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Profits up but full effects of ACFI changes not yet known, says ACFA

For-profit and metropolitan residential providers continue to outperform other operators and financial performance across the sector is strong with profit and investment up for the 2015-16 financial year, according to the Aged Care Financing Authority’s 2017 report on the sector’s funding and financing.

However, ACFA said the reduced financial results seen in March 2017 resulting from changes to the Aged Care Funding Instrument (ACFI) may decline even further as the full effect of the ACFI changes and indexation pauses take effect.

The impact of these changes will not be seen until the 2018 annual report and beyond, it said.

The report analyses financial data collected from the 2015-16 year and incorporates StewartBrown benchmarking data to also look at issues and trends since 1 July 2016.

It concludes that the funding and financial reforms have strengthened the viability and sustainability of the sector.

In 2015-16, there were 949 residential care providers operating 195,825 places with sector consolidation continuing, ACFA said.

Residential care providers brought in a total of $17.4 billion and spent $16.3 billion, respectively equating to $263.92 and $247.58 per resident per day, to achieve a total profit of almost $1.1 billion, an increase of 17.2 per cent on the previous year.

ACFA said the results indicated a “generally strong” financial performance of residential care providers that built on the strong performance in 2014-15.

Key findings for 2015-16 with comparisons to 2014-15:

  • total revenue ($17.4 billion) increased by 8.6 per cent while care revenue rose by 8.4 per cent to $10.8 billion and other income increased by 11.7 per cent to $1.3 billion
  • total expenses ($16.3 billion) increased by 8.1 per cent
  • total profit ($1.1 billion) increased by 17.2 per cent from $907 million
  • net profit before tax (NPBT) per resident per annum was up 14.2 per cent from $5,221 to $5,962
  • total EBITDA (earnings before interest, tax, depreciation and amortisation) was $1,985 million, up 11.8 per cent from $1,776 million while average EBITDA per resident per year increased by 8.9 per cent from $10,222 to $11,134
  • 69 per cent of providers achieved a net profit compared with 68 per cent the year before

ACFA found that for-profit providers, with an average EBITDA per resident per year of $13,908, continued to outperform not-for-profit ($10,182) and government providers (negative $12).

If the government providers, which account for 10 per cent of all residential providers, were excluded from the analysis, the average EBITDA of the remaining sector would be 5 per cent higher, ACFA said.

Providers operating mainly metropolitan services also continued to outperform those operating mainly regional services with average EBITDA per resident per year results of $11,701 and $9,046 respectively.

ACFA said that overall the residential sector’s net worth grew by $42 million with investment continuing to improve since the 1 July 2014 reforms. In 2015-16, the total spend on building activity was $4.5 billion, an 18 per cent increase on the previous year.

Fast facts for 2015-16

  • 234,931 older Australians received permanent residential care services and 56,852 received residential respite care
  • average occupancy in residential care was 92.4 per cent and similar to recent years
  • the average proportion of supported residents, excluding those receiving extra services, across all residential aged care facilities, was 46.8 per cent compared with 47 per cent in 2014-15 and 44.4 per cent in 2013-14.

Access the report here.

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