Home care providers are facing two incoming freight trains speeding towards them in 2025. You must ask the question: how many will still be in business in 12 months’ time?
The first train:
Earlier this week, aged care accountants StewartBrown published a detailed analysis of the impact of the Government’s funding reforms including the shift to consumer contributions under the new Support at Home Program.
One of the key points highlighted in the report is the impact on demand for lower-level services such as cleaning, domestic assistance and gardening.
If consumers are expected to contribute to the cost of these services, StewartBrown warns there will be a decline in their usage.
Our ballpark figures tell us that 80% of home care services currently being delivered fall into this non-clinical category.
This means 80% of operators are likely to start to lose business as new care recipients roll into the system.
The second train:
StewartBrown also puts forward four scenarios for the level of return required for home care to be “sustainable” and “investible” ranging from the current average margin of 3.5% up to 9.5%.
Currently, 40.2% of home operators not in StewartBrown’s Top Quartile are running at a loss and not even close to the current average. In contrast, the Top Quartile is earning a 13.7% margin – see below.
With care management now capped at 10% and expected to be pooled between clients, operators will need both scale and efficiency to ensure they can maintain and build their margins.
The only way to achieve this goal is through investment in technology – for example, refining your scheduling so you are meeting the two-hour shift requirement, minimising travel times for staff and maximising your clinical care teams – a big cost for businesses.
In short, home care is now firmly a logistics operation, and not all operators will be ready or willing to make the investment required.
StewartBrown notes that the Bottom Quartile of home care providers in their survey are losing $10.62 per client per day.
Will these operators be prepared to wait for new funding to flow through or opt to exit now? And what will be the impact on the older Australians they support?
