Financial sustainability remains a critical challenge for Australia’s aged care sector, with the Aged Care Effectiveness Index (ACE Index) revealing that less than 40% of aged care facilities are operating at a surplus.
This concerning figure underscores the need for providers to explore additional revenue opportunities, such as Refundable Accommodation Deposits (RADs), which are often undervalued and under utilised.
Starting January 1, 2025, the maximum RAD cap will increase to $750,000, indexed annually from July 1. Providers will also be permitted to retain two per cent of the RAD annually for up to five years, from 1 July 2025, totaling a maximum of 10 per cent for any given resident.
With sector-wide increases in occupancy giving less pressure on pricing, this policy change provides aged care providers with a crucial opportunity to reassess their RAD pricing strategies, aligning them with market conditions to alleviate financial pressures.
However, many providers remain uncertain about where their pricing stands relative to competitors and consumer expectations.
Low RAD pricing: “A missed opportunity”
Industry data reveals that RADs are often priced significantly below the allowable cap, leaving millions of dollars in untapped revenue on the table.
The Aged Care Effectiveness Index (ACE Index) highlights that effective RAD pricing can directly improve financial sustainability, enabling providers to invest in workforce retention, facility upgrades, and quality care delivery.
“Undervaluing RADs is a common but avoidable issue,” said Andrew Farmer, CEO at Mirus Australia. “With operational costs soaring and compliance pressures mounting, strategic RAD pricing is one of the most impactful levers providers can pull to boost financial resilience. The upcoming RAD cap increase makes this the perfect time to act.”
Supporting providers with data-driven insights
Mirus Australia is offering a free Accommodation Pricing Report to assist providers in navigating the January 1 changes. The report includes:
Why providers need to act now
The financial impact of undervalued RAD pricing cannot be overstated. According to the Aged Care Effectiveness Index, the average operating result for aged care homes is an operating loss of $536 per bed per annum. Adjusting RAD pricing to reflect true market value could offset these deficits and restore financial stability to the sector.
“The time to act is now,” said Andrew Farmer. “Our Accommodation Pricing Reports are designed to give providers the clarity and confidence they need to make strategic pricing decisions ahead of January 1. This is about long-term sustainability.”
What a joke. You can buy a whole house for $750,000. People are expected to pay that for a room and bathroom. People wonder why the system is broken. There are serious issues here that need to be addressed.