UARC report reveals varying cost of care delivery impacts financial viability

Financial viability and complete Registered Nursing coverage continue to be among the top challenges for aged care providers, according to the UTS Ageing Research Collaborative (UARC), which has just released the fourth edition of Australia’s Aged Care Sector Report.

The report is an independent analysis of aged care, and while it shows increased investments into the sector have helped many providers remain afloat, the diversity of needs and resources means there are still acute viability issues.

Key points

• Despite receiving almost $4 billion of additional Government funding since the 2019 financial year, the residential aged care sector has lost roughly $3.5 billion
• Aged care homes in rural towns are the most vulnerable to financial distress, losing an average of $43.86 per resident per day, compared to $14.40 for metropolitan homes
• Administration service costs have increased by 14.1% over the last year (2022-23) while direct care costs have also grown with 24/7 Registered Nurse (RN) requirements
• UARC modelling suggests that although providers do have RNs on-site and on duty 24/7, many are struggling to cover overnight shifts and meet the required coverage

Financial performance has particularly declined for the smallest operators and those in smaller markets, explained the report’s lead author, Dr Nicole Sutton.

“Homes experiencing viability issues are at greater risk of closure, and home closures in a non-metropolitan area can cause significant disruption for residents, families and local communities,” said Dr Sutton.

“Thus, improving the financial viability of rural homes is crucial in ensuring all older Australians can enjoy equitable access to local care services.”

Despite AN-ACC funding exceeding costs by an average of $1.58 per resident, per day, UARC modelling revealed substantial variation in AN-ACC funding outcomes. Homes with residents with less complex needs and lower classifications are struggling the most to cover direct care costs.

Additionally, policy changes over the last four years have prevented homes from building surplus and using funds from direct care services for everyday living and accommodation services. Now that providers have to use direct care funding purely for direct care the prospect of a break-even outcome is more likely unless additional revenue can be generated via extra services. 

Closing the gap on care minutes, RN coverage

UARC’s analysis shows that workforce issues are preventing many homes from meeting both total and RN service-level care minute targets with internal modelling indicating some homes are not meeting overnight coverage requirements. 

• Just 21.4% of homes are meeting both their total direct care and RN care minute targets
• Four out of five homes needed to increase their direct care staffing minutes for RNs before the care minute mandate came into effect in October 2023
• Only 45.6% of surveyed homes had average RN coverage across all morning, afternoon and overnight shifts
• Exemption-eligible homes failed to meet the 24/7 RN requirement, while 51.8% of homes were below the requirement as they could not provide complete overnight coverage

Meeting all requirements will also result in additional staffing expenditure, a burden felt the most by regional and rural providers. Dr Sutton said they are hampered by AN-ACC funding that does not account for higher staffing and resource expenses. 

For example, agency workers delivered 7.5% of direct care hours last financial year and the median hourly rate for an agency registered nurse was 30% higher in large rural towns compared to major cities.

“Under AN-ACC, homes in regional centres, large rural towns and medium rural towns attract the same rate of fixed (base) funding as those based in major cities, despite incurring higher costs of delivering care,” Dr Sutton said.

The UARC has recommended that the Independent Health and Aged Care Pricing Authority (IHACPA) refine the AN-ACC funding model to provide customised subsidy rates for different regions. They say this would allow funding to better align with the varying costs of care delivery across Australia, providing more tailored funding for locations where direct care is more expensive to provide. 

You can view the full Australia’s Aged Care Sector report here.