THE CHANGING CULTURE OF AGED CARE: ARE WE THERE YET?

Transcription

1 THE CHANGING CULTURE OF AGED CARE: ARE WE THERE YET? Douglas Strain CEO, Masonic Homes Inc

2 Outline Where are we now? Where are we going? What are the Challenges we Face? How Will We Get There? What is MHI Doing About It? Questions

3 Where are we now?

4 Where are we now? The Industry;

5 Industry Characteristics Feature Aged Care Property Operating Environment Highly Regulated Highly Competitive Customers Government Private Consumers Principal Outcome Standard of Care Service Delivered Return on Asset / Return on Equity Dominant Corporations Public Benevolent Institutions For-profit commercial operators Capital Position Small Asset Base Large Asset Base Cash Flows Substantial Cashflows Lesser Cashflows Profit Achieved Low Moderate Profit Potential High Moderate, though tightening

6 Where are we now? The Industry; Market Size;

7 Cost of Supplying Aged-Care Services $ billion Year

8 Where are we now? The Industry; Market Size; Operating Structure;

9 Operational Residential Care Places as at 30 June 2002 National SA Religious 37.6% 54, % 4,328 Private 27.3% 39, % 2,505 Communitybased 16.1% 23, % 2,038 Charitable 9.9% 14, % 3,588 State 7.1% 10, % 882 Government Local 2.0% 2, % 343 Government Total Number 144,896 13,684

10 Where are we now? The Industry; Market Size; Operating Structure; Financial Performance- Efficiency;

11 Financial Performance- Efficiency Technical Efficiency - -17% Scale Efficiency - -7% Allocative Efficiency -?% Regulatory Inefficiency -?%

12 Where are we now? The Industry; Market Size; Operating Structure; Financial Performance- Efficiency, and Performance Care vis-à-vis Financial.

13 Performance Care vis-à-vis Financial For-profit residential care services have an average efficiency score that is considerably higher than the national average as well as the averages for notfor-profit and government-run residential care services for-profit services are over-represented amongst the group of best practice services [Hogan, W. P., Review of Pricing Arrangements in Residential Aged Care - Final Report, Commonwealth of Australia, 2004, page 75 Source:

14 Where are we going?

15 Industry Lifecycle Industries begin in a period of fragmentation as companies experiment with different approaches. With time, a scalable approach emerges as a dominant model, often because it yields greater efficiencies than available alternatives. The dominance of the model also depends on the abilities of those invested in it to promulgate the model among key customers, suppliers, and other vital constituents. As the dominant model develops, an industry goes through a shakeout as unaligned firms are forced to exit. Eventually, firms find it difficult to improve their productivity on the dominant model at high rates, volume growth hits a point of diminishing returns, and the industry enters maturity. Ultimately, as volumes drop because of saturated demand or exhausted supply, the industry moves into decline. Source:

16 AGED CARE INDUSTRY LIFECYCLE Emerging Growth/Take-off Shake-out Mature Decline

17 Strategic Response The short-term value of winning the early race for growth and market share leadership has to be balanced against the longer-range need to build a durable competitive edge and a defendable market position. Well-financed outsiders are certain to move in with aggressive strategies as industry sales start to take off and the perceived risk of investing in the industry lessens. A rush of new entrants, attracted by the growth and profit potential, may crowd the market and force industry consolidations to a smaller number of players. Resource-rich latecomers, aspiring to industry leadership, may be able to become major players by acquiring and merging the operations of weaker competitors and then launching strategic offensives to build market share and gain quick brand-name recognition. Strategies must be aimed at competing for the long haul; often this means sacrificing some degree of short-term profitability in order to invest in the resources, capabilities, and market recognition needed to sustain early successes Thompson, A. A. & Strickland, A. J., Strategic Management: Concepts and Cases, 12 th Edition, McGraw-Hill, 2001, page 252

18 What are the Challenges we Face?

19 The Challenges The Role of Government vis-à-vis the Consumer; Consumer Focus; Health/Wellness/Hospitality Models; Management Ability/Capacity; For-Profit vis-à-vis Not-for-Profit; and Staff.

20 Projections of the number of registered nurses, [Karmel, T & Li, J, National Review of Nursing Education: The Nursing Workforce 2010,

21 How Will We Get There?

22 How Will We Get There? Awareness/Acceptance; Technology & innovation; Commercialisation; Management; and Alliancing/Partnering.

23 Alliancing/Partnering 'Industry utilities' restructure industries by shifting the basis for competition and using assets more effectively. Competitors decide to invest in a shared set of assets to make the whole sector more profitable. The 'utility' they create provides a commoditised service to multiple competitors in the marketplace. Those competitors continue to compete vigorously in other aspects of their business, such as service, marketing, distribution or product bundling. Shared assets make good strategic sense because they allow companies to spend their money on things that can set them apart from their competitors. Companies should choose the areas in which they want to compete, and commoditise everything else Companies have to identify which areas of the business are the real value-adding ones, keep control of those, and drive for efficiency in everything else.' Enemies Working Together, Business Review Weekly, 5 April 2004.

24 Alliancing/Partnering The Rub Companies still want to be the masters of their own destiny. But when you go into these alliances and utilities, if you want the benefits, you have to give up some of that freedom. the best solution for the group may not be the best solution for an individual participant - each will benefit to a different degree. 'There is a constant fear that someone's going to get a better deal out of it than you are.' Enemies Working Together, Business Review Weekly, 5 April 2004.

25 What is MHI doing about it?

26 What is MHI doing about it? By 2010 Masonic Homes Inc will be the preeminent not-for-profit provider of quality agedcare services in SA & NT. This will be achieved through a differentiation strategy based on our skilled workforce, our commercialised approach, our innovative bestpractise, our superior governance, and a strong brand.

27 What is MHI doing about it? Masonic Homes Inc will; Pursue organic growth through its current care sites; Make opportunistic acquisitions of aged care services or providers in SA and NT; Ally with the national network of Freemasonry-based aged care providers; Pursue beneficial partnering/alliancing opportunities with key participants in the aged care industry in SA and NT; Develop competitive advantage in key care services dementia, rehabilitation & palliative care; and Develop Information Communication Technologies as a competitive advantage.

28 Thank God That s Over! Now we can get back to some real soldiering STAFF GENERAL, BRITISH ARMY HEADQUARTERS, 11 NOVEMBER 1918

29 QUESTIONS??????????

30 MASONIC HOMES INC