Aged care businesses need to create strategies for achieving sustainable financial returns, now more than ever.
As stressed by the Royal Commission’s findings, they need to do so while delivering greater value for customers, and meeting the social needs of older people, families, communities and broader society.
‘Shared value’ is one way to approach this. It’s a business strategy designed to solve social issues profitably by leveraging the resources and innovation of the private, non-profit and government sectors to create new solutions to some of society’s pressing challenges.
What needs to change, and why?
As in any other service area, the government wants to spend less per recipient on health and care services, not more.
The question it faces is how to achieve this without reductions in quality and safety. The aged care regulatory system does not have the broad, agile and integrated approach to risk response that is required.
The aged care roadmap set the pathway to a market-based system. People with means will be required to pay more for aged care; they are also likely to expect more for that increased investment.
More investment is required to track demand and consumer expectations of quality and accommodation – that means growth in major not-for-profit and private sector companies who can leverage scale and equity.
Should companies profit from aged care?
We live in a capitalist democracy. When we go to work, we expect to be paid for doing a good job. When we put money in the bank or buy shares, we expect a return.
In a competitive context, the profit motive drives innovation to achieve efficiency and marketable advantages such as customer experience and technology.
Billions of dollars – much of it in retail superfunds – has been invested in meeting the challenges of an ageing population and the related demand for care. There is a cost to this capital, just as there is any other source of funding, such as a bank loan.
We should be encouraging this investment as an alternative to other industries such as fossil fuels.
Rather than questioning whether profits are good or bad, we should consider whether the standards of care and experience can be improved as a result of the profit motive.
Whilst confronting, the Royal Commission Interim Report presents an opportunity for aged care providers to innovate their service models and build new partnerships to address the growing issues the sector faces.” – Helen Steel, CEO, Shared Value Project
Creating shared value
In aged care, shared value can achieve outcomes at multiple levels:
- Structural design and reform: defining a sustainable future state and the roles of providers, government, investors, educators and consumers in achieving it. The Australian government has already successfully used shared value as a co-design framework in its foreign affairs and environment portfolios. In aged care, shared value framing provides a pragmatic means to address revenue source and mix, as well as the enabling environment, at arm’s length from the challenging political context.
- Business strategy: identifying and planning for achievement of social and business value across provider and supplier organisations and operations. Aged care examples are social procurement, workforce redesign and health services integration.
- Social innovation: designing products, services, gateways and experiences to address social needs profitably, and therefore sustainably. Examples of outcomes in aged care include repurposing services and assets for families and communities, ‘healthy’ building design and technology adaptation.
Paying for choice
Baby Boomers are entering aged care and, fiercely independent, they want to minimise the change in their lives when receiving care.
They are also used to paying for quality. They expect choice – and so do their Gen X children.
The aged care system – the Act, regulations and industry standards – need to evolve to allow the more personalised care and supporting services. The challenge is to incentivise and not stifle the innovation and therefore the quality of responses.
The job of business is to use shared value as a framework for designing choices – to minimise complexity along the customer journey but ensure choice is delivered, profitably.
People seek purpose
People want to work for companies that are admired for their performance and purpose. Aged care needs to attract an additional 400,000 workers over the next 20 years to meet demand.
But it’s not just about volume; the sector needs people who find personal reward in caring for others – people driven by a sense of purpose.
By using shared value as a framework or business evolution, purpose will always be part of the performance narrative.
It enables a much more honest discussion with staff about the fundamentals of business and, alongside or through employees, a more honest discussion with families.
The Australian Government has invested billions in the aged care sector and worked consistently over the past two decades to build the system, deliver the aged care ‘gateway’ and establish agencies with important standards and assessment frameworks.
It now needs to create an enabling environment for businesses (whether private sector or not-for-profit) and challenge them to design a sustainable future.
Rhod Ellis-Jones is the principal of Ellis Jones, an Australian consultancy creating social impact through research, strategy, communications and design. Ellis Jones has a dedicated health and ageing practice. Rhod is also the founder and deputy-chair of the peak practice body, the Shared Value Project.Do you have an idea for a story?
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