Is bigger better? Economies of scale in residential aged care

Posted on 24 Nov 2023
Updated on 24 Nov 2023
2-minute read

In Australia, aged care is not only vital but comes at a high cost. With increasing financial viability concerns, this research explores the extent to which larger aged-care providers achieve cost efficiencies in delivering residential aged-care services.

The challenge

The residential aged care sector is essential in providing support services to some of the most vulnerable older Australians. However, there are increasing financial viability concerns, with two-thirds of all homes operating at a loss due to the high costs of delivering care. As smaller operators exit, the industry has continued to consolidate, with more care places in larger homes, operated by a few large-scale providers. Although larger homes and providers are expected to achieve greater economies of scale, the international evidence is inconsistent, with limited evidence in the Australian context. This project investigates the effect of provider scale and home size on the costs of providing residential aged care services across different cost categories, including care, administration and accommodation.

Solution

This project investigates the economies of scale in providing residential aged care in Australia. Specifically, it will seek to address the following research questions: To what extent do larger providers achieve cost efficiencies in delivering residential aged care services? What factors increase or mitigate the scale-related cost efficiencies in delivering residential aged care services?

Outcome and impact

This project will be conducted across disciplinary boundaries. Business and health experts will work in collaboration with industry partner StewartBrown, who is the custodian of a proprietary dataset about the operational and financial performance of Australian aged care homes.