Residential care sees ‘dip’ in operating performance
Meanwhile occupancy rates reached 94.4% in June, and Grant Corderoy tells AAA it will likely remain high for the next five to 10 years as demand continues to exceed supply.
StewartBrown’s latest benchmarking report shows a dip in operating performance for the aged care sector, which senior partner Grant Corderoy attributes to some homes having to increase their mandated care minutes to meet targeted minutes.
The effort to increase care minutes led to the sector making a deficit for the year on an operating level, which has been a continued deficit for five years, he added.
The StewartBrown Aged Care Financial Performance Survey Sector Report (FY25), which covered the 12-month period between July 2024 and June 2025, noted that 29 per cent of the 1,206 homes surveyed were operating with a loss on their earnings before interest, taxes, depreciation, and amortisation.
The report also found the average operating EBITDA for FY25 was a $957,000 surplus, representing 1.03 per cent on operating revenue. StewartBrown noted this as insufficient to maintain the standard of accommodation, everyday living services and care delivery.
The direct care margin increased to a surplus of $16.07, including administration, but the everyday living and accommodation margins deteriorated to a deficit of $7.13 per bed per day and $12.05 per bed per day, respectively. StewartBrown said this was a result of the increase in revenue being insufficient to fund increases in labour costs and indexation on non-labour expenses.
The overall operating result was a deficit of $3.10 per bed per day and the operating EBITDA averaged at just $6,817 per bed per annum – well below the operating EBITDA of $20,000-$22,000 that StewartBrown flagged as necessary for encouraging investability.
On the other side of the operating deficit is the increase in the occupancy rates of available beds, which reached 94.4 per cent in June and has likely since reached closer to 96 or 97 per cent, Mr Corderoy said.
“So in nearly all areas, not all areas, but in nearly all areas, we think that occupancy is going to remain high for the next five to 10 years because demand will exceed supply,” he told AAA.
Accommodation pricing review key to investability
The accommodation pricing review, announced by the government in September, will be “very important” in boosting sector investability, Mr Corderoy emphasised.
There has been a drop in the margins for AN-ACC and it needs to be replaced by increasing the margin for everyday living. This will be helped by the hotelling supplement, which is going up to $22.15 per bed per day, but the sector will also need to increase accommodation pricing for both supported and non-supported residents, he said.
But addressing the funding model will only partly address bed shortages, he added, because the new funding is only applicable for new residents entering residential aged care.
“It’s going to take two or three years before we get the benefit,” he continued.
“I think the government will have to consider whether they do some form of capital grants, or low-interest grants, or provide some alternate funding, because the improvement in the results – if assuming the accommodation pricing goes up – won’t take effect really until FY30. So in the interim, we need to get some capital grants or equivalent lower interest loans or alternate funding to allow that to occur.
“But at least if we get a proper revenue flow from accommodation, we will have the confidence to build.”
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