In a Nutshell – Uncharted Waters

Published on 15 March 2019

Just when the sector was looking to recover from a period of funding cuts and regulatory scrutiny, the announcement of the Royal Commission into Aged Care Quality & Safety (Royal Commission) has brought a new wave of uncertainty.

Despite this, the three listed providers continue to demonstrate a strong commitment to navigate these uncharted waters, with new homes opening and a pipeline of greenfield and brownfield development opportunities. However, the ability for all providers across the sector to continue investing is not only being undermined by regulatory uncertainty, but also by rising costs of care, resource competition and changing accommodation payment preferences.

The financial performance of the listed providers was in line with expectations and trends being experienced across the sector. Recognising this, the Commonwealth has injected $320 million into residential aged care, but this is a one off injection and only results in an increase in revenue of approximately $1,800 per resident. Indexation to staffing costs alone are likely to exceed this.

The announcement of the Royal Commission and the upcoming Federal Election has brought aged care into the spotlight. Whilst this is welcomed by many, there is concern that it will delay any necessary and immediate change required. Numerous reviews and countless research projects have demonstrated the current structure is unsustainable and needs significant improvement.

Even with growing regulatory and public scrutiny, providers are preparing for the transition to the new, consumer focussed Aged Care Quality Standards. Early adopters and providers who have long operated in these models already recognise the benefits of providing consumer centric care. However, the debate around mandated staffing ratios has been renewed, which many stakeholders are concerned contradicts the movement away from traditional clinical care models. Our ongoing consultation with providers and international research has highlighted that whilst more resources are required, staff ratios do not reflect the variables and dynamic nature of residential aged care.

Read our report as we summarise the ASX listed aged care company’s HY 2019 results.