Six big players dominate Australia’s scandal-hit aged care sector

The nation's for-profit providers have been accused of putting profits before people.

The nation's for-profit providers have been accused of putting profits before people. Photo: Getty

Aged care providers are expected to rake in $1.7 billion worth of profits in 2018-19, but reports of poor living conditions in nursing homes have raised concerns that the industry is putting profit before people.

So who are the corporate giants running Australia’s nursing homes, and how much are they making?

Australia’s residential aged care industry is made up of 902 companies that provide 200,689 residential places.

The industry’s major players include six big for-profit companies: Bupa, Opal, Allity, Regis, Estia and Japara.

According to a report by IBISWorld, aged care providers will make $1.7 billion in profits over the current 2018-19 financial year.

Aged care services providers are forecast to earn $1.7 billion in profits in 2018-19. Source: IBISWorld (July 2018)

“Industry revenue is expected to grow at an annualised 5.4 per cent over the five years through 2018-19, to $20.2 billion. This includes an anticipated increase of 4.3 per cent in the current year,” IBISWorld said.

In 2016-17, aged care residents stumped up $4.5 billion to cover their living expenses, care and accommodation, the government’s Aged Care Financing Authority’s reported.

Residential care providers generated combined income of $17.8 billion, or $269.55 per resident per day over the same period.

The aged care industry’s revenues are expected to swell further, by around 4.4 per cent annually over the next five years, rising to $25.1 billion in 2023-24, according to IBISWorld.

“Furthermore, the ongoing move towards a market-driven system of aged care is anticipated to boost profit margins over the next five years,” IBISWorld said.

An Australian Nursing & Midwifery Federation report released in May found that in 2015-16, the six major companies alone benefitted from more than $2.17 billion in taxpayer-funded subsidies, making after-tax profits of $210 million.

Bupa is the biggest player in Australia’s aged residential care sector. Photo: AAP

However, the report also found that the big six’s “actual operating profits were much larger”, and that they paid relatively little tax.

Australia’s largest for-profit aged care provider Bupa generated almost $7.5 billion in total income in Australia in 2015-16, but paid only $105 million in tax on a taxable income of only $352 million.

“Bupa’s Australian aged care business made over $663 million in 2017 and over 70 per cent ($468 million) of this was from government funding,” the report said.

“Funding from government and resident fees increased in 2017, but Bupa paid almost $3 million less to their employees and suppliers.”

It was a similar story for Opal, the second largest for-profit company with a total income of $527.2 million in 2015-16, 76 per cent of which came from government funding.

Yet Opal paid just $2.4 million in tax on a taxable income of $7.9 million.

Allity had total income of $315.6 million, 67 per cent of which came from government funding, and paid no tax in 2015-16.

Regis, Estia and Japara “appear to be using methods to reduce the amount of tax they pay while earning large profits from over $1 billion of government subsidies”, the report said.

The report called for aged care’s corporate giants to be forced to become more transparent.

“Companies that receive millions of taxpayer dollars via Australian government subsidies must be required by law to meet higher standards of transparency in financial reports and be publicly accountable,” it said.

Aged care in Australia: Key facts and figures

The aged care sector generates annual revenues of around $22 billion, the vast majority of which is government funded, according to the Aged Care Financing Authority’s 2018 annual report released last week.

The industry services 1.3 million Australians, and consumers spent approximately $4.8 billion on aged care in 2016-17 according to ACFA.

However, the sum does not include the “refundable accommodation deposit” paid by aged care residents, which ranges from hundreds of thousands to millions of dollars depending on the facility.

“The pool of lump-sum accommodation deposits held by providers continues to grow”, ACFA said rising to $24.8 billion as of June 30, 2017.

While the government covers this cost for “low-means” pensioners, many nursing home residents have to sell their home to fund the deposit, which aged care providers hold and earn interest on from the time a resident enters a facility until they move out or pass away.

Total Australian government expenditure on aged care in 2016-17 was $17.1 billion, up from $16.2 billion in 2015-16.

Australia’s multibillion-dollar aged care industry is struggling to keep pace with an ageing population. Source: IBISWorld

Funding for aged care included:

  • $11.9 billion for residential care
  • $2.4 billion for home support
  • $1.6 billion for home care
  • $1.3 billion for flexible and other aged care

Government spending on aged care is expected to rise to $18.6 billion in 2017-18, and $22.2 billion by 2020-21, ACFA said.

Topics: Aged Care
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