Regis comes out on top post-COVID thanks to IT systems, reduced senior management and more efficient buildings: Colliers listed player analysis

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Opinion by Shalain Singh
Head of Healthcare & Retirement Living for Colliers Asia Pacific

The commercial real estate group has released its latest look at the big listed players in Australia’s residential aged care.

Head of Healthcare & Retirement Living for Asia Pacific, Shalain Singh explains how Regis has managed to keep its costs under control during COVID – and why the sector is heading for a “seismic” shift.

You can download the full analysis here.

The report concludes that despite the headwinds of COVID, increased margin compression, declining occupancy and the shift from RADs to DAPs, the sector has done well to maintain the level of care to its residents.

But the analysis also shows all three of the listed providers – Japara, Regis and Estia – have nonetheless taken a serious hit in FY19/20.

Like the rest of the sector, falls in occupancy have in turn impacted on RAD inflows while Government funding is “barely covering” staffing costs.

$224.98 daily bed cost

Colliers notes however that Regis has managed its cost base significantly better than its peers – “reaching an expense run rate of $224.98 per operational bed day vis-à-vis Japara at $248.07 and Estia at $234.65” – which he attributes to three factors:

  • “Electronic systems that permit higher efficiency care delivery and documentation.”
  • “Leaner staffing structure at head office than its peers – this could potentially extend to the facilities as well.”
  • “More efficient building design – the majority of the portfolio is greenfield in origin which impacts incident treatment time, utilities and operational efficiencies.”

We talked to Shalain about the findings.

He says it’s not surprising that Regis was able to find some extra efficiencies given its history of greenfield development which allows it to design facilities to meet its needs.

Hit the development pause button

While all three maintained positive RAD inflows (for Regis, this was only because it had new facilities come online during the year), Shalain also pointed out all three have hit a pause button on new developments.

Again, he puts this on three factors:

  • capital conservation for potential RAD outflows;
  • lack of knowledge about accommodation models that the Royal Commission could recommend in its Final Report; and
  • most importantly what he labels the “seismic shift” towards more people in residential care for shorter periods of time with high co-morbidities and more complex needs.

“People used to call it person centred care but the more accurate definition is co morbidity specific care,” he stated.

Future aged care homes will tailor their care programs to meet the higher needs of their residents, he added, using the example of the high prevalence of diabetes in low socio-economic areas.

Future will be co-morbidity care

This can result in other conditions such as nerve degermation which affects mobility, incontinence and vascular and ocular dementia – so you can build a facility designed to accommodate those particular disease profiles.

Shalain adds that there is also recognition that larger facilities with 120 or more beds are not necessarily the most efficient option.

The analysis concludes that the road ahead will be a challenging one.

“Even if the recommendations from the Royal Commission are welcomed and implemented swiftly, there are still fundamental issues the sector will have to deal with including access to qualified staff, capital management and COVID.”

Shalain predicts consolidation will be driven by both the Government and operators themselves, helped along by the banks.

“The capital structures are going to change,” he said.

Colliers is currently assisting operators to find new sources of funding, sometimes by selling and leasing back a facility or selling off surplus land to recapitalise their businesses.

Interesting times ahead then.