Home care operators have seen a marginal improvement in their finances in the December 2024 quarter – but will need to grow their service margins beyond the required service price increases to maintain financial viability under the new Support at Home program, says the latest report from StewartBrown.
Their 61-page December 2024 Aged Care Financial Performance survey – released last night – found that the current home care operating result has increased slightly to a surplus of $3.61 per client per day, compared to $2.69 per client per day in December 2023.
Revenue utilisation increased to 86.8% of available Package funding compared to 85.2% for September 2024 while unspent funds have decreased to an average of $14,204 for every care recipient.
Despite this decline, unspent funds are now estimated to total more than $4.2 billion across balances held by home care providers and the Federal Government.
Average staffing hours in providing direct home care services also increased marginally to sit at 5.53 hours per client per week, compared to 5.37 hours in December 2023.
StewartBrown points out this figure is still significantly below the average nine hours per client per week provided prior to the implementation of the Consumer Directed Care model in 2015.
Consumer contributions to home care also remain low and represent less than 2.4% of the overall funding envelope.
10% care management cap to put pressure on service margins
The real challenge for home care operators however starts from 1 July with the new Program.
Under Support at Home, the care management funding pool has been capped at 10% of all quarterly client budgets.
Currently, based in the December 2024 survey data, care management revenue makes up 18.7% of operators’ total revenue, while package management makes up 13%.
StewartBrown estimates that the 10% cap will see operators lose $6.03 per client per day care management revenue (from $15.65 per client per day to $9.62 per client per day), and the removal of the package management fee means providers will need to build the $10.87 per client per day (the average package management fee in December 2024) into their service pricing.
Price increases driven by funding model, not operators
Releasing the “indicative prices” for Support at Home last week, the guidance from the Department of Health and Aged Care advised consumers who feel like their services prices are unreasonable to speak to the provider – suggesting operators are guiding the price increases.
However, StewartBrown warns in its report:
“Therefore, the increased pricing for each home care service that will be required is driven by the new funding model, and not through providers merely seeking to increase their operating margins. This is an important narrative.”
As a result, the margin on service delivery (both internal and sub-contracted) will need to increase to 33% from the current 13% to maintain the present operating surplus, as shown below – separate to the required service price increases.
“On average, direct services including sub-contracted services revenue will need to increase to $73.83 per client per day compared to the current $56.95 per client per day to fully recover the loss of revenue from package management and care management for the current level of margin at 4.3%,” the report goes on.
To reach a 7.5% margin, the average revenue needs to be further increased to $86.36 per client per day, and $88.24 per client per day for a 9.5% margin.
Is this achievable for all operators?
The StewartBrown December 2024 Aged Care Financial Performance report surveyed 77,750 Home Care Packages or 27% of the sector.
