Profit or service: why it matters

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24 Aug 2015

The aged care sector is expanding quickly, and we are seeing more private operators and foreign investors wanting a slice of the cake. CEO Ray Glickman considers the implications for community benefit organisations such as Amana Living. 

As the aged care sector moves into an era of greater choice, the competition among service providers is hotting up, and investment is on the rise. This is a good thing for consumers – which includes all of us! A customer-led environment means products and services become more varied and accessible. More and better facilities and housing can only be beneficial. 

The risk is that players will move onto the field whose primary motivation is profit. There are those who predict the demise of not-for-profit aged care organisations because the for-profits have easier access to capital and greater ability to compete on price. There’s no denying that the industry has great potential for savvy investors and businesses. 

But is this what we want? Should consumers of retirement housing, aged care and associated services not care terribly much about who is providing the service if the product itself seems good and well-priced? I contend that consumers of aged care ignore such things at their peril and may find their retirement village or care facility being bought and sold from under them as a commodity. 

There is debate within the industry about the benefits of not-for-profit (NFP) vs for-profit residential aged care providers, in light of evidence from overseas that NFPs deliver better outcomes for residents overall. We don’t yet have data to support this in Australia, but we do know that our NFPs have a lower rate of regulatory failure. (Indeed, Amana Living boasts a 100% compliance rate for industry accreditation of residential care facilities.) Intuitively, these pieces of evidence would suggest that NFPs are likely to be delivering better outcomes. 

I suggest that the community benefit sector will therefore become more important, not less important, in this increasingly competitive environment. These organisations will offer an essential point of difference – a commitment to people and values rather than investment and profit. 

We must also consider regional, rural and remote areas of Australia, and the full range of socio-economic demographics. These are the customers who bring the lowest financial return, but have the same needs. Historically, the for-profit providers have not bothered with these segments of the community. 

Do we really want a sector that is profit-driven, where prices are pushed down as providers eye one another across the uneven playing field? While competition can mean more choice and lower prices, it often leads ultimately to a streamlining of products and services into those that prove to be the most profitable, with the rest becoming categorised as ‘niche’ and therefore costly. The danger looms of a two-tier aged care system. 

There will always be a need for community benefit organisations, whose mission is to serve. This is the only way to ensure the wellbeing of all older people, whatever their situation. 

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