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By Monica E. Oss

Since the mid-1990s, state child welfare agencies have looked to privatization as a way to improve the overall performance of their systems – both in terms of cost and quality. Privatization comes in many forms, with different states choosing to contract out different services to private organizations. Supporters of privatization believe that private organizations can implement more innovative programs and more effectively use government resources. Opponents argue that in a privatized system, quality of care may be sacrificed for profit and that, when all costs are included, use of private organizations does not necessarily guarantee more efficient use of resources (see Privatization of Child Welfare Services: A Guide for State Advocates).

Mr. Shiffman
Mr. Shiffman

Why have so many states opted to privatize some portion of their child welfare systems? My colleague, OPEN MINDS Senior Associate Howard Shiffman, had a few interesting perspectives on that question:

The main argument for privatization is that private organizations have a profit incentive to cut costs and be more efficient. Whenever states make the decision to privatize human services, most of their reasons revolve around efficiency and financial incentives. In addition, the private sector often has salary structures for case management and service delivery that are less costly than state or county human services. They can hire more cheaply and deliver services more cheaply. Another factor relates to outcomes. It is often more difficult for states or counties to assess themselves objectively in regard to outcomes and critical incidents than a contracted provider organization.

The privatization model using a lead agency – where the county or state has only one primary provider organization with the responsibility of recruiting, negotiating, and contracting with multiple providers – does save time and financial resources. In addition, a lead agency usually better understands who to contract with in their community for service delivery and this is untimely more effective in reaching targeted goals and outcomes.

Another benefit is that this model, with the case management function and service delivery in the hands of a single organization, should cut down on multiple involvement of professionals, yielding less confusion, more consistency, and less waste of time.

Finally, privatization reduces government’s political influence and involvement. The government sometimes seems bogged down in making expedient and difficult decisions especially when they impact their budgets and political agenda. This is especially true at times of layoffs, pay cuts, and budget adjustments.

The question for policymakers, legislators, and advocates alike is, do privatized child welfare models produce these results? Unfortunately, much like the practice of privatization itself, the results have caused much debate. Recently, two states that privatized their systems nearly 20 years ago—Florida and Kansas—have come under scrutiny about the results of their privatization (see An Analysis Of The Kansas & Florida Privatization Initiatives and Privatization of Child Welfare Services: An Analysis of the Kansas & Florida Initiatives).

Florida

Florida is one of those states that has been at the forefront of establishing a privatized child welfare system – known as community-based care. A 1996 state statute mandated the Florida Department of Children and Families (DCF) to privatize foster care and all related services throughout the state by 2003; and between 1997-2000, Florida committed $27.5 million on five pilot programs to develop and implement a privatized system of care The community-based care program divides the state into 20 circuits and the Florida Department of Children and Families (DCF) contracts with a lead agency to provide family preservation, out-of-home-placement, independent living, and family reunification in each region. Currently there are 17 community-based care lead agencies (CBCs) serving the 20 circuits. The CBCs contract with other child welfare agencies in the region to deliver services. DCF is responsible for investigating allegations of abuse and neglect and providing legal representation in court.

But in an analysis of available reports and data (see The Elephant in Florida’s Child Welfare), Tallahassee-based non-profit The Children’s Campaign reports that Florida’s “child safety efforts lack consistency and follow-up,” and that mounting pressures on the system include: caseload ratios of 22 cases per case manager (double the recommended standards); a case manager annual turnover rate of 37% (costing $14 million annually); and poor permanency outcomes, with only 45% of children exiting foster care within 12 months. Additionally, in 2015 473 children died in the system, 50% of which were already known to the Florida DCF. (For more, see Does Florida’s Child Welfare Need a Roadmap?.)

Kansas

Kansas implemented privatized foster care in 1997. Currently the state contracts with two agencies – KVC Behavioral HealthCare Kansas (KVC Kansas) and St. Francis Community Services (St. Francis) to provide all family preservation, foster care, adoptive, and reintegration services. The Kansas Department for Children and Families (DCF) is responsible for investigating allegations of abuse and neglect and if the court requires out-of-home placement or family preservation are needed, then the child is referred to the lead agency operating in their region. KVC Kansas provides services in the Eastern and Kansas City regions while St. Francis provides services in the Western and Wichita regions (see Kansas Awards Eight New Foster Care, Adoption, Reintegration & Family Preservation Contracts).

There are two separate types of payments that the lead agencies receive, one for family preservation services and one for foster care services. The lead agencies receive a per family case rate for providing family preservation services for up to 365 days. The case rate is paid in thirds: upon referral, 45 days after referral, and 90 days after referral. If a family does not agree to engage in family preservation services or the child is removed from the home before the end of 90 days, the second and/or third portion of the case rate will not be paid. For providing foster care services, the lead agencies receive two payments – a monthly base rate and case rate. The monthly base rate covers administrative costs related to the lead entities operations while the case rate is provided for each child in the care of the agency at the end of the month regardless of placement type (see Kansas Family Preservation Services).

This system is currently under review, after Kansas lawmakers agreed in 2015 to authorize a wide-ranging audit of current practices within the Department for Children and Families (see Kansas Social Workers Call For Review Of Privatized Child Welfare System). Sky Westerlund, executive director of the Kansas Chapter of the National Association of Social Workers, was quoted as saying, “…. what we’ve seen is exactly opposite of what they intended….It has not cost the state less. It has not created efficiencies.” Previous audits of the system have shown that DCF has struggled to provide adequate oversight and overly deferred to its contractors. The auditors warned that continuing to take this approach to monitoring and overseeing the contractors, DCF increases the risk to the children the agency is responsible for protecting (see Kansas Foster Care Case Workers Missed Visits & Failed To Conduct Background Checks).

What could cause privatization of systems like Florida and Kansas to fail? Mr. Shiffman explained that the reasons vary – from a flawed contract that doesn’t accurately assess risk, to poor oversight, to a bad fit with the organization contracted to deliver services:

The reason that it sometimes fails is that the financial costs to deliver privatized services is often not adequate. The anticipated caseloads are often inaccurate (more, or more difficult clients than anticipated) and the lead agency and provider network do not have the financial resources to provide the array of necessary services. The lead agency and/or the government entity entered into a flawed negotiation, and ended up with a risk-based contract that does not correctly account for the resources needed to provide services. If there is no way to renegotiate the daily rates, case rates, or capitated allocation the contract is not successful.

Another reason for failure of privatization is poor oversight by the government entity. This includes inadequate communication with the contractor or vice versa. Failure can occur when the network has the responsibility to get things done but lacks the authority to make decisions in the best interest of their clients. This is sort of the opposite of lack of oversight. This is about meddling in the network’s business and not allowing the contracted entity to do their job.

Lastly, the wrong provider organization can be chosen by the government entity. We sometimes find that the lead agency did not have the necessary skill set to produce the contracted outcomes. Or their oversight of providers were lacking and they were unable to coordinate and communicate effectively with their subcontracted provider network.

As states continue to look for ways to improve the value of child welfare spending, I think that we’ll only see the practice of privatization grow in the coming years. The real challenge going forward will be for states and counties to move towards better contracting and oversight practices. With 20 years of child welfare privatization experience, hopefully states will begin to take the lessons learned in other states into account—particularly why privatization fails—when developing their own systems of care.

For more, Howard Shiffman will be hosting an exclusive web briefing for members of The Next Generation Forum On Children’s Services on January 18, 2017 at 2:00 EST — Forecast The Future With Predictive Analytics To Improve Your Child Welfare Outcomes: A Case Study. Become a new member and register your team today!


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