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Aged care financial report card details record financial risk for sector

Chartered accountancy firm, StewartBrown, has revealed its latest Aged Care Financial Performance Survey for June 2020, outlining a record financial risk for the aged care sector, irrespective of the additional COVID-19 pressures.

​Compared to StewartBrown's last performance report from March​, there has been an increase of 64 percent of residential care homes operating at a loss in 2019-20. [Source: iStock]

Compared to their last performance report from March, which showed 58.3 percent of aged care homes were operating at a cash loss, the latest report shows this number has increased to 64 percent of residential care homes operating at a loss in 2019-20.

Additionally, the number of regional and remote aged care facilities that are operating at a loss has increased from 74 percent to 78 percent.

StewartBrown identified that residential care is still an urgent concern regarding financial viability and ongoing sustainability. 

The survey found that occupancy rates declined over the year, which is interrelated with the financial result.

Additionally, the disparity between subsidy Commonwealth Own Purpose Expenses (COPE) increases and staff cost increases is considered another viability concern for the sector.

Similar to the recently proposed reform from the Royal Commission into Aged Care Quality and Safety, StewartBrown believes that the Basic Daily Fee needs to be raised, as the cost of providing essential services exceeds the revenue of the Basic Daily Fee by an average of $9.11 per resident per day. 

This deficit doesn't include any allowance for administration costs, which, if included, would raise the deficit to $22.02 per resident per day.

StewartBrown says, "The survey for the 12 month period ending June 2020 shows a significant decline in the underlying financial performance and sustainability of the residential aged care sector. The average operating results for homes in all geographic sectors was an operating loss before (and after) any COVID-19 funding support. 

"Additional specific targeted funding and structural reform around accommodation revenue needs to be implemented to avoid further deterioration in the results of aged care homes and potential increase in provider failures."

The aged care industry has expressed concern over the report and how the recently announced Government funding from the Federal Budget won't be able to cover the added COVID-19 financial burden.

Leading Age Services Australia (LASA), industry peak body, believes that the report figures expose the duress aged care homes are currently enduring to deliver care to older Australians.

Chief Executive Officer (CEO) of LASA, Sean Rooney, adds that the figures do not include the additional COVID-19 costs that would be affecting the sector.

"This highlights that, regardless of the Government’s funding to help combat the pandemic, there still remains a gaping hole between the rising costs of delivering care and funds provided to cover these costs," says Mr Rooney.

"The report reflects what was raised at the Aged Care Royal Commission hearings last month, with records showing increasing pressure on aged care homes since 2016, when funding cuts were enacted in the Federal Budget.

"The Royal Commission heard that funding cuts put aged care homes in an ‘impossible position’, having to balance financial viability alongside delivering the care that is needed. Costs have risen 21 percent since 2016 but [the Aged Care Funding Instrument (ACFI)] rates have only gone up 11 percent."

According to peak body for private aged care, the Aged Care Guild, the Government needs to implement immediate additional support before May 2021, when the Federal Government aims to respond to the Royal Commission's Final Report.

Interim CEO of the Guild, Nicholas Brown, says there needs to be greater support to lay the foundation for necessary sector reform.

"A commitment from the Government would be a down-payment on the future of aged care," says Mr Brown.  

"First and foremost, aged care needs to be about supporting senior Australians. However, it can and should be an important part of rebuilding Australia’s economy, particularly when it comes to the workforce and employing and retaining much-needed staff.

"The aged care sector is committed to the necessary reform, but we cannot do it alone. Long-term change requires long-term commitment. This means taking lessons learnt from the Royal Commission and COVID-19 to develop a long-term and consumer-centred plan for reform, to ensure senior Australians receive the quality of care they need and deserve."

This StewartBrown survey received data from 1,190 residential aged care homes, 187 approved provider organisations and 44,647 Home Care Packages.

To view the full StewartBrown Aged Care Financial Performance Survey, visit their website.


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