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The recent Independent Pricing Review (IPR) of the National Disability Insurance Scheme (NDIS) highlights not only the systematic challenges facing the scheme, but also many of the operational issues that providers are struggling with as they transition from block funding to a unit-funded, consumer driven funding environment.
Throughout the IPR report three common challenges are repeatedly cited for service providers, these being; (1) Increased overhead costs, (2) Cash flow risks, and (3) Low workforce utilisation. To this effect, the IPR report states that if providers are to remain profitable under the NDIS they will generally need to achieve corporate overheads of 10-15% and improve workforce utilisation rates to above 90%. This finding is consistent with our observations of the common challenges faced by many disability service providers in their transition to the NDIS.
To support service providers to thrive in the unit-funded, consumer driven environment of the NDIS, the Deloitte Social Impact Consulting and Deloitte Digital team have developed the ‘Deloitte NDIS Accelerator’. The NDIS Accelerator is a Salesforce based system that we have co-designed with disability service providers to automate and optimise their end-to-end operational processes, from client acquisition and on-boarding, to invoicing and payment.
Our NDIS Accelerator transforms how disability service providers manage their operations and finances, including the management of overhead costs and cashflow to strengthen financial performance, and the management of workforce utilisation and services to enhance operational efficiency and improve client experience.
Figure 1: The Deloitte NDIS Accelerator Overview
Current NDIA pricing assumes an overhead cost of between 10% -15%. From our experience, however, It is apparent, that many providers are struggling to achieve this level of overhead due to the added administrative costs associated with operating in an NDIS environment, such as billing, invoicing, and reporting. In fact, the IPR found significant variation in the level of overheads between providers, with overheads costs as a percentage of direct labour as high as over 20%.
To help providers reduce their overhead costs we have designed our NDIS accelerator to help ease the burden of administration by automating steps in the acquisition and on-boarding process, as well as ongoing tasks such as billing, invoicing and reporting. For example, by automating workflows and tying each service to a valid funding source, the solution enables invoices to be verified, raised and reconciled with minimal manual intervention. By reducing the burden of administration, our NDIS accelerator also allows providers to focus their efforts on what matters most; delivering the best service and achieving the best outcome for their clients.
Under the NDIS, the shift from a ‘payment in advance’ to a ‘payment in arrears’ funding environment has not only increased the administrative costs to manage payments, it has also created cash flow challenges for many providers due to the risk of late, incorrect or failed payments. From our experience working in the disability sector, it is clear that many providers are struggling to manage their cash-flows, which is restricting their ability to invest, innovate and even operate. In fact, the peak industry body for disability providers, National Disability Services (NDS), estimates that the NDIA currently owes providers as much as $300 million in unpaid invoices.
NDIS data suggests that the two main reasons for failed payments are due to claim amounts being greater than the remaining available amount in the service booking or the participant’s available budget for the claimed support category. To address these two root causes, our NDIS accelerator has inbuilt controls that ensure each individual service is linked upfront to an available funding source. This means that providers can only schedule and deliver services that have valid and sufficient funding attached, which reduces the number of failed claims and helps strengthen cash-flow management. This functionality also allows other funding sources in addition to NDIS to be managed.
Figure 2: Funding traceability
Under the unit-funded, consumer-driven funding environment of NDIS, workforce utilisation is now a critical component of provider economics. According to the IPR, to realise a reasonable margin providers should, among other things, achieve 95% utilisation of full-time and part-time workforce, and 100% utilisation of casual workforce. Many providers, however, appear to be falling short of these targets, with some reporting that the typical utilisation of staff is between 80-85%.
With labour accounting for approximately 80% of the cost of service provision, providers need to ensure they are maximising the time staff spend performing chargeable client activities. However, with service times now being determined by the needs of the participant, rather than the rostering requirements of the provider, achieving this is proving much more complicated under the NDIS. It requires a precise understanding and matching of the demand for services, based on various needs and preferences, as well as the supply of workers, by skills, qualifications and locations.
By offering a complete and accurate view of the service demand pipeline, our NDIS accelerator enables providers to easily and accurately forecast utilisation by role (e.g. speech therapist, physiotherapist). With this information, providers are able to proactively manage utilisation through two separate avenues. They can either seek to drive sales through targeted marketing campaigns to bring demand in closer alignment with the supply for specific services, or they could adjust the number of workers rostered over the forecasted period to bring supply in closer alignment with the demand.
Our NDIS accelerator has been designed specifically to support disability providers enhance their operational efficiency, strengthen their financial performance, and improve their client service delivery and client experience. If you would like to learn more about this solution and how it can help your organisation thrive in the unit-funded, consumer driven environment of NDIS, please contact either Les Hems or Vivian Stephens.
https://www.ndis.gov.au/medias/documents/ipr-final-report-mckinsey/20180213-IPR-FinalReport.pdf – page 71
https://www.ndis.gov.au/medias/documents/ipr-final-report-mckinsey/20180213-IPR-FinalReport.pdf – page 27
https://www.ndis.gov.au/medias/documents/ipr-final-report-mckinsey/20180213-IPR-FinalReport.pdf – page 73
https://www.ndis.gov.au/medias/documents/ipr-final-report-mckinsey/20180213-IPR-FinalReport.pdf – page 14
https://www.ndis.gov.au/medias/documents/ipr-final-report-mckinsey/20180213-IPR-FinalReport.pdf – page 40
Tharani leads Deloitte Australia’s Social Impact Consulting Practice, a dedicated practice supporting social sector organisations, government agencies and businesses to deliver greater social impact aligned to their vision and mission. Drawing on over 15 years’ of consulting experience, combined with a deep passion for social change, Tharani has partnered with many organisations (including, disability, homelessness, and community services providers) on their transformation journeys. Her areas of experience include – strategy, growth, operating model design, operational excellence, and governance. She is passionate about bringing the latest trends in strategy, technology and innovation from adjacent industries and globally to support her clients to be ‘future fit’. Tharani is a Director of UNICEF Australia and the Deloitte Foundation, an Ambassador for Good Return, a judge for the Good Design Australia Awards and a passionate advocate for greater corporate and social sector collaboration.
Les is a Principal in Deloitte Australia’s Social Impact Consulting Practice, a dedicated practice supporting social sector organisations, government agencies and businesses to deliver greater social impact. Les has over 30 years’ experience advising NGOs, government and business. His specialties include strategy, organisational performance, operating model design, social innovation, service design, social impact investing, public service reform and social impact measurement. Les supports organisations to achieve greater social impact, operational excellence and commercial sustainability. He works across disability, ageing, family and children, homelessness, justice, regional/remote and First Nation communities. Les has an MBA from Aston Business School and has held senior research positions at UNSW’s Centre for Social Impact, University College London and Johns Hopkins University. Les was a founding member of the Social Impact Measurement Network of Australia.
Vivian is a Senior Manager in Deloitte Australia’s Social Impact Consulting practice, with over 10 years of commercial and consulting experience across the not-for-profit, business and government sectors. Vivian has worked with a wide variety of social sector organisations, including disability, homelessness, family and children, aged care, and indigenous services providers, to support them on their transformation journeys. Vivian is passionate about helping social sector organisations achieve operational excellence and financial sustainability and supporting businesses to achieve ‘profit with purpose’ to deliver greater social impact. Vivian has extensive experience in strategy design and implementation, operating model and organisational design, and social impact measurement.