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Financial performance of aged care declining, ACFA report shows


The number of residential aged care providers making a profit has decreased by 12 percentage points to just over half, the seventh Aged Care Financing Authority report shows.

The 2017-18 ACFA report, which examined the developments, issues and challenges confronting the aged care industry, found that the overall financial performance of the sector declined last year following five years of steady improvement prior to that.

The report shows that 56 per cent of residential providers made a net profit in 2017-18, down from 68 per cent in 2016-17, 69 per cent in 2015-16 and 68 per cent in 2014-15.

The financial performance of the aged care sector was “significantly influenced” by a number of government policies, ACFA said.

“An important influence on the decline in the performance of residential care providers was the government’s changes to the Aged Care Funding Instrument that took effect in 2016 and 2017 and the pause in ACFI indexation in 2017-18,” it said.

ACFA also found a significant reduction in total profits among providers in 2017-18 ($435 million) compared to 2016-17 ($1,006 million).

The ACFA report also found that the average Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) per resident fell by 24 per cent to $8,746 in 2017-18, down from $11,481 the year before.

Expenses in residential care reached $17.6 billion in 2017-18, which is a 5.3 per cent increase from $16.8 billion the previous year.

 Accommodation payments

The report highlights the gradual shift in residents choosing to pay for aged care through daily accommodation payments (DAP) rather than a refundable accommodation deposits (RAD).

The proportion of residents paying for their accommodation through a RAD declined from 43 per cent to 38 per cent between 2014-15 and 2016-17, and fell further to 37 per cent in 2017-18.

While the proportion of residents paying by DAP increased from 33 per cent to 40 per cent between 2014-15 and 2016-17, it remained at 40 per cent in 2017-18.

RADs are an important source of funding for capital investment by residential aged care providers, ACFA said.

“A shift from RAD to DAP will pose cash management issues for providers, who will have to replace interest free debt with debt with an interest charge,” it said.

Government spending

  • $18.1 billion, up from $17.1 billion in 2016-17
  • $12.2 billion for residential aged care
  • $2 billion for home care
  • $2.4 billion for home support

 Residential aged care services

  • 886 residential care providers, down from 902 in 2016-17
  • $435 million total profit
  • $17.6 billion total expenses
  • residents contributed $4.5 billion towards living expenses, care and accommodation
  • 241,723 residents received services
  • average occupancy of 90.3 per cent, down from 91.8 per cent in 2016-17

Capital

  • Total assets of $48.4 billion, up from $45 billion in 2016-17
  • Total liabilities of $36.6 billion, up from $33.6 billion in 2016-17

Stakeholder response

Aged and Community Services Australia acting CEO Darren Mathewson said the report showed many aged care providers were in a fragile position, which would affect the sector’s future.

“The big improvements we are working towards in aged care at the moment won’t be fully realised unless we see a commensurate response on funding for the sector,” Mr Mathewson said.

Australia won’t be able to meet the needs of older Australians until there is adequate planning for structural and funding issues, he said.

“The ACFA report should be a warning to government and the community that our sector needs more support to continue to improve and respond to future challenges,” Mr Mathewson said.

Leading Age Services Australia general manager of policy and advocacy Tim Hicks said the report showed a growing number of providers were under significant financial stress.

“Feedback from consultations indicated that many providers have curtailed or delayed investment plans because of policy and regulatory uncertainty. This impacts on the ability of providers to deliver the care and support older Australians need and deserve,” Mr Hicks said.

Access the report here.

Read also

Home care sector changes continue to cause pain for providers

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One Response to Financial performance of aged care declining, ACFA report shows

  1. David F July 10, 2019 at 5:05 pm #

    If 44.5% of RACFs operating in Australia are now in the red, how many of these will have to hit the wall and go into liquidation before the Government intervenes with a real fee increase that actually reflects the cost increases incurred through salaries & wages, utility costs, food costs and OG&S. Clearly the 1.4% COPO just doesn’t cover these rising costs. No doubt, there will be additional costs that will result from the new compliance requirements together with the full impacts of the Aged Care Royal Commission recommendations are put upon providers. Consumer expectations have been heightened, complaints are encouraged however the resourcing levels remain inadequate to address the emerging demands.

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