Recently, key industry experts1 got together at a Property Council of Australia breakfast seminar in Brisbane to discuss the changing landscape of retirement and aged care living in Australia.
Key takeaways from the Property Council's breakfast and some mind maps to assist you to prepare for changing market conditions can be viewed here. This article discusses these concepts in more detail to bring you up to speed on:
what industry experts are calling the “blurring of the lines” in the provision of aged care; and
what impact those experts think the Commonwealth Home Support Programme(CHSP) will have on the aged care industry when it commences in July.
WHAT LINES ARE BEING “BLURRED”?
In the past, the difference between retirement villages and Aged Care Providers has been clear:
Retirement Village Operators (RVOs) target retirees who are able to live independently, but wish to live in a community with other retirees; and Aged Care Providers (ACPs) supply housing and care services for those who are no longer able to live on their own.
However, research shows seniors are staying in their houses longer and entering Retirement Villages at a later age and, in some instances, seeking to have care delivered at either or both locations.
Indeed, the average entry age of residents in 2014 was 74. At a Retire Australia, Australia’s largest privately owned RVO, this number is 79.
The result is a “blurring of the line” between being an RVO and an ACP when residents in a Retirement village want care services.
These factors have caused significant shifts in the standard of care expected and demanded by residents of Retirement Villages. RVOs are adapting their models to meet these demands by offering integrated accommodation and aged care packages on their own, or through third party ACPs.
Either way, the consensus is that the current legislative framework, whereby funding is directed at ACPs as opposed to those receiving care, favours larger RVOs and ACPs, and the established relationships between them. It was well accepted by the industry experts that it is difficult for new smaller players to enter the RVO/ACP game.
However, the game is set to change.
CHANGING THE INDUSTRY
As part of the general revamp of the aged care system in Australia, on 1 July 2014 the Federal Government implemented measures to give aged care consumers more choice, control, and easier access to aged care services. These measures included the launch of the “My Aged Care” platform.
The next step in the revamp is the implementation of the CHSP, which is set to commence on 1 July 2015. From this date, all government funded care packages must be provided on a ‘consumer directed care’ basis. On 1 February 2017, all transitional funding arrangements to ACPs are set to cease, with funding to be provided directly to consumers of aged care services.
To put it in the words of the industry experts, “control has passed to the consumer."
The Federal Government continues to seek to put control into the consumer’s hand (or the consumer’s wallet) and the consensus in the industry is that the Federal Government’s plan is working. This means is that we will continue to see more and more RVOs providing or facilitating the provision of aged care services as part of the services they provide, and an increase in the number of ACPs providing services to RVOs or RVOs seeking to be approved to provide the services themselves.
WHAT DOES THIS MEAN FOR YOU AS AN RVO?
This shift in control to the consumer means that RVOs (and ACPs) will see a rise in the number of discerning consumers after quality levels of service which are tailored to their needs. Consumers have greater knowledge and when engaging with RVOs and ACPs than ever before.
NEW MARKET RISKS AND HOW TO DEAL WITH THEM
The consensus between the industry experts was that defining and maintaining your brand is becoming harder. To this end, it was reiterated that RVOs need to put serious thought and effort into
These are fundamental considerations crucial to the success of any retirement village.
NEW FINANCIAL RISKS AND HOW TO DEAL WITH THEM
The impact of the CHSP on funding will differ from provider to provider. What can be said for all though is that direct government funding to RVOs/ACPs is set to decrease. Obviously, providers will still be the end recipients of government funding, however consumers will now determine which providers end up in the black.
The need for more robust funding arrangements was highlighted, with attendees noting that deferred management fees arrangements tend to cap out early in terms of covering the costs of providing aged care. Reverse mortgages and sales of homes were suggested as a means of tapping into illiquid assets but ultimately, these resources may also not be enough.
Unfortunately, there is no hard and fast rule to securing the success of your Retirement Village or aged care business. If you have any questions or need any assistance with these matters, then please call us.