Disability service providers facing increased competition and funding pressures in the transition to the National Disability Insurance Scheme are eyeing opportunities in new markets in a bid to secure their financial viability, a new survey shows.
A national survey of business confidence in the sector completed by nearly 550 disability service providers has painted a picture of variable profitability, dampened profit forecasts and the search for new sources of income.
Overall, nearly half of survey respondents (48 per cent) report plans to move into new service areas in the next 12 months.
One in five have plans to expand into aged care, while 17 per cent intend to deliver home and community care services and 13 per cent mental health services, according to the State of the Disability Sector Report 2016 released last week by peak body National Disability Services.
NDS chief executive officer Dr Ken Baker said uncertainty about the future NDIS market and concerns about inadequate prices being paid by the National Disability Insurance Agency were motivating disability services to diversify.
He said disability service providers were also looking to capitalise on the move towards consumer directed care in aged care.
The report said inadequate pricing under the NDIS was a significant constraint on the supply of disability services, which threatened to “erode quality and generate market failure.”
It found 67 per cent of providers were concerned they will not be able to provide services at current NDIS pricing and 46 per cent said pricing levels would have an impact on service quality.
The peak body said government was poor at setting prices that reflected jurisdictional and geographical differences and the complexity of support required by some clients. It called for price deregulation or independent price determination as an interim measure.
Sector consolidation anticipated
As disability services transition to the new policy and operating environment, 41 per cent of organisations said they have discussed a possible merger and 14 per cent are currently undertaking one or completed a merger in the past year.
Some 16 per cent have discussed discontinuing the provision of disability services and 8 per cent have considered closing their organisation, the survey found.
Just over half (55 per cent) of all providers reported making a profit last financial year, 20 per cent broke even and a further 22 per cent made a loss.
The report found only a third of providers achieved a profit of 4 per cent or more for the 2015-16 financial year and 40 per cent of organisations have budgeted to make a profit in 2016-17.
Impact of consumer choice
The organisations also reported that in a new environment of increased client control, people with disability are exercising their power to switch providers.
Almost 60 per cent of providers reported losing one or more clients to another provider, mostly to existing not-for-profits. However, there is also movement away to new not-for-profit providers, sole practitioners and other for-profit providers under the NDIS, the report found.
Some reasons for changing services included a provider could not offer a desired service, clients wanting a different kind of service or choosing to follow a particular worker.
Some organisations also said competitors were using targeted advertising and special offers to attract clients.
Whether a similar movement of aged care consumers occurs from February next year, when home care packages for aged care clients are allocated to individuals rather than providers, will also be keenly watched.
A growing workforce
In terms of ongoing workforce challenges, recruiting allied health professionals is proving to be most difficult for providers.
The survey showed one in four organisations found speech pathologists or occupational therapists “extremely” difficult to recruit.
Also recorded is an increase in administrative burden arising from rostering staff to accommodate consumer choice and greater flexibility.
The rate of casual employment has remained steady at 38 per cent.
The survey was undertaken by the Curtin University Not-for-profit Initiative.
Some 80 per cent of survey respondents were not-for-profit and just over half had an income of less than $3 million last financial year.
Access the report in full here.
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