Australia’s aged care sector faces uncertainty over securing skilled staff and the capital it needs to make continued investment as demand grows from the growing wave of ageing Baby Boomers, a new report shows.
The regulatory environment facing operators of the country’s 210,000 residential aged care beds at the end of the aged care royal commission was a further concern, the Healthcare & Retirement Living Listed Player Analysis report by Colliers says.
“There is a fear factor around what’s going to come out of the royal commission and whether the recommendations are going to be practical or not,” said Shalain Singh, Colliers’ head of healthcare and retirement living.
Mr Singh defended the sector’s performance during the pandemic, however, saying that the deaths of 700 aged care home residents from COVID-19 were fewer than the 900 deaths from influenza last year.
“Despite everything we hear in the press, we managed to have fewer deaths in residential aged care through COVID than there were from influenza last year,” he said.
“Those deaths would have been lower had the Victorian bungle in the quarantine not have occurred in the way it did.”
However, Joe Ibrahim, a consultant physician in geriatric medicine and the head of Monash University’s Health Law and Ageing Research Unit, said a comparison with influenza deaths was misleading and only showed up the sector’s history of poor infection control.
“It’s because we’ve had needless deaths from influenza,” Professor Ibrahim said. “People haven’t died from influenza [this year] because they’ve taken more precautions than previously.”
Uncertainty clouding the sector was putting off institutional investors, which had largely exited, leaving it to the realm of mums and dads to increasingly buy shares in listed entities such as Japara, Estia and Regis, which account for just over 8 per cent of the sector’s beds, the report said.
The uncertainty hindered the sector’s ability to respond to the surge in demand that would come as the country’s Baby Boomers aged, it said.
However, despite the problems, or the sense that the sector was “broken”, Australia’s model of residential aged care management was superior to that of many other countries, Mr Singh said. With more certainty, investors could make money from it.
“The real silver lining is that despite this, there is a lot of interest in investment in the sector,” he said.
One growing problem for the sector over the past six years was the fact that the proportion of so-called concessional residents, who were heavily government subsidised and typically did not pay the lump-sum refundable accommodation deposit that provides operators with capital, had grown over the past six years from the mid-30s to 50 per cent.
“It’s a big change,” Mr Singh said. “It impacts profitability and the amount of capital and to a degree it impacts on operational costs as well.”
Part of this growth over the past two years was due to residents engineering their finances to qualify as concessional residents, rather than higher-paying means-tested residents, he said.
“What we’re hearing from some financial planners, but also from operators, is what a number of residents are starting to do [is become] structurally engineered concessional residents’,” he said.
“People are planning well ahead and going through tax advisers, making sure that they do asset and income planning [so] by the time they get into residential aged care they are concessional residents.”
Of the three listed operators, Regis had done the best job of keeping its costs under control, Mr Singh said.
“Regis’ real prowess is their ability to manage costs by virtue of systems and processes,” he said.
“When you look through what’s happened, you’ve had earnings compression, but really, that’s because of lower occupancy and revenue decline, not overall cost blowout. They’ve managed to maintain the cost side of things better than the other two.”