StewartBrown’s latest analysis of the AN-ACC funding decision has delivered a clear warning: the increase is too low to cover ordinary cost rises and wages, with direct care margins expected to fall further.
Historically, those care margins have been used to cross-subsidise losses in accommodation and hotel services. With that buffer narrowing, StewartBrown argues the time has come for the sector to push for margins to be explicitly factored into care funding.
“A reasonable direct care margin is essential to ensure financial sustainability. StewartBrown recommends this advocacy should now commence,” the firm states in its six-page Residential Aged Care Pricing 1 October 2025 Discussion Paper.
AN-ACC class reweightings “significant”
The paper notes that AN-ACC reweightings – based on 2022-23 data and indexed – may disadvantage providers. Some downgraded classifications are now more prevalent, meaning funding will be lower than expected. StewartBrown describes the impact as “significant.”
The increase to the hotelling supplement, from $15.60 to $22.15 per resident per day, will reduce shortfalls in essential costs such as food, cleaning and laundry. But StewartBrown calculates a $1.73 daily per-bed gap remains – better than the previous $8.00 shortfall, but still a deficit.
Sector still not investable
StewartBrown projects sector EBITDA remains well below the $20,000-$22,000 per bed, per annum threshold required to make aged care “investable.”
Closing that gap, the paper said, depends in part on increasing the accommodation supplement – the Government subsidy for supported residents. Currently, the funding gap between supported and unsubsidised residents is widening, which StewartBrown calls inequitable and warns will discourage providers from admitting supported residents.
Margins a decision for Government
The Independent Health and Aged Care Pricing Authority (IHACPA) is not required to consider provider margins in its determinations. “Issues pertaining to the financial viability of the sector remain the responsibility of the Department,” StewartBrown concludes.
With margins shrinking, construction stalled and investors still wary, StewartBrown’s message is blunt: without factoring care margins into funding, sustainability – let alone investability – remains out of reach.