When policy creates business failure: Lessons from aged care
Research reveals how fundamental issues in Australia's home care business model, from digital barriers to workforce instability, impact vulnerable elderly citizens
In March 2019, an elderly Australian opened her door to find yet another stranger standing on her doorstep. After seven years of home care services, she had lost count of how many different workers had entered her home – each arriving without identification, without introduction, and without knowledge of her specific needs. Her story, told to Australia's Royal Commission into Aged Care Quality and Safety, exemplified a system-wide failure that affected hundreds of thousands of vulnerable Australians.
Between 2019 and 2021, the Royal Commission exposed widespread failures in home care services that went far beyond isolated incidents of poor care. While cases of individual provider failure tended to dominate the media headlines, the investigation revealed that the entire industry operated under a business model that was fundamentally constrained by government policy settings – creating a perfect storm where good intentions translated into poor outcomes.
The stakes were enormous. In 2021, over 176,000 older Australians relied on government-funded Home Care Packages, with 939 approved providers delivering services worth approximately $4.2 billion annually. Yet despite this substantial investment, more than 100,000 eligible people languished on waiting lists. Those who did receive services often experienced care so fragmented and inadequate that many simply gave up trying to navigate the system. The human cost was significant, but the business implications were equally profound – an entire industry trapped in a failing business model with no clear path to innovation or improvement.
Research reveals interconnected problems
The individual stories of failure captured by the Royal Commission represented symptoms of deeper structural problems. To understand why an entire industry could fail so comprehensively, researchers turned to business model theory to unpack the systemic issues.
Published in the Australian Journal of Management, Set up to fail: Explaining systemic problems in the business model of in-home aged care was co-authored by UNSW Business School’s Dr Rachael Lewis together with Dr Gillian McAllister from the UNSW Centre for Social Impact and the UTS Ageing Research Collaborative’s Professor David Brown, Dr Olivia Rawlings-Way, Associate Professor Nicole Sutton, Dr Celina McEwen, Professor Deborah Parker and Associate Professor Nelson Ma.
The team analysed qualitative data from the Royal Commission using a three-stage methodology. They first established the dominant business model for home care services, then identified problems through witness testimony, and finally traced how these problems interconnected.
The team examined 186 transcripts of witness testimonies, along with extensive documentation and reports spanning two decades of previous inquiries. Using business model theory, the researchers mapped over 100 specific problems to nine business model components. Their analysis revealed how constraints in one area created problems in others through interdependencies, ultimately preventing providers from delivering their core value proposition of safe, quality care.
“We were struck by the scale and scope of the challenges that were being reported under the auspices of the Royal Commission,” Dr Lewis explained. “Our findings that many of these problems were being baked into the home care system through policy settings validated the experiences not just of aged care recipients, but also of aged care workers and providers.”
Learn more: Here's how to fix the broken model for funding aged care
Dr McAllister also said the Royal Commission presented a unique opportunity for the research team. “Witnesses told their individual stories at hearings around Australia, and the Commission collected a great deal of financial and statistical data,” she said. “The result was a substantial public dataset on the current state of aged care in Australia. The fundamental flaws in the business model for home care services was an exciting finding from this dataset, in terms of its importance in informing policy development.”
Digital barriers block access to essential services
What emerged was a picture of an industry where external constraints had embedded challenges into the very fabric of how services operated. The research showed that problems were not isolated incidents but interconnected failures that reinforced each other – explaining why individual providers, regardless of their intentions or capabilities, could not overcome the systemic issues.
The first major constraint emerged through the government-mandated My Aged Care portal. This web-based system served as the sole gateway for older Australians to access home care services. The portal was designed to simplify the customer experience by offering a centralised entry point.
However, the reality proved different. During the Royal Commission hearings, an independent expert testified that "the idea that this is a system that is navigable by the average client is absurd." The digital-only interface created immediate barriers for people aged 65 and over who lacked computer skills or internet access.
Beyond access difficulties, the portal failed to provide adequate information for decision-making. A care recipient testified, for example: "I think that there needs to be more options for researching home care providers. They need some kind of comparison service, particularly given that they all charge such variable rates. The lack of consistency is very confusing for me as a consumer." The witness noted that provider fees ranged from 10 to 48% of package values, with no standardised way to compare services.
Unpredictable funding creates workforce instability
The second constraint involved revenue flows. Government funding for home care packages was capped and allocated based on budget considerations rather than community need. This created significant waiting lists, with some people waiting up to 34 months for appropriate care packages.
The unpredictable nature of funding had cascading effects throughout the business model. When customers passed away or moved to residential care, revenue ceased abruptly. Providers responded by shifting to variable cost structures, leading to widespread casualisation of the workforce.
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By 2016, 27% of in-home care staff were agency workers or self-employed, while 14% were employed casually. These cost pressures also limit the time that personal care workers can spend with clients, affecting service quality. A personal care worker explained the time pressures: "that 15 minutes might turn into 35 minutes... we are on a time clock and it can be quite distressing for myself trying to get the job done if the person is not quite right that day."
Workforce shortages undermine care quality
The third constraint centred on human resources. Personal care workers represented 84% of the in-home care workforce, yet no minimum qualifications or training requirements existed for these roles. Combined with poor pay and working conditions, this created severe workforce shortages.
High staff turnover became endemic. One care recipient testified: "I have lost count of [how many workers attended my house during a seven-year period]. There's so many different workers coming to the house without the name tag, without any identification." This constant rotation of staff prevented the development of trusting relationships essential for quality care.
Key lessons for industry and policymakers
This research offers critical insights for business professionals operating in regulated environments. First, it demonstrates how external constraints can embed systemic problems within entire industries, limiting managers' ability to innovate or adapt their business models.
Second, the findings highlight the importance of understanding interdependencies between business model components. In aged care, the mandated digital portal only became problematic when combined with the specific customer segment of older adults. Similarly, funding constraints necessitated cost structures that undermined service quality.
For policymakers and business leaders, the research underscores the need to consider how regulatory interventions interact with business model components. Well-intentioned policies can create unintended consequences when they fail to account for these interdependencies.
Dr Lewis observed that the Australian aged care sector now faces major reforms, including replacement of the Home Care Package program with the Support at Home program from 1 November 2025. The new program is intended to improve support for older people to remain independent at home. Yet, many of the challenges of the previous system may be replicated or even exacerbated under this new design. Workforce shortages persist despite substantial improvements in pay for aged care workers, and individualised quarterly budgets for ongoing services may add further volatility to provider revenue models. Understanding how constraints embed problems within business models will be crucial for designing policies that enable rather than hinder value creation for vulnerable populations.
Learn more: The home stretch: accessing home value to fund long-term care
“Given that many human services are now delivered through an outsourced model rather than directly by government, the business models framework offers a potentially useful tool for policymakers to understand how interventions will work in practice,” Dr McAllister said.
“Ultimately, our analysis suggests that business model innovation in this sector will require sustained partnerships between regulators and provider organisations, and careful attention to how regulatory interventions interact with interdependencies within the dominant business model. Importantly, ethics of care has to be embedded in the value proposition of service providers, so as to deliver both financial and social sustainability in the sector.”