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ACFA report confirms financial struggles for rural, remote providers

Aged care providers operating in rural and remote areas face extra challenges in their financial operations with higher cost pressures and lower financial results, according to the Aged Care Financing Authority.

ACFA’s Financial issues affecting rural and remote aged care providers report, released yesterday, found that the impacts of geographic isolation affected workforce costs, travel and freight expenses, access to allied health staff, and limited catchment areas resulting in smaller facilities and services.

The report illustrated the complexity of the issue, concluding that within the rural and remote sector there were “noticeable variations” in financial performance.

“The level of remoteness had an impact on financial performance,” it found.

Although positive, the average facility Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for rural and remote facilities was around a quarter of the average achieved in non-rural and remote areas, the report found.

Average residential accommodation deposits (RADs) taken by rural and remote facilities during 2014–15 was $130,000 lower than in non-rural and remote areas.

The report confirmed the trend identified in ACFA’s June 2015 analysis that larger facilities generally – but not always – outperformed smaller facilities. The latest analysis found that 70 per cent of rural and remote facilities had less than 40 beds compared with 7 per cent of non-rural and remote facilities.

The impact of smaller facilities could be part of the explanation for the higher labour costs and higher utility costs identified in the report, as minimum labour needs and fixed costs had to be met “without the benefits of economies of scale,” it said.

The report said its analysis confirmed labour costs were a significant contributor to higher expenses in rural and remote areas, and these were particularly noticeable for registered nurses and enrolled nurses as well as in catering, cleaning and laundry, maintenance and repair.

While travel and freight costs were not separately identified in sufficient detail in financial statements to determine their precise impact, ACFA said it expected they were a factor that contributed to the higher overall expenses incurred by rural and remote providers.

In terms of the viability supplement, the report noted the Federal Government provided $66 million during 2014–15 across residential care, home care and flexible care services.

While the supplement was “well targeted” it used a classification scale for determining remoteness that had not been updated since 2005, the report said. “It also continues to pay certain providers based on grandfathered eligibility criteria applying under several earlier versions of the viability scheme, some of which are not rural and remote as defined in this study,” it found.

Discussing the ownership of rural and remote aged care services, the report noted services were overwhelmingly provided by not-for-profit (NFP) and government.

In residential care, 64 per cent were NFP and 32 per cent were state government operated, while in home care, 57 per cent were NFP and 35 per cent state government operated.

Responding to the report, Leading Age Services Australia said it was “a stark reality” that the average rural and remote aged care facility has a negative Operating EBITDA of -$2,004 per resident per annum compared to $8,840 in non-rural and remote areas.

“Care management costs are nearly four times higher in rural and remote facilities than in non rural facilities. Registered and enrolled nurses costs are almost double. Labour and maintenance costs are more than triple. Catering, laundry and cleaning costs are higher, as are utilities and consumables,” said LASA CEO Patrick Reid.

“While the report notes that in many cases financial performance could increase through improved organisational leadership and structure, and the adoption of innovative approaches, the workforce development fund was axed last budget and the government has failed to provide reliable and affordable mobile phone and internet coverage in many parts of Australia,” he said.

ACFA’s full report is available to read here

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