Increased use of external staff for care sends home care profitability to five-year low

The Federal Government’s Financial Report on the Australian Aged Care Sector 2022-23 showed the declining profitability of home care operators. 

Home care providers recorded an average EBITDA (earnings before interest, taxes, depreciation, and amortization) of $1,007 per care recipient per day in 2022-23, down from $1,232 per recipient per day in 2021-22. It was the second consecutive annual decline, and the lowest result in at least five years. 

Only 68% of home care providers were profitable (defined as achieving a net profit before tax) in 2022-23, down one percentage point from 69% the year prior.  

Home care profits were eroded by increased spending on external direct care staff. Expenses for external direct care services increased by $2.08 per care recipient per day in 2022-23, making up a significant portion of the $2.31 overall increase in expenses. Income increased by only $1.70 per care recipient per day in the year.  

The rise for the year in external expenses continues an ongoing trend. Since 2018-19, external care costs have soared 87%, while internal care costs have fallen 32%. 

Providers in the bottom quartile weighed heavily on the overall home care sector’s performance. Home care providers in the bottom quartile saw their EBITDA decline 27% on the year prior. The other three quartiles saw their EBITDA increase. 

Other points made in the report include: 

• 75% of home care providers operate single service facilities, which means they operate in a single Aged Care Planning Region.
• Government spending on home care was $5.6 billion, up $1.2 billion , or 28%, from $4.4 billion in 2021-22. The increase reflects the increase in the number of home care recipients and preference for higher-level Packages.  
• The total value of unspent funds as of 30 June 2023 was $2.82 billion, a 21% increase from $2.34 billion the year prior, 30 June 2022. 
• The average length of time a person accessed home care services was 27 months. 
• Not For Profit home care providers deliver 51% of Home Care Packages. 
• Home care providers with 7 or more services had the lowest EBITDA margins at 3.0%, compared with providers with 2 to 6 services which had highest EBITDA margins at 5.4%. Single service home care providers recorded EBITDA margins of 4.6%.