2016-17 Federal Budget

What will the future look like for aged care providers post-budget?

Sandy Lawson Sandy Lawson

Factors affecting all operators: Budget changes to superannuation, smaller retiree nest eggs from low interest rates and reduced returns on equities

Recent budget announcements will see residential care providers struggle to remain viable. While there was some good news with the announcement of 1,286 new places and increased viability supplements for rural and remote providers, this will mean little to the large number of providers already operating on slender margins.

The financial challenges faced by residential providers, such as funding future capital investment, combined with growing market interest in retirement living offering in-home care, will see many looking to diversify their services remain sustainable.

Demand will always exist for residential care, but organisations that offer retirement living and/or home care services will most likely flourish in the short term. Recent budget cuts to aged care are a sign the government knows it cannot continue to fund residential care at current levels. With the introduction of a user-pays system, long-term sector solutions will involve new models of financing and service delivery.

Leading Age Services Australia recently reported that 38% of providers are vulnerable to collapse, particularly in rural and remote areas. Aged Care failures will add significant pressures on regional health services. 

Opportunities and threats

Residential Community care Retirement
Budget cuts of $1.2 billion which threatens the viability of 38% of providers Desire to stay at home longer Continued affordability in investement, although some markets showing signs of flattening
Increased support for rural and remote providers Lower-level care packages proving unattractive Desire to stay longer in a home environment
Improved quality from targeted compliance Removal of ACAR  
Increasing attractiveness of retirement living Greater consumer choice from February 2017  
Greater affordability of home care    

 

The future

Whether providing residential, community or retirement living, organisations more than ever before need to have a clear strategy and a vision for the future.

Capital and operational efficiency, together with clearly delineated threats and opportunities and the right business strategy, will be key to achieving competitive advantage.