59 per cent of residential care homes operate at a loss – profitability is integral to investment and sustainability StewartBrown expert says

StewartBrown has released its September 2025 Aged Care Performance Survey Analysis, shedding light on trends in the sector. Months July to September 2025 were analysed in terms of key indicators of financial performance for residential aged care providers, and what was found has sector leadership feeling they are living in groundhog-day. What has come to the fore again, in the face of 59 per cent of residential aged care providers operating at a loss, has experts highlighting the immediate requirement to adjust key pricing, to bolster profit, to in turn bolster investment and sector sustainability. StewartBrown’s Grant Corderoy says that the sector needs an urgent rise in the AN-ACC margin and supplement price for residents with low means. The sector needs to support providers seeking to meet compliance and caring for the most vulnerable, and taking a financial hit in doing so.  

AN-ACC margin

StewartBrown’s analysis indicates that AN-ACC margins went from thin, $16.10 per bed per day leading up to the conclusion of the 2025 financial year, to razor thin, $11.84 per bed per day for the next quarter.

The group assesses that this margin will further contract as providers contest with multiple fronts of change. From resources needed to meet direct care minutes, and the subsequent increased staffing costs to comply with these target minutes, providers are under pressure. Further still is the financial pressure of facing a largely reduced AN-ACC subsidy if metropolitan facilities dip below required targets.

Experts assess the government’s compliance rigidity is inefficiently pressuring aged care facilities in metropolitan zones, as under the Modified Monash Model 1. StewartBrown reminds that unlike other models, those within metropolitan areas receive no basic care tariff loading allocation under the AN-ACC modelling.

Accommodation margin

The report also highlights that the accommodation margin has deteriorated. In the 2025 financial year, the loss was sitting at $12.05 per bed per day.

That figure has worsened by 6 per cent for the following quarter, sitting at $12.82 per bed per day.

Attracting investment

As the rate of needed bed builds to realised results continue to widen, that of 10,000 new beds a year, and actual build reaching just under a 1,000, experts reiterate their call for the need for investment.

According to StewartBrown and its report, the basic level of financial returns required to facilitate confident investment to keep pace with oncoming demand is around four times what is currently being met in the earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the sector. 

The group attests that the required EBITDA to secure the capital required to meet the 10,000 new beds a year sits between $20,000 to 22,000 per bed, or a basic threshold of 4 per cent return on new builds of $550,000.

As of September 2025, the sector’s managed EBITDA figure was calculated at $5,486 per bed.

Profitability is key

StewartBrown senior partner Grant Corderoy echoes the sentiments of many provider heads and business experts. In order to attract new investment and entrants into the aged care sector, profitability must be out front.

Speaking to Ageing Australia he sees levels of capital investing to be inexorably linked to confidence in returns, “[it] all comes around to the profitability”. He has reiterated his calls for the government to take immediate and firm action to raise the AN-ACC or direct care margin.

He says, “The AN-ACC margin needs to be sustainable, and higher and more achievable.”

“But the big one is the accommodation”, he says, lending his call to the hopes of many providers, that the accommodation pricing review will return findings that support the adjustment of supplementary pricing to support providers operating above a loss.

Highlighting the sentiments of fairness understood across the sector, those with financial means should contribute more. Corderoy notes that non-financially supported residents should pay “an appropriate price” for their bed in aged care, a view he named, “a general view within the sector at all levels.”

For supplementary and non-supported residents, the pricing levels are too low to meet market costs and financial viability. Corderoy shares, “we think the accommodation pricing is still too low.”

Trends

StewartBrown’s report looked at a significant sample group of the industry, at 1,205 aged care facilities across the nation, operating 101,146 beds, the figures are invaluable to enter into discussions between government and sector.

Under this context, with occupancy rates increasing 1.1 per cent since September 2024, to a 94.9 per cent occupancy level, the operating result of a loss of $7.14 per bed per day in the first quarter of the 2026 financial year is sobering for many analysts and provider heads.

Corderoy named the figures a “disappointment” compared to the $3.08 loss per bed per day in the 2025 financial year.

The group highlighted that through rising occupancy, and with fixed overhead costs being widely spread, there was an expectancy of figures to improve. Contrary to this trend normalcy, the AN-ACCC margin has been thinning.

Even though the group predicts sector occupancy rates will rise above 96 per cent for the next decade, economies of scale may not bring relief. This means systemic overhauls are urgently warranted.

Corderoy shares that thinning AN-ACC margins can be linked to the approach of Independent Health and Aged Care Pricing Authority’s “charter of not building in a margin”. He and other experts double-down on the need for further talks on what margins are appropriate for the sector. And these discussions must happen within the Department of Health, Disability and Ageing and the government for immediate effect.

Corderoy did note that the raised hoteling supplement of now $22.15 per bed per day, effective as of 20 September 2025, is likely to have a growing positive impact on the everyday living margin. From a loss of $7.13 per bed per day in 2025’s financial year, to $6.16 the next quarter, with the price rise to meet inflationary cost pressures, losses may be positively impacted further.

Operating at a loss

Corderoy shares that insight into the sector can and must come from the direct care margin for homes in metropolitan regions. The direct care margin – that of the modified Monash Model 1 – has decidedly deteriorated, from 52 per cent of facilities in September 2025 to 60 per cent 12 months later.

“IHACPA’s charter generally is obviously to support all geographic locations, and they’ve done that by putting an additional loading on MM2 down to MM7, particularly MM2 to MM5”, says Corderoy to Ageing Australia.

“MM6 and 7 also get some additional loading on top of that, and that was deliberate, and understandable.”

“I just feel though, that in the sense of balancing it, they’ve reduced it by giving no additional loading to MM1 and it’s put them out of kilter – and over 60 per cent of homes are actually in MM1.”

The figures are telling, in all other models except MM1, there was an improvement in facilities operating below profitability in the first quarter of the 2026 financial year as compared to twelve months prior.

Yet in the most stark of figures, 59 per cent of facilities across the country continue to maintain an operational loss. In pursuing a robust and sustainable sector, experts implore government and sector leaders to pursue significant measures to improve this percentage. 

As experts continue to weigh in, the need to change the narrative surrounding profitability continues. To meet the growing needs of seniors and sector industry, experts assess these discussions must be entered into by all government and sector leaders to collaboratively meet reform needs and acutely action solutions.