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Home care sector faces tough times


The home care sector has experienced a more than six per cent decline in profitability over the last year as providers continue to accumulate a growing mountain of unspent funds, a key financial report has found.

Home care revenues fell by an average of 6.1 per cent, underpinning an overall reduction in profitability of 29.8 per cent, the StewartBrown Aged Care Financial Performance Survey found.

The report, analysing data from over 24,952 home care packages across Australia for the financial year ending June 2018, was released on Monday.

Grant Corderoy

Grant Corderoy

If found the current amount of unspent funds came to an average amount of $6,000 per client, compared to $4,255 last financial year.

That reflected a sizable decrease in revenue utilisation from 92.3 per cent in 2017 to 86.68 per cent in 2018, leading the report’s authors to warn that profitability would continue to suffer and that an improvement in revenue utilisation “must be a major priority for FY19”.

Senior partner Grant Corderoy said the average decline was consistent even among the sector’s best financial performers. He said it was being driven by pricing pressures caused by increased competition, the rise in CPI and the increase in unspent funds, estimated at up to $400 million nationally.

An ACFA report released last August put that figure at $329 million.

“This money is sitting in the balance sheets of providers when it could be utilised by the 121,000 clients in the national priority queue,” Mr Corderoy told Community Care Review. “It means provider profitability is really affected.”

The increase in unspent funds meant lower package revenue, which was also translating into a reduction in the hours of direct care per client, the report said.

Sink or swim, providers warned

Mr Corderoy said providers needed to look at pricing, service delivery and business models if they wanted to survive in the new competitive environment.

“We’ve had a significant increase in the number of providers in the last year and we are not consequently increasing the number of packages, so I would say clearly these profits aren’t sustainable to support that many providers.

“There’s more new providers than there are available packages and that squeeze is a forcing prices down. It is going to affect sustainability and we will see some providers fail because there’s not enough profit in it.”

According to the report, the number of approved home care providers has increased by 373, or 75.2 per cent, since June 2016. However the number of packages has only increased by 17.57 per cent (to 84,971) since February 2017.

The report says the current aged care funding model is under “significant strain”.

It concludes that the aged care sector requires “significant investment”,  considering the national queue has increased by over 32,500 since June 2017.

“What the survey highlights is that the financial performance of the aged care sector is experiencing significant challenges due to a continued decline in profitability in both residential and home care and this creates challenges for the long-term financial sustainability of the sector,” the report says.

Home care at a glance

  • Unspent funds per client $5,984 (up $1,729)
  • Revenue per client per day: $4.48 (down 6.1 per cent)
  • Operating result surplus per client per day: $3.77 (down $1.60)
  • Direct service costs: up $1.30 per client per day
  • Staff hours per client per week 6.69 hours (down .47 per cent)
  • Number of home care providers: 869 (373 more than in 2016)

Recommendations

  • Increased home care funding
  • Transparent pricing
  • Clarity and flexibility in service delivery
  • Enhanced auditing and compliance measures
  • Clarity in use of unspent funds
  • Consumer education
  • Integration of CHSP and HCP

(Source: StewartBrown Aged Care Financial Performance Survey Sector Report FY18)

You can access the report here.

Read more: Providers sitting on $329m in unspent funds

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2 Responses to Home care sector faces tough times

  1. Barry Arnott October 18, 2018 at 11:19 am #

    In Victoria and Western Australia under the old HACC system people got the services they needed no “your package can’t afford that”, no saving up your package for a $15,000 bathroom renovation which adds $50,000 to the value of the home at the tax payers expense and no millions of dollars sitting unspent in packages.

    But of course these were state idea’s which worked well and the federal bureaucrats could never accept that so they replace a high quality, efficient and well managed system with one which is more expensive, fails to meet the clients needs and call it ‘client directed’. I don’t know of any client who says “just hold off on my services for 12 months or so”.

    So now we push everyone to wards a package which they may have to wait over 12 months for, in the past you got the services you needed usually with in days of being assessed and un spent funds could be taken back at the end of the financial year by the department.

    Under the old HACC system the funds were with the providers to be spent on clients as required not being stored up in individual packages. Clients didn’t get $13,000 scooters they got the services they needed to remain living in the community provided by qualified staff. Every time the government hand services over to the for profit sector it is the consumer who suffers so why will the community services sector be any different?

  2. Disenchanted October 19, 2018 at 8:03 am #

    Agree with Barry Arnott, it is a real mess now. Victoria had a good system, wait lists were reasonable, systems and programs worked together to meet client needs – not wish lists. Package levels met client needs and could be adjusted up and down, now people on high packages stay on them regardless of whether the need remains, accumulating funds and they want to spend them on non care needs because ‘it is my money’, while others are desperate for help and end up in resi care because they can’t get a high package. I have clients that have waited over two years for a level 4 and one was told another 6-9 months is expected – he has been on queue 25 months so far. The high priority wait is 9-12 months. – this is very strict in my region, hard to get this status.
    Requests for furniture, white goods, landscaping, home modification are common. Job satisfaction minimal as we are just managing complaints, and have so many clients now, planning is basic, jumping from one thing to the next is standard. Reablement is a joke – if it is such a major plank of reform, why can’t a level 4 recipient who no longer needs that level be downgraded? Because entitlement has replaced need.

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