Eaten alive: Why smaller aged care providers are being driven out of existence

Michael Goldsworthy is Principal Consultant at Australian Strategic Services and has been watching this coming for fourty years.

The strategist, facilitator and project management veteran, big picture thinker and founder of Australian Strategic Services has spent decades facilitating mergers and amalgamations across the human services sector, working alongside boards, CEOs and executives to navigate the tectonic shifts of aged care reform. He has done more than 283 mergers and amalgamations in Australia, a number he mentions not to boast, but to underscore that what is happening right now in aged care is not surprising to him. Not even slightly.

“’I’ was talking and publishing about this back in the late 80s and 90s,” he says, with a dry matter-of-factness.

What is happening, in plain terms, is this: Australia’s aged care sector is shrinking fast. In 1990, there were roughly 3,000 residential aged care providers operating around 3,200 facilities across the country. By 2025, that number had fallen to 642 and it is still falling. The number of residential operators dropped 18 per cent between 2017 and 2024 alone.

KPMG’s latest Aged Care Market Analysis confirms the trend is accelerating, with further exits expected as the Support at Home reforms reshape the home care landscape.

Goldsworthy’s prediction? It will bottom out somewhere between 200 and 300 residential providers. And in Support at Home, a similar consolidation is running on a parallel track.

It was always going to come to this

To understand where aged care is heading, Goldsworthy argues, you have to understand the past and the paradigm shifts that have propelled it from one era to the next.

He sketches the arc from memory, the way a historian might describe geological epochs. There was the religious paradigm of care, where faith-based organisations provided the backbone of services. Then the charitable paradigm, built on philanthropy and donations as the country grew wealthier from gold and wool. After the Second World War came the welfare paradigm: government funding, standards, acts and regulations, during which residential aged care as we know it was really established, driven by the need to keep ageing seniors out of hospitals, slow readmissions and reduce the burden on the acute health system.

Then, around 2000, everything changed again. The Hilmer Report of 1993 and the introduction of the National Competition Policy in 1995 had quietly laid the groundwork for a seismic shift: the welfare paradigm gave way over time to what Goldsworthy calls the customer-driven competitive market paradigm. As reforms were rolled out private companies and publicly listed operators saw an opportunity.

“The privates said, ‘Oh, we can make money out of aged care. We’ll get in.’ Why? Because you got free capital grants, a free licence, some staff, some clients, and suddenly you were making money.”

The managed marketplace, where government uses competitive, contractual and customer dynamics to drive quality, efficiency, performance and consumer choice, is the paradigm we are still in today. And within that managed marketplace, Goldsworthy says, the trajectory of any sector follows a predictable bell curve.

“There’s an entry phase, where anyone can get in. Then there’s a qualifying phase, where more and more standards and legislation and audits kick in. Then there’s the preferred provider phase, where they crunch the market down to who they want, preferred providers.”

He pauses. “We’re on the downside of the bell curve for home care and even more so for residential care.”

By design, not by accident

The question that hangs over all of this is whether the exodus of smaller providers is a regrettable side effect of well-intentioned reform, or something more deliberate.

Goldsworthy does not hesitate.

“It’s by design.”

He is not speaking of a conspiracy, exactly, but of something arguably more troubling: a set of systemic, interlocking forces that make consolidation the rational and foreseeable outcome of the policy settings government has chosen. Compliance costs, mandatory care minutes, 24/7 registered nurse requirements, the AN-ACC funding model, strengthened quality standards and the bureaucratic weight of the Support at Home rollout have collectively made it extraordinarily difficult for smaller and standalone providers to survive, be successful and sustainable.

A former senior bureaucrat made it explicit, reportedly telling one aged care CEO bluntly: “We’ve got too many aged care providers. I only want 400.” Fewer providers, the logic goes, means fewer entities to regulate, fewer relationships to manage, less complexity to administer from a Canberra desk.

The numbers are beginning to reflect that intent. Glen Eira Council, the only Victorian council still operating a standalone residential aged care facility, recently announced it is seeking to offload its Warrawee home after racking up $5.5 million in annual losses. Mayor Cr Simone Zmood framed it carefully in a recent Q&A, noting that “as a standalone residential aged care service, Warrawee has limited ability to achieve economies of scale or spread fixed costs across multiple sites.”

The subtext is clear: the regulatory and financial framework introduced post-Royal Commission is not calibrated for small operators and has continued the consolidation trajectory; regardless of how long small operators have served their communities or how much they care about residents or clients.

Goldsworthy sees the Glen Eira situation as symptomatic, not exceptional. “Aged care continues to increase in complexity. Efficiency is paramount. Regardless of the size of an organisation they have the same responsibilities, funding and need to operate on a commercial basis, and smaller organisations struggle to adapt. Mindful, bigger does not equal best. Less providers equals less time, activity and cost for the bureaucrats.”

What consolidation actually costs

If the drivers of consolidation are reasonably well understood, the true costs are often overlooked, particularly the things that do not show up in star ratings or care minute data.

Goldsworthy uses a gardening metaphor to describe the aged care ecosystem. The large operators are the oak trees. But around every oak tree, he says, you find bushes, shrubs, even fungi, all vital parts of the ecosystem, all dependent on the broader environment in which they grow.

“If diversity is the key to improving choice, improved service options, pathways and experiences for senior Australians should increase. Consolidation by design raises significant national, organisational and community questions.”

He does not entirely disagree. But he is clear-eyed about what is being lost. Not-for-profit and smaller private operators, the ones holding the line right now, offer something that scale cannot easily replicate: a short line of sight between leadership and the floor, fast decision loops, and a CEO visible enough to know their staff, residents or clients.

Some of these providers are thriving precisely because of that model, posting staff engagement figures well above industry benchmarks. But for every one that is holding firm, others are being absorbed into larger entities or pushed out by cost pressures entirely. And when they go, the ethos and magic of these entities disappears.

“Absolutely, yes,” Goldsworthy says when asked whether the loss of those providers leaves residents worse off. “Consider Bunnings. What do you see around Bunnings? The giant big oak tree. And underneath it, you see specialised retailers; the bushes, shrubs, even fungi. They’re all part of an ecosystem.”

The analogy extends further. He divides aged care providers into leaders (roughly 10 to 15 per cent), followers (around 60 per cent, across upper, mid and lower tiers) and resisters (10 to 15 per cent). The leading providers and upper followers, he says, are building genuine service options, service pathways and continuums of care based on diversified funding models. But they are not a substitute for the boutique, community-embedded providers that are disappearing.

“Around Australia there are these unique, boutique-y specialist machines. I don’t think they get anywhere near enough recognition. Somebody will get up at the conference and it’ll be all the big boys. But in the garden, there are all these sweet flowers and vegetables, they’re actually more unique. They’re the platypuses and echidnas, not the bloody blowflies.”

The leadership gap nobody talks about

One of Goldsworthy’s more pointed observations concerns the quality of leadership driving aged care organisations, and he is not diplomatic about it.

“With an objective look at the CEOs in aged care, many are first and foremost managers of a service or a set of services. They are categorically not leaders and developers of an organisation. I reckon that’s about 65 to 70 per cent.”

The consequence of this is significant. When market conditions tighten and the regulatory burden intensifies, organisations led by service managers rather than strategic thinkers are the first to find themselves underwater, either closing, selling or, in the best case, merging before they hit the front page of the paper.

This is not simply a recruitment failure. It reflects something structural about how aged care has historically selected and promoted its leadership: people who came up through the care ranks, understood the service deeply but were never equipped to build and develop an organisation in a rapidly transforming market.

Goldsworthy argues that boards share responsibility here, and he has spent much of his 50 year career working with Board, CEOs and executives to sharpen the strategic thinking, discussions and decisions at the top.

He also notes that external leaders brought in from banking, aviation or finance for example tend to fare poorly. Out of ten such appointments, he estimates roughly three will stay long-term and thrive, integrating both the business and service realities of aged care. The other seven leave after two to five years, “making all sorts of excuses.”

The numbers that should alarm everyone

Goldsworthy’s framing of consolidation as a “journey” is not complacency. It is a recognition that the arc of reform in Australia’s human services sectors has always followed this logic, entry phase, qualifying phase, preferred provider phase, and that aged care is not uniquely afflicted. Education, early childhood and employment went through it. NDIS is going through it. Allied, acute and primary are on a parallel journey.

But the scale and speed of what is happening in aged care is exceptional, and the demographic backdrop makes the stakes uniquely high. The over-85 population is projected to reach 794,200 by 2030-31. CBRE estimates that if just 30 per cent of that cohort requires residential care, the system will need around 70,000 additional beds within five years, before counting younger residents with complex needs.

Meanwhile, from April 2026, metropolitan residential providers face AN-ACC funding penalties if they fail to meet tightening care minute targets. Only around 54 per cent of providers are currently compliant. The net effect is that financial pressure on mid-tier and smaller providers is about to intensify sharply, accelerating exits at precisely the moment demand is accelerating too.

Against that backdrop, the Reserve Bank’s own forecasting, as far back as the mid-1990s and confirmed in its 2022 Financial Stability Review, identified aged care, health, the NDIS, defence and national debt as areas that are “utterly and totally unfundable” into the future without major structural transformation. For Goldsworthy, this is the meta-context for everything else. Government is not merely indifferent to the survival of smaller providers. It is pulling fiscal and monetary levers that, by design or by consequence, make their survival harder.

“They’re not appropriately and adequately funded. Over many years increases in funding less than CPI acts as an efficiency dividend.” Secondly, some of them are not actually living within their means either. If you’ve got a budget of 100 bucks, you’ve got 100 bucks, not $110.”

Where does the bell curve lead?

Goldsworthy is not entirely pessimistic, but his optimism is conditional and long-range.

He believes the current bell curve of consolidation is already generating the early signals of a new one. Smart operators, he says, are “building a glass bridge from one bell curve to the next.” Two things are emerging at that leading edge: specialisation, the boutique, nurse-led, community-embedded care models that sit outside the standard residential and home care boxes, and more genuinely empowered consumers with the market awareness and financial capacity to demand something different.

The third condition for a better outcome is the hardest to bank on: that government steps back.

“With a tad of luck, the government will come to realise they’re just killing this industry by squeezing providers to death with regulation. Hopefully, they can take a deep breath, re-evaluate and refocus on what really matters.”

What that would look like in practice is not a loosening of quality standards. Those, he and most sector leaders agree, were long overdue after the Royal Commission exposed serious systemic failures. It is a shift in the mode of relationship between government and sector. From transactional to relational. From legislative enforcement to genuine partnership. From counting care minutes at a desk in Canberra to getting in a car and visiting a facility.

“The government’s first thoughts on aged care are legislation and regulation, funding and finance, monitoring and review. When in reality, right now, we need innovation, creativity, entrepreneurship, and a genuine partnership with providers to improve the care of people. That’s not what we have.”

It is, as Goldsworthy would say, a journey. But by his assessment, we are currently delivering outcomes nowhere near as good as we could or should, for the seniors who need them most.

The question is not whether consolidation can be reversed. It cannot. The question is whether what replaces the diversity we are losing will be worthy of the people it is supposed to serve.

Michael Goldsworthy and Russell Kennedy Lawyers are delivering a Mergers and Amalgamations Masterclass in Melbourne on 26 August 2026. The half-day session covers the full lifecycle of a merger or amalgamation, from assessing organisational readiness through to legal compliance, deal structure and integration. Places are limited and more than two-thirds are already sold. Find out more and register here.