Seven in 10 nursing homes operating at a loss

The future of the residential aged-care system is under ‘critical’ threat with seven in 10 nursing homes operating at a ­financial loss.

The latest numbers equate to an annual loss for the aged-care sector of about $1.4bn, despite a government funding boost last year of $10 a bed.

The future of Australia’s residential aged-care system is under “critical” threat with seven in 10 nursing homes operating at a ­financial loss, rapidly declining occupancy levels and severe staff shortages jeopardising the care of hundreds of thousands of vulnerable older residents.

The financial performance of nursing home operators is plummeting, with a new analysis revealing centres lost an average $21.29 a bed a day in the September quarter compared to $7.30 in the same quarter in 2021.

This is a significant deterioration just in the past few months, the latest StewartBrown aged-care financial performance survey shows. The sector had already reached a crisis point in June when facilities were losing $14.67 a bed a day. In 2018 they were making a profit.

Occupancy is also falling fast, the report reveals, down from 95 per cent in 2018 to just over 91 per cent in September.

The latest numbers equate to an annual loss for the sector of about $1.4bn, despite a government funding boost last year of $10 a bed a day to improve quality and range of food and supplements, costing the taxpayer an extra $3.2bn over four years.

Tom Symondson

“The alarming statistic is that 70 per cent of aged-care homes operated at a loss (in the September quarter) compared to 56 per cent in September 2021,” the report says. “Staffing shortages have been a major contributing factor, with much increased levels of overtime and agency staff being required to ensure that resident care needs are being properly met.”

The report collates financial information from 1182 of the nation’s 2670 nursing homes, which provide care for about 245,000 older Australians each year, rating the current situation as “critical for many providers”.

It finds that the raft of legislative and regulatory changes brought in to address the quality of aged care in the wake of the aged-care royal commission, including an extra $2.5bn over four years committed in the government’s October budget to increase the number of minutes of care per resident and to ensure 24/7 nursing in each centre, hasn’t cauterised the sector’s financial bleeding.

And it calls for an urgent cash injection from the federal government to address the current crisis as well as for longer-term system-wide change.

“After more than five successive years of significant aggregate operating losses in the residential aged-care sector, structural funding reforms are essential,” the report says.

Tom Symondson, chief executive of peak provider advocacy group Aged and Community Care Providers Association, said the new data “reinforces what we’ve been saying for years, that the aged-care sector is not financially sustainable”.

“They can’t keep going forever (losing money),” Mr Symondson said. “Those that had assets intended to fund redevelopment or refurbishment have had to sell them to pay wages or utility bills.

“Everyone is being forced to reduce budgets across the board on things like maintenance and training, and we’re struggling to maintain spending in allied health, which adds so much to residents’ care. We’re seeing providers close beds and an increasing number close up for good.”

Report author Grant Corderoy recommends older Australians who can afford it pay more for the accommodation component of their aged care, potentially through either a higher daily accommodation payment or by using a portion of their refundable accommodation deposit. Currently, the full deposit paid on entry to the aged-care home must be repaid to the family of the resident after they depart.

As for the costs of everyday living, such as food, utilities, cleaning and laundry, Mr Corderoy proposes deregulation, which would allow providers to charge a greater amount than the currently mandated $54-a-day basic daily fee. The current system makes it extremely difficult for providers to charge beyond this amount, because it is highly regulated, he said.

“Clearly, where the consumer does not have the financial means to further contribute, this must not in any respect disadvantage them,” Mr Corderoy said. “A safety net must be enshrined within aged care, as with other areas of healthcare and social services.

“But these aspects of our lives, our accommodation and daily living costs, are things we’ve paid for all our lives. That ought to continue into aged care, with government spending focused on providing actual care.”

Mr Symondson said there is a fundamental question about how much the government is prepared to fund the nation’s aged care.

“The government has put funding into some of the aged-care royal commission recommendations such as 24/7 nursing and more minutes of care per resident, but the underlying problem is still unresolved,” he said.

“Funding for aged care has not kept up with the increasing cost for decades. Every year the gap between what it costs to deliver care and what is funded grows. Ultimately, if we want to deliver, as a society, sustainably high-quality aged care we have to acknowledge how much that costs, and we simply haven’t done that.

“This government says it wants to fix aged care. It has a fantastic opportunity to do this at the next federal budget, but this latest report shows just how much more it will take to do that.”

A spokesman for Aged Care Minister Anika Wells said reforms to the sector were under way that “will drive structural change to funding of the residential aged-care system and improve financial performance”.

“In 2022-23, residential aged-care funding will increase by 12 per cent to $16.4bn,” the spokesman said.

“The Albanese government has just implemented the AN-ACC funding model, which helps deliver a fair funding system. Under AN-ACC, average funding per resident is expected to be over $85,000 – an increase of nearly 10 per cent per resident.”

The provision of aged care, a federal government responsibility, is one of the largest spending programs in the federal budget. It is anticipated to cost $30bn this financial year, rising to a projected $52.5bn in 2032-33. And this is without incorporating the 15 per cent pay rise awarded to aged-care workers over the next two years.

Both Mr Corderoy and Mr Symondson said the latest data showed aged-care providers were not making huge profits.

“This report, together with the government’s own aged-care financial report, clearly shows that any notion providers are putting profit before care is wrong,” Mr Corderoy said. “Instead, it confirms that any surplus profits made in the past were due to the selling of aged-care facilities rather than their ongoing operation.”

Mr Symondson agreed. “There is a common myth that aged care as a sector is rolling in money and it absolutely could not be further from the truth. We have to wake up to the real truth, that most of those who are running aged-care facilities are doing it very tough.”

The other arm of federal government-funded aged care, in-home care – the preference of older Australians as they look to remain living in their own residence for as long as they can with services brought in – also has financial concerns, the StewartBrown report reveals.

Providers are seeing a declining surplus per client of just $3.56 a day, compared with $4.90 a year ago.

Mr Corderoy said the biggest concern in home care was the amount of government money allocated under packages that wasn’t being spent: about $2.4bn sitting in an account held by Services Australia.

“Utilisation of home-care packages now sits at just 83.7 per cent of the total available, and there is an average of $11,693 in unspent funds for every care recipient,” Mr Corderoy said.

“Home care has the opposite issue to residential care, as in home care there is more money being allocated by the government than is being spent on actual service delivery.”