The Australian aged care sector is showing signs of financial recovery but continues to face significant challenges, according to the latest StewartBrown Aged Care Financial Performance Survey for the 2024 financial year.
The comprehensive report, which analysed data from over 1,200 aged care homes and 71,000 home care packages, reveals a complex picture of an industry in transition.
A key theme emerging from the report is the sector’s gradual improvement in financial performance, largely due to increased government funding, while grappling with rising costs and staffing shortages.
The average operating result for residential aged care homes improved significantly, with the operating loss decreasing from $16.54 per bed day in FY23 to $1.58 per bed day in FY24. This improvement is primarily attributed to the increase in the AN-ACC (Australian National Aged Care Classification) funding model.
However, the sector’s recovery remains fragile, with 51.3% of aged care homes still operating at a loss, though this is an improvement from 65.8% in the previous year. The report highlights that 28.2% of homes operated at an EBITDA loss, down from 44.4% in FY23.
Staffing continues to be a critical issue for the sector. The survey found that providers have made significant efforts to meet mandated direct care minute targets, with the average registered nurse minutes exceeding 40 and total direct care minutes surpassing 200 for the June 2024 quarter.
However, high agency usage, particularly for registered nurses, remains a concern. Agency RN costs accounted for 14.6% of total agency costs, with an average hourly rate of $128 compared to $85 for internal RNs.
The home care segment of the industry is facing its own set of challenges.
The operating result for home care packages decreased to $2.76 per client per day, down from $3.14 in FY23. Unspent funds continue to be a significant issue, with an average of $14,517 per client, totalling an estimated $4.1 billion across the sector.
Looking ahead, the sector is preparing for further reforms. The Australian Government introduced the Aged Care Bill 2024 to Parliament in September 2024, which includes funding reforms resulting from the Aged Care Taskforce Report. Key changes include increases in the AN-ACC starting price, changes to the National Weighted Activity Unit (NWAU) weightings, and adjustments to mandatory direct care minutes.
StewartBrown’s analysis suggests that while these reforms are likely to have a positive impact on the sector’s financial performance, challenges remain. The report notes that the current direct care margin is probably inadequate for providers to attain an above-average Star Rating for staffing minutes, which would require a significant increase in staff minutes beyond the current target.
The aged care sector’s journey towards financial sustainability and improved care quality is ongoing.
While the latest survey results show promising signs of recovery, they also highlight the need for continued reform and support to address persistent challenges in staffing, funding, and service delivery.
As the sector approaches the implementation of the new Aged Care Act in July 2025, providers, policymakers, and stakeholders will need to work collaboratively to ensure the long-term viability and quality of aged care services in Australia.
The coming years will be crucial in shaping the future of aged care in the country, with the success of ongoing reforms likely to determine the sector’s ability to meet the growing needs of Australia’s ageing population.
