More benchmark blues
Despite slight improvements in high care returns, most residential facilities are still operating at a loss, according to the June 2008 Stewart Brown survey.
The profitability of high care facilities improved in the 2008 financial year, according to the June 2008 benchmarking survey from Stewart Brown Business Solutions.
But the analysis of over 280 facilities in every state and territory revealed that less than a third of participating high care facilities achieved a net operating profit.
In fact, the average result for high care facilities was a deficit of $7.08 per bed day.
“There are still only 30 per cent of high care facilities achieving a net operating profit,” said David Sinclair, the manager of Stewart Brown’s aged care benchmarking service.
“It’s still not good. It’s just that most high care facilities are making less of a loss than before. There has been a little bit of a turnaround but it’s certainly not great.”
Mr Sinclair said the slight improvement among high care facilities could be attributed to more efficient rostering and the introduction of the Aged Care Funding Instrument (ACFI) – although he added that it is still too soon to fully assess the ACFI impact.
“There is evidence from a number of reports that the ACFI has benefited high care facilities but we will have to keep our eyes on that to see how much it continues,” he said.
The trends in low care are less positive as declining returns continue to cause problems.
Less than half (48.4 per cent) of the participating low care facilities managed to obtain a net operating profit.
And the survey average for low care participants was a net operating loss of $2.02 per bed day.
The results reflect the fact that the average wages to income ratio for low care homes has risen 3.48 per cent, while among high care facilities it has fallen 0.72 per cent.
“What is happening in low care now is what happened in high care some time ago,” said Mr Sinclair. “The losses are getting bigger and bigger each year.”
Another worrying finding is that the majority of facilities in the survey are using capital income to cover day-to-day expenses, adding to existing concerns about future building projects.
“That doesn’t augur well for the future,” Mr Sinclair said. “When people have to start rebuilding and refurbishing, the money might not be there, particularly for those small, standalone facilities.”
A major factor behind the existing difficulties for residential providers is administration costs, which continue to rise at a significant rate.
In the past year, spending in this area rose by an average of 6.8 per cent in high care facilities and 21 per cent in low care facilities.
According to Mr Sinclair, the transition from the RCS to the ACFI is probably contributing to this trend.
“[The new instrument] was supposed to decrease the administration burden,” he said.
“And it might be decreasing that burden on the floor but when it comes to administering the subsidies, it can be a lot more difficult.”
As in previous years, the top 25 per cent of participating facilities had fewer staff hours per bed day compared to the survey average.
High care providers in the top quartile allocated 0.06 fewer staff hours per bed day than the survey average, while in low care the difference between the top facilities and the overall average was 0.2 hours per bed day.
“The differences look to be fairly marginal but when you think that we are talking about the hours per person per day, that soon starts to add up,” Mr Sinclair.
As with the recent Grant Thornton survey and previous Bentleys surveys, the June report from Stewart Brown looks at the effect of bedroom size on the bottom line in high care.
Like the other reports, it has found that facilities with mostly single rooms suffered bigger losses than those that had more multiple-bed rooms.
The survey also found that facilities with a separate dementia unit had poorer net operating results than those that didn’t.
“In low care, the average losses are almost three times greater in those facilities that have a dementia unit,” Mr Sinclair.
“It will be interesting to see how that goes as the ACFI transition progresses because it was supposed to provide more money for residents with difficult behaviours.”
On a more positive note, the survey revealed that community care results remained steady in the 2008 financial year.
Average daily returns for Community Aged Care Packages rose to $4.23 and although the returns for Extended Aged Care at Home packages fell slightly, they remained above $15.
