The financial performance of home care providers improved in 2014-15, with 72 per cent of providers recording a net profit, up 6 per cent on the previous year, according to the fourth annual Aged Care Financing Authority (ACFA) report.

The average Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) per package per annum was $2,235 compared with $1,973 in 2013-14, an increase of 13.3 per cent.

Total profits in the sector were around $150 million, up from $120 million on the previous financial year.

However, ACFA noted EBITDA varied considerably across the sector with the top quartile of providers performing substantially better than the rest of the home care sector. The average EBITDA per package for the top quartile was $4,357 compared with the next top quartile returning $1,912. A higher proportion of for-profit providers were present in the top performing quartile. (See chart below)

Providers that only operate one service were over-represented in the bottom performing quartile.

While last year’s annual report showed for-profit providers had achieved significantly higher average EBITDA per package than the not-for-profit sector, in 2014-15 performance of the sectors had converged, the report said.

The proportion of revenue that home care providers obtained through consumer fees has increased from 7 per cent in 2013-14 to 10 per cent in 2014-15.

Chart shows average provider profit per package. Source: Aged Care Financing Authority.
Chart shows average provider profit per package. Source: Aged Care Financing Authority.

Drop in package occupancy

Home care occupancy was 85.8 per cent in 2014-2015, down 2.6 per cent on the previous year, the report found. In particular, occupancy of Level 2 packages dropped noticeably during the year from 88.8 per cent to 85.2 per cent.

While Level 1 package occupancy increased significantly on the previous year to 62.1 per cent (up 13.4 per cent), 38 per cent of operational packages were still vacant.

ACFA noted that the take up of Level 1 and 2 home care packages may be affected by consumers preferring to access home support services due to lower fees in the program.

Occupancy rates varied across Australia, with Victoria and Tasmania reporting the highest rates of package occupancy and WA the most number of package vacancies.

From February next year, all unoccupied packages will be added to the national pool under the changes to home care.

The occupancy rate in home care is lower than in residential aged care, which sits at 92.4 per cent.

The ACFA report said it expected “some rationalisation” of providers could occur as the sector moved to a more competitive home care environment.

“A portion of that rationalisation is likely to involve strategic alliances and mergers between not-for-profit providers who will continue to pursue their missions in the communities that they currently serve. A greater involvement by for-profit providers is also expected to emerge,” the report said.

Impact of CDC

Commenting on the transition to consumer directed care packages, ACFA acknowledged the issue of unspent package funds, which has received recent attention within the sector.

Data collected by accounting firm StewartBrown has indicated that unspent funds are, on average, over 10 per cent of the value of the package. “StewartBrown has also seen that some consumers are choosing to spend their built-up funds on one-off capital items or services that offer little or in some cases no margin to providers,” ACFA said.

Home and community care (HACC) services

The number of Commonwealth HACC providers declined slightly from 1,110 providers in 2013-2014 to 1,084 in 2014-15. Three-quarters of HACC providers were not-for-profit and 18 per cent government owned. The number of Western Australian and Victorian HACC providers also dropped from 566 to 544, indicating some consolidation in the sector.

The most popular service types under the home support programs in 2014-2015 were domestic assistance, centre-based respite, nursing and social support.

Read the fourth report on the Funding and Financing of the Aged Care sector in full here.

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1 Comment

  1. When profits are up, that means the care is down or non existent. Aged care providers shouldn’t be driven by money but they are. Not one does it out of the kindness of their heart.. Shame.

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