Aged care providers on average made an operating loss of $2.1 million last financial year, which is an improvement on the previous year, an aged care finance forum has heard.

Benchmarking firm StewartBrown hosted the 2021 Aged Care Finance Forum last week to share the results of the 2020-2021 Aged Care Financial Performance Survey.

The survey includes data from 269 providers, 1,277 residential aged care homes and 62,697 home aged care packages.

Grant Corderoy

According to the organisational data of 235 participants, providers made an operating loss of $2.1 million in 2020-21 on average, down from a $2.5 million loss the year before.

However, providers in the top quartile turned a $1.8 million operating profit on average while those in bottom quartile made an operating loss of $4.7 million.

StewartBrown senior partner Grant Corderoy said the improved operating result for the survey average was nearly almost all related to COVID.

“There was a COVID surplus this year for the funding for COVID, which exceeded the cost except for those homes that actually had a COVID outbreak,” Mr Corderoy told the forum.

“If we exclude where they’ve had a COVID incident, COVID in a sense has been the sole reason that we’ve seen a slight improvement in the results from 2020 to 2021.”

Elsewhere the survey shows 58 per cent of aged care homes operated a loss last financial year, up from 55 per cent the previous year, and almost one third of aged care homes made a cash loss (32 per cent), up from 28 per cent.

“That is a concern to see that over 32 per cent have a cash loss and 58 per cent are running at an overall operating loss,” Mr Corderoy said.

Aged care home operating losses by region. Source: StewartBrown

Impact of COVID

The survey found that aged care homes on average made an operating loss of $8.43 per bed day in 2020-21, up from a $6.90 loss the previous year.

Without the COVID-19 subsidy of $3.71 per bed per day, it would have been a $12.14 loss, Mr Corderoy told the forum.

“If that COVID supplementary funding goes, it’s going to be a big impact going forward,” he said.

Mr Corderoy said he would like to see the COVID-19 subsidy continue.

The survey found average occupancy was also down in 2020-21 (92 per cent) compared to 2019-20 (94 per cent).

This is the first time in five years occupancy has fallen below 94 per cent nationally, Mr Corderoy said.

While COVID-19 has had an impact on occupancy, it is not the only reason for the decline, he said.

“The negativity from the concerns that the royal commission raised [has] also had an effect. The increased home care packages has also had a significant effect, and may be a lasting effect,” Mr Corderoy said.

“Occupancy, like any business, is a direct reflection on your profitability and your business to be profitable. And I think that we need to do a rejigging when we’re looking now at where residential aged care is, because I think are we going to have lower levels – the 92 per cent type levels and 92.5 per cent – for a number of years to come.”

Forecast for aged care

Source: StewartBrown.

Mr Corderoy said StewartBrown predicts that by 2023 when there is no longer a COVID-19 subsidy, the $10 Basic Daily Fee will not “make a great difference” for providers.

StewartBrown predicts more than half of aged care homes will still be making an operating loss in 2021-22 (53 per cent) and 2022-23 (57 per cent in 2023).

Mr Corderoy said there needed to be improvements to aged care funding and consumer contributions, particularly with accommodation pricing.

“I think that consumers who can afford it should be paying a commensurate rate. A discounted rate, if they’re paying a RAD [refundable accommodation deposit], a commensurate rate if they’re paying a DAP [daily accommodation payment].

The StewartBrown 2021 Aged Care Finance Forum includes five pre-recorded sessions released online on 21 October and a national series of question and answer forums this week.

Other residential findings

Homes on average:

  • spent $9.78 more on residents’ daily living services than the revenue received
  • spent 60.4 per cent of everyday living revenue on food and food preparation
  • spent $33.09 on food and food preparation per resident per day
  • provided 2.93 hours of care to each resident a day, up from 2.91 hours the previous year.

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  1. This should be on the front page of every daily newspaper in Australia.
    Where does the Government think the money is coming from to cover these losses; RADs?

  2. This issue is the Commonwealth has continually and deliberately underfunded the increasing wage costs of the sector whilst paying lip service to implementation of its $17Bn 2021 Federal Budget Announcement.
    As recently as July 1, 2021 aged care wage rates increased by a mandatory 2.5% plus 0.5% superannuation increase and the Commonwealth paid a paltry 1.1%. Throughout the past 12 months the costs of Covid compliance and PPE has increased enormously !!, Its time the commonwealth opened the purse strings to fund aged care appropriately and stop paying lip service that it is concerned about the sector.

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