First published in Australian Ageing Agenda, September-October 2012. Reprinted with permission.

It’s coming up to crunch-time for aged care. With the much discussed ‘new paradigm’ almost upon us, CEOs, boards and senior management teams need to get strategic or get going and that takes real leadership, writes Keryn Curtis.

If Michael Goldsworthy is right, the writing is on the wall. And it’s been there, in big black letters, for a good few years. The management consultant and governance specialist says the environment in which aged care providers have operated in the last two decades is undergoing a seismic shift. A new operating paradigm is merging and providers of aged care services will need to adapt to survive in the new environment.

Goldsworthy says the Productivity Commission’s report on aged care, Caring for Older Australians, is just one of six major government reports in the last three years [see below] that are together shaping a bold new paradigm for health and social care in Australia.

Six reports

  • A Healthier Future for all Australians Final Report; June 2009 [National Health and Hospitals Reform Commission]
  • Building a 21st CenturyPrimary Health Care System – Australia’s First National Primary Health Care Strategy; 2010
  • National Mental Health Report; 2010
  • Productivity Commission Inquiry Report – Caring for Older Australians; June 2011
  • Productivity Commission Inquiry Report – Disability Care and Support; July 2011
  • Productivity Commission Research Report – Contribution of the Not-for-Profit Sector; February 2010

“It’s no coincidence,” he says. “Collectively, these reports herald a new paradigm of individualised care in Australia, with new systems and a new set of funding structures and any organisation involved in this space will need to adapt.”

Together with the growing imperative for ‘customer choice’ and free market forces dominating the horizon, it makes for some tough strategic planning and decision-making ahead for boards, chief executive officers and senior management teams.

Goldsworthy says size and efficiency will be pivotal, with a trend to consolidation of the market. According to his projections, where currently there are 1,200 residential care providers operating 2,380 facilities, and in the future there will be only 400–500 providers operating between 2,500 to 3,500 facilities. In community based care, where there are currently 4,500 to 5,500 providers, Goldsworthy projects only 500-1,000 providers.

“Throughout Australia the number of amalgamations, mergers,sales and closures of community care organisations is increasing. I’ve recently completed my 214th amalgamation/merger project.

“The big will get bigger and the small will become niche or specialist…or perish. But remember,” he says, “as big trees grow, there is plenty of room in the forest for medium sized trees, shrubs, bushes and even fungi; but it’s a case of survive by adaptation…or die,” he says.

The sustainability formula

Catholic Health Australia’s (CHA) CEO, Martin Laverty, agrees that size and scale will play a key role in the future. From a government policy perspective, Laverty says the key questions around scale, efficiency and sustainability for aged care providers in the future remain unanswered.

“It is not said, but it is more or less understood, that government policy expects a certain scale for a service to be efficient, to deliver the quality that consumers deserve. And some providers won’t fit that.

“In the years ahead, government policy is going to encourage providers to be of a greater scale, whether through growth or mergers, because government is looking for efficient delivery,” he says. “Aged care policy is no different to other human services policy. Disability went through this process in the 1990s and it triggered a whole lot of mergers. And look at hospitals. As we move to a national efficient price for hospitals, we will have to demonstrate efficiency.”

“[Aged care] providers in the years ahead will have to assess their scale and trigger the discussion – it’s just a natural part of government policy and the Gillard government reforms have done nothing to slow that down. We should all be talking about scale, efficiency and quality to meet the expectations of consumers but also the expectation of government […] then those smaller organisations can have an easier time of planning for their business future,” he said.

Facing up to those decisions is challenging but essential, says Goldsworthy, and aged care leaders will have to “take the bit in their teeth and get into more strategic thinking and decision making.”

He says his perception is that about a third of providers are already well down the road in adapting to the new paradigm, another third have just set off on the journey, while another group remain in denial about what the future holds.

“There are increasingly boards, CEOs and executive teams who are 110 per cent well positioned and definitely there for the long haul. Sure there’ll be some pain and grief and reinvention but that happens when you’re growing from childhood to adulthood.

“There are others who are getting there or just starting to think about it and they’ll probably be OK. But then there are others who are like kangaroos in the headlights – stunned and they don’t know which way to hop. Or they’re just highly conservative, risk averse, inwardly focused… and they’re dead in the water. Walking backwards into the past, looking at their glorious future,” says Goldsworthy.

“It doesn’t matter whether you’re in residential care or a community services provider, you need to ask yourself, how do we ensure we can provide the right services for both current and future clients? How do we make it viable, sustainable and profitable? And how do we remain part of our community or region?

“You need to start with these three questions.”

 

On leadership

On board leadership:

Photo by Dominic Goldsworthy, Better Boards Australasia

“We need to adapt and thrive at this time of change. Being a leader while managing change sometimes requires extraordinary amounts of energy. You have to run the business as well as manage the change. You need to be visible – recognisable and approachable – to be respected. Integrity is critical and the key is to be yourself. People can smell insincerity a mile off; if you try to be something that you’re not then you will fail. Do more listening than talking and lead by example. Don’t ask others to do what you are not prepared to do yourself. If you believe in your cause and show it constantly and consistently, then your people will follow. Your single most important tool is a three letter word: why?”
David Locke, Assistant Commissioner, Charity Services, ACNC.

On senior management leadership:

“Good leaders have three qualities: they have ‘presence’ (not necessarily charisma) and people notice them and will listen to them. They have ideas and they have the capacity to think in ways that are innovative and progressive. And they can make a judgement call: they have discretion and can handle things when they are in the moment.”
Dianne Adamson, CEO of Adamson and Associates.

On board chair leadership:

“There are two key people. The CEO is the primary leader but the board’s chair is a close second. What shapes the leadership effectiveness of the chair is their emotional intelligence – the personal and interpersonal dimension – but also spiritual intelligence. Think carefully about the role and influence of the chair in your organisation; have a succession plan and train potential chairs. The chair with the most potential is the humble type; they don’t always honk their own horn. You can take this free advice now on choosing the best type of chair or you can pay for it later.”
Yvonne Harrison, Assistant Professor, Rockefeller College of Public Affairs and Policy, University at Albany, State University of New York. (Prof Harrison was a keynote speaker at Better Boards Australasia 2012)

 

Tales of tough love 1: a residential care story

CEO of CHA, Martin Laverty, knows first-hand the pain of making tough decisions ‘for the best’. In 2010, CHA commissioned PricewaterhouseCoopers (PwC) to undertake an assessment of the health and future sustainability of the group’s Catholic hospitals and aged care services. Among the outcomes of the ‘inFORMATION’ project was the advice that a small number of aged care service providers would be ‘sincerely challenged’ in the years ahead.

“The PwC report found that a number of small Catholic aged care providers – 17 across Australia – were of a certain scale that meant they would face sustainability challenges, unless there was a change in government policy to support smaller aged care providers,” says Laverty.

“They all had less than 40 beds and PwC said that there was no expectation that government would change its approach and basically small providers needed to make plans for their future.”

Laverty says there were options to consider in response, including whether to grow the services; to seek alliances for group purchasing and procurement arrangements; to merge with other providers; or simply reconsider their future in aged care and focus attention on how those beds could be transitioned smoothly to another provider.

“For example, there were two small residential aged care facilities in metro Brisbane – one 20 bed and one 30 bed facility – run by the Sisters of St Joseph in QLD, that the PwC report said would not be sustainable in the future without some big changes. We needed to weigh up the options – do we invest and expand? Do we close down all together? Do we transition those beds and services to someone else?

“They have ultimately made the decision to transition out of these services and that decision was a significant one. But the way in which they have taken it, is a best practice illustration”.

Sensible and mature

“They assessed the business options first and they made a decision that was ultimately in the best interests of residents, families, staff, and the Sisters themselves,” Laverty adds. “And they communicated the decision really well to everyone involved.

“They needed to find a partner to transition their services to and they decided that their beds and residents will be cared for by Mercy Aged Care in QLD. It is a five year process and they have a good ongoing communication plan to manage it.”

Laverty describes it as a sensible and mature approach but admits he has seen similar situations that have not been so successful.

“If you focus too much on the financial decision, you can overlook the human impact. And how you communicate an outcome is just as important as the decision itself”.