Aged care operators must consolidate as Productivity Commission push for user-pays system will take years: Expert

Struggling aged care operators are urged to pursue consolidation and exploit their technology and human capital, after the Productivity Commission released a wide-ranging report into the aged care sector.

The Productivity Commission’s report into the sector has recommended the aged care system be simplified and choice widened for users, to balance the needs of the millions more people expected to services over the next few decades versus the dwindling tax base.

The Commission’s long-awaited package, released yesterday, recommended allowing people to receive care at home, choose their provider, contribute in part to their costs of care (with a maximum lifetime limit of $60,000) and meet their accommodation and living expenses, with safety nets for those of limited means. Up to 25% of aged care costs will be met by the individual, based on a means test.

It also recommended the establishment of a government-sponsored line of credit to help meet care and accommodation expenses without having to sell the home, or forcing a spouse out of the home.

The Commission also recommended that a person be able to retain their age pension if they sell their home, by reinvesting the proceeds in an Australian Age Pensioners Savings Account that can only be used to meet aged care costs.

The Commission has also pleased aged care operators by proposing a scheme that would allow them to charge a weekly or monthly accommodation charge that capital-starved operators could invest in the building of new homes or improvements to existing homes.

This money raised from these accommodation charges could be added to the accommodation bonds that many aged care residents now pay to cover the cost of beds in aged care facilities.

But Heath Shonhan, director of national accounting association Bentleys says changes in the sector will take years, as the Government consults with aged care operators and residents.

“We’re moving from a society that has had everything paid for – care, accommodation and services – to a society which can only pay for care,” Shonhan says.

“That transition is going to take time,” he says, likening it to shifting an ocean liner.

With around 1,200 aged care operators in Australia and the largest market player, health insurer BUPA, having less than 10% of the market, Shonhan says the sector is a “true cottage industry” and therefore ripe for consolidation. The average operator has one or two homes.

Cam Ansell, aged care director at Grant Thornton Australia, played a role in the report and notes the thin margins and old infrastructure of some players.

But Ansell says there are opportunities for operators to partner with others not just in the areas of finance, but also hospitality.