“Australia needs the Seasons and Freedom private aged care model”

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We received a lengthy email from Nick Loudon, CEO of Seasons Private Aged Care, after our article on the FY16 results for Aveo. In summary, he is enthusiastic about the purchase of Freedom Aged Care by Aveo and the prospect of it being given prominence across Australia.

“Not to develop the Freedom Aged Care Model as such, is I believe a travesty”.

“The great potential inherent in the Freedom Aged Care Model – the same potential (with key differences) that is inherent in the Seasons Aged Care Model – is the potential to truly revolutionise (disrupt if you like) Residential Aged Care in Australia”.

“I only hope the Aveo board is truly committed to the important role they now play in the Australian aged care industry; it’s not only the retirement living and property sectors that will be following them closely”, Loudon added.

To put things in perspective, understand that Seasons and Freedom both operate retirement villages under the RV Act with care support built into the village offering, all the way up to palliative care. The resident pays the standard village entry fee, weekly service fees and exit DMF. They also pay for their care. Freedom and Seasons differ in how care is paid for but ultimately it is private user pays aged care (affordable for the great majority of older Australians. It may be partly subsidised by government, but is not reliant upon available government funds – home care packages, DVA etc). The model does not have the restrictions of ACFI regimes.

Loudon tells us: “I know we sit under the RV Act from an accommodation perspective, and our care model is very much in the ‘home care’ vein – but that’s the whole point – it’s an alternative to RAC and increasingly accepted as such. Private aged care is how we prefer to and will continue to market Seasons”.

And both Seasons and Freedom are very successful in attracting customers.

As Nick tells us: “Such models in effect represent Consumer Directed Care (CDC) in the Residential setting – years ahead of government policy, funding models and the industry as a whole”.

Freedom and Seasons don’t cater to the high wealth market. Both are primarily based in SE QLD, ranging through the suburbs of Brisbane. The average age is around 84 and time with the village is about 4 years with a 40% DMF. Not For Profit operator Yukana has also been delivering a similar model for up to 20 years out of Toowoomba.

When more than 40% of aged care facilities are barely breaking even or making a loss according to leading accountants StewartBrown quarterly benchmarking surveys, Seasons is doing very well. Nick Loudon says: “The Seasons Private Aged Care Model annually clears an 8-10% return on the DMF side (substantially ahead of RVs) and 20% plus from the care business (at $8million in revenue and growing rapidly)”.

His collegiate challenge to the village and care sector:

“To be successful, to the benefit of customers, operators and government – this model needs scale and multiple operators, all doing it well and doing well”.

Background: Nick is a highly experienced large hospital CEO who took over the leadership of Seasons approximately four years ago. Backed by QLD’s largest residential home developer, they now have seven large private aged care villages (communities as they prefer to call them), and are actively in both acquisition and development modes, with at least 900 additional units to come online in the next 4-5 years (3 greenfield and 1 brownfield site).

The Seasons Group’s care business, Envigor, is also enjoying significant growth, having added seven new community based (not housed inside Seasons) home-care business units to the group in the last 6 months alone – now servicing locations from Cairns in the Far North, down to Rockhampton and across the South East of Queensland. Loudon puts the rapid growth of Envigor down to their unique “pseudo-franchise” profit share model, which maximise funded care hours to the client and shares profits with the care/business unit managers.

The early driver of Seasons was Paul Browne who then went on to establish Freedom Aged Care which grew rapidly and through acquisition to 15 villages. Aveo purchased Freedom nine months ago for $210M and is now rolling out the model to 28 Aveo villages that have serviced apartments.