60 to 90 beds the financial ‘sweet spot’, Grant Corderoy says – but all operators still building big RACs

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The StewartBrown Senior Partner made the point last week during his evidence to the Royal Commission’s funding, financing and prudential regulation hearings, cautioning that size and design is critical to viability.

The most efficient homes sit in the 60 to 90-bed bracket, usually over two or three storeys, he said.

“For the home to be efficient, we’re seeing the homes over 100 places, which are typically single level homes, large homes, big areas, are less efficient now and under 40 places your capital costs of running those costs are just too high.”

This point interested Commissioner Tony Pagone, who asked: “When you worked out that sweet spot of between 90 and 100 places, is there a particular factor that brings it over into the profitability or return rate rather than the other?”

Mr Corderoy said StewartBrown is finding that older-style homes, which are large and require long distances for staff to travel between places and for catering, cleaning and laundry services to be delivered tend to fare worse.

“In the homes between, say, 60 to 90 to 100 places, it means they might have a central lift, the movement of services within that home is much more efficient and also … the design of each of the areas is different,” he replied.

Cocoon shape saves staff

“They might have 15 rooms, and much more in a cocoon-shape design. So rather than walking down long corridors as you might imagine some of the old homes are, they’re now in a cocoon shape where the direct care delivery can be much more efficient, less travel between rooms, less visual – having to travel visually, more able to attend to residents’ needs. So, this means that the actual staffing costs are lower. It doesn’t mean that the direct care they’re providing to the residents is less, often their resident cost per day is — I mean the number of hours of direct interaction with the residents is greater, but their movements are lot less and also the movements of the services, particularly the catering and also the cleaning and laundry-based services is so much more efficient.”

The Senior Partner added that if a home is multi-level, this means the home’s land footprint – and cost – is also less than a larger home on one level over a larger area.

But while many providers are going ‘vertical’ in their developments – saving on land costs – a number of the developments we report on fall into the 100-plus size.

Is it time for a re-think on the size of aged care homes?