Provider profitability stabilises but residential care outstrips home care return 

Year-on-year comparisons show much of the aged care sector has found financial stability following impactful Government reforms with the Quarter 1 2023-24 Quarterly Financial Snapshot one of the strongest in recent years.

There’s also welcomed news as the average care minute total edges closer towards Government targets, but that positivity is paired with the continued loss of aged care providers.

Key points

• Residential care providers turned a $10.36 net profit before tax in Q1 2023-24, an improvement of $38.25 from the previous year
• Home care providers have achieved slimmer gains with a 71c improvement resulting in a $5.68 net profit before tax 
• There has been strong growth (30.2 percentage points) in the percentage of profitable residential care providers, while home care profitability has dropped slightly (2.2)
• Almost 50 residential care providers have exited the sector since September 30, 2022, with just 11 entering the market
• Care minute totals and Registered Nurse (RN) minutes increased to 196 and 38 minutes per resident per day, respectively, compared to Q4 2022-23
• From here on, each QFS will primarily compare results with the previous financial year’s corresponding quarter, rather than just the previous quarter

Contrasting form for residential and home care providers

Improvement in net profit before tax ($38.25) and earnings before interest, tax, depreciation and amortisation (EBITDA, $39.53) is undoubtedly welcomed by aged care providers, however, home care operators have not seen similar gains over the 12 months between Q1 2022-23 and Q1 2023-24.

Where residential care providers returned a slim daily profit of $10.36 per resident, home care providers managed a more marginal profit of $5.68 per client per day. 

There are several contributing factors, with the Government’s focus on residential care reform resulting in positive gains for providers. Examples include increases to the Australian National Aged Care Classification (AN-ACC) price and the 15% aged care award wage increase.

Care funding allocated to providers per occupied bed day (OBD) was an average of $255.11, almost $40 more than Q4 2022-23. 

While Home Care Package (HCP) providers received an 11.8% subsidy rate increase in 2023, home care reform has not injected the same amount of funding. Nor was it required to the same extent as residential care, where fewer providers are profitable.

• Almost 70% of for-profit residential care providers turned a profit in Q1 2023-24, compared to roughly 61% of not-for-profit providers
• Meanwhile, 83% of for-profit home care providers turned a profit, as did 71% of not-for-profit providers
• The percentage of providers with a positive EBITDA was more evenly distributed (81% of residential care providers compared to 76% of home care providers

Care minutes closing in on targets

Elsewhere, there was a crucial closing of the gap in meeting care minute totals. In Q1 2023-24, sector-level average care minutes increased by two minutes on Q4 2022-23, totalling 196 minutes per resident per day, including 38 minutes for RNs.

If similar trends to data sourced by Mirus Australia occur, there is a risk of total care minutes dropping in Q2 due to lower workforce numbers across the Christmas period. Regardless, the Department of Health and Aged Care said it remains confident that care minutes will continue to increase when data from October 1 2023 is tallied – the date from when care minute targets became mandatory.

Additionally, labour costs increased alongside care minutes as providers spent more on wages to meet their care minute requirements. This was paired with an increase in worker hourly rates – much of which was fully funded by the Government – and a decrease in reliance on agency staff.

You can visit the Department of Health and Aged Care’s website to view the Quarterly Financial Snapshot in full.