RVs do a great job as God’s waiting room
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RVs do a great job as God’s waiting room
OK , Perhaps my banging on about this DHB funding increase being significant is getting a bit tiresome. So I'll give it a rest after this one.
In consideration of what's been said I still can't agree with you Bull and Sailor that this DHB “relative improvement of funding to the minimum wage” ( as per the minimum wage chart already supplied) will just get swallowed into the cost increase spiral. Hence not making it to the bottom line.
Here's one more chart before I leave this bone alone.
This chart is the total OCA care profit and then I've broken that down into the 3 income streams that compose it. Plus my forecast for FY24 tacked on for fun. ($m)
The blue line is the juggernaut of premium care revenue. (does not include resale profit- that falls in the village section of accounts)
The red is “other” income and is mostly from the nursing school they run.
Then there's yellow, the profit on DHB fees after all OCA care costs are subtracted.
https://lh6.googleusercontent.com/7n...w3-ZztXoJDDt98
The point of this graph is to demonstrate the powerful effect on profit from a measly increase in DHB fees that only slightly addresses the growing underfunding we have endured, as per the chart , since 2018.
It seems entirely reasonable to think we can return to the scant profitability of DHB funding we had in 2020 and 2021 . I've entered that same level of profitability for FY24 on this chart, although as per my workings shown over the last few posts , I personally think it will be greater than this.
See the incredible effect it has on the care profit ( green ) . This then goes straight to OCAs bottom line because that's the only place it can go from this chart. There are no more expenses or fees to bite into it on the way.
I'm not trying to convince anyone of anything, we can all disagree and still be friends. FY24 Will come soon enough to tell the story but you might indeed have to pay "a little" more for the shares by then.
Other than my forecast of FY24 these are all facts. I've laid them out here in a straightforward way so that anyone who wants to, can read the earlier posts to easily arrive with their own expectations and come out with their own forecasts.
Love all the work you share Maverick. Would expect there is potential that this will result in higher wages being paid by OCA to their staff. Consider it very plausible that they have stated they can’t pay more as part of negotiations but now the staff know they have received more funding they will be expecting a “catch up” OCA might even agree.
Hopefully it is a well run business and half the new funding does flow to the bottom line.
It is my understanding all providers have to "prove" that some of this tagged funding increase goes directly to their staff.
Great in theory but good luck to the Govt trying to sort that out. I think as long as it is seen to be done in the spirit of staff benefit it will be left alone by GOVT. Perhaps only used as a punitive measure for the dodgy providers.
Most likely this rule is purely set to do the PR spin thing to show the NZ tax payer that it isn't going to end up in shareholder pockets. Fundamentally, surely it is only there to stop rest home closures so ultimately it will be used to run the rest home and stop them closing in whatever spending column it ends up in. That's my take on it.
Firstly , how I see this working for OCA is that those wages levels are already being paid for by OCA set at levels needed to attract and retain staff. As Winner always suggests ," selling villas to subsidy the care." So in effect that cross subsidizing can now reduce proportionally. In OCAs case its the premium charges subsidizing the care.
Secondly , The key to this whole thing for me is not that the DHB rates went up, rather , its that they went up to an extent that the "Relative gap between wages and DHB subsidy" has finally actually narrowed for the first time in since 2018 . As opposed to always increasing. That's the game changer. So rather than more funds each year being sucked from the premium revenue to pay staff, some of that underfunding will now come from DHB. There is still going to be unacceptable returns on basic care but it will be better than it was.
Yes , we all expect pay rises for the staff and so will they but this is the GOVT is stumping up for more of this burden than they were and more than the standard wage inflation. There is a partial long term catch up component in this latest increase that wont all need to be spent on staff.
The Government budgeted funding allocated to providers to reduce pay disparity for nurses and caregivers, $200m for year to 30 June 2024, in my understanding must be used for that purpose, so none will "flow to the bottom line" as you put it. We don't know how much OCA will receive from that source and OCA probably don't know either, but we/OCA do know that for the quarter 1 April-30 June OCA received $1.4m for that purpose and I am sure will have not hesitated to raise wages to reflect that.
The other change to revenue is the increase in the weekly sum paid as the Rest Home Care Subsidy, about 9% from 1 July 2023. This is the maximum amount chargeable to bed occupants absent any premium add-on charge for additional amenity, and because it is to cover all overhead costs some portion can be taken to the bottom line as profit/return on capital invested. In many instances even non-profits cannot make ends meet from this payment, which is why we have had media reporting closures in all parts of NZ.
Many operators are pivoting to the RV model and ORA's for care suites, and minimising the traditional care beds component. So in fact, perversely, the solution, as with The Helier, is to go upmarket and deal exclusively with those who can afford to pay outside of the RCS system and whose asset base excludes them from eligibility. Even the significant non-listed private operators, Sanderson Group, Generus Living Group et al know this and most operators are building/developing accommodation and supporting facilities of much higher quality than the early villages that are still on foot and will remain much cheaper to enter. In that respect it is a good result for occupiers who can afford it but nationally the deficit in care beds is increasing because there is no margin for owners/developers. The fact that the listed entities openly say this, albeit discretely still, is proof that the future of aged care in this country (and in Australia) is quite bleak.
Worries me a bit this talk about a chunk of Govt pay increases flowing through to the bottom line instead of going to staff …I might have misinterpreted what some are saying but that’s the impression
Oceania seem a pretty honourable lot ….I recall they repaid the covid wage subsidy they got
If the DHB funding increase was going to pay for the increased expenses only, OCA would end up being a Government Department or cost recovery only operation. They have to get a margin on top of that, to pay for increased overheads and profit margin. I think everyone understands that.