Last night, Vicky Stimson, Survey Administrator for StewartBrown’s Quarterly Aged Care Performance Survey, distributed its September 2023 report. The headline: the average operating result for RACs across the country had moved into a surplus for the first time in years.
The marginal operating surplus increased to $0.89 per bed day, up 104% on Sep 22 when it was a deficit of $21.29.
“We delayed distribution of the Survey and Report due to the significant increase in the direct care margin for residential aged care which warranted additional analysis,” said Vicky.
Why a surplus now
Vicky explained the turnaround was due to two factors:
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Occupancy grew from 91% (Sept 22) to 92.7%, spreading fixed costs.
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Operators received extra funding to facilitate an average of 200 minutes of care but they did not achieve this figure (translating into they did not incur the expense).
In the June quarter, the direct care subsidy and supplement averaged $215.68 per bed but in the September quarter, it was $258.74, an increase of $43.06 per bed per day, or a 20% increase.
This delivered an average surplus of $18.26 indirect care funding and delivery.
Will the surplus last? No
The predominant source of the surplus revenue was the failure to deliver 200 minutes of care while receiving the money from the Federal Government.
The chart below shows the most profitable 25% of homes delivered 182.56 minutes of care, or 32.6 minutes less than the least profitable homes who delivered an average of 215.14 minutes of care.
The 17.04 minutes short of 200 that the most profitable saved, at an average of $60 an hour, equates to (surprise) $17.04 per day, annualised to $6,220.
Vicky Stimson says: “As those homes in the First and Second Quartiles continue to work towards their average care minutes it is expected that their margins will be reduced which will have a downward impact on the care result.”
Indirect care and accommodation losses increase
The bad news: Indirect care – everyday living/hotel services (catering/cleaning/laundry/utilities) lost an average of $6.67 pbd after receiving the Basic Daily Fee and Hotelling Supplement.
Accommodation delivered an average loss of $10.70pbd.
Residential care summary
- Care result $18.26 surplus
- Indirect care result $6.67 loss
- Accommodation $10.70 loss
- Net surplus $0.89 surplus
Vicky makes the point that Government now funds 96.5% of direct care and this is not sustainable. Nor is it sustainable for indirect care and accommodation to remain loss makers.
“The sector cannot rely only on taxpayer funding to support these costs of daily living that persons have paid for all their adult lives,” she says.
Despite this short-term surplus good news, the Aged Care Taskforce recommendations must deliver on Plan B co-contribution, or the residential care sector will likely close shop.
Home care: revenue up, profit down
The headline figures and trends are not encouraging, as outlined below.
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Revenue per client per day (pcpd) increased by $9.39 pcd to $75.78 pcd (14.1% increase)
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Operating profit decreased by $1.33 pcpd to $2.23 pcpd (Sep-22 $3.56 pcpd)
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Direct service costs increased by $6.39 pcpd (16.4% increase)
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Revenue utilisation has decreased by 2.0% to 82.1%
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Unspent funds increased to $13,164 per client (nationally $3.2 billion]
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Staff hours per client increased by 0.44 hours (average 5.32 hours per week)
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Care management decreased (10.2% of revenue compared to 11.2% for Sep-22)
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Administration and support costs represent 26.5% of revenue which is an increase from September 2022 at 24.0% of revenue.
The striking figure is that administration and support costs are up by around 10% since September 2022, at 26.5% of revenue. The cost is genuine but the pub test asks why it takes 26.5% (over a quarter) of the money given to support an older person physically in their home to fund the back office?
The answer is of course imposed regulation, but it can’t sit well with the sector, and the public if it was correctly understood.
With the Taskforce's recommendations due to be made public over the next 13 days, with its simple objective of sustainability of the aged care sector, there is optimism that reports on losses like this one, and with it compromised quality of care delivery, will be a thing of the past.
To best understand the recommendations after their release, and which ones are likely be taken up by Government – and the flow on revenue likely to be generated – join us at the LEADERS SUMMIT, 19 and 20 March in Sydney.
