NFP Aged Care the Forgotten Ethical Enterprise
Not-for-profit organisations such as Social, Community and Aged Care boomed after world war two by providing for the general betterment of the community and driven by the mission and not the profit. A socialist principle that lived through a capitalist dominion till now. NFP aged care sector mainly started by community, culture and religious entities, regulated and mainly funded by the government from taxation revenue streams. In Australia, the population growth and a steady increase in the government budget for long term care are forecasted with less working force and less tax as consequence. The government solution to resolve this issue is to reform the aged care sector to become a sustainable business by introducing a competitive and consumer-centric driven market, a solution that used in Europe and the US for the same concern. In my opinion and facts from the UK and US experience that the outcomes of the solution are globalisation and privatisation of the sector progressively. The outcomes are guaranteed due to business dynamics and consumer-driven market and the golden opportunity for private and global health care. Does it help the consumer, or can it end the culture of care? Is it the end of the welfare state that started in the ’40s after the war to build together and take care of each other? Or is it the beginning of self-interest individuals lives in a disconnected society? Can NFP aged care be a sustainably profitable business? Or the new neoliberal policy of outsourcing public services to the private sector.
To take you with me through my view and to answer those questions I would like you to read the upcoming pages. Due to the length of the subject, I divided this discussion into two separate papers. The first will discuss a few elements: the history, the population, the business and business models. The second paper will focus on enterprise architecture, innovation, digital transformation and technology.
I would like to mention that my view in this writing does not cover all aspects of the subject but my view on the current solution.
There is no right way or wrong way when it comes to opinion, only a positive contribution added to the society, by starting a debate for an existing or upcoming problem. The future will be altered by one event or several but the lessons and learning from past experiences and history should be used to shape a better future. Let’s go back in time to understand the origin, cause and effect of the social, community and NFP organisations.
Back in Time
It has begun in the aftermath of World War two due to economic stagnation, depression, protectionism and unemployment, which paved the way and asserted the Social, Community, welfare services starting in 1946/47 in Western Europe[i]. lead by the fear that Fascism and Communism thrive on social despair, and the divide between rich and poor, therefore the citizens’ common interest must be the responsibilities of the state to protect them against the repetition of 30s and 40s political upheaval. in the next few decades, people had faith in the state — as a planner, coordinator, facilitator, arbiter, provider, caretaker and guardian and crossed almost all political divides. The welfare state was openly social. Left and Right, Christian Democrats and Communists, Socialists and Conservatives, but almost everyone had something to gain from the opportunities, the state afforded them for income and influence. Welfare capitalism unfolded in Western Europe, and it was truly post-ideological (Judit, 2005). NFP sector flourished during this time
When the wall dividing East and West fell in Germany, and the Soviet Union collapsed, globalization became an all-conquering force. (Vanham, 2019) The Capitalist system became the main social and political system till today. the capitalist system is the ‘for-profit’ way of doing business. It is based on the idea that humans are mostly selfish and competitive, so the best way to motivate economic activity is to appeal to individual self-interest. (Hinton & Maclurcan, 2017)
The Market: The young and the elderly
now that we understand the basic historical background and the foundation, let’s review the present, specifically in Australia and NFP Aged Care.
Australia’s population will both grow strongly and become older due to improved life expectancy, the population growth and ageing will affect labour supply, economic output, infrastructure requirements and governments’ budgets and use of government services such as health care, aged care, and public housing. (Lattimore, et al., 2013)
With the increasing demand under current policy settings, government expenditure on aged care could rise from the current 3 per cent of total Australian Government revenues to 9 per cent by 2050. At the same time, there is expected to be fewer taxpayer to fund care (Ageing and Aged Care In Australia, 2008). The cost of Aged Care services to the government was 18.4 billion in 2017/18, 20 billion in 2019 and 24 billion in 2020. The projected and steady increase in budget enforced the government to look for a sustainable aged care system.
Aged care system that requires consumers to contribute to their care costs where they can afford to do so means that there will be increased consumer expectations for greater choice and control. The ability for consumers to choose who provides care and support will create a more competitive and innovative market (Aged Care Sector Committee, 2016)
In 2012, the Government’s Living Longer Living Better aged care reforms identified the need for more choice and flexibility for people receiving care at home. Introducing CDC “Consumer Directed Care” on 1st of August 2013. No one can argue that the sector requires to comply with the quality standards and the consumer freedom of choice, and for the consumer to have greater control over their own lives by allowing them to make choices about the types of care and services they access and the delivery of those services (Home Care Packages Program Guidelines, 2013). Sustainable aged care, quality of care, regulating, and creating a competitive market is great ideas, however, we will see the cascading effect and the impact on the business dynamics for NFP aged care who is a large contributor in the aged market from the early start.
The Business Model of Care
Before we get to the business impact and cascading effect on NFP organisation we need to understand an important concept “The Business Model”.
A business model is the basic logic of a company that describes what benefits are provided to customers and partners. A business model answers the question of how the provided benefits flow back into the company in the form of revenue. The created value enables differentiation from competitors, the consolidation of customer relationships, and the achievement of competitive advantage. A business model involves the following dimensions and elements:
· The customer dimension contains the customer segments, customer channels, and customer relationships.
· The benefit dimension includes products, services, and values.
· The value-added dimension includes the resources, skills, and processes.
· The partner dimension includes the partner, partner channels, and partner relations. The financial dimension includes revenues and expenses.
The objective is to combine the business model elements in such a way that they mutually reinforce each other. This makes it possible to achieve growth and makes imitation by competitors difficult. (Schallmo, Williams, & Boardman, 2017)
The recipe for combining those elements is the strategy that the enterprise/company adapt to increase revenue and to achieve competitive advantages in the market.
NFP aged care providers mainly is a traditional services business model-driven, primarily dependent on government funding and local or religious communities driven by a workforce culture of providing care, mainly medically oriented, reactive and only addressing declines in wellbeing after associated challenges arise, and historically had limited competition pressure and a lack of incentive to innovate in response to emerging customer needs due to a high level of regulation in the aged care sector (Nusem, Wrigley, & Matthews, Disrupting the aged care business model, 2016).
The existing NFP aged care organisation strategy is not dynamic in policy or decisions and therefore the business model elements recipe to achieve competitive advantages is not existing especially with the limitation of regulatory constraints and as a result sustainability of the business model.
Therefore, the long- term sustainability of the non-profit aged care provider’s business model in decline, and its value proposition no longer relevant or compelling.
Ø government reforms resulting in changes to the funding structure;
Ø increasingly savvy customers with higher expectations and a disinterest for the current offering;
Ø risk of consolidation due to an undifferentiated offering;
Ø financially unsustainable business model;
Ø workforce challenges including relatively low pay rates and high rates of turnover; and
Ø risk of digital disruption from new market entrants. (Nusem, Wrigley, & Matthews, Disrupting the aged care business model, 2016)
In the other hand, private enterprise (banks, Tech companies etc.) varies in products and services, but they have a common goal, “maximise profit for shareholders”. Variety of strategic and marketing services recipes with built-in business models to support the organisational goals and with a client-centric approach in providing products and services. Well-established business structures and automated optimised business processes supported by technology and digital tools to measure financial performance; an organisational structure adaptive to change.
Let’s go back to the example of Home Care government reforms and the CDC Consumer Directed Care for a customer-centric, competitive business model and the impact on NFP aged care. in 2013 CDC meant the competition has begun between private providers and Non-For-Profit providers, and between Non-For-Profit providers themselves.
The NFP aged care providers faced competition with a need to respond to changing legislative requirements, increased expectations from customers and the increasing likelihood of a shortage of appropriate experienced staff that are contributing to instability within this sector (Nusem, Wrigley, & Matthews, Disrupting the aged care business model, 2016). Also, major administrative, operational and staffing challenges
Let’s examine the winner’s in CDC reforms
new entrants, such as a non-Commonwealth approved provider, now have the opportunity of deriving revenue from the user-pays market by requiring clients with a Commonwealth entitlement to request the use of their service. Because the approved service provider no longer owns the Home Care Package, they are obliged to manage the package on behalf of non-approved services, if the client demands it. The consequence is that every large provider finds themselves approached by people without an ACAT assessment. Coaching clients in the details of their package, thus, becomes a challenge for providers, who can only recover costs from Commonwealth subsidies and fees. Coaching and advocacy services are not funded (McCallum, 2017).
Larger providers, profit-driven, demonstrated strong natural alignment between their mission, outlook and existing service offering and CDC; embracing CDC view as an opportunity to expand their reach and service suite, and recognise its benefits to their clients. providers who are more likely to be smaller, NFP / Government, or in rural and remote locations, were resistance to the concept of the change more broadly, driven by perceived and actual challenges associated with the process of adapting to change (the operational, administrative and technical shift required), rather than the specifics of delivering home care packages on a CDC basis. (Elliott, Rutley, & Stephens, 2016).
The market share of large for-profit providers continues to grow rapidly. Likewise, the influence of for-profit providers on shaping government policy and influencing broader trends in the aged care sector (Ward, 2018)
A successful story of a large private aged care provider:
Since entering the Australian aged care sector in 2007, BUPA has become one of Australia’s largest aged care providers through the acquisition of various aged care providers such as Innovative Care. Five years after having entered the market, BUPA has grown beyond the size of one of Australia’s larger aged care providers, Acacia Living Group previously known as RSL Care, which has spent over 75 years building its footprint. This aggressive entry into the market presents a huge risk to existing providers which cannot compete against BUPA’s network of resources and extensive customer data. (Nusem, Wrigley, & Matthews, Exploring aged care business models: a typological study, 2017)
The history also told us In the UK experience (during the 1980s and 1990s care home closures were commonplace as the market adapted to the introduction of new regulatory standards, and consolidations within the industry took place. Smaller operators were bought out by larger operators or simply closed because they could not generate sufficient economies of scale to survive and the larger operators began to dominate the sector) (Hudson, 2016).
What about the consumer? Since the introduction of the CDC, administration fees have increased significantly. This is partly because they are now transparent and partly because it is more expensive to provide non-standard packages. Some consumers are experiencing a lack of choice, insufficient or non-existent service provision, and the need for advocacy and coaching. low confidence in the system is felt in regional areas due to lack of choice, high administration fees, and the difficulty of transition between entry-level care and Home Care Packages (McCallum, 2017).
In Australia, in 2018 there were over 104,000 consumers on the waiting lists (Miller & Branley, 2018). In 2021 there are almost 100,000 elderly people on the waiting list for home care. the average wait time for those requiring the highest level of care is 28 months (Atkin, 2021). Therefore if you got the financial means you can choose your Private Aged Care providers that offer the same services, but you pay for the services yourself, rather than waiting for government funding.
traditional, religious and charitable organisations provide aged care services from within a culture of service (McCallum, 2017) and not from a self-interest profit-driven on distress purchase and vulnerability of the consumer during a health and aging crisis is the key to the solution.
Competition gradually changing NFP aged care culture of service and care and impacting the business survival due to the inexperience and deficiency in the existing business model itself, a well-developed dynamic strategy, systematic approach, digital technologies and innovations, poor management to compete in a consumer-driven market. with an increase in spending for hiring business managers from the private sector, the technology and digital tools to compete and lack of experience in marketing services, with no strategic direction to define a roadmap, goals or objectives to achieve a positive outcome.
Wealth, power and the end
The moral values have changed after world war two — from the common genuine support for all after the loss of millions, to self-interest and commercial global power engine to drive the economy to unsustainable endless profit and growth in a world with limited resources during an aging crisis that steadily increases the government budget out of control. The government rightly reviewed the sector multiple times for many years to try to create a sustainable aged care sector that provides maximum quality of care to its elderly citizens, but the forecasted outcomes will drive the NFP culture of care into the void. We will be left with a system that is only concerned with health and aged care if it generates a maximum profit and expansion in the guaranteed growing market for its shareholders’ self-interest. A system that treats profit as an end, rather than a means to an end and can collapse at an economic crisis and leave us to another market in another distant land with a promised capital and growth.
However, the government and NFP organisation need to work together to analyse the parts that sum the whole and create a new NFP aged care business model for a sustainable business with a strategy for the growing demand for ethical products and services, a strategy to generate profit to help NFP focuses on profit to achieve their missions rather than the profit as a goal itself.
Reviewing not only the quality of care also the competitive advantage between private and NFP and the impact of regulatory decisions. Modelling and simulating business dynamics to understand the impact of regulations on the care culture and consumers.
Endeavour to encourage new NFP organisations in the field of business, solution, technical and software development, and enterprise architecture to empower and inspire the NFP aged care to be a sustainable business using the taxation revenue from a large corporation to guarantee a quality of life to our elderly.
But I am not surprised that large corporation, such as Google and Facebook pay zero tax (Khadem, 2019) and, 20–30% of ASX top 500 companies reporting accounting losses on average, (Tax and report data, 2020) to avoid taxes, including The six largest for-profit aged care providers in Australia. (Ward, 2018)
Thomas Carlyle said in his famous quote, ‘if something be not done, something will do itself one day, and in a fashion that will please nobody.
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[i] Germany instituted pension, accident and medical insurance schemes under Bismarck, between 1883 and
1889.