Growth amid uncertainty

Large aged care players are cementing their growth strategies to meet demand and survive a turbulent time for the sector.

High demand, lower construction costs and the need for economies of scale to survive a challenging financial environment are spurring investment in new aged care developments, according to Baptistcare chief executive Russell Bricknell.

“I think this is one of the most dynamic moments this sector has had in quite some years, and particularly in Western Australia where the sector hasn’t been investment-oriented in some time,” Mr Bricknell told Business News. 

“I think the whole sector now is focused on investment and that’s quite a significant change.”

Baptistcare, ranked on the BNiQ database as WA’s seventh largest aged care organisation by number of beds, is cementing its position in the sector with developments planned in Byford and Rockingham, and the recent purchase of the Kalkarni Residency in Brookton.

Mr Bricknell said Baptistcare chose to add Kalkarni to its growing rural property portfolio because it provided the opportunity to offer home care services, independent living and residential care in one location. 

“There should be a seamlessness to the service delivery you receive and there should be a sense of integration with related health providers that we become part of in your network,” he said. 

“We are looking strategically for locations where we can do that as part of our future direction.”

Regional centres are attractive places for investment for Baptistcare, with 10 of its 19 properties located outside of the Perth metropolitan area.

“That’s really deliberate,” Mr Bricknell said.

“We think as the population in WA grows, regional centres will also grow and regional centres are quite often great locations to deliver a continuum of care.”

Baptistcare relinquished the management of Dryandra Residential Care in the Wheatbelt in December and chose not to buy the property, which was instead purchased by Roshana Group. 

“While Dryandra was an opportunity, we also have a couple of new builds coming in the next 12-18 months and a few other changes happening; so you can’t do everything at once,” Mr Bricknell said.

“So that’s why we worked with the Dryandra community organisation to find an alternative.” 

Aegis Aged Care Group, the state’s largest aged care provider according to BNiQ, is also expanding, with projects in North Coogee and Alkimos set to contribute a further 375 beds to its portfolio in 2020.

Executive manager operations and marketing, Kevin Brimblecombe, said there was ongoing high demand in WA due to low levels of development for a number of years before the current uptick.

“There has been a number of projects which have come recently but the decade before that there was very little,” Mr Brimblecombe told Business News. 

Hall & Prior has invested $90 million in the 160-bed luxury Karingal Green aged care facility in High Wycombe, which is due to open in March 2020.

Opal Aged Care expanded to WA in 2014 and has grown quickly to build eight facilities in the state.

Opal has a $31 million development under way in Treeby to be opened in July and is seeking approval to develop a three-storey aged care home in Halls Head.

Signature Care and National Lifestyle Villages are waiting for approval for a $14.1 million facility in Singleton and $7.8 million lifestyle village in Piara Waters, respectively.

Felicity Beaulieu says Berrington Care will fit seamlessly into Bethanie’s portfolio.

Despite the number of new developments, some providers are struggling financially.

The StewartBrown Aged Care Financial Performance Survey Sector Report of September 2019 collected data from 1,043 aged care providers across Australia and found 51 per cent of aged care homes were operating at a loss for the September quarter.

The report said the residential aged care sector: “[C]ontinues to deteriorate in all geographic regions, and unless additional specific targeted funding is implemented it may lead to closure of residential aged care homes and will risk further necessary investment into the sector.”

The March 2019 StewartBrown survey noted the deterioration of the sector began in 2017, which coincided with the federal government’s decision to save $1.2 billion over four years by changing the criteria relating to the Aged Care Funding Instrument used to determine the needs of residents.   

Meanwhile, one group hit by the sector’s financial pressures was Berrington Care, which went into administration in July last year, with its high-end facilities in Como and Subiaco bought by fellow aged care provider Bethanie in early December 2019. 

Bethanie acting chief executive Felicity Beaulieu said the purchase of Berrington was spurred on by financial changes in the industry demanding a growth strategy.

“When the Berrington opportunity came up, I think we recognised the premium brand and quality associated with Berrington as a quality provider and [thought] it really would fit with us organisationally,” Ms Beaulieu said.

Bethanie is also spending $8.6 million building 34 cottages to be opened in May 2020 in Eaton. 

Royal commission

The Royal Commission into Aged Care Quality and Safety final report is due to be released in November 2020.

The interim report released in late October, titled ‘Neglect’, found the system was failing to meet the needs of its older, vulnerable citizens. 

“[It’s] abundantly clear to everyone that what we are doing at the moment in the sector is not acceptable in general and for us as an organisation,” Baptistcare’s Mr Bricknell said. 

“We are working really hard to ensure that the quality of care that we deliver to people is consistently high and consistently meeting their needs.” 

One way Baptistcare was ensuring quality care was via investment in its people and organisational culture, he said.

Aegis Aged Care’s Mr Brimblecombe said he thought the royal commission would change the way aged care was viewed in the community and would hopefully provide recommendations to help organisations improve the system.

“We are hoping for benefits for the consumer because obviously that’s why the royal commission was called, and we are hoping for an improved model of funding so we can deliver an improved level of care beyond what’s currently financially viable,” he said.