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Are service providers in trouble?

Rob explores the concerning provider financial and workforce benchmarking data emerging from the Ability Roundtable White Paper.

By Rob Woolley

Updated 15 Apr 202415 Aug 2023

Recently the Ability Roundtable launched their White Paper collating their key financial and workforce benchmarking data, which gives us a greater understanding of how providers have been tracking over the past few years. The Ability Roundtable offers service providers the chance to see how they are doing compared with other providers across Australia. This benchmarking collects a range of data points and allows providers, the sector, and government to see trends, threats and opportunities to improve practice.

The data set comprises 40 participating organisations representing around $5 billion in revenue, with more than 35,000 workers and supporting nearly 57,000 NDIS participants. These organisations provide a range of services including core supports, therapy services and support coordination.

It’s fascinating reading, born from real-life data and experiences. But it’s not all roses. These are the key insights:


The majority of providers are making a loss…

There’s no other way of saying it: the financial health of many providers is looking very shaky.

In Financial Year 2021-22, 68% of providers in the sample size reported a loss. If you laid out the financial returns of all providers surveyed, the middle point would be a 2.6% loss, with a quarter of providers reporting a loss of at least 8%. This was a year deeply affected by Covid, but so many providers reporting such significant losses is still pretty terrifying. Even the most profitable providers reported a profit of only 1%, which is not sustainable in any successful organisation.

Looking to the 2022-23 Financial Year, 64% of participating providers reported a loss in the first six months. The dozen or so providers doing it toughest in this period reported a loss of almost 4%. Even the financially healthiest organisations were reporting profits of 1.5%, still less than the 2% that the NDIA models for as an acceptable profit margin in the Disability Support Worker Cost Model (more on that later).

The Ability Roundtable has 4 years of longitudinal data and using predictive analysis it doesn’t look like the financial pressures will ease in Financial Year 2023-24. The modelling suggests more than 76% of benchmarking providers will be operating at a loss by the end of Financial Year 2023-24. For more than 50% of the group, this would mean three consecutive years trading at a loss. Reserves – and morale – will be running low. The market, the sector, the Scheme and participants cannot continue on this trajectory.


…further indicating that the DSW Cost Model Pricing model is flawed

For those not aware, the NDIA’s pricing model is based on the price being viable for 25% of organisations (or the most effective 25% of the market). That means if there are four providers in a room and three of them are making a loss each year, the NDIA accepts that as a reality of the pricing model. One of the aims of this pricing model is an incentive for those three providers who are struggling with the pricing model to become more efficient and reach the 25th percentile. But let’s be honest: we know that is not how the real-world works, and it’s certainly not realistic when so many of the increased costs that providers are grappling with are firmly outside their control. Providers have no control over cost-of-living pressures, inflation, changes to NDIA billing systems to adjust to, increased NDIS Commission obligations, insurance costs, etc. The call from the Ability Roundtable is for the NDIA to rethink this pricing model before we are left with serious quality concerns in services.


Providers are becoming more efficient

The data also examines the change in costs related to overheads. Overheads are classified as all organisational costs excluding direct staff costs, supervisor costs and consumables. The NDIA Disability Support Worker Cost Model puts operating expenses / overheads at 12.5% of direct costs.

Since the 2019-20 FY, the median overhead percentage for providers has reduced from 32.5% to 19%. This tells us, broadly, that providers are getting more efficient in their back-office systems. Many providers are also now marking over ten years in the Scheme, so some degree of efficiency would be expected from growing experience.

But this tells a story in itself: if providers are by-and-large reducing their back-end costs, what is causing the significant losses?

This reduction also comes with risks. Anyone can cut overheads - an angry toddler with a red pen can wipe out entire organisational functions and save money - but every time an overhead is reduced it comes with the risk that a quality component is also reduced. This is especially hard when NDIS Commission obligations continue to increase with no direct growth in the Cost Model hourly cap. And even with this trend towards more efficiency, most providers still aren’t meeting the percentage modelled by the NDIA.


Salaries don’t stack up

Across the last three years, participating organisations paid workers about $1 per hour higher than the DSW Cost Model allowed for. This is a good thing (given the cost-of-living pressures everyone is under), a sign of a competitive workforce environment, and an indicator that something isn’t right in the Cost Model.

In 2019-20, 70% of disability support workers were paid less than $30 per hour. Whereas in 2021-22, 83% of disability support workers paid more than $30 per hour.

I don’t think anyone reading this would say “I think support workers should be paid less”. But that commitment must come from the NDIA and the DSW Cost Model to be sustainable.  


Workers Compensation Insurance - the source of so many headaches it should be sponsored by Panadol

It’s been several years since I stepped back from managing service delivery but the phrase ‘workers comp coverage premium’ still sends shivers down my spine. If we zoom out for a second, we should be grateful that we have an industrial relations setup where a worker is supported if they incur an injury while doing their job. Nobody should go to work and come home injured. But it’s been a major cost pressure for many providers for a long time, and this data indicates nothing has changed.

The 2021-22 data shows that the majority of providers (around 87%) pay workers compensation premiums above the Cost Model assumption of 1.7%. This compares to around 78% in 2020-21, meaning finding competitive workers comp insurance is getting harder year-on-year. The median workers compensation premium has risen from 2.5% to 2.8%. But those kinds of figures will be dreamland for many providers: some are paying upwards of 10% of salary costs in workers comp premiums. If you deliver Home & Living supports or any kind of overnight supports, you’d be feeling this pinch even harder. Ability Roundtable members are reporting premium increases for the current financial year of around 4.4%, which is more than 150% above the NDIA cost model assumptions.

The one-size fits all approach to a target in the DSW Cost Model simply does not work. There are so many variations by service type, complexity of supports delivered, and state & territory.

This is a key threat to doing business that is threatening to flow over into service delivery. We aren’t pretending that the NDIA has control over insurance providers (although there are potential solutions where governments come to the table with industry and insurers to find a brokered solution), but the DSW Cost Model simply can’t stagnate on this.


I wish I had a more positive way to end this article. But I don’t – it’s really, really hard for providers at the moment. And many leaders in providers are rightly having sleepless nights about how all this stacks up. The good news is that the Ability Roundtable report is a well researched White Paper that makes a number of calls to action. Most importantly, it recommends an Independent Pricing function that monitors and sets NDIS pricing separate from the Agency itself. With the NDIS Review final report fast approaching, let’s hope this is on their agenda.

The Ability Roundtable White Paper is available now.

The Ability Roundtable is currently undertaking its Financial and Workforce benchmarking activity for Financial Year 2022-23, and there is still time to get involved.

If you want to measure your performance against your peers in the NDIS sector and be a part of Telling the Sector’s Story reach out to the Ability Roundtable team through their website, LinkedIn or by emailing [email protected].


Rob Woolley

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