Mr Nick Hopkin1
1Nick Hopkin & Associates Pty Ltd, Quindalup, Australia
Significant reforms to improve transparency and comparability of home care pricing information and to address high administration costs, have been introduced by way of amendments to the User Rights Principles 2014.
With the removal of administration fees as a separate billing item on statements for new clients from 1 July 2019, there will be a greater focus on generating more revenue from direct hours delivered. As a result, the business will need a better understanding of financial performance. To do this, the business needs a measurement of financial performance, and not merely a count. As Peter Drucker once said. ‘If you can measure it, you can manage it’.
Although there has been substantial innovation and changes in Aged Care, there has been no changes to the familiar monthly management accounts reporting under CDC.
The typical month end commentary around ‘Direct care costs are lower than budget as revenue is lower than budget’, will no longer be acceptable.
By adopting a manufacturing approach to identify the budgeted unit cost of delivering one hour of direct care, and then ‘flexing’ the actual delivery based on budgeted assumptions, allows the business to better understand its underlying performance.
For instance, by using this approach, the business can break down the variance of actual direct labour costs compared to budget to a more granular level, to help understand true underlying performance i.e.:
- Labour rate
- Idle time
This approach can also be applied to other cost categories as well as revenue categories.
There has been little innovation in the way Home Care financials have been reported. Changes in Home Care pricing will result in more revenue being generated by direct hours delivered. Providers will need to adopt a ‘manufacturing’ approach to measuring performance, which includes unit costing and flexing actual activity based on budgeted assumptions to truly understand what is driving underlying performance. No systems exist that incorporate this approach in the Home Care market. Providers will be able to apply this method of reporting in excel for themselves. Having previously worked as a Financial Controller in a Footsie 100 UK manufacturing company for 5 years, I have adopted the manufacturing reporting approach and applied them to the Home Care market. This approach can also be applied to any service delivery market, such as NDIS.
In relation to the ACSA summit, it addresses the following subthemes under performance: Leadership, management and governance, remaining sustainable and innovation.
The outcome of this presentation is to make providers aware of an alternative improved method of measuring performance under Home Care. Any provider can adopt these methods. No additional system needs to be purchased, as the provider can incorporate elements of the reporting into their existing financial systems (via journals) or by excel. Any provider, irrespective of their size, can benefit from adopting this new method of reporting.