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Behind the Benchmarking

Rob takes a look at the Ability Roundtable's Financial Performance & DSW insights from 2021

By Rob Woolley

Updated 15 Apr 20244 Jan 2023

It’s a new year! A fresh year for a fresh start with fresh thinking. And that means one thing: sector data, benchmarking, and analytics (well at least that’s what new year means in my house).

There is an enormous amount of data available for anyone involved in NDIS service delivery. We really are spoiled for choice, with a whole range of rich, in-depth data points across billing, planning, outcomes, and much more. The Ability Roundtable is an initiative that collects, analyses, and presents an enormous amount of data to provide insights for providers across Australia to benchmark themselves against the rest of the sector (and provide some observations for government). One of its benchmarking studies focuses on financial and disability support workforce benchmarking, which is the focus of this summary. The full report has just been released and is available here.

The Roundtable data does much of its benchmarking against the Disability Support Worker Cost Model. If you aren’t familiar with this NDIS instrument, the cost model is how the NDIA sets the pricing caps in the Pricing Arrangements and Price Limits document. The cost model combines all the things the NDIA says a provider needs to do to deliver a service, including worker pay, supervision and training costs, worker on-costs like leave and super, overheads, and a modest profit margin. You can find the latest complete version of the cost model here.

One of the key things about the cost model is that the NDIA expects the majority of providers to find the price caps too low to successfully and sustainably deliver supports. As Evie explained here, the NDIA sets the figures in the cost model at the performance of the 25th percentile, or a “theoretically efficient” provider. This means that 75% of providers will look at the amounts in the cost model and expect to not meet them, which the NDIA hopes will encourage providers to find efficiencies and adopt innovative practices.

The most recent Ability Roundtable financial benchmarking report analysed the financial results, attributes, and profiles of 46 organisations in the 2021 financial year, totalling almost $6 billion in turnover. These are our key takeaways.

SCHADS vs EBA

It was interesting to read that 40% of the participating organisations engaged workers under an Enterprise Bargaining Agreement (EBA) rather than the award, confirming that the decision for providers to stay with SCHADS or move to an EBA is extremely complex. If you’re knee-deep in award changes right now, the stability of an EBA might seem like dreamland. But it’s not all roses: some components of an EBA may tie the provider to higher entitlements (like the leave entitlements highlighted in the report) that worked in a pre-NDIS market but don’t fit modern pricing requirements. We know that industrial relations structures will be a major decision point for providers in the coming years.

Also on the workforce front, casual staff turnover has increased since 2018–19, but permanent staff turnover has decreased. Given that this is 2021 data, this could be related to Covid restrictions and the instability of some service delivery during periods of lockdown.

Creativity in supervision models

One big challenge for providers is the span of control; that is, how many workers the cost model states each supervisor should be overseeing. The 25th percentile in the cost model is 15:1, or one supervisor to 15 workers, but the Ability Roundtable data records a mean of 13:1 in providers that were part of the benchmarking. The report also highlights room for more investigation into non-typical supervision functions – things like horizontal and vertical supervisory functions, rostering and scheduling teams, customer engagement teams with supervisory functions, and self-managing teams were all reported as organisational structures that may help providers meet the 15:1 target. Many providers will take a particular interest in how these more creative supervision functions might sit with traditional Award descriptions of roles.

The report also notes that the efficient span of control was achieved by around half of providers in the benchmarking group, indicating that this may not be the number one priority for providers looking for efficiencies.

Bigger is not always better

Many providers we work with have plans for aggressive growth in the number of participants they support as a financial safeguard. This report shows us that size does matter in the NDIS provider market – but bigger is not always better, especially when we’re talking about achieving good workforce utilisation rates. 

Utilisation is the portion of a worker’s time spent doing billable work. Utilisation rates from the benchmark group ranged from 58% to 97%, so there’s wide variety in how providers approach this metric. Generally, higher rates utilisation are good news for provider finances.

The report has some fascinating analysis of utilisation rates that really highlight one of the challenges of running a business in this sector: utilisation does not markedly increase with an increase in the number of participants a provider supports. A 1% increase in participant count resulted in only a 0.01% increase in utilisation rate (after adjusting for the effect of other variables), and in Group and Centre Based supports, a 1% increase in participant count actually reduced support worker utilisation (0.05% decline), after adjusting for variables. Senior leaders and boards should assess whether a drive for more participants is hollow or a genuine safety net.

Insurance rearing its head again

In December 2021, I wrote about the challenges of providers obtaining appropriate insurance coverage for some of their supports (can’t you tell how much fun Christmas is at my house!). This report reinforces that insurance – although of a different type – is still a challenge for providers.

Workers compensation coverage is a key insurance for providers, and premiums are calculated as a percentage of a provider’s annual worker salary amount. Workers compensation rates have long been a challenge for many providers, and that appears to remain the case. 78% of the providers who responded pay workers compensation rates higher than the cost model assumption (which is set at 1.7%). The variance was huge across all providers surveyed (the lowest was 0.3%; the highest was 7%). Given how vital workers compensation coverage is to the successful financial governance of a provider, this cost will be a headache that many providers will expect the NDIA to review.

Can we pay the bills?

Liquidity ratios can uncover a serious financial risk for providers. A liquidity ratio is one indicator of the financial health of an organisation, capturing whether a provider could cover all of its liabilities if the business closed tomorrow. Essentially, if all our bills come in on the same day, could we pay them?

While some providers reported very high liquidity ratios, the majority were much closer to a ratio that was concerning (45% of providers reported a ratio below the recommended range or at a level classified as a concern). In addition, 72% of providers reported they had less than three months of spending in reserve to cushion against any financial shocks. And if there’s one thing we know the NDIS can bring, it’s shocks. The ideal response to this is for a provider to build up more reserves, but we know that’s easier said than done.

What can providers do with this information?

One significant takeaway the report hints at is that there is currently no organised, consistent way that providers operating in line with the cost model expectations can share that experience and knowledge with other providers. At the moment, the 25th percentile is fairly invisible to most of us. I’m not even sure most providers would know whether they are operating in the 25th percentile!

Part of that will be the pseudo-market approach we’ve all been dragged into (I say pseudo-market because many providers spent decades working closely together and supporting one another, and that can’t be wiped out in a few years), and part will be down to the impact of Covid on face-to-face networking and sharing. Ultimately, though, we’re all in this together, so sharing what works and what doesn’t should be a key part of growing the whole sector.

About the Ability Roundtable

Established in 2013, the Ability Roundtable is a by-the-sector, for-the-sector initiative that fosters innovation and service improvement in the disability services sector by providing a confidential and trusted platform for disability service providers to benchmark their services across Australia. With a current membership of over 60 disability service providers, the Roundtable offers a growing range of benchmarking groups, currently focus on supported independent living, allied health, and core supports. Benchmark data covers both operational and financial dimensions. The Roundtable provides an opportunity for participating organisations to uncover and share innovations and service improvements to rapidly accelerate efficiency and effectiveness of services, leading to better service outcomes for customers.

To find out more, visit abilityroundtable.org/.

Authors

Rob Woolley

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