Managing Director, Pride Living
Bruce consults to aged care providers and retirement living operators to assist them in developing practical and commercial business models that are economically and socially sustainable. He does this in the context of his client’s mission, vision and values while considering the complex environment in which they operate. He works with boards and senior management teams to build strong governance, strategic frameworks and business models. He has worked with some of Australia’s largest organisations and many smaller operators. His vast experience in working with clients whether growing organically, acquiring additional operations or selling or merging their operations ensures his clients get insightful advice that allows them to make decisions with confidence. His experience as a Non-Executive Director in a large and complex organisation provides a unique insight into the governance challenges and practices facing organisations. He is considered a thought leader within the Aged Care and Retirement Living sectors.
Unlocking Wisdom: Aged Care Insights from Banking and Insurance
At a strategic financial level, providers can learn a lot from how banks and insurance companies operate. Traditionally, the focus in the sector has been on EBITDA. This approach downplays the importance of long-term financial sustainability compared to short-term viability. Working with providers, we regularly see how capital allocation and management policies, in particular the approach to and use of RAD, support or detract from provider financial performance.
A sound Capital Management Strategy can be the difference between thriving, surviving and failing! This presentation will compare the financial strategies of banks and insurance companies to highlight how providers can improve their financial viability and sustainability by focussing on the flow and investment of available capital (RAD).
A senior executive in the Department of Health recently shared the following observation with me;
“The RAD system can see providers fail with millions in the bank – how good a system is this?”
Banks manage interest rate margin and insurance companies’ break even on insurance and make money from investing their surplus cash flow. This presentation will challenge providers’ strategy and governance relating to surplus RAD. The presentation will highlight providers’ real return on investment and how encouraging other forms of payment can materially impact the EBITDA of a provider.
The presentation will consider publicly available macro data and a case study of a provider to highlight the steps providers can follow to implement a robust Capital Allocation Policy (CAP) that will enhance their viability and sustainability. The benefit of an effective CAP was highlighted when interest rates were at historic lows and is even more critical as the MPIR has risen above 7%. Maintaining an effective CAP will be vital as the Government explores the ongoing relevance and regulation of Lump Sum Accommodation Payments, the future funding model for the sector and the continuing challenging commercial dynamics of the sector.
Consider this simple example: had a provider borrowed $4.8M from a bank at a fixed rate of 2% for 3 years when interest rates were low and could attract more non-RAD paying residents, they would be generating more than $250,000pa of additional earnings. On an 80-bed facility, this equates to over $3,000 EBITDA prpa!
Delegates will gain a clear understanding of the need to manage both the operating performance and the capital invested in their organisation.
The session has direct application to the current focus on Prudential Regulation by the ACQSC. It will be delivered in an absorbing, interactive and challenging format.