Price Guide: why are these prices stagnant?

The latest NDIS pricing arrangements heralded significant price rises for providers of core supports. However, support coordination, therapy, and plan management providers were left without an extra dollar to add to their hourly rates. So why did the latest price hike skip over these providers?

Gone are the days when NDIA’s pricing decisions were shrouded in mystery. The most recent price guide update came accompanied by a 228-page report outlining the reasoning behind all pricing decisions. The Annual Pricing Review Final Report (APR Report) is a treasure trove of detail for we pricing nerds and gives some frankly fascinating context behind the recent pricing decisions. So, what have we learnt?

Most providers will find the prices too low – and that’s by design

First, a bit of context for how the NDIS develops its prices, because it ain’t just pulling these numbers out of a hat. When the NDIA sets prices, it collects a huge range of data from the sector about the actual cost of delivering supports. There will be some providers able to deliver a support for comparatively low cost and others who need to charge more to generate a surplus. So where should the NDIA set the price?

As it explains in the APR Report, the NDIA’s goal is not to set a price that would return a surplus to most providers or even the average provider. Rather, the NDIA sets prices based on the performance of the 25th percentile (what they call a “theoretically efficient” provider). This is the cost level that one in four providers are operating at or below, which the NDIA considers to be a reasonable target for other providers to aim for and a fair way to set pricing for government spending.

In other words, if three quarters of providers look at the new prices and think “that’s too low!” (or as the NDIA would have us believe, “I’m so inspired to be more efficient!”) then the price has been set at the NDIA’s ideal point.

Therapy: The NDIA believes prices are too high

The last time NDIS therapy prices were changed was 1 July 2019, when prices took a massive jump. In metro areas, prices increased between 8.2% and 31%, depending on the therapy. This coincided with the rise in remote loadings, effectively increasing therapy prices by up to 57% in very remote areas. In this APR Report, the NDIA explains that despite the fact that 2022-23 will be the fourth consecutive year at the same prices, it still believes those prices are too high.

In support of this conclusion, the NDIA cites three key sources:

• A joint submission from 14 of the largest therapy providers, developed by Deloitte Access Economics. This demonstrated the fully loaded cost of a theoretically efficient provider would be $184.57 per hour (the “fully loaded cost” is the figure that eventually translates to price. It includes all direct and indirect costs, overheads and margin).

• NDIA’s own research into private billing rates, which looked at over 7,000 rates and concluded that the average fully loaded cost was $172 per hour.

• A comparison with other government insurance schemes and funding programs for therapy, which found NDIS price limits to be “broadly consistent”.

Whilst the NDIA maintains that current prices are too high, it has opted to maintain pricing levels to avoid disrupting an already thin market. It has also recommended collaboration between government departments to better align pricing across schemes.

“Average” is meaningless in the plan management market

In setting prices for plan management, the NDIA throws the 25th percentile principle out the window. The report states that “the offerings of Plan Managers and the needs of participants are so diverse as to militate against modelling average costs”. To pull out just some of the fun facts that demonstrate this diversity:

• The largest 10 providers serve 42% of participants, while the smallest 1,000 providers serve only 11% of people

• Plan managers are paid a flat fee regardless of a participant’s transaction volume. However, their workload varies wildly from person to person – in 2021-22, the 10% least frequent spenders required eight or fewer transactions, while the top 10% required over 236. This means that the actual cost per transaction is usually somewhere between $5.67 and $105.52

• While 86% of larger providers return a surplus, only just over half of small and medium providers do

Rather than looking at average costs, the NDIA argues that a better methodology is to analyse the health of the market as a whole. Cherry-picking data from the benchmarking study compiled by the intermediaries peak body, Disability Intermediaries Australia (DIA), it highlights the following:

• 54% of surveyed providers returned a surplus in FY 2020-21

• The average EBITDA as a share of costs was 24%. EBITDA stands for earnings before interest, taxes, depreciation, and amortization and is a commonly used metric to compare financial performance between different companies. For comparison, a Deloitte benchmarking study in May 2022 found the average EBITDA for NDIS support work to be 11.4% for small providers and around 14% for medium and large providers

• The average EBITDA for large providers was 30%, compared to 25% for medium providers and 20% for small providers

The eagle-eyed among you may have noticed that the last two of those points were figures based on average costs, despite the NDIA’s own insistence that these aren’t reliable data points for setting plan management prices. And a tiny peek under the hood of the data reveals a very interesting picture – while the average EBITDA in DIA’s data set was 24%, the median was only 3%, which suggests that most providers are operating well below the average.

One of the most interesting aspects of the APR Report is the insight into the principles driving pricing decisions, like the “theoretically efficient” 25th percentile described above. The government doesn’t have unlimited money to spend on NDIS, so there will inevitably be upsides and downsides to any pricing strategy. But how does it decide where to draw the line? On plan management, the insight into these principles isn’t really made explicit, which makes it hard to judge the analysis of market health. Is the price right if half of providers return a surplus and a select few return a large one? The report leaves the impression that the NDIA has not decided that the current pricing is right but rather that the information it has suggests that it’s not wrong enough to change – yet.

NDIA wants to better understand support coordination before changing its price

The one-sentence summary of the support coordination pricing review is this: “Most providers appear to make a modest return and it would be more appropriate to first clarify the role before finalising the pricing arrangements for this support”. Cue the frustrated sighs of support coordinators everywhere, for whom the prices feel pretty bloody finalized after already operating under them for two years.

So, what did the report teach us about the support coordination market?

• Most providers are very small – half of all providers account for only 2.2% of funding (claiming an average of $3,625, or around 36 hours per provider). At the other end, the 40 largest providers account for 25% of all funding (claiming an average of $2.3m, or around 23,000 hours)

• While larger providers enjoyed better financial returns in plan management, the opposite is true for support coordination. Small support coordination providers have double the EBITDA of their larger counterparts (6% vs 3%, so it’s fairly thin either way)

• Of the more than 300 providers surveyed by DIA on their 2020-21 performance, 41% returned a surplus, 39% broke even, and 20% reported a loss

• The scale of this surplus was generally very small, with an average EBITDA of 3% (and for you big ole’ data nerds, the median was 1%)

The same external cost pressures that led to a 9% price increase for Core providers, also impact Support Coordination providers. The report acknowledges that it heard this in submissions but does not offer any explanation for why these have not led to a new price (or a new benchmarking study at the very least), beyond saying that the role needs to be more clearly defined first.

Given the extended and repeated reviews into the role of support coordination over the past few years and the time the industry has put into contributing to them, this is a frustrating result to say the least. Which begs the question - what is left to review? If we accept that the NDIA already knows what support coordination is, and it has received benchmarking data from DIA about what it costs - perhaps the real question the pricing review is asking the NDIA to consider is: what is support coordination worth to the NDIS, and what is the NDIA willing to pay it? And that is a different question.

For those nerds out there whose appetite for pricing details is somehow still not satisfied, please check out our articles on

• Summary of 2022-23 Price Guide changes

• The Price of Quality

• Pricing for Group Services

Since the release of the new price limits and APR report, DIA has responded to the NDIA’s price freeze in two reports, one for Plan Managers and one for Support Coordinators.

The full Annual Pricing Review Final Report can be found here.