Residential aged care facilities in regional Australia are experiencing unprecedented financial distress and analysts say urgent measures are needed to stop many from having to close.

Key points: Regional aged care facilities across Australia are grappling with financial distress, with one survey indicating more than 65 per cent are operating at a loss

Regional aged care facilities across Australia are grappling with financial distress, with one survey indicating more than 65 per cent are operating at a loss Stakeholders say the issue relates to funding shortfalls, the costs of recruiting staff to regional areas and money spent to comply with new aged care quality standards

Stakeholders say the issue relates to funding shortfalls, the costs of recruiting staff to regional areas and money spent to comply with new aged care quality standards Analysts say urgent measures are needed to prevent many facilities from having to close

Being forced to move out of the small nursing home he helped establish in regional Far North Queensland is a thought 82-year-old Stanley Marsh does not want to entertain.

For Mr Marsh and 51 other residents in the rural town of Gordonvale, Pyramid Aged Care Centre is home.

"It's for the locals mostly. It's wonderful. A lot of good friends," Mr Marsh said.

"The staff are so good that I give them all a Christmas present, every one of them."

Mr Marsh helped establish the town's only nursing home 50 years ago, while serving as a local councillor.

Stanley Marsh, 82, helped establish Pyramid Residential Care Centre in Gordonvale in the 1970s and later became a resident. ( ABC Far North: Marian Faa )

But today, the not-for-profit facility is losing money rapidly and is on track to become insolvent if something does not change.

While the centre's staff have been assuring residents they will be taken care of no matter what, director Paul Gregory is very concerned.

"In a nutshell, we run out of money in six months if we keep going the way we're going," he said.

"We're using cash reserves to operate and that is a very bad premise for any business."

Cost of staff, new regulations contributing to 'crisis'

A nationwide survey of more than 1,000 aged care homes found 65 per cent in regional areas were operating at a loss in the September financial quarter of 2019.

The report published by financial consultancy firm StewartBrown, was provided to the Aged Care Royal Commission and Federal Health Department.

It showed rural and remote aged care homes were losing money at an average of $7 for every resident bed each day.

Senior partner, Grant Corderoy, said the results pointed to a crisis within regional aged care.

"This is an area the government needs to be looking at in a very urgent manner," he said.

"The consequences could be and will be the closure of aged care homes in those areas."

Based on historic trends, Mr Corderoy said the number of regional facilities operating at a loss was likely to rise to 80 per cent in the coming year.

He said the problem stemmed from lower occupancy rates in regional aged care facilities combined with the high cost of attracting staff to work in rural and remote areas.

"Also their materials, food, cleaning and laundry materials are more expensive," he said.

Laurelle Marsh says her father's hard work in setting up the centre has meant he could continue to live close to home. ( ABC Far North: Marian Faa )

"If you put that all into the mix: lower size facilities, higher costs and lower occupancy levels, that means [regional facilities] have specifically greater difficulties," he said.

Mr Gregory pointed to changes in government funding models as a contributing factor.

"The national landscape has changed where home care packages provided by government mean that people who come to facilities like this are older, frailer and they require higher levels of care," he said.

"Those higher levels care come at a significant expense."

He said the facility was also struggling with the cost of meeting new aged care quality standards, which came into effect in July.

The centre failed to meet seven of the new standards when it was audited in August last year, but its accreditation was renewed until October 2020.

"On top of our normal operating costs, we've had to invest another half a million dollars into training, advice, added levels of care, things like that," Mr Gregory said.

Fears regional facilities may close

Industry body, Leading Age Services Australia, is calling on the government to inject $1.3 billion into the sector to keep cash-strapped facilities afloat.

It is a strategy Mr Gregory would like to see adopted.

"If there is a long delay before those funds are actually injected into the industry there is a real change a lot of those providers won't be there," he said.

But Mr Corderoy said an overhaul of current funding models was needed to help the sector in the long term.

"I think we now need to look at regional and remote areas separately and have a separate funding model for them," he said.

"One [solution] we think that could be adopted is that regional homes get funded as if they have full occupancy.

"That would certainly ease the pressure, to at least give them an opportunity to be viable."

A spokesperson for the Health Department said the government was delivering record investment into the aged care sector, including a recent 30 per cent increase to the viability supplement in March last year.

"The Australian Government recognises the particular pressures for aged care providers in rural and remote areas … providing an extra $101.9 million in support over four years for eligible providers, predominantly supporting providers in regional, rural and remote Australia," the spokesperson said.

'It's all about the community'

Mr Cordery said the closure of regional aged care facilities could have severe ramifications for local economies according to Mr Corderoy.

"They're an important part of the social fabric of the communities," he said.

"They provide employment, they provide comfort for the elderly, they mean that people don't have to move."

It is something Mr Marsh's daughter Laurelle has experienced first-hand.

"Nobody wants to leave their house [to go into an aged care home] but it's not such a wrench if you know you're going just down the road and down the corner," she said.

"To stay in your own town means you maintain all your family and social connections. And for Dad, it's the right place to be."