Issues impacting aged care providers in 2023

insight featured image
With our eyes always on the future, conversations with aged care providers at the end of 2022 identified four key themes that will take a front seat in Australia’s aged care sector in 2023.

1. The aged care ecosystem

The fundamentals of the sector – funding, regulation, governance – are still very strong, but not without their challenges.

The Australian National Aged Care Classification (AN-ACC), launched on 1 October 2022, was seen as a real opportunity for funding reform and welcomed by many. We are already seeing more funding for providing care under the AN-AAC model than the former Aged Care Funding Instrument (ACFI). Operators who successfully navigated the financial challenges of recent years and maintained an efficient and viable operational model are expected to have a stronger year ahead. Those operating on slender margins should assess their enterprise value and look at opportunities to diversify revenues and manage the risk to their business.

While some providers talked about inflation and recession, it wasn’t the backbone of the discussions. In fact, higher interest rates have increased funding for many providers as Daily Accommodation Payments (DAP) have increased relative to Refundable Accommodation Deposits (RAD) via an increased Maximum Permissible Interest Rate (MPIR). While this will ease some pressure on providers, it won’t remove the structural deficits many organisations are experiencing.

As more funding becomes available, providers can focus on better facilitating solutions that improve outcomes for consumers and meet government systems and process requirements. However, with sector reform gathering pace, understanding regulatory change and implementing this can lead to bottlenecks, compliance issues, and costly solutions to address requirements. Unfortunately, it may be litigation that drives change.

Three areas of concern were consistently identified by providers in all States.

  • potential conflicts between the Aged Care Act 1997 (Cth), the Corporations Act 2001 (Cth) and existing consumer protections. Proposed changes to government arrangements could potentially create legal and practical conflicts and tensions when implementing changes to accommodate the new requirements for providers

  • ongoing research is required to validate the government’s mandatory care minute standards to ensure that this is a meaningful measure of quality for aged care services. Contemporaneously, research needs to be undertaken to develop and assess alternative measures should mandatory care minutes prove inadequate

  • the impacts of the Aged Care Quality and Safety Commission (ACQSC) Code of Conduct for Aged Care (introduced on 1 December 2022) need to be assessed and appropriate strategies developed by providers to ensure they are appropriately implemented.

Although there was some concern that regulation was snowballing and distracting providers from delivering care to the community, the need for uncompromising regulation is clearly understood. It remains to be seen if delivering on aged care reform, rather than considering alternatives is going to benefit the sector.

2. Recharge your talent strategy

Workforce remains the critical issue of the sector and many are adopting new tactics to attract and retain talent. Innovative use of immigration programs and the provision of short-term worker accommodation is making a difference in some markets. Exponents are keen to share in their success.

Modelling the demand side of the aged care workforce is easy. However, understanding the constraints of the supply side, what the sector can realistically deliver, and the cost involved, is an increasingly international issue.

Domestic sector and immigration programs are competing internationally to attract workers. Our international competitors are looking at these same offshore labour markets to address their own labour shortfall. The Australian work environment is also more highly regulated than other OECD countries, making it less attractive for workers seeking to develop their careers internationally. Competition from Canada and the UK with lower entry barriers are beginning to impact international recruitment for Australian aged care services.

Strategies adopted by different countries to recruit and attract workers include back to work programs to attract qualified and unqualified workers back to the sector. Other initiatives include, the development of industry image and attractiveness policies, financial support and training for unemployed people or caregivers willing to obtain licenses and certification as care workers, and non-traditional recruitment methods.

One positive step includes the decision of the Fair Work Commission (FWC) on 4 November 2022 to give a 15 per cent wage increase on award rates for direct care workers – nurses, personal care workers, assistants in nursing and home care workers. However, there are concerns about the expectation that has been created for those that qualify and existing obligations under the ACQSC Enterprise Agreement and those not included, as well as other multi-employer bargaining arrangements. Equally, the Government’s decision to phase the increases, leading to an 18-month wait has been met with concern.

3. Transformation through technology

The 2022-23 Federal Budget set aside $312m to enhance the sectors technology needs, but is light on the detail of how it will do this. Historically, while the benefits of technology are understood, the sectors’ adoption of new technologies has been slow, limited and adhoc. Current margins and fixed labour inputs do not support significant investments in technology that improves efficiency and effectiveness of services.

Some providers have taken the leap of faith and are implementing planned technology roadmaps to address staff shortages through productivity improvements while enhancing care quality and facility attractiveness. Uplifting the interoperability (integration) of their workforce management, residential management, and clinical systems, can reduce data entry duplication, support more efficient workflows and enable improved reporting.  

While transformation through technology can be time consuming, and it will be critical to ensure compliance remains front and centre, a well-executed technology strategy will be a significant contributor to competitive advantage. The operators who thrive will be those who are able to stay one step ahead of the market.

4. Building a community

The competition for residential accommodation stock is increasing on multiple fronts. Older stock is not equipped to cope with the increasing needs of the aged care community, and new stock is slow to market.  Increasing construction costs are putting many providers off new builds, as are increasing interest rates on loan portfolios. Regional developments are increasingly risky as the supporting infrastructure is limited or unavailable. Some providers remain highly acquisitive and are seeking out opportunities for existing stock, but these are rare. Some are looking to utilise technology to support more remote facilities.

Beyond the bricks and mortar, we are seeing more providers across the aged care community working together. A return to more collaborative models, not seen for almost a decade, arose during the pandemic. Supported by the My Aged Care portal, consumers are assessed and supported to locate and access services.

We are seeing consumers increasingly go directly to providers, and collaboration is essential to manage this. Rebuilding trust within our communities is critical and increased collaboration can only facilitate more positive outcomes for consumers. 

Of course, this is a general snapshot developed from our recent discussions with providers. What we know for certain is that opportunities abound for aged care providers that can adapt, innovate, and evolve in this rapidly changing landscape.

Grant Thornton, in conjunction with the Commonwealth Bank of Australia, regularly hosts a series of discussions with aged care providers across the country. These discussions address key issues and challenges in the sector and offer solutions with a view to improving the overall performance of the aged care system and the quality of services to older Australians.

Learn more about how our Health & Aged Care services can help you
Learn more about how our Health & Aged Care services can help you
Visit our Health & Aged Care page