The proportion of aged care facilities reporting a loss has grown from 34 to 41 per cent in six months, according to StewartBrown’s latest benchmarking report, which found an increasing number of financially vulnerable services.
StewartBrown’s survey of more than 915 residential aged care facilities found the sector’s financial performance has “declined considerably” for the six months ended 31 December 2017.
“The [results] represent a major concern for the sector and its ongoing financial viability,” according to the December 2017 Aged Care Financial Performance Survey report, which was published on Wednesday.
The poor performance is being attributed to this financial year’s freeze on indexation and the January 2017 changes to the Aged Care Funding Instrument.
Staff costs increasing at a much greater rate than inflation, accommodation pricing still set too low, slow uptake of optional services and insufficient dementia funding to cover the staffing need are among contributing factors highlighted in the report.
In the red
StewartBrown’s quarterly survey captures more than one-third of Australia’s residential services, which totalled 2,672 at 30 June 2017.
The latest analysis found that two in five facilities (41 per cent) reported a loss on their overall facility earnings before tax (EBT) for the six-month period while more than one in five facilities (21 per cent) reported a loss on their earnings before interest, taxation, depreciation and amortisation (EBITDA).
That’s up from 34 per cent and 16 per cent of facilities experiencing a negative EBT and EBITDA respectively for the previous financial year, according to the report.
While the sector primarily uses EBITDA to measure operating performance, EBT should be given equal consideration as it includes depreciation, which is a significant expense for facilities, StewartBrown said in the report.
The highest proportion of facilities recording a loss were in outer regional, rural and very remote areas, however, “significant declines in performance also occurred in the inner regional and metropolitan demographics,” the report found.
In terms of remoteness, the survey found:
- 56 per cent of facilities in outer regional, remote or very remote areas made an EBT loss and 33 per cent made an EBITDA loss
- 42 per cent of facilities in inner regional areas made an EBT loss and 23 per cent made an EBITDA loss
- 39 per cent of facilities in major cities made an EBT loss and 19 per cent made an EBITDA loss.
Elsewhere the survey found the difference between care revenue and care costs fell by $5.36 per bed per day to $4.06 for the survey average and by $3.51 to $34.34 per bed per day for the top 25 per cent of facilities.
Facility EBT dropped by $1,618 per bed per annum to $1,617 across all facilities and by $783 to $12,319 per bed per annum for the top quartile, according to the report.
Similarly, facility EBITDA reduced by $1,326 per bed per annum to $7,071 on average and by $525 to $17,760 per bed per annum for the top performing facilities.
“This declining performance will continue into the next two quarters, leading to a very concerning fiscal year performance for many residential aged care facilities,” StewartBrown said.
Access the report here.
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