Aged care providers say the federal government's decision to rejig the funding formula for their services means they're facing a revenue shortfall of $750 million over the next two and a half years.

Labor announced in April it was tightening the assessment criteria of the so-called aged care funding instrument (ACFI), allowing it to redirect $1.6 billion over five years to sector-wide reform.

Now the peak body representing providers has crunched the numbers and determined the changes will cost them up to $23,000 per resident each year. That's $63 a day.

The average loss per facility is $125,000 a year, according to the Centre for International Economics, which carried out the modelling for Leading Age Services Australia (LASA).

The changes to the funding instrument, effective from July, are intended to stop the massive blowout in care subsidies the government was facing.

Labor says the rejigged formula, which is used to determine residents' care needs, will return spending growth to between two and three per cent above indexation.

But LASA chief executive Gerard Mansour says restricting funding regardless of need is a backward step.

"The growth that's come in the ACFI tool is because it meets its original purpose, which was better matching care and funding needs," he told AAP.

"That ought to drive the budget and not the other way around."

The changes mean hygiene and medication needs will be given less weight when determining care costs. There's also a one-off reduction in the amount paid at all care levels for 2012/13.

"The driver to funding shouldn't be a projection of growth, it should be what are the needs of residents and people that we're caring for," Mr Mansour said, adding the solution was simple: "More money from the commonwealth."

LASA wants the federal government to cough up an extra $1.1 billion over four years and scrap the one-year funding freeze.

Labor should commit to an independent cost-of-care study to calculate what it actually cost to look after residents, he said.