/ 1 Benchmarking today’s results for tomorrow’s success Grant Corderoy Senior Partner

/ 2 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?

/ 3 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

/ 4 Benchmark methodology Need to ensure a consistent data set o Standardised set of definitions for each item being benchmarked o Consistent chart of accounts Data collection o Timely, accurate and abnormal variations identified Data set o Statistical size large enough to be relevant o Revenue and expense to be broken down by category Common denominator used o Dollars per bed day / client day o Hours per resident per day / client day Trends o Benchmarking should be regular and shown over different financial periods

/ 5 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

/ 6 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

/ 7 Current Environment  Period of reform  Uncertainty around future cash flows  Increasing competition from:  Other providers  Home care / residential care mix  Ageing building stock?

/ 8 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)

/ 9 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

/ 10 Dissecting the Data Revenue and expense allocations Grouped by revenue bands Within bands: – Survey average – Average of 2 nd 25% – Average of top 50% – 25 th percentile – Median Filtering the data: – Size – Geography – State – City, Rural and remote – Contracting – catering, laundry, cleaning

/ 11 Analysing the Data  Income - Subsidies  Care costs  Hotel services  Accommodation services  Other services  Facility Result  EBITDA  Wages as a percentage of care subsidy and fees  Per bed day  Percentage

/ 12 What is the survey telling us?

/ 13 The numbers in more detail Extract from StewartBrown Aged Care Financial Performance Survey for the three months ended 30 September All amounts shown are measured in $ Per Bed Day. Sept 2013 June 2013 June 2012 June 2011 June 2010 June facilities710 facilities607 facilities545 facilities432 facilities333 facilities Resident fees Government care subsidies Other resident revenue Other government revenue Total revenue Expenditure Care Hotel services Accommodation services Administration & support services Total expenditure Facility 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$ 3.66 Total 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$ 1,707 Overall 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%

/ 14 Results by benchmark band Results by Income Band Extracts from StewartBrown Aged Care Financial Performance Survey for the three months ended 30 September All amounts shown are measured in Dollars per Bed Day. Survey Average Results Band 1Band 2Band 3Band 4Band 5 $$$$$ Total of 626 Facilities in survey102 Facilities141 Facilities152 Facilities118 Facilities113 Facilities Revenue Expenditure Care Hotel services Accommodation services Other services Total expenditures 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 $11.28$4.97 EBITDA (facility) $ per bed p.a. (2013)$8,439$5,198$5,182$8,290$6,001

/ 15 Benchmarks Results by Income Band Extracts from StewartBrown Aged Care Financial Performance Survey for the three months ended 30 September All amounts shown are measured in Dollars per Bed Day. Top Quartile Average Results Band 1Band 2Band 3Band 4Band 5 $$$$$ 26 Facilities36 Facilities38 Facilities30 Facilities29 Facilities Revenue Expenditure Care Hotel services Accommodation services Other services Total expenditure 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$31.92 EBITDA (facility) $ per bed per annum $18,369$13,455$16,253$17,621$14,772

/ 16 Results - The Gap

/ 17 Differences between Average and Top 25% Band 1Band 2Band3Band 4Band 5 $ pbd Income (0.61)4.13 Care costs Hotel services Accommodation services Administration and other support services Total expenses 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

/ 18 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

/ 19 Staff Hours Average of top quartile Hours worked per resident per day for the three months ended 30 September 2013 Band 1Band 2Band 3Band 4Band 5 Care management Registered nurses Other care staff Therapists Total care hours Hotel services Accommodation services Administration Total hours Survey Average – Care Hours Survey Average – Total Hours June Benchmark June Benchmark

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/ 23 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

/ 24 Conclusion Start benchmarking!  Improve financial performance  Grow profits  Be ready for future challenges  Improve management performance  Grow and empower people  Monitor trends  Adapt to changing environment

/ 25 Contact Us Grant CorderoyStuart Hutcheon PositionSenior PartnerManaging Partner Telephone Office Address Level 2, Tower 1, 495 Victoria Avenue Chatswood NSW 2067 Phone Postal Address PO Box 5515 Chatswood West NSW 1515 Web-pagewww.stewartbrown.com.au