Aged care Government funding is increasingly inadequate

The analysis of the operating performance of 974 aged care facilities and 24,952 home care packages for the year to 30 June 2018 by accounting firm StewartBrown reveals a continuing decline in profitability in both residential care and home care.

The Aged Care Funding instrument (ACFI) government subsidy to aged care providers has been frozen in recent years and the recalibration of ACFI scoring will see reductions in subsidies to new entrants to aged care facilities. Allied to this are rising staff salaries and electricity costs leading to profit margins are being squeezed.

In 2018, more than 45% of aged care facilities reported an operating loss (up from 34% in 2017) and, more alarming, over 21% reported an effective cash loss. The impact was most noticeable in rural and regional areas.

The refundable accommodation deposits and daily accommodation payments have not been a bonanza for aged care operators, as there is consumer reluctance to pay high prices – even in Sydney and Melbourne where property prices have surged. The 45% of supported residents also reduces the funds available to operators, far more of which would make losses if depreciation charges were not kept artificially low by assuming an unrealistic 40 year life for facilities.

Declining revenues for home care operators has led to a reduction in staff hours provided and a reduction in profits by around 30%. Also home care clients are keeping a larger proportion of the funding available unspent – thinking of rainy days to come – with clients keeping an average of around $6,000 unspent.

The financial performance of Aged Care facilities in 2018 indicates that the current funding model is not sustainable with StewartBrown forecasting an increasing number of facilities being in jeopardy in 2019 unless the government stumps up additional funding in the next budget.

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