‘In a Nutshell’ – Waiting in Suspense

In this edition of 'In a Nutshell' Ansell Strategic examines the performance of the listed operators in the lead up to the Royal Commission and the impacts of the likely recommendations.

‘In a Nutshell’ – Waiting in Suspense

In the last few years we have witnessed significant turbulence in the aged care industry.  From market darlings in 2014 where consolidation and development opportunities were strong and encouraged, we’ve seen investment half at a time where it couldn’t be more critical.  This suspense is driven by the growing uncertainty associated with funding pressure, regulatory scrutiny, the Royal Commission into Aged Care Quality & Safety (Royal Commission) and changing consumer preferences.

The performance of listed aged care providers mirrors the deteriorating state of the sector in the 2018/2019 financial year.  Without a one-off boost in federal funding in the fourth quarter none of the three providers would have reached guidance.

The condition follows the austerity measures introduced in the 2016 Federal Budget and a low indexation of subsidies relative to ever growing care costs.  Across the country, providers have shelved or canned their building projects just ahead of the largest demographic shift in Australia’s history.

At the same time, the Royal Commission has been running with a heavy focus on system failures and incidences of poor care outcomes.  It will be difficult for the Commissioners to miss the connection between these incidences and the declining Government investment in the sector.

We believe that the Government will need to be seen to respond seriously to its own Royal Commission findings and this is likely to take the form of additional funding and tighter regulation.

You can read more in our report.