The final report of the Aged Care Royal Commission was released this week – Jonathan Dutton FCIPS looks at the role that procurement can play for SUPPLY CLUSTERS members …
The final report of the Royal Commission into Aged Care was released this month with 148 recommendations for the Government to consider, and some little disagreement amongst the twin-commissioners about the best way to oversee and manage aged care in future?
Regardless, one thing is clear – that standards of aged care across the sector must rise. Inevitably this will cost aged care operators. Not all are not-for-profit enterprises. Some are large scale providers.
Yet many of the 2,7000 aged care homes in Australia are smaller for-profit businesses – often state based and operating just a handful of local homes each. With no great scope for real economies of scale. Maybe, even, a wave of consolidation or collaboration is likely downstream?
Anyway, one example mentioned as indicative but unacceptable in the Royal Commission hearings was of two Registered Nurses (RN) working a 12 hour night shift 6pm until 6am looking after fully 72 aged patients. Some patients were not checked on at all during the shift.
Imagine new care standards set night-shifts as a more standard one RN to a recommended number of 8 or 6 or, even, 4 patients – as many ideal nurse/patient ratios are recommended. And over a 9 hour shift maybe (9pm-6am), not 12 hours overnight.
That could mean 9 nurses working 9 hours (81 nursing hours) to support 72 patients in care, not 2 nurses working 12 hours (24 nursing hours). All at premium night-time rates of course.
In other words, a 330% rise in costs. Plus on-costs of keeping 7 more nurses on the payroll or, worse, using nursing-agency staff on call.
Costs to rise for aged care providers
What this simple example means is that inevitably costs will rise dramatically in certain aspects of aged care – for all providers. As they inevitably will anyway in post-Covid aged care regimes – as extra precautions are taken in future against pandemics or even simple viruses.
Government cannot fund all aged care cost increase indefinitely – tax levies or not. The pressure will be on to cut cost elsewhere in the business. Especially on INDIRECT costs, but also bringing more efficiency to DIRECT cost streams – usually the most expensive bits of patient care.
Many smaller aged care operators have already started work. Some have hired procurement managers straight out of roles in larger procurement teams to bring their expertise to bear for the benefit of smaller scale businesses.
Often, spend can be just tens of millions – say $50m up to $100m typically. But a 10% saving on DIRECT cost (certainly a 15% saving on previously unaddressed cost categories) can bring millions of savings to use elsewhere.
Will it be enough though, will new efficiencies and new savings solve the problem of the cost of new standards? Personally, I doubt it. Leaving scope for more government support, more patient contribution or more family support.
Indeed, the line “putting patients at the centre of the system” might even be code for they also get to choose their own level of care, support and facilities and make-up the out-of-pocket costs themselves perhaps?
The UK Care Act 2014 seems to head in that direction; it’s six values are :
The six principles of the UK Care Act are:
The supplier community to the health sector in the UK have seemed to have previously moved their offerings towards collecting multiple contributions to the cost of one person’s aged care.
Especially the IT sector.
In any case, the pressure is on. Procurement have a key role to play to make sure the best value for every dollar spent on aged care; and that all categories are properly addressed.
This August, PASA will run the 7th Aged Care Procurement Conference LIVE in Sydney on 11-12th August. The programme will be geared to helping procurement practitioners in the sector to achieve more. The vendors and exhibitors attending will be there to help as well, of course. Many have worked hard to contribute new ideas to help.
The Aged Care Minister, Senator Richard Colbeck, has provisionally accepted an invitation to speak as well.
See you there.