At a recent round table attended by leaders from across the aged care sector, Sally Evans, Former Head of Retirement at AMP, Chair at LifeCircle, Director of Opal Aged Care and former member of the Aged Care Finance Authority, and Marcus Willison, EY Australia, TAS Partner, challenged attendees to disrupt their own industry.

Customers about to drive industry disruptionAlthough disruption is already occurring in the aged care industry, Sally Evans believes incumbents have yet to feel its true impact. “What we’re seeing today is not truly disruptive. There are lots of new entrants in the market, but they are finding margin opportunities in areas of customer friction that don’t yet overlap with the residential care value proposition.”

The biggest area of digital disruption is helping people to navigate the aged care system itself. Evans herself has first-hand experience of trying to find care for her neighbour. She was surprised how hard it was to find solutions until she discovered an online platform that cut through the complexity.

“These platforms are convenient and demonstrate value for money. It’s the distributed economy at work, removing layers of admin and enabling users and service providers to interact directly. This is clearly the way of the future for home care. It makes life significantly easier for families trying to coordinate a complex network of care.”

With digital aged care service platforms targeting home care and National Disability Scheme (NDIS) customers, residential care has hardly been touched — yet. However, as more customers use the new platforms, the convenient digital experience will raise their expectations of residential providers.

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Will Australian aged care providers survive, sustain or thrive?

2 | Aged care insights: Will Australian aged care providers survive, sustain or thrive? August 2017

Evans believes that “the customers using the new platforms will be the ones driving disruption in residential care. We have some time to adapt to their increasingly sophisticated expectations, but we need to start preparing now.”

Having spent the last few years focusing on the digital solutions disrupting aged care services, residential providers will have to emerge from what she calls their current ‘survival’ mode and disrupt their own industry.

The industry’s service delivery model is changing, with an increasing focus on integrated care. This is blurring the difference between in-home and residential care. High-touch services are not immune from new entrants with innovative solutions. As Evans stated, “the industry can’t rely on regulation and capital as barriers to entry. We all need to start transforming our business models to make them sustainable — by which I mean, they must create value for residents, families and shareholders”.

Where are the next opportunities? There are opportunities to solve customer problems on the supply side by improving productivity and streamlining the payment system. On the demand side, industry has an important role to play in supporting family decision making and augmenting family capacity and capability to care. This includes helping people to:

• Access equity in the home Evans notes that, “people may need to access equity in their home to fund the services they want in the future. Politically that’s a difficult sell, but it presents an opportunity for the industry. In the future, there may be a financial solution, where a user pays capital up front in return for certainty of care until the day they die. The message is: people can retain their independence while having the life they want.”

Many of us are looking for certainty and peace of mind, so those who can promise a place until they die for an agreed sum will have a compelling proposition for all key stakeholders.

• Have the advanced care they want Evans suggests that “in the next 15 years, the number of people who die each year is going to double. Currently, only 15% of Australians die at home, compared to 30% in New Zealand and the UK. A massive 50% die in hospital, which is expensive for tax payers and a poor outcome for the individual and their families. The answer is to build community-based palliative care, so when there’s a health crisis, people are on hand who are equipped to deal with it. We shouldn’t expect family members to provide 24/7 care at the expense of being able to fulfil their family role. This is an important opportunity for retirement villages and residential care. We can provide the care people need while they stay in their homes with their families there beside them and residential centres can provide hospice services when the time comes for family to be supported in providing 24/7 care.”

Aging: a disruptive forceAt EY, we believe the cost of treating the diseases of aging is threatening to swamp health systems and the agendas of companies and governments. Working together, governments, corporations and individuals have an opportunity to disrupt aging before its costs displace other priorities. As a nation, we need to recognise that managing diseases of aging as they arise is no longer affordable. Linking healthy aging to the absence of disease is not sufficient. That means:

1. Health must be reframed as a lifelong asset worthy of investment.

2. Individuals must be empowered by new tools and data to prioritise their own health, engaging proactively rather than waiting for disease or illness to arise.

As part of the shift, every person will have a unique healthy aging profile. These individual profiles will define wellness across three different, but interrelated, dimensions: physical and cognitive wellness, social wellness and material wellness. Depending on health status, individuals may bear higher costs at a time when government entitlement programs face budgetary pressure.

As aging is repositioned as longevity, stakeholders must focus less on physical and cognitive debilitation and more on mechanisms to improve human performance and social connections. These mechanisms could be new technologies (e.g., driverless cars, invisible sensors and mobile and computer apps) or new health-related services built on the sharing economy. Regulations encouraging integration of services into a common platform will propel healthy aging innovations.

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1. Know your customerTo win trust, the industry needs to think more about and understand a lot more about residents and their families — who are often the ultimate customer.

Evans says “few aged care service providers have an astute understanding of market segmentation. Aged care service users are not a homogeneous group. It’s vital to segment customers beyond geography and financial status.”

Aged care providers need to understand what’s happened to people before, during and after the patient is in care. Focus on the experience of the resident and their family is vital. She says “we currently think of aged care as a linear journey. But, in reality, people go backwards and forwards, they enter at different times and skip parts altogether. The industry needs to be clear about what customer problem we are solving and what part of the customer journey we are helping to disrupt.”

2. Harness data to create valueThe banking industry has been investing in data analytics for decades – not to get data to support Search Engine Optimisation, but to heat-map new customer segments. The data thrown off by bank accounts and loyalty programs gave us enough information to quickly understand where new services needed to be. Online aged services platforms already have that type of data. They know who’s accessing aged care, for what purpose, where they live and how much they’re paying.

Marcus Willison believes that aged care providers have a major opportunity to aggregate volumes of patient data from multiple sources (clinical, financial, social, environmental and operational) and use Artificial Intelligence (AI) to gain insights into care management, risk stratification, performance and care supply gaps.

Evans believes data will be key to helping families navigate the terribly difficult but essential conversations needed to create a humane end of life for their loved ones. “If artificial intelligence can tell us what’s going to happen to a person over the next six months or five years, that’s critical information for families. We should be sitting down with them and saying: ‘Everything we know tells us that this is the trajectory your mother is on. Here are the issues that you as a family should talk about now. And here’s an expert to facilitate that conversation.’ We have to get comfortable with this role. It’s a difficult conversation, but we have the data that could profoundly change the experience of dying for everyone.”

Willison indicates that through data mining, learning and predictions from captured data, ‘simple AI’ is already available that will enable a retirement village operator to monitor and support residents by generating risk alerts from the data and delivering services.

For example:

• Sentrian (www.sentrian.com) is a remote patient intelligence big data predictive analytics platform. It captures and analyses a patient’s physiological data from a raft of sensors to build personalised disease deterioration models that detect subtle changes or warning signs in a resident’s condition and alert staff of those at risk for hospital admission.

• HealthReveal (www.healthreveal.com) analyses incoming data from medical records, claims, wearables/implantables, and directly from residents, to monitor continually high-risk clinical signals and sends diagnostic/treatment information directly to the resident and their care team via mobile alerts.

3. Design small, simple solutions and test them iterativelyThe aged care industry needs to start disrupting itself by designing micro services that solve residents’ problems. Evans suggests that “the best way is to take small steps, fail fast, learn and adapt. Don’t make a decision and implement change. Suggest a hypothesis and test it in a low-cost pilot. Find out what works and what doesn’t. Only roll out a change once you have confidence in your assumptions.”

Evans says getting adept at this type of testing will require aged care providers to build capability in agile change management. “We need to hire people who understand human-centred design and iterative testing.”

Seven ways residential providers can prepare

| Aged care insights: Will Australian aged care providers survive, sustain or thrive? August 2017

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Contacts:

David Roberts EY Health and Life Sciences Leader — Asia-Pacific david.roberts@au.ey.com +61 2 8295 6661

Marcus Willison TAS Partner — EY Australia marcus.willison@au.ey.com +61 3 8650 7270

4. Collaborate with peers and start-upsCollaboration is key to surviving the coming disruption. Evans notes that “none of us are going to solve the aging challenges alone. We need to understand what part of the solution we are going to be and who we need to partner with – especially disruptors. Don’t be afraid of start-ups. Understand who they are, make friends and learn from them. We can all win through collaboration.”

The residential aged care market is highly fragmented and ripe for disruption. To better control the disruption, participants may need to consider pooling investment into a user friendly platform that makes it easier to do business. Failing to do this will allow more external parties into the sector who will see your thin margin as a sales opportunity.

5. Consider new funding and finance optionsThinking about financing growth, when the Government Guarantee for Refundable Accommodation Deposits (RADs) is removed, providers will likely have to meet prudential regulation such as maintaining 40% equity in their capital structure. Given the current volatility in aged care funding, equity funding is suited to long-term institutional investors. “Institutions want to invest in aged care. They’re struggling to find places to put their health allocation to work. Given they’ll be looking to write $100 million cheques, we need to think about what vehicles we can create to attract that money.” Marcus Willison indicates that we have seen recent investments by property trusts, including Generation and Vital Healthcare. The offerings have however been few and far between but this may change in time as the OpCo PropCo structure becomes more common and accepted.

6. Own your marketThe residential aged care market is fragmented and consumers/stakeholders are confused as they have little knowledge of trusted brands. Providers need to know which segment of the market they want to own/lead and provide a consistent message to their target market. This can be undertaken using data analytics as everyone is looking online for answers. If done well, key stakeholders will call your brand when they have a specific type of resident that needs your type of care. Many segments like dementia or behavioural issues, specific locations, ethnicity and/or various price points are all up for grabs as no one is owning them. Providers who try to be everything to everyone may struggle against those who can show they specialise in relevant specific sectors.

7. Online access to loved onesWe all want to know that our loved ones are being well cared for but at present this is difficult. Creating an online platform allowing stakeholders to login or receive regular emails on the care provided, visitors, the activities the resident participated in, dietary and medication intake etc. will be well received by loved ones and is only a small extension of the data currently captured by providers. Making the value of care transparent to residents and their families is a prerequisite for building trust and confidence in the sector.

| Aged care insights: Will Australian aged care providers survive, sustain or thrive? August 2017

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