The team at DCM Group attended the first leg of StewartBrown’s annual Aged Care Finance Forum in Sydney yesterday. Our key takeaway from the information presented to the crowd of more than 130? Home care operators are facing a fresh battle for survival.
The FY24 results for home care – due to be formally released in a few days – outlined the continued decline in the financial performance of home care operators.
The national operating result for home care has fallen again to $2.76 in FY24, down from $3.14 in FY23. This represents a return of just 2% on revenue.
You must ask: is this a business that you would want to invest in?
The bottom 25% of operators are losing $10.62 per client per day.
You must ask: will these operators survive into the future?
The big concern is the financial implications of the Government’s new aged care reforms, particularly the 10% cap on care management.
StewartBrown Partner Stuart Hutcheon noted that in FY24, care management revenue was $14.60 a day. Based on StewartBrown’s forecasts, this will drop to $9.09 post-reforms from 1 July 2025.
Care management costs will stay the same at $7.94.
This will knock providers’ margins down from $6.67 to only $1.15.
To maintain the sector’s surplus, this means that the margin in the pricing on the price list – now due to be released in February next year – needs to be 40%, added Stuart.
How likely is this to happen?
We’d say zip.
Based on current projections, the sector will be in real trouble from 1 July.
The message?
The sector needs to be advocating now to ensure that the Independent Health and Aged Care Pricing Authority (IHACPA) gets the pricing right.
Many presenters urged attendees to make a submission to IHACPA’s consultation on its pricing approach for Support at Home, which is open until 5pm AEDT Friday 25 October 2024. You can find more details here.
However, the question remains: will all operators be able to thrive in this new environment?
With margins continuing to thin, providers will need volume – and the technology and back-of-office support – in order to remain financially viable.
In short, home care is the new battleground for the sector and it will be survival of the efficient.
We will have more on StewartBrown’s FY24 survey results in next week’s newsletter.
