news

17 tasty tit-bits from the 2017 ACFA Report

04 Sep. 2017

By Ken Ridgwell and David Ettershank – Principals Outcomes Plus

Aged Care Conference season is upon us.  Wondering how to make conversation at that conference function?  Read on.

The 2017 Aged Care Financing Authority Report has just been released (click here for copy of report ), and as usual, it’s packed with loads of informative data on the aged care sector. In case you didn’t get to read all 150 pages, we thought we would put together 17 of the most interesting bits that we’ve extracted from the report.

Number 1 – 62,000 home care packages and 49,000 residential places will need to be released before 2022 for the Commonwealth to reach its target ratio. In 2016, home care represented only 29% of all aged care places, but by 2022 it will represent nearly 36%. We think the home care planning ratio has the potential to keep increasing after 2022.

Number 2 – Length of stay in residential care is still declining – the current average is just under 3 years. This is consistent with the increasing average age of entry (84.2) and the proportion of male residents (40%). Sorry guys, but it appears your average length of stay is only around 2.5 years.

Number 3 – The pool of accommodation deposits has jumped to $21.9b – that’s an increase of nearly 40% in just two years.

Number 4 – There is not a lot of difference between agreed accommodation prices (Average $380,000) and those advertised (Average $391,000). While ACFA points to the customers successfully negotiating reductions, we think this is not the full picture. We think the difference is being disguised by providers encouraging RAD/DAP combinations as a means of overcoming affordability.

Number 5 – There is a higher level of DAPs being paid in regional and rural areas – no doubt because accommodation prices (read property values) are lower and more affordable.

Number 6 – The growth of respite residents has doubled in recent years, with longer stays for high care residents. ACFA concludes that many of these residents are using respite services while they arrange their financial affairs or await means testing

Number 7 –50% of people on a level 2 package stay for 1.5 years and 25% stay for 3 years. By contrast 50% of people on a level 4 package stay for up to one year and 25% stay for 2 years.

Number 8 – The higher accommodation supplement for new and refurbished residential facilities ($55.09 p.d) is roughly in line with the average accommodation payment by non-supported residents ($55.23). For providers that don’t need the capital, it’s a whole lot better in many circumstances to consider supported residents.

Number 9 – Industry consolidation continues with a drop in the number of residential providers (23 providers or 2.4%) and services ((12 services or 0.44%). Two thirds of residential providers have only one service yet they only represent 23% of all operational places. The top 19 providers account for 27% of all places

Number 10 – The average provisional allocation for residential care takes 4.3 years from ACAR approval to bring online – 25% are more than 4 years old and amazingly, 2% were allocated 10 or more years ago!

Number 11 – Average EBITDA achieved in residential care was $11,134 prpa. but how will this number withstand the recent ACFI cuts? Also of note is the high amount ($7,500 prpa.) of “other income” which has gone into propping up this average. Other income is defined as investment income, donations, asset sales, capital grants etc.  We suspect that care EBITDA is probably on the decline but will be compensated by improving accommodation EBITDA – but for how long can this continue? Is it time to consider reporting Care EBITDA discretely from your Accommodation EBITDA?  (Click here to see our previous posting )

Number 12 – The ACFA report notes that the average lifetime of an aged care home is 40 years – really? We think it is likely that many of the existing aged care buildings will still be standing in 40 years, but that doesn’t mean that they will be left untouched. In 2016, new building, refurbishment and upgrading was happening on 24% of all homes. It would be very surprising if a provider had not spent at least an amount equivalent to the cost of the original building on upgrade/refurbishments well before the 40 years had expired. Keep this in mind when setting depreciation rates as the market, not the physical building, is driving these capital decisions. Deregulation of licences will put this issue on steroids.

Number 13. – The Department of Health has received over 200 applications from organisations wishing to become approved home care providers in 2016/17 – While not all will be approved, that’s a potentially big increase on the existing 492 providers at 2016 and a clear sign of increasing competition in the sector.

Number 14 Level 2 home care packages are losing their shine despite being 66% of all home care places – occupancy is down to 83% at 30 June 2016 yet it appears demand is not being met for levels 3 and 4. This may be a guide to future package releases despite Government fiscal constraints.

Number 15 – 85% of older people requiring help with selfcare receive assistance from family and friends – these informal carers are on the decline.

Number 16 – There is a remarkable fall in the home support and home care workforce (54,537 FTE in 2012 to 44,087 FTE in 2016) despite an increase in consumers – no surprises there given the number of contractors and digital disruptors now working in the aged and disability sectors.

Number 17 – 22% of home care providers are not charging the basic daily fee, and of those that did, more than half reduced the amount they charged. Similarly, 17% of providers are not charging the income tested fee. Anecdotal evidence suggests that most people will opt to receive a lower level of service than contribute towards a higher level, whether the service is needed or not.

Outcomes Plus will be at the LASA and ACSA conferences this year. Feel free to give us your take on the 2017 ACFA report – we’d love to get your feedback.

Ken Ridgwell and David Ettershank are founding Principals of aged care consulting firm Outcomes Plus.  To view their full credentials click here.

Recent Posts

Categories

Get Connected

An overview to improve aged care services
for your community

Download now
Copyright © 2017. Outcomes Plus. All rights reserved