Expenses continue to impact providers, reports StewartBrown

StewartBrown has released its December 2023 Aged Care Financial Performance Survey, recapping an impactful six-month period that saw notable changes to funding and expenses for aged care providers. 

The Report stated that the Federal Government has continued its positive commitment to implementing the much-needed reform agenda, which included important financial boosts to the sector throughout 2023. 

However, the Survey for the six months ending December 2023 revealed a decrease in operating results for residential aged care, while home care returned a marginal improvement.  

Key points

• The average operating result for residential aged care homes was a loss of $2.25 per bed day (pbd), a dramatic increase from the $15.98 pbd loss recorded in December ‘22
• Short-term results bucked the positive trend, with an average loss of $764 per bed per annum down from the September ‘23 YTD operating surplus of $289 per bed per annum
• While there was a decrease in the agency usage of Enrolled Nurses (ENs) and personal care workers (PCWs), agency usage of Registered Nurses (RNs) increased as mandatory direct care minutes were implemented
• For the December ‘23 six-month period, 51.6% of aged care homes operated at a loss, compared to 63.1% in December ‘22; 31.4% operated at an EBITDA (cash loss, compared to 41.6% in December ‘22
• AN-ACC margins have decreased after an early grace period with no mandated care minutes, with everyday living and accommodation services resulting in significant losses

StewartBrown’s December ‘23 Financial Performance Survey Report covers a period of considerable change, with the introduction of an interim 15% pay rise for direct care workers, the AN-ACC price increase and requirements such as the 200 minutes of direct care and 24/7 RN coverage. 

On their own, each one would have a noted impact on the financial performance of aged care providers. Together, they have created hurdle after hurdle to overcome and adjust to. 

Yet there are plenty of long-term gains. As highlighted, the operating loss of $2.25 pbd was a $13.73 improvement compared to the previous year. While this result did not see the September ‘23 surplus maintained, it is a steady step forward. 

But as StewartBrown stated, October 1 ‘23 was when 200 direct care minutes requirements came into effect, placing additional pressure on providers to be compliant.

“Direct care staffing levels delivered to residents continued to increase in response to the 24/7 registered nurse requirement and the mandatory direct care minutes from 1 October 2023,” the Report said.

“On average, Survey participants recorded RN minutes of 37.23 per resident per day and total direct care minutes of 202.74 per resident per day for the standalone Dec-23 Quarter, compared to the 40 RN and 200 total direct care minutes targets respectively. This is an increase from the Sep-23 quarter average of 196.36 minutes including 36.12 RN minutes.”

Meeting the sector-wide requirement of 40 RN minutes per day appears to be one of the toughest remaining challenges. With 2.77 minutes to makeup, there has been an increasing reliance on agency RNs, which incurs additional costs. 

Unspent home care funds on the rise

Where the residential care sector can look forward to a greater sense of stability in 2024 – many reforms are in place and it understands what goals have to be achieved – StewartBrown said home care continues to operate with uncertainty. 

This is due to the limited information available ahead of the July 2025 Support at Home implementation date. Financial performance will likely change for home care providers over the next 24 months as Support at Home brings in a new funding model to maximise spend.

Currently, there is a surplus of $2.69 per client per day for home care, a 15 cent improvement on December ‘22. But revenue utilisation has decreased to 82.7% of available package funding and unspent funds increased to an average of $13,963 per care recipient.

As a result, an estimated $3.7 billion in unspent funds sits across Government and provider balances. The Aged Care Taskforce recognised this pool of unused funds as a necessary well to tap into for a growing cohort of consumers who want to age at home.

Accommodation and indirect care costs causing pain

Major ongoing expenses such as accommodation and indirect care will continue to hinder residential care providers despite the sector reporting an average $13.26 pbd direct care surplus.

“While AN-ACC funding of direct care has been a focus of funding reform, it is unlikely that Providers will be able to use this funding to increase their staff minutes as losses are still being incurred in indirect care and accommodation services. Additional funding sources are required for indirect care and accommodation to ensure that AN-ACC funding is spent only on direct care,” the Report said.

Even if labour costs do not significantly increase – StewartBrown predicted relative stability for Financial Year 2023-24 – indirect care and accommodation costs will result in a forecasted $3.24 pbd deficit for FY24.

StewartBrown said the lack of sufficient funding will restrict providers from channelling additional funds into different models of care and innovative care delivery solutions. A low level of profitability is also deterring increased investment, it concluded. 

The full Aged Care Financial Performance Survey (December 2023) can be viewed on StewartBrown’s website.