In our recent webinar with LASA, we talked to the specific challenges, issues and settings in which a Provider might consider selling or merging their operations into another Provider.

As a follow up to the webinar, we asked participants whether their focus was to Stay, Grow or Go. Despite the current turbulence, the majority of responses affirmed a commitment to the Stay or Grow pathways.

In this Insight, we share some successes and observations that may help you  build long-term sustainability as you pursue either a Stay or Grow strategy.

BRUCE BAILEY
Managing Director

Key drivers of financial sustainability

Like everyone in the sector, the issue of sustainable financial performance is constantly on our minds.  While commentators focus on the 60% of Providers who are in deficit, being solution focused, we focus on what tactics the Providers are making a profit employ.

To understand the gap in the financial outcome, we took a deep dive into Stewart Brown’s March 2020 survey and dissected the difference between the results of the top 25% and average providers. This is a bit like analysing the training program of two athletes to understand why they perform differently. Following the right training program means your financial performance will improve!

 
The Pack
Champions
The Variation
Average ACFI
$181
$184
$3.00
Direct service costs (% relative to ACFI)
$147
82%
$130
71%
$17.00
11%
Average cost /hr of labour
$46.50
$45.10
$1.40
Other operational costs
$62.14
$57.11
$5.03
Administration
$36.08
$32.91
$3.17
Care hrs /resident
3.23%
2.95%
9%
Cumulative variation
$28.20
EBT per bed day
$(8.23)
$21.08
$29.31
EBIT per bed per annum
$10,698

The evidence is clear, if you want your facility to perform like a champion, you need to focus on four key result drivers:

Be at least average at ACFI
Being average with staff productivity/efficiency won’t cut it
Get the supply chain (external costs) under control
Look at the back-office functions and make sure they are efficient
Reaching Peak Performance

While benchmarking gives you a starting point and a target for your performance. It’s the actions and discipline that result in improved performance. Given the parlous state of finances in the sector, if your financial outcome is average (the Pack), there is a good chance that your long-term financial sustainability is seriously threatened.

In our experience the challenge is not in seeing the gap in performance, its designing and implementing the solution. Changing the outcome is all about improving your work practices and systems, the reality is your staff like things the way they are otherwise they wouldn’t be the way they are!

Using our Profit Improvement Program (PiP) we partner with Providers to coach them to peak performance, within the context of their capability and capacity. A standard PiP roadmap looks like:

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The PiP works because it’s a partnership between Pride Living and your management team. Both parties are invested in achieving the changes that have been mutually agreed. Our continuous reporting of status, blockages and achievements to an appropriate project team, which may include the board, ensures appropriate accountability.

Examples of where Providers have achieved wins through the PiP include:

Enhanced internal capacity and processes to lift ACFI by over $10 prpd
Increased revenue of $5,000 per bed through our additional services program
Reduced roster costs by 7% (>$600,000) while implementing 24/7 RN coverage.

The journey certainly isn’t for the faint-hearted as tough conversations and decisions need to be made. What is surprising is that once explained we generally get great support for the recommendations as they ultimately create more security and provide better outcomes for all stakeholders. Pride Consultants find the results of our PiP engagements been some of the most satisfying they have been involved in.

We encourage you to take this first step

Using the above table compare your metrics against the Stewart Brown benchmarks. If you’re not happy with the financial performance of your facility you can either create your own PiP or give us a call to discuss how we can help you on your journey to Peak performance.

The good news is that some providers can access all the benefits from our Profit Improvement Program under the Business Improvement Grant Program.  This program can provide up to $7,500 per place towards the cost of implementing specific initiatives to improve the sustainability of your organisation. If you like we’ll even complete the grant application for you!

To find out more on how we can help you, contact Bruce Bailey on 02 9239 9004 or email bruce.bailey@prideliving.com.au