Residential aged care is continuing to see an uplift in its financial performance thanks to an increase in AN-ACC funding to meet care minute targets, but this boost is set to decline within 12 months reducing operator margins according to the aged care accountants.
StewartBrown’s 61-page December 2024 Aged Care Financial Performance survey released last night, shows operators made a marginal average operating surplus of $1.56 per bed day, an operating surplus of $535 per bed per annum, primarily due to an increase in AN-ACC funding.
Occupancy also continued to improve to 94% of available beds for mature homes from 93.8% in the September quarter, which is slightly higher than the pre-COVID-19 September 2020 occupancy level at 93.9%.
However, the average operating result per provider was a deficit of $236,000 for the year to date, up from a $125,000 deficit in the December 2023 quarter.
The average operating EBITDA (cash) result was a surplus of $1.4 million – compared to $2.2 million for the corresponding quarter in 2023 – or just 2.60% of operating revenue, which StewartBrown notes is “insufficient to maintain the standard of accommodation, everyday living services and care delivery”.
For the six-month period ended December 2024, 48% of aged care homes in total operated at a loss (compared to 52% for December 2023) and 25% operated at an EBITDA (cash loss) compared to 30% for December 2023.
The most concerning element of the report is the long-term forecast for the sector.
Direct care margins to fall during FY25
While direct care margin has significantly improved between the September and December 2024 quarters to $26.95 per bed day, StewartBrown projects the direct care margin for FY25 will be $17.59 per bed day – a 5.9% margin – as providers moving towards the direct care minutes target and the Fair Work Commission wage increases from 1 January 2025.
“This challenge is particularly acute given that reforms to everyday living and accommodation services, which currently operate at a loss, have not yet been fully implemented to enable providers to meet their costs in those areas of operation,” the report flags.
Currently, the sector average everyday living margin is a $6.33 per bed per day deficit.
StewartBrown identifies that the Government’s proposed increase in the hotelling supplement – from $13.46 per bed day in March 2025 to $15.60 per bed per day from 1 July 2025 will continue to fall short of covering operators’ actual costs – which the Aged Care Taskforce had recommended be fully funded – by $8 per bed day.
The accommodation supplement also remains the biggest loss-making service.
Operators recorded an average margin deficit of $11.19 per bed day in the December 2024 quarter, compared to a deficit of $10.11 per bed day in the previous December quarter.
April 2026 set to challenge residential aged care
The real test for operators will be in 12 months’ time – April 2026 – when the sector moves to payments in arrears and for those operators in metropolitan areas that have not met their care minutes – seeing their AN-ACC subsidy reduced.
“The margins are higher than they ever were under ACFI,” StewartBrown Senior Partner Grant Corderoy told The Weekly SOURCE.
“But they will start to contract and that is why we need to see progress on key Taskforce recommendations such as reviewing the methodology for the Maximum Permitted Interest Rate (MPIR) and reviewing the Accommodation Supplement as a priority.”
“Otherwise, we will see a return to the ‘bad old days’ of widespread financial losses.”
The StewartBrown December 2024 Aged Care Financial Performance report surveyed 1,168 aged care homes or 96,627 beds/places, 45% of the sector.
