Volume XXV, Issue 18 |

Key trends in aged care 

Aged care operators globally are facing many long-term trends that are challenging their models of delivering high-quality care efficiently to the elderly. Consumer preferences, care needs and government policy landscapes globally are becoming more acute, and this is driving aged care operators to rethink their care strategies (see Figure 1).

Shifts in consumer attitudes  

There is an increasing preference among the elderly to delay entry into residential aged care and receive care in their own homes instead. Based on 2020 surveys in a developed market, over 80% of the elderly preferred to age in their own homes. 

Retirees also want to make only one move into retirement living, entering integrated ecosystems that can provide different levels of care as their needs change over time.  

At the same time, retirees are projected to become increasingly affluent over the next decade. Globally, the 65+ age group is expected to have the highest average gross income across all age groups in 2030. Therefore, retirees will become less financially dependent on the government to provide for their care needs. 

Elderly populations are also becoming more tech-savvy. More than 60% of baby boomers use smartphones. As they age, their technology use is maintained, increasing the number of elderly people with a high level of technology proficiency.

Changes to care needs 

An increasing prevalence of dementia and comorbidities such as cardiovascular disease is anticipated over the next two to three decades. For example, the prevalence of dementia is expected to grow at c.4% p.a. over the next 30 years. 

The informal networks that have cared for the elderly are also ageing. In many developed markets, unpaid caregivers are typically older than the average adult, and the median age of these unpaid caregivers is also increasing faster than the national average. 

Industry developments 

Furthermore, aged care operators worldwide are facing worsening labour shortages, which impedes their ability to deliver care. Operators find it challenging to secure new talent due to declines in workforce supply, driven by funding constraints and immigration policies. In some markets, there is a shortage of aged care nurses equivalent to nearly 20% of the workforce. 

Government policy preferences are also shifting towards more aged care delivered in the residences of the elderly as opposed to in a residential aged care setting. This is due to the relatively lower cost to the government of reimbursing home care rather than residential care. As a result, funding for home care services, including both personal and medical care capabilities, is increasing across many countries at a much faster rate than funding for residential care. 

Several leading aged care operators around the world are responding to these trends by broadening their care offerings. That is, they are expanding the range of settings and care services they deliver to their residents across the full continuum of care, as illustrated below (see Figure 2).

A broad care offering allows operators to follow the resident journey and government funding pools, maximising the funding streams accessible. For operators with mixed retirement village and residential aged care models, a continuum of care offering also facilitates retaining residents within their ecosystem for as long as possible. While this may impact deferred management revenue in some models, it can be help moderate churn and reduce customer acquisition costs in light of increasing competition from home care and other external care providers. For premium operators, broadening their care offering also allows them to both better align their offering to consumer expectations and support premium price positioning for their offering in appropriate markets. 

How are leading operators delivering a broader continuum of care? 

We have observed leading operators delivering a broader continuum of care in the following five ways, as illustrated below (see Figure 3).

However, global operators that have broadened their care offering have yet to show a clear financial uplift directly related to their care strategy, and in fact have consistently faced three key challenges, as illustrated below (see Figure 4).

Operators will need to carefully develop their care strategies in order to take into account a range of factors in the relevant markets under investigation, including: 

  • Maturity of the public funding model for different parts of the care continuum
  • Consumer needs, attitudes and willingness to pay privately for care services
  • Competitive landscape and positioning of key players 
  • Operators’ own internal capabilities, risk appetite and financial goals 

Overall, the next few years are set to be an exciting time for the aged care industry globally as operators grapple with the challenges and opportunities outlined in this report. 

For more information, contact strategy@lek.com.

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