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From red to black

Making profit in aged care has never been harder, but there are simple steps providers can take to help improve the bottom line

The latest survey is further evidence the industry is in financial trouble, writes David Sinclair.

The aged care sector continues to struggle with costs, funding and regulatory burdens. But according to several leading operators and financial experts, it is possible to provide quality care and achieve positive financial results.

Stephen Judd, CEO of Hammond Care, says “people investment” is key.

Labour costs are the lion’s share of expenses, but Judd argues that costs per hour are more important than number of hours worked. Savings can be made without reducing hours worked.

He suggests reducing agency hours wherever possible, and hire overseas staff instead for specific RN positions.

Managing workers compensation is also important. “Having someone focusing on it is the single most effective investment you can make to reducing staff costs. We achieved a 60 per cent drop in workers compensation costs,” he says.

With a 25 per cent aged care workforce attrition nationally, facilities with 100 employees have to hire 25 people each year just to maintain services. Extra costs come from productivity predeparture, termination, recruitment, training, lower productivity for new workers and vacancies.

Judd suggests that workers should be hired for attitude, rather than having to be fired despite skills and experience. “I can always train a person to certificate III or IV but I can’t train them to like older people,” he says.

“Our staff recruitment and on the job surveying has resulted in a 40 per cent drop in the attrition rate, at an estimated saving of $500,000 per year. And with an average length of employment of seven compared to four years, we have a more experienced and engaged staff.”

He also focuses on ensuring high occupancy – now up from 96 to 98.5 per cent, using a client liaison manager to assist residents and families in understanding the entry and funding process.

Peter Staples from Advanced Management Systems says the return on investment from that hour is assisted by competent tools that are readily available.

“Our ACFI reviews so far are showing an underclaiming of ACFI of at least $3000 per bed. Systems software can assist in more timely management of ACFI reviews by identifying and tracking the changing care needs of residents and relating those changes to the resident’s ACFI scores, thus leading to greater financial returns.”

Elsewhere, Ian Sanders, head of national industry segments at the St George Bank, stresses the importance of implementing interest rate risk management strategies and dept repayment strategies. For those organisations that are debt free, interest rate risk management strategies around savings are equally important.

“Effective cash flow management covering budget planning, banking consolidation, credit control and cash flow finance are critical,” he says. “Also, looking at ways to maximise the interest on deposits and using online banking facilities effectively can assist to become smarter financially.

“Providers should ensure funding mixes are appropriate. Are short term assets being funded by long-term debt, or vice versa?”

Sanders also suggests maximising bond values, using independent financial planners to manage the transparent receipt and payment of bonds.

Reducing costs is also important, through salary packaging and appropriate use and access to banking services to retain staff.

“Choosing appropriate partners when building a facility may save money. Understanding the balance of receiving periodic payments versus debt repayment versus investing elsewhere can be a fairly straight forward decision that can make meaningful outcomes to the bottom line,” he says.

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