Full beds, falling margins: what the latest aged care data tells us

To say that the home, community and residential care sectors are under strain is not revelatory.

The introduction of the Aged Care Act amidst a backdrop of new technology and pressure for high-quality care has resulted in a sector under constant strain.

This has been confirmed by recent reports developed by StewartBrown that outlined the sustained pressure that home, community and residential care providers face.

Speaking at AlayaCare’s recent roadshow, Stuart Hutcheon, Managing Partner, StewartBrown, shared these findings. Speaking to the fact that demand is growing, costs remain high, and reform is reshaping how services are delivered and funded, many providers are finding the financial reality increasingly challenging.

Watch Stuart speak at AlayaCare’s recent roadshow, AI and Efficiency: Protecting margins in a changing care landscape:

A sector under strain

The headline is clear: providers are operating in an environment where financial sustainability is becoming harder to achieve.

Residential aged care occupancy is sitting at 95%, and many providers are effectively full, with waitlists already in place. At the same time, Australia needs 40,000 additional aged care beds over five years, yet only 6,000 were built in the previous five. Another estimate suggests the sector would need to open an 83-bed aged care home every three days for the next two decades to keep pace.

In home and community care, the challenge looks different but no less significant. Providers are working through Support at Home changes while also trying to maintain package utilisation, workforce productivity and margin. When package usage drops, the impact flows quickly through the rest of the business.

Taken together, StewartBrown’s latest numbers show a sector under strain, not because providers are doing the wrong things, but because the environment around them has become much harder to navigate.

Residential care margins are being squeezed from multiple angles

The residential numbers show just how hard it is to stay financially sustainable right now.

On average, providers are losing $9.80 per bed day. Sixty-one percent of aged care homes are losing money, and 35% are operating with negative EBITDA, which means a cash loss. Even more telling is the spread between top and bottom performers: the best-performing homes are making a $32 profit per client per day, while the worst-performing homes are losing $58 per client per day.

That gap matters. It shows there is still room for improvement, but it also shows how exposed weaker performers are in the current environment.

The data also suggests the sector has lost momentum. Financial performance had been improving, but that progress is now being squeezed again. Average EBITDA is sitting at around $4,500 per bed per annum, well below the roughly $20,000 per bed that would make the sector sustainably investable.

In other words, this is not just a story about lower margins. It is a story about whether providers can remain viable enough to invest, grow and meet future demand.

Support at Home is also under financial pressure

The home and community care numbers point to a different model, but a similar challenge.

At the start of the financial year, Support at Home providers were recording a surplus of $4.70 per client per day. That sounds positive, but it only equates to about a 5% return on revenue. The benchmark being suggested is at least 10%, with some arguing sustainable businesses should be aiming for 15% to 20%.

Utilisation is at the centre of that challenge. Early data showed revenue utilisation at around 90%, which is critical to maintaining performance. But providers were also reporting that, in practice, some clients were only using around 75% of their package after the transition. If utilisation drops by 20% to 25%, providers are left carrying fixed costs, care management and workforce costs without enough revenue to cover them.

The scale of underutilisation is also striking. On average, $15,000 of a package has historically gone unspent. Across Australia, that adds up to $4.5 billion in funding allocated to older Australians that has never been used, with only 6% of it ever expected to be spent.

Stuart speaking at AlayaCare’s recent roadshow series

The rules have now changed, with carryover limited to $1,000 per quarter or 10% of a package. That means the focus has shifted. The challenge is no longer just unspent funds sitting in the system. It is making sure clients actually use their package so providers can remain financially viable.

Workforce pressure is still shaping every decision

Even the strongest operating model will struggle without the workforce to deliver it.

Workforce shortages remain one of the biggest barriers facing the sector. An estimated 65,000 workers leave the industry each year, while Australia could face a shortfall of 30,000 to 35,000 direct care workers by 2030.

That pressure shows up everywhere. It affects rostering. It affects continuity of care. It affects quality, morale and productivity. And it forces providers to spend more time thinking about how each hour of labour is used.

This is especially important in home and community care, where provider performance is closely tied to workforce productivity and billable time. But it also matters in residential care, where every shift decision can affect compliance, costs and outcomes.

These shortfalls are particularly important to consider when coupled with the financial pressures the sector currently faces.

Technology is no longer a future conversation

This is where the data becomes especially useful. It points not just to the pressure, but to where providers need to respond.

The strongest opportunities are in the areas that most directly affect margin: workforce productivity, scheduling, package utilisation and administration. In residential care, that means using technology to better manage rostering, overtime, agency use and funded minutes. In home care, it means tighter visibility over billable hours, productivity and utilisation.

There is also a broader back-office story here. Corporate costs are rising, and technology is one of the fastest-growing areas of spend. HR and people and culture costs are increasing too. That makes technology investment feel like a contradiction for some providers: reduce overhead on one hand, invest more on the other.

But that is the tension the sector now has to manage. The issue is no longer whether to invest. It is whether that investment is smart enough to reduce friction, improve visibility and deliver measurable efficiency over time.

The reality is tough, but there is still a path forward

If the latest data tells us anything, it is that providers cannot afford to treat these pressures as temporary noise.

Rising demand, workforce shortages, changing regulation and tighter margins are all happening at once. But the answer is not to simply absorb more pressure and hope conditions improve.

The organisations that move forward strongest will be the ones that get sharper about how they operate. They will understand their utilisation, their workforce productivity and their true cost to serve. They will invest in the right systems. And they will look for ways to make every hour, every shift and every process work harder.

Because while the environment is difficult, there is still room to build more sustainable models of care.

And right now, the data is a timely reminder that sustainability is not a secondary issue. It is what will determine whether providers can continue delivering the care older Australians need.