How aged care providers can increase revenue

Providers can move to raise their revenue by optimising facility design, according to an aged care advisory firm.

StewartBrown's latest review into the sector estimated that up to 50 residential care homes could be closing their doors in the next 18 months because they can no longer afford it.

Just over one-third of aged care homes made a profit last year, according to federal data.

During the first quarter of 2023, residential aged care providers had a collective net loss of $465.3m before tax, equating to a $27.90 loss per resident per day.

StewardBrown's senior partner Grant Corderoy said changing a facility's design and optimising staff costs could help to maximise revenue.

"The newer homes do better than the older, more traditional ones," Corduroy said.

"They are often designed so that the movement of staff around the home and of services is much more efficient.

"Some of the old aged care homes have long corridors, so the staff have to walk up and down the corridors to visit the residents or move services around."

Corduroy's recommendations are based on differences between the top aged care providers who were 'financially successful' compared to those facing financial losses.

Traditionally, residential care homes are built similarly to institutions and clinical settings.

In 2021, the Royal Commission's final report called for an enhanced focus on residents' well-being in the overall design of an aged care home.

The pandemic also emphasised a need for an individualised model which prioritised aged care residents' personal choices.

Providers have begun de-institutionalising facilities, opting for more 'home-like' designs where residents are part of a close-knit community with enclosed green spaces.

Corduroy said these homes had more efficient staff rostering and usage.

Up to 85 per cent of an aged care provider's spending goes to labour costs, averaging $173 per resident per day.

"For example, a design where you might have 15 rooms in a particular wing where staff can move through while also checking in on the residents is more beneficial," he said.

"You get the same subsidy for care, but you've reduced your staffing costs, which will improve your performance."

Corduroy said the most profitable homes ranged between 70 to 90 operational beds.

In 2021, it was estimated that large residential facilities (101 or more beds) delivered the bulk of aged care services. 

Medium homes (61-100 beds) provided nearly 33 per cent of services, and small homes (60 beds or fewer) just over 18 per cent.

"Ideally, you want to get at least 94 per cent occupancy," Corduroy said.

"For larger homes, you have to have a fairly high turnover rate to make that number.

"In reality, they're more likely to sit at a number of 70 per cent, which reduces a provider's supplement funding paid by the government."

Providers offering specific services in everyday living, such as hairdressing, or better technology, were also more likely to perform better financially.

Corduroy said that if you can prove these additional services improve resident wellbeing, you can charge an additional services fee.

"There's a margin that homes can get for these extra services that can improve their revenue line," he said.

Overall, Corduroy said it's a fine balance between a home's design, staff efficiency and additional government funding that determines the financial situation. 

However, he highlighted that many aged care homes are not able to remodel their facility or offer additional services.

"Unfortunately, their options are limited," Corduroy said.

"If they can get government grants to help refurbish and rebuild, or consider taking some debt to renovate, that would improve their financial situation.

"But for those to remain as they are is becoming increasingly difficult and very unsustainable."

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