Loss making facilities on the rise on top of COVID impact

The aged care sector is continuing to operate under significant financial strain with 60 per cent of aged care homes now operating in the red, StewartBrown’s latest report shows.

The aged care sector is continuing to operate under significant financial strain with 60 per cent of aged care homes now operating in the red, StewartBrown’s latest industry report shows.

This figure is up from 56 per cent for the six months ending December 2019 and 45 per cent 12 months ago.

The quarterly aged care benchmarking survey also found that 34 per cent of aged care homes reported a cash loss (negative EBITDAR), compared to 29 per cent at the end of the previous quarter and 20 per cent for the same period last year.

The StewartBrown March 2020 Aged Care Financial Performance Survey released this week includes data from 201 residential aged care providers and 1,108 aged care homes across Australia.

The situation is worst in outer regional, rural and remote locations where 74 per cent of homes are operating at a loss, up from 71 per cent the previous quarter. More than half of these aged care homes made a cash loss (55 per cent) at March 2020.

But there are more loss-making facilities in all types of locations.

In inner regional areas, 64 per cent of homes are now operating at a loss, up from 61 per cent at December 2019, and likewise for 56 per cent of homes in major cities, up from 52 per cent.

Operating losses of aged care homes. Source: StewartBrown

StewartBrown senior partner Grant Corderoy said the financial performance of the sector was worrying.

Grant Corderoy

“We’ve got a deteriorating financial performance and when you overlay that with COVID, it becomes much more concerning,” Mr Corderoy told Australian Ageing Agenda.

However, he said the alarming number of aged care homes operating at a loss is not entirely due to COVID-19.

“It has an impact but probably not a major impact. This is a continuation of a trend that we have been seeing over the last few years,” he said.

Mr Corderoy said the benchmarking firm undertook a scenario analysis where the Basic Daily Fee increased by $10 per resident per day.

With the proposed funding reform, 46 per cent of aged care homes would still be operating at a loss, and 24 per cent homes would be making a cash loss, the report found.

“That confirms that the whole funding envelope, both from government and consumer, is not sufficient to maintain residential aged care’s long-term or short-term financial viability,” Mr Corderoy said.

Scenario analysis with the Basic Daily Fee increased by $10 per resident per day. Source: StewartBrown

Report recommendations

The report recommends an additional $1.7 billion in funding to ensure the sustainability of the residential aged care sector including:

  • $700 million to lift basic daily fee
  • $350 million accommodation supplement
  • $315 million training subsidy
  • $240 million inflation adjustment
  • $140 million regional provider supplement.

It is clear funding for residential aged care is insufficient, Mr Corderoy said.

“The sector needs to come together and agree on the levels of funding required, some being government, some being consumer and that has to happen as quickly as possible,” he said.

“This trend of deterioration will be a continuing trend unless it is rescued by increased funding.”

Sean Rooney

Peaks express concerns for year ahead  

Leading Age Services Australia CEO Sean Rooney said the report highlighted the increasing challenge for aged care providers.

“These alarming figures reveal the pressure on delivering quality care to thousands of older Australians, even before the full impact of the pandemic hit,” Mr Rooney said.

Patricia Sparrow

Aged and Community Services CEO Patricia Sparrow said the figures were particularly concerning given they only covered the first month of the COVID-19 pandemic.

“The already troubled financial situation of the aged care sector coupled with the ongoing coronavirus pandemic shows that rescue measures are urgently needed to ensure the sector’s viability,” Ms Sparrow said.

Other residential results at a glance

  • everyday living costs exceeded revenue by an average of $8.72 per bed per day
  • average of 3.23 total care hours per resident per day, up from 3.14 the previous year
  • average occupancy of 92.1 per cent, down from 93.6 per cent the previous year
  • average ACFI of $180.75 per bed per day, up $2.37 on the previous year.

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Tags: Aged Care Financial Performance Survey, aged-and-community-services-australia, cash loss, covid-19, featured, finance, financial-performance, funding pressures, grant corderoy, leading-age-services-australia, operating loss, patricia sparrow, Sean Rooney, stewartbrown,

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