Www.stewartbrown.com.au / 1 Benchmarking today’s results for tomorrow’s success Grant Corderoy...

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Benchmarking today’s results for tomorrow’s success

Grant CorderoySenior Partner


Financial Benchmarking Presentation

• Examine the theory Why benchmark? Benchmark methodology? How to use benchmark data Current environment Success drivers

• Look at benchmarking in practice Benchmarking in Aged Care Aged Care Financial Performance Survey Dissecting the data Analysing the data Difference between the average and the top 25% What are the top performers doing better?


Why benchmark?

To compare your financial performance with other organisations and facilities to achieve best practice

To improve operating performance To review and monitor cost centres and financial ratios Manage financial performance accountability Prioritise improvement opportunities


Benchmark methodology• Need to ensure a consistent data set

o Standardised set of definitions for each item being benchmarkedo Consistent chart of accounts

• Data collectiono Timely, accurate and abnormal variations identified

• Data seto Statistical size large enough to be relevanto Revenue and expense to be broken down by category

• Common denominator usedo Dollars per bed day / client dayo Hours per resident per day / client day

• Trendso Benchmarking should be regular and shown over different financial periods


How to use benchmark data• Financial Management

Incorporate in monthly management reporting Investigate and analyse variances to benchmark Assist in budget process and forecasting

• Key Performance indicators Board – compare financial performance with other organisations Management accountability

• Team Focus Benchmark results should be disseminated within appropriate levels

within the organisation Accountability for performance compared to benchmark Collective responsibility Prioritise specific areas to focus on


Drivers of success

• Major influences Competency of management Accuracy, timeliness and availability of information Ability to set measurable goals and monitor

performance against goals

• Minor influences Building design Size of facility Location of facility Nature of organisation


Current Environment

Period of reformUncertainty around future cash flowsIncreasing competition from:

Other providersHome care / residential care mixAgeing building stock?


Benchmarking in aged care

• Two main streams of benchmarking– Clinical / process Quality of care HR outcomes Efficiency measures Improvement measures Often structured around the outcomes required by the accreditation

standards

– Financial Profitability Sustainability Viability (operational and capital)


Aged Care Financial Performance Survey

• What is surveyed– Residential Aged Care– Home Care packages

• Survey Process– Participants surveyed quarterly– Rigorous data cleansing process– 2 month turnaround

• Survey Outcomes– Report for each residential facility or home care program– Comprehensive report with survey analysis and trends

• Interactive Website– Participants can create customised reports including trend reporting– Drill down on data– Filter data in a number of ways


Dissecting the Data• Revenue and expense allocations• Grouped by revenue bands• Within bands:

– Survey average– Average of 2nd 25%– Average of top 50%– 25th percentile– Median

• Filtering the data:– Size– Geography– State– City, Rural and remote– Contracting – catering, laundry, cleaning


Analysing the Data

Income - SubsidiesCare costsHotel servicesAccommodation servicesOther servicesFacility ResultEBITDAWages as a percentage of care subsidy and feesPer bed dayPercentage


What is the survey telling us?


The numbers in more detailExtract from StewartBrown Aged Care Financial Performance Survey for the three months ended 30 September 2013. All amounts shown are measured in $ Per Bed Day. Sept 2013

June2013

June2012

June2011

June2010

June2009

626 facilities 710 facilities 607 facilities 545 facilities 432 facilities 333 facilities

Resident fees 47.75 46.65 44.97 43.32 39.75 37.90Government care subsidies 135.70 132.48 128.29 117.79 105.64 98.78Other resident revenue 12.53 12.23 11.77 10.36 8.33 7.11Other government revenue 11.33 10.12 8.62 6.97 7.38 5.28

Total revenue 207.31 201.48 193.65 178.43 161.09 149.07Expenditure Care 106.54 105.07 97.94 90.06 81.70 77.88Hotel services 33.23 33.75 31.90 31.49 29.69 28.70Accommodation services 28.60 28.52 27.93 26.38 22.99 20.66Administration & support services 27.24 28.85 27.64 25.41 25.88 25.84

Total expenditure 195.62 196.19 185.41 173.34 160.27 153.08Facility result $ 11.69 $ 5.29 $ 8.24 $ 5.09 $ 0.82 $ (4.01)Provider result $ 3.09 $ 3.25 $ 4.33 $ 3.69 $ 3.07 $ 3.66Total result $ 14.78 $ 8.54 $ 12.57 $ 8.79 $ 3.89 $ (0.35) Facility EBITDA per bed per annum $ 8,847 $ 6,573 $ 7,621 $ 6,046 $ 3,977 $ 1,707Overall EBITDA per bed per annum $ 9,376 $ 6,884 $ 7,994 $ 6,435 $ 4,427 $ 2,171 Care cost as % of resident fees & government subsidies 58.1% 58.5% 56.5% 55.9% 56.2% 57.0%


Results by benchmark bandResults by Income BandExtracts from StewartBrown Aged Care Financial Performance Survey for the three months ended 30 September 2013. All amounts shown are measured in Dollars per Bed Day.

Survey Average Results

Band 1 Band 2 Band 3 Band 4 Band 5

$ $ $ $ $

Total of 626 Facilities in survey 102 Facilities 141 Facilities 152 Facilities 118 Facilities 113 Facilities

Revenue 251.11 225.95 204.23 183.06 155.45

Expenditure

Care 135.65 120.03 104.68 89.56 70.81

Hotel services 36.86 34.56 33.03 30.77 29.85

Accommodation services 29.83 29.03 28.19 28.36 27.38

Other services 31.36 29.06 27.00 24.07 23.28

Total expenditures 233.70 212.68 192.90 172.76 151.32

Facility Result ($ per bed day) $17.41 $13.27 $11.33 $10.30 $4.13

Total Result ($ per bed day) $19.04 $16.37 $14.54 $14.03 $7.94

EBITDA (facility) $ per bed p.a. $11,325 $9,769 $8,378 $8,228 $5,729

EBITDA (overall) $ per bed p.a. $11,841 $10,419 $8,772 $8,778 $6,266

Facility result (2013) $9.69 $1.44 $1.44 $11.28 $4.97

EBITDA (facility) $ per bed p.a. (2013) $8,439 $5,198 $5,182 $8,290 $6,001


Benchmarks

Results by Income BandExtracts from StewartBrown Aged Care Financial Performance Survey for the three months ended 30 September 2013. All amounts shown are measured in Dollars per Bed Day.

Top Quartile Average ResultsBand 1 Band 2 Band 3 Band 4 Band 5

$ $ $ $ $

26 Facilities 36 Facilities 38 Facilities 30 Facilities 29 Facilities

Revenue 262.15 227.28 206.76 182.46 161.51Expenditure Care 128.84 104.56 92.16 66.71 61.40

Hotel services 34.08 32.32 30.23 27.80 25.28


Other services 25.47 25.24 22.88 19.96 16.69

Total expenditure 215.42 184.14 169.33 139.41 128.36

Facility Result ($ per bed day) $46.73 $40.14 $37.43 $43.04 $33.15

Total Result ($ per bed day) $47.04 $41.35 $38.58 $45.98 $34.46

EBITDA (facility) $ per bed p.a. $21,449 $18,448 $16,743 $19,411 $15,742

EBITDA (overall) $ per bed p.a. $21,670 $18,673 $16,860 $19,882 $15,799

Facility result – 2013 $40.96 $28.35 $32.72 $41.00 $31.92EBITDA (facility) $ per bed per annum - 2013 $18,369 $13,455 $16,253 $17,621 $14,772


Results - The Gap

Band 1 Band 2 Band 3 Band 4 Band 5$0

$5

$10

$15

$20

$25

$30

$35

Gap between facility results of survey average and top quartile

This Survey201320122011

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Differences between Average and Top 25%

Band 1 Band 2 Band3 Band 4 Band 5 $ pbd $ pbd $ pbd $ pbd $ pbd

Income 11.04 1.33 2.53 (0.61) 4.13

Care costs 6.82 15.46 12.52 22.85 9.41

Hotel services 2.78 2.24 2.80 2.98 4.57


Administration and other support services 5.89 3.82 4.13 4.11 6.59

Total expenses 18.28 25.54 23.56 33.35 22.95

Facility result $29.32 $25.54 $26.09 $32.74 $29.02

• The below table shows the $ per bed day ($ pbd) difference between the Average (mean) of the September 2013 survey and the Average of the Top 25%

• Using Band 1 as an example the Top 25% have greater income of $11.04 pbd and less expenses of $18.28 pbd resulting in a greater surplus of $29.32 pbd


What are the top performers doing better?

There is a greater focus on financial performance at all levels of management

Accountability for performance by facility level There is a strong focus on key indicators such as care wages as a % of income Financial performance is aligned to strategic direction They incorporate financial performance benchmarking as a major

management tool – KPI’s


Staff HoursAverage of top quartileHours worked per resident per day for the three months ended 30 September 2013 Band 1 Band 2 Band 3 Band 4 Band 5

Care management 0.12 0.11 0.12 0.12 0.09

Registered nurses 0.44 0.37 0.31 0.12 0.08

Other care staff 2.67 2.08 2.12 1.61 1.51

Therapists 0.01 0.08 0.11 0.10 0.12

Total care hours 3.25 2.64 2.65 1.96 1.81

Hotel services 0.57 0.72 0.62 0.51 0.62


Administration 0.18 0.17 0.15 0.12 0.12

Total hours 4.09 3.60 3.50 2.63 2.60

Survey Average – Care Hours 3.65 2.96 2.79 2.49 1.87

Survey Average – Total Hours 4.62 3.85 3.76 3.30 2.69

June 2013 - Benchmark 3.86 3.54 3.09 2.41 2.18

June 2012 - Benchmark 3.39 3.24 2.55 2.22 1.67


Case Study 3 - Adding value to benchmark data

We have one group of community providers who all operate within a 50km radius

Each quarter we provide a tailored report which compares their facilities to each other as well as the benchmarks

They have formed a discussion group which we facilitate each quarter where they discuss how they achieve various improvements by sharing information

Now looking at areas where they can cooperate to increase influence with suppliers to save costs


Conclusion

Start benchmarking!

Improve financial performanceGrow profitsBe ready for future challenges

Improve management performanceGrow and empower peopleMonitor trendsAdapt to changing environment


Contact UsGrant Corderoy Stuart Hutcheon

Position Senior Partner Managing Partner

Telephone +61 411 508 093 +61 411 508 093

Email [email protected] [email protected]

Office Address

Level 2, Tower 1,495 Victoria AvenueChatswood NSW 2067

Phone +61 2 9412 3033

Postal Address

PO Box 5515Chatswood West NSW 1515

Web-page www.stewartbrown.com.au

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