UnitingCare NSW.ACT Chief Financial Officer May 2014

ACS Community Forum 10 November 2015 Steve Teulan Uniting

Uniting Church Values

Our Heritage

• CDC conversion of Home Care Packages (HCPs)

• Commonwealth Home Support Program (CHSP) transition from HACC, DTC, NRCP and ACHA programs

• Introduction of My Aged Care (MAC) and Regional Assessment Services (RAS)

• Medicare Online DHS (Department of Human Services) for HCP claiming re-introduced. Reconciliation of pre-1July claiming continuing.

• Increased competition in sector, including new entrants with different business models, direct marketing to consumers by unfunded service providers

• Consumer expectations increasing

Community Care – Changing Environment

• Income-tested user charges (substituting for care subsidy) by up to $5,000 (pensioners) or $10,000 (non-pensioners) annually

• 40% of eligible older people reject packages

• Reduced demand for lower level packages

• Increased demand for higher level packages

• Overall reduced occupancy/greater competition

• Decreased client fees

Home Care Packages– Changing Environment 1 July 2014

HomeCare Packages – Changes on 1st July 2015

• Consumer conceptually “owns” Government subsidy – provider accounts to consumer for services provided.

• Accounting treatment of revenue changes from full subsidy to value of services rendered.

• Most profitable clients became least profitable.

• Unspent funds are retained generally by provider on client’s exit from package

Home Care Packages – Changes from February 2017

• Full deregulation of home care packages supply

• Consumers will truly “own” funding and go to any provider of their choice

• Unspent funds are unlikely to be retained by provider

• Significant number of new entrants and expanded geographical coverage of existing entrants

Prior to Consumer Directed Care (CDC) Home Care Packages

Subsidy

Accounting for Revenue

Cash Received

Total (maximum) subsidy held and retained by provider

Revenue recorded when cash received

At all times, maximum cash subsidy received equalled accounting revenue.

=

Consumer Directed Care Home Care Packages

Subsidy

Accounting for Revenue

Cash Received

Total (maximum) subsidy held and

retained by provider

Revenue recorded only as services provided (ie revenue

earned model)

“Unspent” / unearned subsidy recorded as

liability

“Unspent” / unearned subsidy recorded as revenue

28 days after client exits package

Cash rec’d (max subsidy) equals accounting revenue 28 days after client exits package

Deregulation of Home Care Packages (Expected future guidelines)

Subsidy

Accounting for Revenue

Cash Received

Subsidy funds received and unspent funds unlikely to be

retained

Revenue recorded only as services provided (ie revenue

earned model)

Provider does not receive benefit / revenue from

unspent funds

Cash retained by provider equals only revenue earned from services provided

Changing Environment for Private Hospitals in 1990s

• Health insurance funds became price-setters for hospitals as part of Federal Government’s No Gap approach to hospital charges to consumers

• Hospitals could be excluded from health fund contracts resulting in much lower rebates and very high out of pocket costs for patients from that fund

• Consolidation of sector as large ASX listed for-profit hospital providers emerged

• Encouragement in NSW of co-location of private hospitals with major public hospitals

Mater Hospital North Sydney

• “New” Hospital opened in 1990

• Not for profit hospital which had services owned and operated by Sisters of Mercy on the site since 1911.

• Strengths in orthopaedics and obstetrics

• New cardiac services

• Radiation oncology, chemotherapy, pastoral care etc • Efficient in LOS and high patient satisfaction

• Significant long term debt funding

North Shore Private Hospital

• Opened in 1998

• Owned by Ramsay Health Care

• Co-located on Royal North Shore Hospital site

• Natural strength from public hospital in cardiac, neurosurgery, obstetrics and gynaecology

Immediate Impact on Mater of New Competitor

• Patient mix of NSPH exactly as forecast

• Reduction in occupancy

• Profitability downturn

• Lost some doctors

• A small number of staff left

• Risk of deteriorating negotiating position with health funds

Actions Taken

• Introduced new Board members with commercial skills

• Friends of the Mater established

• Opened new consulting rooms and encouraged new doctors

• Reduced costs by 5%

• Renegotiated debt on more favourable conditions

• Contracted for public patients (briefly)

Actions Taken

• Undertook market research

• Created new brand based on strengths

• Used strengths, distinctiveness and differences to position hospital for future and leverage with health funds

• Responded strongly to aggressive approach to

negotiations by health funds

Identified Distinctiveness and Strengths

• Service strategy was built on strengths and advantages

• Created new brand

• The ethos of service delivery was consistent across all key services

• Used strengths and differences to position hospital for future

• Maintained high levels of patient satisfaction and service efficiency

Subsequently

• The Mater joined the St Vincent’s (Sisters of Charity) Health Group

• Received a private donation of $30 million for cancer (melanoma) services and built leadership in multi-disciplinary cancer care. • Continuing leadership in obstetrics and orthopaedics • Cardiac services were grown • NSPH was also successful, later increasing the size of

the hospital by one third.

Lessons Learned – Know yourself, your competitors and your market

•Reinforce your distinctive identity and purpose every day

• Communicate your distinctiveness to consumers and referrers

• Use your visible and invisible strengths • Know where you will grow (eg cancer)

Lessons Learned – People

• The right people at all levels • Set clear KPIs for all of your people

• Empower people to act in a faster

market

• Expect your best people to be targeted

Lessons Learned – Financial Sustainability

• Be ready to withstand a financial a financial shock • Create a financially sustainable operating model • Avoid knee-jerk reactions to the initial impact

Lessons Learned

• Be prepared to share, swap, joint venture, or merge • Remember the four Ps • It is about you continuing your mission – not

destroying the competition • ACT NOW!