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Aged Care Facilities crippled by sudden drop in MPIR

Amongst the daily tragedy unfolding on our television screens, the radio, in papers and online, other issues facing our sector aren’t getting much attention. The recent dramatic drop by the Federal Reserve Bank in March has led to a major fall in the Maximum Permissible Interest Rate (MPIR) from 4.89% to 4.1% for the coming quarter and will place further pressure on an aged care system already at breaking point.

StewartBrown’s most recent Aged Care Sector Report for the six months ending in December 2019 found that 56% of surveyed aged care homes recorded an operating loss for that period. This latest drop in the MPIR from July 1st is sure to only increase those bleak numbers.

Let’s get the numbers to do the talking…

• Most Daily Accommodation Contributions (DAC) currently sit at the refurbished rate of $58.19/day.
• With a current average RAD of say $450,000, the new MPIR would result in a drop in income of $3,555/yr if the resident is unable to pay the RAD.
• Applying the new MPIR to get the same income of $58.19/day the RAD would need to increase to $518,033.
• A facility with a RAD below $518,033 would generate more income from a supported/concessional resident.
• A non-refurbished facility would need a new RAD of $337,670 anything lower means once again a supported person will generate more income.

At Beacon we believe facilities should right now be considering all their options at how to best remain viable, and continue to provide a much-needed service to the community.

Some key areas to consider are…

• Either increasing RADs to off-set the loss in income or increase focus on attracting concessional residents.
• Rather than couples staggering their entry into aged care, it may be a far better outcome for them to move in on the same day.
• Bring respite clients permanent admission date forward so that they enter on the 4.89% rate (if possible)

One way facilities can easily help themselves is to streamline the time it takes from enquiry to admission for new residents. But it’s often the financials, which slow down the process and can become even a barrier to converting an enquiry. That’s where a service such as Beacon Aged Care and Retirement Advisors can really assist a facility by providing expert financial advice to potential clients. We cut through the Centrelink red tape, and give clarity on financials, resulting in a faster decision-making process. At the end of the day a vacant bed earns no income, that’s a loss for the industry, and a major concern for clients who genuinely need care.