Residential aged care providers face further financial pressure under the Federal Government’s planned 2.55% increase to the AN-ACC price, according to consultancy StewartBrown.
The Government announced on 2 September that the Australian National Aged Care Classification (AN-ACC) price will increase from $295.64 to $303.19 per resident per day from 1 October 2026.
However, StewartBrown’s latest analysis argues the increase does not reflect the current cost of delivering residential aged care and recommends an AN-ACC price of at least $310.91 per resident per day – a 5.17% increase.
The consultancy said the Government’s increase was below recent cost growth, with CPI at 3.8% in the year to July, the Wage Price Index for health employees at 3.9% and the national wage decision delivering a 4.75% increase from 1 July.
StewartBrown’s own financial performance data shows direct care costs, including an allocation of administration overheads, increased by 9.5% in the nine months to March 2026 compared with FY25.
While StewartBrown considers the Independent Health and Aged Care Pricing Authority’s (IHACPA) methodology sound in principle, it argues the underlying cost base is outdated.
The methodology relies primarily on FY24 data, which StewartBrown says no longer reflects the operating environment following the introduction of the new Aged Care Act, strengthened Quality Standards and increased reporting obligations.
The consultancy recalculated the AN-ACC price using its March 2026 quarter-to-date cost data, applying the same broad methodology used by IHACPA.
“Its modelling produced a recommended price of $310.91, compared with IHACPA’s $303.19 – a difference of $7.72 per resident per day.”
StewartBrown also argues the AN-ACC price should include an appropriate margin to support investment in innovation, staffing above three-star average levels, different service delivery models, regional considerations and regulatory requirements.
The financial sustainability issue is already significant. In the nine months to 31 March 2026, 62% of homes in the StewartBrown survey recorded an operating loss, while 35% recorded an EBITDA loss.
StewartBrown expects those figures to deteriorate further if the current 2.55% AN-ACC increase remains unchanged.
Hotelling supplement also falls short
StewartBrown has also called for an increase in the Government’s Hotelling Supplement, which is currently $22.15 per bed day.
The supplement is intended to help cover the cost of everyday living services including food, cleaning, laundry and utilities.
StewartBrown argues the current methodology is distorted because revenue from additional and extra services (Higher Everyday Living Fees – HELF) is included when calculating the cost gap.
This means homes that do not charge HELF may not recover the full cost of providing core everyday living services.
Based on its March 2026 data, StewartBrown calculated an $8.52 per bed day gap for homes not charging additional or extra service fees in the standalone quarter, rising to $11.18 across the nine months to March.
It recommends increasing the Hotelling Supplement to at least $27.96 per day.
Regional providers under greater pressure
Regionality is another area of concern.
StewartBrown’s March quarter data shows everyday living margins declining progressively across metropolitan and regional classifications, from a $4.19 per bed day margin in MM1 to a $12.11 deficit in MM5.
After excluding revenue from additional and extra services, the gap ranges from $2.74 in MM1 to $13.97 in MM5.
StewartBrown is calling for a regional loading or top-up to recognise higher costs and the reduced ability of regional providers to generate HELF revenue.
The report argues the current funding settings do not create an environment that supports long-term financial sustainability, investment and quality care.
