Take ‘aged care’ out of the pitch. Who would invest?

Someone puts a business plan in front of you.

Two-thirds of existing facilities lose money. A new building costs upwards of $650,000 per bed, sometimes more than $900,000. Much of your revenue depends on government pricing decisions.

You need to recover the construction cost, fund operations and earn enough to justify tying up your capital for decades.

Would you invest? Would your bank? Would private equity?

The Weekly SOURCE previously reported that 62% of residential aged care homes operate at a loss. StewartBrown’s current Finance Forums now put that at two in every three, with metropolitan homes (MM1) now losing money on direct care.

The NSW Productivity and Equality Commission’s report released on 14 October makes the development problem explicit.

NSW needs 2,600 additional beds annually. Under current settings, it will deliver only 660.

“New aged care developments remain unviable on average,” it concludes. Almost half the NSW locations assessed cannot support a financially viable new home.

Ageing Australia heads to Canberra calling for a national aged care investment plan to support around 10,000 additional residential aged care beds each year, alongside urgent action to reduce Support at Home waitlists and end the rationing of approved care.

Instead, shouldn’t that plan aim to reduce the number of beds Australia needs to build?

If new homes struggle to attract capital and take five to seven years to open, we need to invest in helping people avoid or delay needing them.

That means earlier access to care at home, falls prevention, rehabilitation, dementia support and help for carers. It means acting before a fall, an exhausted partner or a hospital admission forces the decision.

The NSW Commission makes the point directly: “The cheapest residential aged care place is often the one that never becomes necessary.”

A wartime effort would mobilise government, operators, health services and capital providers around both tasks: making essential new homes investable and reducing avoidable demand.

We still need beds for people whose care cannot safely be delivered elsewhere. The funding levers of AN-ACC, hotelling supplements, HELF and RAD retention, must work together to make those homes viable.

But every person supported to remain safely at home for longer eases pressure on the building program, hospitals and families.

If the business case for building 10,000 beds a year does not stack up, the investment plan must consider what it would cost to avoid needing them at all.