Slight financial uptick, says report

Hold off the champagne, say number-crunchers, dark days are ahead.

Residential aged care providers have scored a small surplus, according to the latest industry data – but there’s a catch.

Analysing statistics from 1,191 homes, StewartBrown’s Aged Care Financial Performance Survey Report for the June-September 2023 quarter shows a marginal operating profit of $0.89 per bed per day – an improvement on a year ago when the period recorded a $21.29 loss.

However, as the report’s authors note, the improved performance is a direct result of a taxpayer subsidy that enabled providers to meet the mandated 200 direct care minutes that became compulsory from 1 October last year. “As this taxpayer-funded margin reduces,” say the authors, “then the operating performance will decline, and the overall financial sustainability of the sector will remain under pressure.”

The authors also stress that there are a number of areas that will have “future cost implications” for the sector including further mandatory care minute requirements – commencing 1 October – 24/7 nursing, the new Aged Care Act, and other legislative and compliance changes.

Elsewhere in the 37-page report, the direct care subsidy and supplements for the quarter averaged $258.74 per bed per day – a substantial increase from $215.68 for the April-June quarter.

Due to the increased levels of funding revenue – and partly because funded target minutes are not yet being met – the Sep-23 report recorded a surplus for direct care services of $18.26 per bed per day.

Source: StewartBrown

During the period, direct care staff minutes increased to an average of 196.36 minutes per resident per day, including 36.12 minutes from registered nurses.

However, as the table below shows, the profit margins of those homes meeting or beating the direct care targets are less than those who are falling short.

Source: StewartBrown

“As those homes in the first and second quartiles continue to work towards their average care minutes it is expected that their margins will be reduced, which will have a downward impact on the care result,” say the report’s authors.

Source: StewartBrown

Residential aged care occupancy levels for the period rose to 92.7 per cent – up from 91 per cent as of September ’22.

Indirect care – catering, cleaning, laundry and utilities – continues to cost more than revenue earned through the basic daily fee – currently set at 85 per cent of the age pension – and the hotelling supplement. The result for the survey period is an average loss of $6.67 per bed per day.

Accommodation is the biggest money loser for aged care providers, however, with the period showing an average loss of $10.70 per bed per day.

As shown in previous financial performance reports, regional aged care homes – particularly those located in large and medium rural towns – continue to record significant operating losses, which, say the authors, “are becoming financially unsustainable.”

Source: StewartBrown

Crunching home care finances from data derived from 64,423 home care packages, the report shows revenue per client per day has increased by $9.39 to $75.78.

However, average operating profit per client per day decreased by $1.33 to $2.23 – Sep-22 recorded $3.56.

Other findings include:

  • staff hours increased with care recipients receiving an average of 5.32 hours of care
  • unspent funds rose slightly to an average of $13,164 per care recipient – total unspent funds nationally stands in excess of $3.2 billion
  • care management cost as a percentage of revenue fell to 10.2 per cent during the period compared to 11.2 per cent for Sep-22
  • administration and support costs represent 26.5 per cent of revenue – an increase from the same period last year of 24 per cent.

To ensure the future financial sustainability of Australia’s aged care sector – and ahead of the final report from the Aged Care Taskforce, which is due to land by the end of the month – StewartBrown concludes its report by once again calling for “a greater level of consumer co-contribution in funding aged care.”

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