NDIS vs Aged Care: Comparing Margin Management Strategies for Australian Providers

Australia's two major care funding systems-the NDIS and aged care-share superficial similarities but operate with fundamentally different economics. For organisations operating across both sectors, or CFOs moving between them, understanding these differences is essential for effective margin management.

This comparison examines the distinct challenges and strategies each sector demands while identifying transferable approaches that strengthen financial performance in both.

Funding Model Fundamentals

The structural differences between NDIS and aged care funding create distinct margin management imperatives.

NDIS operates on a participant-directed, fee-for-service model. Participants hold individual plans with defined budgets across support categories. Providers deliver services, claim against plans, and receive payment per service or support item. The NDIS Price Guide sets maximum prices; providers can charge at or below these rates.

This model means NDIS provider revenue is inherently variable-it depends on attracting and retaining participants, delivering claimed services, and managing plan utilisation. Revenue can grow quickly with volume increases but can also decline rapidly if participants leave or reduce service use.

Aged care operates on a provider-funded, classification-based model (AN-ACC for residential care). Funding flows to providers based on resident classification assessments, with per-resident-per-day payments covering care and services. Accommodation payments operate separately under means-tested arrangements.

This model provides more predictable revenue once residents are in place, but growth requires capital-intensive bed expansion and depends on occupancy maintenance. Classification accuracy directly impacts funding adequacy.

Cost Structure Differences

While both sectors are labour-intensive, cost structure specifics differ significantly.

NDIS workforce costs are driven by direct service delivery hours. Support workers, therapists, coordinators and other frontline staff constitute the majority of costs. Provider margins depend heavily on billable utilisation-the percentage of paid staff time that generates revenue through claimed services.

Key cost drivers include worker pay rates versus NDIS price allowances, travel time and non-billable activities, supervision and coordination overhead, and cancellation and no-show rates.

Aged care workforce costs are driven by care minute requirements. The mandated 200 care minutes (215 from October 2024) per resident per day, including 40 registered nurse minutes, creates a cost floor independent of funding. Providers must roster to meet requirements regardless of AN-ACC funding levels.

Key cost drivers include skill mix between RNs, ENs and PCWs, rostering efficiency against care minute targets, agency and overtime usage, and staff turnover and recruitment costs.

Margin Pressure Points

Each sector faces distinct margin pressure points requiring tailored responses.

NDIS margin pressures include pricing constraints from the NDIS Price Guide, which hasn't kept pace with wage increases in some categories. Thin time limits on certain supports squeeze delivery economics. Plan under-utilisation means participants don't use their full plans, leaving revenue on the table. Claiming integrity issues with rejected or questioned claims erode realised revenue. Geographic dispersion in rural and regional areas faces travel cost challenges. Competition intensity, particularly in metropolitan therapy markets, pressures pricing.

Aged care margin pressures include AN-ACC adequacy where funding doesn't cover care costs for many resident profiles. Care minute compliance requires specified staffing regardless of resident needs within bands. Star Rating investments in quality measures may not generate commensurate funding. Accommodation volatility affects RAD/DAP revenue with interest rate sensitivity. Food and utilities inflation affects costs that funding indexation under-compensates. Regulatory compliance burdens require investment in quality, reporting and governance systems.

Revenue Optimisation Strategies

Optimising revenue requires different approaches in each sector.

For NDIS providers, revenue optimisation focuses on service agreement management by ensuring participants have adequate plan budgets and appropriate support categories funded. This involves advocacy during planning meetings and review processes. Claiming integrity means minimising rejected claims through proper documentation, correct line items, and timely submission. Plan utilisation support helps participants use their plans effectively, which benefits both participant outcomes and provider revenue. Service mix optimisation shifts toward supports with better margin profiles where appropriate and clinically justified. Volume growth through participant acquisition and retention directly drives revenue in the volume-based model.

For aged care providers, revenue optimisation focuses on AN-ACC classification accuracy, ensuring residents are correctly assessed and documented to reflect actual care needs. Classification appeals for under-classified residents can recover significant funding. Accommodation strategy optimises RAD/DAP mix based on resident preferences, provider cash needs, and interest rate environment. Additional services and charges for services beyond basic care can generate higher-margin revenue. Occupancy management, with every empty bed representing lost revenue, drives focus on hospital relationships, respite, and waitlist management.

Cost Management Approaches

Cost management strategies also diverge between sectors.

NDIS cost management priorities include billable utilisation optimisation by maximising the percentage of worker time that generates claims. This involves efficient scheduling, travel minimisation, and reducing administrative burden on frontline staff. Service delivery model design balances service quality with cost efficiency through group programs, telehealth where appropriate, and assistant-level supports. Cancellation management implements policies and practices that minimise late cancellations and no-shows. Administration efficiency streamlines rostering, claiming, and participant management processes.

Aged care cost management priorities include rostering efficiency by meeting care minute requirements with optimal skill mix and minimal gaps or overstaffing. Agency reduction through permanent workforce strategies reduces premium labour costs. Staff retention investment keeps experienced workers to reduce turnover costs. Procurement optimisation leverages scale in food, consumables, and clinical supplies. Energy and utilities management addresses significant fixed costs through efficiency measures.

Quality-Financial Alignment

Both sectors face the challenge of aligning quality performance with financial sustainability, though the mechanisms differ.

In NDIS, quality drives participant choice and retention. Providers known for good outcomes attract and keep participants. NDIS Quality and Safeguards Commission compliance is mandatory but doesn't directly affect funding. The financial alignment is indirect-quality enables volume and retention, which drive revenue.

In aged care, Star Ratings create direct visibility of quality performance. While ratings don't yet directly determine funding, they affect consumer choice and may influence future funding models. Quality indicators around falls, pressure injuries, unplanned weight loss, and medication management require investment that may or may not be offset by improved ratings and occupancy.

Transferable Strategies

Despite sector differences, several margin management strategies transfer between NDIS and aged care.

Service-line profitability analysis matters in both sectors. Understanding which services, participant/resident segments, or support categories generate margins enables strategic focus. The methodology applies regardless of funding model specifics.

Workforce efficiency is paramount when labour exceeds 65% of costs in both sectors. Rostering optimisation, retention investment, and productivity improvement translate across contexts.

Data-driven management using real-time visibility into key metrics-utilisation, occupancy, staffing, claiming-enables proactive intervention. The specific metrics differ, but the capability requirement is identical.

Cost consciousness culture embedding financial awareness throughout the organisation benefits both sectors. Frontline staff who understand cost implications make better decisions daily.

Diversification strategy reduces single-source dependency. NDIS providers diversifying into aged care (or vice versa) spread risk across funding systems with different risk profiles.

Sector-Specific Capabilities

Certain capabilities are sector-specific and don't transfer directly.

NDIS requires participant engagement and relationship management skills. Success depends on attracting, serving, and retaining individual participants-a fundamentally different go-to-market than aged care's facility-based model.

Aged care requires facility management and capital planning capabilities. Physical infrastructure, bed licensing, and accommodation economics create requirements absent in most NDIS service delivery.

Strategic Implications for Dual-Sector Providers

Organisations operating across both sectors should consider several strategic approaches.

Shared services can generate efficiency. Corporate functions-finance, HR, IT, quality-can serve both sectors with appropriate customisation, spreading overhead across larger revenue bases.

Cross-subsidisation may be appropriate depending on strategic priorities and mission. Stronger margins in one sector might support mission-driven services in the other, provided this is intentional and sustainable.

Capability leverage allows strengths built in one sector to transfer where applicable. NDIS participant engagement skills might inform aged care consumer experience; aged care clinical governance might strengthen NDIS quality systems.

Risk management through diversification across sectors reduces exposure to single funding system changes. NDIS pricing reviews and aged care reforms create distinct risk profiles that partially offset.

Conclusion

NDIS and aged care present distinct margin management challenges requiring tailored strategies. NDIS rewards volume growth, utilisation efficiency, and participant relationships. Aged care rewards classification accuracy, occupancy management, and staffing optimisation.

Yet the underlying capability requirements-data visibility, cost management, workforce efficiency, strategic focus-are remarkably similar. CFOs who build these foundational capabilities can adapt to either sector's specifics while maintaining financial sustainability focus.

For organisations navigating margin management in NDIS, aged care, or both sectors, CFO Insights provides fractional CFO services with deep expertise across Australia's care funding systems.