74% of aged care providers making a profit? Grant Corderoy says data used for Royal Commission financial transparency paper “limited” in its scope

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The StewartBrown Partner says the financial information given to the Department of Health by approved providers fails to provide a full picture of the sector’s profitability and viability – but the Government is looking to enhance the transparency of providers.

Media headlines yesterday like ‘Nursing home companies rake in profits’ focused on the research paper’s findings that 74% of aged care providers were profitable and only 13% were unprofitable according to 2018 financial data.

This goes against StewartBrown’s latest aged care financial performance survey for the nine months to March which found 60% of providers had recorded an operating loss.

Providers may have many segments to their business

We asked Grant about the data used in the report.

While he had no criticism of BDO, which carried out the research, he cautioned that the data comes from the financial reports supplied by approved providers to the Department of Health – and these do not always represent the full story.

For example, a provider may have multiple business segments across residential care, home care and disability services or house their management structures or property assets in another entity.

They could be making a surplus but maintaining a loss in their residential business, or vice versa.

These figures are then utilised by the Aged Care Financing Authority (ACFA) to develop its annual report, which Grant noted confirmed this year that 46% of providers were making a loss in 2018-19 – the same as the previous year and StewartBrown’s own data.

“The data is older and limited on where it comes from,” he said.

Department of Health enhancing its aged care financial report

Grant added that their quarterly surveys provide much more detailed and timely data because it is for providers’ own use – and the Department has recognised this issue.

“The Department will be enhancing their aged care financial report to provide a lot more data,” he stated.

It is clear that the Department – which the BDO paper noted sets the reporting obligations – requires more information than it is currently collecting.

The question is now: what level of transparency does the Government require – and what information does the public need to know?

Grant points out that there is no guarantee that all providers will prepare their data in the same format.

He argues that it is fair that as the taxpayer provides funding for care, the public – and potential residents and their families – should have oversight of care subsidies and the hours of care provided by this funding which could be done in aggregate for each provider.

“In a consolidated sense, providers should provide all of that information,” he said. “That’s good transparency.”

Public should have oversight of care – but not other aspects of organisation

However, Grant says in relation to non-consolidated, information, this would likely not be meaningful or necessary for the public to understand.

He used the example of other sectors that receive Government funding such as disability services, private hospitals and school.

“It’s a matter of understanding what is relevant,” he stated. “At the moment, none of these other areas are providing anywhere near this level of transparency.”

“I think if residential care can provide information on care subsidies, they will be far ahead of other sectors.”

Transparency over other areas of operations and accommodation can be picked up in general purpose financial statements, Grant added.

“We need to identify what would be beneficial to the public and what would be important for the Department to receive to understand the prudential risk of providers,” he concluded.

Given the Federal Government guarantees all RADs – and the Royal Commission data has reflected the ballooning balance of RADs – it would seem the Department does need to better engage with providers on this issue.