Collapse of aged-care facility highlights a sector under pressure

The aged care sector is bracing for trouble after the surprise collapse of a nursing home in Melbourne.

The Bridgewater Aged Care Facility in the Melbourne suburb of Roxburgh Park was placed into administration on 23 May3 after struggling with mounting debts. The facility has more than 100 residents and 120 permanent, part-time and casual staff and has been operating since December 2004.

Rod Young, the chief executive of the Aged Care Association Australia, says he is very surprised with the shock announcement that the facility has been placed in administration. Typically an aged care facility is sold or restructured before it collapses. “It is a very isolated incident. Usually if a facility gets into trouble there are indicators well before the business gets to this point [administration].”

But while the drastic step of putting a facility into administration is rare, Young expects the number of operators looking to exit the sector will increase sharply. “I wouldn’t be surprised if we see a spate of them, in the context of the financial status of the industry.”

Cost pressures and a lack of government funding are squeezing an industry already struggling to cope with a shortage of skilled workers. Young is expecting Federal Government funding will increase by around 3.65% this year, but with inflation running at 4.3% that will leave a considerable gap. “It’s still less than CPI and still way below what we are seeing in terms of wage increases.”

Young admits that carers are underpaid, but says with wages accounting for 65% to 67% of the industry’s cost base, facility operators’ hands are tied. “It’s not our desire to pay them at such low rates, but unfortunately we don’t have much choice. At this stage we are struggling and all of the analysis of our financials have indicated a gradual decline in profitability.”

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