Above: Bentleys director, Heath Shonhan.
By Stephen Easton
Aged care providers have heeded the government’s drive for stricter prudential standards in the industry, shifted to a consumer-based funding model and are back on the road to proftability, reducing their dependence on government funding, according to a national survey.
The accountants who produced the Bentleys National Aged Care Financial Survey say their results show aged care has moved swiftly towards a ‘user pays’ financial model, with funds under management now accounting for about 30 per cent of providers’ available finance.
“The real stand out finding from this year’s survey is that providers are increasingly taking responsibility for their own financial future, rather than relying simply on government funding,” Bentleys director Heath Shonhan said.
Mr Shonhan said it was essential for aged care providers to function independently of the government, as is the case for organisations in other parts of the economy.
To do this, they would need to continue separating accommodation from care, allowing them to make money from the same kinds of services offered in the hospitality industry, particularly in the face of rising costs.
Bentleys found staffing expenses had risen by 20 per cent and utility costs by 28 per cent over the past five years, and indications are they will keep going up.
Ratios of assets to liabilities have improved, which Mr Shonhan said was a “very positive indication” for operators, “which means that they are managing the money better and improving their ability to repay debt and keeping with prudential regulation.”
“The key consideration for the sector now, and particularly for the major providers, is how they continue to push ahead with consumer-based funding and becoming less reliant on government funding.”
The survey of over 300 facilities, run by 100 for-profit and non-profit providers, also showed profit margins and returns from assets in 2010 were higher than in 2009, but remain short of their 2006 levels.
Aged and Community Services Australia’s acting CEO, Pat Sparrow, said the positive signs had come after a gradual decline in the sector’s profitability over the past few years, due to “chronic underfunding” that had “placed constraints on the sector’s ability to maintain services and develop facilities in the face of increasing demand and rising costs”.
Ms Sparrow said it was imperative the government act on the Productivity Commission’s recommendations when the final version of their report, Caring for Older Australians is released later this year, “to address a broad range of funding issues”, and also pointed out the survey data showing more funds under management came from an increased number of accommodation bonds, which she said are not used for day-to-day operating costs.
“In preparing a final response to the Department‘s consultation paper, Enhanced Prudential Regulation of Accommodation Bonds, ACSA has restated its concerns about major changes to prudential arrangements ahead of the Productivity Commission’s final report,” she said. “ACSA is seeking to work with the Department to ensure changes to the prudential system achieve a fair regulatory system that protects resident’s funds and engenders confidence in the community.
“However, there is no evidence to suggest that there is a problem with existing management of bonds and any changes must assist providers to build capacity and not impose administrative burdens.”
ACSA initially responded to the Department of Health and Ageing’s issues paper last year, which concerned an earlier report by the Australian National Audit Office, Protection of Residential Aged Care Accommodation Bonds 2009.