Mar 31, 2020

COVID-19 adding strain to aged care system already under financial pressure

The aged care sector is doing an extraordinary job rising to the challenges created by the COVID-19 crisis. Staff are on the front line, putting concerns about their own health aside as they care for those who are most at risk from the disease.

But some in the industry are worried about the additional costs of complying with the new requirements for COVID-19, noting they are being imposed on providers at a time when many are struggling to stay afloat.

The latest report from independent accountancy firm, StewartBrown, showed that 56 per cent of aged care homes recorded an operating loss in the six months to December 2019. For outer regional, rural and remote homes, the figure is a shocking 71 per cent of homes operating at a loss.

With all aged care facilities in the country facing additional costs and higher expenses, some are worried homes could be forced to close and are calling for additional support from government to ensure continuity of local services, particularly in remote and regional centres.

“I don’t know how facilities are staying open”

Anton Hutchinson, whose family has owned Canberra Aged Care for over 30 years, said the industry “can’t afford” the additional costs.

“The residents have been fantastic, the staff have been fantastic, 99 per cent of the relatives have been fantastic,” he said.

“We’re bending over backwards to accommodate people.” But he said his facility is financially feeling the effects of COVID-19. 

“Operating costs have gone up, not dramatically but they have gone up,” Mr Hutchinsons said.

“We’ve got staff who are concerned. It’s impossible to get PPE. Fortunately we don’t have any symptoms in the facility, but everything we can buy, prices have gone up,” he said.

Mr Hutchinson said food has become difficult to buy and prices have gone up.

There have also been additional staff costs, he said. Some staff are reluctant to come to work, and are having to be replaced with agency staff. 

“The industry can’t afford any expense, even the smallest one,” he said.

The government should be maintaining the 9.5 per cent they put into the system before the election, Mr Hutchinson noted. 

“I honestly don’t know how facilities are staying open. They’ve been skating on ice for a couple of years now,” he said. 

Some operators are already cutting back on staff, Mr Hutchinson said, which lowers the standard of care, and they are also cutting back on food.

Aged care sector is already compromised

Aged and Community Services Australia CEO, Pat Sparrow, said she is incredibly proud of the work aged care providers and staff are doing during the COVID-19 crisis, but residential age care is already a sector facing significant financial challenges.

“They’re already compromised and they’re now experiencing a whole lot of additional cost pressures,” she told HelloCare.

For example, visitor restrictions add a new layer of costs, such as some providers adding concierge-style services at their homes to facilitate the flow of people through the home.

As Mr Hutchinson said, staffing is a major added cost. “If you’ve got staff who can’t work because they either need to self isolate or because they’re sick, or when schools close, that’s a huge cost for our workforce,” Ms Sparrow said.

“Our providers want to do the right thing, they want to pay people who otherwise might not be paid if they take time off, but there’s struggling,” she said. 

She said the government’s response to keeping staff on is positive.

Smaller and regional operators face the greatest challenge

Ms Sparrow said homes that are already under financial pressure will struggle the most. “The more impacted you already were by poor financials then overlaying these additional costs on top of that is just going to make the situation worse,” she said.

“The biggest risk is those that are already operating at a loss.”

“For our rural and remote providers that’s a particular worry,” she said, but noting that the government did increase the rural and remote liability supplement, “but at this stage we don’t really know if it’s going to cover the additional costs or not.”

Ms Sparrow said it can be tougher for smaller operators to absorb the changes brought on by COVID-19.

“Smaller members can generally take change less well than a larger operator,” she said. “They don’t have the scale to move things around or do things differently.”

Ms Sparrow said it’s quite likely homes will be forced to close due to the added costs of complying with the requirements for COVID-19.

“We’ve been concerned for some time that we’re hearing more providers talking about if can they continue to stay in aged care, and we’ve seen more closures,” she said. 

If homes close, people will lose their local aged care services.

“I think it is a concern that with an additional overlay it remains a risk that we need to manage, otherwise you won’t have services available locally which is what everybody is acknowledging at the moment: we need to have those services locally on the ground.”

Ms Sparrow said there were also added risks for home care providers, where care recipients and families are beginning to refuse services now.

Likely more government support will be needed

Ms Sparrow said ACSA is appreciative of all the government is doing, but said it’s likely more will be required.

“I think the government’s trying to do as much as they can,” she said. “They have put some additional funding on the table, they have made some adjustments and we’re all really appreciative of what they’ve done.

“But we think there probably are going to be some additional things that need to be done, like combatting the social isolation, making sure that providers have got the financial support they need to keep doing all the preparation and infection control, and have PPE. Both residential and home care providers need to be able to do that. 

“We think these are an additional cost on a sector that you would have to say is already financially pretty challenged.”

“Significant, ongoing, financial pressure”

Leading Age Services Australia CEO, Sean Rooney, told HelloCare that hundreds of aged care providers are “under significant, ongoing, financial pressure, with the situation for regional providers particularly alarming.”

“Financial performance has deteriorated for aged care homes of all sizes and this is putting care at risk, especially during this time of national alert, when providers are doing everything possible to guard residents and staff against COVID-19,” Mr Rooney said.

“To be in the strongest position to save lives and slow the spread of the virus, the sector has to be financially sustainable.”

“We welcome the Government’s recent coronavirus funding for aged care.  However, more is needed,” he said.


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  1. A lot more is needed. Aged care is significantly underfunded already and now has thousands of the most vulnerable older people and staff to keep safe. We are a front line in this pandemic but haven’t been given the resources we need. Over $100b to sustain business and our $1b ask is ignored. Can’t understand the ignorance!

  2. It is saddening that, even though we are hearing a lot of concern from Government about COVID-19 and ways to keep it out of Residential Aged care (Lots of extra notifications, regulations, on line training modules etc…) that we are seeing only a 1.2% indexation to ACFI. Given the industry has been screaming for at least a restoration of the 9.5% we saw previously, this increase represents an insignificant token when compared to the increased cost burden we are under.

    Our home would need around 5% just to cover the extra costs of managing COVID-19, let alone the cost pressures which were already biting into our bottom line.

    While it has been great to see stimulus and record rescue packages in many areas of the economy, still the most vulnerable people, and the operators charged with their care seem to be the least important on the funding priority scale.

    1. So true. But it seems not even a pandemic will get our governments to take the issues in Aged Care seriously. They go on and on and on about the Coronavirus most often effecting the elderly but still not enough is being done even as I speak. What amazes me is the fact they are still allowing new residents in my facility!! A Dementia resident with aggressive behaviour was admitted here after being released from hospital today. Too many grey areas! Now get this!! He is now PPE and is supposed to be isolated for 2 weeks!! This is Dementia you cannot isolate a Dementia resident that has the capacity to walk now can you? You cannot prevent another wanderer from entering their room as we are not allowed to lock a resident in their room. So let’s spread the Virus throughout the community by bringing in new residents with cognitive imparement to spread a disease to other residents and staff that have no choice in the matter.

    2. Mark, we sympathise with your position because it mirrors our own.

      Personally I’m bloody tired of hearing our associations thanking the federal government for their help when it’s pittance.

      Why aren’t our associations being so pathetic? Abundant reports, irrefutable evidence presented to the Royal Commission clearly detailing the funding shortfall and still this softly softly bullshit from Rooney and Co.

      The cuts made to funding since 2015 have been deliberate and now sees more than half of residential care facilities struggling to survive and still nothing.
      There are hundreds of single home operators and we need to contact our associations individually and demand action.
      We should be launching legal action seeking adequate funding and just as importantly we should be demanding compensation for the losses over the last five years.

      Additionally, those people who bought shares in the BUPA and Estia portfolios to fund their investment have lost everything. The government has failed its duty of care to facilities and as a direct consequence these retirees are broken.

      We won’t get anywhere until all us small operators demand action from the people who are supposed to represent our industry.

      Contact, everyone needs to contact your association, I certainly have, repeatedly. I met with our CEO recently and he doesn’t believe the industry has the “stomach” for a fight and won’t even allow an expression of interest ballot.
      We need our associations to start the fight, not another round of futile dialogue. Everyone knows the situation but the government just wants to destroy us!


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