Menu lock


Jan 15, 2015

Profits rise, quality called into question in aged-care industry

Reforms to the aged-care industry have made running those businesses more profitable. But at what cost to the people they're supposed to be caring for?

Paddy Manning

Crikey business editor

Private industry figures show nursing homes more than doubled their profitability on average last year by cutting down on hours of care, particularly from trained nurses, and other costs per resident.

The annual survey by Bentleys Chartered Accountants was released in summary form late last year but a full copy of the survey has been provided to Crikey. The survey covers 179 nursing homes around the country, breaking down average income and expenses line-by-line, and shows that net profits jumped 159% last year, from $4.14 to $10.71 per resident per day.

Source: Bentley’s National Aged Care Survey

The rising profitability came as major aged-care players like Japara, Regius and Estia listed successfully on the stock exchange last year, as investors chase exposure to a growth industry underpinned by government subsidies and an ageing population. The investment boom comes amid widespread concerns about the standard of care being provided to the vulnerable residents of nursing homes, regulated by the Australian Aged Care Quality Agency (AACQA).

As ABC Radio National’s Background Briefing reported last September, coronial inquests into separate deaths at two nursing homes — BUPA Kempsey and Arcare Hampstead in Melbourne, both of which had been given AACQA accreditation scores of 100% — exposed inadequate care, mismanagement and cover-ups in response to complaints.

Bentleys National Aged Care survey has been conducted for 20 years and is used across the industry to benchmark profitability. The 2013-14 survey, which provides a detailed snapshot of industry performance just before the former Labor government’s legislated aged-care reforms came into effect on July 1, shows wide discrepancies between the profitability of the average operators and the top 25% of operators.

In a presentation given in Brisbane last October, Bentleys highlighted that while the average home spent $99 per resident per day on nursing and care (mostly wages, the biggest single expense) or 46% of their daily operating revenue, the top quartile of operators by profitability spent 6% less, just $92 per resident or 40% of revenues.

The presentation noted providers had been forced to find efficiencies in carer staffing profiles, particularly a steady trend away from reliance on nurses towards personal care assistants. A chart showed the long-term decline in 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 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.

Charmaine Crowe, senior policy adviser for the Combined Pensioners and Superannuants Association, told Crikey:

“The clear modus operandi for the industry is to boost profits by cutting skilled staff. Registered nurses are being replaced by lower-skilled care workers at a time when older people are entering nursing homes sicker and frailer. Not only does this threaten the health and safety of residents, it risks increasing the burden on state health systems as more residents are shipped off to emergency departments because the nursing home doesn’t have appropriately skilled staff to look after them.”

The detailed figures throw up other surprises. For example, daily catering costs of $20.63 per resident on average comprise 21% of total operating revenues, and are made up of food costs of $10.80 and kitchen staff wages of $9.83. Meanwhile the amount spent on head office management charges is $10.73 per resident per day — about the same as food costs.

Crowe believes the increasing profitability of nursing homes is likely to have accelerated since the July reforms, which shifted more of the balance of funding from government to consumer and introduced the ability for residents to pay daily accommodation payments in place of expensive up-front accommodation bonds. Aged Care Financing Authority figures for July and August showed bonds continue to be the preferred payment method and that the industry doubled the amount it held in bonds from $403 million in July to $937 million in August. “Early days,” said Crowe, “but it suggests that the industry’s fear that everyone would be paying daily fees rather than bonds was unfounded.”

Bentleys is now conducting its first six-month survey, for the period ending December 31, to provide the industry with an early snapshot of the implementation of the reforms. Bentleys’ business development manager Jo Adams told Crikey the reforms were making aged care a “much more lucrative investment asset for capital investors”.

We recommend

From around the web

Powered by Taboola


Leave a comment

7 thoughts on “Profits rise, quality called into question in aged-care industry

  1. JMNO

    Having had two parents go through aged care homes and many friends in the same position, my advice to others considering aged care is always to choose a not-for-profit provider. They vary in quality as well but they are there usually because of a commitment to caring for people rather than making money

  2. Norman Hanscombe

    An interesting statistic would be a concise summary of how the Government and Private Nursing Homes compare on costs per capita to taxpayers.

  3. The Pav

    This is not the type of industry that large corporates should be involved.The large not for profits can be just as bad

    Small to medium size operators will keep the market competitive whilst no allowing no large player to have undue influence

    The next scandal will be when somebody rips of millions of Accommodation Bonds and the Feds have to pay out compo

  4. bushby jane

    I thought that the charming Dr. Wooldridge had already been involved in something like that,although he didn’t get into too much trouble from memory.

  5. GF50

    Thanks Paddy, now for the Private Hospitals robbery of the Medicare system!

  6. AR

    Profits up, care of the most vulnerable down. In other breaking news, water is wet and ..ahhh fuggit

  7. Jack Robertson

    Hey Paddy, long time no etc, hope all is well. Since I discovered that ranty lefty writing doesn’t pay the rent I’ve been working in Aged Care, so this stuff is interesting to me. One of the striking changes occurring in this industry is just how lucrative the hardhead$ are recognising it will be. One of the few guaranteed, captive and expanding markets going forward – throw in buckets of guaranteed government money and the promise of more to come and every suity bastard is now sniffing around. For those who will grab the opportunity for profiteering Aged Care has the magnificent advantage of a high level of inherent societal guilt attached, of the kind that discourages the average bleeding-heart progressive from applying too much scrutiny to the money-grubbers. Everyone’s got the guilts about dumping mum and dad.(No, now, do spare me the protesting, everyone: I’m actually the one wiping your dad’s arse, so save me the usual pious ‘Oh, you’re so wonderful, Í could never do what you do…’. Yes, you bloody could, you just choose not to. It might be because you and your partner are dirt broke and both have to work multiple jobs just to pay your rent. Or it might be because you’d rather do six Pilates classes a week than drop in on your mum for a daily chat, while hubby can’t bear the thought of not working the Futures Market 12 hours a day 7 days a week, because it might reveal to his mates that he’s got a small penis.)

    Aged Care is a pretty simply issue, really. And if we’re going to make it work into the future, people have got to have the intellectual honesty to face up to the fact that the level of care we provide to our old people is a function of the priority we choose to give it, collectively and individually, over other things we choose to do with our…time. Because time is the only thing you really need to provide good quality aged care – the level of care that doesn’t end up in those (to us Carers) tediously regular outbreaks of hidden-camera Walkley Gotcha! moments, and narcissistic public breast-beating by Ladies Who Lunch. Yeah, sure, qualifications, facilities, regulations, oversight, checks-and-balances, all that jazz are important, but overwhelmingly looking after an old person just needs…time. Time. That is, face-to-face care time, per carer, per client. Arguing about all the rest – private/public, bonded or daily fees, quality control, RN versus Carers – is kind of side-stepping the simple question: how many carers are we as a society prepared to provide per oldie? RN or AIN (or brain surgeon for that matter), the more human beings you have at the coal face caring for each old person daily, the better daily the care each one will get. By all means medical expertise is important, but the reality is that medically complex instances are going to be dealt with by doctors and nurses anyway. Wiping bums, showering people, dressing them, helping them get about, keeping them active and entertained and feeling valued as people…this is the bread and butter of ‘good’ care, and it needs carer numbers more than it needs anything else. So, for example re: this may very well make for better care standards overall to hire a dozen (good) Carers (at $20/hour) than to hire six Carers and three RN’s at $40/hour). That’s not to suggest that this is the trade-off many facilities make in cost ‘efficiencies’ – sure, they’re much more likely to hire six Carers and one RN (part-time), and pocket the difference. What we have to do is chest-poke them on this, but the only way we can free ourselves to do so openly and without reservation is to recognise that what we are buying when we choose to pay someone else to do for our kin what, in most societies still, families do themselves, is…’time’. The better care you want, the more time you need to pay for (and the more you need to ensure your commercial system is based upon the efficient provision of the right product – time – and can be scrutinised on THAT.

    Why else does the industry relentlessly resist minimum mandated staff-client ratios? Jesus, it’s hardly rocket science.

    So: the community needs to start arguing about this key question in the Aged Care industry directly, otherwise the industry will keep getting paid more and more (by us) for ‘time’, while keep providing less and less of it per client, the process being politely ignored by us, because we feel guilty, knowing that we are perfectly able to provide the product ourselves – ‘time’- but make a choice not to.

    Cheers Paddy, sorry for length, close to home!