Summary of the 2018 Independent Pricing Review.

You may think the rollout of the National Disability Insurance Scheme does not affect you but if your not-for-profit operates mostly grant-funded, you may want to take heed of the transition in the disability sector. In reality, ‘bulk funding’ as we know it has already made way for ‘fee-for-service’ in other sectors.

Earlier this month the National Disability Insurance Agency (NDIA) released its Independent Pricing Review (IPR). It was undertaken to address pricing efficiencies, deal with feedback of national vs regional pricing disparities, adequacy of provider returns and the risk of undersupplied markets in particular in regional and remote areas.

The review had the objective of identifying key issues and provider challenges. At the core of the data collection were face-to-face and forum consultations with over 1000 NDIS providers but also service providers within adjacent sectors like aged care. Here is a summary of the findings.

 

Pricing Limitations and Shortfalls

The NDIA capped pricing was found to be restrictive in some circumstances causing grief with service providers and participants alike.

Issues identified

  • Provider transition costs due to significant changes to their operating models
  • Cost of delivering services to complex-need participants
  • Travel allowances not adequate for regional and isolated communities

Recommendation

  • In addition to annual indexation of prices, the introduction of Transitional Support for Overhead (TSO) of 2-3% in the price cap for the initial 12-months of the provider’s transition phase is to assist them to operate at a surplus
  • Allow quote for services to isolated regions
  • Increase travel allowance to cover longer travel times
  • Pricing deregulation remains the goal but requires the formulation of an appropriate path

 

Market Challenges

There have been some robust discussions on creating incentives to improve outcomes. Some of the issues that emerged may not come as a surprise to many in the sector but rectifying them now could have a long-term impact on the success of the scheme.

Issues Identified

  • Danger of shortages in high-risk markets such as rural and remote areas and where complex participants are involved
  • Call for ‘outcome-based’ service delivery versus ‘hourly-rate based’ approach
  • Administrative burden to service providers weighing heavily on overhead costs
  • Current price caps are challenging and many providers are unable to operate profitably
  • Undersupplied markets – particularly regional and remote areas

Recommendation

  • NDIA to trial an outcomes-based pricing model to discourage volume of service only and simultaneously increase quality of service
  • Improve NDIA systems and processes around portal functionality
  • Build more notice into cancellation policies

 

Unit Costs

The report found that many providers have had difficulty measuring the costs of their activities and the services they provide and this “was a significant source of stress in many organisations”. Larger organisations hired external consultants to calculate their unit costs but smaller ones were left to spreadsheets (unless they had read Unit Costing for Dummies, of course).

 

Whilst the feedback during the consultations is mostly what was expected, it is great to see issues publicly acknowledged. The NDIA continues to express its aspirations to improve participant outcomes by growing a market underpinned by innovative supports and building a financially sustainable scheme. It has accepted all of the IPR recommendations going forward.