Confirmation that some providers are seeking to exit the sector as financial pressures mount.
Aged care placement and advocacy service Third Age Matters’ Bina Brown has penned a piece for her regular column in the Fin Review warning families with loved one in residential care preparing for a COVID-19 outbreak that the bigger threat may be the collapse or voluntary closure of their aged care home.
As we reported here, 45% of providers are expected to access the Government’s free business advisory services for the aged care sector – run by PwC in partnership with StewartBrown – by the time the program ends in June 2021 with 25% of operators already using the service.
Bina confirmed to us her sources tell her that at least 10 providers have specifically sought advice on shutting down.
She says the speculation is directors will be either trying to sell or close facilities by August or September, when the Government’s COVID-19 stimulus measures and its temporary changes to insolvency rules will both run out.
“By changing the rules around what determines a company to be insolvent, the government must be giving some aged care providers an extended lifeline,” Bina explains.
“Where previously a creditor had to be owed only $2,000 to start placing a company into liquidation, the minimum was lifted to $20,000. A company now has 21 days to respond to that statutory demand, after which time it is deemed to be insolvent. The 21-day compliance period has temporarily been extended to six months.”
This will place more financial pressure on the system because of the Government guarantee on RADs which places a levy on all providers if one fails and the Government has to repay their outstanding RADs.
The Government’s one-off COVID-19 measures including the Staff Retention Bonus also dry up.
Bina concludes it is a situation that needs a solution sooner rather than later.
“Fewer people may be moving into residential care, but families and residents who have made the transition (or need to in the future) deserve to know that they are going to be cared for now and forever and the system needs to be robust enough to allow providers to do that without going broke.”