Governance in focus: disability organisations

The AICD released its NFP Governance and Performance Study in September 2017, providing our annual insight into governance trends and concerns for the NFP sector.

As in prior years, the AICD also took the opportunity to look more closely at a sub-sector in the study and associated focus groups. This year, we have revisited the NFP disability sector given the important and transformative National Disability Insurance Scheme (NDIS) reforms.

This report provides an overview of our 2017 disability sector study findings. Not surprisingly, NDIS implementation is the key strategic focus for boards, impacting business and funding models, service delivery, mergers and collaboration.

There remains strong support for the NDIS and the objective of improving outcomes for people with disabilities.

To add to our sector findings, we have included an update from the National Disability Insurange Agency (NDIA), the government body charged with bringing this complex, transformative reform to life.

Why focus on views of disability NFPs?

Four years ago following the establishment of the NDIS, the AICD’s NFP Study took a close look at the disability sector and surveyed directors on the paradigm shift in funding allocation.

While the NDIS aims to improve the quality and availability of services for clients, directors then had questions about how the changes would help their organisations meet those aims. They noted directors raised potential impacts on smaller organisations with cash flow changes and staff skills as concerns.

“We will need to be as good at marketing as we are at providing service,” one director said in focus groups at the time. There was also recognition that boards in the sector needed to change. “Change has been positive and forced boards to operate in a more sophisticated way,” noted one director.

Now that the NDIS has been rolled out in some jurisdictions, though not all, this year our study revisited governance in the disability sector for current governance issues and views.

Disability organisations are well-prepared

The transition from state-based block funded services to Commonwealth-based, person-centred funding under the NDIS was always going to be a challenge, although critical to the NDIS aims. NFPs working in disability recognised that they would need to change the way they engage with clients, understand the new requirement for outcomes and provide value for money. Boards would need to have knowledge of complex policy changes and organisational cultures would need to shift.

This year’s study suggest that NFPs working in disability are well-prepared to meet these challenges. In a positive result, nearly all (85 per cent) of directors agreed their organisations have a clearly defined plan, while a similar number (87 per cent) said that their organisation is actively working to improve productivity. Importantly in times of significant change, 64 per cent said they had a clear vision for what their organisation will be like in three years from now.

These positive results reflect the hard work that disability organisations and their boards have put in over the last four years to prepare for the profound change that the NDIS delivers – along with its opportunities and impacts.

Support for NDIS is high while some anxieties remain

While most directors reported that their organisations are actively working to transform themselves to adapt to the NDIS landscape, anxiety remains. Two thirds of directors continue to worry about the ability of their organisation to adjust to the NDIS. Directors noted many areas where their organisations could still improve. Top of the list was implementation of strategic plans, followed by improved information and communications technology, costing and pricing, and marketing practices.

There is concern among a majority of directors (64 per cent) that their NFP will not be able to provide services being offered under the NDIS. Pricing for services was top of mind at the time of our study, with 40 per cent of directors saying their NFP could be forced to do reduce quality at the then proposed pricing levels.

In focus groups, some directors voiced doubts about the ability of their NFP to remain financially sustainable – although recognising that these are constant pressures. “We would not be sustainable if we had to rely on government funding,” one director commented. “This is not new but the NDIS has probably made it worse overall for my organisation.”

Despite these views, most directors remain supportive (69 per cent) of the direction in which the NDIS policy reforms are heading.

Unsurprisingly, and echoing media reports over recent months, concerns about the implementation of the NDIS are top of mind for directors.

Only six per cent of directors in our survey agreed that the government was anticipating or responding well to their NFP’s needs in NDIS implementation. Indicative of this sector frustration, only seven per cent of directors agreed that the NDIA is working well with providers to implement the NDIS, at the time of our study.

Directors in our focus groups felt that more time and planning is needed to avoid service availability and quality being compromised as NDIS implementation ramps up.

“There is a real risk that the sector will begin to unravel or be significantly damaged if the implementation of the NDIS is not slowed down and the sector’s input is not heeded,” one director commented.

“[A]n unregulated market with no accreditation standards would pose a huge risk for government. For-profits will focus on high margin services, leaving unprofitable services to NFPs who don’t have the wealth to be able to subsidise these services,” said another director.

Disability organisations more likely to merge

An area where disability organisations differed considerably from other organisations was with regard to mergers. Almost two thirds of directorsof disability organisations stated that they had discussed the possibility of a merger in the past 12 months, which compared to only 38 percent of general survey respondents. Interestingly over 50% of those considering meregers believed that they would come to fruition. Disability organisations were twice as likely as other respondents to be currently undertaking or to have completed a merger in the last 12 months. While only 7 percent of general respondents stated that they were currently undertaking a merger, the result to the same question was 14 percent from those from disability organisations. There were similar results when asked whether they had completed a merger in the past 12 months.

Not surprisingly, the responses to why they were considering or undertaking a merger focused on improved efficiencies and being able to better achieve the mission. Also notable was the number of responses that stated that funding bodies had pushed them to consider a merger.

Our disability sector results illustrate the significant impact of the NDIS and the challenges of implementation. A major investment by government and the NDIA in engagement with the NFP sector, listening to their concerns and advice, will be critical to successful implementation.

Update on recent NDIA reviews and initiatives

The National Disability Insurance Agency (NDIA) welcomes the opportunity to address some of the matters raised in this report – which is based on research undertaken in May – June 2017.

Since this time the NDIA has undertaken a significant program of work - consistent with the commitment of the Board and management of the NDIA to address issues as they emerge - so that the National Disability Insurance Scheme (NDIS):

• Offers participants a quality experience that makes a difference to their lives;
• Encourages a vibrant provider market that will progressively be deregulated; and,
• Ensures the NDIS is financially sustainable.

Two major projects undertaken by the NDIA are the Independent Pricing Review (IPR) and the Participant and Provider Pathways Review.

The NDIA Board commissioned McKinsey & Company in June 2017 to undertake the IPR in response to market feedback that some providers were under pressure during transition and that the potential existed that the needs of participants would not be met.

During the review which lasted until December 2017, McKinsey & Company consulted with over 1,000 individuals across Australia, in addition to undertaking extensive market benchmarking and detailed analysis of the market for disability supports.

On 2 March 2018, the Board of the NDIA released the IPR – and provided in principle support for all of the Report's 25 recommendations.

Key recommendations made by the IPR include:

• Adding a third tier to the complexity loading to account for higher level skills or experience of workers and additional training required;
• Allowing providers to charge up to 45 minutes of travel time in rural areas;
• Allowing providers to quote on the delivery of services in isolated regions;
• Changing the cancellation policy to allow providers to recover 90% of their costs if a cancellation is made after 3pm on the day before the service;
• Removing the annual $1000 travel cap for therapy supports and aligning the travel policy with the attendant care travel policy;
• Changing therapy prices to better reflect different therapy types, and introducing a second tier of pricing for therapy assistants;
• Introducing temporary overhead assistance equivalent to a 2% to 3% loading on the price for providers delivering attendant care for the next 12 months.

Other recommendations relate to price limits, interventions to address specific market challenges, and improvements in market monitoring and engagement. The NDIA acknowledges and appreciates the input and advice provided by all organizations and individuals who participated in and gave so freely of their time in the preparation of the Report.

Their commitment is indicative of the widespread desire of the sector to ensure that the NDIS is a success.

"The NDIA is mindful of the pressures faced by some providers who are challenged by the complexity and pace of the roll-out of the Scheme. We are committed to working with them to ensure a vibrant market for disability supports that enables participants to achieve better outcomes. A vibrant and financially viable provider market is essential to the longer-term sustainability of the Scheme.

If providers are stronger, all participants will benefit,” Mr Robert De Luca, the CEO of the NDIA said.

To support implementation of the recommendations, the NDIA also announced that it will establish a Pricing Committee, which will help provide greater transparency and an active monitoring of pricing decisions as the market evolves and grows to adequately meet the needs of participants. Separately, work is also underway to enhance market communications around the delivery of Specialist Disability Accommodation (SDA).

In February 2018 the NDIA also released a report on the NDIS Participant and Provider Pathway Review (the Review), following this work being initiated in April 2017. While the NDIS is making good progress as it is rolled out across Australia — with more than 142,000 Australians now benefitting from the NDIS — the need to continually improve the experience that people with disability as well as service providers have with the Scheme is a matter of the highest priority for the NDIA’s Board and management. It was this desire that prompted this comprehensive review.

Throughout this process, the Agency heard from more than 300 participants, providers and other stakeholders, including listening to more than 70 in-depth stories from individual participants, family members and carers. The Independent Advisory Council also provided significant feedback.

From a provider’s perspective comprehensive improvements are underway, particularly in the areas of learning about and operating in the Scheme. Providers also said they wanted clearer and more consistent information and policy guidance, "to be able to resolve issues more easily", as well as improvements to the portal and payment processes. Work is underway in both these areas and has been for some time. An improved, web-based, interactive and easy-to-navigate Provider Toolkit was launched on 10 November 2017.

Comprehensive work is also underway on the participant pathways, with the approach for more tailored pathways, including for individuals with psychosocial disabilities and more complex needs approaching the point where they can be piloted.

The NDIS is a once in a generation reform which, by focusing on improving outcomes for participants, requires many providers to undergo significant change. The commitment to work to build the best NDIS possible is indicative of the widespread desire of the sector to ensure that the NDIS is a success. The Board and management of the NDIA is unequivocally committed to this task and they are confident that most providers have a similar view.