Poor profits continue for home care providers

The profitability of home care services declined substantially over the past financial year, according to a new report.

The profitability of home care services declined substantially over the past financial year, according to a new report.

The second edition of Australia’s Aged Care Sector Report released last week – compiled by the UTS Ageing Research Collaborative and based on data collected by chartered accountancy firm StewartBrown – covers the full-year financial results for 2021-22.

Over the 12-month period, the profitability of home care services “declined substantially”. On average, services achieved an operating result of $3.42 per client per day, a fall of 38.7 per cent from $5.58 per client per day the previous year.

“If home care providers cannot maintain financial viability, they will exit the sector, leaving service gaps for consumers,” warn the report’s authors.

Source: UARC Australia’s Aged Care Sector Report

One of the main reasons for the decline in the profitability of home care providers is the fall in average revenue earned per client per day. In 2021-22, the average revenue per client day was $69.80 – 3.1 per cent lower than the $72.02 per client per day in 2020-21.

Noting that home care providers do not incur the same capital outlays as residential care providers, the persistently low profit margins in 20210-22 – just 4.1% – “represent an ongoing challenge,” say the researchers.

Unspent funds

Source: UARC Australia’s Aged Care Sector Report

The StewartBrown home care data captures the unspent funds held by contributing providers and Services Australia. The average value of unspent funds has continued to increase to $10,802 per package by June 2022.

“Given the necessary fixed cost outlays in providing home care services, such as equipment, vehicles and administrative overheads, the growing levels of unspent funds represent a potential threat to their financial viability.”

Unspent funds represent an “inefficient allocation of taxpayer monies,” say the researchers – particularly while there remains a long waiting list for home care packages. StewartBrown estimates that, at a sector level, the aggregate value of unspent funds is currently more than $2.1bn.

However, say the report’s authors, “The aim should not necessarily be to ensure that the packages allocated under current arrangements are fully spent, but rather that taxpayer funds are being allocated correctly to older Australians according to the program criteria and that providers can deliver the needed services in a viable manner.”

Sector redesign

In the 136-page report, the UARC researchers point to the major redesign of the Support at Home Program as an “important opportunity” to improve the home care sector.

“Looking forward,” say the report’s authors, “unification of four major in-home care programs provides an important opportunity to redesign services to meet older Australians’ needs while also reflecting the interests of providers and Australian taxpayers.”

Aged care providers must also come to grips with other reform initiatives, say the authors, such as home care fee caps, and the Fair Work Commission wage case outcome. “All of these matters will have both short-term and long-ranging impacts across the sector.”

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Tags: Australia's Aged Care Sector Repor, stewartbrown, UTS Ageing Research Collaborative,

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