Aged Care Financing Authority chief says performance of sector a ‘significant concern’ to the agency

This article is more than 10 months old

This article is more than 10 months old

The agency overseeing the financial health of aged care in Australia has concerns that the sector is not financially viable or sustainable, a Senate committee has heard.

Mike Callaghan, the head of the Aged Care Financing Authority, told Senate estimates on Wednesday that the financial performance of the aged care sector, and particularly nursing homes, remains a “significant concern” to the agency.

The authority’s annual report stated that a “sizeable proportion” of residential care providers were making a loss and a number of smaller providers were seeking to leave the sector.

Many others were “concerned about their ongoing viability if current financial trends are maintained”.

'Scratching the surface': the aged care stories that go untold may be the worst Read more

In 2017‑18, 44% of residential care providers reported a loss, compared with 32% in 2016-17.

Under questioning from Labor senator Murray Watt, Callaghan said the financial difficulties facing providers had implications for the “viability and the sustainability” of the aged care sector.

“There are many hurdles that the sector has to confront now towards achieving the objective of a sustainable residential aged care sector,” Callaghan said.

“There are many issues that need to be addressed … It is not simply money, it is getting the incentives right, it is getting the whole arrangements right, the roles, it is about getting the competitive pressures right, it is improving the overall performance of the residential aged care providers.”

Pressed on whether the authority had concerns about the sector’s viability given all of these factors, Callaghan responded: “Yes.”

The shadow minister for ageing, Julie Collins, said the revelations were “incredibly concerning”, with 250,000 Australians currently in residential aged care.

“The viability of the aged care sector is at risk because of the Liberals’ cuts and inaction,” Collins said.

She pointed to a $1.2bn “efficiency” recorded in the 2017 budget from changes to the Aged Care Funding Instrument (ACFI), which is used to calculate payments per resident based on their needs.

That was on top of a $472m saving in the previous year’s midyear budget update.



The Liberal senator Dean Smith said the ACFI change was wrongly characterised as a cut, asking the department secretary Glenys Beauchamp whether it was better characterised as a “tightening”.

“In terms of looking at the bottom line, average government contributions through the ACFI instrument has actually gone up every year since 2012-13,” Beauchamp said. “Not only has the funding per patient or care recipient has gone up, but the bottom line in terms of funding for residential aged care facilities has also gone up.”

According to the authority’s report, while funding has increased, the indexation rate for ACFI payments in 2018-19 (1.4% for the activities of daily living and behaviour domains and 0.7% for complex health) remained below the rate of cost increases.

The shadow minister for aged care, Ged Kearney, said Australia’s aged care system had lurched from “one crisis to another”.

“A week doesn’t go by without more disturbing accounts emerging about the mistreatment or neglect of older Australians in residential aged care.”



The sector is currently being scrutinised by a royal commission, which has received more than 6,000 submissions and has canvassed concerns about workforce stresses, performance standards and safety.

The commission is due to provide an interim report to government by the end of October.