Aged Care - Care - Quality - Cost - Choice

  • Sep 29,2015

    As a Consultant who works across a number of sectors, it is interesting to watch the development of Consumer Directed Care (CDC) in community aged care.  

    All markets change.  Some providers are better at responding to the challenge of competition.  Others simply want competition to go away.

    Some years ago I received a call from a provider telling me my late mother was eligible for a Commonwealth package.  News of assessed entitlement was undermined by a statement to the effect ‘if you don’t want it someone else will so make up your mind in the next 24 hours or else’!

    Scarcity is an acknowledged principle of influence.  We took the package.  The provider was enriched by government funding but the service was poorly coordinated with multiple changes of staff and of little value.  Better than nothing was our most favourable assessment of quality and value.  

    Mum did not perceive that the provider cared or the quality of the service reflected her definition of care as a retired nurse. Predictably when it came time for residential care, that provider has ruled themselves out as an option.

    Time moves on.  There is now greater acceptance that the aged have the same rights as any consumer.  Yet a variety of constraints in the government funded sector continue to restrict choice and the number of direct hours of care available within packages...  Those constraints will be removed eventually by more informed consumers and service development to better meet client needs.

    Two important issues bubble away in the CDC transition period:

    Restricted Consumer Choice 

    Long term players protecting their market position by restricting consumer choice. For example, transitional care being referred to in-house providers with little advice to clients that there are choices and they can decide the provider to best meets their needs.  

    Lack of Fee Transparency 

    CDC statements too often hide the true hourly cost of care.  In simple terms, the accurate comparison is between the total cost of care divided by total hours provided.  Some providers have yet to undertake target costing to maximise the hours of care available to their client. Under-quoting the true hourly rate does not qualify as a definition of care.

    Some definitions:

    Care is not the mere provision of a service but the manner in which a service is provided.  It undermines the reputation of a ‘care’ provider when a client requires an external advocate to optimise their access to care. In a CDC environment, clients can expect care to be provided in a manner which is flexible, empathetic and where they are valued.

    Quality is a noun but also defines an outcome. Quality is ‘fitness for purpose’ as judged by a service recipient. Poor quality is a tangible outcome which, in a competitive environment may eventually lead long term clients to choose an alternative provider.

    Cost is a dollar amount and a measure of value.  If a provider Invoices a client for 39 hours of care at $42.58 per hour but the total bill is $2,979 including a $784.85 Advisory and Co-ordination charge per month, the true cost is $76.39/hour.

    Is this a competitive rate for Personal Care? 

    Does it represent value to the client, their family, the Commonwealth and the tax payer?  

    Are more direct hours of quality care available through an alternative provider?

    Will potential market entrants believe that, at this rate, they can achieve a high margin by entering the market?

    The recipient of a CDC statement has been assessed as being in need of care. Statements should not read like a phone bill or create undue confusion. 

    When personal care hourly rates on Tax Invoices are not inclusive of all indirect costs, a ‘like for like’ comparison between providers requires significant analysis. 

    Inevitably, confusion of the true hourly rate requires a capable service recipient, informed family members or a broker to resolve it.  

    When the opportunity cost of a bloated bureaucracy or inefficient service is too high, resolution includes identifying providers of equivalent or better quality at a lesser cost and exercising a consumer’s right under CDC.

    The message for all providers is to put the Consumer into CDC by target costing total expenditure to provide Clients with the maximum direct hours of care.

    Care is a client’s assessment of the manner in which services are provided.  Best confirm that your clients feel ‘cared for' because that’s the promise a plethora of alternative providers make through a variety of channels.

    Quality is fitness for purpose determined by the receiver not what an inflexible service decrees based on history or a prior funding formula.  Henry Ford is alleged to have said you can have any colour you like as long as it’s black.  

    The market reality is that cars on the road demonstrate quality comes in many colours!  Equally the market decrees care and quality are determined by the consumer, or their advocate, in whatever terms they choose to define it.  Number of direct care hours is a predictable part of that definition.

    Cost determines the total number of hours of care an eligible aged person receives within their funded package.  If providers feel indirect costs of 30%+ are acceptable, the market and individual consumers may decide otherwise.  

    Providers who assume clients will accept less hours of care because of their high indirect costs should ask clients if their assumption is correct.  Potential new market entrants will be delighted at their prospects in a high revenue industry where traditional providers accept low margins. 

    Direct hours of care within a Commonwealth funded package is a discussion that will take place even if providers don’t drive it.  Social media is exposing high cost providers of low quality service. Proven claims will drive significant changes in market share and thankfully a reduction in the number of high cost providers of low quality services.

    Digitalisation, automation, systems thinking, constraints management, lean thinking and process excellence provide a pathway to more competitive hourly rates.  Target costing is essential for providers committed to more direct hours of care within the client’s package.  Target costing is also essential for providers losing market share if high cost is the elephant in the room.

    If a provider has not yet defined a target cost and embarked on a target costing exercise, it’s fair to ask who are the real beneficiaries and in whose interest scarce government and tax payer funding is being expended?

    If the answer is not the C in CDC, consumers and their advocates have every right to exploit increased competition for best value in community care.

    That's what consumers of all ages do in any market when it becomes clear that alternative providers are available and can better meet their needs. 

    That’s what informed consumers, families and brokers will do when ‘best value’ and quality outcomes are not being delivered in community care.

    Article reproduced with permission given by author: John Cleary


    John Cleary is the Managing Director of Blue Chip Consulting Group and a Consultant, Trainer and Facilitator engaged in all aspects of Aged Care across Australia following his fifteen years (15) as a Director of Community Services in Victorian Local Government. 

    John is valued by Aged Care Boards and Executives for his thought leadership, business acumen, quality outcome focus and expertise in driving return on investment and leveraging sustainability.

    John is a regular speaker on the conference circuit in Australia, Asia and Africa on topics around disruptive innovation, business intelligence, leadership, governance, strategy, cost management and change management. The focus of his work in the ‘not for profit’ sector is quality client outcomes and creating ‘more money for mission’.


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