Aged care provider selling up homes ahead of major sector changes

A major aged care provider is putting their aged care facilities up for sale, following a raft of concerns around meeting new sector requirements.

The ABC has reported that the Royal Freemasons, a Victorian provider of aged care, home care and retirement living for over 152 years, is selling up shop due to upcoming Government changes – such as the new funding model for aged care, future staffing level requirements, and potential staff wage increases.

The Chief Executive Officer (CEO) of the Royal Freemasons, John Fogarty, who was only appointed to his position in May following sanctions at the Royal Freemasons Sale aged care facility, said that the Federal Government’s reform plan for aged care was going to make operating aged care facilities difficult – especially for smaller providers.

“You’ll find there’s fewer but larger providers with many, many homes who are the ones that are going to be able to, I guess, survive the increasing pressure that’s coming in the new funding arrangement which started on October 1,” he told the ABC.

“The requirement to have a certain number of care minutes and Registered Nurse care minutes coming in October next year is going to be very, very challenging for the industry.”

The Sale facility in Victoria has been experiencing issues, compounded by the COVID-19 pandemic, and experienced sanctions from the Aged Care Quality and Safety Commission (ACQSC) due to staffing issues, and had some of its funding cut.

These issues expressed by Mr Fogarty about unsustainable problems on the horizon for providers have been seen in data from the latest quarterly aged care financial report from Stewartbrown in June 2022, with an estimated two out of three (67%) nursing homes running at a loss.

Data collected from 1,313 homes in Australia uncovered that financial sustainability in the sector is still declining, with many providers in “critical financial sustainability” positions and losing an average of $14.67 per bed per day – which is a further decrease from the last projection of $8.43 average loss on a bed per day.

The report outlined that staffing levels in aged care are still a big concern, and coupled with a “complicated regulatory environment” has seen the financial performance of providers declining to an operating surplus of $3.98 per client per day.

While StewartBrown believes the funding model will make a difference for providers, it may take some time for that effect to be seen more broadly through the sector.

In this report, Stewartbrown experts said, “A major issue is that as the reforms are being implemented, there is a lag period of some years before they will positively impact financial performance. This is where the pressure point is likely to occur and short-term remedial assistance may be required.

“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. 

“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.”

If these issues are not addressed, StewartBrown believes more aged care facilities will be seen shutting their doors because they are unable to meet the new aged care reform requirements while still being profitable.