Aged-care minutes up but profit a struggle

Nursing home residents are receiving more care, but the financial position of many nursing home providers remains precarious, a new report warns.

Aged care residents are receiving more care, but many providers remain in financial trouble​, a new report warns.

Increased government funding has boosted the minutes of care for nursing home residents but has failed to improve the sector’s financial position, with two in three homes operating at a loss.

Residential aged-care providers lost more than $1bn last financial year, their sixth consecutive year of aggregate losses, leaving homes vulnerable to closure or reduced care capacity, especially in the regions, a new report finds.

The analysis by leading aged-care accountants StewartBrown reveals nursing homes recorded average losses of $16.54 per bed per day in FY23, up from $14.67 per bed day loss the year before.

“This represents an operating loss of $5491 per bed per annum, and a continuation of losses for over six successive years,” Stewart­Brown’s Aged Care ­Financial Performance Survey Sector Report FY23 says.

It notes the “concerning statistic that 66 per cent of aged-care homes operated at a loss in FY23 (equating to) a loss … in excess of $1.05bn.” In 2018 they were making a profit.

Aged-care reforms since the royal commission reported in early 2021 have included bumping up the care per resident to 200 minutes a day, including 40 minutes of nursing care, by October 1.

While this only became mandatory this month, the government provided about $1.15bn in additional funding during FY23 under a new funding model to help homes build capacity.

The report notes the “very positive effect” the extra funding had, with homes averaging almost 13 minutes more care per resident per day than the year before. But this funding for increased care flows through to the care workers, and doesn’t deliver any additional support for a nursing home’s bottom line.

And the other cost centres, ­accommodation and everyday living expenses, were seeing nursing homes falling behind financially, the report says.

Everyday living costs such as catering, cleaning and laundry were costing providers an average $6.62 per day per resident more than the $54 a day basic daily fee they were able to claim from residents under current laws.

And the sector was losing an average $13.05 per resident per day on accommodation costs, which would cover maintenance and refurbishment.

One piece of good news for the sector was that occupancy rates, which had been consistently declining since 2018, had stabilised at 91 per cent in 2023, the same as the year before. The report, which collates financial and other data from 1237 of the nation’s 2650 homes, notes that the aged-care royal commission “fell short in providing a clear direction to ­ensure the financial sustainability of the sector”.

It says the Albanese government’s aged-care task force’s terms of reference include examining financial sustainability in the sector, and advocates for more means-tested consumer co-contributions to accommodation and everyday living costs.

But the sector’s short term ­financial situation was so critical that more urgent action is needed, the report says.

“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,” it says.

The federal government publishes its own quarterly financial report on the aged-care sector, the most recent for the March quarter concluding that 52 per cent of operators were not profitable. The difference between the two reports is that one reports on the profitability of providers and one on individual homes.

The StewartBrown report notes that attracting workers to the sector remains an issue, with “a severe shortage in staffing capacity impacting care service delivery across all levels of aged care”. A 15 per cent wage rise for most categories of care workers will kick in from July next year, which is expected to cost the government an additional $11bn over four years.