The Department of Health and Aged Care has refuted peak body and media claims that the aged care sector is close to financial collapse in a Senate Estimates briefing published this week.
An internal DoH “Hot Issues Brief”, released under a Freedom of Information request, states, “The recent media claims that the aged care sector is at risk of collapse are untrue.”
StewartBrown Senior Partner, Grant Corderoy, agreed it is “not appropriate” to use “emotive terms” when talking about the state of the aged care sector, and says his firm also steers away from using such language.
However, Grant said aged care homes are closing because providers are finding themselves in a “critical financial sustainability position”.
The Government briefing notes the “care income result”, which the Government largely funds, is a profit of $25.14 per resident per day.
“While the Government progresses structural funding reforms, residential providers should focus on administrative efficiencies and opportunities to increase revenue from accommodation to improve their financial performance,” the Department says.
But ACCPA CEO Tom Symondson told the SOURCE increased efficiencies are “not the whole solution” – more funding is required – as the Government’s own data revealed in the inaugural Quarterly Financial Report showed, with residential aged care homes at making a loss of $27.90 per resident per day.
The financial situation for residential aged care providers is “very serious” and “declining”, he said.
The Department’s suggestions ignore the significant cost of administration for aged care providers – a cost Grant says is “unfunded”.
“The sector is highly regulated, and the cost of compliance is increasing exponentially, which has driven up administration costs and burden,” he said.
In the last few years, most providers have conducted detailed analysis and reviews of their administration processes and related costs according to StewartBrown.
“Whilst there is always some room for further efficiency gains, we do not believe these will provide any material reduction in administration costs,” Grant said.
There are also considerable barriers to increasing accommodation revenue for providers, including the $550,000 threshold on RADs.
“We have been advocating to providers for many years to increase the accommodation prices to be more in line with house/unit pricing for their geographic area,” said Grant.
“Providers are concerned, however, as to the effect that this may have on occupancy levels, which are currently at historic lows, and the difficulty in gaining approval to increase the price over the $550,000 threshold.”
The Independent Health and Aged Care Pricing Authority, which approves accommodation prices above $550,000, is now processing applications within the 60 day legislation period, a spokesperson for the Department of Health told The Source.
The average agreed accommodation price is $480,000. Residential aged care accommodation is 61.9% of the value of the median house price, the spokesperson said.
Policy reform or increased accommodation price structure will have a lag period of several years to provide the financial benefit.
“After five years and most likely a sixth successive years of operating losses, the financial viability of residential aged care homes needs an immediate level of funding support,” Grant said.
Current data suggests that AN-ACC has increased funding to the sector, but those gains are to cover increased direct care minutes, 24/7 RN coverage and the FWC award increases.
“There is no margin in-built into this aspect of residential care after allowing for a reasonable contribution to the administrative costs of operating a home, which means that the focus must be on improving the revenue streams for everyday living and accommodation services, which should come directly from the consumer where they have the financial means,” Grant said.
Average Government funding per resident will increase from $77,500 in 2021-22 to over $85,000 per resident in 2022-23. The “vast majority” of the residential care funding increase is due to additional funding provided through the new AN-ACC funding model, according to the Department of Health.
We will be going over the briefing document in more detail over the coming weeks.
