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The cost of quality is...

The Annual Price Review acknowledges the cost burden of compliance. Here's what they heard from consultation - and what they've done about it.

By Jessica Quilty

Updated 15 Apr 20245 Jul 2022
Illustration indicating measuring, charts and costs

The NDIA is making up to $514 million available to registered providers of activities of daily living and community supports to recognise costs of keeping participants safe, particularly during COVID, and the significant overheads incurred by providers in this time.[1] This payment will be delivered as a one-off lump sum to eligible registered providers and will be calculated by the Agency, with a minimum threshold of $5000. Eligible organisations will receive an email with information about claiming the payment (by no later than this Friday 8th July) and have 28 days to accept or it will self-destruct (okay I made the self-destruct bit up – but the 28 days is real). There was apparently an error in the early calculation of some payments last week - read the full notice from the NDIA here.

You may have also heard that as of 1 July 2022, price limits for NDIS supports delivered by disability support workers increased by 9%, including a 2% temporary loading in 2022-23.

But that’s not all the pricing news, the NDIA has released its Annual Pricing Review (APR) 2021-22 Report. For us NDIS nerds, it’s a treasure trove of information to understand how the NDIA has come to its decisions. One of several factors considered in the APR is the cost of quality and safeguarding, so let’s take a closer look.

 

APR key points

  • People told the APR that the Disability Support Worker (DSW) Cost Model and hourly price of support do not properly account for the cost of delivering high-quality, safe supports under the NDIS Quality and Safeguards Commission (NDIS Commission).
  • The APR generally agrees with the evidence presented - the cost of compliance has increased.
  • The support work prices have increased to account for this cost (in addition to other cost drivers).
  • This price increase is rolled into a new operational overhead component of the DSW Cost Model but is presumed to be about 0.7%.  

The consultation

In 2021, participants, families, community, providers, peak bodies, and other sector representatives were invited to make submissions to the NDIA’s APR. Of the 254 submissions received, 48 included feedback on the cost of quality and safeguarding. The NDIA also led 12 working groups to look at each consultation paper topic, one of which focused on the following question: Does the NDIS DSW Cost Model properly account for the costs associated with the delivery of high quality and safe services? If no, how should the Cost Model be adjusted to better account for these costs? [2]

Costs acknowledged in the report include third-party auditing, reporting and managing serious incidents, managing and resolving complaints, internal quality assurance, training, supervision, and record keeping. It was widely reported that these costs have increased from state and territory systems under the NDIS Commission – but without the previous block funding to offset these costs.

 

Updates to the DSW Cost Model

The APR Report acknowledges the increased cost to service providers in delivering safe, high-quality, and compliant services consistent with the regulatory requirements set by the NDIS Commission. While the NDIA found evidence of increased costs for core supports, it said the evidence was less compelling for capacity building supports. From the evidence available, a 0.75% increase in direct worker costs is considered to be a reasonable estimate of the additional overhead costs that core providers now face as a result of the higher quality and safeguarding standards to which they are expected to adhere.[3]

The NDIA uses a tool called the DSW Cost Model to build its hourly support work prices. The DSW Cost Model estimates the fully loaded cost of a billable hour of support, taking into account base pay, shift loadings, leave entitlements, salary on costs, employee allowances, operational overheads (including supervision costs, utilisation costs, and workers’ compensation costs), corporate overheads, and margin.[4] Past versions of the cost model have been silent on quality and safeguarding, but the latest pricing review justifies an increase on direct worker costs by 0.7%–0.75%.[5]

The APR also recognises the impact of COVID-19 and the changes to the SCHADS Award on pricing by at least 1.5%–2% each. As such, the APR recommended an increase of 3.7% (or 3.8% high intensity) to the DSW Cost Model to cover the combined increased costs of quality and safeguarding, COVID-19, and the changes to the SCHADS Industry Award. It is difficult to extrapolate the specific adjustment made for quality and safeguarding in the 2022 version of the DSW Cost Model, however, as it has been rolled into the new “operational overhead” which includes a wide range of other costs. It is also worth mentioning that the controversially low corporate overhead of 12% in the DSW Cost Model has not been increased.

Interestingly, the APR did not accept that there needs to be a decrease in utilisation in the DSW Cost Model assumptions in relation to compliance. Utilisation refers to the time spent by staff undertaking unbillable activities. Claims that increased compliance under the NDIS has resulted in additional unbillable support worker time was not supported by the NDIA’s benchmarking. Further, the claim that frontline supervisors should be classified at a higher level under the SCHADS award than is currently assumed in the DSW Cost Model was also not supported by the NDIA’s evidence.[6]

 

So, what did the submissions to the Annual Pricing Review say about the cost of quality and safeguarding?

The key themes are as follows.

Provider registration and ongoing compliance audits

The cost of provider registration, including audits and the associated administrative burden, was canvassed widely. For many larger organisations, this has meant the establishment of new quality and compliance teams. For smaller or new providers, the regulatory burden is often deemed prohibitive and disproportionate. Concerns were also raised about geographical factors and duplication for professionals such as those in Allied Health.

Practice standards

The sheer increase in the number of quality standards under the NDIS Commission and the minuscule timeframes in which providers have been expected to conform to amendments to the standards have also been raised loudly in submissions.

Incident and restrictive practice reporting

While the NDIS Commission expects real-time reporting, the limited technological solutions and lack of interfacing with CRMs mean providers often struggle to be efficient. And we do know the NDIA loves to talk about being efficient. Moreover, the lack of streamlined reporting and information sharing with states and territories can translate to increased costs through duplication of reporting.

Registration disincentives

While NDIS certification was generally recognised as ensuring a higher level of quality and safety, the financial impost was criticised for penalising registered providers and incentivising growth in the unregistered market. Some felt that it was unfair that unregistered providers could charge the same prices as – well in some cases actually more than – registered providers.

Misalignment between the NDIA and NDIS Commission

The working group also raised concerns about continuity of support and duty of care, where the requirements of the NDIS Commission were not well aligned with the NDIA’s planning processes or with the pricing arrangements. If support is untenable, the NDIS Commission appears to expect providers to continue service until another provider is in place – even if the participant’s plan does not include sufficient funding to safely do so.

These themes are consistent with what we have been hearing for some time, so it is pleasing to hear the NDIA appears to have listened in this round of consultation. The costs associated with registration have also been raised in the NDIS Commission’s Registration Roundtable.

This is just a snapshot of the quality and safeguarding pricing findings for our time-poor friends. You can get all the details in the 2021-22 Annual Review of Pricing Arrangements: Report on Consultations and the Annual Pricing Review 2021-22 Final Report on the NDIA’s website. There are vast amounts of data there, so if you find something you think we’ve missed, be sure to let us know, and we can spread the word.

Thirsty for more? We also have two other articles in this series exploring the pricing decisions for capacity-building supports and group supports. You can read them here:


[1] B. Shorten, Media Release: NDIS pricing boosted to support participants, 22 June 2022

[2] Annual Pricing Review 2021-22 Working Group 4 – Quality and Safeguarding Costs Terms of Reference, p.1

[3] Annual Pricing Review 2021-22 Final Report, p. 74.

[4] Disability Support Worker Cost Model Assumptions and Methodology 2022-23, p. 4.

[5] Annual Pricing Review 2021-22 Final Report, p. 12, 74, 76.

[6] Annual Pricing Review 2021-22 Final Report p.74

Authors

Jessica Quilty

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