Kiama Municipal Council has moved to provide better quality aged and disability care services, launching Blue Haven Care on Monday.
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Blue Haven Care combines the Blue Haven aged care facility with an in-home support program.
The new "one-stop shop" aims to meet the challenges of the sector since funding cuts by state and federal governments.
"It's a revolutionary change in funding that's occurring, with the funding now being in the hands of the recipient, rather than with the organisation that provides the service," Kiama mayor Brian Petschler said.
"We have a very significant aged care facility - Blue Haven retirement village - which we think gives us the size and the ability to continue to undertake the provision of services."
It comes after Shellharbour City Council shut down its home and community care services in light of the funding changes.
Cr Petschler said every council was addressing the changes differently, but Kiama wanted to "continue providing a high level of community services".
"It's a challenge this new funding structure ... anyone in the community is vulnerable," he said.
At the last census, 36.1 per cent of Kiama's population was aged 55 and above, with the council's aim to keep people as independent as possible, before needing to head to a retirement home.
Blue Haven Care will provide a residential environment with support 24 hours a day, while Kiama Hospital will be redeveloped to include a 134-bed aged care wing, with dementia-friendly care.
The new facility is set to accept residents from April 2018.
Kiama Council general manager Michael Forsyth said he knew people who were already moving to Kiama for the aged care and disability services, and it could be a trend for the future.
"The other day [I spoke to someone] who said they have a friend who was moving from Melbourne to Kiama, because they knew of Blue Haven retirement village ... and knew their care needs in the future would also be met, and it's also close enough to transport like the railway and buses so they can carry out active lives."