Care minute funding behind differing losses in regions
Without better incentives to retain staff, aged care facilities in regional communities will struggle to turn a profit, Grant Corderoy tells AAA.
Despite their similar characteristics, a higher proportion of aged care homes in regional centres are operating at a loss than their counterparts in large rural towns, StewartBrown’s most recent quarterly report shows.
Most of the 1,205 aged care homes surveyed for StewartBrown’s Aged Care Financial Performance Survey Report made an operating loss for the quarter ending 30 September 2024 and across all Modified Monash Model categories included.
Among the key findings noted, the report found that 72 per cent of aged care homes in regional centres (MM2) are operating a loss compared to 62 per cent of homes in large rural towns (MM3).
StewartBrown Senior partner Grant Corderoy told AAA he believed this is due to the differences in funding of direct care minutes between the two groups. He also pointed to broader staff availability issues.
Mr Corderoy said that on aggregate, MM3 facilities have been receiving full funding to reach their targeted minutes, but because they only achieved 97 per cent of their target minutes, there has been a transition surplus.
Meanwhile the providers of MM2 facilities achieved 101 per cent of their target minutes, which has brought higher labour costs and ultimately saw the number of homes operating at a loss exceed seven out of 10 compared to six out of 10 homes in September 2023. A rate of just over six out of 10 MM3 homes operating at a loss has continued since September 2023.
There are many reasons which could lead to a facility being unable to reach their direct care minute target, but one of the key obstacles is availability of staff.
Mr Corderoy told AAA that he believed specified incentives are the best way to attract and keep staff in the smaller, more transient MM2 and MM3 category homes.
“The different MMMs have got slightly different characteristics and the incentives that we’ve got to get staff [can’t be] one size fits all,” he said to AAA.
“We’ve got to get them focused on what those particular regions look like.”
Looking at the results of the other categories, facilities in MM4 areas – medium rural towns – recorded the lowest operating result for the September 2024 quarter, with a deficit of $28.16 per bed day. At the other end is MM1 category facilities – major cities – which had an average operating deficit of $3.29 per bed day.
MM1 facilities also recorded the lowest loss in everyday living services at $5.14 per bed day compared to other facilities, while MM5 facilities – small rural towns – recorded the highest everyday living deficit at $17.87 per bed day due to higher expenditure.
The report does not include facilities in MM6 or MM7 categories – remote mainland communities and remote offshore areas. The report also notes that MM1-MM4 facilities currently receive the same base care tariff components, but MM4 facilities are not compensated for the higher labour costs in delivering direct care services. This will be adjusted under the new arrangement from October 2024.
Mr Corderoy said it was not unexpected to see the varying results between the different MMM categories but would like to see incentives for staff retention to see better results in the regional and rural homes.
Providers should also focus on accommodation pricing and consider raising everyday living fees in preparation for the funding changes due to commence in July 2025, he said.
Home care needs to get pricing right too
Providers of home care should make similar preparations, said Mr Corderoy, as while there was a slight improvement for the sector this quarter, high rates of unspent funds remain. The report shows a new average of $15,221 in unspent funds per client, a $2,057 increase from the September 2023 average of $13,164 per client.
“The big challenge for the sector in home care, both from the pricing authority, as well as the providers, is setting a price from July 1, for the first year of transition, that’s [an] appropriate price, that’s affordable for the consumer, but also reflects a proper margin, we’ll call it, for the provider. And it’s going to be a lot of work around what the right pricing structure should be,” he said to AAA.
“I feel that this is something that really is going to be the major focus for home care. And until they get that right, it’s going to only have marginal surpluses.
“Unspent funds and revenue utilisation has been a [big] area of concern for many years. And I think that will change that. And if we can then use the funding available, the consumers use what’s available, [and] not have unspent funds, [it] will also allow us to have more funding to get more people into home care, which is needed because the waiting lists are starting to grow.”
Read more about the home care findings in our report Unspent home care funds continue to rise
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