Care on the Brink: The Cost of Getting Support at Home Pricing Wrong
In-home and community care organisations play a vital role in supporting older people to live safely and independently at home. While the mission of care organisations is people-centred, financial sustainability is essential to achieving that mission. At the heart of this is accurate costing and pricing.
As the sector faces increasing compliance obligations, workforce shortages, and changes in funding models, such as the transition to Support at Home, having robust costing and pricing methodologies becomes even more critical. These tools can empower organisations to model the impact of reforms (for the organisation and their clients), support data-driven decision making, advocate for fair funding, and make more informed plans.
One common mistake we’ve seen is providers setting prices based on what competitors charge or even the Summary of Indicative Support at Home Prices, without first understanding their actual cost to deliver the service. This “race to the bottom” can undermine both financial sustainability and care quality. By contrast, an effective costing and pricing methodology supports organisations in making informed decisions about which services to offer, in which areas, where efficiencies can be found, how to maintain workforce stability, and in modelling potential impacts at both an organisational and client level.
It’s important to understand the impact of your pricing decisions before you set prices and renegotiate hundreds of client service agreements. Especially if you are a Board member with fiduciary duties.
Furthermore, the guidance for setting Support at Home prices requires that prices must be reasonable and transparent. To be considered reasonable, prices should correspond to your costs of delivering services. If they don’t, the Commission may consider your prices to be unreasonable and take action including issuing a non-compliance notice.
We understand that the Care Management cap of 10% of package value is based on industry expert advice. However, was this the direct cost of care management, without any overhead allocation perhaps? The analysis of providers we are working with is showing that the full cost of care management exceeds this 10% cap. So, providers will have to make a choice:
- reduce the cost of their care management function
- include the ‘excess’ care management cost as an overhead to be recovered via billable hours for other services
- find other efficiencies (eg reduce excess overhead, streamline key business processes, integrate and automate systems)
- or a mix of the above.
By undertaking a robust costing process, an organisation may also discover that they are above industry standards for some costs. For example, excessive make-up pay. This knowledge informs decisions about actions that need to be taken, such as planning a rostering optimisation initiative.
Transparency in establishing true service costs builds credibility with funders, Boards, auditors and clients. It strengthens risk management and helps providers to more clearly communicate the value of their services to clients. It is also a compliance requirement – as a provider you must keep evidence to show how you have set your prices, and the department and the Commission can request to see this evidence to confirm that your prices are justified.
In the current environment where every dollar counts a robust costing and pricing methodology is not just a financial tool, it’s a strategic enabler of quality, equity, and sustainability in in-home care services.
Jane McDonald, Founder and CEO, Pontem Pty Ltd
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Pontem have released a Provider Pricing Workbook to assist in-home aged care providers set their service prices under Support at Home. For an investment of only $249, you’ll receive an instant download of this intuitive, user-friendly workbook.
What’s Included:
- Interactive pricing model aligned with the Department’s Fact Sheets
- Side-by-side comparison of your current vs. future pricing scenarios
- Customisable model inputs
- Client impact model
Why You Need This Tool:
- Make more informed pricing decisions
- Understand the potential financial impacts of the funding reform
- Make informed decisions — before the changes hit
- Be ready for pricing transparency and client choice in Support at Home
- Inform your clients about how the pricing changes will impact their package funding
