The uncertainty around the future of home care pricing – whether it will be market-based or a more fixed-price system – is putting the industry “on pause”, Jason Howie, Partner Strategy and Corporate Governance, Pride Living, has told The SOURCE.
Finance complexity
Uncertainty around pricing is also causing problems for home care organisations looking to refinance their businesses or grow, and for organisations performing poorly and wanting to exit the industry.
“Some purchasers at the moment aren’t willing to pay a full price,” said Jason, who was CEO of home care provider Kincare for 20 years before joining Pride Living.
“So the the exit path for organisations is a real headache at the moment, because the expectations between buyers and sellers in many cases don’t match. So unless you’ve got a forced sale, we’re not really seeing a lot of transactions taking place at the moment.
“Trying to transact in that environment has been very difficult. Financing is extremely difficult because there’s no revenue model for the industry beyond what was 2024 and is now going to be 2025.”
Fixed vs market pricing
Uncertainty about the pricing reforms in general is hampering the sector, but pricing, more than any other aspect of reforms, will define the industry in the future, said Jason.
Early proposals last year for home care reforms indicated NDIS-style fixed pricing could be a feature of the future model, however, no clarity has been provided by the Department of Health and Aged Care since then.
Jason is in favour of the current market-based pricing.
A fixed-price model would commoditise home care and remove competitive behaviour from the industry, he believes. Providers would be less likely to invest in innovation, differentiation and even their workforces.
“If everybody’s being paid the same amount, because the path to success... is to become the lowest cost provider of services,” he said.
“One of the strengths of the existing system is that price is set by the provider and it's done in a competitive environment. I’m not seeing organisations overcharging, but I am seeing a lot of business cases get up around innovative service models.”
A more flexible home care system allows more potential for innovation, for example developing programs that allow family to be engaged in the delivery of services, finding person-centred ways to increase each customer’s quality of life, delivering preventative models of care, and investing in technology.
“If you've got a commoditised system, then organisations won’t invest in that type of service because they’re not getting paid for it,” Jason said.
Providers have their hands full
Uncertainty and tweaking of the current system is preventing providers from taking advantage of the flexibility in the current system.
“The [Department of Health and Aged Care] has been tweaking the system every six months, so project specialists in [home care] organisations have spent all their time absorbed in responding to the latest change the Department has required at an administrative level or a compliance level, rather than really having the opportunity to differentiate their organisations.”
