SaH prices will rise to cover lost revenue
Price increases in response to the capping of the care management fee and the removal of the package administration fee unlikely to impact participants, says Grant Corderoy.
Aged care financial benchmarking service StewartBrown’s March report has found home care providers are going to lose an estimated $5.91 per client per day in care management revenue when the 10 per cent care management cap is introduced and the package management fee is removed.
This means providers will need to build the $10.93 per client day into their service pricing.
Critically, StewartBrown noted that the direct margin on internal and sub-contracted service delivery will need to increase to 32.1 per cent from the current 11.9 per cent to maintain the current operating surplus of 3.8 per cent on revenue.
StewartBrown senior partner Grant Corderoy told Community Care Review providers currently charged a care management fee and a package management fee which could be up to 30 per cent of the total funding.
“Under the new arrangement, we’ve got capped at 10 per cent of the funding for care management and nothing for package management. So providers, and quite rightly, [need] to increase their pricing to cover the fact that they’re not getting those two fee revenues,” Mr Corderoy explained.
“And so effectively, I think that’s a better thing. It makes it more efficient and [provides] more clarity for participants, people receiving home care.
“But the narrative has got to be that this price increase is a result of government policy – which is to exclude the package management and to limit the care management – and therefore, it’s not providers just seeking to hike prices up.”
He said the actual cost to the home care participant is going to be pretty much the same, it’s just going to be coming out of a different bucket.
Efficiency gains and financial investibility
The home care sector also needs to be conscious of the need for financial investibility to encourage more providers to come in and grow the sector.
StewartBrown puts forward 9.5 per cent as an investable return in the March 2025 report.
“Now we’ve cautioned that that’s not just by providers increasing their prices, we also think there’s a significant amount of efficiency gains once SaH settles down,” he told CCR.
“Providers have also got to look at improving their efficiency. So it’s a combination of… increasing the prices to commensurate with the cost of providing the services, plus getting a higher degree of efficiency in the sector.”
Other findings
The report also noted home care operating results decreased to $3.13 per client day from $3.41 per client day in March 2024. However, revenue utilisation increased slightly since June 2024 to 86.7 per cent from 86.3 per cent. It was 84 per cent in March 2024.
The amount of unspent funds per client has also slightly increased, averaging $14,764 per client compared to $14,309 per client in March 2024.
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