The Knowns and Known Unknowns of Home Care Reform

There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don't know we don't know. (Rumsfeld)

It is too easy to look at the development of the Home Care reform program and conclude that because it is over 18 months out, we don’t know much about it, therefore there’s not much to do yet. There are however a number of things that we do know already with a reasonable degree of certainty, and many strategic conclusions that can be drawn.

Understanding the strategic implications of some of these points allows us to draw conclusions regarding the form of the market that will exist in the coming years. This allows us to make early decisions regarding how best to prepare for it, and what we should or shouldn’t be investing in right now.

While I have focused on those issues that have an impact on strategic decision making, there are many other factors relating to the service model. I’ve not addressed these, as many others have written about them. Instead, I will focus on those that will make a difference to corporate strategic decision making.

What we know

• There is currently, and will be for the rest of my lifetime, demand for Home Care services. The future of the industry is secure.

• The Department of Health and Aged Care, along with all political parties see Home Care services as part of the solution to the demographic and fiscal challenges we are facing. Consequently, demand will grow faster than the underlying demographics.

• The tone of communication, both written and verbal, from those responsible for the reform program, is pointing towards a commoditised NDIS style supply model to meet this demand.

• The challenge we will face in the future will not be whether we have enough demand, but whether we are paid enough to supply each individual hour of service.

• We will be leaning more heavily on the regulatory system to drive outcomes around quality and cost. This fundamentally shifts the economic incentives in the system, and consequently where organisations should be investing.

• Downward pressure is being placed on the cost per hour of service delivered, at the expense of likely cost over-runs for the system as a whole.

• Consumer choice is trending downwards as a priority in system design in favour of more ‘perceived’ control over system costs.

• The service delivery machinery in Home Care organisations is not likely to change much in response to the reform program, and hasn’t throughout the past 50 years.

This last point is particularly important. The process of hiring staff, onboarding them, scheduling, training, and the logistics of service delivery hasn’t changed much in response to the various reforms highlighted in last week’s blog. Changes in service delivery machinery have been driven by wider economic trends, such as technological adoption, disintermediation, industrial relations reform and social change. This element is therefore more predictable, and less dependent on aged care government policy. It is also by far, the largest driver of costs, and the most strategically important component of our organisations.

What we know we don’t know

• Whether we are facing fixed prices or market based prices

• The methodology for determining a fair price (efficient price) for services

• How much input customers will have in the design of their service delivery

• How much flexibility there will be for organisations and customers to address changing preferences and circumstances

• Whether existing customers will be grandfathered into the new system creating a need to run several different service delivery models concurrently

• What the new payment model will look like administratively

What does this mean for decision making

It is clear that under any system, efficient service delivery will be the biggest contributor to success. Investment in improving service delivery efficiency will never be wasted. Organisations should be focused on this as a priority.

Compliance burden will increase, and encroach further into areas that it has not existed before. We are already seeing this in relation to Price Caps, Governance Standards and the introduction of SIRS. Having a strong and efficient compliance program, and an effective compliance culture will benefit organisations regardless of system design decisions. Compliance problems are an enormous distraction from other activities that can benefit organisations strategically.

Investment around consumer experience, innovative care management models and marketing may not stack up from a business case perspective. We won’t know this until the economic model becomes clearer. The direction we are heading would make differentiation of services to customers less viable.

The entire industry needs to pressure the Department of Health and Aged Care to provide detail well in advance of deadlines for development of IT systems and other change related activities. The earlier detail is released, the lower the change related cost to the industry as a whole.

Commence working immediately on options around organisation design that respond to a range of scenarios so that they can be implemented quickly as the picture becomes clearer in the coming months.

From what I’ve seen across the industry, there is plenty of work to be done on service delivery models, compliance programs and scenario planning, without getting too concerned about corporate level challenges such as marketing and customer experience. Those items that are yet to come into focus can generally be implemented rapidly as the bigger picture comes into focus.

At Howie FSC we’d be delighted to assist with addressing those strategic decisions that can be made now, as we await further information to be released regarding the reform program. Getting a head start on your planning will be of benefit in the longer term as the market will evolve rapidly in response to the changing incentive structure. Please feel free to contact me on jason.howie@howiefsc.com.au to set up an appointment to discuss the challenges you are facing in your organisation.