Grim news from Grant Thornton

Returns are down again and current funding arrangements are making it hard for providers to meet consumer demand, according to a new report.

A damaging report has found that current aged care funding arrangements are not keeping up with consumer demand and are threatening the sector’s viability.

The Grant Thornton aged care survey found that average, annual per-bed earnings have dropped from $3,211 to $2,934 in the past twelve months.

Modern high care facilities have been hardest hit, with an average return on investment of just 1.1 per cent.

The results also indicate that not-for-profit operators have been worse affected than their for-profit counterparts.

The head of Grant Thornton’s aged care services, Cam Ansell said the main reason for the dramatic fall in profitability is the growing desire among consumers to stay in high-quality, single-room facilities.

“Consistently across the country, providers are finding it harder to satisfy clients with shared accommodation and older facilities,” said Mr Ansell.

“People really don’t want to share with other people and two, four and six-bed wards are getting harder and harder to fill.”

The report found that the average anticipated building cost for new facilities was $176,000 per bed, excluding land.

This is a dramatic increase on 2003 estimates which put per-bed construction costs somewhere between $74,000 and $85,000.

Mr Ansell said providers have also found that modern, single room facilities cost more to operate, forcing them to put building plans on hold.

“We work all over Australia and everywhere we are hearing about projects that are being stalled,” he said.

“Many organisations are running new facilities and are finding that the costs are sky-rocketing at the same time as subsidy levels and resident contributions remain stagnant.”

The Minister for Ageing, Justine Elliot responded to the report by saying that the Federal Government is providing record financial support to the sector.

“No Australian Government has invested as much in aged and community care as the Rudd Labor Government,” Mrs Elliot said in a statement.

“After 12 years of neglect, the Rudd Labor Government is committed to tackling the challenges of the 21st century, including our ageing population.”

But Mr Ansell said his organisation’s findings demonstrate the need for a thorough review of pricing and regulatory arrangements.

“What we are saying here is that the primary issue is about consumer demand,” Mr Ansell said.

“It is the consumers that are most at risk here because we can’t meet their choices unless providers are incentivised to invest in modern infrastructure.

“This is a relationship that is predominantly between providers and government but it needs to be more about providers and consumers.”

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