Aged  Care  Seminar    

Profit  improvement  and  opera/onal  efficiencies  in  the  Aged  Care  Sector!  

 

25th  October  2011  Novotel  Brighton  

Sydney  

1.  Are  you  op?mising  your  funding  en?tlements  and  how  well  is  the  team  equipped  to  sustain  the  right  level  of  financial  en?tlements?    

2.  What  tools  and  processes  can  be  employed  to  manage  the  intricacies  of  resident  level  revenue  streams?  

3.  How  you  can  improve  Workforce  AJrac?on,  Reten?on,  Reward  &  Remunera?on  &  Succession  Planning  strategies.  

4.  Do  you  have  an  effec?ve  cost  management  program  to  deal  with  challenging  ?mes?    

5.  How  do  your  costs  measure  against  industry  benchmarks  and  should  they  be  compared?    

5  Key  Ques?ons:    

Effective Cost Management in Aged Care Presentation to: Aged Care Industry 25th October 2011 Avron Newstadt – Principal Expense Reductions Analysts

Effective cost management in Aged Care

•  Do you have an effective cost management program to deal with challenging times?

•  Where can you make a difference with the least disruption and without sacrificing quality of care

•  How do your costs measure against industry benchmarks and should they be compared?

Objectives of effective cost management •  Generate identifiable, measurable and sustainable results

•  $100,000 Savings @ 30GP% = $333k revenue that need to be generated…….constantly.

•  With a P/E Ratio 6:1 = $600k increase in value

•  $200,000 saved is 2-4 staff members to focus on increased care

What are we dealing with?

Look for savings in Non Labour related costs Specific to Aged Care Industry

• Labour hire agency costs • Recruitment fees • Food, catering & supplies • Cleaning, supplies and chemicals • Waste • Clinical supplies • Continence • Uniforms • Laundry

Other

• Telco • Office supplies • Insurance • Building & facility maintenance

• Fire services • IT • Energy • Payroll processing

For Cost Management to work

•  Needs ownership • Give it a name – “Project 10”

•  Needs key stakeholder support

• Provide comfort

• Project may not necessarily change everything

• Re-negotiating with current suppliers

• Improve level of service from current suppliers

•  Although……nothing should be taken for granted

Process 1 – Understanding Scope • Analysis of:

• Spend by Supplier • Detailed spend analysis using data mining and analysis, excel, access or ERA Software

• P&L (Allocated to various cost centres or costs capitalised)

• Key Stakeholder requirements • Risk (Change of Supplier, change of product etc)

• Supplier/Vendor/Market

Process 2 – Selection and Discovery Selection - categories based on a benefit matrix Discovery – gain understanding:

• Volumes; seasonality; contracts; • $ Spend per category • Prices charged per unit – is there an opportunity?

• Industry benchmarks? • Current Supplier Status

»  Account management? »  SLA’s, KPI’s in place? »  Are they meeting KPI’s? »  Date of last review?

Process 3 – Create Opportunity

•  Consolidation of suppliers •  Negotiation

•  Tender – Full, Part, RFT, RFP, RFQ

•  Evaluation is key! – Like for Like basis – Scoring & Weighting – Financial Evaluation – Non Financial Evaluation »  Value for Money decision

Process 4 – Implement and Review Implementation

• Documented plan with times • Contract/SLA’s • KPI’s • Staff training

Review • Monitoring for sustainability • Measurement of savings • Activity/volume analysis • Supplier review • Market knowledge

Cost Benchmarks •  Benchmarks are a guide to your relative performance. •  Cost per Bed/day, H/C, L/C Hostel, % continent

•  Cost per unit of product/service purchased. •  Don’t be concened if you don’t conform – there may

be circumstances that make you different? Example - when “benchmarking” your site(s) to others there are many catering/food features to consider to ensure that comparisons are “apples with apples”. E.g. numbers of residents; type of food service; design, numbers & locations of dining rooms, centralised cooking.

•  Your objective is to ensure you are at least achieving or doing better than benchmark pricing!

•  How do you get there?

Selected Specific Hints and tips Cost Category Factors to Consider Continence Manage Suppliers, regular reporting, monitor

contract compliance, competitive industry, consolidation of suppliers. Work with suppliers to accurately profile residents.

Waste 50% increases in NSW State Landfill levies over 2 years. Disposal practices have a direct impact on management of waste streams and associated costs – general, recycling, organic, clinical, grease trap. Conduct a waste audit – you may be surprised!

Food & Catering Aggregate and consolidate line items and suppliers Develop a very specific & detailed “Scope of Works” or “Specifications. Off contract items come at a big cost!

Expense Reduction Analysts

•  Commenced in USA, Australia from 1993 •  800+ consultants worldwide, 50 ANZ

•  Global presence (32 countries) •  Local and Global expertise

•  Deliver tangible, measurable cost benefits

•  ERA are completely independent and only represent clients interests

•  Over 14,000 projects executed delivering average savings of 20%

•  Serve clients under a no-risk arrangement

ERA’s Process Discovery Opportunity

Activities

Duration

Deliverables Discovery Options New Supply QuarterlyReport Report Arrangements Reports

4 weeks/category

Confirm scope

Obtain financial data

Understand volumes and activity patterns

Confirm business requirements with stakeholders

Obtain incumbent supplier contracts

Confirm benchmarks

5 - 6 weeks/category

Confirm business supply requirements

Document client requirements and prepare tender

Identify and meet relevant suppliers

Manage tender process

Assist in supplier selection

4 weeks/category

Appoint supplier

Review supplier implementation plan

Monitor and manage implementation of new supply arrangements

Arrange access to any online systems

24 months

Quarterly review of supply arrangements

Calculation of actual savings achieved

Produce usage reports

Check pricing

Management of price increases

ReviewImplement

ERA Aged Care Clients

Client Name Projects

Uniting Care Ageing

Continence, Uniforms, IT, Medical Alert Systems, General procurement

Catholic Homes Outsourced Catering, Telco

Kennedy Healthcare

Waste, Cleaning, Food, Clinical supplies

Montifiore Insurance, Energy, Food, Packaging, Clinical Supplies

Tullich Homes Energy, Maintenance

Thank you

Questions?

Avron Newstadt | Principal Consultant Expense Reduction Analysts

Level 3, 179-191 New South Head Road Edgecliff NSW 2027

anewstadt@expenserduction.com www.expensereduction.com