Let me explain why the govt announcement from Friday is...

Let me explain why the govt announcement from Friday is material.

First - the biggest thing the market is worried about with Estia is the impact of ACFI regime changes that roll out for new residents from 1 January 2017 and that could see revenue per patient per day decline by up to $20. At present the aged care providers make EBITDA per resident per day of around $40, so this change to govt funding could see EBITDA halve over the medium term if corrective action is not taken

The aged care companies have responded to this looming reality by introducing new resident co-pay arrangements that have the objective of bridging this revenue gap.

The govt has now guided explicitly that many of these new fees and charges are illegal.

I expect the sector to be off 15%+ in the morning.