The clock is ticking on home care reform

A new in-home aged care program is coming in 2024 and aged care providers need to act now, write Nikita Weickhardt and Grace Luo.

Older Australians have voted with their feet: many want to stay in their own homes as they age. They expect access to quality care with minimal wait times and transparent payment arrangements that are aligned to consistent assessment of their needs.

In 2022 the number of people with home care packages has, for the first time, overtaken the number of people in residential aged care. With the home care market growing rapidly and the Australian Government’s reformed and improved in-home aged care program starting in 2024, the clock is ticking for the sector to prepare.

A new in-home program is set to combine and replace Home Care Packages (HCPs) and the block funded Commonwealth Home Support Programme (CHSP). It will change key aspects of in-home aged care, including assessment, individualised support plans, clarity on service inclusions with a service list, consistent funding models and regulation of the market. The market and funding landscape are already changing.

As of March 2022, some 227,209 people had access to an HCP, up 24 per cent on a year earlier, with demand for home care services projected to continue to grow. This expanding pie allows existing providers to deliver a greater number of packages, while also providing incentives and opportunities for new providers to enter the market.

Meanwhile, increased consumer choice has intensified competition between service providers, prompting existing providers to strengthen consumer focus, and modernise and refresh their service delivery models.

The shift from HCPs and the CHSP is putting extra strain on many aged care providers. The change comes at a time when they are already grappling with myriad trends impacting the industry from workforce shortages to ongoing government reform, rising inflation, reduced margins and an evolving COVID-19 situation.

While the recent Fair Work Commission decision of an interim 15 per cent pay increase to direct care staff does provide some relief, the cumulative effect of these trends is that a new approach to service provision is essential.

The reformed in-home aged care program is likely to bring even more new entrants and service models into the market, intensifying competition to retain current clients and attract new ones. For many aged care providers, this means they need to redefine their value proposition and change their business model to meet these evolving needs and reform.

Home care reform presents challenge and opportunity

The new in-home care and support program represents a challenge and an opportunity for aged care providers. While its introduction has been delayed to 2024, the government has indicated it will be in line with the recommendations of the Royal Commission into Aged Care Quality and Safety.

Based on the tenets of the royal commission, we know it will involve:

• consistent assessment and enhanced service recommendations throughan integrated, four-level assessment tool
• development of an approved provider model with risk-proportionate regulation and market-entry requirements
• tailoring to each consumer’s specific needs and circumstances through an individualised support plan, rather than being placed into one of four broad HCP levels
• introduction of a service list for clarity on available services, including a new ‘Care Management’ service type, and for greater fee transparency
• introduction of a separate fund for short-term transitional supports to support independence, including for home modifications 
• consistent funding arrangements through a mixed funding model that includes activity-based funding (arrears at fixed subsidy rates), supplementary grants for a subset of providers, and billing against a funding pool
• a new regulatory model to enable consumers to self-manage their care and to promote greater competition between like-services and enable consumers to more easily swap services.

While details are not yet available on how the new in-home program will operate, providers need to move quickly to prepare. There is a narrow window to redefine the value proposition and adapt the business model to better reflect the needs and preferences of consumers, attract business from consumers and meet community expectations.

Six steps to take now to get ready for change

Drawing on our experience working with aged care providers, we have identified six steps for aged care providers to get ready for the reformed in-home aged care program:

1. Understand the changes to the funding and regulatory environment, including the royal commission and government program and funding reform, which will shape the sector for the next decade. Although the new government’s aged care reform direction is still being shaped, there remains a whole-of-government policy commitment to aged care sector reform and providers should anticipate high standards.
2. Leverage current knowledge of the aged care market, client expectations, preferences and behaviours and the performance of current services. Use this knowledge to identify operating model improvements that align with the organisation’s mission and values and new drivers of client experience and choice. Providers can learn a lot from each other as well as from their own experience.
3. Recognise the characteristics of successful providers. These include having an effective scheduling and client care management system, developing a compelling employee value proposition and career pathways, identifying the competitive advantages that guide strategy and related investments, and forming partnerships with communities, hospitals, and technology and training providers. Aged care providers should look at other sectors – disability services and education providers may also be valuable sources of inspiration.
4. Define your client value proposition to guide how you will compete. Aged care providers are not homogenous. Understanding current service provider strengths is critical: What is valued most by consumers? What do they want to be known for? What makes them distinctive? There are a range of factors to consider when developing your client value proposition, including service-type – family owned, franchise, for-profit or not-for-profit; remoteness – metropolitan, regional, rural or remote; specialisation –dementia-specific, culture-specific, etcetera; and level of care provided – domestic support, personal care, clinical care, allied health, dementia care or palliative care.
5. Use strategic analysis and financial modelling to identify and assess strategic opportunities, risk appetite and financial impact. Detailed financial analysis and modelling enables organisations to understand the operational impact of modifying service delivery parameters. Combine this with sector expertise to understand the workforce and supporting infrastructure needed to achieve success and to develop a cost-effective operating model.
6. Prepare for implementation by identifying a pathway for change management. This requires providers to define the leadership roles required, equip the team with the necessary skills, maintain purposeful engagement with staff and clients, and implement robust governance to provide greater transparency on performance.

As baby boomers reach retirement and life expectancy continues to increase, demand for home support will only grow. The potential upside of getting this right is huge for older people and for providers, but the consequences of getting it wrong are also substantial.

Nikita Weickhardt and Grace Luo are directors at Nous Group. Nous Group principal Ian Thompson and director Rob Sutherland also contributed to this article.

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