Chilling warning that aged care sector at risk after huge losses

The sector has suffered close to $4 billion in losses in recent years, with calls for Australians to pay a lot more to keep the industry afloat.

An essential industry in Australia is at serious risk of financial collapse after a new report revealed that two out of three nursing homes operated at a serious loss in 2020-21, with warnings an emergency injection of funds from the federal government is needed.

Analysis of more than 1300 residential aged care homes across Australia showed the desperate situation the sector is facing with each home suffering a loss of $14.67 a bed a day, a huge jump compared to the previous financial year where losses sat at $8.43.

The figures were even more alarming considering the former government paid an extra $10 a bed a day last year in a package worth around $800 million for the sector.

But the report from specialist accounting firm StewartBrown said the financial situation had “deteriorated” due to a number of reasons including staff pay jumping by an extra 1.75 per cent to 3.5 per cent, inflation skyrocketing to 6.1 per cent and an increase in superannuation payments to employees.

The aged care sector is facing a funding crisis. Picture: iStock

It also revealed that 67 per cent of nursing homes made an operating loss in the year to June 2022, a significant jump on the 58 per cent in 2020-21.

“The residential aged-care segment has sustained significant aggregate operating losses for the last five years totalling an estimated $3.8 billion, with $1.4 billion being the FY22 forecast,” it noted.

“These losses have eroded equity and capital growth, which has caused a considerable ­decline in investment into the sector.”

Its a stark downfall for the industry where providers were making $2.11 a bed a day in 2018-19, only for losses to rack up to $14.67 a bed a day.

The aged care sector made an estimated $3.8 billion loss. Picture: Getty Images

“It is the opinion of StewartBrown that after five years of significant aggregate operating losses in the residential aged care sector, structural funding reforms including increased and appropriate care recipient co-contribution are essential, the report said.

“However, to avoid closure of homes and reduced service delivery, especially in regional locations, an emergency funding package also needs to be considered in the short term to ensure current viability and allow for the necessary funding reforms to be properly implemented.”

This would include the aged not only paying for the accommodation, but for living essentials as well such as such as food, utilities, cleaning and laundry.

However, it added where the consumer did not have the financial means to further contribute this must not in any respect disadvantage them.

“A safety net must be enshrined within aged care, as with other areas of health care and social services,” the report urged.

The elderly need to contribute more to funding the cost of residential care. Picture: iStock.

With the Labor government set to deliver its first budget next week, Treasurer Jim Chalmers had already flagged that aged care was one of the biggest cost pressures for it.

Funding for the sector will increase from $29.8 billion in 2022-23 to $52.5 billion in 2032-33.

There are around 245,000 Australians who live in an aged-care facility annually but with an ageing population this is expected to rise dramatically in coming years.