Home' Community Care Review : CCR Jan-Feb 2015 Contents or an understanding of what needs to happen in the background to
provide the service. Due to the high level of skills and experience
required, case management is an inherently expensive service
and costs have traditionally been amortised over the entire client
group. Some clients need more, some clients need less. The swings
and roundabouts approach to budgeting for care coordination and
administrative costs won't work anymore.
Budget scrutiny will also increase when clients personally
contribute more of their own money via higher fees. This will also
drive more focus on the value of what's actually being delivered.
Some not-for-profit community care agencies have historically
struggled with the issues of how to negotiate and collect client fees.
Talking about the financial aspects of care delivery with clients can
be uncomfortable for some care coordination and liaison staff and
they are often more comfortable discussing end-of-life issues with a
client rather than discussing fees, charges and billing issues.
Providers need to be ready and prepared to answer difficult
questions about the financial aspects of the service.
What's the real cost?
The direct costs of care delivery tend to be well understood by
providers. Indirect costs are another matter. For some not-for-profit
providers, the administrative overhead costs are not easily allocated
to any particular program when they provide a diverse suite of
services or programs. An understanding of the actual total cost
of service delivery that takes into account an appropriate share of
finance, executive management, infrastructure, IT and HR is critical.
In the future, services have to cover all costs to remain viable.
When pricing HCP services some providers only factor in the direct
administration costs of the community care department and
ignore the bigger picture of the total cost of service provision. In
our experience, we have seen providers whose advertised price per
service is significantly lower than the actual cost. This is obviously
not sustainable. Established providers that operate a broad range
of services are at a price disadvantage compared to new entrants to
the HCP market because they also have large HR, finance, and other
corporate services costs to cover.
In the past, some packaged care services have only been
profitable because not all of the funds were expended, not because
they were well managed and had competitive overhead and service
delivery costs. Most unspent funds were retained to cover costs,
cross-subsidise other services or provide a profit margin.
Ensuring that a higher proportion of funds are spent on direct
services rather than overheads or retained profits is a clear objective
of the reforms. The general perception that HCPs are highly
profitable compared to other programs is likely to be challenged.
Who are you exactly?
In many cases the bulk of client services are delivered by third
party providers while responsibility for the quality, safety and
client outcomes reside with the HCP provider. That creates another
dilemma. "Why should we take on all the financial and operational
risks and responsibilities of providing packages when the third party
subcontractors that provide the easier aspects of care delivery take
most of the available margin?"
The level of reliance on third party subcontractors is often
determined by whether the HCP provider has staff in the client's
local area. If using subcontractors makes the service less viable,
providers will certainly rethink their geographic boundaries and use
their own staff where possible.
The client's main day-to-day relationship will often be with
the individual staff delivering the service. The "brand" of the HCP
provider can be meaningless if coordination and case management
contact is infrequent and the client's loyalty is much more likely
to sit with the subcontracted direct care provider than the HCP
provider. In this context, it is much simpler and more profitable
to be a fee-for-service subcontractor than a HCP service provider.
The proliferation of subcontracting providers and franchises is no
surprise. How these factors will play out over the next few years in
the aged community care provider market remains to be seen.
To paraphrase the TV series Game of Thrones: change is coming,
better get ready. n
Michael Roberts is senior health advisor, Victoria,
at Grant Thornton.
24 | JANUARY 2015
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