Improving financial accountability and governance in aged care businesses

Jussi Karjalainen, Founder & Managing Partner, Valta Technology Group (Valtatech)

Greater financial accountability will become central to Aged Care provision, but how can providers prepare themselves? Can anything be learned from the superannuation industry’s response to their Royal Commission?

The recently released Federal Budget promises a huge and much-needed fiscal boost for Australia’s Aged Care system, fulfilling nearly 85 percent of the recommendations made in this year’s Royal Commission Report. As aged care providers take stock of the new budget, one thing that is clear from the recommendations is that greater financial accountability is coming to the sector. Take recommendation 116 as an example, which requires approved aged care providers and their suppliers to take part in regular cost data reviews[1]. The implication being that any additional Federal funding comes at a cost, and providers will be required to demonstrate greater visibility and accountability into how and where they are spending that money. That will likely mean regular spend reporting and an ability to justify every cent that is spent.

Luckily, we have seen this type of regulation before. Just under two years ago, Australia’s regulators set their sights on the superannuation industry, increasing scrutiny of underperforming super funds. My team and I have been working with CBUS’s superannuation fund for many years now, and we have seen first-hand the Australian Prudential Regulation Authority (APRA) requirements the fund is now required to meet. So, how can Aged Care Providers apply best practice to their business and spend management systems as they prepare themselves for increased scrutiny? And what can we learn from the superannuation industry’s response to their Royal Commission?

What should providers do today?

As a first step, providers will need to get a strong handle on their current finance and procurement processes. A good place to start is to conduct an analysis of those processes; bringing in key stakeholders from all parts of an organisation that are involved. This analysis will result in key insights such as:

  • Visibility into current procure to pay processes
  • Identification of key pain points
  • Identification of key levers that may impact user adoption of any new solution
  • Identification of key areas and drivers for financial return on investment for that solution
  • Identification of quick wins and longer-term development areas
  • The technology landscape map across Source to Pay processes

Utilising the insights and resources from the current process analysis, providers should then be able to start pulling together a clear and articulated vision of what the future requirements are, to inform resource and business planning processes. Additionally, the relevant teams should be able to produce a clear and articulate list of technology requirements to support their ‘to-be requirements.

Key learnings from the superannuation industry’s push for smarter procurement

There is no doubt that procurement practices across many sectors, including Aged Care, have changed since the superannuation industry’s Royal Commission two years ago. As a function, procurement used to be solely about acquiring products and services for the best price. However it is currently defined by information management and the ability to give executives the analytics, and guidance, they need to make better business decisions.

Procurement professionals now play a strategic role in any organisation that extends well beyond simply controlling expenses. Many teams are now also expected to manage legal and regulatory exposure, while providing valuable intelligence to key stakeholders.

As a result, procurement spend analysis is now a key health indicator of the organisation. The problem is that many aged care providers do not have efficient means of understanding their own spend data, therefore do not have the data available to make informed decisions. This was primarily due to either procurement not existing as an end-to-end function in their business, a lack of agile systems, or both.

Procurement is all about increasing the value of an organisation by sourcing innovative suppliers and increasing compliance with these suppliers. For superannuation, it was about sourcing goods and services with the lowest risk and highest value, ensuring a fund was spending for the best interests of members. Aged care providers take note.

While building procurement value in superannuation looks significantly different to other industries, including aged care. The main difference between it and an aged care procurement unit is that a superfund buys very few goods and a significant number of services. Yet there is a lot aged care providers can learn from their peers in investment. The additionally funding and new regulatory requirements are a great opportunity for Aged Care providers across the country to drive value and efficiencies in their back-office functions, freeing resources, and funding to enable them to focus on the most important part of their business – the care itself.

Upcoming webinar: Mr Jussi Karjalainen (author of this post) is joining an Inside Ageing webinar on July 8 to discuss how HammondCare took procurement into the cloud. Also on the webinar is HammondCare’s head of procurement Mr Aaron Passfield. To learn more about this discussion and to register – Click Here


[1] “Requirement to participate in Pricing Authority activities – By 1 July 2022, the Accountability Principles 2014 (Cth) should be amended to require participation by approved providers in cost data reviews. 2. By 1 July 2023, the new Act should require that as a condition of approval or continued approval, aged care providers are required to participate in any activities the Pricing Authority requires to undertake its functions, including transmitting cost data in a format required by the Authority for. the purposes of costing studies. The Authority should take costs associated with these activities into account when determining funding level.”

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