A surplus of $8 per bed day

More aged care providers are now operating in the black but not by much, according to the results of a new 2011/12 financial performance survey.

By Yasmin Noone

Aged care facility owners are making more profit today than they were a year ago, with around 70 per cent of residential facilities now operating in the black, according to new industry benchmarking survey results.

The Aged & Community Care Financial Performance Survey, recently released by the chartered accountancy firm, StewartBrown, has measured and compared the financial performance of more than 600 Australian residential aged care facilities for the financial year finishing June 2012.

The results show that even though providers are barely scraping through financially, an overwhelming majority – almost 78 per cent of residential care facilities – are making a surplus. 

The average facility result for the 2012 year was also $8.24 per bed day compared with $5.10 per bed day for the 2011 financial year.

StewartBrown director, David Sinclair, said that although it is presumptuous to specifically pinpoint exactly why each facility recorded the statistic they did, it can be assumed that most have taken recent action “to cut costs or make better use of the ACFI through better documentation and so forth”.

“People are managing their facilities better and probably have a little bit of extra income in the mix,” Mr Sinclair said. 

Government funding has made a difference, he speculated. But, added: “I don’t think that anyone is arguing that there is not more funding [available] from the government. But what the government has been arguing is that they want to claw back some of the money.”

Mr Sinclair cautioned against overstating the positive financial results, which should be looked at in a business context, relative to other industries.

“…Overall, profit has increased a little bit but it’s coming off a low base. It’s not like these places have squillions of dollars.

“Even though profits have improved, $8 a day is not a lot of money. It’s not a big return on their investment.”

The survey however also indicates that just over 14 per cent of facilities had a negative EBITDA – earnings before interest, taxes, depreciation, and amortisation rate. That is a three per cent increase in facilities with a negative EBITDA compared to the March 2012 quarter.

Mr Sinclair explained that EBITDA moved from $6,435 per bed per annum to $7,994 during the same period.

While these results are welcomed, he said, it must be remembered that it was only in the 2009 financial year that the average facility result was a deficit of $4.01 per bed day. So although, on average, aged care facilities are doing better, a return of $8.24 on average income of $193.65 per bed day can hardly be called “a good result”.

The accounting company also looked at EBITDA as a return on what it might cost to construct a new home, based on conservative figures: $250,000 including the cost of land, with an EBITDA of $7,994 per bed per annum and a return equal to 3.2 per cent.

“Over the last three years, things have improved and [some facilities] are making a small profit. But again, when you look at the return on investment, three percent is nothing to smile about – especially when you can stick your money in the bank and earn five per cent.

“..The average result is still not providing the aged care facility with a satisfactory return.”

The survey explained

Participants in the financial performance survey received a comprehensive report on the results as they do each quarter, for a fee.

The report includes a detailed analysis of all the data collected, trend summary tables and graphs.

“We split the performance up into two areas: overall and facility result,” Mr Sinclair said.

“An ‘overall result’ reconciles to their financial statements. It includes areas like fundraising, investment income, interest earned on monies invested [etc]; and we exclude these areas from the facility result.

“A facility result also allows us to compare like with like. It excludes all those bits of income that some organisations may allocate to a facility and others may not. So really, the facility result is the measurement of financial performance that we most talk about.”

This year, the survey contains data from 607 residential care facilities, 177 CACP programs, 120 EACH programs and 97 EACHD programs – making this the largest survey to-date.

Financial benchmarking has become more interactive with the launch of our new online financial performance survey website, which allows participants to log onto our secure website and manipulate the data with various filters to create their own customised reports.

Related event information

StewartBrown will be travelling to most major cities and regional cities to report on the June 2012 results and to launch the company’s new website. The locations and dates are:

-MELBOURNE: Friday 9 November
-PERTH: Monday 12 November
-ADELAIDE: Tuesday 13 November
-BRISBANE: Thursday 15 November
-WOLLONGONG: Monday 19 November
-CANBERRA: Tuesday 20 November
-ALBURY: Wednesday 21 November
-COFFS HARBOUR: Monday 26 November
-ORANGE: Tuesday 27 November
-TAMWORTH: Wednesday 28 November
-NEWCASTLE: Friday 30 November
-SYDNEY: Tuesday 11 December

For more details about the workshops, visit the StewartBrown’s website.

Tags: acfi, ebitda, finance, income, performance, residential, stewartbrown, surplus,

2 thoughts on “A surplus of $8 per bed day

  1. A provider needs to make $25,000 to $32,000 per supported bed based on an establishment cost of $225,000 (Grant Thornton, January 2012). Stewart Brown’s survey of charities with an average EBITDA per bed of just shy of $8,000 per bed suggests that the large church based charity sector is incapable of competent finance performance management. The church based sector is likely to fade to black and be supplanted by the private sector over the coming decade or two.

  2. No, $8 a day is not much, but the worry is how much was sacrificed in the way of staff and care, to make that. And the Government wants to claw back more??

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