Child welfare overhaul: Rough start

LINCOLN — A few bumps in the road are expected when states turn over large parts of their child welfare systems to private agencies.

Tell that to Debbie O'Shea's grandchildren.

Three of them spent an extra month away from home. They were moved through three foster placements in four months this spring. They missed Easter weekend and other court-ordered visits with their parents.

And the middle child was delivered two hours late to his 4th birthday dinner.

“It's been a horrible, horrible thing,” the Bellevue woman said.

O'Shea's family became entangled in the turmoil that followed Nebraska's latest effort to overhaul its child welfare system.

The effort involved contracting with five private agencies to take on many responsibilities previously handled by state workers.

It remains to be seen whether the changes will improve Nebraska's child welfare system in the long run, but the short run has been rocky.

Since the contracts took effect eight months ago:

_ One private agency has folded and another has pulled out of its contract, citing inadequate reimbursement from the state.

_ The remaining three agencies are losing money but vow to continue.

_ Foster parents are seeing their pay shrink as agencies cut costs, leading some foster parents to quit.

_ Children and families missed visits and treatments and dealt with turnover of state and private caseworkers as confusion from the transition added to problems from the old system.

State officials acknowledge the privatization move has not gone as smoothly as they had hoped.

It will take time — and some adjustments — to realize the fruits of the effort, said Todd Reckling, director of the division of children and family services in the Nebraska Department of Health and Human Services.

“True system reform is not going to happen overnight,” he said. “It's a multiyear process. We're probably talking two to perhaps five years.”

But he said the state needed to take a different tack to improve the care provided to children.

Nebraska's child welfare system has been a frequent target of criticism. The state takes children from their homes at one of the highest rates in the nation, and it falls short on federal measures of safety, permanency and well-being for children in the system.

“There were kids before (the change) that we owe it to them to try to make a better system for them,” Reckling said.

Under the new system, five lead agencies were given responsibility for coordinating all services for children in the child welfare and juvenile justice system. State workers remain as case managers.

The hope was to tap the expertise and creativity of the private sector and free state workers to focus on bigger case decisions.

Financial savings were not anticipated, Reckling said.

But the state wanted to change financial incentives so children could get home more quickly and safely.

Under the contracts, the private agencies are paid a flat amount to cover all cases and services. The fewer children they serve with costly out-of-home placements, the better for their bottom line.

During the fiscal year that began Thursday, agencies share $8.8 million a month, or about $106 million for the year.

Nebraska's private agencies had long sought a bigger role in — and bigger paycheck from — the state's child welfare system.

The reality of contracting turned out to be much different.

Lincoln-based Cedars Youth Services announced April 2 — less than six months after privatization began — that it would drop out of its contract.

Visinet, the Omaha-based agency that served O'Shea's grandchildren, filed for bankruptcy the following week and shut down April 15.

Both said higher-than-expected costs and inadequate payments created unsustainable losses.

Gov. Dave Heineman expressed frustration with the turn of events. He said the private agencies had made claims about their abilities and signed contracts, knowing the amount of money available from the state.

“They knew what they were getting into,” he said.

Agency officials said the contracts put them deeper in the red than they anticipated.

Cedars officials estimated they were on track to lose more than $5.5 million over the 20-month contract. Visinet officials said they were losing $10,000 a day.

Reports showed that the three remaining agencies combined — the Kansas-based KVC, Omaha-based Nebraska Families Collaborative, and Boys and Girls Home of Sioux City, Iowa — went nearly $2 million in the hole during the first quarter of 2010.

Visinet was the only for-profit agency of the five.

Officials with those private agencies said several factors contributed to the losses: the number of children being referred for care, a higher proportion of denials of Medicaid coverage for court-ordered services, state workers and courts overruling agency plans, duplicated administrative efforts, the cost of coordinating services, and the requirement to offer continuing care for a year after a case is closed.

Kerry Winterer, the Health and Human Services CEO, said the state is trying to figure out where the problems lie.

HHS statistics raise questions about two of the claims.

Denials of Medicaid coverage have jumped substantially since February for residential treatment — one of the most expensive types — but changed little for other types of treatment.

And the number of children needing care, both voluntary cases and those made state wards by the courts, remained relatively stable over the past 18 months.

But clearly, the contracts call for the private agencies to do more for the money than the state had done.

For the same $106 million the state spent annually on child welfare services, it wanted the five agencies to continue those services plus coordinate services and offer families aftercare.

The agencies were expected to lose money initially, then to break even or possibly make money as more children were served in their own homes.

“The private sector realized that they were going to have to put in money to make their bottom line numbers work,” Reckling said. “Part of it was them analyzing how much risk they were willing to take.”

Officials with the private agencies acknowledge there was some overconfidence.

But they, along with child advocacy groups, question whether the money provided for the contracts is sufficient.

HHS is negotiating contract amendments with the remaining three agencies to address the problems. The amendments are unlikely to include more money, given the state's looming budget shortfall, but they could change agency responsibilities.

The three agencies all say they plan to stick it out. They hope to turn around their finances through trimming expenses and changing how children are served.

“We have an opportunity, and it's not time to get weak in the knees,” said Jeff Hackett, chief operating officer for Boys and Girls Home.

He and the other agency leaders believe privatization eventually will improve child welfare. Child advocates are more skeptical.

But there have been positive signs.

While families such as O'Shea's suffered under the new system, others have found it an improvement.

Joni Levinson of Lincoln said state workers failed for a year and a half to provide the treatment her son desperately needed for behavior problems. Visinet got treatment arranged for him within weeks of taking over the case.

Problems resurfaced when Visinet folded and the case went back to state workers, she said. Although her son remained in treatment, he missed several home visits.

KVC has brought nine of 22 children back from costly out-of-state placements to less-expensive care in Nebraska.

The Nebraska Families Collaborative had 52 percent of its children in out-of-home care during May, compared with the 70 percent that the state averaged.

Boys and Girls Home also had a smaller-than-average percentage of children in out-of-home care during the first quarter of the year.

“I'm very optimistic about what potential there is for Nebraska if we could just get the system stabilized,” said Sandra Gasca-Gonzalez, president of KVC in Nebraska.

Said Judy Dierkhising, executive director of the Nebraska Families Collaborative: “It comes back to that four-letter word: time.”

Contact the writer:

402-473-9583, martha.stoddard@owh.com

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