Health-Care Stocks Plunge as Australia Restricts Aged-Care Fees

  • Estia Health loses as much as 31%, Japara shares drop 26%
  • Government restricts fees that providers can charge residents

Australian aged-care providers slumped in Sydney trading after the government issued guidelines that signaled tighter rules on fees for services and refurbishments.

Estia Health Ltd. tumbled as much as 31 percent to A$2.17, Japara Healthcare Ltd. dropped as much as 26 percent and Regis Healthcare Ltd. fell as much as 22 percent. The Australian government’s health department will no longer allow senior-care providers to charge certain fees related to projects known as capital refurbishment, according to details it released Sept. 2.

Estia Health has lost more than two-thirds of its market capitalization this year amid concern its funding model will be hit as the government reins in the cost of aged care services. Japara is down about 50 percent this year and Regis Healthcare has lost 36 percent.

“The sector is so contingent on government handouts and is still at risk from changes,” Angus Nicholson, a Melbourne-based analyst at IG Ltd., said by phone. “These highly valued health-care stocks are at risk especially because there’s a lot of pressure in this environment where the government is so hard pressed on the fiscal front, and is looking for savings in the health-care sector.”

The Australian government said the operators can’t charge their residents fees for maintenance inside and outside the aged-care home or for any repairs or refurbishment of a resident’s room after they have left the aged-care home.

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