No surprises but aged care is a marginal business until co-contribution

Estia and Regis have just produced their annual accounts and they are disheartening.

Estia has 6,163 beds and Regis 7,057. Each has over 7,500 staff. Neither of them are making money, despite them being among the most efficient aged care operators in the sector – with equally high resident satisfaction scores.

Estia lost $9.6 million operationally while Regis made $3.9 million for the financial year 2022. In the mix is up to $30 million in unrecovered COVID costs.

Using Estia’s numbers, it had revenue of $306 per bed day, or $111,690 a year, which delivered them an operational net profit of $6,746 per bed day ($18.48 per day), or 6% per annum.

But the uncertainties of the sector drove Estia to a $52 million statutory loss. Both Estia and Regis had to book a $60 million amortisation of the bed licenses, the result of a change in Government policy (they did get a $17 million tax benefit from this – see Estia results below).

The question is: how do you strategise ahead with businesses like these in a sea of uncertainty, driven by the federal government?

Pricing, workforce, and co-contribution are government decisions that need to be made now, not at some vague time in the future. This is what Estia is requesting to create certainty in its business:

Deregulation of the basic daily fee and the introduction of co-contribution are the only short-term sources of the new cash required to deliver an outcome in this uncertain business.

This is Plan B, and it should be the focus of aged care operators and peak bodies through to the May budget next year.