Sector staring down $1B operating loss in 2019-20 – 58% of aged care homes running at a loss: StewartBrown

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The accounting firm has estimated the number of aged care homes operating at a loss will increase to 70% by the end of 2021 with all providers forecast to have recorded a combined operating loss of close to $1 billion for 2019-20 according to Senior Partner Grant Corderoy.

StewartBrown’s latest results for the six months to December 2020 – which cover 1,119 aged care homes or 44% of the sector – show 58% of homes recorded an operating loss while 31% recorded an operating cash loss, continuing a downward trend that began in December 2016.

Care homes recorded an operating result of $2,746 deficit per bed per annum and a deficit of $8.14 per bed per day based on care and accommodation revenue streams.

The Bottom 75% surveyed had an average result of a deficit of $18.67 per bed day which this represents the average of 840 homes nationally.

The Government’s COVID funding – which amounted to $3.18 per bed per day – was excluded from the results.

Direct care costs outweighing care subsidies

The results highlight the fact that care continues to outstrip Government funding.

StewartBrown notes that while ACFI has had an accumulated increase of 10% over the past four years, direct care costs have increased by 22%.

Everyday Living results (excluding administration) declined to a deficit of $9.10 per bed per day in the December quarter – even with revenue from additional services.

Regional and remote homes are the most vulnerable, recording a deficit of $15.21 per bed per day.

This is despite outer regional, rural and remote occupancy improving to its pre-COVID levels, while major cities saw their occupancy fall by 1.82% on the back of COVID and increased Home Care packages.

National average occupancy was 91%.

Critically however, care providers still managed to increase the care hours per resident per day from 0.04 hours to 3.29 hours from the December 2019 quarter.

Unspent funds totalling $1.4 billion – home care hours now at an average of 5.5 per week

Home care operators also took a financial hit.

Revenue per clients per day for the 43,000 Home Care Packages (35% of the sector) surveyed dropped by 1.1% to $0.80 per client per day with the average operating profit per client per day also falling by $0.20 to $4.53.

Average unspent funds per client increased by $1,997 per client to an average of $9,901 per client – with the national total now estimated to be in excess of $1.4 billion.

Case management cost as a percentage of revenue remains consistent at 10.3% while administration and support costs make up 23.3% of revenue.

Interestingly, home care hours continue to bottom out, falling by another 0.19 hours to an average of 5.45 hours per week.

Royal Commission’s funding recommendations to be gradually rolled out

The results place an extra onus on the Government’s response to the Royal Commission’s Final Report in the Federal Budget expected in May.

The Royal Commission has supported a $10 increase in the Basic Daily Care fee from 1 July 2021 and also recommended the 30% increase in the Viability Supplement be continued plus a training subsidy to reimburse providers for workforce training and education costs as interim measures.

But the majority of the other funding recommendations such as the new casemix funding models and an independent Pricing Authority are not due to be in place for another year or longer.

As we reported here, the Government provided $190 million for residential care providers – to be paid next month – as part of its $452 million interim response to the Final Report plus $90 million in targeted support to providers facing financial stress.

We also understand the Federal Budget will be an ‘aged care budget’ with a significant package to address the recommendations in the Final Report.

Will it come in time however to save some operators from closing their doors?

We will be looking at the Commissioners’ recommendation for an aged care levy – and if it is the ideal option for funding Australia’s future aged care system – in the next issue of our new fortnightly digital magazine SATURDAY.

Look out for Issue 2 in your inbox at 6am, Saturday 27 March, for the story.