Hundreds of providers at risk of insolvency

Almost 200 residential aged care providers with more than 30,000 residents have insufficient funds to cover their liabilities, according to a new analysis by Leading Age Services Australia.

Almost 200 residential aged care providers with more than 30,000 residents have insufficient funds to cover their liabilities, according to a new analysis of providers’ financial records by aged care peak Leading Age Services Australia.

Accounting professionals at LASA analysed de-identified data from the Federal Government’s 2017-2018 financial reports of residential aged care providers.

LASA financial analysts assessed providers’ ability to pay current liabilities from current assets. Refundable accommodation deposits (RADs) were removed from liabilities because they are generally not payable immediately.

The analysis of 739 residential providers found 197 providers with 32,000 to 50,000 beds were unable to pay their adjusted liabilities from their current asset pools.

Of these, 142 providers are in metropolitan areas, 44 in regional areas and 11 in both.

Financial analysts also looked at providers making a loss after removing non-cash assets, such as depreciation, and RADs.

It found six metropolitan and four regional providers with up to 1,500 residents in total were generating “cash flow” losses and had negative adjusted net assets.

These providers are essentially trading while insolvent, according to the analysis seen by Australian Ageing Agenda.

LASA CEO Sean Rooney said the figures revealed the dire situation facing many services.

“The scale of this risk is alarming for residents and their families, as well as stressed staff, financially stretched providers and the Government,” Mr Rooney said.

Sean Rooney

He reiterated calls for $1.3 billion in additional operational funding before Christmas and immediate action as set out in its Working While We Wait campaign.

“We are also calling for a structural adjustment program to avoid the risk of unplanned closures of distressed services, while maintaining continuity of care for residents.

“We believe this is particularly critical for regional and remote providers, with the latest evidence given to the Aged Care Royal Commission highlighting concerns for country services.

“This additional funding should be on top of the Government’s welcome commitment to a quick response to the three immediate priorities highlighted in the Royal Commission’s Interim Report, which includes a major home care boost,” he said.

Aged care benchmarking firm StewartBrown’s latest Aged Care Financial Performance Survey showed the financial performance of residential aged care facilities was continuing to decline and despite this year’s one-off funding boost (read more here).

“Our appeal for funding assistance has nothing to do with maximising profits, it is solely focused on maintaining and improving care, while avoiding more service closures,” Mr Rooney said.

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Tags: Aged Care Financial Performance Survey, financial-performance, lasa, leading-age-services-australia, news-8, royal commission into aged care quality and safety, Sean Rooney, slider, stewartbrown,

2 thoughts on “Hundreds of providers at risk of insolvency

  1. The profit owned nursing homes are greedy , if they got more money it would go into their pockets 1st . The non profits owned nursing homes are struggling but are still trying to keep the same amount of staff regardless. Yes the funding needs to be more and profit owners needs to be watch and investigated. Aged care went down hill when Liberals got into power, That’s the main cause of the big problems in aged care now . Most of the experienced workers have been burnt out . New ones that come into aged care don’t often have the passion and patience that is needed in aged care and the short coarse makes it easy for them to get a job and only treat as a job with out the care

  2. The complete lack of “real training”, poor employment practises/policies and ridiculous rostering procedures in many cases have lead to extremely poor staff satisfaction levels are at the root cause of many thousands of dollars wasted across the aged care system.
    Low staff morale leads to a significant increase in unproductive hours, again attributed to a significant financial loss.

    We need government to to provide a significant increase in financial support for training. This includes training for Boards, Management and leafership in general.

    Training for potential employees who have english as a second language needs significant investment.

    Lets get away from this low cost, short stop on line training (it is actually more expensive due to the low outcomes and limited transferrable skill levels required).

    We are working in a hands on industy that cannot be improved by just a classroom/online trainibg program (like hands on it needs more face to face training).

    Once a N.Home has investigated the level of unproductive hours the work can begin, and for those that have low levels of unproductive hours and still suffering financially (it’s more about numbers and the requirement cost to provide a number of specialised services) they should be able to apply for additional funding provided from the Goverment source.

    Country nursing homes could be found to have difficulty in securing people to provide specialist services, and if they do it could be expected to be much more costly than their larger city counterparts.

    Whilst trying to keep afloat all nuring homes should be examining their businrsses, particularly in relation to overall employment costs (as we know many are under resources at present), this could invariably lead to potential savings that could be better utilized.

    The other area should be technology to enable cost savings in procurement and also improved safety monitoring to reduce levels of risk.

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