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Business model innovation

How the aged care sector is responding to major reform

6 minute read
Elderly Lady Sitting In Chair With Elderly Smiling Man Holding Her Hand

Changes to an organisation’s underlying operating model and what it offers to clients is an important consideration to maintaining a long-term and sustainable business.

In Australia, the aged care sector is currently implementing a major reform agenda after a challenging few years.

Now more than ever, business model innovation is vital to maintaining the quality of care and satisfaction of clients within the sector.

Aged care reforms

According to Juniper Planning and Strategy Executive Director Eve Currie, the sector has faced significant change and pressure as a result of the Royal Commission into Aged Care Quality and Safety (RCACQS) and the introduction of new Aged Care Quality Standards, compounded with the impacts of COVID-19.

“Increased legislative and regulatory compliance, and reporting requirements without the necessary increased resourcing are placing huge pressures on the sector,” she said. 

“Community expectations are changing and the aged care sector is having to respond to these changing requirements.

“Over 60 per cent of mainstream aged care providers – more than 70 per cent for remote providers – are in significant financial difficulty and require urgent Australian Government assistance.” 

The RCACQS, details of which were released in May last year, and the Aged Care Quality Standards introduced in July 2019 highlighted significant reforms needed in the aged care sector. 

According to Ms Currie, one key issue is the urgent need for more frontline care and clinical staff.

“The Australian Government must urgently provide additional funding to meet this demand and address the unacceptably low salaries of aged care workers,” she said. 

Review of Innovative Models of Aged Care

The third research paper published by Flinders University for the RCACQS reviewed the innovative models of aged care.

This research assisted the RCACQS final report, which determined a mix of factors resulted in an aged care sector that was behind the research, innovation and technological curves. 

“Whilst there are still unknowns about how the reforms will specifically impact providers and the sector, they are challenging aged care providers to think differently about innovation and their business model, to remain competitive and sustainable in the longer term, and to remain responsive to community need and expectations,” Ms Currie said. 

“In this new landscape, it’s imperative that aged care providers review and rethink their strategy for the future to ensure older Western Australians can access high-quality and safe care and services as per the Aged Care Quality Standards. 

“Providers must be able to differentiate themselves from competitors and ensure they are sustainable long term, while also being able to collaborate in an increasingly competitive environment.”

As a Federal Government-funded and highly regulated industry, rethinking the business model for aged care providers comes with limitations.

According to Ms Currie, overcoming these limitations means thinking outside the box.

“We need to break the mould of thinking what has worked before will work in the future, because it likely won’t."

“The board and executive need to work together and challenge themselves about what aged care looks like in the future under the aged care reforms and how to best respond to this challenging and complex changing landscape.

“Major organisational transformation, together with service redesign and innovation, will be essential.”

Ms Currie said although aged care, like all industries, was competitive in the sense that there are multiple operators, it was also collaborative in its response to working with government.

“Reform of the aged care sector requires providers to work together to ensure that the reform of the overall aged care system is responsive to the needs of older Western Australians,” she said.

What are aged care companies doing?

The Juniper Board and Executive undertake strategic plan reviews each year to revise and refresh the company’s strategic plan and direction.

“Since the release of the aged care reforms, the strategic review process has been ongoing and more comprehensive,” Ms Currie said. 

“There is a strong focus on ensuring service quality and excellence in corporate and clinical governance.

“Juniper is one of the largest aged care providers in WA and the largest not-for-profit provider of residential aged care services in the state.

“The size and complexity of the organisation can sometimes result in necessary change being slower than required.

“Whilst Juniper has a large asset base, many of its facilities require repurposing and refurbishing to better meet contemporary consumer expectations.”

According to Ms Currie, sole reliance on government funding is not only an inhibitor, but also a driver for innovation.

“It ensures our services are competitive and innovative, meets consumer expectations and are also sustainable long term,” she said.

“Current government policy settings and funding arrangements in aged care are no longer appropriate and providers must reset their strategies if they are to be sustainable in the future.

Just one of the areas the RCACQS identified as needing reform was the integration of technology into the aged care system. 

The final report stated a technology-enabled environment was needed for efficient clinical, business and operational systems, which needed to be designed to identify the needs and preferences of older people and provide tailored care. 

Strategy and business model innovation

The disruption in the aged care sector is a powerful case study to illustrate the importance of business model innovation.  In their Harvard Business Review article Can You Say What Your Strategy Is?  Professors David Collis and Michael Rukstad provide a framework for looking innovation through three critical components, - objective, scope and advantage.

A specific model referenced throughout the article is the Edward Jones model, where the company outlined the customer relationship to be the heart and centre of the business.

According to the report, many executives cannot succinctly explain their own business model or strategy which, in turn, means they cannot expect their employees to do so. 

“Companies that don’t have a simple and clear statement of strategy are likely to fall into the sorry category of those that have failed to execute their strategy or, worse, those that never even had one,” the article said. 

Often not having a clear strategy leads to frustration among employees and executives. 

Devising a clear strategy frontline staff, executives and everyone in between can cite is imperative to a functional business model and outcomes-based workplace. 

Where to from here?

Senior Executive Forum 2022 - Leadership & Executing New Strategy 

With Harvard Business School Professors David Collis & Ethan Bernstein

AIM WA invites our region's best and brightest leaders and high-potential individuals to participate in this exclusive Forum. 

This year's Senior Executive Forum (SEF) represents an inflection point in our thinking about strategy. It moves us away from strategy formulation and shifts the focus to executing strategy and to creating value with innovative business models and agility so we are adaptive to the constantly changing external environment.

Using the highly effective Harvard Business School case study method, Harvard's very own prestigious faculty will challenge us to develop our judgement and critical thinking. Learning not only from expertly delivered case studies, but co-creating knowledge with peers, we'll bring our collective experiences together on the complex topics under discussion.

You can't afford to miss this unique opportunity to develop your meta-skills alongside some of the world's most revered, big-picture thinkers.

The Senior Executive Forum takes place Wednesday 27 to Saturday 30 July 2022 and is fully residential at the DoubleTree by Hilton Perth on the beautiful Swan River waterfront. 

Numbers are limited. Reserve your place today or call 08 9383 8000 and ask to speak with Dr Shaun Ridley or Alex Quinn for more information.