The earnings of residential aged care homes are likely to come under pressure in the current financial year as the majority of providers still fail to meet both mandatory care minute and 24/7 RN requirements and pressure mounts from the Government to comply.

The Department of Health and Aged Care's June quarter 2023-24 Quarterly Financial Snapshot shows the financial performance of residential aged care providers "improved significantly" in the fourth quarter of 2023-24 compared with the same period the previous year. Residential aged care earnings before interest, tax, depreciation and amortisation (EBITA) were $44.92 per resident per day per resident per day (prpd) in the year to 30 June 2024, more than double the $21.35 prpd earned for the same period the previous year.

The improved profitability was largely the result of a $1.2 billion increase in AN-ACC funding between Q4 2022-23 and Q4 2023-24 to cover higher labour costs due to mandatory care minute targets.

However, with 60% of aged care homes not meeting both their care minute and 24/7 RN targets, the report says higher labour costs "may reduce the scale" of profits in 2024-25.

For Profits under scrutiny

The report also notes that since the care minute targets were introduced, Not For Profit providers have consistently exceeded the mandatory targets, while For Profits have not met targets.

"Under delivery against care minute targets appears to be contributing to profits," the report says.

88% of For Profit aged care homes reported a positive EBITDA, compared with 79% of Not For Profits, the report notes.

"The department is developing options, including funding policy options, to boost care minutes compliance", the report noted, pointing to the letter from the Aged Care Minister Anika Wells to residential aged care providers warning them the Aged Care Quality and Safety Commission will use the "full extent of its regulatory powers" for homes that are not "making genuine attempts to increase their staffing levels".

At Regis Aged Care's AGM this week, Managing Director and CEO Dr Linda Mellors said the Aged Care Quality and Safety Commission is auditing "very heavily" in terms of the self-reported metrics such as care minutes.

Also of note:

• 43 residential aged care providers left the sector in 2023-24 and there were 15 new entrants, and
• average occupancy was 88.5%, up 1.8 percentage points.

You can read the report here.