The financial landscape of residential aged care in Australia has become increasingly complex. Providers are facing a convergence of pressures—rising labour costs, tighter funding models, increasing compliance requirements, and growing expectations from residents and families. At the same time, affordability remains front of mind for residents, placing additional scrutiny on how services are delivered and funded.

In this environment, every operational decision has a financial impact. One area that deserves closer attention is how physiotherapy services are structured within a facility.

The growing challenge: balancing quality care with financial sustainability

Margins in residential aged care are tighter than ever. Providers are being asked to deliver higher standards of care, meet stricter staffing requirements, and remain financially viable—all within constrained ANACC funding framework.

This creates a difficult balancing act:

• Maintain high-quality clinical outcomes
• Meet compliance and funding requirements
• Control operational costs
• Keep services affordable for residents

It’s no longer just about delivering care—it’s about delivering it efficiently and sustainably.

The hidden cost of internal physiotherapy models

With the transition from ACFI to ANACC funding, many any aged care providers have opted for an internal physiotherapy model believing that it is a more cost-effective option to meet regulatory compliance and ensure quality standards. On the surface, this can seem like a way to maintain control and consistency. However, in today’s labour market, this model is becoming increasingly difficult to sustain due to the following challenges:

Key challenges include:

1. Recruitment difficulties
There is a well-documented shortage of qualified physiotherapists, particularly those experienced in aged care. Attracting the right talent is time-consuming and often expensive.

2. Retention issues
Even when you secure good clinicians, retaining them is another challenge. Burnout, competition from other sectors, and limited career pathways can lead to high turnover.

3. Coverage gaps and replacement costs
Sick leave, annual leave, and unexpected departures create service gaps. Backfilling these roles—often with agency staff—can significantly increase costs and disrupt continuity of care.

4. Administrative and operational burden
Managing an internal allied health team adds another layer of complexity—HR, rostering, compliance, supervision, and performance management—all of which divert focus from core operations.

When margins are already under pressure, these inefficiencies can quickly add up.

Refocusing on core strengths

At its core, residential aged care is about delivering:

• Safe, high-quality accommodation
• Compassionate, person-centred care
• Strong clinical governance

Operating an in-house physiotherapy service effectively means becoming an allied health provider as well. For many organisations, this stretches resources and shifts focus away from what they do best. There is a growing recognition across the sector that not every service needs to be delivered internally to be effective.

External physiotherapy providers v’s Internal: The Benefits v Costs

Outsourcing physiotherapy services to a specialised external provider is increasingly being seen as a more flexible and cost-effective model.

Benefits of this approach include:

1. Reduced labour risk
External providers absorb the challenges of recruitment, retention, and workforce management. This removes a significant operational burden.

2. Scalable service delivery
Services can be adjusted based on occupancy, acuity, and funding—ensuring you only pay for what you need.

3. Continuity and reliability
Established providers typically have broader teams, reducing the risk of service disruption due to staff absence.

4. Cost predictability
Contracted service models provide clearer cost structures, helping with budgeting and financial planning.

Not all providers are the same

While the external model offers clear advantages, outcomes depend heavily on the quality of the provider. A strong physiotherapy partner does more than deliver sessions—they become an extension of your clinical team.

A high-quality provider can:

• Align therapy programs with AN-ACC funding drivers
• Support accurate clinical documentation
• Help identify opportunities to maximise funding outcomes
• Contribute to improved resident mobility, independence, and quality of life

This is a critical point: physiotherapy is not just a cost centre—it can influence funding, compliance, and overall care outcomes. Choosing the right partner can therefore have both clinical and financial benefits.

Supporting AN-ACC funding outcomes

Under AN-ACC, funding is closely linked to resident acuity and documented care needs. Physiotherapy plays an important role in:

• Maintaining and improving functional capacity
• Supporting mobility and reducing decline
• Contributing to clinical assessments and documentation

An experienced external provider understands how to align service delivery with these requirements—ensuring that care provided is both meaningful for residents and supportive of funding optimisation.

A smarter way forward

In a sector facing ongoing financial pressure, providers are increasingly re-evaluating how services are delivered. The goal is not to reduce care, but to deliver it in a smarter, more sustainable way.

External physiotherapy models offer:

• Greater flexibility
• Reduced operational burden
• Improved workforce stability
• Potential for stronger financial performance

Final thoughts

Residential aged care providers are navigating one of the most challenging periods in the sector’s history. Staying financially sustainable while delivering high-quality care requires thoughtful, strategic decisions. Reconsidering how allied health services are delivered—particularly physiotherapy—is one of those decisions.

Partnering with an experienced provider can help maintain quality, reduce risk, and support better financial outcomes, all while allowing your organisation to stay focused on what matters most: delivering exceptional care and living environments for residents.

At Agestrong Health Group we strive to exemplify this approach—bringing sector experience, clinical expertise, and a deep understanding of aged care funding models to support providers in a practical, sustainable way.