The amount of aged care homes operating at a loss has tipped over 50 per cent for the first time, StewartBrown’s latest report on the financial performance of the sector finds.
The latest data from accounting and benchmarking firm StewartBrown released last week shows that 51 per cent of the 984 residential aged care homes surveyed recorded an operating loss (negative earnings before tax) for the quarter ending September 2019.
This is up from 41 per cent of homes for the same period in 2018 and 34 per cent of homes in September 2017, StewartBrown’s September 2019 Aged Care Financial Performance Survey shows.
More than a quarter of homes also recorded a cash loss (negative earnings before interest, taxation, depreciation, amortisation and rent) for the September 2019 quarter (27 per cent), up from 19 per cent of homes for the same period the previous year.
The situation was worse in outer regional, remote and very remote areas where two-thirds of homes reported an operating losses (65 per cent) and almost half made a cash loss (47 per cent) compared to their counterparts in major cities (47 per cent and 22 per cent respectively).
In inner regional areas, 55 per cent of homes reported an operating loss and 31 per cent reported a cash loss.
StewartBrown partner David Sinclair said July to September is historically the best performing quarter from an operating results perspective because subsidy rates are indexed on 1 July.
However, this year’s results highlight the ongoing deterioration of the sector’s financial performance, he said.
“In the September 2019 quarter, there has been a decline in profitability both in terms of the same period in the previous financial year and also from the results for the 2019 financial year,” Mr Sinclair told Australian Ageing Agenda.
“This continued deterioration in the financial results highlights the strain in which the residential sector finds itself,” Mr Sinclair said.
The report also found that the average occupancy rate was 93.9 per cent for the September 2019 quarter, down from 94.9 per cent the previous year.
It is the first significant decrease in occupancy levels for at least five years, the report said.
Reasons for this decrease include the accelerated increase in home care packages during the 2019 financial year and a loss of confidence in the sector due to the preliminary findings of the Royal Commission into Aged Care Quality and Safety, Mr Sinclair said.
He said the financial viability of aged care will worsen unless additional targeted funding is provided.
“The deterioration of the financial sustainability of the residential aged care sector in all geographic regions continues, and unless additional specific targeted funding is implemented it may lead to the closure of residential aged care homes and will risk further necessary investment into the sector,” he said.
Other residential aged care results
- $1.69 – the aged care home result (operating profit) per bed day for the survey average, down from $4.37 in 2018
- $33.41 – the aged care home result (operating profit) per bed day for homes in the top quartile, down from $33.61 in 2018
- $5,829 – cash profit per bed per year for survey average, down from $7,737 in 2018
- $17,816 – cash profit per bed per year for facilities in the top quartile, up from $17,810 in 2018
Access the report here.
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