StewartBrown released its latest Aged Care Financial Performance Survey over the summer break, and it did not make for relaxing holiday reading. The aged care accountants reported that in the September quarter, 70% of aged care homes operated at a loss, up from 56% at the same time the previous year.

While the report notes the Government is committed to implementing the Royal Commission recommendations, “more funding reforms are urgently required which must focus on a greater level of consumer contribution for everyday living and accommodation services in particular.”

Will this result in more aged care home closures in 2023?

Last year 38 homes closed around the country, or 2,104 beds. 

However, what is more interesting to us is the fact that even more homes are changing hands. The latest data available from the Department of Health shows that in the 12 months to September 2022, 44 aged care homes accounting for 2,769 beds changed hands, up 25% from 35 (2,355 beds) the year prior. And this data will not include the four aged care homes that Estia acquired from Premier Aged Care last December.

Smaller providers, in general, are selling to larger operations, and we are seeing signs that they are making a good go of it.

In their results announcement last November, Estia said it expects the 409 formerly Premier beds to be earning $20,000 per bed by the end of the 2023 financial year.

How does Estia achieve a return on beds that even experienced operators like Florence and Viv Padman could not? Does it suggest that consolidation is the key to making the aged care sector financially sustainable? Economies of scale are beneficial, and large operators focusing on specific regions can share staff, helping to overcome the biggest hurdle facing operators right now: workforce.

Consolidation is gathering pace. It’s one of the themes we will be keeping an eye on in 2023.