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.

Workforce woes

Dr Nicole Sutton

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.”

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2 Comments

  1. Ah.. perfect!
    That’s 31 reports saying the same thing!
    How on God’s green earth could you vote for the liberals. This didn’t just happen on their watch, they actually deliberately brought about cuts to the funding calculation in 2015 that have had this result. It’s not new, so many reports and a royal commission and still the liberals have done nothing… nothing except lie and lie and lie.
    How could you trust the liberals to do the right thing in the future when they have done so much damage in the past.
    When people think of the royal commission they naturally think nursing home which is exactly what the government wants you to think. That’s why they coined “aged care” where they lumped residential care and home care etc under the “aged care” banner. People still think that the 17.7 billion went to nursing homes but less than one billion was received.
    Yes… another bloody lie from Colbeck, Hunt and Morrison!

  2. Anton, I think the issue is more complex than what you describe. With the emphasis on wellness, better health care, more community care packages and a greater awareness of when to seek health, our older people are living longer, therefore requiring more assistance as they age. As most wish to remain at home, there will necessarily be more empty beds in Aged Care facilities.
    I agree with you that the funding has never been adequate for Aged Care and might never be, because it costs governments too much. However, the remuneration for Aged Care Carers should be lifted urgently as they comprise the bulk of the workforce in that sector. They work very hard and many find they can’t physically sustain the level of care required by clients with very complex needs and many with cognitive impairments who demonstrate very challenging behaviours.
    Much has been said about reducing psychotropic medication and while this is admirable, it also requires greater staffing levels and much better trained staff.
    The whole issue of better care for older people has never been adequately addressed by any government.

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