The financial performance of the Australian aged care sector is deteriorating, according to the latest report from consultants in the sector, StewartBrown.

“The financial performance of the aged care sector continues to experience significant challenges due to the systemic decline in profitability in both the residential care and home care segments,” the report states.

For the three months to 31 March 2019, more than 45 per cent of aged care facilities operated at a loss before tax, an increase on last year’s rate of just over 43 per cent.

“The Mar-18 financial results for the sector again highlight that the current funding model remains under significant strain,” the report says.

“The underlying year-on-year results for both residential care and home care indicate a declining financial performance, as does the comparison with the FY18 annual results.”

Regional aged care under pressure

Aged care facilities in regional centres are experiencing “significant financial concerns”, according to the report, with 67 percent recording a loss before tax.

“Mandating additional staffing costs” in regional areas could have significant “financial implications”, the report commented.

Unspent home care funds a “concern”

The report claims unspent home care funds is the “biggest single issue” for home care.

Almost $600 million of unspent funds are currently on the books of approved home care providers.

“We view with concern the prospect of continued growth in Unspent Funds, and many probable instances of their use for capital-related expenditure for care recipients (probably for a short-term benefit in many instances),” the report says.

“A more effective utilisation of Unspent Funds would be the funding of more home care packages. This would help to cut the time that newly-approved care recipients spend on the wait list.”

Home care waiting lists are one of the most visible and serious problems for the Australian aged care sector, with more than 180,000 people sitting on waiting lists for home care.

Report highlights

Other highlights of the report include:

  • Total care hours per resident per day rose by 0.03 hours to 3.14 hours (3.11 hours in March 2018)
  • Aged care facility’s earning before tax was $1.65 per bed day, down from $3.93 per bed day at the same time last year. The decline was mainly due to “care expenses increasing at a much higher rate (up 4.7 per cent) than care revenue (up 3.4 per cent)”
  • Average ACFI and supplements per bed day for survey participants rose by 3.4 per cent to $178.37 per bed day ($172.54 per bed day in March 2018)
  • 47% of home care clients transitioned to residential care (44% at Mar-18)
  • 10% of home care clients transferred to another provider (8% at Mar-18) – the majority being due to change of place

Australian aged care sector is “under-funded”

“The overall funding arrangements for aged care require considerable adjustment,” the report concludes.

“Residential aged care is under-funded, both from a government and consumer perspective.

“Consumers should be provided with more education and related data to understand the real costs of providing aged care services, including the cost of accommodation for residential aged care, and accordingly, the requirement that consumers co-contribute to the cost of care delivery where financially able to.”

The overall funding for home care is “not being fully utilised”, the report concludes, recommending “it may be preferable to broaden the funding so that it is available to more care recipients, rather than necessarily increasing the aggregate funding subsidy.”

The StewartBrown report is based on responses to the firm’s ‘Aged Care Financial Performance Survey’, which encompasses 183 aged care providers, 952 residential aged care facilities, and  26,180 home care packages.

Approximately 40% of Australia’s aged care facilities are included in the survey.

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