Apollo Care - Good news for the Aged Care Sector

Two-and-a-half years on from its initial investment, private operator Apollo Care is on target to reach 1,200 aged care beds under its virtual management model this year – and attracting interest from regional communities and overseas investors alike. Apollo Care currently has seven aged care homes across NSW and Queensland (see breakout box) and is actively seeking to acquire more – including private and government-owned facilities. “My goal is that by the end of the calendar year, we’ll be at 12 or 13 facilities,” says CEO Stephen Becsi. “We’re happy to consider any struggling group or facility that would be a good fit for the Alliance.” Even those that are currently making a profit are being drawn to Apollo’s operating model, he added. “In the ideal world, we would keep saving organisations that are in trouble, but I can’t see an issue with acquiring organisations that just want to come into the Alliance,” said Stephen. APOLLO LOOKING OVERSEAS FOR CAPITAL Unlike Not For Profits, Apollo has the advantage of being able to attract private investment – while maintaining its members’ Not For Profit status and the associated benefits. “Charities can’t raise capital, but the Apollo Care Alliance can,” explains Stephen. “Together, we have the best of both worlds.” Apollo’s investors include high net worth individuals in Australia – though the CEO concedes that attracting investment to residential care is a challenge. “The media is scaring Australian investors away from aged care. When investors hear that seven out of 10 aged care homes are losing money, they ask: ‘Why would we invest in residential aged care? It’s a bad business’.” The vendors themselves – being faith-based, community-based or not-for-profit organisations – also invest in the organisation, with some actually preferring to obtain shares rather than cash – indicating a high degree of trust in the model. The group is also looking overseas for investment, with potential foreign investors currently being assessed against Foreign Direct Investment requirements in accordance with the Foreign Investment Review Board (FIRB) regulations. “The offshore investors have a completely different perspective on aged care,” said Stephen. “They know that we have great systems and tight accreditation.” RECOVERING OPERATING LOSSES The group is also outlaying capital on some of its acquisitions as well as recovering operating losses. For example, Harden Grange was purchased from Southern Cross Care (NSW & ACT) and is now in startup phase. Four of Apollo’s current facilities were either sanctioned or under voluntary administration when they were acquired – all are now reaccredited and turned around in terms of compliance, service provision and financial performance. “Everything we bought was losing money, so we pay those costs every month until the facility is turned around,” said Stephen. However, this turnaround time is improving. Apollo’s first facility, Charingfield in the COVID- lockdown-hit Sydney suburb of Waverley, took 21 months to go from an operating loss of $2 million a year to break even. Today, this turnaround time has fallen to an average of 12 months and is steadily improving. THE RIGHT SIZE AND THE RIGHT MANAGER There are two other ingredients for success: the right number of beds and the right facility manager. Apollo’s smallest facility is Harden Grange in the regional NSW town of Harden, which has 45 beds. “We can make a 40-bed facility work, but we wouldn’t go any smaller,” said COO Barry Ashcroft. “Sixty is a better size and 80 is optimal.” 80% FACILITY MANAGER TURNOVER The other key factor is the right manager – Apollo has turned over 80% of its residential site managers since its launch. Expectations are high and some have decided that they are not cut out for that level of intensity. “We’re fortunate with our current group of residential service managers (RSMs) as they’re experienced and engaged,” said Barry. “We provide expert support in every area, but RSMs must have an appropriate skillset themselves. They need to understand where the gaps are and who to call within our organisation. We immediately focus on developing the skills RSMs need to make their facility work well.” “Each RSM operates like a CEO,” added Stephen. “They’re now running their business. Apollo has built a dashboard that provides feedback on business KPIs for each facility, and RSMs report to Barry and me about how they’re achieving those KPIs.” “I can’t name another small, aged care facility in regional Australia that has reopened after being shut down, but we are proving that it can be done.”...