There's not doubt the Government wants to reduce its costs in...

There's not doubt the Government wants to reduce its costs in subsidising aged care, but not to the detriment of a base level of care. Given the low care/high care model whereby the aged care providers are operating in the high care space, several factors are at play here

1. The Government isn't going to allow back yard operators to set up
2. If they could set up, high care is expensive as it requires large infrastructure, whereas low care infrastructure is already in place (i.e. the homeowner's place of residence)
3. The Government needs the high care providers to be profitable, otherwise they won't invest in additional spaces which is needed given the demographics, and the government wants a private sector solution (either for profit or not for profit).

However, it is clear that the Government wants to restrict the profitability of the for-profit sector, so some of the claims will be denied but they will still have regular government revenues flowing in - just not at the levels that they previously claimed. So assuming they have high occupancy (likely) and manage their costs well (likely) and don't get too aggressive on expansion (likely), they have very sound revenues but not at the PE ratio that they once traded on. A growth stock is now a yield stock. Funny how these things happen !!