Hivetec-DES-Report-V1.3
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CONCLUSIONS<br />
The changes proposed<br />
are wide-ranging, the most<br />
significant being increased<br />
consumer influence on provider<br />
choice and the increased<br />
weighting of outcome payments<br />
on total provider revenue.<br />
New providers must attract their own referrals from Centrelink. Should volumes come in lower than<br />
projected, the new providers’ ability to recover fixed costs through (PbR) revenue is immediately limited,<br />
and the economics of a programme can be fundamentally undermined.<br />
We conclude that market forces are unlikely to have a major affect at the initial spill. Unless government<br />
amends the pre-offering slightly and bids a small market share provision to new entrants, whom we feel<br />
will be reluctant to start delivering services until they have minimum viable caseloads.<br />
History tells us that <strong>DES</strong> clients are likely to exhibit a high degree of inertia when switching to an<br />
alternative supplier, we have seen such behaviour in prior <strong>DES</strong> contracts and more recently in the NDIS<br />
consumer choice environment.<br />
Over time as more individuals embrace choice and variety, <strong>DES</strong> participants are likely to be attracted to<br />
the following five pull factors when exercising choice:<br />
1. Ease of accessibility. (“status quo bias”)<br />
2. Prior/existing consumer experience (people interaction & digital interaction).<br />
3. Delivery branding.<br />
4. Organisational values and culture.<br />
5. Most lenient in meeting mutual obligation requirements if known by participant.<br />
Current proposed structure heavily favours incumbents, especially those with overlapping contracts and<br />
existing infrastructure in situ. From July 2018, likely after a good six-to-twelve months’ larger providers<br />
will have some vulnerability to customers switching in search of more personalised or specialist services<br />
in the form of new and more engaging delivery platforms, if these new providers can bridge the funding<br />
black hole of outcome based contracts.<br />
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