Aged care providers losing up to $15, per resident, a day

Aged residential care providers are losing up to $15 per resident per day, but Age Concern isn’t convinced that more government funding is the only solution to the aged care crisis.

Providers – many of whom are community organisations – are already closing beds as they try to maintain service levels while trying to keep up with rising costs, which means seniors are ending up in residential care far from their families and communities.

The Aged Care Association and former DHB bosses have been sounding the alarm about the impact of nurse staffing shortages and a lack of pay parity since 2021, warning that providers cannot afford to build the 80,000 beds that will be needed by 2040.

Age Concern believed a solution should consider people who want to live in their own homes, while independent advisor Cam Ansell said it was time to have a conversation about whose care is being subsidised.

Ansell’s advisory firm has just completed a financial performance study of New Zealand’s aged residential care sector.

His team looked at the financial statements of 291 aged care facilities representing 22,580 beds, or 54% of the sector.

More than half of the providers (55%) were small operations with one facility and 56% were making a net loss, while 64% had to temporarily pause admissions because of clinical staff shortages.

More than 969 beds have been closed throughout the country since January 2021.

In Southland, providers are averaging a loss of $15.21 for every resident, every day. That number is $10.15 in Taranaki and $2.69 for the Manawatū/Mid Central and Whanganui DHB regions, according to the Ansell Strategic Report.

The Aged Care Association puts day rates at about $372 a day (as opposed to $1700 in hospital) and data from Te Whatu Ora shows the government is paying providers between $173 and $296 per resident per day (excluding GST), depending on their level of care.

Ansell said there was no real way to monitor the sector collectively.

“We’ve been running blind trying to work out how our clients were performing.”

Auckland and the Bay of Plenty are the only regions where aged care facilities are profitable.

This was because seniors in more affluent areas could pay added fees for additional services, Ansell said – which is how big retirement village companies supplement their aged care beds.

These large groups were the only providers building new facilities, but only in regions where they could charge premium property prices, he said.

As maintenance has become a deferred cost for struggling providers, Ansell said many facilities were no longer fit for purpose, but Te Whatu Ora’s aged residential care demand planner shows New Zealand would need to build another 40,000 beds by 2040 to keep up with demand.

Ansell believed the country needed to have some uncomfortable conversations about who was receiving government subsidies.

“We still have a high level of taxpayer support for people who need it,” he said.

Age Concern chief executive Karen Billings-Jensen said most people want to age in place – in their own homes and communities.

That’s why she believed there needed to be investment in appropriate levels of home care support and staff.

“For us it's about dignity,” she said.

Billings-Jensen agreed that more funding was needed to help providers recruit and retain staff to keep beds open.

Presbyterian Support manages 1786 beds across the country.

National executive Dr Prudence Stone said some of the organisation’s Enliven branches had moved into home support because they saw they wouldn’t be able to keep beds open.

Growing expenses were the result of three factors, she said: the increase in manpower resources needed to keep residents connected and happy during the Covid-19 pandemic, a lack of pay parity making it difficult to retain staff, and global supply challenges pushing up the price of everyday goods.

Stone also noted that a third of people over the age of 65 had no equity to afford aged care.

Aged Care Association interim chief executive Katherine Rich said: “There’s not a single business that can sustain a loss on every client, day after day.”

The benchmarking report added weight to the messages the sector had been pushing for the past few years, she said.

And while she supported the idea of ageing in place, Rich said there would always be people who needed residential care.

Te Whatu Ora’s Mark Powell said the health agency was reviewing aged care funding and service models to improve sustainability and ensure equitable outcomes.

“We have started working with the sector and with the community to identify future demand,” he said.

Powell believes there are currently enough beds across the country.