The majority of residential aged care providers in Australia continue to operate at a loss, according to a new, independent report.
The report – the first in a new biannual series from the Ageing Research Collaborative at the University of Technology Sydney – takes a deep dive into data from the latest financial performance survey by aged care chartered accountants StewartBrown. It includes responses from around 1,190 aged care homes, and makes grim reading for providers.
The report’s findings show more than 60 per cent of residential aged care facilities operating in the red during the first half of 2021-22 and an average deficit of $339,000 or $11.34 per resident per day – more than double the average deficit of $5.33 recorded in the previous year.
“Aged care providers are facing an acute threat to their financial viability,” report author Dr Nicole Sutton told Australian Ageing Agenda.
In terms of financial viability, Australia’s Aged Care Sector Report notes that mid-range residential care homes with 40 to 80 beds generate a better operating performance than smaller cottage model facilities and large-scale sites.
It’s not just the financials that are troubling for the residential aged care sector: “The news isn’t great on the workforce side either,” said Dr Sutton.
As the report notes, with workforce accounting for 80 per cent of all direct care costs, staff are central to the performance and sustainability of the sector.
Compared to last year, direct care staffing time during the first half of 2021-22 increased by only 1.9 per cent to an average of 178 minutes per resident per day, well below the mandatory minimum of 200 minutes that facilities will be required to provide by October 2023.
To reach that minimum threshold, the report shows providers will have to increase direct care staffing by 12.4 per cent – an average of 22 minutes a day.
“When I reflect on these results, what I see is that – despite expectations from both the community and politicians that there should be an increase and uplift in aged care staffing, particularly following the royal commission – the growth in staffing has slowed in residential care,” said Dr Sutton.
“This is evidence that providers are facing real challenges in attracting and retaining aged care workers,” she added.
The lingering impact of COVID
Over the past 18 months, rusted-on challenges such as staff shortages have been compounded by the pandemic, which has further disrupted workforce supply, Dr Sutton told AAA. “We can’t ignore the fact that these findings are a result of the significant impact of COVID across the sector.”
And the costs of COVID – such as proactive infection control – are still being incurred, she said. At the same time, emergency financial support from government has ceased.
Indeed, as the report shows, in the first six months of this financial year, providers lost an average of $196,000 due to the withdrawal of COVID-related funding in July 2021. “It’s having a real operational impact,” said Dr Sutton.
More empty beds
One of the most influential drivers of profitability is the occupancy level of an aged care facility. For the first six months to December 2021, the residential aged care sector saw a decline in the average occupancy rates of homes in every state and territory.
Again, decreases in occupancy rates have been exacerbated by COVID. From an average rate of 92.4 per cent in December 2020, the report shows that levels of occupancy have reduced to 91.6 per cent.
“But we’re also seeing some structural issues that are going to continue on beyond the pandemic,” said Dr Sutton.
The report highlights poor pay and conditions, the availability of higher award rates in other healthcare settings such as the disability sector, consistency of working hours, limited opportunities for career progression and negative perceptions of the industry.
Report shows few positives
As for any positives to be found in the 95-page report, Dr Sutton cites a stabilisation of the decline in staffing times in home care settings. The report shows they’ve fallen, but not at the same rates as two or three years ago. “That would probably be the good news I could see,” she said.
Overall, the report shows the need for industry to rethink about the underlying business model, Dr Sutton told AAA.
“Most people agree that in order for this sector to be sustainable, the providers need to be viable,” she said. “To be viable, that means that [facilities] need to be able to earn a reasonable return on the services they provide, and we’re just not seeing that here.”