If you needed proof the aged care bed drought is real, look no further than the latest Operation of the Aged Care Act 2023-24 which came out on Tuesday (26 November).
Page 112 of the 144-page report reveals the estimated value of building work across the sector has fallen yet again to $3.6 billion, down from $5.3 billion five years ago.
Only 0.9% of homes completed new building work during the 2023-24 financial year, while just 0.5% of homes were planning new building work. That’s around 130 homes based on our back-of-envelope calculations. 7.6% of homes finished upgrades during the year, down from 11.5% in 2018-19.
The data is dated but it underlines the challenge facing the sector and Government.
While a number of larger providers have announced new developments since the Government announced its aged care reforms in September, the reality is few new beds are being added to the system.
Older homes struggling to find buyers
We hear there is little appetite for new developments among smaller and mid-sized operators.
The market for acquisitions does remain hot – but only for newer facilities.
Even if the facility is struggling with compliance issues, operators are looking to close down their older facilities and move residents across to the newer home.
This does nothing to increase the supply of beds. It’s like moving the deck chairs on the Titanic.
Meanwhile, older aged care homes are struggling to find buyers because of the capital expenditure required to bring them up to modern standards.
No one is willing to pay market value for older homes where there will be no income coming in.
And this situation won’t change soon.
The new Aged Care Act may have been passed this week by Parliament, but the grandfathering arrangements for the residential aged care reforms mean operators will be waiting three years for new funding to flow through.
Home care also won’t provide the answer – Stuart Hutcheon, Managing Partner at StewartBrown, told DCM Group’s Melbourne VILLAGE SUMMIT last week their latest home care analysis identified a Level 4 Home Care Package now delivers just five hours a week of direct care.
What does this mean for the sector – and older Australians and their families?
With the shortfall in beds set to stay for the medium-term, the demand in alternative options will take off.
As our CEO Chris Baynes reflected on Tuesday, retirement villages are the logical ‘safe harbour’.
That means big demand for private aged care models and care suite models à la New Zealand.
Several operators are already turning to village care options as an answer – see RetireAustralia and Scalabrini.
But this model requires a significant investment in infrastructure and staffing – which is beyond many smaller and regional and rural operators.
Over the ditch, the rise of ‘premium’ beds has also meant few ‘standard’ beds are being built – leaving older people on lower incomes with few options.
With neighbourhoods around Australia set to become ‘grey ghettoes’ over the next five years, it is clear the Government, and the sector, need to come up with a solution to fill this gap fast.