Nearly half of Australia’s residential aged care facilities are running at a loss

Of these, nearly 20 per cent have greater cash outgoings than incomings, meaning they have to reach into their own pockets or rely on support from their parent organisations and shareholders to remain financially viable.

The sector’s strain is even starker in the country’s outer regional, rural and remote facilities, where 67 per cent probably won’t break even, and 43 per cent cough up cash to keep the doors open.

The recent findings, published by accountancy firm Stewart Brown, come as no surprise to Canberra Aged Care Facility’s director Clayton Hutchinson. He forks out about $50,000 every month to keep more than 100 locals in a job, and more than 100 residents in their beds.

His family, which has owned and operated the facility for 32 years, was forced to sell its $2.8 million farm to fund the expense. Mr Hutchinson said the money would last up until the end of 2020, with aged care royal commissioners expected to release a final report on April 30 that year.

“We’re in a cafe now; if this was going backwards every month you would close and it would affect … the six people behind by the bar, but they could go and find another job,” he said.

“I have to keep the doors open, I can’t close.

“Thank God we had [the farm to sell] because otherwise, they [wouldn’t be].”

Facility bosses in the ACT say the sector’s viability has been spiralling downhill since about 2015. Despite government funding for residential aged care increasing from $132.5 million in the territory in 2015-16, to $144.4 million in 2017-18, it has been nowhere near enough to meet rising costs.

The federal government removed the payroll tax subsidy for “for-profit operators” on January 1, 2015, equating to $493,000 in costs for Jindalee Aged Care Residence in Narrabundah.

“No valid explanation by the government was provided,” Gary Johnson, managing director of Johnson Village Services, which has been the approved provider of Jindalee since 1996, said.

“Jindalee is currently operating at a small loss. Included … is building depreciation, employee entitlement increases and provisions for unpaid accounts.

“These expenses are non-cash, however, they accurately reflect expenses that will need to be met at some future date.”

Aged Care Minister Richard Colbeck said the government was investing record funding into aged care, having committed $5 billion over four years. A $467 million cash injection for residential care, in the form of a 9.5 per cent subsidy increase, was available until June 30.

Staffing costs generally increase at 3 per cent annually, while increases to the aged care subsidy, or “aged care funding instrument”, averaged at about 1.17 per cent in 2019 and were neutral for the 2017-18 financial year.

A potential replacement for the funding instrument, the Australian National Aged Care Classification, would be trialled in the coming months, Mr Colbeck said. It proposed using external assessors rather than providers to determine residents’ funding.

“Our government is committed to longer term funding reform and continues to consider options for a new residential funding model,” Mr Colbeck said.

The axing of additional supplements and new pressure on facilities to comply with rigorous documentation standards was leading some to overcharge clients to turn a profit, Mr Hutchinson said.

Canberra Aged Care Facility was in the process of clearing a notice of non-compliance, of which seven out of eight problems had been resolved.

Mr Hutchinson wouldn’t resort to “cutting corners” like other facilities but was frustrated by the current “process-driven” accreditation standards that they were assessed against, he said. He hoped the new Aged Care Quality Standards – which would come into effect on July 1 – would focus less on management systems, and more on residents themselves.

“We put a [senior registered nurse] on about three-and-a-half months ago [at the cost of about $90,000 a year] and it is purely in response to … the government regulating the industry into the ground,” he said.

“Ultimately, at the end of the day, it hasn’t put more people in front of our residents … all it has done is fulfilled this legislative requirement of regulatory compliance.”

A spokesman for the Aged Care Quality and Safety Commission said it took a risk-based approach to regulating aged care services informed by intelligence, complaints, consumer feedback and compliance history.

Assessors at each site gathered evidence relating to all the accreditation standards, and breaches of outcomes that posed a “serious risk” to residents were refereed to the Department of Health for possible regulatory action.

“If a provider has concerns about some aspect of the commission’s work or activities, they can raise their concerns with us via by telephone, email or post,” the spokesman said.

“In implementing each and all of its functions, the commission is committed to promoting continuous quality improvement by individual providers and across the aged care sector.”

Mr Colbeck said the new consumer-focused quality standards would make regulation simpler for providers working across multiple aged care services, and encourage them to continue to improve.

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