Financial struggles persist, says report

Ongoing financial instability continues to make life difficult for residential aged care providers, according to the latest industry data.

Ongoing financial instability continues to make life difficult for residential aged care providers, according to the latest industry data.

StewartBrown’s Aged Care Financial Performance Survey Report for the 12 months ending June 2023 shows an operating loss of $16.54 per bed per day – $1.87 more than the previous financial year ($14.67).

“This represents an operating loss of $5,491 per bed per annum, and a continuation of losses for over six successive years,” say the report’s authors.

Source: StewartBrown’s June 2023 Aged Care Financial Performance Survey

However, there is some good news for the residential aged care sector in the 32-page report – which crunches data from 1,237 homes. The introduction of the Australian National Aged Care Classification funding model – along with the inclusion of the mandated minutes in the subsidy – “has had a very positive effect in relation to direct care staffing levels delivered to residents.”

AN-ACC has seen direct care staffing minutes increase by 12.71 minutes per resident per day – up 7.18 per cent from the previous year.

That isn’t to say the sector hasn’t experienced significant workforce challenges. As the report’s authors note: the aged care sector continues to record considerable shortages in staff numbers across all regions of Australia. “The ability to attract and retain staff has reached a critical stage,” they say.

While the 15 per cent pay increase awarded to a selection of staff in July “is a positive step”, the report’s authors question “whether this increase is sufficient on its own to attract additional staff.”

With workforce shortages continuing to bite, providers remain reliant on agency staff. As StewartBrown’s report shows, agency staff now represent $17.10 per bed day – 14.62 direct care minutes per resident per day – an increase of $6.20 per bed day compared to the same period in 2022 ($8.42 per bed day).

Source: StewartBrown

This all equates to 66 per cent of aged care homes operating at a loss during the period – on par with the previous year’s result of 67 per cent.

To remedy this, say the report’s authors, there needs to be “strong consideration” of funding reforms to plug the gap and provide a sufficient margin for financial sustainability.

“Ultimately,” say the report’s authors, “this will come down to requiring a greater level of consumer co-contribution in funding aged care” from those who can afford it.

Source: StewartBrown’s June 2023 Aged Care Financial Performance Survey

“A climate of operating issues” is continuing to impact the home care sector say the report’s authors – who analysed data from 71,269 home care packages. Not least, uncertainty surrounding the design of the Support at Home program – due for implementation from 1 July 2025. The delay has caused a “policy void” that has led to a “stagnation of innovation” for many providers.

As with residential aged care, staffing remains the most crucial concern for the home care sector. This – combined with a complex regulatory landscape – has seen a decline in financial performance. The current operating result has decreased to a surplus of $3.14 per client per day, compared to $3.98 the previous year.

Revenue utilisation has also decreased to 84.3 per cent of available package funding while unspent funds have increased to an average of $12,604 for every care recipient. In total, unspent funds are now in excess of $2.9 billion.

Source: StewartBrown’s June 2023 Aged Care Financial Performance Survey

The report also shows a continued reduction in staffing hours – 5.16 hours per client per week, compared to 5.28 hours the previous year.

“Considerable concerns over financial viability.”

In summary, the report’s authors say, whilst the aged care royal commission highlighted the declining financial performance of the industry, “the recommendations fell short in providing a clear direction to ensure the financial sustainability for the sector.”

As a result, the aged care sector – particularly residential aged care – “is continuing to have considerable concerns over financial viability.”

However, on an upbeat note, the report’s authors also acknowledge that the royal commission’s recommendations prompted the Albanese Government to embark on a bold and wide-ranging reform agenda.

“Whilst reform is disruptive and costly, it will ensure that the sector moves forward to delivering quality aged care services that are equitable, contemporary, transparent, and sustainable.”

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