Royal Commission wants system focused on wellness and reablement – but is this model achievable for smaller operators and For Profits? Life Care and Southern Cross Care (SA, NT and VIC) say no – changes to funding model and culture required

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The importance of allied health services to regaining and maintaining physical function was a key point in last week’s Royal Commission hearing with Adelaide-based Not For Profits Churches of Christ Life Care and Southern Cross Care (SA, NT and VIC) being highlighted for their restorative care programs. We spoke to both providers about how they fund their models under the current ACFI arrangements – and it is not so simple.

Putting homes into the red to benefit residents

Jo Boylan, SCC’s Executive for Services, explained they have spent six years systematically integrating a health and wellbeing model across their 17 aged care homes, including 21 gyms, the tripling of their allied health services, and early identification and intervention introduced as a fundamental practice.

As Jo told the Commissioners last week, these practices have seen positive results including a 67% reduction in resident transfers to hospital and 93% experiencing good quality of life on World Health Organisation indicators and more than 90% being able to weight bear.

But they have come at a “substantial financial cost”, Jo says – to the point that SCC has put the benefits to residents ahead of profits in their aged care homes.

“We remain constantly challenged to do this within the confines of our existing ACFI funding and we have knowingly compromised the profitability of our Residential Care services,” she said. “We have managed to maintain the viability of these services, however it has become increasingly marginal.”

Cash reserves used to fund reablement model

Allen Candy (pictured below), Life Care’s CEO, told us a similar story, saying they could not fund their reablement program with ACFI funding alone.

Life Care has spent the last two years partnering with two Spanish psychologists to adapt the Spanish Hoffman method into their homes, with amazing results that include a German woman with dementia who had lost the ability to speak English regaining her second language, and other residents with dementia learning Spanish.

However, 80% of the program has been funded through their cash reserves with only the allied health services partly funded under ACFI.

“We operate on a pretty tight margin at all of our homes but we are profitable and do well on the StewartBrown benchmarking,” he said.

Not For Profit status increases surplus 30%

The CEO also credits their status as a Not For Profit which means that they don’t pay tax.

“We do look at the 30% of our surplus that stays with us and what are we doing with that,” he said.

“It is part of our social license to justify the fact that we are a Not For Profit.”

Size matters – larger operators less “agile”

Allen adds that Life Care’s size and scale – which includes five aged care homes and 180 home care packages – also helps them to fund this approach.

“We consider ourselves to be a small operator by national standards, but if we were much smaller, we couldn’t do it,” he stated. “But we’re not too big that we’re not agile enough to take this approach.”

Smaller operators don’t have the staff and scale

He says some of the larger operators have too much ‘bureaucracy’ to allow them to innovate with these kinds of models.

“If we had two sites rather than five and without villages, we would be less financially viable and we wouldn’t be able to afford staff to do it,” he said.

“The listed operators have to worry about their return to shareholders… there is a sweet spot to do some of these models.”

For Profits must deliver profits to shareholders

This is a valid point. For Profits face the decision – do they use their surplus funds to support reablement and wellness programs or return it to shareholders as a profit?

Larger For Profits are usually in locations where people are more affluent and can afford to pay extra for services while Not For Profits deliver on their mission in lower-economic and regional areas.

On the other hand, there is the argument around whether older people will want to access these services through private operators? There are some who will say they don’t.

There is also the cultural change required to implement a reablement focus from the top-down – will all providers want to commit to such a model?

Improved funding and commitment from providers key to reablement focus

Both Jo and Allen stressed the need for a better funding model and a commitment from the leadership to a reablement approach as being key to other providers adopting these models.

Allen says with 60% of providers losing money according to StewartBrown, it’s hard to talk about the wider sector providing extra services.

“If we can get financing right and keep people viable – and make some tweaks to the funding model and organsiational commitment – others can do it,” he said.

“Hopefully the Royal Commission will make some recommendations that would make it easier.”

AN-ACC model not ‘fit for purpose’ for rewarding wellbeing

Jo adds that the proposed AN-ACC model to replace ACFI will not encourage a model that rewards resident wellbeing.

“Going forward, the aged care sector needs a whole of system redesign and a new funding model that enables all providers to implement a healthy ageing and wellbeing approach,” she said.

The Royal Commissioners, in particular Commissioner Lynelle Briggs, have indicated they favour a wellbeing and reablement model.

It is clear however that this will require a fundamental shift for both the funding and culture – will the Government and provider leadership come to the party?