Residential homes with negative net profit before tax (NPBT). Source: StewartBrown

The number of loss-making facilities in outer regional, rural and remote areas is on the rise, with homes in South Australia struggling the most, a new report shows. 

The StewartBrown Aged Care Financial Performance Survey Rural and Remote Results Summary released this week further analyses the financial results of 95 aged care homes in outer regional, rural and remote areas across the country from the September 2019 Aged Care Financial Performance Survey (read our backgrounder here).

It shows that two-thirds of homes in these areas recorded an operating loss (negative earnings before tax) for the quarter ending September 2019 (65 per cent) and 47 per cent made a cash loss (negative earnings before interest, taxation, depreciation, amortisation and rent).

This is up from 61 per cent and 40 per cent of homes in these areas making an operating and cash loss respectively for the same period last year.

By comparison, in major cities, 47 per cent and 22 per cent of the 640 facilities recorded operating and cash losses respectively as did 55 per cent and 31 per cent respectively of the 249 facilities in inner regional areas , the survey shows.

Grant Corderoy
Grant Corderoy

StewartBrown senior partner Grant Corderoy said the results highlight that many homes in outer regional, rural and remote areas are struggling.

“The scary finding is that 65 per cent of outer regional, rural and remote homes recorded an operating loss in real terms but 47 per cent recorded an EBITDAR loss, which is effectively a cash loss,” Mr Corderoy told Australian Ageing Agenda.

“There are many regional and remote aged care homes that are in a vulnerable situation,” Mr Corderoy said.

He said there needed to be a different funding approach for these areas.

“Rural and remote has to have a separate funding model as it is distinct from what is happening in the major cities and inner-city regional areas because it has conditions that are characterised by having different demographics,” he said.

“If we don’t have a substantial funding conditions and improved funding conditions, we will see failures in the rural and remote areas,” Mr Corderoy said.

Aged care providers peak bodies agree that more services failures are immiment without additional funding (read our story here).

Losses higher in SA

Aged care homes in outer regional, rural and remote areas in SA fared the worst where five in six facilities recorded an operating loss (85 per cent), and two in three recorded and cash loss (65 per cent) for the September quarter.

The next poorest performing state was Western Australia where more than two-thirds of outer regional, rural and remote homes recorded operating and cash losses (both 67 per cent).

It was a similar result for homes in Tasmania and New South Wales including the Australian Capital Territory, where 67 per cent of homes recorded an operating loss, however, fewer homes made a cash loss (56 per cent and 48 per cent respectively).

In Victoria, 55 per cent of outer regional, rural and remote homes recorded operating and cash losses. While in Queensland, 52 per cent of homes reported an operating loss and 26 per cent a cash loss.

South Australian homes are performing worse than other states because many of its rural and remote homes are owned and operated by the state government, Mr Corderoy said.

“At the moment, South Australia’s losses are worse due to having a greater number of government owned homes, being Country Health SA. Being state government owned, it’s not a core area of their health business and then they also have a different staff award structure, staff mix and smaller aged care homes,” Mr Corderoy said.

SA is also the largest provider of aged care services in rural and remote areas, Mr Corderoy said.

Call for more funding

Mr Corderoy said a funding injection was critical for rural and remote providers, but also necessary for the whole residential aged care sector.

“If there are no funding increases or if there is nothing coming through in the upcoming budget, then we are going to see a further deterioration across the board.

“Regional and remote are in a worse situation than major cities and inner regionals, but all of them are suffering from a lack of funding,” he said.

Other findings for outer regional, rural, remote homes

  • minus $3,963 – average operating profit per bed per year
  • $1,945 – average cash profit per bed per year
  • $175.76 – average Aged Care Funding Instrument income per bed day
  • 3.31 – average number of direct care hours per resident per day
  • 92 per cent – average occupancy

Access the report here.

Related coverage

Half of Australia’s aged care homes now in the red

Additional $320m not enough to improve sector’s bottom line

Listed providers doing ‘better than average’

Financial performance of the sector deteriorating

Sector continues to experience significant financial challenges, survey shows 

Residential occupancy down and wait times up, report shows

Financial performance of sector ‘disappointing’

45 per cent of facilities making a loss

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1 Comment

  1. So what’s new?
    The federal government is abundantly aware of the crisis across the residential care industry.
    They should be because they caused it!

    So what’s next, the Royal Commission is looking at safety and care. Not at funding.

    What incentive is there for the government to address the funding crisis? Are the various associations getting anywhere with endless meetings and conferences with the Minister or any one of hundreds of other government personnel?

    Is the government going to address the funding crisis in the May budget?

    Why would they? Is there another study due that will enlighten their conscience and rescue the industry?

    Do the associations have a Plan B. ( plan A is more blah blah)?
    Do they intend to take unprecedented action, do things not done in this industry previously and take a decent swing at the government to force them to come to the table?
    The associations aren’t representing the core residential care industry and its time they did.

    There is a Plan B, not all that popular with some and might spoil the very matey relationship between the association and Government.

    Industrial action is now required!

    Personally, I’m not looking for a friend in government, I just want this underfunded industry to be corrected and to hell with the budget.

    Ask what plan B is, if you support it then stand up and insist on it being implemented.

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