Financial recovery? 7-in-10 aged care providers now operating at a profit

The aged care sector has shown notable financial improvement, with new government data revealing that 71.5% of residential aged care providers reported a profit in the second quarter of 2024-25, up nearly seven percentage points from the same period last year.

These figures, released in the Quarterly Financial Snapshot by the Department of Health, Disability and Ageing, also show a lift in care minute delivery and profitability per resident, pointing to improved sector stability under recent reform efforts.

Unfortunately, a similar uplift has not occurred for home care providers, with far slimmer profit margins and a slight decrease in the percentage of profitable providers being recorded. 

Daily profits on the rise 

• Residential aged care providers recorded an average net profit before tax (NPBT) of $20.69 per resident per day, a significant increase of $11.94 compared to the same quarter last year. 
• Earnings before interest, tax, depreciation and amortisation (EBITDA) rose to $45.77 per resident per day, up $3.44 from the previous year. 
• However, the median EBITDA margin dropped to 8.3%, suggesting increased costs have slightly offset the gains in revenue for some providers.
• Home care providers recorded an average NPBT of $5.83, an increase of just 54 cents, while the EBITDA rose to $6.22, growing by a similar margin of only 49 cents.

Overall, the aged sector reported $736.2 million in profits, representing a 143% increase year-on-year. This turnaround has been driven by a 10.3% increase in AN-ACC funding and an uplift in occupancy rates, which climbed to 89.7%.

The department noted that the result comes after a ‘modest decline in performance in quarter 1 2024-25’ with the $0.7 billion increase in AN-ACC funding delivering the desired results.

Conversely, growth in operating expenses was driven by higher labour costs (increased wages for direct care staff) and increased direct care staff time.

“At a sector level, it is expected that labour costs will continue to increase as more services start to meet their care minutes targets. Reporting in FRAACS 2022-23 shows care is fully funded, and providers are using care funding to cover losses in hotelling and accommodation results,” the snapshot added.

The department said provider accommodation and hotelling results must improve to strengthen profitability while ensuring care funding is spent on care delivery.

As for home care, the total YTD NPBT for the sector was a profit of $285.1 million, an increase of $45.2 million (18.8%) from the quarter 2 2023-24 result. A 19.1% growth in both revenue and expenses kept the NPBT margin consistent. 

Similar to residential care, labour costs were the driving force behind increased expenses. The increase in revenue was attributed to a 7.9% increase in claim days and increased utilisation of Home Care Packages from 80.7% in quarter 2 2023-24 to 85.8% in quarter 2 2024-25.

Care minutes near target but compliance varies

• From 1 October 2024, the mandatory average care minutes increased to 214.74 minutes per resident per day, including 43.81 minutes from a registered nurse. 
• While the sector came close, averaging 212.90 minutes, only 37.4% of services met both their care and RN targets, a drop from the previous quarter. 
• Notably, RN-delivered care (including enrolled nurses) exceeded the target, with an average of 45.88 minutes per resident per day.
• Not-for-profit providers continue to overachieve, recording an average of 214.80 minutes compared to 207.97 by for-profit providers. 

With the sector (on average) falling short of total care minute targets, the department said poor compliance will be addressed via funding changes from April 2026. Metropolitan providers are the most likely to be penalised. 

“Compliance rates for services in metropolitan areas (MM1) remain low, despite consistent feedback from the sector that workforce shortages are most acute in rural and remote areas,” the snapshot stated. 

“As reported in the previous QFS report, to boost care minutes compliance, from April 2026 non-specialised residential aged care services in MM1 areas will receive their full care minutes funding only if they meet their care minutes targets in quarter 2 2025-26 (October to December 2025). 

“This change is not intended to reduce funding. Instead, it is intended to make sure providers meet their care minutes targets, ensuring better care for residents. It will also mean the Government is not paying for care minutes that are not being delivered.”

Government highlights bed write-offs 

The department highlighted the impact of bed license write-off expenses on residential care NPBT. This has played a larger part in YTD NPBT results as the government determined that residential aged care places will be directly assigned to individuals. 

In the QFS quarter 4 2023-24 report, providers reported that they had written off $683.5 million in bed licenses in 2023-24, resulting in a balance of $313.3 million to amortise in 2024-25.

Meanwhile, the YTD quarter 2 2024-25 results show providers have written off approximately $27.3 million. $60 million is left to amortise in the remaining quarters. 

“The difference between the amount left to amortise in this QFS and previously reported figures is likely to be due to providers making additional end-of-year adjustments that were not captured in the QFS quarter 4 report,” the department said.

“Of the remaining value, for-profits have approximately $53.3 million remaining and not-for-profit providers have approximately $6.7 million remaining. 

“The department expects these adjustments will have only a small impact on the financial results for the remainder of 2024-25. The impacts are to providers’ balance sheets (decreasing net assets). There will be no impact to recurrent income and expenses.”

What this means for providers

The snapshot confirms that recent funding increases and structural reforms, including AN-ACC indexation, changes to care minute obligations, and wage decisions, are having measurable financial impacts. However, challenges remain, particularly in achieving consistent compliance with care delivery targets.

For aged care executives and boards, these results offer a valuable benchmark and signal the importance of continuous operational improvement, particularly in areas like workforce planning, cost control, and care quality delivery.

As the sector prepares for the implementation of the new Aged Care Act and Support at Home reforms in November, financial transparency and performance benchmarking will be essential in navigating the changing landscape.