The financial state of aged care
Not enough money for care: Another area where there are widely different views is the financial viability and the financial state of the industry.
The sections of the public that do look at what is happening in aged care are well aware that the industry is complaining about not having enough money to employ nurses, while at the same time, companies are making large profits and analysts are advising investors to invest because of this.
This web page contrasts:
- the claims by the industry that it needs more funding, and
- the way responses by industry to failures in care frequently switch the issue to funding and suggest that is responsible;
- claims from analysts that the sector is booming and large profits are being made;
- documents and assessments that show that:
- profits have increased by 159%, ($4.14 to $10.71 per resident per day);
- bonds have increased by an average $37,000;
- the bonds held by providers have jumped by $3.3 billion to $20 billion and this is likely to increase rapidly;
- government is allowing providers to game the system by admitting a greater proportion of wealthy residents than the regulations allow.
At the same time there are:
- ongoing concerns about the standards of care much of which is attributed to staffing issues;
- absense of data about staffing levels but indirect evidence suggesting it may be as low as 1.6 hours per person per day;
- findings that while there has been some increase in the numbers of personal care assistants, this has been at the expense of skilled nurses;
- many are part time and would like more work;
- large amounts of time is spent in administration rather than care, particularly by skilled nurses;
- large numbers of newly qualified Australian nurses are looking for work;
- instead, overseas carers on temporary visas are being employed;
- many are receiving suboptimal training by shonky online courses.
The largest costs of care is staff salaries. There is concern that the booming profitability is a consequence of cost cutting, primarily of staff. The large increase in funding, much of it paid by individuals, is fuelling the profitable market and driving consolidation. Little if any, seems to be going to care.
The only sensible way to resolve this is to get something like the Community Aged Care hub working in the sector monitoring care and collecting financiual and outcome data. Until then, we should not be throwing more money at a system that is not using that money to improve care. Its far too costly.
The US experience should tell us that an unregulated free market is by far the most expensive and inefficient mechanism for providing care. While boasting about offering choice, it compromises it. We seem to be rushing down the same path.
Aged care providers looking for more money
Aged care providers continually cry poor and never have enough money.
Industry asking for more funding
The Combined Pensioners and Superannuants Association have been particularly critical:
A new report has found aged care in Australia is in crisis and will be unable to meet future demands.
The Access Economics report found the system is plagued by staffing and bed shortages and is crumbling under financial pressures.
Source: Aged care in crisis, report finds - ABC News, 15 Sep 2010
"Every lead-up to the Federal Budget is the same for aged care providers: an opportunity to cry poor", said CPSA Policy Coordinator Paul Versteege in response to a call by the National Aged Care Alliance for urgent action in the Sydney area.
Source: Pensioners slam misleading numbers put out today by aged care sector CPSA, 4 Apr 2012
Aged and Community Services Australia spokesman Jxxx Kxxxx says banned visits are relatively rare but are a sign the industry needs help.
"This is a stressed system, and without an injection of new dollars into this system we will continue to have these sorts of stories," he said.
Source: Relatives turned away from aged care homes after complaining about standards - ABC News, 22 May 2013
ACSA CEO Adjunct Professor Jxxx Kxxxx expressed his deep concern and apologies to the residents and families involved.
He stressed the need for a substantial injection of funding to deliver high quality care and urged the government to move quickly to introduce its Living Longer, Living Better reforms, cutting the 10-year timeframe by half.
LASA (For-Profit group) CEO Pxxxxxk Rxxd said the program had revealed what industry had known for some time, that there is a critical workforce shortage, recruitment and retention is difficult and government funding does not match care needs.
He said the government’s focus on regulatory compliance rather than quality clinical care had to change.
Source: Aged Care Under Fire Australian Ageing Agenda, 16 Jul 2013
“Industry responses to Lateline’s coverage - - - and that the aged care system needs more funding from Government.
“The first report by the Aged Care Financing Authority (ACFA) turns this second assertion on its head by reporting that average profit margins for aged care facilities are 12 per cent.
“This shows that aged care is a very healthy industry financially, while the health and well-being of residents is being left at the wayside by some providers.
Source: Aged care operators making a mint out of poor care CPSA, 22 Jul 2013
Whenever providers have to confront failures in care, they turn it around to the need for more money or blame government for the problems. In 2015, when they have received a massive boost in bonds and additional funding via larger contributions from consumers themselves, the industry is still complaining and asking for more handouts.
The first quote is from the response of the industry to serious allegations about the services provided by a Queensland not-for-profit:
“There is complexity in the delivery of any human service provision, but even more so when caring for our most vulnerable, older Australians. For a number of years LASA has advocated that government funding does not meet the demonstrated care needs of older Australians," he says.
“Funding is not the only issue, nor do we use it as a scapegoat for allegations of serious neglect and breaches of standards that ensure the safety and wellbeing of residents.
“When government funding does not meet the care that is deemed necessary for the individual it is clearly not a position that can be sustained. LASA is committed to working with stakeholders and government as the voice of industry to address what is simply a critical area of essential human services policy that requires a more constructive focus from policy makers."
Source: Aged care abuse allegations 'unfortunate' Agedcareguide.com.au, Feb 2015
The federal government has been accused of being poorly advised on and unresponsive to the aged care sector's financial pressures by a sector advocate.
The economic complaint, made by Leading Age Services Australia Victoria follows the government's new Aged Care Subsidies and Supplements payment rates which came into effect on 1 July last week, indexing payments to a 1.3 per cent rise this year.
Mr Carr said this year’s indexation increase does not even come close to what the sector needs.
“Aged care is oversubscribed, undersupplied and understaffed and to add salt to injury it seems our ageing Australia is poorly represented,” Mr Carr said.
Mr Carr said consecutive federal budgets have ripped $700 million from aged care providers while leaving the cost burden of care on the industry and our seniors.
Source: Is the gov out of touch with aged care? Hospital and Aged Care, 6 Jul 2015 (Link no longer works)
“Current funding levels are one-third of what is needed for providers to keep up with rising costs, let alone expand their services to meet rapidly growing demand with 2000 Australians turning 65 years every week.”
“Although we have seen some increases to aged care funding, its value is completely outstripped by the true costs of care. The impact of this affects everyone – age service providers, staff, people receiving aged care services and their families,” Rxxd said.
“Consumer co-payments should not be an opportunity for government to starve the industry or shirk its responsibility to fund aged care properly,” Rxxd said.
Source: Real aged care costs are three times estimates Transforming the Nation’s Healthcare, 7 Jul 2015
The member for Indi told Federal Parliament last week that changes to the Aged Care Act that came into place last year are robbing the service of much needed funding.
The multi-purpose service is now 18 per cent worse off when it comes to subsidies for high care patients and has lost almost two-thirds of its funding from the previous model for low care residents.
Source: Health funding threat Alpine Observer, 23 Sep 2015
But some are very profitable
Despite the claims of underfunding, it is clear that many are making significant profits.
A very profitable industry
Plenty of money for consolidation
Analysts have been increasingly glowing about the income the companies are generating, the opportunities for entrepreneurs and the prospects on the share market. When banks talk about performance, they are talking about money and not care. They are interested in things that show that the industry is making money or growing and investing with the prospect of doing so. The NAB described the sector as a strong performer and this was before the Living Longer Living Better additional funding. The financial boom in the sector that started in 2013 is addressed in depth on the Aged Care Marketplace section of this website.
Since 2008, the healthcare sector has been one of the strongest performing sectors in the Australian economy, a source of growth and strong job creation.
Source: Insights: Healthcare, Aged Care and Retirement Care - National Australia Bank, Dec 2012 (Link broken)
A few reminders
- Aged care the place to be, says Deutsche Bank - The Australian, 28 Jan 2015 (Paywall)
- Age of change as big players expand in aged care sector Sydney Morning Herald, 24 June 2015
- 3 ways to profit from the ageing population The Motley Fool 9 March 2016
Citizens who have looked feel betrayed. We are all vitally affected, but the information we need to sort out these contradictions is all in confidence and behind closed doors. That our concern is justified is revealed in a number of reports and surveys. We have to search to find government and industry reports.
Annual survey of nursing home profitability
Crikey online news, obtained a copy of this report prepared by Bentleys Chartered Accountants. Crikey reported that the industry itself knows that it has increased its profits by 159% while at the same time, the time spent actually caring by registered nurses decreased and that by PCA's increased.
The figures given for the hours of care are unclear because it is not clear what the percentage refers to. If the figures reflect all of the care given, then it looks as if residents are getting about 1.6 hours of care each per day. If this is so, then it raises the issue of what these staff are doing with the other 48% of their time. If on the other hand the percentage indicates that 52% of care is given by these staff, then we need to ask who is giving the remaining 48% of care and what training have they had. In the latter situation we can calculate that residents are getting 3 hours of care per day.
This can be contrasted with the 4.5 hours recommended in the USA and the findings there that 4.1 hours was the minimum below which harm to the residents was likely - and that below 2.9 hrs most residents needlessly suffer harm. Note that the figures for Australia are hypothesis based on the figures available in the Crikey article. Even if the correct figure is 3 hours then it suggests that a little under half will be providing below 2.9 hrs of care per resident per day nd so placing most of the residents in these facilities at risk of harm. Until now, this information has been concealed from us and even now this is a leaked document.
- - shows that net profits jumped 159% last year, from $4.14 to $10.71 per resident per day
- - - the time spent on care by registered nurses, which fell from 5.9 hours per patient per fortnight in 2004, comprising 17% of total care staff hours, to 5.2 hours or 13% of total hours in 2014, while the amount of time spent by Personal Care Assistants (PCAs) jumped from 11.4 hours in 2004 comprising 31% of total care staff hours, to 16.8 hours or 39% of total hours in 2014.
Source: Profits rise, quality called into question in aged-care industry - Crikey, 15 Jan 2015
The report also revealed that only 46% of daily operating revenue was spent on nursing and care in the average nursing home. The most profitable 25% of nursing homes spent less, only 40%.
The Sydney Morning Herald obtained a copy of the confidential Bentley Report a year later and published in January 2016. Profits had increased another 40%. Time spent on care decreased by another 7%.
The profits of aged care homes surged 40 per cent in the past year as operators cut hours of nursing care while claiming higher payments - - - -
The earnings boom in the sector comes after the government introduced widespread reforms of aged care in 2014, including deregulating fees and lifting restrictions on the accommodation bond that nursing homes can levy on residents.
- - - - average profit before interest and tax increasing from $4497 per resident per annum in 2014 to $6278 in 2015.
- - - - - refundable accommodation deposit – also rose by 40 per cent – from $154,116 to $217,839.
Yet while nursing homes report they are looking after more needy residents, the time spent caring for them declined by 7 per cent over the past year.
In 2015, hours by care staff (nurses, care assistants and therapists) fell from 42.71 hours per fortnight to 39.80 hours per fortnight.
Source: Nursing home profits soar as patient care declines Sydney Morning Herald 1 Jan 2016
More money from bonds
CPSA have looked at the figures for bonds. By making both low and high care residents pay bonds and increasing the size of the bonds and accommodation payments “at the rate the market would bear” the government gave the industry a massive boost to stimulate growth and provide better care. Average bonds increased by $37,000.
Providers who ignore the requirements that 40% of residents must be lower paying concessional payers (supplemented by government) are able to charge higher bonds and accommodation fees. Government is not prosecuting them for this.
- Nursing home bonanza CPSA 1 Oct 2015
The Aged Care Financial Authority (ACFA) confirms this
The ACFA has revealed that these changes have added $3.3 billion to the bond pool increasing it to “almost $20 billion” They indicated to a LASA conference that “Further growth in the amount of bonds was almost certain given only a third of residents had entered the system since 1 July and were therefore affected by the new payment arrangements.”
The report on the conference said '“Ms O’Grady said that for these new residents coming into the system, comparisons of their payment options against what they would have been under the old regime were “irrelevant and frankly not constructive” yet a number of financial planners, providers and assessors were “tinging their communications with those perspective residents with comparisons which were of no relevance.”'
Why this was not relevant was not explained. I would have thought that these increased charges would be very relevant for residents and families. They would like to know where the extra $37,000 in bond money and/or accommodation fees they are paying (that fellow residents who entered a year earlier have not paid) is going and what the benefits for them will be. This will be especially so given the concerns many have about the adequacy of staffing.
- Providers told to expect greater scrutiny over rising bonds Presentation to LASA Conference, Australian Ageing Agenda, 13 Oct 2015
The risks to funding using bonds
But a bonanza can be a threat. Some are more concerned about the risks bonds might pose for the industry when companies go under and the bonds are lost.
Some years ago the government claimed to have set up an industry fund that would refund the lost bonds when facilities collapsed. But this quietly lapsed and taxpayers have been refunding the bonds when collapsed businesses have spent the bonds. An article predicts that government will not continue to do this. Another study is quoted to claim that instead of making large profits the industry is losing money and many groups are threatened.
The article claims that the value of bonds “has risen 20 per cent – from $16.7 billion to more than $20 billion – since new rules governing how consumers pay for their accommodation in aged care were introduced on 1 July last year”. They will “will further increase to $36 billion by 2025”. Government have guaranteed this, should nursing homes go under, and “ 20 per cent of providers were not generating a positive EBITDA”.
The article indicates that “With the move towards deregulation of aged care it was counter-intuitive that government would continue to provide free security for providers when it had less control over how they operated”. This would mean “shifting obligation from government back to the industry”. The study had found that “The profitability of the industry is declining,” and that “In 2014 the bottom quartile of providers represented a drain of over $400 million or 31 per cent of industry EBITDA.”
Under the current system, the Australian government would be heavily exposed if massive corporate collapses like those that have decimated the UK's aged care system were to occur.
- Providers could be charged new fee, as government liable for rising bonds - Australian Ageing Agenda Australian Ageing Agenda 20 April 2016
The industry responds to criticism
As revealed in the 19 Years of Care section, during late 2015 and in 2016 there were a series of critical articles claiming that money was being taken from care to fuel profits, principally by understaffing, and care was being compromised. The industry responded by using the larger and publicly available Stewart Brown Report to refute these claims.
The December 2015 Stewart Brown report was based on a larger sample. It showed that it was “business as usual with respect to the overall financial performance of the residential aged care sector”. But it also found that while the upper quartile were doing much better “then logically the results of those outside of the top quartile have declined.”
They commented that “many of these not‐for‐profit organisations are mission or faith based, and while there will often be a cost to the bottom line associated with mission- - -“. The report indicates that “they will need to improve financially if they are to remain viable”. If care goes with mission as seems likely, then it may be those with a mission that are less profitable. The report and the market could he unwittingly insisting that care be compromised in order to remain profitable and viable. It can also be concluded that some are doing this.
Without data on staffing or failures in care this is compatible with the criticism that those who reduce costs by spending less on care are doing well and those who have a mission and provide the care that is needed are not competitive and struggle to survive. This is the argument I have been making. The system rewards mediocrity and penalises good care.
- Beyond the headlines: a closer look at the sector’s finances Australian Ageing Agenda 13 Jan 2016
- Sector Results Briefing AGED CARE FINANCIAL PERFORMANCE SURVEY Stewart Brown 2015
- AGED CARE FINANCIAL PERFORMANCE SURVEY Stewart Brown Dec 2015
Saving money by reducing staff skills and numbers
Instead of money going to employ staff to provide the care needed money is saved by reducing staff skills and numbers.
Surveys of staffing
Trained nurses replaced by cheaper "lower skilled workers"
Cepar Population research: In Part 2 of a research report carried out for the Australian government by Cepar (Population Research) in February 2014.
The report indicates that "The (aged care) sector employs about 350k staff and has seen a growth in lower skilled workers in place of nurses. Care workers tend to be older" and that while nurses are often in demand "their shortage and higher cost has meant that lower skilled community care workers or (residential) personal care assistants make up a vast majority of the direct care workforce".
In other words, costs (read profit) is an important determinant of staff numbers and skills. If the share market is so attractive for investors, then is it because money is not spent on staff - particularly the skilled registered nurses?
The report found that, although it is more difficult to get qualified nurses at the current pay rates, the lower quality carers are mostly part time. Many have other part time work and would like to do more aged care.
The study revealed that "30 per cent of direct care workers in community care would like between one and ten more hours of work" and that rather than providing care "23 per cent of direct care workers in community care and 16 per cent in residential care spend less than a third of their time caring. Time spent caring differs by skill level since certified nurses take on more managerial roles".
So, there are carers looking for work and care staff are being used for administration rather than care. The nurses the residents need to closely supervise and help in providing their care do even more of this administration.
The nursing unions have been tracking what was happening and have surveyed nurses:
As many as 33 per cent of nurses and midwives who finished their training last year were jobless and many were employed as casuals and wanted more hours, said the report.
Only 15 per cent of graduate respondents had found secure employment in the industry.
The findings underpinned the Australian Nursing and Midwifery Federation's submission to a Senate inquiry into working visa schemes, raising concerns about employers accessing about 3000 migrant workers a year while graduates were knocked back.
More than 280 graduates in South Australia and 400 in Western Australia had also not found work, said the union's analysis, while just 600 out of 2500 graduates from Queensland were employed in the industry.
Graduates told of spending months unsuccessfully applying for dozens of positions in urban and remote areas after finishing their courses.
ACTU secretary Ged Kearney, formerly a registered nurse, said overseas workers on temporary visas were being hired ahead of graduates "because they can't speak up".
"They live and work under the threat of deportation," she said.
"Student nurses and midwives complete their degrees, they are often very passionate about this chosen career path, and yet when they try to find work, employers won't give them a chance ... they are told they lack experience, which is outrageous considering they are graduates."
Source: Nurse graduates 'locked out' of workforce as migrants get jobs Sydney Morning Herald, 7 Jun 2015
As part of some restructuring by FPCompany NewnameC “standardised rosters are being introduced” in order to “improve services to residents” and increase registered nurses hours. “Casual worker hours and shifts are being decreased, nursing jobs are being advertised online, stating 457 visa holders are welcome to apply”.
The union is concerned that the company is “cutting back hours for local workers, with a long term plan to flood in overseas 457 workers”. “There are FPCompany NewnameC job ads for 457 workers springing up all over the country”. The union’s concerns relate to the visa holders being “vulnerable to being overworked and taken advantage of” and “don't speak up when they (are) overworked or underpaid”.
- FPCompany NewnameC aged care introduces roster overhaul, job cuts and 457 nurses ABC radio Gippsland 24 June 2015.
The industry is reluctant to employ less experienced newly qualified trained nurses preferring to recruit overseas. The nurses union believes it is essential to do so so that they have the experience when the real aged care bulge starts in a few years time. There is “maldistribution of staff and little increase in productivity or clinical roles has created a fractious environment”’. The government had “ rejected a union push to alter the “blanket approach” that allows overseas-trained nurses to work in Australia". The union indicated that “the worst pay and conditions for nurses were in aged care, a growth industry, where employers sought 'a more compliant workforce' from overseas”.
- Nurses lured by holidays, pay hikes as shortages bite The Australian 17 Sept 2016 (Paywall)
Whilst companies are becoming ever more profitable, the number of skilled staff on whom the standards of care depend are being reduced and less well trained untrained staff are replacing them. Worse still, it is abundantly clear that the industry's claims that they can't find nursing staff to employ are hollow. Large numbers of nurses are being trained to a high Australian standard but they are not being employed, using a variety of excuses.
Instead, nurses whose standards of training we don't control are brought in on temporary visas and paid much less. But there is another issue. There are the level 3 and level 4 nursing staff, many of them from overseas being given qualifications by shonky training groups under contract with government.
The recent scandal exposed in this industry is described on the Contracting government services to the market web page. One company, Vocation Limited, has been forced to withdraw the qualifications of 1,100 students already out in the workplace because their training was inadequate. It is likely that many of these are on temporary visas.
We have to ask whether people are being brought in on temporary visas, given shonky training on computers without any practical experience and then employed at low rates.
Aged care is not the only sector where the exploitation of employees and customers has occured. The web page Failed markets and culturopathy describes multiple examples to show that this is the norm and not an exceptopn in those sectors where people are vulnerable. Employees on temporary visas and international students doing part time work have been targeted. We simply don't have the sort of information about staffing we need. We don't know how many international nurses brought in to care for residents are being similarly exploited, but we do need to consider it. In fact, we have almost no accurate information about staffing and this is a disgrace. The proposed hub would address this issue.
The elderly are trapped and powerless
The elderly and their families are trapped in a competitive system where those who extract more money from the funding system and spend less on the care of residents are the winners and are seen as successful and credible. They are powerless to do anything about it.
The problems of morale and skills
On the web page Conflicting Cultures I explained how the sort of conflicted aged care system we have destroys motivation and creates alienation. Not only do staff become disinterested and their emotions blunted, but they can lose patience and take out their frustrations by abusing residents or even playing cruel jokes and games on them.
The report below is prior to the additional funding in 2014, but this is an industry that the NAB report indicates has been making plenty of money since 2008 and strong job creation. But this is a sector where many question the claims by industry about the number and the skills of the people employed. The many reported failures in care over the last 19 years of supposed job creation have been blamed on inadequate staffing numbers and skills.
The study below done at the end of 2013 is representative - but this has been happening progressively for 19 years. While the NAB reports that the industry has been booming since 2008 there is much to suggest that numbers of staff are inadequate and that skills have fallen steadily over the years.
More than 2,250 people were allegedly assaulted in nursing homes in 2012-13, according to a federal government report, - - -
The number of alleged assaults rose by 14 per cent from 2011-12, despite the number of residents only increasing by 1.6 per cent in the same period.
The alleged assaults included 1878 instances of suspected unreasonable use of force, 349 cases of unlawful sexual contact and 29 as both.
More than 1,000 residents were reported missing from facilities without explanation in 2012-13, up 6.5 per cent from 2011-12.
Source: Increase in nursing home assaults fuels call for overhaul of aged care sector - Sydney Morning Herald, 30 Nov 2013
The problem of supervision
Rarely mentioned is the difficulty for trained staff when the care they are responsible for is being done by untrained staff or by agency staff whom they don't know.
There is a similar problem in acute hospitals when there are too many agency staff who are unfamiliar and need supervision. Hospitals examine the training, the experience and the records of staff before they appoint them. Agency's do business by filling vacancies and are far less discerning. The busy staff in charge in hospitals simply have to delegate and cannot supervise everything that is done. They cannot cope. Several of the avoidable complications that I have seen and at least one lawsuit were due to blunders by agency staff. The more agency staff, the greater the problem. I suspect that it is little different in nursing homes.
All of the available information that we have (and much of it the industry would rather we did not have) shows that both the extra money from government and the extra funds the elderly pay goes to top up the coffers of the companies to drive the market and consolidate it.
It has not gone to pay for better care by employing more and better trained nurses. Instead, the industry has been cutting trained nurses and when it employs staff at all levels it is employing the cheapest it can find regardless of the consequences for care.
We have been deceived
It was money we thought was provided to care for us - or so we were told. Companies issuing their reports on the first quarter after floating attribute their success in generating profits and floating successfully to the increased funding made available by the mid-2014 funding changes. These were made by government as a result of the recommendations of the Productivity Commission.
At the same time, these companies are treating sicker patients and spending less on staff. It is clear that the money we were persuaded was being provided to improve care and which we were being asked to pay more ourselves, was not intended for that at all.
It was actually being given to the sector to create the income stream that would allow the rapid consolidation and corporatisation of the sector in pursuit of the governments economic rationalist objectives. Neither the industry nor government seem to have been interested in improving care.
Are providers deliberately reducing staffing?
In the USA, the big commercial groups have been shown in court to have deliberately reduced staffing and not replaced vacancies on instructions from management. We have no means of finding out if staffing levels are being deliberately kept low and whether many staff, who should be providing care, are being used for administration because this saves on the costs of employing others to do this. The care of residents is getting much less nursing time that the number of people capable of providing it suggests. Creative people can always find ways of justifying this so that they can claim it is in the interests of the people being cared for.
The only way to resolve this to anyone's satisfaction is to have people both in the nursing home looking at care and at the financial data. This the proposed hub would do.
Postscript August 2016: A system in crisis
There have been multiple articles in 2016 highlighting the increasing number of problems in care in the face of rising profits. (see the 2013 to 2016 slider on the page "Scandal after Scandal")
In addition to cost cutting the big companies have been maximising their profits by exploiting every chink they could find in the porous funding system and the sharemarket has welcomed their efforts.
Doom and Gloom
The government finally had enough. In 2016 it not only threatened large fines but it abolished the funding in those areas where it considered funding was being rorted. Profits were markedly reduced and shareprices collapsed. The big companies responded by increasing the fees that residents had to pay in order to maintain their profits. They cried poor, blamed the government for poor care and mounted a public campaign to pressure the government to restore their funding.
There is information about the response to the reduced funding under the Update 11 June 2016 heading at the end of the slider Australian Private Equity Investors on the web page “Private Equity”
Share prices crumble and industry responds: Faced by a drop in funding, listed company’s share prices have plummeted. “One of the reasons why the listed operators are facing this challenging situation is they have to take a profit maximisation motive, which may require different priorities and approach”. Apparently “an increasing number of providers have been charging, or proposing to charge additional services fees, including 'capital refurbishment fees', 'asset replacement contributions' and similar other fees”. It seems that many of these are not legal.
When the government indicated that “several payments would not be permissible” and that “additional service fees charged by providers would not be supported by the Aged Care Act if the fee did not provide a direct benefit to the individual or the resident cannot take up or make use of the services”. This requirement that the care given actually be beneficial and be given before money was paid was enough to “smash confidence”. Share prices were falling and analysts “expect margin decline in fiscal 2018”.
- Aged care sector hit by govt fee changes SBS 5 SEP 2016
- More pain ahead for aged care operators: Morgan Stanley in "Live coverage of financial markets and companies, plus analysis and opinion" Australian Business Review 6 Sept 2016
- 5 things you need to know today Switzer Daily Business News 6 September 2016
A gloomy future: Some analysts see nothing but financial doom and gloom as they look into the future. They see massive need with “little evidence that sufficient supply can be created to meet the most optimistic forecasts of demand during the next decade” and “even if supply could be created to meet demand that there is insufficient appetite for this within the sector”. They see “the profitability of the industry is declining’ and “return on assets and equity continue to decline”.
- Aged Care Sustainability Review 2016 RSM Global 18 April 2016
- Mid-tier firm points to dire outlook for aged care SMSF Adviser 19 April 2016
The not-for-profits many of whom probably were putting money into care seem to be suffering and perhaps genuinely complaining. There are suggestions that these are the 20% that have difficulty in keeping afloat.
- Government clamps down on ACFI claims Australian Ageing Agenda, 18 Dec 2015
Some claim that these cuts and the changes to the funding will impact directly on the poor who will not be able to pay for what they need.
- Risk of a two-tier aged care system emerging after ACFI cuts: CEO Australian Ageing Agenda, 10 June 2016
There seems to be total confusion about what has been happening in the sector with some reports showing economic opportunities and others predicting armageddon. Much of this is self-serving, some of it media hype but it may just be selective perception in the way data is collected or reported. For many, aged care is all about money and the care itself is simply assumed to be there - even when it isn't. Not surprisingly the system has been rewarding those that should not be there and penalising those who should be.
It is likely that some were doing very well by maximising funding and by spending less on staffing and other services. Others who tried to play fair with the funding system and with the residents by providing care would be struggling financially. Those writing articles could place the emphasis on where it suited them.
The point though, is that the system is unpredictable and unstable and through no fault of their own the aged have been trapped in this. They are an incidental necessity and not an interest.
Responses: Aged care may well need more money, but it is clear that simply throwing more money at this failed system is not going to work. It did not work with aboriginal health where large sums of money were wasted. The same is likely to happen in aged care.
The proposed Community Aged Care Hub
The sensible way to make this market work is to fund aged care through groups in local communities with the knowledge, skills and the power to be an effective customer. Support them in getting the best care at the best value for the older members of their communities by supporting those who need support and helping those who have the resources to contribute. They would have the information and the power to make this market work. Funding individuals directly is a good idea but not in the way it is being done.