Aged care homes ‘face insolvency’ as occupancy drop dents deposits

A consultant to the federal Health Department warns aged care homes face insolvency as providers are forced to hand back millions of dollars in deposits as residents exit the system amid the coronavirus pandemic.

With 582 Victorian aged care residents dying in the last nine weeks as coronavirus swept through homes, the warning of a wider impact on the $25-billion-a-year industry has been sounded by Ansell Strategic, a consultant to many of the larger home providers.

Ansell Strategic managing director Cameron Ansell said in a memo to the Health Department, tendered to the aged care royal commission this week, that the second wave of COVID-19 in Victoria would hit many nursing home operators hard.

"The compounded effect of the first shutdown with the current increased spread of the virus will lead to potential insolvencies happening during the infection period," Mr Ansell wrote.

On Thursday, Premier Daniel Andrews said there had been another six deaths recorded in aged care, and that there were now 464 active cases of coronavirus in Victorian homes. This number was down from 2075 active cases a month ago.

But research by Ansell Strategic showed occupancy levels in aged care in Victoria – already falling after the many examples of shoddy care in homes exposed by the media and the subsequent royal commission – fell further, and more rapidly, than the rest of the nation.

Another financial expert who has spent significant time analysing aged care, Jason Ward, said that while the big operators would be able to survive the downturn in people wanting to live in aged care, smaller providers could be affected.

"While some small operators may face problems due to a lack of new deposits coming in as occupancy drops and existing deposits are refunded, this is not a serious risk to the large operators or the aged care system as a whole," he said.

He said the sector needed "transparency and accountability", and that occupancy was dropping "because many operators have failed to protect residents, failed to spend the federal funding they get on providing high-quality care and not due to community transmission which has been low by global standards".

He said large operators were using the second wave of coronavirus in Victoria to ask for more money from Canberra. "The biggest aged care operators are doing quite well by all accounts and once again using the current crisis as another excuse to ask for more funding."



A study for the aged care royal commission last week revealed most of Australia's for-profit nursing home companies were making big profits, but also found there was a weak relationship between earnings and the quality of care provided.

The royal commission is under pressure from nursing home providers to recommend a substantial increase in government funding to the sector, but the study, by international consulting firm BDO, showed the industry's income in Australia had risen faster than its expenses over the past 10 years.

Across home care and residential care the industry made $1.1 billion in profit in 2018 on total income of $25 billion, with an average profit margin of about 5 per cent.

Aged Care Minister Richard Colbeck said there was no personal risk to anyone choosing to leave a home because the Australian government guaranteed the return of refundable accommodation deposits paid by residents to homes.

"The government has been closely monitoring the viability of providers and refundable accommodation deposits exposure since the pandemic began," he said.

The federal opposition’s spokeswoman on ageing, Julie Collins, said more older Australians were choosing to leave residential aged care homes as a "consequence of the Morrison government’s complete failure to prepare aged care for COVID-19".

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