Helping aged care organisations chart their way to a viable future
The aged care industry is facing increasing level of regulation and has recently been required to adopt new standards that better reflect client directed care. The capacity of smaller operators to adopt new practices, including enhancement to the living environment are likely to see further consolidation in the years ahead. The estimated revenue of the sector is approximately $22.2 billion with profits sitting around $2 billion per year. The industry is likely to show annual revenue growth of around 4.5 per cent from 2018 to 2023, but rising costs of care mean sustainability is challenging.
A challenging state of affairs
There are many facilities that are simply unable to run cost-effectively due to any number of constraints. These providers are likely to exit the industry or become consolidated as part of M&A activity in the near future. The providers that remain will need to manage costs and revenue streams strategically to ensure ongoing viability.
Larger providers will potentially have the edge here as they can benefit from economies of scale. However, that doesn’t preclude smaller providers from offering a bespoke, first class service that clients would be willing to pay a premium for, which could deliver a healthy mix of excellent care and sustainability.
An age for rapid transformation, from top to bottom
Aged care providers should consider starting an innovation committee to look at ways to become more financially viable in a changing landscape. This can include: improving or diversifying the services offered; improving the employee experience to attract and retain skilled staff; implementing technology solutions that automate key processes; and refurbishing facilities to open up new opportunities.
Overwhelmingly, the aged care sector requires transformation. Incremental improvement will not suffice for most providers. Instead, the industry requires retooling from top to bottom. To succeed, aged care operators require inspired leadership with a focus on innovation.
Such a desperate need for wholesale change can be daunting for aged care providers who are already running lean operations and coping with a regulation-heavy environment. However, this growth industry provides significant opportunities for providers that can overcome cost pressures and innovate to make the most of the potential presented by the ageing population. Aged care providers who put their residents first and let that value proposition guide everything they do are more likely to be successful.
RSM Australia provides expert advisory services to operators in the aged care sector. Operators should seek independent advice to augment their in-house capabilities to improve business operations, turn a profit and provide exceptional care choices to ageing Australians. To read the full analysis of the Royal Commission into Aged Care’s Interim Report produced by RSM Australia and gain further insight into the current state of the industry, please visit: https://www.rsm.global/australia/industry/aged-care-services#interimreport