Beyond the headline losses: what StewartBrown’s latest report says about aged care’s real fault lines

Australia’s aged care sector has grown used to bad financial news, but the latest StewartBrown Financial Performance Survey reveals something more complicated. The numbers look worse, yet the story behind them is even more unsettling.

Residential aged care posted an average operating deficit of $3.10 per bed day, almost double last year’s figure. More than half of all homes are running at a loss, and nearly a third are cash-flow negative. EBITDA averages $6,817 per bed per year, barely a third of what’s needed for reinvestment.

That much has been widely reported. What hasn’t been is how the underlying reforms and policy shifts are reshaping the fault lines of the sector.

Reform meets reality

StewartBrown’s modelling shows that from April 2026, facilities failing to reach 85 per cent of required care minutes could lose up to $33.41 per resident per day in funding. Even well-performing homes are likely to see an average $4 daily reduction once the new AN-ACC weightings take effect.

Providers have lifted average direct-care minutes to 217 per resident per day, surpassing the 215-minute target. Yet the more care they deliver, the less financially sustainable they become, with the direct-care margin falling to just 3.2 per cent of revenue.

Agency staffing has eased slightly to 4.6 per cent of minutes, but inflated hourly rates still eat through any funding gains.

Everyday living still bleeds cash

Even the long-awaited increase to the hotelling supplement from $15.60 to $22.15 per bed day will not pull everyday living services out of the red. StewartBrown calculates that facilities without “additional” or “extra” services will still lose around $2.89 per bed per day.

To plug the gap, more homes are charging for add-ons once considered part of basic care. The proportion offering paid extras has climbed from 18 per cent in FY22 to 42 per cent this year.

Geography still decides survival

The financial gap between metro and regional providers is widening. Facilities in small rural towns recorded an average deficit of $23.93 per bed day, compared with $15.17 in major cities.

Changes to AN-ACC weightings will further disadvantage higher-acuity and MM3 regional homes, where nearly 70 per cent of residents are expected to receive lower funding under the new formula.

Accommodation reform offers hope, but only on paper

From November 2025, providers will be allowed to retain 2 per cent of new RADs each year for up to five years. On a $750,000 RAD, that’s about $15,000 annually. Helpful, yes, but the gulf remains stark. The accommodation supplement for supported residents sits at $70.94 per day, while an equivalent DAP on a $650,000 room is more than twice that.

Without a serious review of the supplement, StewartBrown warns, homes with a high proportion of supported residents will remain structurally unviable.

Scale now dictates resilience

The report also underscores the growing advantage of large operators. Providers with 20 or more homes consistently outperformed their smaller peers, benefiting from purchasing power, lower overheads and diversified risk.

Investment still a distant goal

Even under optimistic modelling, the sector will not hit an “investable” return before 2030. StewartBrown forecasts average EBITDA between $11,800 and $13,400 per bed per annum by then, still well short of the $20,000–$22,000 benchmark considered necessary to fund redevelopment and growth.

In short, providers are working harder, spending more, and still falling further behind. The reforms may tidy up funding logic, but they risk cementing a new divide between the operators big enough to absorb change and those small enough to feel it first.