Service costs in modern residential aged care facilities

Social isolation Social security Ageing Economics Aged care Australia

In December 2010, Grant Thornton was commissioned by a consortium of industry peak bodies and providers to undertake a national study of the cost of delivering residential aged care services in modern efficient facilities. The research builds upon Grant Thornton's examination of service costs in New Zealand in the Aged Residential Care Service Review 2010 and similar research undertaken by the Joseph Rowntree Foundation in the United Kingdom.

The objective of the research was to determine the costs associated with the delivery of residential aged care services by an efficient operator in a typical, modern operating environment. These costs were then compared to the expected income generated from a typical modern, efficient facility. Between May and September 2011, Grant Thornton collected and collated detailed financial and operational data from residential aged care providers based on strict selection criteria for the year ending 30 June 2010. This report summarises the findings from this research.

At 30 June 2010, more than 160,000 Australians received permanent residential aged care services and the National Health & Hospital Reform Commission projected that these numbers would double by 2030 based on current population supply targets. The requirement for increased service provision comes at a time when the level of Australian investment in modern aged care infrastructure is in rapid decline.

In 2008, Grant Thornton conducted the largest independent study into the financial performance of the residential aged care industry. This research and the recently released Productivity Commission Report: Caring for Older Australians 2011 concluded that, for the majority of Australian providers, the provision of aged care services in modern facilities is not financially viable.

This is largely because of the over-regulation of pricing of services under the Aged Care Act 1997. Grant Thornton found that the cost of establishing and operating modern, predominantly single room facilities was substantially greater than older, multi-bed facilities which was not met by a commensurate increase in revenues.

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