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Thinking Thin Markets

Thin markets dramatically effect choice and control. Rob covers how the NDIA plan to respond to this issue.

By Rob Woolley

Updated 15 Apr 202422 Sept 2021

Metro areas, regional areas, remote areas, very remote areas – nowhere is safe. And no, we are not talking about the Delta strain, but thin markets for NDIS services. The phrase “thin markets” is thrown around pretty often in NDIS World. If I had a dollar for every time I’ve heard it in the last seven years, I wouldn’t be driving a scratched-up 2003 Ford Focus. But it’s a significant problem for a Scheme that aims to deliver choice & control to all participants, whether they are in Bondi or Bourke. So, what exactly is the NDIA doing about thin markets? Let’s take a look, because it’s actually quite a lot.

What is a thin market?

A thin market has a pretty simple definition – it is a situation where demand and supply are low, which leads to a lack of choice. In the case of the NDIS, it often occurs in rural or remote areas that lack the population needed to establish a sustainable business. But the term is used more broadly in the NDIS to describe a range of circumstances, including low demand, low supply, high demand with low supply, immature markets, and straight-up market failure (where there are literally no providers to deliver specific services).

Anyone who has been involved in service delivery pretty much anywhere in Australia will agree that there are problems with thin markets, and that they’re not limited to only the remotest parts of the country. I’m in ACT and we’ve had NDIS for longer than almost any region, yet even now it’s common to wait well over six months for appointments with in-demand services like Behaviour Support Practitioners. And why do we want a diverse and healthy market? Two words and an ampersand, friends: choice & control. A small market means limited choice & control, which means the fundamental idea of the NDIS (moving from a welfare-based model to a market-based, insurance approach) isn’t realised.

One of the problems (expertly summarised by John Walsh at WTFH in July) is that you can’t use the same pricing model in Sydney as in Strahan. Market stewardship is how the NDIA fosters a healthy, open market for NDIS supports. But there is very little international precedent or evidence for how market stewardship for a Scheme like NDIS should work – only that the establishment of a market stewardship function and identifying clearly who carries it out are vital. But logic says that in countries as diverse as Australia, you need a more nuanced approach than simply three tiers of pricing.

Why are thin markets different in the NDIS?

The NDIA has some relatively sophisticated ways to measure whether a market is thin, including plan utilisation, provider concentration, total plan budgets for a geographical area, provider growth, and whether participants report that they feel they choose who supports them. But in other markets and sectors, the two main hallmarks of thin markets are price volatility & vulnerability, and low transaction volumes. This means prices go up and down a lot to reflect (and respond to) the instability of supply and demand and that there is often a small number of purchases.

These hallmarks uncover a number of major problems for traditional definitions of thin markets in NDIS World. Price caps for registered providers prevent the price volatility that would reflect the actual state of the market. We also see even more pressure on already razor-thin profit margins. Moreover, there is added urgency in purchasing NDIS services. If you’re buying a pair of Crocs, it’s usually not a big deal if you can’t purchase them at exactly the time and price you want. You can either wait for the price to change or purchase a more fashionable piece of footwear instead (I love Crocs, btw). This doesn’t apply to NDIS services. If someone needs some Daily Living support, they usually need it now.

So - the big question - how does the NDIA address thin markets/

At the moment, the NDIA has a number of interventions being tested in a wide range of places (which can be found on this page Under Trial Locations). The NDIA lists the following examples of how it conducts market intervention:

  • Providing information signals: this intervention is based on the idea that timely and relevant information is essential for the market to function. This includes use of the Provider Finder, Market Insights, Market Position Statements, and the Market Analytics in the Quarterly Reports.
  • Market facilitation: improving connections between providers and participants. Ideas in previous NDIA Market Approaches documents have included the useof ILC funding to support organisations to link people to their local communities, using LACs to support individuals to create these links, and working with groups of providers to upskill them in navigating the NDIA. The vast majority of current interventions in thin markets are market facilitation interventions.
  • Coordinated funding proposals: this involves multiple participants and their Support Coordinators purchasing services as a group, so a more stable pool of funding is available to providers entering the market.
  • Direct commissioning: this is when the NDIA directly commissions providers to deliver a service in an area that is designed to be used when other interventions have failed. It is a formal contract between the NDIA and a provider/panel of providers for long-term service delivery. This is often controversial as it can look a lot like the old days of block funding. But the Agency has committed to act in the least interventionist way possible, giving the market the opportunity to grow itself, so direct commission is rarely used. In fact, there are currently only three direction commissioning arrangements in place in thin markets across Australia.

Addressing thin markets is a long-term goal, but the foundations need to be laid now. If some markets or regions are allowed to slip off the back of the treadmill, it’s going to be harder and cost more to get them back in stride. One of the problems with direct commissioning is that it is a short-term fix, even with the NDIA referring to its being used for longer-term service delivery. Ultimately, there are many complex social, financial, cultural, geographical, and technological reasons why a given market hasn’t grown to offer choice. Direct commissioning (and other highly interventionist approaches) tick the immediate box – people get the support – but don’t directly address any contributing factors.

Thanks, Robbo, this is all heaps interesting but what am I supposed to do with all this information?

You’re welcome. I’m glad you find it interesting! So do I. Too interesting, really. But I’m currently in lockdown so my definition of “interesting” has slipped somewhat.

Providers don’t have to do anything specific about thin markets, but I do think it’s everyone’s responsibility to at least ensure the NDIA is aware of the scale of the problem. The data collected is a good start, but there will also be local idiosyncrasies that tell a larger story, so you, as a provider, can:

  • keep a log of when you can’t deliver supports in an area and why – an Enquiries Log is a great way to do this. Review this often with people from across your organisation (e.g., the people who take enquiries, the people responsible for delivering various services, the Quality Manager, the Finance Manager), not just the senior management team in Executive Meetings. They may not see the on-the-ground connections between different service offers and what’s happening in the local market.
  • help your board (if you have one) to understand the risks and opportunities of the thin markets where your organisation operates, and where those services or regions fit into your strategic planning process.
  • email [email protected] when you have questions or insights about the thin markets identified in the NDIA data.
  • email [email protected] if you are already grappling with a thin market and want to know more about possible NDIA Market Interventions in your area.
  • fully participate in any pricing review opportunities that come your way – if the Agency doesn’t know which elements of pricing are a problem, they can’t do anything to remedy the situation.

And let’s fatten up those markets!


Rob Woolley

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