The hidden cost of the cost model is a conversation we can’t ignore.

By now, most of you have heard about the Valmar case. This heartbreaking situation had devastating consequences, and our deepest condolences go out to those directly impacted. While no two cases are identical, the broader issues that contributed to this tragedy were sadly, foreseeable.

Last week, we saw how the top 10 attendant care providers are experiencing persistent operating losses. This article digs deeper into the SIL cost model to show how real-world factors—such as vacancies and surplus hours—lie mostly outside its formal funding scope. Once corporate overhead is brought down to an ultra-lean level, the remaining levers typically force cuts to direct supports, especially supervision and training. Over time, these reductions weaken the very safety controls essential to good practice and participant outcomes.

The Cost Model’s Efficiency Assumption

A commonly repeated tenet of SIL pricing is:

“The cost model pays a supervisor at SCHADS 3.2, assuming a 15 FTE span of control.”

To understand how razor-thin these margins can be, let’s consider a strict 1:3 SIL setting (with no additional supports):

• 3.54 FTE are required to staff a single 1:3 property fully.
• Under the cost model’s logic, one supervisor at SCHADS 3.2 overseeing 15 FTEs would manage about 4.24 houses and 12.72 participants.
• In practice, that means roughly 30+ staff to roster (counting leave cover), plus an annual turnover that might require six new hires per year per cluster of houses.

Each 1:3 house often involves higher levels of complexity—seizure management, mealtime protocols, community participation, or nuanced social interactions. Even in the best circumstances, a supervisor’s time is stretched thin.

Now, scale that ratio up to 1:6 or higher:

• The same single supervisor could be responsible for double (or more) the participant load, meaning substantially more support plans, staff coordination, and incident follow-ups.
• The cost model doesn’t increase the supervisor’s resourcing to reflect the increased administrative or clinical oversight needed. It is fixed at the staffing unit.
• More participants multiply the demands on that same finite supervisory bandwidth.

In both scenarios, once you add typical real-world disruptions—staff sickness, participant transitions, or unexpected vacancies—supervisors end up pulled away from their primary role of practice leadership.

Note: While it hasn’t been stated since 2021: we can assume these assumptions are conserved once we pull categories forward.

But that is just one component of a broader approach built on peak efficiency. The model:

1. Benchmarks Corporate Overhead
• At the 25th percentile of providers—meaning providers are expected to run extremely lean.
• Assumes robust systems and minimal administrative burden.
2. Expects Stable, Fully Utilised Staffing
• Anticipates low turnover, minimal absenteeism, and high occupancy (i.e., few vacancies).
• Supposes that “surplus hours” (unfunded extra staff time) rarely occur.

While logical on paper, these assumptions quickly unravel when real-world complexities—such as overhead inefficiencies, unplanned participant absences, or staff turnover—enter the picture.

Overhead Inefficiencies and Their Impact on Supervision

Under ideal conditions, corporate overhead is minimal yet sufficient: the provider has efficient HR, technology, and administrative workflows. In reality, systems immaturity and weak balance sheets often spill over to supervisors.

• Underfunded HR leads to slow recruitment processes, pushing line managers and supervisors into repetitive hiring or onboarding tasks.
• Manual compliance and record-keeping (due to lack of a proper CRM) forces supervisors to track participant documents themselves.
• Gaps in finance or quality systems mean supervisors also become de facto troubleshooters—spending hours on tasks outside their scope.

Once you reach the hard floor of these overheads—where there’s simply no more fat to trim—any additional budget shortfall essentially comes at the cost of frontline support, particularly supervision and training.

Sensitivity Analysis: Validating the Vacancy and Surplus Problem

Our team conducted a sensitivity analysis, simulating thousands of SIL providers under varying conditions. Two consistent factors emerged that undermine cost-model sustainability:

Hard line

Once vacancies and surplus exceed 12%, the provider loses enough operating margin that either overhead must be cut further (already at a minimum) or direct support must be curtailed.

The analysis showed that once corporate overhead is lean, vacancy and surplus-hour stress almost inevitably pushes providers to chip away at supervision and training. This is not a moral failing, but a structural reality of the current pricing approach.

Why Supervision Suffers First

1. Supervisors Plug Roster Gaps
• When staff call in sick or there’s an unexpected vacancy, supervisors fill shifts to maintain participant safety.
• Time previously earmarked for staff coaching or practice development vanishes, replaced by frontline coverage.
2. Training Becomes a “Luxury”
• With margins stretched, formal training budgets are among the first to be reined in.
• Over time, staff skills stagnate or degrade, increasing the likelihood of incidents or suboptimal supports.
3. Practice Leadership Devolves
• Supervisors spend their days in reactive mode—juggling rosters, incident management, and admin tasks.
• In-situ coaching—evidenced by the works of Beadle-Brown, Bigby, and Mansell—diminishes, robbing staff of real-time feedback crucial for high-quality support.

Practice Leadership: Introducing the Stakes

Practice Leadership is widely regarded as the most critical element in delivering safe and effective SIL supports. It revolves around direct, context-specific oversight:

• Engaged Observation: Supervisors watch staff in action, providing immediate pointers or course-corrections.
• Responsive Coaching: Teams are guided through complex participant interactions—think de-escalation techniques, behavioural supports, or medical protocols.
• Proactive Safety Measures: Supervisors identify early warning signs and embed preventative strategies rather than reacting after incidents occur.

This leadership style is high effort, high reward—it reliably improves participant outcomes but is also fragile when supervisory capacity is squeezed. Once finances force supervisors into frontline coverage, compliance chores, or constant recruitment, the high-touch nature of practice leadership is one of the first casualties.

Everything Affects Safety

When even small inefficiencies arise—vacancies, surplus hours, overhead gaps—they radiate through the entire SIL operation:

• Overhead shortfalls push admin tasks onto supervisors, reducing time for coaching.
• Vacancies reduce incoming revenue, prompting budget cuts to supervision or training.
• Surplus staffing needs (often for genuine participant safety) go unfunded, heightening financial strain.
• High staff turnover (exacerbated by limited training) creates a cycle of never-ending onboarding, further distracting supervisors.

Each step erodes the ability to maintain consistent, high-quality support. Indeed, every facet of a SIL provider—from HR to IT—either conserves or undercuts participant safety.

Conclusion: Preserving Practice Leadership in the Cost Model

Valmar is unlikely to be the last provider marred by crisis under the current arrangements. By design, the NDIS pricing model pressures providers to operate with minimal overhead, leaving no buffer for unexpected vacancies or essential surplus hours. Once that buffer is gone, the inevitable cuts fall upon supervision and training—the two linchpins of safe, person-centred care.

To prevent these near-misses and collapses:

1. Acknowledge Real-World Variances
• Funding models should accommodate typical fluctuations in occupancy and staff hours, rather than assuming everything aligns perfectly.
2. Provide for Essential Surplus Hours
• When participants genuinely need additional support, providers shouldn’t have to absorb it without any financial offset.
3. Protect Practice Leadership
• Directly invest in supervisory capacity and training to ensure the high-touch oversight that underpins safety and quality.

Until these systemic gaps are addressed, SIL providers will remain perched on a financial knife-edge—forced to cut back on the very mechanisms (supervision and practice leadership) that guard participants from harm. Consequently, the risk of recurring incidents akin to Valmar remains alarmingly high.

At Empathia Group, we understand the critical role of supervision, training, and sustainable funding in delivering safe, high-quality support. If your organisation is navigating these challenges, we’re here to help—offering practical guidance to strengthen systems without compromising care.