The new ‘Australia’s Aged Care Sector: Full-Year Report 2023-24’ has confirmed what many in the sector already knew: big operators are getting bigger – and more efficient.
The new 134-page report from the UTS Ageing Research Collaborative (UARC) has flagged the increasing consolidation of the residential aged care sector, with the 24 largest providers now operating 40.2% of all places and 37.5% of homes.
Based on our back-of-envelope calculations, that’s an average of 3,300 beds per provider – which may not seem significant.
But this growth comes with substantial financial and regulatory benefits, the report shows.
While all providers, on average, improved their relative cost efficiency, homes operated by large chains continued to report the lowest expense-to-revenue ratio at 99.5%.
In contrast, smaller providers (with 1 to 19 homes) still had operating expense ratios of more than 100% of revenue – suggesting negative operating margin.
These lower average expense-to-revenue ratios were most pronounced in everyday living services, where in 2023-24, single homes had an average expenditure (excluding administration) of 97.8% of their everyday living revenue.
Compare this to small chains (89.0%), medium chains (89.8%), and large chains (83.5%).
Larger chains also spent less of their revenue on staffing (67.9%) compared to single homes (76.9%).
Interestingly, most homes also needed to spend more on direct care labour to achieve a higher staffing Star Rating – see below.
The exception were larger providers, which had a range of costs between 74.4% and 76.4% across all the stars – indicating bigger chains potentially have more efficient staffing models.
In short, when it comes to efficiency and compliance, the data says bigger is better.
You can read the full report here.
