Major aged care merger sees third-biggest provider emerge

Three providers have merged to create a single organisation with more than 12,000 employees servicing 38,000 elderly Australians.

BaptistCare will jointly run 49 aged care homes and 32 retirement villages. Picture: Kari Bourne / Sunshine Coast Daily

Three aged care providers have embarked on a major merger that will see the creation of a single organisation with more than 12,000 employees that service 38,000 elderly Australians, in a move the organisation’s new chief executive says was made to insulate the companies against the challenges of a sector that is set to be completely overhauled in coming years.

The Australian can reveal Baptcare – which operates in Victoria, Tasmania and South Australia – this week merged with Baptist Care and Baptist Care SA to become the country’s third biggest care and service provider.

The three service providers have combined to form a new entity – to be known as BaptistCare – and will jointly run the 49 aged care homes and 32 retirement villages currently under their remit.

BaptistCare chief executive Charles Moore said the move reflected the increasing trend of consolidation in the aged care sector because of decades of underfunding.

“We must give credit to the current federal government, who have done a significant amount to increase funding to the aged care sector, but the reality is that’s just a movement in the right direction for the past 25 years of significant underfunding by governments of all persuasions,” he said.

“Throw on top of that the fact continuing to find staff remains a very real challenge and throw on top of that this tsunami of regulatory change the sector has been facing now for a number of years. I think that financially and emotionally, more and more operators are just worn out.

Mr Moore said there were several reasons why coming together made sense for the three organisations – which together have a combined annual revenue of $1.2bn a year – including increasing the level of influence they had in the conversation with governments on policy and reform.

“Secondly, this is about financial sustainability, we can’t get away from that,” he said.

“Whilst in whilst we work in highly regulated markets, down to being dictated how many care minutes need to be provided with each of our residents, there is significant savings to be made by the eradication of the duplicate services in our back office. We think we will extract something around $15m to $20m in synergistic savings, yeah, totally in all the support services across the organisations.”

He said the third reason for the merger was to be able to find new staff.

“By being larger we have an opportunity … to really enhance the employee value proposition with that national name, we can offer different benefits.”

The three organisations alerted the market that they were in discussions over the merger late last year, amid the introduction of new aged care reforms by the Albanese government.

“The changing in the pricing dynamics and the way the home care market will work is placing further burden on operators, there is going to be reduced margins,” Mr Moore said.

“So you’re going to have higher volumes or more clients and you’re going to have to invest in better and more intelligent systems so that your staff can optimise the time they’re with clients not doing paperwork. I just don’t know how small operators will actually be able to remain in business.”

Mr Moore said that on top of legislation passed late last year that overhauled the pricing of residential aged care services, new financial and prudential regulations introduced last month had also increased pressure on providers.

“Under these changes we have to hold almost three times as much cash as we would today,” he said.

“The larger you are, the more chance we have of being able to preserve that cash. For small operators, it’s going to make running your business very, very difficult.”