Providers should take a close look at recent changes to home care funding arrangements if they wish to service their clients effectively and operate a viable business. There are steps that can be taken to address these changes, but they need to be done sooner rather than later.

I’m sure the industry slipped through the 1 September 2021 change to the home care funding arrangement with little or no impact. It seemed harmless enough and besides, if the full funding from the program is not being used, what harm can a change to the funding arrangement bring?

If you think that, you missed the best disappearing funding trick, resulting in loss of revenue to the provider and services to the Consumer. “No!” I hear you say, “surely not!”

Well, firstly, let’s start with the acronym; it’s misleading at best. IPA (Improved Payment Arrangement) more accurately should have been described as GIPA (Government Improved Payment Arrangement) or TIPA (Treasury Improved Payment Arrangement), because it certainly could not be described as CIPA (Consumer Improved Payment Arrangemen) or PiPA (Provider Improved Payment Arrangement]).

If home care providers step back and take a critical look at the direction of this funding program, they will see the negative impact on their clients (consumers) and the viability of their business (provider) going forward, as they attempt to provide the correct level of care and maintain a viable service.

The 1 September changes clearly benefit the government/Treasury and certainly do not benefit the consumer and/or provider.

Consumers

The consumer has, and will be, disadvantaged in a range of ways, including:

  • Not requesting or receiving the correct level of services, as designated by the ACAT/ACAS assessment, which led to the accumulation of unspent funds in the first instance. The clawing back of those unspent funds is a loss to both the consumer and the provider
  • Providers not charging the consumer their contribution, thus reducing the level of funding available to deliver approved and planned services to the consumer
  • Not being correctly informed about the Home Care Program, in particular its objectives and the way funding works, which will likely lead to consumers transitioning to more intensive care earlier than necessary
  • Providers and unaware consumers being party to sending a strong signal to the government that the program is overfunded and the level of care determined by ACAT/ACAS has been overstated

Providers

The Provider has, and will be, disadvantaged most definitely in a range of ways:

  • Negative impact on cash flow
  • Potentially higher interest expense to cover the cash flow shortfall
  • Reallocation of unspent funds to government control rather than the provider, which drives both the cash flow issues, plus sends the wrong message to the government: that providers do not need the level of funding currently tied to each consumer level
  • Increased cost of reporting services for claim purposes, requiring upgraded software and documentation
  • Cost increases associated with the expanded Home Care Financial Report (HCFR) requirements
  • Needing to reintroduce the recovery of the income tested fee (ITF), having created an expectation that consumers would not be charged
  • Reducing the ability of providers to negotiate with the department in relation to future increases in the funding available to the Home Care Program

It would be fair to say that the change in the funding arrangement was aided by home care providers and their staff not fully understanding some of the key aspects of the home care funding programme. This impacted how providers addressed delivering services, with some not fully appreciating that not utilising the funding, not charging consumers their contribution and not passing on the funding reduction created by the ITF, would have negative consequences. It certainly has.

Addressing the situation

So how does the industry address and correct this unfavourable situation?

Fortunately, there are things that can be done, and they need to be done sooner rather than later.

Ask yourself the following questions:

  • Do I charge the consumer component of the fee structure?
  • Do I recover the ITF from your consumers?
  • Do my consumers have unspent funds?

If you answered yes to all or at least two the above, urgent action is required.

  • When did you last review the care plan and needs of each consumer? If not in the last six months, it needs to be done now.
  • When was the last time you updated your pricing? If not in the last 12 months (as a minimum), immediate action is required.
  • Did you use a formal pricing model to arrive at your pricing and are you aware of where your current pricing compares regionally, on a state basis or nationally? If not, you need to adopt a formal costing approach
  • Have you reviewed your third-party contractual arrangements and have you included a provider “mark-up” on your third-party contracts? Indeed, do you have a formal contract with your third-party suppliers?
  • Are you utilising allied health professionals to assist with care planning, outcomes assessment, care plan review and providing professional support to consumers?
  • Have you trained your service delivery staff on how to communicate with your consumers and assist consumers to understand the home care program: its goals and objectives and its purpose to keep consumers independent and in their home longer? In my experience there is little evidence of this occurring.

If the industry does not change its operational practices and improve the way in which it delivers quality home care services to those in need, the program will be depleted of funding. This will occur because Treasury will use “unspent funds” as the basis for implementing smaller, if any, increases to funding going forward. Consumers will enter residential aged care earlier and ultimately home care providers will find that they can no longer operate a viable service.

Finally, the current changes are not the end to this story. In the next tranche of changes, I predict that the funding will not only be in arrears, tied to services delivered, but also will replicate the NDIS funding model and will be based on individual service pricing. Providers need to understand, prepare and position their services to maintain a quality, viable service going forward.

David Powis MBA is Managing Director of e-Tools Software.