StewartBrown’s Financial Performance Survey for the six months to December 2022 again reveals a sector under pressure – with residential aged care’s financial sustainability continuing to decline and innovation in home care stagnating ahead of 2024 reforms.
The headline figure – residential aged care homes operating at a loss as of December 2022 – was 63%, an increase from 60% at the same time the previous year. Three quarters – 73% – of inner regional homes are operating at a loss.
Mature aged care homes reported on average an operating loss of $15.98 per bed per day, a 55% increase from $10.31 for the December 2021 half.
A “transition” benefit from the introduction of the Australian National Aged Care Classification (AN-ACC) funding model last October, which is intended to fund higher staff numbers that don’t become mandatory until 1 July 2023, meant there was a stronger performance in the December quarter (an operating loss of $10.67 pbpd) than in the September 2022 quarter (a loss of $21.29 pbpd).
However, that benefit will subside, according to the aged care accountants.
“Over the next three quarters, the transition benefit of the AN-ACC subsidy will progressively decrease as the subsidy will remain at the same amount (average $215 per bed day) however the direct care staffing costs will escalate as the minutes will increase from the current average level (186.27 minutes per resident per day) to the average mandated level (200 minutes per resident per day),” the report states.
Occupancy in residential aged care has continued to decline, falling to 90.8%, compared with 91.5% at the same time the previous year.
Staffing shortages have necessitated increased use of agency staff and more overtime for existing staff. As of the December 2022 half, agency staff cost providers on average $15.33 per bed day, two-and-a-half times the $6.52 per bed day of the December 2021 half.
Overall, staffing costs as a percentage of operating revenue were 72.2%, up from 71.0% in the December 2021 half.
HOME CARE
Innovation among home care providers has “stagnated” due to uncertainty surrounding reforms – causing a “policy void”, StewartBrown states. The introduction of In-Home Aged Care reforms has been pushed back to 1 July 2024.
Profitability in home care declined, driven by the decrease in revenue utilisation. The amount of unspent funds in the sector is now $2.5 billion in total.
Margins also fell from 6.5% in the December 2021 half to 3.7% for the December 2022 half.
Operating results nearly halved from $4.51 pcpd to $2.54 pcpd.
Staff hours per resident continued to decline. Average staff hours per week were 5.41 hours, down from 5.46 hours in the December 2021 half. Of that time, on average more than one hour per week is spent on management and administration.
Costs are rising too. Home care administration and support costs were 25.1% of revenue, up from 23.2% in the December 2021 half.
FUNDING REFORMS
Funding reforms are “essential”, the report states, calling for:
- Increased funding to cover staff pay, including on-costs and benefits
- Indexed taxpayer subsidy funding to cover direct costs of care (particularly staff)
- Regulated consumer contributions for Home Care (and CHSP) based on ability to pay
- Deregulation of the residential aged care Basic Daily Fee
- Structural improvements to the residential aged care Accommodation Pricing model
- Increase capital grants for rebuilding and refurbishment
- Alternate home care funding mode
With funding reforms taking years to flow through to the bottom line, StewartBrown says an “emergency” funding package is required. “Short term remedial assistance” is needed, the report states – will this be contained in the May Budget then?
StewartBrown’s Aged Care Financial Performance Survey Sector Report for December 2022 compiles data from 1,138 aged care homes, 251 providers, and 66,703 Home Care Packages all over Australia.