Uncapping the daily care fee is the best option for boosting the declining revenue of residential aged care organisations, an aged care consultant tells AAA.
Grant Corderoy, senior partner with aged care accountancy and benchmarking firm StewartBrown, said the current funding and revenue arrangements were making it “very tight” for the majority of residential aged care providers.
The only real opportunity available today is to make a surplus through the aged care funding instrument, but any potential to do that is reduced by freezes on the indexation of ACFI and facilities under staffing squeezes, he said.
This makes the Tune Review recommendation to allow providers to charge a higher daily fee “critical to residential facilities to allow an increase in revenue,” Mr Corderoy told Australian Ageing Agenda.
Facilities can offer additional optional services today and while some are providing those, many especially in the not-for-profit sector are not, he said.
Mr Corderoy was speaking to AAA last week following his presentation on financial sustainability for the aged care sector at the recent SA Care Revenue Symposium in Adelaide, the first event in a national series underway by Aged and Community Services Australia.
He said StewartBrown benchmarking data of over 950 facilities showed facilities were losing $43 per bed per day on the gap between a resident’s daily living expenses and the revenue received from the basic daily fee.
The daily fee, which covers everyday living costs, is set at 80 per cent of the single pension and currently $49.42.
The Tune Review recommended changes to the basic daily fee including a requirement for providers to charge a minimum fee while allowing them to charge a higher fee to non-low means residents, with fees in excess of $100 to be approved by the pricing commissioner.
As previously reported, aged care peaks ACSA, Leading Age Services Australia, the Aged Care Guild and Catholic Health Australia have given their support to allow providers to charge a higher daily fee to wealthier seniors, although CHA argued the higher fee should still be capped.
The Federal Government flagged in its December mid-year budget update that it would respond to the 38 recommendations of last year’s review of aged care by David Tune in the 2018-19 Budget to be handed down in May.
Implementing an uncapped fee
If the government does legislate to deregulate the daily fee, Mr Corderoy said there were still decisions to be made by facilities on how that would be implemented.
Facilities may rightly ask “if we’re providing these services now, how do we suddenly charge more? If 40 per cent of residents on average are supported have they got the revenue base to increase the fee?” he said. “No provider wants a two-tiered system.”
Mr Corderoy suggested “the fix going forward” was for facilities to provide a range of services over the duration of a resident’s stay.
“Early on this might be meals and recreation, later on it might lean towards end of life and palliative care,” he said.
Providers advised to consider bonds
Last Wednesday providers were told they could double their investment return for a little additional risk at a briefing in Adelaide, also hosted by ACSA.
Justin McCarthy of fixed-income brokers Mint Partners said there was some potential for raising additional revenue by investing in bonds.
For most aged care providers, much of their excess cash or investments are in term deposits, which are yielding about 2.5 per cent as interest rates keep coming down, Mr McCarthy said.
At the briefing, he advised participants on the bond market and options for taking money out of term deposits and putting it into bonds.
“For almost the same risk or a very marginal increase in risk, providers at present could double their return – to about 5 or 5.5 per cent,” he told AAA.
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