Residential occupancy almost at capacity
To ensure older Australians all have access to high quality aged care more new builds must be completed – something which StewartBrown’s Grant Corderoy notes is not happening at the rate required.
In financial and supporting data from 1,168 aged care homes – representing 45 per cent of the sector – and 77,750 home care packages – representing 27 per cent – across Australia, financial benchmarking service StewartBrown has found residential aged care occupancy rates have nearly reached capacity, rising from 92.8 per cent in December 2023 to 94 per cent a year later.
The increase is attributed to a rise in demand and the stagnation in available beds due to a lack of new builds over the last four of five years.
The data uses beds that are actually available as the denominator, rather than approved places, as this can include offline beds unable to be used due to insufficient staffing, refurbishment, new builds, sanctions or approved places that have been allocated but not utilised.
The December 2024 Aged Care Performance Survey Analysis Report covers the six-month period from 1 July to 31 December 2024.
StewartBrown senior partner Grant Corderoy told Australian Ageing Agenda he attributes the rising occupancy levels to three things the demographic change of more people entering aged care, inadequate supply of buildings due to too much old stock unsuitable for people with high acuity levels plus insifficient new stock being built, and not enough staffing.
He told AAA that while it wasn’t a surprise to see occupancy rates rise, the speed it has risen was unexpected.
“As we’re getting towards almost full occupancy – where demand will start to outstrip supply – that’s bad for the sector, because it means that people wanting to get in residential aged care might end up in hospital,” he told AAA.
“You’ve probably heard the term bed blocking, where you’ve got elderly people who should be in an aged care home, but they’re in a hospital bed, and that causes issues because they’re not getting the same aged care treatment that they would get in an aged care home, and the public can’t get that [hospital] bed because it’s already filled.
“So when we get into this crux point – which is not that far away – where demand will start to exceed supply, there’s no great advantages in that happening.”
Small rural MMM5 homes had the lowest occupancy rate at 92.2 per cent, followed by regional MMM2 homes (92.5 per cent), large rural MM3 homes (92.9 per cent) and medium rural MMM4 homes (93.2 per cent). The highest occupancy rate was in metropolitan MMM1 homes at 94.7 per cent but Mr Corderoy told AAA he didn’t think the Modified Monash Model reclassification process would impact the occupancy.
Other key findings included the AN-ACC direct care margin increasing to $19.08 per bed day from $13.26 per bed day in December 2023 due to the transition benefit in funding toward the increased mandated direct care minutes.
Everyday living deficit and accommodation margins – including administration – both decreased and the December 2024 operating result was a small surplus of $1.56 per bed day – the December 2023 operating deficit was $2.25 per bed day. StewartBrown noted this as likely being driven by the increased AN-ACC surplus that will decline in coming months as providers increase their direct care staff minutes.
The number of facilities operating at a loss by MMM categories has also decreased since December 2023, and shows less disparity between the MMM categories as what was seen in StewartBrown’s last report.
Capping and removal of fees likely to impact home care operating margins
When looking at the Home Care Package results, revenue had increased by 9.71 per cent from December 2023 – from $76.08 per client per day to $83.47.
Package management utilisation – an area of concern for many years – also increased by 4.1 per cent to 86.8 per cent of funding received and package management revenue as a proportion of total revenue was 13 per cent, only 0.1 per cent more than December 2023 (12.9 per cent).
The report noted the capping of the care management fee at 10 per cent could see home care providers lose an estimated $6.03 per client per day in care management revenue.
Meanwhile the removal of the package management fee will require providers to build the $10.87 per client per day into servicing pricing.
StewartBrown has emphasised the importance of this as it means the required increased pricing for each home care service will be driven by the new funding model and not through providers merely seeking to increase their operating margins.
“So for both care management, when they’re charging say 18.5 per cent of their revenue, and say package management’s 30 per cent, that is, in a sense, a guaranteed revenue flow that providers have had today,” Mr Corderoy explained to AAA.
“Now when you incorporate not being able to charge that into their pricing, you’ve got a reasonable amount and there might be consumer reaction, but it also means that if you’re not getting the full services, you’re not getting that same guaranteed revenue from it.
“So it could lead to a reduction in revenue, and certainly a reduction in profitability unless it’s managed properly.”
The full report can be read here.
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