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Heralding the era of competition

The UK’s move to a market model of care provision 20 years ago has similarities – and lessons – for Australia today. Darragh O Keeffe reports.

If the Productivity Commission’s vision for aged care service provision is adopted in Australia, the for-profit sector will grow exponentially. Niche markets will flourish and the private sector will respond accordingly.

Under the new system, service providers will have two options: embrace the new market and grow, or get out. They cannot succumb to inertia, because it will be fatal.

This was the stark message for Australian aged care providers from Angela Gifford, the CEO of Able Community Care, one of the first major private home care companies in the UK.

Speaking at the recent Aged Care Summit in Sydney, Gifford said that from the 1990s to the 2000s the UK aged care system underwent a period of profound transformation – similar to that which is foreshadowed to occur here, should the thrust of the PC’s report be endorsed by government.

In the 1980s, the majority of home and aged care was provided by local councils and major charities and not-for-profits. However, as a result of the large-scale changes introduced by the Thatcher Government in 1990, which essentially opened the system to market forces, today just 6 per cent of services are provided by not-for-profits, and local councils have all but exited the system, Gifford said.

The Thatcher government had realised people were getting older and living longer, and tax revenue would not be sufficient to pay for this growing elderly population. It commissioned Sir Roy Griffiths, who had been director of the supermarket chain Sainsbury’s, to investigate and propose reforms to the system, similar to the way in which the PC did last year, Gifford noted.

His resulting Care in the Community report led to the 1990 NHS and Community Care Act which heralded the start of this new world. “The word was out to the general public that it was their right to have choice of where, and by whom, they were cared for,” she said.

During the 1990s the government introduced financial assessment, which led to a new market of private clients. “My main client base had always been private clients. But we were in the minority. When financial assessment came in, many more thousands of people became fee-paying.”

The passing of the act essentially created a marketplace, she said. “The era of competition in care services had arrived.”

The changes led to the rapid decline of the major care providers, mainly the councils. “As a result of this legislation the councils were told to stop being providers, but to become purchasers. And they were to buy 85 per cent of their care services from the independent sector, which included for-profits,” she said.

When Gifford started her private care company in 1980 she was one of only five or six, she said. However, the implementation of the act started an exponential rise in new private companies.

“The aged care homes which had been in the ownership of the local council were sold off to private providers over a passage of years. I don’t think there would be more than half a dozen homes now that are run by the councils.”

The for-profit sector responded immediately to the changes, she said. “Franchise companies appeared almost overnight. Small local providers in very rural areas sprung up and provided excellent services. Specialised providers took market niches. The for-profits just sprinted away. They were offering client choice, flexible and innovative services at all levels and they were efficient, responsive, and had ambitions to grow and become very profitable.”

In contrast, for the first seven or eight years, the not-for-profit sector in the UK did not react to their best advantage, she said.

“They could have done better. They could have recognised that in the late 1980s change was inevitable. They did not. They could have recognised that to survive and grow, they had to adapt and embrace such changes. Very few did. They could have reconsidered their conviction that commercialisation was a road not to be travelled.

“Some charities, the larger charities, do have a care force. But they have to compete with the for-profit companies, to go for the council tenders. They have to compete in a private market. Many, as I said, have gone under. They’re just like a business that could not pay its way, they have disappeared.”

Since 2000, local governments have steadily reduced the financial grants they give to charities, to the extent that many not-for-profits now receive no funding and are either dependent on public donations or on the services they have put in place and run on a commercial basis.

The result has been a series of mergers between not-for-profits and charities. “Our biggest aged care charities were Age Concerned and Help the Aged. About18 months ago, they combined and became Age UK,” said Gifford.

In fact, she told the conference she had, that morning, read another report that a not-for-profit care company, Crossroads, was to merge with another charity. “I’m very surprised because I would have said they were one of the most successful ones,” she said.

Although the Productivity Commission recommendations have not yet been endorsed by government or progressed to legislation phase, Gifford said she had not seen great assurance that state funding would continue at the present rate and would grow as the population ages.

“It may be well that this is the time to look at what happened to not-for-profits in the UK,” she said. The not-for-profits could have put in place earlier the strategies necessary to become efficient market competitors, she said. “To have done so would have benefited themselves, their workforce, their volunteers, their bank balance, and the services they can provide. Most of them in the UK did not,” she said.

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