RSM Australia

Is it better to be a specialist or a generalist in aged care?

Recently I presented at the strategic planning session of the board of a mid-tier residential aged care provider. This group also has a minor position in home care and a reasonable footprint in ILU’s.

There were a couple of notable points of discussion around the direction the organisation should pursue. To assist in this we prepared a competitor analysis of the top ten providers (by size) in their market for each of the service lines (residential, home and ILU).

From this analysis we learned that:

  • there were two players who were in the top three in all areas
  • only 3 of 23 providers covered all three areas
  • 19 of the 23 providers in the group specialise in only one service area

There is much talk among residential aged care providers of extending their reach into home care and or independent living. The above analysis suggests that this is not generally how providers operate.

There might be very good reasons to be circumspect about a strategy that is built on all things to all people. While the provision of care may be seen as common to all of these services there are other inherent skills needed to be successful in each of these businesses.

Home care is a logistics business where the core challenge is to achieve productivity from your workforce. Residential care requires skills in capital management and real estate development is central to operating ILU’s.

Another way to visualise this is our variant of the Ansoff Matrix, as it applies to providers of residential aged care services.

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In this figure the horizontal axis represents existing and new customers and the vertical axis represents existing and new services.

Continuing to do what you do (the green box) involves the least immediate risk while adding a service that you currently do not provide (red box) involves the greatest risk. However not developing the business model exposes you to other risks including, concentration or dependency on a single revenue stream. 

In a climate where the regulatory environments are changing, the challenge for boards and management teams is to make the right strategic choices. Readers who are interested in evolution might find it interesting to consider how in nature there are specialist and generalist species and the environments in which each thrive.

We are seeing many more providers reviewing their strategy in relation to the scope of services they provide with some interesting decisions being made. Good strategy development brings the outside world into your organization challenging your existing thinking. With the introduction of CDC in home care, the development of NDIS and the likelihood of further deregulation in residential care it's an opportune time to reflect on whether to be a specialist or a generalist and what this means for your organisation.