29 Apr 2015

Home support providers 'slowly going broke'

7:05 am on 29 April 2015

Providers of home support services for more than 100,000 New Zealanders are going broke and need help urgently, says the association that represents them.

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Photo: 123RF

The Home and Community Health Association has released a financial review it commissioned from Deloitte.

The review concluded that the current funding model was unlikely to be sustainable, particularly in an environment of increasing demand.

The association, which represents a wide range of providers including Nurse Maude and Presbyterian Support Services, said demand was expected to double in 20 years due to the growing and ageing population.

Home and community support "will increasingly become an option only for those who can afford it," it said.

The Deloitte review said the average provider would have needed to achieve year-on-year overhead savings of more than 7 percent for the past seven years to maintain margins. Instead, over half of funding increases from district health boards over that period were insufficient to cover minimum wage increases alone. Only three providers, whom the association will not name, had increases greater than the increases in the minimum wage.

Funding for the sector also comes from the ACC and the Ministry of Health. The Deloitte review said overall the ACC's increases to Domestic Assistance and Personal Care pay rates covered increases in the minimum wage rate. But "the MOH [Ministry of Health] rate did not increase for two years (2009 and 2010). As a result the cumulative increases have not been sufficient to even cover the minimum wage increases up until 2013."

The review said three providers had been struggling with negative margins for the past three years, and in 2014 four out of six respondents to the review team had negative earnings before interest and tax (EBIT) margins.

Providers have had to find different ways to cut costs, including by reducing co-ordinator to support worker ratios, halting pay increases and performance reviews, delayed IT capital expenditure and maintenance.

The Home and Community Health Association chief executive Julie Haggie.

Home and Community Health Association CEO Julie Haggie. Photo: LinkedIn

The review also said most providers were paying direct support workers the minimum wage, so any cost savings needed to come from somewhere else.

It said providers are also finding it difficult to retain staff when there were opportunities elsewhere, and struggling to adhere to higher levels of compliance and increasing needs and demands from funders.

The association said its members are "slowly going broke because home support is the only service not planned and funded on a national basis."

It said the lack of consistency was short-sighted. "Without proper support to help these people live in their own homes or communities, the only alternative for many would be full-time residential care or hospitalisation."

Association chief executive Julie Haggie is calling on DHBs to implement a national funding model based on client need which she said the DHBs agreed to.

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