Stay up to date with all the latest from Shared Value Project by signing up to our eNewsletter

The future of aged care needs to be framed for shared value creation.

October 3, 2019

All Australians agree that we need to look after the elderly and frail – we need (and believe in) aged care.

But there is no aged care when there are no staff, beds or nursing homes – and all these resources need constant flows of money. So, how are we to sustain the investment required to achieve viable and effective aged care services – those that adequately address the health and wellbeing needs of Australian communities?

The Royal Commission into Aged Care Quality and Safety will address this question. In doing so, it should consider the merits of the strategic business approach known as ‘shared value’.

Australia’s aged care sector is unsustainable

More than 45 percent of Australian residential aged care providers are running at a loss. That is an astounding statistic given the critical nature of the services they provide.

It should not be any surprise to them that the promise of ‘consumer directed care’, and the individual choices it would bring, is not being fully achieved. This can be partly attributed to available investment but also due to regulatory constraints and the Aged Care Act.

Regional and rural communities are consistently the most disadvantaged. There is no incentive for margin conscious organisations to invest in developing regional and rural facilities or in-home care services. As a result, the public sector is filling the gap – the Victorian Government is the largest provider of public sector residential aged care in Australia, with over 180 services across the state. But for how long? State governments also need to reduce health and care costs.

The Royal Commission is welcome. It is surfacing the key issues. It is also creating concern in communities across Australia. There has been a 30 percent increase in complaints since the commencement of the Royal Commission.

With the interim report, titled Neglect, released last week, it is clear that a fundamental overhaul of aged care in Australia is required.

Providers are fielding the bulk of questions regarding care – but they don’t have all the answers. Meanwhile investors and workers are steering clear until the final report is published (the due date was recently extended to 12 November 2020).

Understandably, most major providers have adopted a ‘small target’ strategy while the Commission has been underway; however, while minimising proactive communication, the best are working on ‘what next’.

If the current development activity of providers is any indication, the future of accommodation looks more like a village (high or low-rise) than a hospital ward. Clusters of rooms in home-like configurations. It is going to need investment.

The evidence of standards breaches heard in the Royal Commission demonstrate that, on the fundamentals, there’s work to be done. The challenge is to understand why these breaches are occurring. Are they isolated failures or related to systemic problems?

Fundamentally, from governments to providers, there is broad agreement that we need aged care to be viable and grow with the needs and preferences of Australian people.

What needs to change?

As in any other service area, the government wants to spend less per recipient on health and care services, not more.

The question it faces is how to achieve this without reductions in quality and safety. The aged care regulatory system does not have the broad, agile and integrated approach to risk response that is required.

With broad agreement, the aged care roadmap set the pathway to a market-based system. People with means will be required to pay more for aged care; they are also likely to expect more for that increased investment.

More investment is required to track demand and consumer expectations of quality and accommodation – that means growth in major not-for-profit and private sector companies who can leverage scale and equity.

For the sector to be effective in the future, sustainability of all aspects needs to be given greater consideration, including a closer look at the relationship between the provision of accommodation and care.

Should companies profit from aged care?

We live in a capitalist democracy. When we go to work, we expect to be paid for doing a good job. When we put money in the bank or buy shares, we expect a return.

In a competitive context, the profit motive drives innovation to achieve efficiency and marketable advantages such as customer experience and technology.

Billions of dollars – much of it in retail superfunds – has been invested in meeting the challenges of an ageing population and the related demand for care. There is a cost to this capital, just as there is any other source of funding, such as a bank loan.

We should be encouraging this investment as an alternative to other industries such as fossil fuels.

The question is not about whether profits are bad, but if the standards of care and experience can be improved as a result of the profit motive.

Creating shared value

Aged care businesses need strategies to achieve sustainable financial returns while meeting the social needs of older people, families, communities, governments and broader society.

‘Social needs’ in this context mean the health and wellbeing outcomes for people in care. Some of these needs are currently measured by the Aged Care Quality and Safety Commission, but not all. Aged care has a positive impact on the families of people in care, and the communities around them that rely on the availability of local services.

What is ‘shared value’? It’s a business strategy designed to solve social issues profitably by leveraging the resources and innovation of the private sector to create new solutions to some of society’s pressing challenges.

In aged care, shared value can achieve outcomes at multiple levels:

  1. Structural design and reform: defining a sustainable future state and the roles of providers, government, investors, educators and consumers in achieving it. The Australian government has already successfully used shared value as a co-design framework in its foreign affairs and environment portfolios. In aged care, shared value framing provides a pragmatic means to address revenue source and mix, as well as the enabling environment, at arm’s length from the challenging political context.
  2. Business strategy: identifying and planning for achievement of social and business value across provider and supplier organisations and operations. Aged care examples are social procurement, workforce redesign and health services integration.
  3. Social innovation: designing products, services, gateways and experiences to address social needs profitably, and therefore sustainably. Examples of outcomes in aged care include repurposing services and assets for families and communities, ‘healthy’ building design and technology adaptation.

Paying for choice

Baby boomers are entering aged care and, fiercely independent, they want to minimise the change in their lives when receiving care.

They are also used to paying for quality. They expect choice – and so do their Gen X children.

The aged care system – the Act, regulations and industry standards – need to evolve to allow the more personalised care and supporting services. The challenge is to incentivise and not stifle the innovation and therefore the quality of responses.

The job of business is to use shared value as a framework for designing choices – to minimise complexity along the customer journey but ensure choice is delivered, profitably.

People seek purpose

People want to work for companies that are admired for their performance and purpose. Aged care needs to attract an additional 400,000 workers over the next 20 years to meet demand.

But it’s not just about volume; the sector needs people who find personal reward in caring for others – people driven by a sense of purpose.

By using shared value as a framework or business evolution, purpose will always be part of the performance narrative.

It enables a much more honest discussion with staff about the fundamentals of business and, alongside or through employees, a more honest discussion with families.

Getting started

The Australian Government has invested billions in the aged care sector and worked consistently over the past two decades to build the system, deliver the aged care ‘gateway’ and establish agencies with important standards and assessment frameworks.

It now needs to create an enabling environment for businesses (whether private sector or not-for-profit) and challenge them to design a sustainable future.

Start with shared value.

Written by Rhod Ellis-Jones of social impact agency Ellis Jones.