Hivetec-DES-Report-V1.4

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