NDIS Market Dynamics: NDS releases new research on Victorian disability services sector

The sustainability of disability service providers is critical for the development of a diverse NDIS marketplace. This is why NDS undertook an NDIS Market Dynamics Study in 2019 (PDF | Word) as part of our Sector Development Project, with thanks to funding from the Victorian Government’s Transition Support Package.

This study investigated the factors influencing the financial viability of service providers, and identified a number of strategies to help mitigate thin markets.

Recommendations arising from this study centre around the need for:

  • critical sector development supports to remain available for at least 2-3 years post NDIS transition, to help providers build their sustainability; and
  • governments and the NDIA to respond with various market stewardship actions, which can help mitigate risks of thin markets and ensure people with disability have access to, and choice of, high-quality supports.

This study examined Victorian and national data from NDS’s 2018 Annual Market Survey and the Workforce Wizard, as well as our 2018 SDP Outcomes Evaluation survey, various policy surveys and reports, and wider literature. Stakeholder feedback was also sought throughout the study.

What did we find out?

The data supported a number of concerns that NDS has observed and heard anecdotally from providers and participants. These concerns are particularly pressing in rural and regional areas, as well as with particular services and for specific cohorts of people with disability. It also uncovered more specific details about Victorian and regional market risks than have been previously reported.

Pricing pressures

Lean NDIS pricing is undermining the long-term sustainability of the Scheme. Victorian providers are generally more worried than organisations in other states and territories, that at current prices, they will:

• not be able to provide services (63 per cent); or

• will have to reduce quality (54 per cent).

While NDS welcomes recently announced price increases, this does not solve all the issues, and the effects of the past three years of insufficient pricing cannot be disregarded.

Financial viability risks

The financial viability of many Victorian providers is under threat:

• only 46 per cent made a surplus last financial year (2017/18); and

• even fewer (43 per cent) expect a profit this year.

Workforce constraints

We also found that the workforce is still far from stable and sufficient. Clear sustainability risks are emerging from:

• a largely aging workforce (nationally, 45 per cent aged 45 years and above);

• a predominately casual workforce (43 per cent);

• high turnover rates of casual staff (7 per cent per quarter); and

• difficulty recruiting and retaining certain occupations.

Services and groups

When we looked at the types of services and customer groups most at risk, we found clear market supply gaps emerging in:

• home modifications and assistive technology services;

• transport supports;

• community participation supports; and

• high intensity/1:1 supports.

Provider mergers and closure

These key factors of NDIS pricing, financial viability risks, and workforce constraints are collectively impacting on organisations’ decisions to merge or wind up.

• 38 per cent of Victorian providers believe it is ‘likely’ or ‘very likely’ that their organisation will complete a merger within the next two years.

• Regional organisations are more likely to merge.

• More regional and metropolitan providers are also currently discussing the potential to wind up than larger state-wide organisations.

What next?

Thin markets are clearly beginning to emerge in Victoria. If these are not quickly addressed, the lives of people with disability and their families will be seriously affected, and the success of the NDIS undermined. However, unpacking and mitigating market gaps in order to respond effectively is a complex and difficult task.

NDS has identified a number of recommendations for sector development support and market stewardship, to help mitigate the risks of thin markets. NDS is ready and able to deliver sector development support, with the right level of funding, and we will use the recommendations and findings of this study to inform our sector development work in the next two to three years.

You can read the recommendations and find more detail about of the types of market gaps we identified, and their influences, in the full NDIS Market Dynamics Report below.

/Public Release. View in full here.