Business Share Tolerance Calculation

DES-DMS Transition Provider Fact Sheet

Business Share Tolerance Calculation

Background

To ensure an equitable distribution of referrals for Providers, business share tolerance calculations will be recalculated for providers that have gained business in an ESA affected by the DES-DMS tender. The Department is making this adjustment because when there are significant changes in business shares within an ESA, the business share tolerances of providers will no longer accurately reflect the adjusted business shares.

The Employment IT System controls the flow of participant referrals to providers from Centrelink at a level that is within a 30 per cent tolerance of its allocated business share for an ESA. A provider’s business share tolerance within an ESA is calculated by:

· taking the provider contract referral total

· dividing this by the total ESA referrals, and

· dividing this value by the provider’s contracted ESA business share percentage.

How will Business Share tolerance be recalculated?

Business share tolerance starting points will be calculated for successful tenderers at the date that business share changes in the ESA come into effect. For the majority of ESAs this will be on 2 March 2015, however this may occur earlier in some ESAs where early Commencements are agreed.

To calculate business share tolerances for successful tenderers, CRS Australia’s referral counts will be used commensurate with the amount of business awarded in an ESA. That is, business tolerance levels will be calculated:

· for new contracts in the ESA, on the proportion of CRS Australia referral counts transferred to the new contract over the total referrals in the ESA and then divided by the value of the provider’s contracted ESA business share percentage, or

· for gaining contracts in the ESA, on the proportion the transferred CRS Australia referral count and the provider’s existing referral count over the total referrals in the ESA and then divided by the value of the provider’s new contracted ESA business share percentage.

It should be noted that the calculation of business share tolerances will only apply to successful tenderers and does not affect the tolerances of other providers operating in the ESA.

Further Information

Enquiries regarding this matter can be sent to your Contract Manager.

ESA Scenario examples

The examples below illustrate what would happen to providers’ tolerances should nothing be done to reset the contract and ESA counts, followed by examples applying the recalculation.

ESA Scenario prior to tender outcome and transition of participants

/ Total active caseload / Contract referral total / Total ESA referrals / Provider’s ESA business share / Provider’s business share tolerance /
CRS / 600 / 7000 / 13500 / 60% / 86%
Provider B / 300 / 5000 / 13500 / 30% / 123%
Provider C / 150 / 1500 / 13500 / 10% / 111%
Provider D (new) / 0 / 0 / 0 / 0 / 0

Scenario 1 –One new contract (Provider D) - Do Nothing

/ Total active caseload / Contract referral total / Total ESA referrals / Provider’s ESA business share / Provider’s business share tolerance /
CRS / 0 / 7000 / 14100 / 0% / 0%
Provider B / 300 / 5000 / 14100 / 30% / 118%
Provider C / 150 / 1500 / 14100 / 10% / 106%
Provider D / 600 / 600 / 14100 / 60% / 7%

Scenario 1 –One new contract (Provider D) - Following recalculation

/ Total active caseload / Contract referral total / Total ESA referrals / Provider’s ESA business share / Provider’s business share tolerance /
CRS / 0 / 0 / 13500 / 0% / 0%
Provider B / 300 / 5000 / 13500 / 30% / 123%
Provider C / 150 / 1500 / 13500 / 10% / 111%
Provider D / 600 / 7000 / 13500 / 60% / 86%

Scenario 2 –Two new contracts (Provider D and E) - Do Nothing

/ Total active caseload / Contract referral total / Total ESA referrals / Provider’s ESA business share / Provider’s business share tolerance /
CRS / 0 / 7000 / 14100 / 0% / 0%
Provider B / 300 / 5000 / 14100 / 30% / 118%
Provider C / 150 / 1500 / 14100 / 10% / 106%
Provider D / 500 / 500 / 14100 / 50% / 7%
Provider E / 100 / 100 / 14100 / 10% / 7%

Scenario 2 –Two new contracts (Provider D and E) - Following recalculation

Scenario 3 –One gaining contract (Provider C) - Do Nothing

Scenario 3 –One gaining contract (Provider C) - Following recalculation

Scenario 4 –One new contract (Provider D) and one gaining (Provider B) - Do Nothing

/ Total active caseload / Contract referral total / Total ESA referrals / Provider’s ESA business share / Provider’s business share tolerance /
CRS / 0 / 7000 / 14100 / 0% / 0%
Provider B / 600 / 5300 / 14100 / 60% / 63%
Provider C / 150 / 1500 / 14100 / 10% / 106%
Provider D / 300 / 300 / 14100 / 30% / 7%

Scenario 4 –One new contract (Provider D) and one gaining (Provider B) - Following recalculation

/ Total active caseload / Contract referral total / Total ESA referrals / Provider’s ESA business share / Provider’s business share tolerance /
CRS / 0 / 0 / 13500 / 0% / 0%
Provider B / 600 / 8500 / 13500 / 60% / 105%
Provider C / 150 / 1500 / 13500 / 10% / 111%
Provider D / 300 / 3500 / 13500 / 30% / 86%