More than half of homes still operating a loss

Additional funding is required to improve the financial performance of aged care homes, most of whom continue to operate at a loss, a key industry report has found.

The government needs to fix funding gaps for struggling homes before it considers the money needed for a new aged care system, an industry expert has told Australian Ageing Agenda.

Accounting and benchmarking firm StewartBrown’s Aged Care Financial Performance Survey December 2020 released this week shows 51 per cent of aged care homes recorded an operating loss, down from 56 per cent a year before.

The survey of 1,119 aged care facilities also found that 28 per cent of homes made a cash loss, which is slightly down from 29 per cent for the same period last year.

Without the COVID-19 subsidy, which was an additional $3.18 per bed day, 58 per cent of homes would have recorded an operating loss and 31 per cent a cash loss.

StewartBrown senior partner Grant Corderoy said the figures show the sector’s poor financial performance continues.

Grant Corderoy

“It’s just again highlighting that there needs to be fairly urgent funding increase before we start looking at what funding is required for any reforms from the royal commission. We need a short to mid-term funding increase based on our current aged care settings,” Mr Corderoy told AAA.

The “small financial benefit” of the COVID-19 subsidy has had little impact for providers, Mr Corderoy said.

“The majority of providers, over 50 per cent, are making a loss with or without the impact of the COVID subsidy.”

The survey shows aged care homes on average had an operating loss of $4.96 per bed day for the six months ending December, down from a $6.43 loss for the same period the previous year.

Without the COVID-19 subsidy, homes on average would have made a loss of $8.14 per bed day, the survey shows.

COVID, home care impacts occupancy

Image: StewartBrown.

National aged care home occupancy hit 92.4 per cent for the six-month period, down from 93.9 per cent the year before, largely due to the COVID-19 pandemic, but also the increase in home care packages.  

The Northern Territory recorded the highest average occupancy (99.4 per cent) followed by South Australia (95.6 per cent), Western Australia (94.7 per cent), the ACT (94.6 per cent) and Tasmania (93.9 per cent).

Occupancy in the eastern mainland states fell below the national average with Victoria faring the worst (90.2 per cent) followed by New South Wales (91.6 per cent) then Queensland (92.3 per cent) for the six months ending December 2020.

“Occupancy is starting to improve except for in Victoria, which was heavily hit by the second wave,” Mr Corderoy said.

“[In] Western Australia, South Australia and even Tasmania, occupancy has now improved to pre-COVID levels” but the “significant increase” in home care packages is also part of the reason for the drop in occupancy, he said.

Occupancy in rural and remote areas showed an improvement, up from 88.94 per cent in December 2020 from 88.46 per cent for the same period last year.

Predictions for the year ahead

Based on current policy settings with allowance for indexations of subsidies and costs, StewartBrown has forecast more homes will be operating a loss at the end of this financial year (63 per cent) and even more at the end of next year financial year (65 per cent).

Mr Corderoy said the findings were unsurprising and added that providers were already doing their most to minimise costs.

“Providers are holding on as best they can,” he said.

 They need an urgent funding boost, Mr Corderoy said.   

Government told to act now

Leading Age Services Australia CEO Sean Rooney called on the government to act on funding shortfalls.

“With a significant surge in operating losses forecast for residential care, we need urgent action on the royal commission recommendations,” he said.

Sean Rooney

He pointed to the royal commission’s final report finding that decisions by successive governments had cut almost $10 billion from the 2018-19 aged care budget.

“Constantly, we hear from our members that financial subsidies for residential aged care are not keeping pace with the real costs of caring. [Providers] and their staff battle every day to provide top-quality care with limited resources.”

Mr Rooney called on the Government to lead fundamental change including funding reform.

“It is critical that additional funding will increase the numbers of nursing and care staff, have them better paid and trained and lead to better outcomes for residents,” he said.

Aged and Community Services Australia CEO Patricia Sparrow said the results demonstrated “aged care is deep in the red” and that it must be addressed properly in the upcoming federal budget.

Patricia Sparrow

“There are only so many times we can put out statements saying the latest data is a wake-up call,” Ms Sparrow said.

“Keeping services local and open is important, particularly in rural and remote settings. Closures result in significant social dislocation for clients, residents and families. If lost, smaller local services are unlikely to be replaced.”

She said piecemeal funding cannot address the issues.

“If there is anything less than a total overhaul of aged care services and the way they are financed in Australia in this year’s budget it will be a failure.”

Other residential aged care results

  • average ACFI of $187.79 per bed day, up $7.48 the previous year
  • average of 3.29 total care hours per resident per day, up from 3.25 hours the previous year
  • average everyday living costs exceeded revenue by $9.10 per bed day.

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Tags: acsa, aged and community services australia, Aged Care Financial Performance Survey December 2020, aged care occupancy, COVID19, featured, funding, grant corderoy, lasa, leading age services austalia, operating loss, pat sparrow, reform, Sean Rooney, stewartbrown,

1 thought on “More than half of homes still operating a loss

  1. This unfortunately isn’t news. The federal government has failed its duty of care to provide adequate funding for the provision of sustainable services for the elderly community.
    They did this deliberately in 2015, they knew when they slashed ACFI the ramifications. They knew of the hardship when axed the payroll subsidy. They knew the grief and distress when they withheld CPI increases.
    There has been twenty reports prior to the Royal Commission that have been studiously ignored.
    The residential care sector has been struggling to pay the bills, this is not new.
    The associations have done very little, they were weak when they needed to be strong and this sector has been neglected too long. The recent funding increase of $452m equates to $2 per day per resident… about a tim tam rise.
    Disgraceful behaviour, I saw our PM with a tear in his eye saying that he is upset and distressed about the sector!!! He oversaw the whole demise!!

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