Aged care is now an industry. Ben X, a health explorer, examines the implications for staff and community when companies list on the stock exchange and profits and dividends enter the aged care picture.
Are aged care operators listed on the ASX [Australian Stock Exchange] ruining it for everyone? And when I mean everyone, I mean not just other aged care operators but residents and staff.
This article explores how aged care ASX-listed companies are potentially changing the way aged care is seen by the general public and therefore funded by government. The way aged care is discussed, the words we use are important and I believe they shape the direction of what we want for aged care.
As far as I know, the ASX has never had a company who sources their income solely from residential aged care. Back in 2006, the ASX-listed Amity (now BUPA) operated a significant number of aged care facilities, but also operated an imaging diagnostics business. Babcock & Brown Communities (now Regis) owned a significant number of retirement villages (along with Aevum). But in 2014, three companies were listed on the ASX which, by and far, solely operate residential care – Estia, Regis and Japara. Although there are a number of other large for-profit aged care organisations such as Bupa and Opal Aged Care, they don’t share the same obligations as an ASX-listed company. These obligations play a significant role in why I believe ASX-listed companies are changing aged care.
Aged Care is now an industry!
I know aged care is an industry, but terms like ‘capital expenditure’, ‘return on investments’, ‘earnings per share’ and ‘shareholder value’ were not always associated with aged care and are a recent development. Gone are the words ‘compassion’, ‘respect’ and ‘patient care’ or, heavens forbid, ‘ratios’. You will only find these words now on provider websites and brochures as part of a marketing strategy to attract new residents.
To be clear, I am not saying that employees of these companies don’t care, they do, just that when these large for-profit employers say it, I take it the same way as when I ask my seven year old if she brushed her teeth. I get her to come over and breathe in my face to prove it, otherwise it didn’t happen. The way the industry is described has changed considerably, especially since the entrance of for-profit companies but even more so since the ASX listing of three aged care providers.
The Aged Care Guild, the lobbyist for the largest aged care providers (including the ASX-listed companies), has recently released a report, Australia’s aged care sector: economic contribution and future directions. This report has a whole chapter dedicated to the vital economic contribution aged care makes in Australia, stating that the aged care industry is now comparable in economic footprint to the “sheep, grains, beef and dairy cattle industry”! That’s right, for these companies it is similar to livestock, just numbers and percentages. This, I believe, was an attempt by the Aged Care Guild to take a subtle poke at the government with a really long stick while whispering “stop cutting our funding, we’re big now”. The report continues the typical for-profit agenda of less regulation, market-based system and the freedom to impose additional charges (they call it ‘personalised services’). These ASX companies believe they can make up any government reduction in funding with more resident fees, as stated in the Estia audio presentation. These personalised services seem to be the magic pudding for aged care providers, where we now have two tiers of service within the one facility. Some have the beef bourguignon with a glass of 1990 Château Rayas for dinner, while by the time I enter aged care, with the current gouging of resident fees from these companies, I could probably afford a small bowl of Campbell’s Vegetable stock, salt reduced (meat day is Thursday) and settle down with a glass of half-strength orange fruit powder drink.
What happens when you lobby the Australian Government about increasing the level of aged care funding while at the same time publishing big profit forecasts to institutional investors?
Like any “industry”, aged care has its magnates, multi-millionaires and dynasties. We have high flyers who contemplate whether to drive the Ferrari or the Lamborghini to work, while employees who have worked for 20 years for the same employer receive a token “platinum coloured” badge with opal resin for their service. It is hard to cry poor and argue about funding while these high flyers are creating headlines. But for ASX-listed companies, it is even harder.
As a researcher, it is difficult to obtain financial information on most aged care operators as there is no obligation for the employer to provide a copy of their financial reports or make them publicly available any more. Not only must ASX companies provide annual financial reports, they also provide half yearly reports and a number of investor briefings. It is these investor briefings and financial reports I believe have played a part in the reduction of aged care funding over the past two years and are changing the way aged care is seen by the general public, as a money maker for shareholders.
Although federal budget pressures are a constant issue, the argument to the general public to reduce funding became substantially easier with Estia forecasting just last December net profits of $44.6 million, up 25%! They stated they will “reassess” their newly purchased Kennedy Aged Care beds with the view of bringing them in line with other Estia residents (an increase of 13% or about $20 per bed per day) and finally then increase the resident deposit (RAD) from $180,000 to about $450,000. That’s the market at work for you. Government reduces funding, aged care providers charge residents more, life goes on.
If you are interested in listening to the audio Estia investor briefing to institutional investors, you can find it here . I made a drinking game out it where every time I heard the word ‘ratios’ I had to drink. The bottle is still unopened. It is also no surprise that the government has accused aged care providers of “over categorising” residents to increase their ACFI funding. What do you think Estia did, they admitted that only happens in 1 of 14 (or 7%) claim submissions compared to the industry average of 12.5% or 1 in 8! What the…!
If this continues I see a bleak future for residents of the future, where they will have to pay extra for a warm doona at night in winter, extra for an Arnotts Arrowroot biscuit with their cup of tea and extra for properly staffed facilities, while current staff take the brunt of any loss of funding.
Tell me about any extra personal services that you know about that are offered in aged care. Tell me if you disagree with me. Or maybe send pictures of kittens.