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NDIS Q & S Consultation Paper

Purpose

The purpose of this paper is to consult and seek feedback on the design of the market oversight function of the new National Disability Insurance Scheme (‘NDIS’) Quality and Safeguards Commission (‘the Commission’).

The market oversight function will provide broad oversight of the NDIS market, monitoring of systemic market risks, and prudential oversight of providers that would be hard to replace in the event of their sudden and unexpected exit from the market.

This paper seeks feedback on proposals for the nature, scope and broad design of the market oversight function.

Feedback

Feedback is sought on this paper by 2 February 2018 by email to ndismarketoversight@dss.gov.au

This paper is provided for direct consultation with key stakeholders representing people with disability, workers and providers who have been part of the overall development of the NDIS Quality and Safeguards Framework. It will also be provided to relevant academics and professionals with expertise in market regulation, prudential oversight or monitoring of market risks.

Feedback will inform the development of guidelines as a notifiable instrument under Section 181D(2)[1] of the National Disability Insurance Scheme Act 2013 (‘the Act’). The Market Oversight Guidelines will:

  • outline the market oversight function and scope, including prudential oversight and monitoring of systemic market risks
  • clarify the market roles and responsibilities of the Commission, as distinct from the National Disability Insurance Agency (‘NDIA’) and mainstream consumer protection agencies
  • identify the criteria for inclusion of the subset of providers subject to prudential oversight
  • outline the obligations on these providers, including reporting and record-keeping
  • outline other matters relating to the market oversight function.

A draft of the Market Oversight Guidelines will be released for consultation in the first quarter of 2018, ahead of Commission commencement in July 2018.

Definitions

In this paper, the following definitions apply:

ACL is the Australian Consumer Law, the national law for fair trading and consumer protection, a cooperative reform of the governments of Australia and the states and territories.

ACL regulators are the Australian Competition and Consumer Commission and the state and territory consumer protection agencies, which together administer the ACL.

The Act means the National Disability Insurance Scheme Act 2013.

The Amendment Act means the National Disability Insurance Scheme Amendment (Quality and Safeguards Commission and Other Measures) Act 2017.

The Commission means the NDIS Quality and Safeguards Commission, the independent statutory body implementing core elements of the NDIS Quality and Safeguarding Framework.

Full scheme, for the purposes of this paper, means the point in time when the Commission assumes responsibility for quality and safeguards regulation of a given State or Territory.

Government means the Commonwealth Government.

NDIA means the National Disability Insurance Agency, the independent statutory body implementing the NDIS and jointly funded by the Commonwealth and State and Territory governments, except Western Australia.

NDIS means the National Disability Insurance Scheme, the scheme established by the National Disability Insurance Scheme Act 2013.

Scheme means the National Disability Insurance Scheme.

Sharp practices are provider/worker behaviours that are not illegal or prohibited under the NDIS, but border on being unethical and can reduce participant outcomes and confidence in the integrity of the NDIS.

Worker means someone employed or otherwise engaged (including for registered and unregistered providers) in the provision of supports and services to people with disability under the NDIS, and includes people in paid roles, unpaid roles, and self-employed roles.

Background

In December 2016, the Council of Australian Governments (‘COAG’) endorsed the NDIS Quality and Safeguarding Framework (‘the Framework’), setting out a new nationally consistent approach to regulation for the NDIS. The Framework was publically released on 3 February 2017 and is available at dss.gov.au/ndisqualitysafeguards.

The Framework provides a nationally consistent approach to help empower and support NDIS participants to exercise choice and control, while ensuring appropriate safeguards are in place, and establishes expectations for providers and their workers to deliver high quality supports.

The National Disability Insurance Scheme Amendment (Quality and Safeguards) Act (‘the Amendment Act’) was developed to give legislative effect to the Commonwealth Government’s regulatory responsibilities under the Quality and Safeguarding Framework by amending the National Disability Insurance Scheme Act 2013. The Amendment Act provides for the NDIS Quality and Safeguards Commission, as an independent statutory body, to have the following integrated functions:

  • registration and regulation of NDIS providers, including NDIS Practice Standards and a Code of Conduct
  • complaints and reportable incidents, including abuse and neglect of a person with disability
  • national policy setting for worker screening
  • national oversight and policy setting in relation to behaviour support and monitoring the use of restrictive practices within NDIS services with the aim of reducing and eliminating such practices
  • compliance, inspection, investigation and enforcement powers to support the functions of the Commission above
  • information sharing arrangements between the Commission, the NDIA  and State, Territory and other Commonwealth regulatory bodies.

The Amendment Act also specifies market oversight as one of the Commission’s ‘core functions’ (s181E(i)). Market oversight is to be achieved by activities including:

  • monitoring changes in the NDIS market which may indicate emerging risk (addressed in this paper as systemic market risks); and
  • monitoring and mitigating the risks of unplanned service withdrawal (addressed in this paper through prudential oversight).

What is the Commission’s market oversight function?

The NDIS represents a significant reform to the way in which supports and services are delivered to people with disability. In the new market-based system, participants choose their providers and the supports and services they need, rather than supports being delivered through government agencies or providers receiving ‘block funding’ from government to deliver particular supports.

Through its integrated functions – complaints, reportable incidents, registration and compliance in particular – the Commission will provide important protections for NDIS participants as consumers. Participants will also continue to have access to mainstream complaints and redress mechanisms, including consumer protection agencies and professional and industry bodies. However, oversight of the market is also a critical protection for participants.

Market oversight in the Commission is a specific function designed to:
monitor the NDIS market and risks to its efficient and effective functioning; and monitor and mitigate the risks of unplanned service withdrawal.

Commission market oversight complements the market stewardship role of the NDIA, as detailed in the NDIS Market Approach: Statement of Opportunity and Intent. Market stewardship goes beyond oversight, including activity to monitor and facilitate the marketplace, and intervene when necessary to ensure the market operates efficiently and effectively for the benefit of NDIS participants.

This paper addresses the Commission’s core market oversight function and does not attempt to describe or set policies for its other functions. Functions that will have important intersections with the market oversight function include: providing education, guidance and best practice information to NDIS providers; administering effective compliance and enforcement arrangements; promoting continuous improvement amongst providers and the delivery of progressively higher standards of supports and services; and engaging in, promoting and coordinating the sharing of information.

The market oversight function will inform, and be informed by, these other Commission functions, particularly education and guidance about sharp practices and good governance. A full exploration of these other functions, and the way the Commission will implement them, is beyond the scope of this paper.

Monitoring systemic market risks

An NDIS market risk is anything that has the potential to negatively affect the efficient and effective operation of the NDIS market, and therefore might reduce participants’ ability to choose and obtain suitable goods or services.

While other Commission functions will focus largely on the protection of individual participants or the obligations of providers, the market oversight function will focus on impacts on the overall market and sub-markets (by geography, support type or participant cohort).

Prudential oversight

A feature of open markets is the ability for suppliers to enter and exit the market as they wish. The NDIS, while being a regulated market, will see the entry and exit of numerous providers as different market models are tested. This ‘churn’ in the market can be healthy as it leads to innovation, but is problematic when the services are critical to people living with disability and exit is unexpected.

The loss of a large provider of critical supports, with little warning, has the potential to cause anxiety for some participants and the loss of supports for others. The Commission’s market oversight function seeks to address this by monitoring of the market, including risks to the viability of the most significant providers of supports, and by providing early warning to the NDIA to inform its market stewardship activities, particularly around maintaining critical support continuity for participants.

  1. Monitoring Systemic Risks

Monitoring changes in the NDIS market which may indicate emerging risk

Monitoring of the NDIS market and its development is critical to ensuring the ongoing health and sustainability of the Scheme. While other parts of the Commission are focused on provider quality and participant safety, market oversight will focus on the effects on the NDIS market (or sub-markets) when certain behaviours or market factors become so widespread, or have such a detrimental effect, as to affect the efficient or effective operation of the market (systemic risks).

The function will encompass both monitoring of market dynamics for indicators of risk; and monitoring of particular systemic risks.

The market oversight area of the Commission will collect and analyse information, assess for evidence of systemic market risk, and provide advice to the Commission, NDIA and Government as appropriate. The role will be advisory only; any policy or operational changes will be a matter for other parts of the Commission, DSS, the NDIA or other parts of Government.

This paper does not attempt to develop a comprehensive register of market risks; however they may include the following:

  • Sharp practices: unscrupulous providers may exploit participants, reduce scheme sustainability and reduce confidence in the NDIS market
  • Market information failure: insufficient information, or unequal access to information, could lead to reduced investment, insufficient competition and participant vulnerability
  • Significant provider exit
  • Significant quality issues
  • Provider concentration
  • Poor financial health of providers
  • Indicators of barriers to competition
  • Withdrawal of, service to participants with high reliance on those services.

Monitoring of emerging risks to the market will require information from the NDIA and other parts of the Commission, particularly registration and complaints:

The registrar will gather intelligence on the capacity and performance of the market through provider registration, quality assurance and NDIA market data. The patterns of complaints and serious incidents reported to the NDIS complaints commissioner will also be considered…Rapid expansion or contraction of market share will be tracked as an indicator of changing risk.
(Framework)

The Commission will need to establish operational relationships with other regulators and the NDIA to support information sharing and collaborative action (particularly with respect to NDIA-held data). All of this information will inform market oversight, and market oversight will in turn inform the Commission’s risk-responsive prioritisation of its work.

It is important to note that NDIA payment data will not be owned by the Commission. The Commission will have access to a great deal of market information from provider registration data and complaints/reportable incidents, but data on the delivery of supports will be held by the NDIA and shared with the Commission.

States, territories and other Commonwealth agencies will also have information about providers and market trends that will help inform market oversight (e.g. workplace health and safety regulators and consumer and competition regulators). Some risks may be best mitigated by these other agencies and the Commission may seek to collaborate with other regulators to address particular risks. Examples include:

  • an NDIS provider that operates in another sector (e.g. aged care or health);
  • data from other sectors may signal potential NDIS support failures (e.g. delayed discharge of people with disability from hospital because of apparent lack of NDIS supports);
  • complaints to State and Territory consumer protection agencies and the Australian Competition and Consumer Commission (‘ACCC’) (together, the ‘ACL regulators’) may signal information asymmetries in NDIS provider-participant contracts, or concerns about NDIS provider sales practices that may be exploitative; and
  • workplace regulator concerns about poor safety practices or underpaying staff could provide early warning of financial risk.

To properly understand emerging market risks and trends identified from its various sources of information, the Commission may study some aspects of the NDIS market in greater depth. These ‘market studies’ could involve commissioning expert research or public consultation processes.

Data analysis conducted as part of the market oversight function will be risk-focused and will utilise data gathered from other Commission functions, the NDIA and other sources as discussed above to create regulatory intelligence. Once problems and risks are identified, the Commission will need to evaluate the respective likelihood, impact and acceptability and consider which problems and risks to prioritise and resource for further monitoring, investigation and action.

A detailed consideration of the Commission’s approach to risk management is beyond the scope of the current paper, as is an analysis of the education and training activities the Commission may employ upon identifying systemic risks. These are matters for the Commission, which will need to administer market oversight in a way that aligns with its other quality and safeguards functions.

  1. Are there any gaps in the systemic risk monitoring function outlined in this paper?
  2. Are there any particular known systemic risks the Commission should monitor and respond to?
    1. Sharp Practices

One category of risk that has been identified through consultation as an immediate priority is ‘sharp practices’. DSS is targeting the monitoring and, where appropriate, prevention of sharp practices at the early design stage, after consultation indicated that some sharp practices could pose a threat to the NDIS market should they become widespread.

Sharp practices, technically, are practices by providers or workers that are within the rules of the law and not prohibited outright, but border on being unethical. The term is also commonly used to refer to a range of practices involving unfair treatment, or taking advantage, of consumers; for example, over-servicing and high-pressure sales. Some sharp practices may create incentives that do not align with the aims of the Scheme, may increase the likelihood of fraud or other illegal dealings and may cause broader problems within the market. The market oversight function will be concerned with systemic market risks of this kind, whether prohibited or not.  

Market oversight will cover sharp practices that pose a risk to the NDIS market or sub-markets, or participants generally, should they become widespread, rather than the effect those practices have on individuals in isolated cases (a role for other parts of the Commission). Monitoring is essential early in the development of the NDIS market to avoid the normalisation and entrenchment of practices that may be commonplace in other markets but are not appropriate for a market in disability supports.  

The Commission’s market oversight function will gather, integrate and assess information about sharp practices from multiple sources such as provider registration data, participant feedback and complaints, reportable incidents, referrals and intelligence from other agencies including the NDIA, and from its own market studies. In the case of participant feedback and complaints, the Commission will adopt a “no wrong door” policy, enabling complaints about sharp practices to come from anyone, through any avenue or referral.

What is the mechanism for regulating sharp practices?

The intended mechanism for regulating a sharp practice is the NDIS Code of Conduct, which imposes certain ethical obligations on providers and workers. The Commissioner may issue guidance that explain the obligations providers (registered and unregistered) and workers have under the NDIS Code of Conduct. Under the proposed National Disability Insurance Scheme (Code of Conduct) Rules 2018, providers will be obliged to act in accordance with the NDIS Code of Conduct Guidance. The guidance material will be public and communicate which types of practices may contravene the NDIS Code of Conduct to ensure that those doing the right thing are not inadvertently in breach of their obligations. 

DSS is identifying at the outset existing sharp practices that may contravene the NDIS Code of Conduct, including certain inducements to participants and sales commissions for workers. Communication and education about appropriate practices, and those that may be regarded as inappropriate, will be critical to discouraging sharp practices.

Code of Conduct

Section 73V of the Amendment Act allows for a mandatory code of conduct for all NDIS providers and workers, including sanctions for breaches. The ethical obligations on providers under the NDIS Code of Conduct are broad; guidance enables the Commissioner to clarify which sharp practices may be regarded as breaching the NDIS Code of Conduct, and enable the Commissioner to flexibly update this as new behaviours emerge or existing behaviour becomes a market problem. Registered providers in breach of their obligations may be subject to action with respect to their status as a registered provider, and individuals or unregistered providers (as well as registered providers) may be subject to other sanctions, such as civil penalties, enforceable undertakings, and banning orders to prevent them from operating in the NDIS market in the future (even as an unregistered provider).

Part of the proposed NDIS Code of Conduct would require workers and providers delivering NDIS supports to: “Act with integrity, honesty and transparency”. The draft Code of Conduct guidelines for providers lists (p19) expectations for this obligation:

  • Providers must not seek to mislead or withhold information from people with disability, their carers or families and must support a person with disability’s right to choice and control over who provides a service under the NDIS.
  • The obligation to act with integrity, honesty and transparency means that the provider must:
    • Recommend and provide supports and services appropriate to the needs of the participant and provide truthful information about the efficacy of any supports, services or products, including the capacity of the provider’s workforce to deliver proposed supports, services or products
    • Ensure workers, including key personnel, declare conflicts of interest in a timely and transparent manner
    • Not engage or participate in sharp practices.

Examples of business practices that may breach the proposed NDIS Code of Conduct include:

  • certain inducements unrelated to support for the participant, particularly where there is a lack of transparency about the full details of a support offering or associated conditions;
  • conflicts of interest for support coordinators, SDA providers and others that inappropriately induce a participant to a particular service;
  • denying supports unless a participant agrees to get all their supports from that provider; and
  • sales commissions to workers that create conflicts of interest and that may pressure sales workers into (in turn) pressuring participants inappropriately or encourage over-servicing.

The Commission’s role will include monitoring, investigating and taking compliance action against providers undertaking business practices that breach the NDIS Code of Conduct. While some Commission enforcement actions only apply to registered providers, the NDIS Code of Conduct applies to unregistered providers (and workers) and allows the Commission to take action against them. This will need to be effectively communicated to providers and workers.

The market oversight function will not enforce compliance with the NDIS Code of Conduct. Other parts of the Commission will identify, or receive information relating to, sharp practices which will then be shared with the market oversight area. The role of the market oversight function with respect to sharp practices will be to monitor and advise on the systemic effects of sharp practices.

  1. Are there any other known sharp practices that should be monitored and addressed in the NDIS Code of Conduct Guidance?

Other laws

Registered health practitioners are subject to conduct obligations and other requirements under the Health Practitioner Regulation National Law as in force in each state and territory (‘the National Law’). Registered health practitioners and bodies advertising regulated health services (services provided by or usually provided by a registered health practitioner) are also subject to advertising restrictions under the National Law.

The Australian Consumer Law (‘ACL’) also has general consumer protection provisions enforced by ACL regulators. It is important to note that, while these ACL protections will remain available to participants, resourcing and specialisation mean that the Commission and the NDIA will be the primary avenue for participants seeking consumer protection assistance in relation to the NDIS (although participants will be welcome to make complaints elsewhere, which may then be referred to the Commission, consistent with a “no wrong door” policy).

The Commission and the NDIA will need to maintain working arrangements with these agencies.

Sharp Practices vs Fraud

A discussion of fraud is necessary due to the often-blurred boundaries between fraud and sharp practices, and the complementary roles that the Commission (sharp practices) and the NDIA (fraud) will have in relation to provider conduct. Many individual cases may involve sharp practices and potential fraud, as the two behaviours may be intertwined. However, the paper does not aim to provide a comprehensive summary of NDIA fraud control or attempt to set NDIA fraud policy.

Fraud is “dishonestly obtaining a benefit or causing a loss by deception or other means”. Fraud is against the law (e.g. Crimes Act 1914 & Criminal Code 1995). State and Territory Police can investigate fraud against individuals, businesses and State or Territory agencies. The Australian Federal Police can investigate fraud against the Commonwealth, including fraud against NDIS funds, and other serious or complex fraud.

The NDIA has obligations under the Commonwealth Fraud Control Framework and the Public Governance, Performance and Accountability Act 2013, and has established systems to detect and investigate overpayments and fraud, to recover debts and initiate legal action with enforcement authorities.

The NDIA, upon investigating allegations of fraud, may refer instances to enforcement authorities which will initiate prosecutions according to their own priorities and policies. In these cases, the NDIA may refer evidence to the Commission or other regulators.

The NDIA can play a role in alerting participants about potential and identified NDIS scams, and has in the past (e.g. the 2015 “Shelby’s Plan” email scam and the 2017 “personal details” telephone scam). Scams are organised fraud that often involve online and telephone techniques, and sometimes involve offshore protagonists.

Intersection with other agencies

The Commission will need to form, or have in place, operational arrangements (in whatever form) to enable and formalise the sharing of information and allocating of resources relating to unlawful or undesirable practices. This includes its own internal processes, as well as external relationships with Commonwealth, state and territory organisations such as ACL regulators.

The Commission will particularly need a strong operational relationship with the NDIA to enable collaborative action and information sharing. The market oversight function will share and analyse intelligence from the perspective of systemic risks; individual cases and investigations will be managed by other parts of the Commission. Where the Commission identifies potential fraud against the NDIS, it will refer the matter to the NDIA for further investigation. Similarly, the NDIA will need to share details of its fraud investigations with the Commission for potential compliance action, particularly in cases that may involve both potential fraud and sharp practices.

  1. Prudential Oversight

Monitoring and mitigating the risks of unplanned service withdrawal

The purpose of prudential oversight is to monitor the finances, governance and performance of hard-to-replace providers and to provide early warning indicators (principally to the NDIA as market steward) of potential provider failure. Prudential oversight will apply only to a subset of registered NDIS providers.

If a ‘hard-to-replace’ provider were at risk of financial failure, the Commission would work first with the provider to share analysis of the provider’s position and monitor the implementation of appropriate mitigation strategies, including contingency and risk planning. The Commission will inform the NDIA of imminent provider failure to enable the NDIA to conduct timely and appropriate market stewardship activities. Clear guidelines and procedures will be established and communicated to provide clarity for providers that may be subject to prudential oversight.

The Amendment Act gives the Commission broad information-seeking powers to obtain financial and prudential information from providers and to protect that information once it is obtained. The Commission will have the ability to impose conditions on a provider’s certificate of registration at or after registration. Registration conditions will be the mechanism for setting any additional requirements on providers subject to prudential oversight. The market oversight guidelines will clearly outline the criteria by which these providers are selected.

However, broader oversight powers are not proposed for prudential oversight. In particular, the Commission will not have the power to directly intervene in an at-risk provider’s management to keep the provider financially viable until an orderly transition of participants can be arranged (i.e. to be a ‘statutory manager’). Close collaboration between the Commission and the NDIA will therefore be critical to the protection of participants from the adverse effects of provider failure.

    1. Prudential Oversight Inclusion Criteria

The prudential oversight role of the Commission will be targeted at the subset of providers that are ‘hard-to-replace’.

The registrar will base the decision that a provider of difficult-to-replace supports needs to be monitored on a range of criteria, including the providers’ scope, speciality of supports provided, geographical reach and risk of the support type. (Framework)

Scope

Prudential oversight will focus primarily on risks to the viability of large providers. Large providers are likely to have independently audited financial reports and internal governance systems conducive to prudential oversight. The incremental compliance cost would therefore be relatively low compared to the benefit to participants. ‘Large’ could be measured by total number of participants, number of supports delivered, market share for certain supports, region or cohort or more targeted measures such as the number of participants from certain vulnerable cohorts.

Similar schemes in other sectors measure ‘large’ in different ways. For example:

  • The Department of Education monitors providers that operate 25 or more childcare services: about 75 providers (one per cent) that supply 30 per cent of the market. The Department of Education also monitors around 300 subsidised childcare centres in thin markets
  • The English Care Quality Commission monitors providers of residential and non-residential adult social care that are either a significant size nationally (2000 beds or 30,000 care hours a week), or regionally (e.g. 1000-2000 beds with ten per cent market share in three or more regions for residential care providers)
  • Text Box: 4.  Should entry to the prudential oversight arrangements be based on:
a. the number of clients a provider has -  nationally and/or in a single state/territory or region?
b. market share (national, regional or for a particular support type or participant cohort)?
c. an alternative threshold, including a combination of the factors above?
The Department of Health monitors the financial viability of every residential aged care service in Australia, primarily to ensure the security of participant’s bonds, but also to ensure continuity of care in thin or concentrated markets.

Support type

Support type may be a relevant criterion to either restrict or expand the number of providers subject to prudential oversight. A scope criterion (e.g. number of clients) could be supplemented with a support type criterion to confine prudential oversight to providers of supports that are ‘critical’ such that if the provider unexpectedly failed, the participants would likely face immediate hardship. Alternatively, it may be appropriate to subject a provider of certain specialist supports to prudential oversight despite it not meeting the scope threshold.

All funded supports are to some extent critical to the participant receiving them, so defining a sub-group of critical supports may be problematic. However, there may be providers of less specialised supports that service a large number of participants that, due to the type of support they provide, do not warrant prudential oversight (e.g. large providers of domestic services). It may be, though, that other criteria such as availability of substitute providers and timeliness of access to substitute services, may better exclude such providers.

Core supports (as defined by the NDIA) that are delivered to participants daily are likely to be especially critical to participants, where if the provider unexpectedly failed, the participant would likely face immediate hardship.

Ultimately, a risk-based approach will be taken to determining which supports should be included. DSS welcomes comments on whether all supports or only specific supports should be included (and whether this should be determined by registration group or actual delivery of supports); and which supports should be included.

  1. Should prudential oversight be confined to a sub-group of ‘critical’ supports?
  2. If so, which types of supports should be regarded as ‘critical’ for prudential oversight purposes (i.e. the support is not just important, but is difficult to replace within a time period critical to the participant)?
  3. Should assessment of supply of ‘critical’ supports be based upon the supports a provider is registered to supply (registration data) or the supports a provider actually delivers (NDIA payment data)?
  4. Should providers of certain specialised supports be subject to prudential oversight irrespective of scope?

Thin markets

In some areas, or for some types of supports, there will be too few providers to support the competitive provision of services. Thin markets may have a high risk of provider failure and potential consequences to affected participants, factors that could indicate a need for prudential oversight of providers with dominant market share within that market.

However, although providers operating in thin markets would be hard to replace in the event of failure, subjecting providers in these areas to the additional compliance requirements of prudential oversight may exacerbate the thin market problem..

For this reason, it is arguable that providers operating in thin markets not otherwise subject to prudential oversight should be either excluded from prudential oversight, or subject to only light-touch prudential oversight that adds no unnecessary compliance requirements (oversight would be based on information provided for other purposes). For example, monitoring could be limited to analysis of NDIA payment data with additional reporting requirements only applied if certain ‘triggers’ occur, such as the sudden cessation of payment claims by that provider.

The Commission could conduct prudential oversight on an ad hoc basis as needed. If there are concerns about the financial viability of any provider or market sector that is not subject to prudential oversight, the Commission could use its information gathering powers to obtain further financial and governance information from the relevant provider and assess it. The Commission would need to justify this use of resources and powers and consult with the affected providers accordingly. By contrast, the prudential oversight of large providers with many participants would be a regulatory program with specified ongoing reporting obligations.

  1. Should providers operating in thin markets not subject to prudential oversight for other reasons (scope or support type) be subject to any prudential oversight? 
    1. Prudential oversight obligations

When monitoring is required, the registrar will develop compliance requirements proportionate to the risks the provider is managing. In most cases, this will include provision of standard reporting information already commonly required under contractual funding arrangements. Depending on the nature of the risks involved, this may include financial reporting, reporting on significant governance changes and developing a plan for continuity of service if the provider fails. (Framework)

Providers that are subject to prudential oversight may have additional reporting and compliance requirements. Any additional regulatory requirements for providers will be imposed through conditions of registration. The nature of these obligations, and the criteria by which providers will be subject to prudential oversight, will be clearly outlined in the market oversight guidelines. There will be a base level of reporting of financial and governance information, with any additional obligations proportionate to provider size and the risk to participants of provider failure. The information required (much of which will already be provided as part of providers’ registration, practice standards or continuous disclosure obligations) may include:

  • financial: audited financial reports or other financial information that covers a range of trading, gearing and debt payment indicators, such as: cash flow, debt position and leverage, and net tangible worth
  • non-financial: ownership/organisational structure, service closure or divestment, mergers or purchase of other business, breach of debt covenants, insolvency proceedings for related persons or entities, proportion of business outside NDIS and a range of quality indicators.

Depending on the nature of the risks involved, a provider may be required to develop a risk mitigation plan to outline how it will mitigate any risks to participants relating to its ongoing financial state and operation.

Reporting and compliance obligations will be designed so as not to impose unnecessary burden on providers. Wherever possible, the Commission will seek to obtain required information from available sources such as the Australian Charities and Not-for-profits Commission.

  1. What reporting, record-keeping and other compliance obligations should providers be subject to under the prudential oversight function?
    1. Risk Assessment

A number of implementation issues will be resolved after the primary policy settings are agreed, including developing a risk assessment and escalation framework. DSS broadly intends that providers subject to prudential oversight will be assessed to identify risk indicators in relation to the prospect of sudden or unexpected exit from service provision.

Possible factors on which to base an assessment of the likelihood of market exit could include: profitability of NDIS operations, profitability of the provider (or the provider’s parent company) as a whole, rapid gain or loss of market share, and complaints and critical incidents. Analysis of the consequences of sudden exit could be based on: the number of participants to which the provider supplies supports, the number of supports provided over particular timeframes (daily, weekly, monthly etc.) and the market share that provider has in the market of interest (whether national, jurisdictional or a geographically remote sub-market).

  1. What factors and metrics may be appropriate to analyse the risk of provider failure?
  1. General Feedback

In addition to the specific questions raised in this paper, general comments or feedback on the design of the market oversight function are welcome.

  1. Do you have any further comments or feedback about the design of the market oversight function of the Commission?
 

[1] Proposed in the National Disability Insurance Scheme Amendment (Quality and Safeguards Commission and Other Measures) Act.

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