The movement of aged care funding to a market-based system and individualised budgets is not new. In the last decade, similar reforms have been introduced in the United Kingdom and New Zealand. The impact of the reforms on the competitive landscape was significant – over 50 percent of UK market share shifted from the not-for-profit to the for-profit segment, and New Zealand providers reported losing up to 30 percent of their existing clients to other providers including new entrants.
With the move to a market-based system in 2017, it is likely similar changes will be seen in Australia. The current aged community care market has over 500 providers across Australia. This market is dominated by not-for-profits (particularly faith-affiliated groups) and is fragmented with the majority of providers operating within limited geographical boundaries. A review of the current distribution of Home Care Packages (based on the Department of Social Services 2015 listing) shows high dispersion, with the largest provider holding only 3.4 percent of all packages. In fact over 72 percent of providers hold less than 100 packages. This has contributed to a large number of providers regarding community care as a small part of their overall portfolio of aged and disability care, rather than a core business.
The current market
In such a market, it is clear that providers need to make a conscious choice if they are prepared to invest in order to be a competitive player in the community care market. For those who are, the potential rewards are sizeable. The 2011 Productivity Commission’s Caring for Older Australians report estimated that by 2050, over 3.5 million older Australians will access aged care services each year, with around 80 percent of services delivered in the community. Informal care is declining, with more and more families prepared to pay for formal supports. Baby Boomers are entering the market with greater wealth and more demands than previous generations.
So what changes are we seeing in the competitive landscape?
Most visibly, major players are focusing on increasing their market share to build scale, breadth and depth. This is happening primarily through acquisitions and mergers. But size is not everything. The fastest growing organisations in the last three years are those that focus on enabling technology and the customer experience.
Other models are also gaining traction, such as franchise and e-market-based models that personalise the care experience. They provide options for consumers to connect directly with carers and are responsive to the needs of the consumer.
Organisations are also actively diversifying their portfolio to include meal provision, mobility aids, specialised housing and more to attract consumers through an expanded service offering. All strategies can be successful if a unified approach is taken and the right investments are made.
What steps can be taken for success.
There is no silver bullet. The best strategy is to know your strengths and your market, and build on them to gain sustainable competitive advantages.
There is a place for everyone at the table if we adopt a collaborative rather than competitive approach to navigating the community care landscape.
- Take the time to study your own organisation, your clients and what others in your market are doing.
- Gain clarity on your strengths and values, and be prepared to change your operating model and approach to market to align clearly with a strategy that will build on them.
- Ensure you communicate your value proposition clearly to the market.
- Build partnerships and alliances with other organisations who have complementary approaches rather than trying to be everything to everyone.
A bright future
I believe change brings opportunity, and it is vital that providers embrace this. The reforms and deregulation of home care packages give providers freedom to choose to do what is important to them, including the where and how, rather than just continuing providing services as dictated. Those who embrace this will likely be successful in a consumer-driven market environment.