Competition not funding main worry in new home aged care

Article published 17 March 2023

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Competition not funding main worry in new home aged care

How providers compete now and in future

CHSP providers generally appear to be pre-occupied with how their funding will work from 1 July 2024. Will they get block-funding or be moved to activity-based funding?

They may have a bigger problem on their hands though. How do they prevent Home Care Package (HCP) providers poaching their clients.

Competition: HCP providers competing with each other

Ads for home care packages on the sides of public transport buses are the most visible part of the commercial, competitive approach taken by HCP providers. Compare that with the modest CHSP provider logo on a community transport bus or car.

The commercial approach taken by HCP providers to a human service is obvious. The intensity with which they use this approach will only increase from 1 July 2024.

That’s the day their ‘market’ will effectively subsume the CHSP ‘market’. HCP providers will be gunning for what is now still CHSP business. They will try to cherry-pick and go for the most profitable parts of the CHSP program.

From 1 July 2024, there won’t be HCP and CHSP providers anymore. Everyone will be an In Home Aged Care (IHAC) provider.

Competition: CHSP is winning for now

An important reason why former HCP providers will be able to poach clients from former CHSP providers is pricing. As Home Care Package data reports have shown, many CHSP clients with HCP level 1 and 2 needs are reluctant to move across to the HCP program. The reason often is cost.

The CSHP has a far more relaxed approach to client contributions to the cost of care. In commercial terms, this means that CHSP providers are competing with HCP providers and beating them on price.

But from 1 July 2024, CHSP providers will lose their built-in pricing advantage. All IHAC providers will presumably be using the same client contribution rules. These will presumably be the same as, or similar to the rules used in the HCP program now.

So, CHSP providers will lose a competitive advantage. IHAC providers can no longer compete on price. That leaves quality, or the perception of quality.

Hence the huge ads on the sides of city buses. That’s the way HCP providers currently compete with each other.

The competitive value of in-arrears financial management experience

CHSP providers are block-funded. Block-funding involves the transfer of a set amount to fund CHSP providers in advance for a quarter. This money is then acquitted by providers at the end of the quarter.

Generally, their financial and accounting systems are not geared to intensive interaction with the Department’s payment system. For activity-based funding, this interaction is on a monthly basis. Block-funding involves the transfer of a set amount to fund CHSP providers for a quarter. This money is then acquitted.

HCP providers have slowly been getting used to activity-based funding. At first, the Department deposited funds in individual accounts operated by HCP providers for each of their clients. These deposits were monthly and in advance. HCP providers would take money out for services provided. In a way, this was a form of monthly block-funding with activity-based characteristics.

Then, the Department noticed that literally several billions of dollars in unused funds were sitting idle in HCP provider bank accounts. Clients tended to ‘save up’ in their HCP for a rainy day, or for equipment, assistive technology or home modifications.

The Department changed the system to monthly payment in arrears for services delivered. This is the spitting image activity-based funding.

However, the rubber will hit the road on 1 July 2024. On that day, CHSP providers will have to have a transition plan in place to move from a system where they received a known sum of money upfront to a system where they provide services first and get paid after, hoping their costs are covered by what they receive.

By that time, HCP providers will already have been using in arrears activity-based funding for some years. That will be an important advantage in the competitive battle scheduled to commence on 1 July 2024.

Also read:

IHAC is coming: In Home Aged Care

In Home Aged Care: the new equipment scheme



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