There is insufficient transparency about the use of funds in aged care, says a report on providers’ financial information.
It found large differences in the way in which individual aged care providers structure their operations and the costs they incur such as interest, management fees and rent.
In a statement, the Royal Commissioners into Aged Care Quality and Safety said these expense items can range from 0 per cent to 100 per cent of total expenses for different individual aged care providers.
To determine the financial state of play, the commission asked global professional services firm BDO to analyse data supplied by aged care providers to the Australian Department of Health.
BDO found 74 per cent of aged care providers were profitable, 13 per cent were unprofitable, 4 per cent were unprofitable but had positive cash flows and 9 per cent had the inverse.
Overall, just over half (53 per cent) of aged care providers were ‘viable’, while 8 per cent were ‘not viable’. The remainder fit into neither category because their viability hinged on them being able to secure additional capital.
The report held: “The current model favours more sophisticated providers who have the necessary financial acumen to manage diverse portfolios and capital structures. Such providers are likely to generate better risk adjusted returns from the sector than those who are less sophisticated.
“Theoretically, allowing providers the flexibility to utilise complex structures to maximise returns may imply that the Australian Government has to fund the sector less than it would otherwise have had to if such flexibility did not exist.
“On the other hand, a possible issue with this relatively complex model is that it arguably weakens the link between the drivers of return and the quality of aged care service provided by the provider.”
Shadow Minister for Ageing and Seniors Julie Collins was pushing for more transparency of funding.
“It’s not good enough that Australians are in the dark on how taxpayer money is spent,” Collins said.
The royal commission will further unpack funding, financing and prudential regulation of aged care in hearings scheduled for 14–22 September.Do you have an idea for a story?
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