StewartBrown Report highlights ‘declining profitability’ in residential and home care

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The sector report for the six months to 31 December 2018 says the Government’s $320 million one-off funding boost “will not repair the underlying issues” in the sector’s current funding model.

While the report resorts to increasingly stronger language, here are some key numbers:

Residential care

42.3% of facilities recorded a negative operating result (EBT), and 19.5% of facilities recorded a negative EBITDA – representing a “cash loss” from operations.

All geographic locations reported a decline; however, the financial viability of regional, rural and remote facilities has reached a “pivotal point” – recording the highest level of EBT losses at 61%.

According to the report, there are few opportunities for existing providers in these areas to merge or sell their facilities to larger providers, making remedial funding “essential”.

EBT for FY18 averaged $1,109 per bed per annum, equating to $21.33 per bed per week – an “unsustainable amount” that is “not sufficient to generate future growth”.

Occupancy levels for survey participants remained neutral at 94.9% – interesting to note, however, that the Government’s official statistic on this remains at 90%.

The waiting times for aged care places already exceed 100 days in most states.

Home care packages

Revenues have reduced by an average of 6.1% underpinning an overall reduction in profitability of 29.8.%.

This decline, however, appears to have been somewhat stabilised in the current FY, which shows a $0.09 increase to $3.33 revenue per client per day.

Direct service costs increased by $2.78 pcd – 51% of total revenue.

Staff hours per client per week reduced by 0.45 hours and averaged at 6.69 hours – that is one hour per day per week, which is not a ‘business’.

Read the full report here.