The system is mature. The standards desired are however just not sustainable financially.

Every experienced executive we talk to can roll off the equivalent of a one page ‘new deal’ and they are all remarkably similar.

Now is the time for genuine leadership by the (seven) peak bodies. They must genuinely come together as one and on one page develop a ‘new deal’ that is actionable and financially sustainable for those four stakeholders – the aged care customer and family, the government, the operators (and equity holders) and staff.

If six months is the time frame, with insolvencies gathering momentum in 4 weeks’ time, we need that one pager also in the next four weeks, leaving five months to explain, consult, win support and adjust business plans.

Therefore, make a diary note to be asking your peak body for its ‘one pager’ say on 15 May.

Respected, but broke must not be our future.

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