In the year leading up to portability of packages StewartBrown had been tracking the sector levels of unspent funds with an increasing concern that almost $220 million of funding had accumulated and was lying unused within client’s Home Care packages – benefitting neither the client’s wellbeing nor the provider’s results.
The underlying concern is also that government may see this chronic underspend and reclaim it into consolidated revenue, further de-funding an already stressed sector.
In the year to March 2017 the Aged Care Financial Performance Survey average result showed a strong response by the package recipients and the sector in reducing the amount of unspent funds.
This change is likely through improving service uptake by clients while de-risking the threat posed to providers should the client transfer to another service.
To ensure that this trend relates to services provided to clients we use the proxy of total staff hours to correlate the uptick in services provided.
During the nine months to March 2017 the survey average of total staff hours for all programs rise to 7.09 hours per client per week against a weekly total staff hours in June 2016 being 6.59 hours. The March 2017 total comprised:
- Direct care: 32 hours
- Agency staff: 36 hours
- Case management and coordination: 87 hours
- Administration and support: 54 hours
- Total staff hours: 09 hours
The inverse of the unspent funds ratio is what we call the revenue utilisation rate – the ratio of total revenue charged to clients compared to total revenue available in a package from client fees and government subsidies.
There has been a large improvement in revenue utilisation in the last two (2) quarters and this has had the resultant effect of improving profitability.
It should be noted, however, that unspent funds are across the lifetime of the package, not simply this reporting period, so as unspent funds from previous periods is utilised the quantum of unspent funds will normalise to a more consistent result.
The average of total unspent funds for all programs in the survey was $3,612 noting that this amount spans all periods, not simply for the March 2017 quarter.
As an example the Level 4 package average unspent funds were $7,426 which would equate to an 85% revenue utilisation rate, rather than the 94% for the year to march 2017, so as the client better utilises their package funds from previous periods these amounts should decrease to comprise a more accurate amount against the total percentage of the package funding for each period reported.
- Level 1 Average unspent funds per client was $2,209
- Level 2 Average unspent funds per client was $2,497
- Level 3 Average unspent funds per client was $2,948
- Level 4 Average unspent funds per client was $7,426
As the sector moves forward there will be a number of measures that StewartBrown will encourage the Home Care providers to track to ensure that this trend of clients utilising their packages effectively continues:
- Revenue utilisation is a measure of total income recognised as a percentage of total funding and resident fees received for the period
- Encouraging clients and providers to try (as much as possible) to deliver the maximum benefit of the package and measure that as a weekly revenue percentage and are suggesting an appropriate target is 95%. Client wellbeing and goal attainment of this measure should be mutually inclusive, and we suggest;
- Case Managers should be responsible for achieving this revenue utilisation target
Unspent funds (Revenue Utilisation) by the numbers
- Bands 2-4 showed strong responses by the sector in reducing the amount of unspent funds that had been accumulating throughout the year prior to February 27 and posed a risk to providers should the client transfer to another provider.
- Band 1 packages underperformed dropping in March 2017 to a Revenue Utilisation of 6% falling 3.2% from June 2016 level of 80.8%.
- Band 2 packages applied a 6.1% increase in the March quarter to 1% from the June 2016 figure of 85.0%. Band 3 packages developed by 4.2% to 93.5% from the June 2016 level of 89.3% while Band 4 performance increased strongly by 9.9% during the 9 months to March 2017 at 95.3% from the June 2016 figure of 85.4%.
The below graph and the table within it shows that providers have been both working hard on ensuring that clients are utilising their packages more fully and they have priced their services more appropriately to the demand.
The second graph below shows the accumulated dollar amounts as at 31 March 2017 that each package level has for the survey Average and Top Quartile.
This updated was provided by StewartBrown based on findings from its March 2017 Aged Care Financial Performance Survey incorporating detailed financial and supporting data from over 479 Home Care programs and 869 residential aged care facilities across Australia.