NDIS 2024-2025 Reforms

The 2024-25 NDIS pricing arrangements and price limits (the 2024-25 Pricing Arrangements) were released on 28 June 2024: the last business day of the 2023-24 financial year. 

For therapy support providers – like occupational therapists, behavioural therapists, physiotherapists, and speech pathologists – two things stood out:

• The 2024-25 price limit for most therapists is unchanged from the previous year. (For most therapy support providers, the pricing limit remains $193.99 an hour. This limit has stood, unchanged, for 5 years.)
• The short notice cancellation policy has been reduced from seven days to two clear business days.

These changes took effect on 1 July 2024 – the first business day after the 2024-25 Pricing Arrangements were released.  

Why did the NDIA recommend these decisions?

Also on 28 June 2024, the National Disability Insurance Agency (NDIA) released its 2023-24 Annual Pricing Review Report (the Report). Many of us were too focused on the 2024-25 Pricing Arrangements to notice.  

The Report is not well-written or accessible. It looks like it was drafted by a committee.  

We read it anyway. We wanted to understand what the NDIA thinks about therapy support providers. We wanted to understand the context and data used by the NDIA to look at pricing limits and cancellation policies. And we wanted to understand the NDIA’s rationale for making its recommendations. 

The Report refers, briefly, to the 2023 NDIS Review, The Royal Commission into Violence, Abuse, Neglect and Exploitation of People with Disability, and some of the budget papers. It doesn’t refer in any meaningful way to Government reform proposals, including the amendments proposed in the NDIS Amendment (Getting the NDIS Back on Track No. 1) Bill 2024 (the NDIS Bill 2024). But it would be naive to think they did not influence the Report recommendations and the 2024-25 Pricing Arrangements. 

Here are our key takeaways (in bold), with relevant excerpts from the Report (in italics). (As always, any errors of interpretation are our own):

1. Most NDIS participants bought therapy services

“In the six months to 31 December 2023, 379,296 participants, representing 59% of the total 646,449 active participants, as of 31 December 2023, purchased therapy supports through their plans.”

2. NDIS participants bought a range of different therapies, including Occupational Therapy, Early Childhood, Behavioural Therapy, Speech Pathology, and Psychology services

“In the six months to 31 December 2023, participants claimed therapy supports, predominantly from Occupational Therapists ($441.6 million from 214,271 participants), followed by Early Childhood Professionals ($357.9 million from 93,154 participants), Behavioural Therapists ($287.7 million from 53,064 participants), Physiotherapists ($202.2 million from 95,095 participants) and Speech Pathologists ($198.2 million from 109,829 participants).”

…

3. The ‘NDIS therapy market’ expanded

“The NDIS therapy market continues to expand significantly….Notably, payments made to unregistered providers increased by 60%, although registered providers still received the majority of payments – 65% or $1.3 billion of total payments. This demonstrates growth in both the provider base and financial volume within the therapy sector.”

4. The number of Registered Therapy Providers plummeted

“Registered provider numbers decreased by 16% from 8,778 to 7,392 providers in the six months to 31 Dec 2023….The decline in registered providers…is attributed to 1,562 providers switching to unregistered status and 1,470 registered providers no longer receiving therapy related payments in the six months to 31 December 2023.” (My emphasis.)

5. The number of Unregistered Therapy Providers surged

“Conversely, unregistered providers have risen in all areas, growing from 27,528 to 45,543 in non-remote areas within the same periods….”

6. The NDIA knows that therapy providers were experiencing high demand and rising costs

“Data on economic conditions suggest strong demand for health and disability services, a tight labour market for health and disability related workers, as well as higher costs given high general inflation and wage inflation.”

…

“High inflationary environment (sic) can increase cost pressures on providers delivering supports to NDIS participants such that these providers may then be under pressure to raise prices for their services….Inflation in the health industry …has run above the economy wide (all-industries) rate for most of the past decade, suggesting relatively strong cost pressures in the HCSA [Healthcare and Social Assistance] sector.”

7. The NDIA consulted with providers, peak bodies, and professional bodies. The NDIA knows about providers’ challenges and worries, including with financial sustainability, staff recruitment, retention and turnover, administrative and compliance overheads, increased costs of delivering therapy, general business expenses, and costs of delivering supports to children

“Almost all providers reported increases in costs. Providers highlighted general increases in wage costs in a highly competitive labour market, as well increases in insurances, rent, travel costs, utilities, and other operating expenses. Several providers attributed these increasing costs to reduced profit margins, and expressed concern about their ongoing financial viability as NDIS providers. Many providers noted that the NDIS price limits have not increased for a number of years.

…

Provider peak bodies raised similar themes about challenging economic conditions where costs have increased, and profitability is reduced. Respondents noted that these challenges are likely to impact the quality of services offered by providers, with less investment in staff training and other quality-enhancing initiatives. It was also noted that many businesses are operating at a loss, which may lead to market exits.

…

Professional bodies also reported rising costs and financial pressures. It was noted that some providers who previously charged below the NDIS price limits, are now increasing their prices up to the price limits. Professional bodies reported instances where providers are considering moving to self-managed participants so they can charge above the price limits to cover their costs. A professional body reported that many providers are conscious of the impact of a challenging economic environment on participants and have sought to minimise any price increases by bearing the cost themselves.

…

Financial sustainability was identified as the primary business risk by 64% of provider responses. This was raised when responding to questions about changing economic conditions.

Providers also raised challenges with staff recruitment and retention as a key business risk. Providers reported a shortage of practitioners, increasing wage costs and challenges with retaining staff due to competition from other sectors, as well as staff leaving to become unregistered sole-trader providers…

Providers also raised a wide range of other themes, including risks arising from the amount of time spent on NDIS administrative tasks, registration costs and uncertainty about ongoing reforms to the NDIS.

…

Peak bodies raised concerns about the costs of NDIS registration and noted that some members report considering de-registering.

Similarly, professional bodies also stated the administrative burden of NDIS registration as a business risk, as well as financial sustainability and uncertainty about broader changes within the NDIS. Professional burnout and delays in receiving payment for services relating to assistive technology were also raised as business risks.

High staff turnover was reported in many submissions, as well as broader challenges with recruitment and retention. Several providers reported an operating environment where staff leave to become independent/sole-trader providers or take up work in other sectors where they may receive higher wages. A number of providers reported increasing costs associated with salaries and wages to retain staff, or additional costs associated with recruitment (e.g. advertising and recruitment agency costs).

…

About 87% of provider submissions reported increases in the costs of delivering therapy supports and services. Providers noted increases in wage costs (including increasing staff wages, keeping up with Allied Health awards and professional development costs) and costs associated with recruitment and retention. Providers also reported increases in business expenses such as rent, utilities, office supplies, insurance, workers compensation premiums and travel expenses.

Allied Health Professions Australia described rising business costs (e.g. wage market rates, rent and utilities, supplies, fuel, consumables and equipment, travel, insurance and other operational expenses).

…

Providers outlined a range of unique costs of providing early childhood supports, with 85 (or 33%) of provider submissions responding to this question. Most providers describe this group of NDIS participants as more complex, compared to other early childhood clients who are not eligible for supports under the NDIS.

When describing early childhood supports for NDIS participants as more intensive and requiring more time, the following additional activities and costs were noted:

• collaboration and liaison as part of team-based approaches, with an appointed ‘Key Worker’ 

• delivering supports in natural environments, such as at home or in school settings, which requires travel that can exceeds established caps

• specialist skills and professional development needs, often resulting in a need to pay higher salaries

• mandatory reporting obligations, such as writing reports related to funding allocation decisions, risk assessments, reporting to the NDIS Safeguards Commission and making Child Safe notifications.

Professional bodies noted similar costs of providing early childhood supports for NDIS participants. For example, the Australian Physiotherapy Association described liaison and communication with the care network, support to the family, the expertise and complexity required, extended appointments, the service environment and administrative load.“

8. The NDIA appears to believe that, as health care businesses, Therapy Support Providers are resistant to slowdowns in the economy

“The HCSA sector is resilient to slowdowns in Australian economic activity due to the ‘non-discretionary’ nature of the services provided (generally necessities) and continued demand from population growth and an ageing population. The HCSA is also heavily reliant on funding from the public sector.”

9. The NDIA accepts that its private billing data – gathered by scraping provider websites for public pricing information – was limited and unrepresentative. (Many providers don’t post pricing information publicly for business and legal reasons, e.g. to avoid illegal price signalling.)

“The analysis of private billing rates for NDIS-related weekday in-room therapy services in the 2023-24 period offers detailed insights into the therapy market. The dataset, consisting of 1,791 observations, was compiled by the NDIA from provider websites across Australia. This sample size is derived from previous annual pricing reviews, ensuring continuity and comparability over time.

…

The distribution of sample observations geographically leaned more towards VIC, 34% of the sample, and QLD, with 27%, indicating an underrepresentation of therapists from NSW, which accounted for only 20%, compared to its share of the NDIS market (31% of total NDIS therapy claims in the six months to December 2023). The NT was the only state or territory with fewer than 30 observations. (My emphasis.)

The NDIA acknowledges that there are many uncaptured variables that would assist a greater explanation of private billing rates. This, however, is difficult to obtain through website scrapping (sic) alone.” (My emphasis.)

10. Notwithstanding the limits of its analysis, the NDIA concluded the price limits ($193.99 per hour in most regions) reflect market norms and there are no systemic pricing concerns that hinder participant access (compared to other clients)

“Overall, the private billing rates analysis provides a crucial benchmarking tool for the NDIA, helping to align NDIS pricing structures with the market and ensuring the sustainability of therapy services under the scheme. This analysis indicates that NDIS price limits generally match or exceed the rates for most therapies nationwide. However, regression analysis highlights statistically significant variances among therapies, which could correspond to differences among therapy professionals such as in qualifications, skills, and experience.“

11. The NDIA think that psychologists are an exception to the general rule to freeze prices because their market rates (based on private billing rates) exceeded then-current pricing limits

“After reviewing the current price limits for Psychologists against private billing rates and other comparable government schemes, it is apparent that the current limits generally sit below the prevailing market rates.”

“Analysis reveals that the mean billing rate for psychologists exceeds the NDIS price limits in both state groupings, with a mean rate of $228.6 and $260.3 for Psychologists and Clinical Psychologists, respectively. Similarly, median billing rates for these professionals surpass NDIS limits, standing at $228.0 and $255.0. Moreover, the 75th percentile billing rates indicate that a significant portion of appointments exceed (sic) NDIS price limits, highlighting a clear difference between market rates and NDIS price limits. This suggests that it is appropriate for the NDIS to increase price limits to better align with prevailing market rates and ensure fair compensation for psychology services.”

12. The NDIA recognises that its pricing model may underestimate real world business costs and that a new price-setting approach may be needed

“Stakeholder feedback has suggested a potential underestimation of corporate and operational overheads, such as insurance and compliance costs given the model is currently based on previous benchmarking survey results. The feedback received through the APR consultation and ministerial correspondence, has raised concerns that the current price limits may not fully accommodate the delivery of more specialised and complex supports for some NDIS participants, which may restrict providers’ ability to recover adequate costs.”

“The NDIA should work with the sector, providers, and other stakeholders to consider options for setting prices for Disability Supports, including but not limited to exploration of a new pricing approach.“

13. NDIS cancellation costs surged, including for early childhood supports

“In the three years from 2020-21 to 2022-23, the costs linked to short notice cancellations nearly doubled, increasing from about $60 million to just under $120 million. This rise highlights the need for effective management of such cancellations. Additionally, therapeutic, and early childhood supports, which account for 37% of all claims, are identified as the categories most affected by cancellations.”

14. The NDIA thinks that providers have the right to recoup costs for cancellations but wants them to work harder to reduce the number cancellations. The NDIA thinks 2 clear business days’ notice is sufficient for therapy supports 

“The NDIA recognises that there is a need to strike a balance in its short-notice cancellation policy to allow providers sufficient ability to recover costs while incentivising them to work with participants to reduce the number of short-notice cancellations. Participants, in turn, must be given reasonable period to provide notice, considering unforeseen circumstances like illness, urgent appointments, or changes in personal circumstances, to minimise using NDIS funds on services they do not receive.

…

Through consultation and research conducted, there is a case that the maximum of 7-day policy may not be necessary for non-DSW supports. There appears to be a greater usage of a 2-day cancellation policy in the sector, particularly among therapy providers, which supports a potential for a shorter cancellation policy. 76% of provider respondents delivering therapy supports to NDIS participants suggest they already have a short-notice cancellation policy of 48 hours or less. This is also supported by the website data analysis conducted by the NDIA, acknowledging the limited sample that had available data for analysis. The NDIA believes there to be mechanisms and methods already being utilised by the sector to assist participants limiting cancellations, which could make the reduction in notice period feasible.”

Our view: One reasonable conclusion

We have no qualms about the cancellation notice changes. Many therapists already have more generous cancellation arrangements than were allowed under the old rules. 

The decision to freeze pricing limits for most therapy supports in a period of relatively high inflation and business uncertainty was not an accident. Neither was the late timing of the announcement.  

The Government is attempting the very tough task of balancing the rights and interests of participants and taxpayers. Therapy providers are trapped in the middle, facing rising business and compliance costs, downward pricing pressures (in real terms), and forecasts of falling demand for some therapy services (as NDIS access and funding rules are expected to tighten as a consequence of the NDIS Bill 2024). 

Therapy professionals, peak bodies, and professional associations have all expended a lot of effort to explain their challenges, to little avail. In coming months, many ethical therapy providers will need to make some tough decisions about their ongoing capacity to deliver high quality, evidence-based therapy supports to participants without going bust.