Sector’s financial performance declines further

Almost six in 10 aged care homes in Australia are making a loss, highlighting the sector’s broken funding model, the latest report from benchmarking firm StewartBrown has found.

Almost six in 10 aged care homes in Australia are making a loss, highlighting the sector’s broken funding model, the latest report from benchmarking firm StewartBrown has found.

For the 12 months ending June 2020, 58 per cent of homes recorded a loss, up from 56 per 12 months ago.

The data released this week shows aged care homes on average made a $6.90 loss per bed per day before tax, which is more than double the $2.62 loss reported in 2018-19.

But without the  COVID-19 funding, it would have been 64 per cent of homes recording a loss and a $9.84 loss per bed per day on average, according to StewartBrown’s June 2020 Aged Care Financial Performance Survey of 1,190 aged care homes.

The survey also found that 32 per cent of aged home homes recorded a cash loss for the year including with the funding boost, up from 28 per cent the previous year. Without the COVID funding boost, 36 per cent on homes would have reported a cash loss, according to the report.

Grant Corderoy

StewartBrown senior partner Grant Corderoy said the report was more evidence of a sector in financial difficulty.

“It demonstrates that the funding model is broken as it exists now,” Mr Corderoy told Australian Ageing Agenda.

The sector needs targeted funding is need to provide some relief, he said.

“It’s getting to the point where some critical additional subsidy funding… has to come to improve the viability and the sustainability of the residential sector,” Mr Corderoy said.

Mr Corderoy said the much of the report analyses the financial performance of the sector without the COVID-19 subsidy because the benchmarking firm wanted to compare the trends year on year based on normal recurrent revenues and expenses.

While the financial performance of aged care homes in all locations is declining, the report shows that outer regional, rural and remote locations again fared the worst.

With the COVID-19 subsidies excluded, 78 per cent of outer regional, remote and rural homes operated a loss, up from 74 per cent the previous year.

In inner regional locations, 69 per cent of homes are operating at a loss, up from 57 per cent in 2018-19 while in major cities, 59 per cent are operating at a loss, up from 52 per cent the previous year.

Aged care homes operating a loss based on no COVID subsidy by remoteness. Source: StewartBrown.

Without additional targeted funding, the sector will continue to face challenges, Mr Corderoy said.

“The next year will be very difficult. We’ve got homes in major cities that have been making losses two or three years in a row and that’s not sustainable,” he said.

“If there’s not additional funding and additional regulatory reform to enable revenues [and] additional services… I think we are going to see potentially… more provider failure and… importantly, we’re going to see providers not willing to keep investing and innovating within the residential aged care sector.”

Sean Rooney

Peaks call for change

Leading Age Services Australia CEO Sean Rooney said the report highlighted “a gaping hole between the rising costs of delivering care and funds provided to cover these costs” even with the funding boost.

“The report reflects what was raised at the aged care royal commission hearings last month – with records showing increasing pressure on aged care homes since 2016, when funding cuts were enacted in the Federal Budget,” Mr Rooney said.

Patricia Sparrow

“LASA and the nation wants this addressed as soon as possible and we strongly note the commitments made by the Treasurer and the aged care minister to act on the Royal Commission’s recommendations, once the final report is handed down in February.”

Aged and Community Services Australia CEO Patricia Sparrow said greater investment in aged care was clearly needed.

“This is not a few inefficient providers running into trouble, this is a systemic issue of underfunding and must be urgently addressed,” Ms Sparrow said.

She called on the government to act now.

Nicholas Brown

“The royal commission final report, due early next year, provides a once-in-a-generation opportunity for big picture reform for the sector, rather than ongoing band-aid solutions but actions should begin right now,” she said.

Aged Care Guild acting CEO Nicholas Brown called on the government to support the sector to achieve its necessary reforms.

“A commitment from the government would be a down-payment on the future of aged care,” Mr Brown said.

Residential results at a glance

  • $23.62 – average per bed day profit for homes in the top quartile, down from $25.98 in 2019
  • $4,341 –average per bed per year cash profit for survey average, down from $5,531 in 2019
  • 14,442 –per bed per year cash profit for homes in the top quartile, down from $15,334 in 2019
  • 91.4 per cent – average occupancy, down from 92.3 per cent in 2019

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Tags: acsa, Aged Care Financial Performance Survey, aged care guild, featured, finance, financial performance, grant corderoy, lasa, nicholas brown, patricia sparrow, stewartbrown,

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