The trend towards more aged care delivered in the home will only marginally dampen long-term demand for residential services as care needs increase and the number of informal carers falls, according to a new industry report.
While the Living Longer Living Better reforms and accompanying government funding targeted home care as the preferred option, the growing need for higher care residential services would prevail in the longer term, the analysis said.
The report by advisory and investment firm KordaMentha, released in late December, highlighted future trends of Australia’s growing residential aged care industry and identified opportunities, particularly for high care and specialist operators.
Despite growing consumer preference to age in the home, an ageing population would result in fewer informal and unpaid carers – an essential cornerstone of community care programs – and further lessen the impact on demand for residential care, the report found.
“Whilst low care providers will experience reduced demand and funding as resources are reallocated to community care programs, high care providers are not likely to experience significant demand impact,” it said.
The analysis also said that convergence was likely to be a significant industry development over the medium term that would be driven by consumer preference for ageing in place and constraints on government funding.
The trend, which would lead to a continued reduction in the demand for low care packages, represented a key opportunity for residential aged care providers to expand their service offerings through vertical integration, it said.
The report noted:
“In recent years, ageing-in-place policies have seen some integrated services offerings emerge, with residential aged care providers best positioned to pursue these opportunities. There may be opportunities to move into the growing sub-acute care sector, but only larger, more corporatised residential care operators are likely to have or be able to acquire the necessary capabilities and relationships to support this model.”
In terms of specialised services, the report identified the increasing prevalence of dementia as an opportunity for extra service revenue and increased profitability, but warned that it was not without risk.
“The profitable provision of dementia services requires scale. Sub-scale dementia wings can actually result in negative profitability,” it said.
It similarly advised against dementia wings in low care and merged facilities stating that the current funding assessment arrangements for low care dementia residents was not likely to be sufficient to allow most facilities to run profitability.
The report also analysed the impact the reforms would have on the performance and viability of residential aged care operators and highlighted that metropolitan providers were likely to have a disproportionate benefit at the expense of low care and rural and regional operators.
Read the full report: Residential aged care industry: Consolidation and convergence
