The overall performance of home care providers declined in 2017-18 and financial pressures are continuing, a key sector report says.
The Aged Care Financing Authority’s annual report on the funding and financing of the aged care industry says changes to home care that took effect in 2016 and 17, including the introduction of CDC, continued to influence the industry in 2018-19.
“The overall performace of home care providers declined in 2017-18 and financial pressures are continuing,” the report says. “The main influence was increased competition caused by the introduction of CDC.”
The report finds “a significant deterioration” in the financial performance of home care providers in 2017-18.
After several years of relatively stable returns, before-tax earnings per consumer for home care providers fell by over 60 per cent. For the first time in three years, for-profit providers reported a larger fall in financial performance than the not-for profit sector.
The report says government policies have had a significant impact on financial performance, especially the introduction of CDC which has resulted in an increase in the number of approved providers from 496 in 2015-16 to 873 in 2017-18.
“In turn greater competition between providers … has resulted in a decline in profit margins,” the report says.
Expenses per consumer for home care providers increased by 7 per cent in 2017-18 while income per consumer decreased by around 1 per cent compared with 2016-17.
Leading Age Services Australia said the latest indicator came in the wake of the government’s recent funding increase of 1.4 per cent and a 3 per cent minimum wage increase, compounding pressure on the sector.
A period of transition
ACFA says home care is in a period of transition and many providers are still adjusting their business models to meet the needs of consumers.
“The reforms have increased costs for providers and the increased competition, including price competition, has significantly squeezed margins,” the report says.
It says the increased competition is attracting new consumers with only a small number of people moving between providers.
However it also notes concerns that some providers are not only reducing their prices, but also the quality of their services, as a result of increased competition.
The report says demand for aged care services will intensify with the aging of the population, and consumers are likely to become more demanding in the range of aged care services they seek.
ACFA says there is a significant under-supply of home care services, with 127,748 people waiting for a home care package or a package at their assessed package level last December.
The home care sector continues to be predominately not-for-profit with 53 per cent of providers from this group, although this represents a drop from 65 per cent in 2016-17.
The report shows the proportion of home care consumers aged 65-74 has been increasing since 2014-15 and the proportion of those aged 75-84 increased noticeably in 2017-18, as it did in 2016-17, likely reflecting the expansion of home care packages in recent years.
The proportion of those aged 85 and over decreased slightly for the third year in a row.
The demand for aged care services will expand with the ageing of the population, ACFA says, although it adds it is not currently possible to accurately measure demand or to reliably establish consumer preference for residential and home care, because of existing supply constraints.
Aged care in 2017-18 at a glance
- 1.3 million Australians received subsidised aged care services with the figure expected to hit 1. 5 million by 2020-2021
- Total expenditure was $18.1 billion, up from 17.1 billion in 2016-2017
- There were 1456 CHSP providers, down from 1523
- There were 873 home care providers, up from 702
- There were 366,000 aged care workers and 68,000 volunteers
- There were 116,843 home care consumers, a 20 per cent increase from the previous year
The report says the number of Australians aged over 70 will increase by around 1 million people each decade. Meanwhile the 85-years and over cohort will increase from just under 500,000 people in 2019 to just over 1 million people by 2039.