Two out of three nursing homes running at a loss

A new report from chartered accountants, StewartBrown, has revealed that the residential aged care sector is still experiencing financial sustainability problems, with two out of three nursing homes (67%) running at a loss.

The quarterly Aged Care Financial Performance Survey Report, which looked at 12 months of data finishing at June 2022, found that nursing homes are, on average, losing $14.67 per bed per day on operating costs and $12.06 per resident per day on accommodation costs. 

Grant Corderoy, Senior Partner of the Consulting Division at StewartBrown, explained that even after the $10 basic daily fee supplement – which was implemented on July 1 last year to improve food and quality nutrition – the funding has not assisted in improving the overarching sustainability of homes.

Mr Corderoy added that after five years of operating losses for nursing homes, they expect there will be “continued home closures” across the board despite the new funding model, which began on October 1, and urgent funding is needed.

This has already been seen, with major Victorian aged care provider, Royal Freemasons, starting to sell up their residential aged care homes – citing recent Government reform changes as being challenging to meet.

Home care is also experiencing similar issues to residential aged care, with the report finding that the home care sector is reflecting a decreasing financial performance, currently at a surplus of $3.98 per client per day ($6.05 in 2021) as well as an average of $10,736 of unspent funds for every care recipient.

Mr Corderoy explained that the upcoming reforms for the aged care sector, particularly the new funding model, will see “winners and losers” across the board, which is normal for any large changes.

The Government implemented their new funding model, the Australian National Aged Care Classification (AN-ACC) on October 1, which has been seen as a better model for funding direct care than the previous Aged Care Funding Instrument (ACFI).

However, StewartBrown expects the AN-ACC will cause teething issues for the sector and it may take time for the aged care sector to adjust to these changes.

Mr Corderoy explained, “The AN-ACC was implemented as a subsidy to closely align the subsidy and the acuity of a resident, that was good and a much better funding system than ACFI – which doesn’t closely align [like that]. 

“[However], AN-ACC has been somewhat compromised because it has to fund [new reforms like] providers providing more mandated minutes up to an average of 200 minutes. And it is a bit of a hybrid model between funding on the one hand and funding for more costs in minutes on the other hand. 

“What it means is that it is going to take years before that washes through…

The Independent Pricing Authority will be an important part of improving the funding and ensuring that care costs are covered appropriately, said Mr Corderoy, but aged care providers will only be getting paid for direct care and it will not be providing that “additional margin”.

To assist with the viability options in residential aged care, StewartBrown is providing two options that would need to be implemented quickly, either:

1. Government increases in funding for aged care
2. An increased consumer subsidy for everyday living and accommodation services, provided by the Government

Mr Corderoy believes the first option won’t be likely due to the current economic market and would be looking for the Government to take on board the second option.

He wants to make it clear that an increase in the subsidy paid would not be on the consumer paying but how much the Government put towards the subsidy per resident.

Additionally, while this would improve the out-of-pocket costs by providers for delivering care, it would not fix the ongoing viability of the sector.

Mr Corderoy said the new Government is very cognisant of the issues in aged care and that the coming months will be a difficult time for the community but also, in this case, for aged care.

To view the full report, head to the StewartBrown website.