StewartBrown’s financial assessment of the aged care sector has painted a challenging picture for procurement professionals to navigate.
Financial results for the last five years were presented during PASA’s 8th Annual Health and Aged Care Procurement Conference by StewartBrown’s Managing partner Stuart Hutcheon.
Day one opened with Bain & Co’s Partner Healthcare and Life Sciences Practice Damien Angus who revealed key global, regional and local trends in healthcare, and new models of care improving the patient experience.
A total of 25 presentations took place over the two days.
Stuart’s keynote kicked off day two at Sydney’s Royal Randwick and showed that homes operating with an EBITDA loss was 42% of those surveyed – more than double the 19% total in 2018.
The December 2022 figures show a total of 63% of homes are operating at a loss compared to 42% in December 2018.
Stuart revealed the operating EBITDA per bed per annum had slid from $7391 to an “unsustainable” $2169 as of December 2022.
“$2000 per bed per annum is a very low return. It’s Simply not enough to get investment in the sector or for providers to be viable and sustainable,” Stuart told more than 100 aged care procurement professionals at the conference.
Figures on catering costs including food and preparation were revealed to be an average of $36.69 per resident per day.
In an interview with PASA, Stuart suggested procurement teams would start to look closer at contracts in an effort to bring costs down.
“For our procurement managers, directors, and our teams, it’s all about trying to get the best deal,” Stuart said.
The theme of the conference was summed up by Damien Angus who asked the audience: “How can we decrease the cost base of the health economy, yet still improve the patient/resident experience?”
He urged procurement and supply stakeholders associated with the sector to challenge the thinking of the current model.
“If we’re really serious about changing the care model, we have to think about things differently,” he said. “We have to do things at scale. We probably have to invest a bit in thinking about how to do this really well, and we have to be committed to wanting to do it. It can’t be on the edge of the desk.”
His presentation alluded to opportunities being presented through stakeholder convergence and APAC had strength in being “the most digitally savvy patient base globally.”
Damien said there are five forces currently shaping the Asia Pacific region in healthcare landscape.
- The macro environment displays increasing turbulence, inflationary pressure, budget tightening and growing ESG scrutiny
- An ageing population and high prevalence of chronic diseases is expected to drive demand for healthcare services
- Health tech insurgents are embracing emerging patient-centric opportunities
- Payers are integrating the healthcare value chain to drive greater patient-centricity and cost savings
- New partnership formats and non-traditional entrants are growing across the healthcare value chain.
He said there were three forces specific to the Australian healthcare landscape including:
- dissatisfied patients with higher expectations are pushing for public system reforms, better quality and alternative models of care
- Increasing digitisation and uptake of digital technology and AI solutions is disrupting legacy IT management systems in Australia
- labour markets are still recovering after border closures constrained supply of labour and COVID-19 caused a peak in demand.
