United States General Accounting Office

GAO Report to the Chairman, Subcommittee

on Human Resources, Committee on

Ways and Means, House of

Representatives

October 1998 CHILD WELFARE

Early Experiences

Implementing a

Managed Care

Approach

GAO/HEHS-99-8

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-280259 

October 21, 1998

The Honorable E. Clay Shaw, Jr.

Chairman

Subcommittee on Human Resources

Committee on Ways and Means

House of Representatives

Dear Mr. Chairman:

This report, prepared at your request, describes states’ efforts to implement managed care in

their child welfare systems.

We are sending copies of this report to the Secretary of Health and Human Services, state child

welfare directors, and selected county child welfare directors. We will also make copies

available to other interested parties upon request.

Please contact me at (202) 512-7125 if you or your staff have any questions about this report.

Other GAO contacts and staff acknowledgments are listed in appendix IV.

Sincerely yours,

Mark V. Nadel

Associate Director

Income Security Issues
Executive Summary

Purpose Faced with a decade of escalating costs and a poorly integrated patchwork

of services, state and local child welfare agencies are looking to new

financial and service delivery strategies to meet the needs of the nearly

1 million abused and neglected children in the child welfare system.

Managed care in child welfare, like its counterpart in health care, is seen

as a strategy to improve access to care while controlling the cost of

delivering services. By coordinating the delivery of only those services that

are necessary and appropriate, managed care strives to reduce the

inefficiencies of the traditional fee-for-service system while providing

quality care. However, unlike health care, the child welfare system legally

holds the custodial responsibility for the safety and well-being of many of

the nation’s abused children. Aware of recent criticisms of managed health

care’s excessive controls over access to services, policymakers,

practitioners, and child advocates are concerned about the consequences

if the child welfare population is underserved or denied needed services

while providers unduly profit.

The Chairman of the Subcommittee on Human Resources, House

Committee on Ways and Means, asked GAO to determine the (1) extent to

which public agencies are using managed care to provide child welfare

services; (2) financial and service delivery arrangements being used under

a managed care approach; and (3) challenges child welfare agencies face

as they develop and implement managed care, and the results of such

efforts to date.

Background The current child welfare system encompasses a range of programs and

services, including child protection, family preservation and support

services, and foster care. States and counties administer these programs

and services. The services typically provided include a temporary home

for abused or neglected children, health care, educational services, and

other services to support families, such as parenting education, mental

health counseling, and substance abuse treatment. Many of these services

are currently provided through a system of separate fee-for-service

contracts with private providers. Federal funding is primarily authorized

under title IV-E of the Social Security Act, which reimburses states for a

portion of out-of-home care costs for those children eligible under the Aid

to Families With Dependent Children (AFDC) program.1

 In 1996, federal

funding for child welfare services totaled nearly $5 billion.

1

Although legislation passed in 1996 eliminated the AFDC program, children who meet the 1996

eligibility criteria for AFDC continue to be eligible for title IV-E assistance. The states incur all foster

care costs for children not eligible for federal support.

Page 2 GAO/HEHS-99-8 Child Welfare Managed Care
Executive Summary

With roots in the health care system, managed care has two primary

elements. The first is a prepaid, capitated payment system to control costs

and discourage providers from providing unnecessary services. Under

capitation, the managed care plan—such as a health maintenance

organization—is prospectively paid a preset price for a range of services

that are delivered by an established network of affiliated hospitals,

physicians, and other providers for a defined population of clients. The

managed care plan must then manage its resources to ensure the

availability of appropriate services when the need arises. This payment

arrangement is a departure from that used by many human service

programs, where providers submit bills and are reimbursed on the basis of

the number and type of services they provide. Prepaid capitation exposes

the managed care plan to some financial risk because the cost of serving

clients may exceed the capitated payment. Therefore, setting an

appropriate rate that factors in the anticipated costs of all clients’

needs—including the needs of high-cost clients—helps build in the

financial incentives and protections that are important for both plans and

clients. The second element is coordinating service needs through a single

entity to improve clients’ access to quality care. At this single point of

entry, the managed care plan assesses clients’ needs, develops the

treatment plans, and prescribes the appropriate services needed to achieve

desired outcomes. The managed care entity can provide services itself,

manage a network of affiliated providers, or authorize out-of-network

services to collectively make available the broad array of services that

might be needed.

Results in Brief Nationwide, public child welfare agencies have implemented managed

care projects or initiatives in 13 states, with new initiatives being planned

or considered in more than 20 other states. Most of the ongoing initiatives

involve foster children with the most complex and costly service needs.

However, currently, only about 4 percent of the nation’s child welfare

population is being served under managed care arrangements. In general,

public agencies have contracted with experienced nonprofit,

community-based providers in their service systems to implement

managed care initiatives. For-profit managed care companies have not had

a major role in implementing managed care in child welfare; only a few

jurisdictions are using for-profit companies to administer and provide

child welfare services.

The majority of the ongoing child welfare managed care initiatives have

established a capitated payment system. Lacking experience and uncertain

Page 3 GAO/HEHS-99-8 Child Welfare Managed Care
Executive Summary

about the feasibility of new fixed payments, however, some initiatives also

use mechanisms to limit the financial risk that has been shifted to

providers, such as limiting contractors’ losses should costs exceed the

fixed rate. Managed care initiatives require service providers to organize

and coordinate a full array of services to ensure that appropriate and

necessary services are available to children and their families. In addition,

most of the public agencies responsible for the initiatives have transferred

case management functions to private entities—mostly nonprofit service

providers. The public sector, however, continues to play an active role at

strategic points throughout the service-delivery process, such as

determining which clients will be served under managed care. To ensure

that providers’ cost-controlling strategies do not jeopardize service quality

or access to care, public agencies use various quality assurance

techniques, such as performance standards to hold service providers

accountable for outcomes.

As more public child welfare agencies move toward managed care, the

experience of the ongoing managed care initiatives suggests that public

officials and their private contractors face several challenges. First, as they

develop and implement a capitated payment method, agencies need to find

ways to maintain adequate cash flow. Cash flow can be problematic

because under capitation the agencies pay providers prospectively but

claim federal reimbursement only after services have been delivered.

Second, agencies face the difficult task of developing sound management

information systems, which are critical to establishing an appropriate

capitated payment rate and a performance-based monitoring system.

Finally, both public and private agencies face new responsibilities as some

traditionally public functions shift to the private sector and new roles

emerge. These changes may require these agencies to develop new

procedures for case management and program administration and to

provide additional training for both public and private employees. Despite

these challenges, public officials are encouraged by some positive, though

limited, early results from managed care initiatives.

Principal Findings

Managed Care Is a New

and Growing Strategy in

Child Welfare

The application of managed care in child welfare is a new phenomenon.

On average, most initiatives have been operating 2 years or less. Public

agencies have implemented one or more initiatives in 13 states, and by the

Page 4 GAO/HEHS-99-8 Child Welfare Managed Care
Executive Summary

end of 1998, additional initiatives will be operating in four more states.

These numbers are expected to continue increasing, with 18 more states

currently in some stage of planning or considering managed care

initiatives.

Most managed care initiatives are small in scale, serving targeted

populations of children and their families in a limited number of locations.

In only one state and one county—Kansas and Sarasota County,

Florida—are essentially all children and families in the child welfare

system served under new private managed care arrangements. Most

initiatives also include the most difficult to serve and high-cost

adolescents in need of group or residential care, with many serving this

group exclusively. In total, however, only a small portion of the nation’s

child welfare population is covered by managed care arrangements. In the

13 states where initiatives are in place, about 44,000 children, including

both in-home and out-of-home care clients, are served under managed

care. This represents about 8 percent of the child welfare population in

those states and 4 percent of the nearly 1 million children in the child

welfare system nationwide.

Structurally, most of the ongoing child welfare managed care initiatives

rely solely on the public and community-based private providers that have

traditionally served children and families in the child welfare system. GAO

found that the organizational arrangement among public and private

entities involved in these initiatives falls into four models:

• The public model, used in 10 initiatives, maintains the system’s traditional

management and service-delivery structure while the public agency

incorporates managed care elements into its own practices and existing

contracts with service providers. While payment methods to service

providers and performance standards are new, most roles and

responsibilities remain unchanged.

• The lead agency model relies on private entities to manage child welfare

services and is used in 19 initiatives. The public agency contracts with a

private entity, which assumes new responsibility for coordinating and

providing all necessary services for a defined population of children and

families. In this model, the lead agency provides some or all direct services

itself, and may also subcontract with a network of local service providers.

• The administrative services organization (ASO) model privatizes

management services, such as billing and reimbursement, development or

operation of a data system, training, and technical assistance. The public

agency contracts with a private organization for these administrative

Page 5 GAO/HEHS-99-8 Child Welfare Managed Care
Executive Summary

services only. In the three initiatives that have implemented this model,

the coordination of client services and provision of direct services are the

responsibility of a separate private entity as in the lead agency model.

• The managed care organization (MCO) model is most similar to managed

care arrangements in health care and can be found in four initiatives. The

public agency contracts with a private organization to manage child

welfare services, as in the lead agency model. However, in contrast to the

lead agency model, the MCO does not provide direct services, but arranges

for the delivery of all necessary services by subcontracting with other

service providers.

Managed Care Initiatives

Use Capitated Payments

and Rely on Private

Entities to Assume Case

Management

Responsibilities

In most of the 27 initiatives about which GAO obtained detailed

information, public agencies have introduced capitated payments to

providers at a rate set either for each referred client or for a defined

population of clients residing in a geographic area. Nearly all of these

public agencies have limited providers’ financial risk by capitating only

part of the provider’s payment and reimbursing some services through the

fee-for-service method, or by specifying contract provisions that limit the

extent of providers’ financial risk. These provisions include limiting the

contractor’s losses when costs exceed the capitated payment or setting

funds aside to cover unusual catastrophic costs. In addition, while public

agencies use various sources and methods to finance their managed care

initiatives—including federal, state, and local dollars as well as pooled

funds from various human service agencies—contractors are often

expected to supplement the contract rate with funds from other sources.

Managed care contracts generally require the contractor to provide,

create, or purchase a full package of services. When contractors need to

purchase services from other providers, they may develop and subcontract

with a network of other service organizations. The managed care

entity—whether a public agency, lead agency, or MCO—functions as the

single point of entry to the service system and performs case management

tasks, such as treatment planning and case monitoring. Although most of

the 27 initiatives GAO examined have privatized case management

responsibilities, public agencies continue to perform activities

surrounding the investigation and substantiation of abuse and

neglect—often considered the gateway into the child welfare system. In

addition, public agencies continue to play a major role in service-delivery

decisions that directly affect the child’s safety, such as discharge from care

and changes in the level of care.

Page 6 GAO/HEHS-99-8 Child Welfare Managed Care
Executive Summary

Public agencies have also implemented quality assurance strategies

designed to offset the inherent incentive in managed care to withhold or

provide reduced services and balance the desire to control costs with the

goal of improving service outcomes. In nearly all of the ongoing initiatives,

public agencies have instituted performance standards as a means of

holding their contracted service providers accountable for outcomes.

Some standards focus on system outcomes, such as returning children to

their families more quickly, while other standards are more client-specific,

such as completing high school or job training programs. Another quality

assurance strategy links financial incentives and disincentives to

outcomes, such as offering bonuses to contractors for meeting

performance standards and limiting providers’ profit levels or requiring

unspent revenues to be reinvested in services. Finally, these managed care

initiatives will have to be evaluated to determine the efficacy of the new

financing and service-delivery arrangements in accomplishing desired

objectives and achieving efficiencies.

The Move to Managed Care

Is Not Without Challenges

The experiences of the initiatives GAO examined indicate that child welfare

agencies face three principal challenges as they seek to implement a

managed care approach. First, many public agencies need to find ways to

maintain an adequate cash flow as they make prospective payments to

service providers while receiving retroactive reimbursement from other

sources, such as title IV-E. Moreover, public agency officials expressed

concern that federal prohibitions against the use of title IV-E funding for

services other than out-of-home care may force states to fund a greater

share of capitated contracts. Specifically, if managed care creates

incentives for contractors to provide better services and, consequently,

return more children home, federal reimbursement for foster care ceases;

however, the child and family may continue receiving unreimbursable

in-home services.

Second, the child welfare system has historically been plagued with poor

service and cost information. Accurate and timely information on services

and outcomes is critical. Public agencies are slowly implementing

performance standards to hold contractors accountable for desired

outcomes; however, ensuring that these standards are the most important

ones and are set at reasonable levels becomes especially difficult when

baseline and ongoing program data are absent. In addition, establishing

and revising an accurate and fair capitated payment rate requires

information on an array of services from a variety of providers and their

associated unit costs. Public agencies have approached the development

Page 7 GAO/HEHS-99-8 Child Welfare Managed Care
Executive Summary

of their information systems in a variety of ways, including contracting

specifically for a new system, developing it in-house, or adapting existing

systems.

A final challenge both public agency staff and private service providers

face is the dramatic changes in their traditional roles and responsibilities.

Public agency staff need to adjust to performing less direct client

casework and focusing more attention on contract and system

management, as private entities assume new responsibilities for managing

child welfare services. Where case management and administrative

functions have shifted to private entities, some public agencies have had to

downsize the public workforce and retrain and move the remaining staff

into their new roles as contract managers or quality assurance workers. At

the same time, private contractors have found themselves becoming

quasi-governmental entities as they assume what were formerly public

agency functions, such as direct responsibility for complying with federal

and state procedural and paperwork requirements; hiring, training, and

retaining qualified staff to perform new case management or

administrative functions; and managing and monitoring a network of

service providers.

Little quantitative information exists on how managed care has affected

the children and families in the child welfare system, as only a limited

number of initiatives have collected evaluation data. Preliminary data in

these few locations, however, indicate some cost efficiencies when

children appropriately avoid residential care. Moreover, public officials

are encouraged by other service-delivery improvements, such as increases

in the amount and types of services that better match the needs of children

and families in the child welfare system.

Agency Comments GAO obtained comments on a draft of this report from the Department of

Health and Human Services (HHS) and state and county public child

welfare officials responsible for the managed care initiatives in the four

case study sites. HHS and the four public agencies generally agreed with the

report’s findings and provided additional technical information, which GAO

incorporated in the report as appropriate. HHS also said GAO should clarify

the report to reflect HHS’ efforts to provide public child welfare agencies

guidance and supporting information to aid states’ consideration and

implementation of managed care concepts. GAO clarified the report to

reflect this information. (Ch. 5 contains additional information about HHS

and the public agencies’ comments and GAO’s responses.)

Page 8 GAO/HEHS-99-8 Child Welfare Managed Care
Page 9 GAO/HEHS-99-8 Child Welfare Managed Care
Contents

Executive Summary 2

Chapter 1 

Introduction

14

Child Welfare System Is Ripe for Reform 14

What Is Managed Care? 18

Fundamental Differences Exist Between the Child Welfare and

Health Care Systems

22

Federal Role in Child Welfare Managed Care Is Limited 23

Objectives, Scope, and Methodology 24

Chapter 2 

Managed Care Is a

New and Growing

Strategy in Child

Welfare

27

Managed Care Initiatives Are Limited in Scope and Size 27

Public Agencies Pursue Various Managed Care Models but

Continue to Rely on Traditional Partners

31

Chapter 3 

Managed Care

Initiatives Use

Capitated Payments

and Rely on Private

Entities to Assume

Case Management

Responsibilites

42

Capitated Payments Shift Financial Risk to Service Providers 42

Service Delivery Changes Are Designed to Coordinate Care, but

Public Agencies Retain Critical Functions

48

Quality Assurance Strategies Are Designed to Balance Costs and

Quality

52

Chapter 4 

The Move to Managed

Care Is Not Without

Challenges

58

Public Agencies Face Initial Start-Up Tasks 58

Management Information Systems Are Needed 64

Roles and Responsibilities Change Dramatically 67

Early, Though Limited, Positive Results Encourage Public

Officials

70

Page 10 GAO/HEHS-99-8 Child Welfare Managed Care
Contents

Chapter 5 

Observations and

Agency Comments

73

Observations 73

HHS and Public Agency Comments 74

Appendixes Appendix I: Ongoing Child Welfare Managed Care Initiatives 76

Appendix II: GAO Survey of State and Local Public Agencies 80

Appendix III: Comments From the Department of Health and

Human Services

100

Appendix IV: GAO Contacts and Staff Acknowledgments 104

Tables Table 2.1: States With Child Welfare Managed Care Initiatives

Ongoing, Planned, or Under Consideration as of March 1998

28

Table 2.2: Type of Managed Care Model Used in 36 Ongoing

Initiatives

40

Table 2.3: Role of For-Profit Companies in 27 Managed Care

Initiatives

41

Table 3.1: Performance Standards Contained in Lead Agency

Contracts for Foster Care Managed Care Initiative in Kansas

54

Table I.1: Information About 27 Ongoing Child Welfare Managed

Care Initiatives, as of March 1998

76

Figures Figure 2.1: Organizational Arrangement of a Public Model of

Managed Care in Boulder County, Colorado

33

Figure 2.2: Organizational Arrangement of a Lead Agency

Managed Care Model in Sarasota County, Florida

35

Figure 2.3: Organizational Arrangement of an ASO Managed Care

Model in Massachusetts

37

Figure 2.4: Organizational Arrangement of an MCO Model in

Hamilton County, Ohio

39

Page 11 GAO/HEHS-99-8 Child Welfare Managed Care
Contents

Abbreviations

ACF Administration for Children and Families

AFDC Aid to Families With Dependent Children

ASO administrative services organization

CPS child protective services

GED general equivalency diploma

HHS Department of Health and Human Services

HMO health maintenance organization

IMPACT Integrated Managed Partnership for Adolescent Community

Treatment

MATCH Multi-Agency Team for Children

MCO managed care organization

SACWIS Statewide Automated Child Welfare Information System

SAMHSA Substance Abuse and Mental Health Services Administration

SSI Supplemental Security Income

Page 12 GAO/HEHS-99-8 Child Welfare Managed Care
Page 13 GAO/HEHS-99-8 Child Welfare Managed Care
Chapter 1 

Introduction

For children who have been abused or neglected by their caregivers, the

child welfare system is an expensive and often poor substitute for a

permanent home. The children and families in the system often have

serious and difficult problems that can require intensive and

time-consuming services. Unfortunately, most experts agree that the

current system for caring for these children is inadequate. Program

officials and policymakers alike are eager to find new and better solutions

to meet the growing demands of this vulnerable group. Though not

without controversy, managed care has emerged as one strategy to

improve the overall care system for families in the child welfare system.

Child Welfare System

Is Ripe for Reform

The child welfare system is a complicated network of policies and

programs designed to protect and promote the safety and well-being of

children. Encompassing a broad range of activities, child welfare services

include those designed to protect abused or neglected children, support

and preserve families, care for the homeless and neglected, support family

development, and provide out-of-home care when children must be

removed from their families. The Adoption Assistance and Child Welfare

Act of 1980 (P.L. 96-272) established requirements that states undertake

reasonable efforts to prevent the need to remove abused and neglected

children from their families. If separation is required, however, states must

ensure adequate care for the children while providing the necessary

services to help reunite the family or locate another permanent home for

the child if reunification is inappropriate.

The child welfare system has been under great pressure to meet increased

demands. Over the last decade, rising caseloads have dramatically

increased federal, state, and local spending for child welfare services. The

needs of children and their families in the system are greater and more

complex than ever before. Yet, the current system for funding and serving

this more difficult population is fragmented and has strained public

agencies’ ability to adequately meet service needs.

System Seeks to Protect

Children

The child welfare system consists of a myriad of agencies and programs

that intervene when children are neglected or abused. State or county

child welfare agencies carry the responsibility for ensuring the safety of

these children through multiple programs funded by local, state, and

federal governments. Children generally come to the attention of the child

welfare system when someone—a physician, child care provider, or

teacher, for example—reports to the state or local child welfare agency an

Page 14 GAO/HEHS-99-8 Child Welfare Managed Care
Chapter 1 

Introduction

allegation of abuse or neglect. Child protective services (CPS) workers

respond to and investigate these reports, identify services such as

parenting classes for the family, and determine whether to remove a child

from the family’s home.

If removal is warranted, the child is placed in any one of several foster

care settings that offer different levels of care depending on the needs of

the child. The lowest to highest levels of care—corresponding to the least

to most costly foster care settings—include foster family home,

therapeutic family foster home,2

 group home, and residential treatment

center. A child’s stay in foster care is considered temporary, until the

family can be reunited, the child is adopted, or some other permanent

living arrangement is made. In addition, states provide family preservation

and support services to prevent out-of-home placement and help reunite

families. These services include family counseling, respite care for parents

and caregivers, and services to improve parenting skills and support child

development.

Primary responsibility for child welfare services rests with the states, and

each has its own legal and administrative structures and programs to

address the needs of children. In most states, the state child welfare

agency makes major administrative decisions; in 12 states, however,

counties administer child welfare programs with considerable autonomy

to establish policies and priorities within broad state guidelines.3

 While

public workers provide some or all child welfare services in some

locations, most state and county child welfare agencies have long relied on

private service providers—predominantly nonprofit, community-based

agencies—to work directly with children and families. For children

entering the child welfare system, public caseworkers are typically

responsible for (1) developing a service plan for the child that can identify

out-of-home care, educational, and health service needs; (2) directly

providing or arranging to purchase from private or other public providers

the specified services; and (3) periodically monitoring the child’s progress.

Caseloads and Costs Are

Rising

During the mid-1980s through the mid-1990s, the child welfare system

witnessed dramatic increases in the number of children reported abused

2

Children with special needs, who would not ordinarily be placed in traditional family foster care, may

be placed in a therapeutic family foster home as an alternative to group care or residential treatment.

3

The 12 states with county-administered child welfare systems are California, Colorado, Georgia,

Maryland, Minnesota, New York, North Carolina, North Dakota, Ohio, Pennsylvania, Virginia, and

Wisconsin.

Page 15 GAO/HEHS-99-8 Child Welfare Managed Care
Chapter 1 

Introduction

or neglected and placed in foster care. An estimated 3 million children

were reported possible victims of abuse or neglect in 1996. Upon

investigation, CPS workers confirmed maltreatment of almost a third of

these reported children. During this same period, the foster care

population grew almost 80 percent, from 280,000 children in 1986, to

502,000 in 1996.4

 Child welfare experts attribute the rise in the foster care

population to such trends as the increasing use of illegal drugs, especially

among young mothers in inner-city areas; rising numbers of homeless

families; and the growing number of children whose families live in

poverty.

With increasing foster care caseloads, expenditures for the basic needs of

foster children and program administration have risen dramatically. From

1986 to 1996, federal costs for child welfare services increased nearly

fivefold to $4.2 billion. The Congressional Budget Office estimates that this

will rise to $5.9 billion by 2002. In addition to facing similar increases in

these expenditures, state and local resources have been constrained by

competing demands from other activities. States have found it increasingly

difficult to maintain sufficient funding levels to ensure that service needs

are met.5

 To address these financial pressures, many states have cut child

and family services or kept budgets constant.6

 Further, resource

constraints force public child welfare workers to prioritize their caseloads,

which often means responding to emergency situations, leaving little time

to attend to children already in out-of-home care.7

Current Funding and

Service-Delivery System Is

Fragmented

No single federal program fully supports the range of services that

typically make up state and local child welfare programs. The major

federal programs are found in the Social Security Act:

• Title IV-E Foster Care is an uncapped entitlement that reimburses states

for a portion of foster care costs, such as food and shelter, daily

supervision, administration, and training for agency staff, for only those

4

The American Public Human Services Association estimated the foster care numbers on the basis of

data voluntarily reported by the states.

5

Child Welfare: Complex Needs Strain Capacity to Provide Services (GAO/HEHS-95-208, Sept. 26,

1995).

6

C. Brach and L. Scallet, “Managed Care’s Implications for Children and Families: An Overview of

Trends and Issues,” draft prepared for the Annie E. Casey Foundation, July 1996.

7

T. Feild, “Managed Care and Child Welfare: Will It Work?” Public Welfare (Summer 1996).

Page 16 GAO/HEHS-99-8 Child Welfare Managed Care
Chapter 1 

Introduction

children eligible under the Aid to Families With Dependent Children

(AFDC) program.8

• Title IV-E Adoption Assistance, also an uncapped entitlement, reimburses

states for a portion of adoption costs, including payments to parents who

adopt children with special needs as well as administrative and training

costs, for only those children eligible under the Supplemental Security

Income (SSI) or AFDC programs.

• Title IV-E Independent Living reimburses states for some of the cost of

providing independent living services for older foster children.

• Title IV-B Child Welfare Services and Promoting Safe and Stable Families

programs provide federal matching grants to states for up to 75 percent of

the costs of services such as family preservation and support services,

some foster care, and other child welfare services related to preventing

out-of-home placements; reuniting families; finding adoptive families;

protecting children’s safety; and preventing maltreatment.

• Title XX Social Services Block Grant gives states discretion to fund a wide

array of social services for children, families, adults, and the elderly.

Federal, state, and local governments share responsibility for funding the

child welfare system. In fiscal year 1996, over 65 percent of the $4.7 billion

in federal funding for child welfare services under titles IV and XX was for

foster care services.9

 Title IV funding of states’ child welfare program costs

ranged from 50 to 77 percent.10 In addition, where federal sources are

fixed by annual appropriations, as in title IV-B, states fund both the

required match and any additional costs above the capped amount.

Furthermore, through cost-sharing arrangements with counties, states pay

all foster care costs for those children ineligible under the federal

program. Nationwide, about half of all foster care placements were funded

under title IV-E in fiscal year 1996.

The child welfare service system is also fragmented. The service needs of

children and families known to the child welfare system are more complex

than in the past. Facing multiple problems of economic hardship,

substance abuse, homelessness, and mental or physical illness, these

8

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L.

104-193) eliminated the AFDC program; however, children who meet the 1996 eligibility criteria for

AFDC continue to be eligible for title IV-E assistance.

9

In addition to the $4.2 billion from titles IV-E and IV-B, the 1996 Social Services Block Grant was

about $2.4 billion. However, the most current data available on the amount of title XX funds spent for

child welfare-related services were for 1995 and represented about 22 percent of title XX expenditures

in that year, or $0.5 billion of the 1996 block grant.

10Title IV-E funding for foster care and adoption maintenance costs are tied to the Medicaid matching

rate, which ranged from 50 to 77 percent in fiscal year 1997. Federal funding for other child welfare

costs under titles IV-E and IV-B is at either 50 or 75 percent of states’ costs, depending on the program.

Page 17 GAO/HEHS-99-8 Child Welfare Managed Care
Chapter 1 

Introduction

children and their families more often have serious emotional, behavioral,

and medical needs. However, rarely does a single state or local agency

have control over the full array of services to appropriately address the

needs of the child welfare population. Many of the needed services, such

as mental health care and drug treatment, are outside the control of the

child welfare system. Public child welfare agencies often must tap into a

complex set of human service systems, which are usually supported by

separate categorical funding sources and have different eligibility criteria.

Gaining access to needed services, especially those outside the child

welfare system, can be extremely difficult when other systems also have

insufficient capacity or do not share child welfare’s priorities.11

Finally, service providers are rarely held accountable for achieving system

objectives to improve the quality of care and service outcomes to ensure

children do not languish in foster care. Public agencies traditionally use

private service providers who are paid on a fee-for-service basis whereby a

provider submits a bill and is reimbursed for the number and type of

services delivered. Under this system, the provider has little incentive to,

when appropriate, reduce the level of care as children’s functioning

improves, discharge them from care, or monitor and assess the number of

service units provided because these actions may result in lost revenues.

What Is Managed

Care?

The origins of managed care lie in the health sector. Prepaid health care

plans were first developed to improve access to and continuity of health

care while controlling costs. Early health maintenance organizations (HMO)

served primarily an employed population. Contracting with prepaid,

fixed-fee managed care plans to deliver health care services to Medicaid

beneficiaries first became an option for states in the 1960s. As federal and

state Medicaid expenditures soared, states increasingly turned to managed

care programs to help bring costs under control and expand access to

health care for low-income families. By 1997, states had extended prepaid

managed care to more than 48 percent of the Medicaid population.12

Prepaid managed care plans have two fundamental elements—a

prospective capitated payment system and coordinated services. In

general terms, states pay contracted plans, such as an HMO, a monthly or

capitated fee per enrollee to provide a range of medical services that are

11Child Welfare: Opportunities to Further Enhance Family Preservation and Support Activities

(GAO/HEHS-95-112, June 15, 1995) and GAO/HEHS-95-208, Sept. 26, 1995.

12Medicaid is a joint federal-state health financing program for the poor and provided health care to an

estimated 36 million people in 1997.

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Introduction

coordinated through primary care physicians and typically delivered by an

established network of affiliated hospitals, physicians, and other

providers. With its fixed prospective payment, this model attempts to

create an incentive for plans to provide preventive and primary care and to

ensure that only necessary medical services are provided. The second

managed care element brings together an array of different services to

ensure that an enrollee has access to needed care by linking individual

beneficiaries with a single provider responsible for coordinating their

health care needs.13

Prospective Financing

Transfers Risk

A capitated payment is a prospective rate paid for a range of services for a

specified population. The methods for developing the capitated payment

generally involve bundling rates by aggregating costs for a related set of

services and paying a single average rate on a fixed-fee basis. Separate

rates may be established for specific populations, such as individuals with

chronic illnesses or disabilities. The fact that the price is fixed exposes the

managed care plan to some financial risk. Plans have an incentive to

control expenses to avoid losses but always face a risk that the needs of

certain patients may result in unexpectedly high costs.

Two types of fixed payment arrangements, in particular, illustrate how risk

is shifted to providers. The first type, a case rate payment, transfers to the

managed care plan the risk that patients’ service level, duration, and cost

will exceed projections. Under this arrangement, the health plan’s

payment rate is fixed to cover all expected costs incurred for a specified

patient. Although each client generates a new payment, providers have an

incentive to reduce the duration of treatment and avoid serving patients

whose treatment will be costly or lengthy. The second type, a capitated

rate, similarly shifts financial risk when service use is higher than

anticipated but also includes a factor of uncertainty because the number

of clients that will actually require services is unknown. A capitated rate is

a single, previously negotiated, monthly or periodic fee paid for all

members of a pool of potential service users, whether or not an enrollee

uses any services. The plan is expected to respond to whatever level of

service is needed by the enrollees, as long as the service falls within

contractual terms.

Services Are Coordinated

to Meet Clients’ Needs

In a managed health care plan, the primary care provider is responsible for

delivering or arranging for the delivery of all health services required by

13Medicaid Managed Care: Serving the Disabled Challenges State Programs (GAO/HEHS-96-136, July

31, 1996) and Medicaid Managed Care: Challenge of Holding Plans Accountable Requires Greater State

Effort (GAO/HEHS-97-86, May 16, 1997).

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the covered person under the conditions of the provider contract. A

primary care physician is typically responsible for approving and

monitoring the provision of all services covered by a health plan to the

patient and family. As the case manager, this primary care physician acts

as the gatekeeper or single point of entry for patient access to health care

services. To simplify access to a continuum of services and ensure

coordination of care, the plan may incorporate a broad range of general

and specialty services within a network or organization of affiliated

providers. In addition, the plan may provide services itself or authorize

out-of-network services. To discourage and reduce unnecessary

procedures or inappropriate service use, a patient may be required to

obtain prior approval, or preauthorization for payment, before admission

to inpatient facilities, emergency rooms, or other high-cost or high-risk

services. Furthermore, requiring approval for appropriate and necessary

care as a condition of payment authorization reduces excessively

prolonged or unnecessarily expensive treatment levels. Costs can also be

reduced when patients are diverted from unnecessary or overly expensive

levels of care into suitable, less costly alternatives.

Managed Care Is Viewed as

a Solution to Child Welfare

Problems

Public agencies are beginning to adopt these managed care elements in

their child welfare systems. According to child welfare experts,

policymakers and child welfare administrators are attracted by the twin

promises of managed care—cost containment and improved service

access and quality—and hope that managed care can improve

shortcomings in the current child welfare system. Currently, for example,

a public child welfare caseworker may have difficulty accessing different

services, such as group or individual counseling and parent training, from

a number of separate providers. This fragmentation can lead to delays in

receiving needed services and prolonged stays in foster care, and offers

little assurance that children and families are getting services that best

match their needs. In addition, provider payments are typically made on a

fee-for-service basis with little incentive for the provider to reduce the

child’s type and amount of services or recommend discharge from care

when appropriate. Under managed care, a single entity is responsible for

arranging and coordinating the child’s care among a network of providers

and is reimbursed on a capitated basis rather than for the total amount of

services provided.

Similar to the pressures the Medicaid program faced, rapidly increasing

child welfare expenditures and eligible populations have strained state and

local budgets, while providers and policymakers have experienced

Page 20 GAO/HEHS-99-8 Child Welfare Managed Care
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Introduction

difficulties in meeting their fiscal or program goals amid calls for system

reform. As we have previously reported, the current federal system for

financing child welfare services makes it easier for states to place children

in foster care rather than provide services to avert the need for foster care

because federal funding under the open-ended entitlement program of title

IV-E is available only when a child is in out-of-home care.14 Federal

funding under titles IV-B and XX is capped for in-home services, such as

those to prevent the need to reenter foster care, and has not kept pace

with growing demands.

The implementation of Medicaid managed care—which serves many of the

same vulnerable populations that child welfare agencies serve—has also

created interest in managed care in child welfare. Child welfare clients

may already be required to access health care or behavioral health15

services through a managed care system. As of fiscal year 1997, more than

48 percent of Medicaid-eligible clients, including some in the child welfare

system, were enrolled in managed health care or behavioral health

programs.

Child welfare experts point to several other factors that have coalesced to

heighten interest in managed care. First, child welfare providers are

responding to and adapting their practices to new managed care

environments in other human service systems. Private child welfare

service providers often serve children, youth, and families from various

service systems, including child welfare, mental health, and juvenile

justice. In an attempt to diversify their funding streams, some of these

providers have pursued the commercial business of behavioral health

managed care organizations and marketed themselves as a less expensive

alternative to inpatient care. These efforts enable the providers to capture

new private clients, learn managed care skills, and advocate privatizing the

child welfare service-delivery system. Second, states are seeking the

opportunity to allocate money more efficiently by using more appropriate

and effective services. As many states have addressed financial pressures

by cutting children and family services or keeping budgets constant in the

face of increasing demand, managed care is seen as well suited to

downsizing and cost containment. Finally, behavioral health managed care

14Foster Care: Services to Prevent Out-of-Home Placements Are Limited by Funding Barriers

(GAO/HRD-93-76, June 29, 1993) and GAO/HEHS-95-208, Sept. 26, 1995.

15The term behavioral health is used to specify mental health and substance abuse treatment and

includes inpatient, outpatient, and residential care.

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organizations are seeking new markets in the child welfare system.16 In

chapters 2 and 3, we describe state and local efforts to implement

managed care in the child welfare system.

Fundamental

Differences Exist

Between the Child

Welfare and Health

Care Systems

In contrast with health care, the child welfare system is uniquely affected

by several factors, including the characteristics of the clientele, the role of

the judiciary, legal and policy goals and responsibilities, and service

delivery complexities.17 One significant difference between child welfare

and health care is that most child welfare services are delivered on an

involuntary basis. Child welfare services are most often imposed on

unwilling clients at the direction of the courts, police, or a CPS worker,

after concerns are raised about their parenting abilities. In the health care

system, the patient wants the protection of a health insurance plan and

seeks out services when the need arises. In child welfare, families are

often resistant or hostile to system intervention. In these situations,

according to child welfare experts, it may not be appropriate to assume

that a limited number of visits or treatments will resolve long-standing

family issues that have led to child abuse or neglect.

A second difference between the child welfare and health care systems is

that courts play a key role in child welfare decision-making, and this could

limit providers’ control over costs. In health care, the payer is also the

arbiter of what services are delivered and paid for, guided by contractual

and regulatory guidelines. In child welfare, however, many cases—

including all out-of-home care—are under the jurisdiction of the state’s

family or juvenile court. State law determines the full extent of the court’s

authority. In some states, neither the public child welfare worker nor a

service provider ultimately controls a child’s treatment plan because the

court has the authority to order specific services and placement at

individual facilities, or the court may order different services from those

recommended by child welfare professionals. Moreover, courts may be

backlogged or disagree with recommendations about children’s movement

within foster care or discharge from care; in either case, children may

remain in or at a level of care longer than clinically necessary.

A third factor unique to the child welfare system is the scope of care

provided by public agencies. Public agencies do not look merely at a

16Brach and Scallet, “Managed Care’s Implications;” and T. Feild, Managed Care and Child Welfare: Are

They Compatible? Institute for Human Services Management (Bethesda, Md. 1996).

17Feild, Managed Care and Child Welfare: Are They Compatible?; and A. Winterfeld, “Managed Care,

Privatization and Their Impact on the Child Welfare System,” Protecting Children, 11(4) (1995).

Page 22 GAO/HEHS-99-8 Child Welfare Managed Care
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child’s clinical needs but also at the child’s other needs, such as safety,

protection, and social supports. In addition, the overall well-being of the

child’s family is a concern of public agencies. In many cases, the child’s

primary need may be the services provided to the parents, such as

substance abuse treatment or parenting classes. Recalcitrant, hostile, or

uncooperative parents may prolong the intervention required for a

seemingly simple problem. In addition, if a child cannot be reunited with

the family, then the child welfare agency assumes the difficult task of

finding an alternative permanent home for that child that will offer

appropriate supervision and guidance until the child reaches adulthood.

Last, the links between diagnoses, interventions, and outcomes are less

clear for clients in the child welfare system. In health care, one can

generally predict with reasonable confidence the incidence of particular

ailments for a given population, costs of care, and probable outcomes.

This predictability allows a managed care provider to anticipate service

demand and, therefore, costs. In the child welfare system, however,

predicting needs and outcomes is much less certain and depends more on

social factors, which are less predictable than physical ones. Moreover,

social services are much less standardized than health services and are

often delivered very differently from community to community and from

family to family, according to factors unrelated to the family’s situation.

Federal Role in Child

Welfare Managed Care

Is Limited

Federal involvement in managed care in child welfare has thus far been

limited. While the federal role in states’ managed health care efforts has

expanded recently, no comparable role has emerged for managed care in

child welfare. The Administration for Children and Families (ACF) within

the Department of Health and Human Services (HHS) administers the

federal child welfare programs; this involves monitoring states’

compliance with federal statutes and regulations, providing technical

assistance to states, funding various resource centers across the country,

and supporting research and evaluation efforts. To date, ACF has included

managed care topics in some of its conferences and responded to specific

inquiries about managed care financing in child welfare but has so far not

provided any formal guidance or technical assistance. In addition, HHS was

given the authority in 1994 to establish no more than 10 child welfare

demonstrations that waive certain restrictions in title IV-E and allow

broader use of federal foster care funds. Although a waiver could facilitate

managed care, the purpose for granting waivers is to test a variety of

innovations including but not limited to managed care. The Adoption and

Safe Families Act of 1997 (P.L. 105-89) expanded HHS’ authority to approve

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up to 10 states’ waiver demonstrations in each of the 5 fiscal years 1998

through 2002.

Objectives, Scope,

and Methodology

The Chairman of the Subcommittee on Human Resources of the House

Committee on Ways and Means asked us to review states’ efforts to

implement managed care arrangements into their child welfare systems.

This report describes (1) the extent to which public agencies are using

managed care to provide child welfare services, (2) the financial and

service delivery arrangements under managed care that are being applied

to the child welfare system, and (3) challenges child welfare agencies face

as they develop and implement managed care, and the results of such

efforts to date.

To determine the number of managed care initiatives in the child welfare

system and how they are being implemented, we surveyed all 50 states, the

District of Columbia, and selected localities. To obtain more detailed

information about managed care arrangements as well as implementation

challenges and results, we studied ongoing managed care efforts at four

locations—Kansas, Massachusetts, Boulder County in Colorado, and

Sarasota County in Florida—where different managed care models of

varying scope are being implemented. We also interviewed public agency

officials in states and localities that are implementing managed care

initiatives and reviewed available documentation about individual

initiatives. In addition, we reviewed relevant literature, and interviewed

experts about managed care in both health care and child welfare as well

as representatives from national and state child advocacy organizations.

To learn about the federal government’s involvement in state efforts to

implement managed care, we spoke with officials at the Substance Abuse

and Mental Health Services Administration (SAMHSA) and ACF.

GAO Survey The purpose of the survey was twofold. First, we wanted to determine the

total number of states and localities operating or considering managed

care projects or initiatives nationwide and, for those projects in operation,

obtain a description of the types of managed care arrangements being

used. Second, because some locations have more than one ongoing

managed care initiative, we wanted to obtain detailed program

information on the initiative that is serving the most children.

In February 1998, we mailed a copy of the survey to the child welfare

director in each of the 50 states and the District of Columbia. We also

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mailed the survey to child welfare officials in 43 localities we had

identified as possibly implementing or considering managed care

initiatives. We learned of those officials by telephoning the state child

welfare directors in the 13 county-administered states and asking them to

identify the applicable localities in their states.18

We received responses from 48 state agencies, the District of Columbia,

and all the local agencies. On the basis of the returned surveys and

telephone contacts with several local agency officials, we excluded from

our analyses 17 counties and 1 district that either (1) were implementing a

multiple-county initiative and chose to designate one county as the survey

respondent, or (2) were neither implementing nor considering managed

care arrangements in their child welfare systems at the time of our survey.

Hence, for our adjusted population size of 76 state and local agencies, the

74 valid responses resulted in an overall response rate of 97 percent. From

these responses, we obtained general information on 36 initiatives and

more detailed information on the 27 initiatives serving the most children in

each location.

We did not verify the information obtained through the survey. However,

we conducted telephone interviews with state and local respondents to

clarify responses, as needed, and obtained additional information about

program and population coverage and available descriptive

documentation. In addition, we obtained more detailed information about

ongoing managed care efforts at four locations.

Case Study Sites We selected four locations—Kansas, Massachusetts, Boulder County in

Colorado, and Sarasota County in Florida—to obtain more detailed

information about the events and activities surrounding the locations’

decision to implement managed care in their child welfare systems, the

process of planning and designing the initiative, the rationale behind

changing service delivery and financial arrangements, contracting and

subcontracting processes and management, monitoring and accountability

activities, results to date, implementation challenges, and lessons learned.

On the basis of the relevant literature and in consultation with child

welfare experts, we selected these four locations because they were

implementing different managed care models, had different circumstances

leading to their initiative’s design, and provided examples of both stateand local-level efforts. At each location, we interviewed officials from the

18We included Florida among the 13 county-administered states because, although Florida’s child

welfare system is administered at the state level, its 15 district offices have considerable autonomy and

state legislation had authorized privatization pilots in several districts.

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state and local child welfare agencies as well as representatives from the

primary managed care contractors and subcontractors, and reviewed

pertinent documentation. Furthermore, we coordinated our site selection

and data collection efforts with researchers at the University of Chicago’s

Chapin Hall Center for Children, who were conducting case studies to

describe how managed care is being implemented in Kansas and three

other locations—Tennessee, Hamilton County in Ohio, and Lake and

Sumter Counties in Florida. Where appropriate, information from Chapin

Hall’s four case studies is incorporated in this report.

We conducted our work between August 1997 and August 1998, in

accordance with generally accepted government auditing standards.

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Nationwide, public child welfare agencies are implementing, planning, or

considering managed care initiatives in 35 states. Most ongoing initiatives

are serving foster care children with the most complex and costly service

needs. In total, however, only a small portion of the nation’s child welfare

population is covered by managed care arrangements. In general, public

child welfare agencies are entering into managed care arrangements with

nonprofit, community-based providers who have historically served as

providers in the agencies’ foster care or out-of-home placement systems.

These new arrangements, however, have significantly changed the roles

and responsibilities of the public and private entities. Finally, for-profit

managed care companies have not had a major role in implementing

managed care in child welfare, with only a few locations using these

organizations to manage the delivery of child welfare services.

Appendix I lists the 27 managed care initiatives about which we obtained

detailed data, including their implementation date, geographic scope, size,

organizational arrangement, and description of the populations and child

welfare programs covered.19

Managed Care

Initiatives Are Limited

in Scope and Size

Interest in child welfare managed care is growing, as public agencies

launch new efforts or consider developing initiatives in their states.

However, to date these efforts tend to be small in scale, serving targeted

populations of children and their families in a limited number of locations.

Use of Managed Care in

Child Welfare Is New

Public agencies’ exploration of managed care in child welfare is a new

phenomenon. Nationally, most managed care initiatives have been

operating for 2 years or less. As of March 1998, 36 initiatives were under

way in 13 states and had been operating for an average of 20 months. By

the end of 1998, managed care initiatives will be operating in four

additional states. These numbers will continue to rise in the near future as

managed care efforts are being planned or considered in another 18 states.

(See table 2.1.)

19Some locations are implementing more than one managed care initiative. In these instances, we

obtained more detailed information about the initiative serving the most children.

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Table 2.1: States With Child Welfare Managed Care Initiatives Ongoing, Planned, or Under Consideration as of March 1998

Implementing managed care

Planning to implement

State As of March 1998

Number of

ongoing

initiatives

By the end of

1998

After 1998 or in

the near future

Considering

managed care,

but no official

action taken

Alaska X

Arizona X

California X 1

Colorado X 6

Connecticut X

Florida X 3

Georgia X 1

Idaho X

Illinois X 2

Indiana X 3

Kansas X 3

Kentucky X

Louisiana X

Maryland X

Massachusetts X 1

Michigan X 1

Missouri X

Montana X

Nebraska X

Nevada X

New Hampshire X

New Jersey X

New York X 5

North Carolina X

Ohio X 6

Oklahoma X

Oregon X

Pennsylvania X

Rhode Island X

South Carolina X

South Dakota X

(continued)

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Implementing managed care

Planning to implement

State As of March 1998

Number of

ongoing

initiatives

By the end of

1998

After 1998 or in

the near future

Considering

managed care,

but no official

action taken

Tennessee X 1

Texas X

Utah X

Wisconsin X 3

Total: 35 states 13 states 36 initiatives 4 states 7 states 11 states

Source: GAO survey.

Geographic and Population

Coverage Varies Among

Initiatives

The majority of the managed care initiatives have been implemented by a

county or district-level child welfare agency. Of the 36 ongoing initiatives,

23 were established by local agencies. Two counties—Mesa County,

Colorado, and Hamilton County, Ohio—have implemented multiple

efforts. In addition, eight state agencies have implemented managed care

in child welfare, including statewide efforts in four states—Georgia,

Kansas, Massachusetts, and Tennessee.

Believing that managed care arrangements can contribute to better

services and control costs, public child welfare agencies have targeted the

most expensive and programmatically difficult populations to serve in

their initiatives. Of the 27 largest initiatives about which we obtained

detailed information, 25 include the hard-to-serve and most costly

children. This population often consists of severely emotionally disturbed

children—mostly adolescents—needing mental health services, who are

either in or at risk of group or residential foster care placement. About half

of the 25 initiatives serve this group exclusively. For example, Indiana’s

The Dawn Project targets children aged 5 to 17 who reside in Marion

County and (1) are at risk of separation or are already separated from their

families and living in a residential treatment center; (2) have been involved

with two or more human service systems, such as child welfare, juvenile

justice, special education, and mental health; and (3) have had an

impairment for more than 6 months. In contrast, some jurisdictions serve

all eligible populations—these include one statewide and five countywide

efforts.20 For example, Kansas’ entire foster care, adoption, and family

preservation program populations are being served through regional

20Kansas’ statewide effort serves all eligible clients, and similar countywide initiatives are ongoing in

Jefferson and Mesa Counties in Colorado, Albany County in New York, and Champaign and Madison

Counties in Ohio.

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contractors across the state; and in Jefferson County, Colorado, the

managed care initiative serves all children and families in the county’s

child welfare system. While nearly all 27 initiatives cover children in foster

care, some initiatives also include or target children in other child welfare

programs, such as adoption and family preservation and support services

(see app. I).

Small Proportion of Child

Welfare Population Is

Being Served

With few statewide efforts and most managed care activity occurring at

the local level, only a small segment of the child welfare population is

currently being served under managed care. In the 13 states where

initiatives are in place, almost 44,000 children are being served under child

welfare managed care arrangements. This represents about 8 percent of

the child welfare population in those states, including both in-home and

out-of-home care clients, and 4 percent of the nearly 1 million children in

the child welfare system nationwide.21 By the end of 1998, when managed

care initiatives are expected to be under way in four more states, the

nationwide proportion is likely to increase to about 6 percent.

The number of children served under managed care in each of the

geographic areas covered by an initiative—whether a state- or

county-established effort—varies greatly. Numbers range from fewer than

10 children in Oneida County, New York, to as many as 23,200 children in

Illinois, with an average of about 4,300 children in state-level efforts and

500 in counties and districts. Many of these states and localities plan to

expand the size of their initiatives by increasing the number of clients

served, targeting new types of clients, or both.

Where state-level initiatives are being implemented, the proportion of the

state’s child welfare population being served under managed care ranges

from 1 to 80 percent, with a median of about 6 percent. For example,

Michigan’s family preservation initiative is serving about 165 children at

selected sites around the state, or 1 percent of the state’s child welfare

population. At the other extreme, the three statewide initiatives in Kansas

are unique in their breadth and geographic scope, covering all 6,000

children in the state’s foster care, adoption, and family preservation

programs, representing 80 percent of the state’s child welfare population.

Excluded from Kansas’ initiatives are children and families involved in a

CPS investigation, a small number of noncustodial families receiving

in-home services, and the juvenile offender population. More typically,

21According to HHS’ 1997 National Study of Protective, Preventive and Reunification Services

Delivered to Children and Their Families (Washington, D.C.: HHS, 1997), an estimated 1 million

children were receiving child welfare services as of March 1994.

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Georgia’s statewide effort serves 660 children who are in therapeutic

residential settings, or 3 percent of the state’s child welfare total.

In the local initiatives, the proportion of a county’s or district’s child

welfare population currently being served under managed care covers the

full range, from less than 1 percent to the entire child welfare population,

with a median of 20 percent. At the lowest extreme, Oneida County in New

York has just begun its countywide initiative, having so far served 7

children, or less than 1 percent of the county’s child welfare population;

the county expects to serve 120 children by the end of the year. At the

highest extreme, Jefferson County in Colorado has brought its entire child

welfare population of about 1,700 children under its managed care

initiative. A more typical example can be found in Albany County, New

York; the 1,750 children receiving preventive services represent 20 percent

of the county’s child welfare population.

Public Agencies

Pursue Various

Managed Care Models

but Continue to Rely

on Traditional

Partners

Public child welfare agencies have approached both the overall design of

their managed care initiatives and the distribution of roles and

responsibilities among initiative participants differently. Nonetheless,

most of these agencies now contract with private entities to coordinate the

provision of an array of child welfare services and to assume

administrative tasks, such as processing claims and monitoring program

activities.

Managed Care Follows

Four Models

We found that the organizational arrangements among public and private

entities implementing managed care generally fall into four

models—public, lead agency, administrative services organization, and

managed care organization.

Public Model Maintains the

Traditional Structure

The public model represents the least change for public child welfare

agencies. While the public agency continues its role of coordinating care

for children and families as well as providing services, it is both changing

the way it reimburses service providers and introducing performance

standards. For example, public agencies can incorporate fixed payments

into existing contracts with community-based service providers. Currently,

10 of the 36 initiatives are using the public model of managed care.

Boulder County in Colorado began implementing its Integrated Managed

Partnership for Adolescent Community Treatment (IMPACT) initiative in

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July 1997. Three county agencies—social services, mental health, and

youth corrections—jointly formed a new managed care entity to perform

gatekeeping, assessment, case planning, concurrent service utilization

review, and quality assurance functions for children placed out-of-home.

The new public entity merged funding from the three county agencies and

currently performs joint programming and placement decision-making for

adolescents in need of out-of-home care in group or residential treatment

settings. Although the county agencies now take an integrated approach as

care coordinator, they continue to rely on the same network of public and

private providers for direct services. Boulder County’s new public

managed care entity receives funds from the state in the form of a block

grant. This is, in effect, the public agency’s capitated payment for the

services it provides to adolescents. In turn, the managed care entity

intends to contract with community-based adolescent placement providers

on a “subcapitated” basis—that is, the public managed care entity will pass

on capitated payments to subcontracted service providers. Finally, the

state has introduced a series of performance standards. Figure 2.1

illustrates the organizational arrangement of Boulder County’s managed

care initiative.

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Figure 2.1: Organizational Arrangement of a Public Model of Managed Care in Boulder County, Colorado

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Single Provider Assumes Key

Role in Lead Agency Model

Over half of the 36 initiatives—19 in all—are using the lead agency model

to incorporate managed care elements into their child welfare systems. In

this model, the public agency contracts with a private entity that, as the

primary contractor or lead agency, assumes new responsibility for

coordinating child welfare services for a defined population of children

and families. The lead agency’s case management functions can include

assessing clients’ needs, developing treatment plans, and monitoring

progress toward achieving permanency or treatment goals. In addition, the

lead agency is responsible for providing all the necessary services, as

prescribed by the treatment plan. In this model, the lead agency provides

some or all direct services itself but may also subcontract with a network

of local service providers.

Sarasota County in Florida is using a lead agency model. In January 1997,

the state child welfare agency transferred to the Sarasota County Coalition

for Families and Children responsibility for coordinating the care of all

children and families in the child welfare system in this one county.

Formed specifically for this managed care initiative, the Coalition’s

members are primarily community-based, nonprofit entities and include all

major service providers in the county. One Coalition member—the

YMCA—has been designated the lead agency responsible for managing the

project and contracting with the state public child welfare agency. Where

the state previously had separate contracts with each service provider, the

state now has only one contract with the lead agency which itself

developed new subcontracts with the Coalition service providers. The lead

agency is responsible for (1) performing administrative tasks, such as

disbursement and accounting of state-allocated funds and preparing

required reports; (2) monitoring the quality of services provided by

Coalition subcontractors; and (3) providing some direct services. Case

management functions have been subcontracted to two other Coalition

service providers. Of the ongoing managed care initiatives nationwide,

Sarasota County is one of only two locations in the country that have

contracted with private entities to manage essentially the entire child

welfare system.22 Figure 2.2 illustrates the organizational arrangement of

Sarasota County’s managed care initiative.

22According to Florida child welfare officials, a child does not enter the child welfare system until after

state CPS workers investigate maltreatment reports and determine the need for system intervention.

Kansas’ child welfare managed care initiative is the other location and is also using the lead agency

managed care model.

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Figure 2.2: Organizational

Arrangement of a Lead Agency

Managed Care Model in Sarasota

County, Florida

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Administrative Services

Organization Model Privatizes

Administrative Services

Under an administrative services organization (ASO) model, the public

child welfare agency contracts out the administrative or management

services, including such activities as billing and reimbursement,

development or operation of a data system, training, and technical

assistance, separately from the service-delivery tasks. The administrative

contractor, or ASO, is not responsible for the delivery of child welfare

services to children and families directly. In this model, currently used in

three initiatives, the management of clients’ care and provision of direct

services are the responsibility of the public agency or a lead agency in the

public or lead agency model, respectively. For example, Massachusetts’

Commonworks program is a statewide initiative whereby the state public

child welfare agency has contracted with a for-profit behavioral health

managed care organization to function as the ASO. On behalf of the state

agency, the ASO’s responsibilities include

• monitoring and reporting on the use of Commonworks services;

• implementing and monitoring an overall program quality evaluation and

improvement system;

• developing and managing an information system for the entire program;

• developing the overall financial reporting system;

• developing, implementing, and managing the billing and payment system;

• tracking complaints and grievances from clients, families, providers, and

the community; and

• reviewing, monitoring, and reporting on the credentialing of all direct

service providers.

The ASO does not provide any direct services to children and families. The

state agency contracts with a lead agency in each of six regions across the

state to develop service networks and coordinate the care of adolescents

in group home and residential treatment settings. The six lead agencies are

responsible for coordinating the care of Commonworks’ youth in their

respective regions. Although the lead agencies have no compensatory

arrangement with the ASO, each lead agency has a formal agreement with

the ASO to discharge its respective responsibilities related to credentialing,

utilization review, quality improvement, training, reporting, information

systems, payment processing, and care authorizations. Figure 2.3

illustrates the organizational arrangement of Massachusetts’ managed care

initiative.

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Figure 2.3: Organizational Arrangement of an ASO Managed Care Model in Massachusetts

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Managed Care Organization

Model Is Most Similar to Health

Care Model

The managed care organization (MCO) model is most similar to managed

care arrangements in health care and is being used in 4 of the 36 child

welfare initiatives. Under this arrangement, the public child welfare

agency contracts with a private organization to perform administrative

services and assume responsibility for developing and subcontracting with

a network of service providers. The difference between the MCO and lead

agency models is that the MCO does not itself provide services directly to

children and families. Rather, the MCO arranges for the delivery of all

necessary services through its provider network.

The largest MCO managed care effort under way is in Hamilton County,

Ohio. In January 1998, the county child welfare agency contracted with a

national for-profit MCO to (1) manage care for children and families in need

of either outpatient mental health services or foster care in therapeutic,

group home, and residential treatment settings and (2) build an integrated

information system for three county agencies—child welfare, mental

health, and alcohol and drug addiction. To carry out its administrative

responsibilities, the MCO has subcontracted with four other companies to

manage outpatient mental health services, maximize Medicaid funding,

provide the hardware for the information systems, and manage the

software and network. To fulfill its service-delivery responsibilities, the

MCO has subcontracted with 22 local service providers. The MCO serves as

the organizer, gatekeeper, and manager of services, but is itself precluded

from providing any direct child welfare services, unless no other provider

can offer the same service and the county agency approves. At the end of 5

years, the county intends to assume the operation of the managed care

initiative.23 Figure 2.4 illustrates the organizational arrangement of

Hamilton County’s managed care initiative.

23F. Wulczyn and B. Orlebeke, “Fiscal Reform for Child Welfare Systems: Four Case Studies,” Chapin

Hall Center for Children, University of Chicago (Jan. 1998) (draft).

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Figure 2.4: Organizational Arrangement of an MCO Model in Hamilton County, Ohio

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Public Agencies Continue

to Rely on Traditional

Partners

Most of the 36 managed care initiatives currently under way are using

some version of either the lead agency or public model, as shown in table

2.2. These organizational arrangements tend to rely solely on the

community-based nonprofit providers that have traditionally served

children and families in the child welfare system. In some lead agency

model initiatives, public agencies stipulated in the request for proposals

that only those prospective bidders with previous experience in providing

child welfare services within the state or locality were eligible to submit

bids. Used less frequently, the ASO and MCO models introduce a new type of

organization to the child welfare system—a management entity that

generally is not itself in the business of delivering child welfare services. In

the three initiatives implementing the ASO managed care model, one or

more lead agencies are responsible for coordinating and providing direct

services.

Table 2.2: Type of Managed Care

Model Used in 36 Ongoing Initiatives

Model

Number of

initiatives

Lead agency 19

Public 10

Managed Care Organization (MCO) 4

Administrative Services Organization (ASO) 3

Total 36

Source: GAO survey.

For-profit companies, including organizations with experience providing

managed physical or behavioral health care, have not had a major role in

developing and implementing managed care initiatives in child welfare. Of

the 27 initiatives about which we obtained more detailed information, 10

currently use for-profit organizations as a service provider, managed care

entity, or both, as shown in table 2.3. For-profit companies are providing

traditional direct services in five of the initiatives using the public model

and in one of the initiatives using the ASO model. The companies function

as a lead agency in the two initiatives using the lead agency model and the

other initiative using the ASO model. Many of these for-profit entities had

historically provided services to children and families in their community

before the managed care initiative. For example, in Massachusetts’

Commonworks program, a for-profit company that was already a primary

provider of mental health services was the successful bidder for one of six

regional lead agency contracts. Having little or no experience in the child

welfare system, some for-profit managed care companies are functioning

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as ASOs or MCOs. In Milwaukee County’s Safety Services Program in

Wisconsin, a behavioral health managed care company linked with two

nonprofit, community-based agencies to form a new entity to which the

state awarded a contract to become one of four lead agencies. For-profit

managed care companies are functioning as the MCO or ASO in three of the

five initiatives using these models.

Table 2.3: Role of For-Profit

Companies in 27 Managed Care

Initiatives

Number of initiatives

Model Total

Using for-profit

company(s)

Role of for-profit

company(s)

Lead agency

12 2

Lead agency and

service provider

Public 10 5 Service provider

ASO

3 2

In one initiative,

different companies are

the ASO and a lead

agency, respectively; in

the other initiative, the

same entity is the ASO

and a service provider

MCO 2 1 MCO

Total 27 10

Source: GAO survey.

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Child welfare agencies have implemented capitated payment systems and

new service-delivery strategies in their managed care initiatives. In these

new financial arrangements, public agencies are developing methods to

limit risk and to establish the capitated payment rate. In addition, public

agency contracts with providers now require the providers to organize and

coordinate a full array of services. With these changes, public agencies are

using different approaches to hold providers accountable for outcomes

through performance standards and by linking financial rewards and

penalties to outcomes.

Capitated Payments

Shift Financial Risk to

Service Providers

Public agencies are implementing capitated payment systems in managed

care initiatives, although they still maintain fee-for-service reimbursement

methods in some of their contracts with service providers. States and

counties have used a number of different methods to develop capitated

contract rates and have created strategies that shift some or all financial

risks to the private sector. Finally, some public agencies have pooled

funds from different agencies to increase their flexibility to provide

multiple services to hard-to-serve children.

Capitation Replaces

Traditional Fee-For-Service

Payment System

In 19 of the 27 initiatives about which we obtained detailed information,

payments to providers serving children and families under managed care

are fixed. In nine initiatives, payment takes the form of a case rate, or a

fixed dollar amount for each referred client, and covers contracted

services for all clients in the caseload regardless of the extent to which

these services are used. For example, in Kansas’ foster care managed care

initiative, the state pays each lead agency a case rate for each referred

child averaging about $13,850 a case, which is expected to cover the

complete operation of the out-of-home care system, including food and

shelter, child care, mental health treatment, independent living,

reunification services, and case management for the children in foster

care, as well as all recruiting and training of foster parents.

Eight initiatives use a capitated rate—a fixed payment for all contracted

services for a defined client population, such as those residing within a

designated geographic area, with no limits on duration of care. Unlike the

case rate, each new client does not generate a new stream of dollars;

rather, the capitated rate is fixed regardless of how many children are

served. In Sarasota County, Florida, for example, the lead agency receives

a capitated rate of about $4 million, over a 1-1/2-year period, for providing

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all the child welfare services that any county resident in the state’s child

welfare system might need.24

Different Methods Are

Used to Limit Providers’

Financial Risk

A single entity that assumes the total cost of providing a defined scope of

services to a defined population of potential users over a specified time

period inevitably assumes financial risk as well. Of the 19 ongoing

initiatives using capitated payments, only 2 initiatives—the Sarasota

County initiative and the Lake and Sumter County initiative in

Florida—have transferred full financial risk to the respective private lead

agency. In nearly all the remaining capitated arrangements, public and

private agencies alike have created risk-limiting mechanisms to address

the unknowns associated with the size of the population needing services

and the scope and duration of those services. Absent good historical data

on service use and costs as well as experience with a capitated payment

system, public child welfare agencies have explored different ways to limit

the financial risk carried by the initiative’s service providers. We found

that public agencies are using two approaches—one fixes only a part of

the provider payment and reimburses some services through the

fee-for-service method, and the other uses specific contract provisions to

limit the size of the financial risk assumed by the providers.

In five initiatives, public agencies have established a fixed rate for only a

part of the contracted services. Services not included under this partial

fixed rate are reimbursed on a fee-for-service basis. For example, in the

Kids Oneida project in Oneida County, New York, the lead agency receives

a prepaid, monthly case rate of $2,500—amounting to $30,000 a

year—which is expected to cover the full range of services needed to keep

children and adolescents with serious emotional, behavioral, or mental

health issues in the community or at home. However, the federally eligible

behavioral and mental health services that the lead agency provides or

purchases may be billed for Medicaid reimbursement on a fee-for-service

basis.

According to our survey of ongoing managed care efforts, seven initiatives

include contract provisions that limit providers’ losses when costs exceed

the fixed rate. Mechanisms to limit a provider’s losses can take several

forms, including those where the public agency and provider share excess

costs and others where the public agency bears the excess costs alone.

One risk-sharing mechanism limits the provider’s losses to a percentage of

24Two initiatives use a combination of case and capitated rates for different contracts. Seven of the

remaining eight initiatives plan to implement some type of capitation in the future.

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total costs, with either public dollars alone paying any further costs or the

provider sharing some of the cost overruns. For example, during the first

year of Kansas’ foster care managed care initiative, the lead agency

contracts contained a 10-percent margin so that the contractor was

responsible for all additional costs up to 10 percent above the case rate

and the state was to pay for all excess costs beyond that. Under this

arrangement, the lead agency would pay all costs up to 110 percent of the

case rate and the state would pay anything over that amount.

Other techniques address the serious financial burden associated with the

catastrophic costs of certain groups of children or circumstances beyond

the provider’s control, such as an unexpected increase in the number of

abuse and neglect reports. One technique is to set aside a pool of funds,

known as a risk pool, for use if the cost of care exceeds some targeted

amount. For example, in Champaign County, Ohio, the county and its

foster care contractor created a risk pool set at a value equal to 10 percent

of the contract value, or about $24,000. The contractor funds 40 percent of

the pool, and the county funds 60 percent. The risk pool covers

catastrophic costs over $32,400 per child, so that costs in excess of this

amount are charged to the risk pool; however, once the risk pool is

depleted, the county pays the cumulative costs over the $32,400 per child

amount.

To prevent a fixed payment system from penalizing extraordinarily

hard-to-serve children, some managed care initiatives exempt these

populations from their rates. This can be accomplished by either not

referring certain clients to the managed care entity or allowing the costs

associated with serving only these clients to be reimbursed on a

fee-for-service or per diem basis. Without such exemptions, the

prohibitively high service costs for these clients could place such a drain

on the managed care entity’s resources that it would not be able to provide

the caliber of services these hard-to-serve children need. Furthermore,

serving these high-need children could significantly reduce the resources

available to serve more typical clients. For example, in both Kansas’ foster

care managed care initiative and Boulder County’s managed care initiative

in Colorado, developmentally disabled children are excluded from the

population served by the respective managed care entities. These children

have unusually high service needs, including hospitalization and in-home

medical care. Moreover, in Kansas, each lead agency can now exclude a

designated number of referred cases—ranging from 24 to 35—for which it

has 60 days to decide whether a referral will be served outside the case

rate on a fee-for-service basis. This change was effected to ameliorate

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financial problems lead agencies experienced while serving children with

high service needs within the contract case rate, which was initially

developed without data on actual service costs.

Financial risk is also associated with uncertainty about the size of the

population to be served. One mechanism to limit this type of risk is for the

public agency to guarantee the provider a minimum or maximum number

of cases. According to our survey of ongoing managed care initiatives,

seven initiatives have such measures in place. For example, in the Kids

Oneida initiative in Oneida County, New York, the lead agency must

accept all county referrals as long as its capacity has not been reached.

Public Agencies Use

Different Methods to

Establish Capitated

Payment Rates

Setting capitated payment rates for child welfare services was a new

exercise for states and local agencies. Consequently, they used a variety of

methods. In some initiatives, the public agency used the competitive

bidding process as the forum to negotiate a contract rate for services. In

Kansas’ foster care managed care effort, for example, each of the five

regional lead agency contracts has its own case rate. The state provided

prospective bidders with a dollar amount that was based on previous

expenditures for purchased services, staff, other operating expenditures,

and services funded through other parts of the agency, such as mental

health and child care. Equipped with this information, private entities

vying for the lead agency contracts proposed their own annual case rates

covering a 4-year period. These rates then became the case rate for those

successful contractors. In Massachusetts’ Commonworks project, the state

negotiated a 3-year contract rate with the managed care company that was

awarded the ASO contract; the rate was based on the annual projected

operating costs for the specified administrative services.

In other initiatives, the public agency used historical data to set the

contract rate and did not, as a rule, negotiate the rate with the contractors.

For example, in Florida’s managed care initiative in Lake and Sumter

Counties, the lead agency’s case rate was developed by examining the

actual cost for the care of children sheltered in Lake County over a 2-year

period, including multiple cost categories, such as out-of-home care,

administrative services, and therapeutic services for children and families

entering care. Costs were also categorized according to whether children

were entering foster care or receiving only protective services, and

bundled into a single 2-year case rate.25 In Massachusetts, the state’s

25B. Peacock, Implementation Study Report on the Child Welfare Privatization Projects, Florida

Department of Children and Families (Jan. 1998).

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contract with the lead agency in each of six regions across the state has

two components. One is a negotiated annual fee for the lead agency to

coordinate and oversee its service provider network and is intended to

cover staff costs and training. The second component is a case rate for

direct services that is the same for each lead agency and, for the first year,

was partly based on an actuarial model using 1995 expenditure and

utilization data for youth in group care, and also including an educational

subsidy.

In other initiatives, the state allocated a portion of its child welfare

services budget directly to the managed care entity. Such was the case in

Colorado, where the state allocates child welfare funds to counties

through a block grant. In Boulder, Jefferson, and Mesa Counties, the block

grant, in effect, created the capitated contract rate for each county’s public

managed care model. For the Sarasota County managed care initiative in

Florida, the state carved out the county’s share of a multicounty district’s

annual operating budget, generally using the same methodologies it uses

to allocate budget line items to districts.26 The allocation method is based

on caseload size; actual dollar amounts from about 14 different budget

components, including out-of-home care, sexual abuse treatment, and

independent living services; and operating expenses and salaries

associated with the cost of 37.5 public positions. Once the county’s budget

allocation was determined, the state withheld about 10 percent of the total

to fund an evaluation and seven new public positions in the county to

perform quality assurance and title IV-E eligibility determination functions.

The remaining budget dollars became the lead agency’s contract rate.

Regardless of the method for setting rates, the public agency often expects

the contractor to supplement the contract rate with funds from other

sources, especially federally reimbursable programs such as Medicaid. For

example, in Massachusetts’ Commonworks program, the lead agencies are

expected to tap Medicaid and state education sources, as well as private

funding sources, to fund related services. The state also encouraged the

lead agencies to enter into public-private partnership agreements to help

subsidize the cost of coordinating their provider networks because the

state will reimburse no more than 75 percent of these costs, or a maximum

of $100,000. For Wisconsin’s Safety Services Program in Milwaukee

County, the state expects each of the four lead agencies to supplement

state funding by referring clients who are eligible under Medicaid to their

26Florida administers its child welfare system through and distributes funding to 15 state-operated

districts, which comprise multiple counties. Sarasota County is one of seven counties in District 8.

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HMO for applicable services and securing Medicaid funds for targeted case

management to partially support staff costs.

Pooling Funds Increases

Flexibility

The child welfare system relies on many different programs from multiple

agencies with many funding streams. Because of restrictions on eligibility

and prohibitions on certain uses of funds, public and private agencies

often face problems accessing needed services. To reduce service access

problems sometimes associated with these categorical programs and

increase flexibility in the use of funds, agencies in some locations have

agreed to pool or blend funds from various sources for their managed care

initiative. In four states where counties administer the child welfare

system, the state distributes child welfare funds to county child welfare

agencies through a capitation method that fixes the level of funding, for

example, a block grant.27 “Blockgranting” state funds in this way loosens

the restrictions on the use of the funds and thus increases counties’

flexibility. In Colorado, for example, the state’s capped allocation to

counties now typically includes categorical child welfare budget line items

for out-of-home placement, subsidized adoptions, and child care and

county administrative costs related to child welfare services. Boulder

County’s managed care initiative—serving adolescents at imminent risk of

placement in group or residential care referred from the child welfare,

mental health, and juvenile justice systems—further pooled its capped

child welfare allocation with funding from the mental health agency and

youth corrections agency to finance its IMPACT initiative.

Funding from both child welfare and mental health funding streams are

often pooled, especially for the hard-to-serve and high-cost children.

Under its public managed care model, the Wraparound Milwaukee

program in Wisconsin blended Medicaid, child welfare, and federal grant

funds into a single buying pool to purchase individualized, family-based

services to help children placed in residential treatment centers return to

their family, a foster home, or other living arrangement in the community.

The county child welfare agency agreed to pay a monthly case rate of

$3,300 per child out of its institutional placement budget. In addition, the

state health care financing agency agreed to pay a monthly case rate of

$1,459 to pay for all mental health and substance abuse services for

Medicaid-eligible children, who make up about 80 percent of the

initiative’s clientele. Along with a federal grant from SAMHSA’s Center for

27In response to our survey, the states of Colorado, New York, Ohio, and Wisconsin indicated they have

“blockgranted” funds for child welfare services to counties. In addition, Alameda County is

implementing a managed care initiative as one of five counties in California experimenting with

blended funding strategies.

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Mental Health Services, these child welfare and Medicaid dollars form the

funding pool from which the public managed care entity pays the cost of

residential treatment, group and foster care, and all other services, except

physical health care, which is outside the capitated contract rate and still

obtained by families on a fee-for-service basis.

Service Delivery

Changes Are Designed

to Coordinate Care,

but Public Agencies

Retain Critical

Functions

Managed care contracts usually require the managed care entity to

provide, create, or purchase a wide range of services to meet clients’

needs. If not providing services directly itself, the primary contractor may

develop and subcontract with a network of service providers to make

available all the services referred clients might need. Under managed care,

public agencies have increasingly privatized case management tasks, such

as treatment planning and case monitoring, and expect the managed care

entity to serve as the single point of entry to the service system.

States and localities have retained certain functions that officials believe

are critical to meeting their legal responsibility for the safety of children in

the child welfare system. Although most of the 27 initiatives have

transferred case management responsibilities to private entities, public

agencies maintain a large presence during strategic points in a child’s

service history. These include the points at which a child enters and exits

the child welfare system and when key decisions are made about changes

in a child’s service plan.

Primary Contractor Is

Responsible for Ensuring

Access to a Wide Range of

Services

Managed care initiatives are trying to better coordinate care and ensure

access to a wide range of services to address concerns about service

fragmentation and gaps that have historically plagued the child welfare

system. Where public agencies have contracted out the care coordination

function to a lead agency or MCO, that primary contractor assumes

responsibility for ensuring the availability and provision of all contracted

services as well as any additional services that may be necessary to meet

individual client needs. If a child or family has a unique service need that

traditional services cannot meet, the primary contractor must develop new

strategies to meet it. Whether using existing services or creating new ones,

the primary contractor—regardless of whether it is a public agency in the

public model or a private organization in the lead agency model—can

either deliver services itself or contract with a network of service

providers.

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Service Networks Provide the

Framework for Full Array of

Services

The creation of an organized and coordinated network of service

providers is the foundation of managed care initiatives. These

configurations of service providers have been formed in one of two

ways—through a self-initiated process prior to the formation of the

managed care project or as a required component of the initiative itself.

The self-initiated process often begins with a group of community

providers establishing itself as a service coalition or consortium in

anticipation of state or county reform. By either becoming an MCO itself or

designating one of its members as the lead agency to perform management

services, a provider group assumes responsibility for coordinating the care

of a defined population of children and families. In Indiana’s The Dawn

Project in Marion County, four community mental health centers in the

county formed a new nonprofit MCO. The MCO contracts with case

managers and service providers who collectively provide or develop the

necessary services for children and youth with serious emotional

disturbances who are already in or at risk of out-of-home placement. In the

lead agency model being used in Sarasota County, Florida, all the major

local vendors that had traditionally provided contracted child welfare

services, such as parenting classes, therapy, in-home visitation, family

support services, therapeutic foster care, and residential services, formed

a coalition; one member—the YMCA—serves as the lead agency, and the

coalition operates as the provider network.

In still other initiatives, the primary contractor had to build a network of

service providers as a condition of its managed care contract with the

public agency. In both Massachusetts’ Commonworks program and

Tennessee’s Continuum of Care contracts, for example, the primary

contractors are responsible for forming a network of either existing or

new providers and, through this network, providing all the appropriate

services to meet the needs of clients accessing the network.

New Approaches to Case

Management Are Designed to

Better Coordinate Care

Under child welfare managed care arrangements, contracted private

providers are attempting to develop coordinated networks of service

providers and are assuming more case management responsibilities. While

some private entities were already performing some case management

functions before these initiatives were implemented, in 21 of the 27

ongoing managed care initiatives, the public agency has shifted more case

management responsibilities to private contractors. In the lead agency and

MCO models, in particular, the private sector is now performing such case

management tasks as developing the treatment plan that identifies the

treatment goals and needed services, as well as arranging for the provision

of these services either by the case manager’s own organization or through

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the provider network. Case managers also track clients’ progress toward

achieving their treatment goals, assess the appropriateness of each

service, and update the treatment plan, as needed.

In an effort to better match services with client needs, many of the

ongoing initiatives use a team approach to case management to avoid the

duplication, time delays, and fragmentation that often result when

different service systems are not involved in the treatment planning and

decision-making process. In some initiatives, the treatment team consists

of those individuals who are regularly in direct contact with the child,

including the case manager, therapist, parents or guardians, school

officials, and other service providers, depending on the child’s problems.

Together, the treatment team develops an individualized service plan and

reviews, revises, and implements any necessary changes. For example, in

Sarasota County’s managed care initiative in Florida, where the lead

agency subcontracts with two coalition service providers to establish case

management teams, the subcontractor provides a case manager and a

therapist, who bring in the foster parents, and, when appropriate, a

guardian ad litem,

28 to work exclusively with families and complete

assessments, case plans, concurrent planning, and case reviews. Having

both a case manager and therapist on the team means that mental health

services are routinely made available to each family and child in care.

In other initiatives, case management teams are interdisciplinary with

representatives from multiple agencies to better address the varied needs

of hard-to-serve children who often have long histories of involvement

with multiple agencies. For example, the managed care initiative in

Boulder County, Colorado, is an interagency collaboration under the

public managed care model. The local child welfare, mental health, and

juvenile justice agencies formed a new managed care entity to perform

joint gatekeeping, assessment, placement case planning, concurrent

utilization review, and quality assurance functions for the targeted

population of adolescents in need of group or residential placement. Youth

in need of such a placement are referred to an interagency team

comprising public agency administrators from child welfare, community

corrections, health, community services, mental health, youth corrections,

and probation, and facilitated by staff from the managed care entity. This

team makes the final decision on whether and where the referred

adolescent should be placed and reviews the child’s progress every 90

days. The day-to-day case management responsibilities are handled by the

28A guardian ad litem is an attorney or trained volunteer who represents the child in court, investigates

the case, and monitors case progress.

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managed care entity’s intensive case managers, who monitor and assess

the adolescent’s movement toward placement goals in conjunction with

the county child welfare caseworker.

Public Agencies Retain

Certain Child Welfare

Functions

Although public agencies are privatizing the management and

coordination of care for children who are victims or at risk of abuse and

neglect, they continue to retain certain tasks they believe are critical to

meeting their legal responsibility for the safety and well-being of children

in the child welfare system. In all 27 initiatives, the public agency

continues to conduct all CPS functions related to investigating reports of

child abuse and neglect and recommending to the courts whether a child

needs to enter the child welfare system for protective or any other

services. A child enters the managed care system on the basis of a referral

from the public child welfare agency to the managed care entity. To ensure

that managed care providers do not deny access, some contracts explicitly

state that the primary contractor can neither reject a referral nor eject an

accepted case.

The public agency also maintains its presence by participating in the

primary contractor’s treatment planning process and requiring approval

when the contractor decides to make changes in the level of care, such as

moving a child from residential care to family foster care. In several

initiatives, public agency staff are members of the case management team

that reviews, revises, and implements the child’s treatment plan. The

public worker’s role on the treatment team in some initiatives is to review

and approve the case manager’s service plan for the child and family, any

significant deviations from the plan, and decisions calling for discharge

from care or transfer to a different level of foster care placement or to an

in-home service provider. For example, in Sarasota County’s managed care

initiative in Florida, a public worker attends all case review meetings

where case plans may change significantly, including the treatment goal

and decisions to discharge a case or pursue termination of parental rights

to free a child for adoption. This worker does not participate in case plan

choices or recommendations, but is there to listen, observe, and intervene

when he or she perceives a child’s safety may be jeopardized because of

the case review decisions.

While primary contractors are generally free to subcontract any of the

contracted services, the public agency can exercise some control over

these subcontracts. For example, in Massachusetts’ Commonworks

program, the state requires that if a lead agency also administers a

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residential care program, then at least 75 percent of placement services

must be subcontracted out to avoid conflicts of interest regarding

placement decisions among direct service providers in the network and to

help maintain diverse programming and placement options. In several

initiatives, the public agency controls which agencies are in the provider

network. In the TrueCare Partnership initiative in Hamilton County, Ohio,

for example, the MCO has contracted and negotiated reimbursement rates

with local service providers to carry out its service-delivery

responsibilities; however, the county selected the first group of providers

through a competitive process and must approve any elimination or

addition to the provider network.

Quality Assurance

Strategies Are

Designed to Balance

Costs and Quality

Public agencies are developing strategies to protect against the inherent

incentive in managed care to withhold or provide reduced services. These

strategies attempt to hold managed care providers accountable for

achieving the outcomes public agencies are pursuing by setting

performance standards and linking financial rewards and penalties to

outcomes. In addition, public agencies plan to evaluate the effectiveness of

their initiatives to determine whether managed care is accomplishing the

desired objectives and resulting in efficiencies.

Performance Standards

Hold Managed Care

Partners Accountable

Public agencies have instituted performance standards as a means of

holding their contracted service providers accountable for outcomes. In 23

of the 27 managed care initiatives about which we obtained detailed

information, the public agency requires service providers to meet specific

performance standards. In a majority of these 23 locations, the public

agencies were using performance standards in contracts before

implementing managed care initiatives. However, in most cases, these

agencies are now incorporating performance standards into more

contracts. In addition, service providers in eight ongoing initiatives are

being held accountable for their performance for the first time.

Public agencies are using multiple performance standards to balance the

twin goals of controlling costs while ensuring quality of care and the

overall safety of children. Taken together, a set of goals and objectives

with related performance standards can help ensure desired outcomes are

achieved. While some standards are based on system outcomes, such as

reducing overall costs of placements or achieving permanency more

quickly, other standards are more client-specific and appropriate for every

child, such as ensuring that immunization schedules are met. Moreover,

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some standards address cost efficiencies and the savings associated with

speedier exits from foster care or transfers to less costly but appropriate

levels of care. For example, if a goal is to achieve cost efficiencies, the

performance standard may call for decreased residential care costs shown

as a percentage less than an established baseline amount. Or, if an

objective is to ensure that children are reunited with their families in a

timely manner, a performance standard may require that a percentage of

children in out-of-home care be returned to their families within a

specified period of time. Other standards focus on the quality of care,

which is often measured by whether children remain in safe, stable

settings and their well-being is sustained and nurtured. For example, in

addressing children’s safety, the performance standard could prescribe a

percentage of all children that are returned to their families with no

findings of maltreatment for a specified period of time. Furthermore, an

indicator of placement stability in out-of-home care could be a standard

setting the maximum number of times a percentage of children experience

changes in their placement setting. In addition, promoting families’

well-being could manifest itself in a standard of a certain percentage of

families that show improvement in parenting skills and capacity.

Public agencies in most ongoing managed care initiatives are

incorporating multiple performance standards for their service providers,

as illustrated for Kansas’ foster care managed care initiative in table 3.1.

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Table 3.1: Performance Standards

Contained in Lead Agency Contracts

for Foster Care Managed Care Initiative

in Kansas

Outcome or goal Performance standard

Children are safe from maltreatment 95 percent of children in the care and

supervision of the contractor will not

experience confirmed abuse or neglect

while in placement (raised to 98 percent

for year 2)

80 percent of children will not experience

confirmed abuse or neglect within 12

months after reuniting with their families

Children experience a minimal number of

placements

90 percent of children referred to the

contractor will have no more than three

placement moves subsequent to referral

(lowered to 70 percent for Year 2)

65 percent of all children will be placed

with at least one sibling

Children maintain family, community, and

cultural ties

70 percent of children referred after the

implementation date will be placed within

their contract regional boundaries

75 percent of youth, aged 16 and over,

released from custody will have completed

high school, obtained a general

equivalency diploma (GED), or be

participating in an educational or job

training program

Children are reunited with their families in a

timely manner

60 percent of children placed in

out-of-home care will be returned to their

families within 6 months of referral to the

contractor (lowered to 40 percent for year

2)

90 percent of children who are reunited

with their families will not reenter

out-of-home custody within 1 year of return

home

65 percent of children will achieve

permanency within 1 year of referral to the

contractor (new standard added for year 2)

Clients will be satisfied with services 80 percent of parents and youth (aged 14

and over) will report satisfaction with

services as measured by the Client

Satisfaction Survey upon case closure

Source: Kansas Department of Social and Rehabilitation Services.

Financial Incentives and

Disincentives Are Linked

to Outcomes

Some initiatives offer bonuses as a financial incentive for the managed

care entity to meet performance standards. For achieving cost savings or

successfully returning a child to the family, for example, the contractor

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can earn additional funds in several ways. In Massachusetts’

Commonworks initiative, the lead agency receives a bonus payment of

$1,000 for each youth who has been discharged for 6 months and not

readmitted to the program during that period. In the TrueCare Partnership

initiative in Hamilton County, Ohio, the MCO can earn two kinds of

performance bonuses. First, the MCO can earn as much as about $100,000

per year in bonuses for meeting 20 individual performance indicators

related to (1) service outcomes for referred families, such as improved

functioning, timely receipt of behavioral health services, and success in

ensuring children’s safety and reducing risk of harm; and (2) management

services, including maintenance of a competent provider network,

revenues maximized, and client satisfaction with network providers’

services. Second, the MCO can earn an additional bonus up to a maximum

of $33,000 a year by meeting all its performance standards and reducing

costs by more than 15 percent.29

Similarly, some contractors can be penalized for poor performance.

Continuing with the Hamilton County example, the MCO can incur financial

penalties totaling about $63,000 if it fails to meet the various performance

indicators related to service outcomes for families and management

services. In several initiatives, another disincentive to poor treatment

planning and discharging children from care prematurely is to hold

contractors financially responsible for those children who must reenter

care within a specified period of time. For example, in Kansas’ foster care

managed care initiative, the lead agency must pay for all costs if a child

who was returned to the family reenters foster care within 12 months of

the discharge. Hence, while the lead agency initially received a fixed case

rate for each referred child, the state provides no additional funds beyond

this amount if the child must once again be removed from the family

during the year following discharge.

Another method public child welfare agencies use to help ensure that

managed care entities do not inappropriately limit the amount or types of

necessary service to children and families is to restrict profit levels or

require that cost savings be reinvested in services. Ongoing managed care

initiatives limit contractors’ ability to profit at the public’s expense in

several different ways. First, in Massachusetts, state regulations limit

surplus revenues to 5 percent for the lead agencies and their network

providers in the Commonworks managed care initiative. Second, contract

language can limit a provider’s gains with a risk-sharing mechanism similar

to the one that limits losses. In the Kansas foster care initiative example,

29Wulczyn and Orlebeke, “Fiscal Reform for Child Welfare Systems.”

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where the lead agency was financially at risk for up to 110 percent of the

contract rate in the first year, the contract also allowed a 10-percent

margin for retaining any cost savings. Under this arrangement, the lead

agency could keep any savings after spending 90 percent of the contract

rate; any additional savings reverted to the state. Such a limitation on both

losses and gains is sometimes referred to as a “risk-reward corridor.”

Other managed care initiatives include contract provisions requiring

providers to reinvest “profits” in the program. For example, in Sarasota

County’s managed care initiative in Florida, the lead agency must reinvest

any realized savings in primary prevention programs or enhanced child

welfare services. In Boulder County’s public managed care initiative in

Colorado, the state stipulates that the county can use up to 5 percent of its

capped child welfare allocation to reduce its share of the state-required

local match, but any additional savings must be reinvested in additional

child welfare services. Under this arrangement, the county plans to

reinvest any savings in innovative community-based services to shorten or

eliminate the need for residential placement; reward and enhance selected

providers’ capabilities to serve adolescents effectively; and develop and

maintain a countywide management information system that will integrate

clinical, fiscal, and outcome data on children in placement.

Finally, public agencies are concerned about the critical time immediately

following a child’s discharge from foster care. To better safeguard against

reentry into care, some locations are offering providers incentives—in the

form of additional funds or as a supplement to the contract rate—to

deliver aftercare services to recently discharged children and their

caregivers. For example, in the Commonworks program in Massachusetts,

the state has incorporated funding specifically for aftercare services into

the lead agencies’ case rate during the first year so that, once a child is

discharged from foster care, the lead agency’s case rate changes from

$4,000 to $400 per month for up to 6 months.

Independent Review Will

Assess the Efficacy of

Managed Care Initiatives

External or independent reviews will help determine whether system

reforms under managed care arrangements are effective, accomplishing

desired objectives, and resulting in efficiencies. Most of the 27 initiatives

about which we obtained detailed information intend to collect

information to assess the time it takes to achieve permanency goals as

well as the cost of providing services under managed care. In addition to

these efforts, many initiatives include an evaluation component that will

examine project outcomes, performance quality, and cost efficiency in

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various ways. Some initiatives—for example, both Massachusetts’

Commonworks program and Alameda County’s Project Destiny initiative

in California—will conduct independent longitudinal evaluations. A

systemwide evaluation is planned in Kansas, where the state has

contracted for a 4-year external review of its entire child welfare system,

including its three statewide managed care initiatives and services

provided by both public and private employees.

In some initiatives, public child welfare agencies plan internal evaluations

of their managed care efforts. In Tompkins County, New York, the county

child welfare agency will conduct an annual program review of its Youth

Advocate Program and the lead agency’s services. The objective is to

determine the extent to which client milestones and targets are achieved,

and to use the program review results to help modify program goals and

performance standards. Other initiatives will be evaluated by the managed

care entities themselves, as in Wisconsin’s Safety Services Program in

Milwaukee County, where the contracted lead agency is responsible for

designing and implementing a 2-year plan, subject to the state’s approval,

to evaluate program effectiveness and the quality of the services delivered.

A final approach is to measure the extent to which foster and biological

parents as well as older children are satisfied with the services they

receive under managed care arrangements. As part of either an

independent evaluation, performance standards, or ongoing quality

assurance monitoring, collecting information directly from clients will

help identify outcomes related to managed care’s effect on children and

families. For example, in Boulder County’s managed care initiative in

Colorado, client satisfaction data will be collected from adolescents and

families served—through focus groups of those receiving services under

the initiative—as a component of the overall quality assurance plan. This

information will add qualitative texture to the quantitative outcomes and

assessment data.

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Public officials considering managed care for their child welfare system

face three difficult challenges. First, when implementing managed care,

public agencies have found that they need to accomplish a number of

tasks, of which developing a capitated, prospective payment system is

most crucial. Second, client service and outcome data are critical to

setting adequate payment rates and monitoring both client and provider

outcomes. Developing the management information systems needed to

store and retrieve these data represents a difficult task for public agencies.

Third, managed care requires both public and private agencies to assume

new roles and responsibilities. Staff from both sectors must alter

long-standing practices and develop new skills. Despite these challenges,

public officials are encouraged by early—though limited—positive results.

Public Agencies Face

Initial Start-Up Tasks

Before managed care arrangements can be implemented, both public and

private agencies have found they need to accomplish a number of start-up

tasks. First and foremost, public agencies have sought solutions to the

fiscal challenges of developing a prospective, capitated payment system

when the major federal source of support for child welfare services—

particularly foster care—is the service reimbursement method of title IV-E.

Second, in developing their managed care initiatives, public agencies have

brought together key participants in the system—many of whom have little

experience in such joint efforts. Third, because applying managed care

principles to child welfare is new, public agencies have developed

different strategies to build expertise in this area. Finally, private providers

participating in new initiatives need to anticipate significant start-up costs

that may not be covered in their contracts.

New Financing Systems

Are Difficult to Develop

and Require Adjustments

In a managed care environment, the use of prospective, fixed-payment

arrangements between public agencies and private service providers can

be difficult and presents states with fiscal challenges because the federal

government retrospectively reimburses states for many child welfare

services. The managed care environment—in which public agencies pay

service providers in advance of services but obtain reimbursement from

federal title IV-E funds only after the services have been delivered—strains

public agencies’ ability to maintain an adequate cash flow. In some states

as well, state law mirrors federal law and prohibits advanced payments

from the state’s funding category for out-of-home placements. States have

found ways, however, to address this problem. Some states, for example,

initially make nonfederal funds available for advance payments to

managed care entities. In Massachusetts, the state advances general

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revenue dollars to the Commonworks’ lead agencies and later replaces the

advances with reimbursements from the federal foster care and Medicaid

programs.

Public agency officials also expressed concern that federal prohibitions

against the use of title IV-E funding for services other than out-of-home

care may increase the state’s liability for funding a greater share of

capitated contracts. When a child returns home, federal reimbursement for

foster care costs ceases; however, the child and family may continue

receiving unreimbursable in-home services. As managed care entities

provide aftercare services and become more successful at returning and

keeping children at home, the state’s portion of the contract rate will

increase as the federal share decreases. In this scenario, the state will also

realize savings in its out-of-home costs; however, these savings may be

more than offset by the state’s obligation to continue paying contractors

for in-home services under the fixed rate. This was the case in the Lake

and Sumter County managed care initiative in Florida, where the state was

paying the lead agency a case rate of about $15,000 over a 2-year period for

each child entering foster care. The state based this rate on a daily cost of

about $21 per child and expected to finance this rate, in part, by

submitting claims for federal title IV-E foster care reimbursement.

However, the lead agency had the flexibility to use its case rate dollars to

fund treatment and in-home services, and sometimes returned children

home or completed successful adoptions in less than 2 years; the state was

then left paying more of the daily per diem amounts with its own funds

and could no longer claim federal title IV-E reimbursement because the

children were no longer in out-of-home care. Finding this financial risk

unacceptable, the state abandoned the case rate after a year in favor of a

capitated rate for the entire caseload and not for each referral.

Of the 13 states where initiatives are currently being implemented, HHS has

waived the categorical funding restriction in title IV-E for one state. Ohio

secured a federal waiver to receive a quarterly block grant of title IV-E

funds that can be spent on in-home services, such as home-based therapy

and other community-based support services. Fifteen counties

volunteered to participate in this demonstration, including Hamilton

County where the county has contracted with an MCO to manage care for

children and families in need of therapeutic, group, and residential care. A

few of the 10 states that have received an HHS waiver of certain title IV-E

restrictions plan to use it in part to implement managed care initiatives.

Furthermore, other states with ongoing managed care initiatives, including

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Kansas and Florida, are now seeking similar relief from title IV-E

restrictions and have submitted waiver proposals to HHS.

Once a financing system is established, agency officials have found that

adjustments are often necessary as they gain experience with managed

care. For the second year of Kansas’ foster care managed care initiative,

for example, the state modified the lead agencies’ risk-sharing mechanism

to offset an increase in the lead agencies’ case rate.30 Unlike the first year

of the contract, lead agencies’ financial liability is no longer limited by a

10-percent margin; instead they must pay all costs above the case rate. In

addition, each lead agency can now exclude a designated number of

referred cases—averaging about 3 percent of each lead agency’s total

caseload—from the case rate and bill the state for those cases on the more

traditional fee-for-service basis instead. According to state officials, these

changes were necessary because of potential cash flow problems

associated with the risk-sharing mechanism and the realization that the

cost of serving some children and families was higher than the initial case

rate anticipated. The payment method was changed altogether in the Lake

and Sumter County managed care initiative in Florida, although the rate is

still fixed. Because the state found the case rate too costly when the

number of children requiring a foster care placement grew at a steeper

rate than anticipated, the state changed the payment method to a capitated

rate—that is, a fixed fee that is no longer linked to each child the state

refers to the lead agency but instead covers the estimated total number of

children residing in the two counties who may require foster care services.

Key Stakeholders’ Buy-in Is

Important

The child welfare system includes many different individuals and

groups—such as public and private agencies, courts, community

organizations, child advocates, and foster parents—all with different roles

and perspectives. Public agencies have found that involving these key

participants to build consensus concerning program design issues is an

important step in developing managed care initiatives. In hindsight,

program officials agreed that more inclusive, early involvement would

have helped address misconceptions and reduce tensions surrounding

managed care and would have facilitated program implementation by

ensuring that stakeholders were informed about and supportive of the

planned system reform. While public agencies took steps to involve key

stakeholders when the managed care initiatives were being developed,

officials agreed that they could have done better in this regard. For

30Technically, the state did not increase the lead agencies’ case rate, but supplemented it by a fixed

dollar amount.

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example, Boulder County’s IMPACT initiative in Colorado is built on a

premise of interagency collaboration among the various public agencies

that serve the targeted population of adolescents in need of group care or

residential treatment. Although the directors from each of these agencies

are stakeholders in the public managed care entity, setting broad policy

and procedures, caseworkers were not involved in the initiative’s

development, resulting in some duplication of efforts between agency

caseworkers and the new intensive case managers.

In Sarasota County, Florida, on the other hand, the community-based

providers collectively designed the service-delivery model and actively

supported the state legislation that authorized the initiative, without the

involvement of the state child welfare agency. Hence, according to

officials, the state agency was not initially prepared to implement the state

legislation and experienced great difficulty in resolving with the lead

agency such contract issues as the contract rate, data reporting

requirements, and public workers’ role in overseeing children under the

lead agency’s care. However, at the state agency’s suggestion, the lead

agency convened a stakeholders’ group, including community leaders and

business representatives, to provide oversight and advice. This action has

resulted in increased community involvement and support for the initiative

through donated space and equipment.

The courts also play a critical role in determining outcomes for children in

the child welfare system, yet they are often a forgotten player in reform

efforts. As independent judicial bodies, the courts may view themselves as

outside the child welfare service-delivery system and not necessarily

bound by the same policies or priorities. However, children in out-of-home

care often cannot be transferred to a different level of care or discharged

from foster care—both key strategies for controlling costs under child

welfare managed care—without the court’s approval. While public

agencies have involved the courts as they developed their initiatives, the

extent of judicial involvement has not always been sufficient to guarantee

support for system reform efforts. In Kansas, public officials

acknowledged the lack of adequate judicial involvement in their foster

care managed care initiative. According to officials at one lead agency, the

local judge has disagreed with some of their recommendations to

discharge children from care and, as a result, children are staying in

out-of-home care longer and incurring more costs than the lead agency

had projected for its case rate.

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Building Expertise Takes

Many Forms

Because managed care in child welfare is new, public agencies have had to

develop strategies to find both information and sources of assistance.

Information on managed care can be obtained from national associations

or provider organizations, private consultants, or internal resources in

other public agencies with experience in managed care. For example, in

both Massachusetts and Sarasota County, Florida, the state hired a private

consultant to help develop various aspects of its managed care initiative,

particularly how to set capitated contract rates. In both Massachusetts and

Boulder County, Colorado, public agency staff looked at their state’s

experience with managed care in behavioral health care—which serves a

similar clientele—to learn more about that system’s capitation and

service-delivery arrangements. Anticipating the arrival of managed care,

private service providers also sought information about the subject to

better position themselves—by developing or becoming part of a provider

network, for example—as players in states’ system reform efforts, often

with assistance from national organizations, such as the Child Welfare

League of America.

Public agencies have looked to and adapted their own successful practices

and relationships as starting points for their initiatives. With its history of

interagency collaboration, especially between the child welfare and mental

health agencies, Boulder County in Colorado decided to build on this

relationship to launch its IMPACT initiative. The county established a new

public managed care entity comprising representatives from the agencies

that might be involved in the lives of the target population of adolescents

in need of group or residential care, such as child welfare, mental health,

youth corrections, health, and probation. In Sarasota County, Florida,

community-based service providers were active in shaping the managed

care initiative, having had a tradition of working together. They formed

their own coalition, comprising all major service vendors in the county.

Thus, a provider network with a designated lead agency was already in

place when state legislation authorized a limited number of

community-based pilots. Finally, in Massachusetts, a strong and

established service provider network existed in the predecessor to the

Commonworks program. The state, therefore, decided to build upon this

existing framework and also to contract with an ASO to be responsible for

standardizing all operating procedures.

Providers Also Face

Financial Challenges When

Implementing Contracts

Participating in managed care initiatives is a new experience for most

community-based service providers. Service providers we interviewed told

us they are eager to participate in this new phenomenon because they

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believe managed care is part of child welfare’s future and do not want to

be excluded from initial efforts. As financing for services becomes fixed

under new payment arrangements, one critical issue facing

community-based providers is the potential financial strain—both from

start-up and ongoing operational costs—involved in their new efforts. As

they assume new roles as managed care entities, providers often need to

hire additional management and frontline personnel as well as purchase

buildings, equipment, and other capital to manage both their provider

networks and the new caseloads of children and families. However, public

agencies do not always make start-up funds available in the new contracts.

For example, neither the lead agency contracts in Kansas’ foster care

managed care initiative nor the one in Sarasota County, Florida, included

start-up moneys. This prevented providers from using the dollars spent on

start-up acquisitions to fund a risk pool or required them to seek

additional in-kind donations from community organizations.

Providing start-up funds can help alleviate potential financial pressure on

new managed care entities and enable them to focus more attention on

serving and coordinating the care of children and families. This was the

case in Alameda County’s small Project Destiny initiative in California,

where the county awarded a separate contract to the lead agency,

providing funds to support start-up costs, such as those associated with

developing the consortium of care providers, training, and any other

unanticipated costs.

While public agency officials admit that they expect their providers to find

other sources of funding, such as Medicaid and charitable contributions,

to support their managed care initiatives, some contractors may have

difficulty attracting financial support from their usual contributors

because of misconceptions about financial arrangements under managed

care. In Kansas, for example, the public agency expected foster care

contractors to supplement the case rate with their usual in-kind

contributions from philanthropic organizations. However, according to

one provider, these organizations were at first reluctant to continue their

monetary contributions because they had incorrectly assumed that the

new managed care contract provided sufficient funds to cover the lead

agency’s service costs.

Community-based service providers, who formerly contracted with the

public agency and now find themselves part of a provider network under

subcontract with a lead agency or MCO, are not immune from financial

strains under managed care either. In particular, small providers we

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interviewed expressed concern about their financial viability in a managed

care environment when client referral patterns fluctuate and payments are

capitated. For example, in Massachusetts’ Commonworks program, lead

agencies have developed their own provider network and, in some regions,

have expanded the number of providers to make available the full array of

services needed by the adolescents in their care. As a result, lead agencies

have not utilized the services of some providers as often as the state

agency had in the past and, faced with empty beds in the fee-for-service

payment method still in place for subcontractors, these underutilized

providers lost revenues. In addition, without the capacity to serve a

substantial volume of clients as larger providers might, several small

community-based providers expressed reservations about the lead

agencies’ plans to subcapitate payments and transfer financial risk to

providers, especially given the high and costly service needs of

Commonworks’ target population of adolescents in need of group or

residential care.

Management

Information Systems

Are Needed

For managed care initiatives to effectively develop and adjust capitated

payment rates, track service use, and monitor program and child

outcomes, public agencies realize that client-level data on services and

outcomes are needed. However, public child welfare officials believe that

developing management information systems is the most difficult task

they face.

Managed Care Is a

Data-Dependent System

The successful ongoing operation of managed care arrangements is linked

to the extent to which public agencies have timely and accurate

information on services and outcomes. These data form the basis for two

important activities central to managed care. First, as state child welfare

agencies move from a process-monitoring environment to a

performance-based approach, information on client outcomes is needed to

develop and revise performance standards. Second, payment rates must

reflect the accurate overall costs for providing services to children and

families in the child welfare system. Aggregate client-level information on

service use and costs is necessary to establish capitated rates.

Although most of the initiatives use performance standards in their

managed care contracts, performance-based management in general is a

new focus for many child welfare agencies. Setting appropriate standards

and determining how to measure performance against those standards can

be a daunting task for some public agencies. Massachusetts’

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Commonworks program, for example, identified performance goals for

treatment planning, recidivism, family functioning, education, and

independent living but did not evaluate providers on these outcomes for

the first year because the outcome measures had yet to be developed. In

conjunction with the state agency, the new ASO is expected to develop the

measures and collect baseline information for comparison the second

year.

As public agencies gain more experience with managed care and develop

the capacity to collect better information, public officials recognize that

adjustments to existing performance standards and payment rates will be

necessary. For example, in Kansas’ foster care managed care initiative, the

state set initial performance levels not on the basis of past program

performance but on what public agency officials believed could

reasonably be expected of the new lead agencies. Realizing that these

expectations might be unrealistic, the state chose not to penalize the lead

agencies for failing to meet performance standards. Indeed, when the lead

agencies fell short of first-year goals, such as reuniting families in a timely

manner, the state lowered the standard the following year by narrowing

the gap between its original expectation and contractors’ actual

performance.

As we described earlier, establishing payment rates for providers also

requires public child welfare agencies to continually revisit and adjust

price levels and, in some cases, risk-sharing provisions as more current

information is collected. The absence of quality client and service-cost

information can, potentially, delay the implementation of capitated rates

and create financial strains for both public and private agencies. In

Massachusetts’ Commonworks program, for example, the state delayed for

a year applying the case rate and transferring financial risk to the lead

agencies. Instead, the state opted to collect and analyze baseline cost and

service-use data as well as minimize financial pressures on lead agencies

so they could focus on service-delivery issues during the first year.

Financial strain was a problem for the lead agencies in Kansas’ foster care

managed care initiative because the case rate did not reflect the true cost

of serving children with high service needs. On the basis of accumulated

first-year cost data, the state modified the risk-sharing formula by

increasing lead agencies’ case rates in the second year, eliminating the

10-percent risk-reward corridor, and permitting lead agencies to charge

the state actual service costs for a limited number of cases.

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Management Information

Systems Are a Continuing

Challenge

Program officials responsible for the initiatives we surveyed view the

development of a management information system as the most difficult

task they face in their move to managed care. We found that public

agencies are implementing their managed care initiatives without

appropriate information systems in place. In many instances, providers

and public agencies are working with multiple and incompatible

information systems. For example, in the managed care initiative in

Sarasota County, Florida, the lead agency is directly connected to the

state’s two child welfare client and service information systems for

submitting required management reports, and has its own internal system

that is networked with subcontracted service providers to input and track

client-level data. Because these three systems are not integrated, lead

agency staff must enter duplicate information into each system and

physically locate the three computer terminals side-by-side to ensure

consistent data. In contrast, Kansas implemented its foster care initiative

without an information system in place and relies on handwritten reports

submitted by the lead agencies to generate automated reports for the state

to manage the initiative. Despite their limits, according to state officials,

these management reports contain more information about program

performance than was previously available.31

Public agencies are approaching the development of their information

systems in a variety of ways that reflect the complexity of new systems

and in-house expertise. One approach is to purchase a custom-designed

system. For the TrueCare Partnership initiative in Hamilton County, Ohio,

for example, one major component of the MCO’s contract is to develop a

comprehensive management information system for the initiative’s public

partners—the child welfare, mental health, and alcohol and drug

agencies—that will integrate client-level data to meet both the public

agencies’ and service providers’ information needs. Another approach is

for in-house staff to develop the information system. This has been the

case in the Lake and Sumter County managed care initiative in Florida,

where the lead agency’s information system personnel have developed a

database to track all service and placement data regarding program clients

to measure outcome achievement. Yet another approach to developing an

information system is to adapt an existing system. Boulder County’s IMPACT

initiative is using a temporary system to track client and aggregate

outcomes data until the county can purchase or custom build a more

comprehensive, integrated management information system with

anticipated project savings within the next year. For the short term,

county staff have modified a system originally designed to track

31Wulczyn and Orlebeke, “Fiscal Reform for Child Welfare Systems.”

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adolescents in a previous pilot project that also targeted adolescents in

out-of-home care.

Roles and

Responsibilities

Change Dramatically

Under managed care, public agencies are adjusting to new responsibilities

while shifting some traditional functions to the private sector. These

public agencies now focus their attention more on oversight and

monitoring, and have reconfigured staff resources for contract monitoring

and quality assurance purposes. Private agencies, assuming many of the

responsibilities traditionally held by public agencies, are now faced with

learning various state and federal requirements; preparing and monitoring

other service provider contracts; and attracting, training, and retaining a

larger workforce.

New Responsibilities

Demand a Culture Change

and Staff Adjustment

Many of the public agencies implementing managed care initiatives have

shifted most of the day-to-day casework responsibilities to private

contractors, while developing the capacity and expertise to perform

system oversight and monitoring activities. To accomplish this change,

some locations reduced the number of public caseworkers and created

new positions that reflect their new role. Gaining employees’ acceptance

of these changes was a difficult task, according to about half the agency

officials we surveyed. Comfortable with the traditional service-delivery

system and concerned about the safety and well-being of their caseloads

of children and families, some workers have resisted the loss of their

control over service decisions for clients and must learn new skills and

abilities to perform new quality assurance and contract management

duties. In some instances, workers were not fully prepared to assume their

new duties because public agencies had not taken steps to ensure staff

support or to train until after implementation was under way.

Former state child welfare caseworkers have assumed new positions,

performing quality assurance activities and managing the new lead agency

contract for the managed care initiative in Sarasota County, Florida. The

state replaced 37.5 positions with 7 new positions—filled by public foster

care, adoption, and protective services caseworkers whose jobs had been

eliminated—to oversee the lead agency contract. Of these seven positions,

three are quality assurance workers, responsible for monitoring the

contractor’s case management activities to ensure that issues related to

the child’s safety are adequately addressed; they accomplish this function

by reviewing case files and provider-prepared court paperwork as well as

attending case review meetings. A fourth position is for a contract

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manager, who monitors the lead agency’s compliance with the terms and

conditions of the contract. Finally, three public employees perform tasks

related to determining children’s eligibility for the federal foster care

program and claiming federal reimbursement. The transition in public

workers’ responsibilities has not been easy for either the public employees

or provider staff, according to officials, as the public workers received no

training for their new positions and focused most of their initial efforts on

providing technical assistance and training to the providers’ staff about

federal and state documentation and procedural requirements rather than

on quality assurance.

Kansas’ foster care managed care initiative has changed public employees’

approach to casework. State caseworkers are still responsible for a

caseload of children and their families but have shifted their emphasis

from day-to-day case management to intake, assessment, and child

protection, and now function as service managers who monitor the

services provided by the contractors. In addition, the state has altered the

structure of its contract management staff. Now, some of the contract

managers are Area Contract Specialists physically located in each of the

state’s 12 area offices. As the state caseworker’s direct liaison with the

lead agency, an Area Contract Specialist receives reports for management

and oversight purposes and responds to questions about contract

operations.

Private Entities Are

Assuming Public Functions

Private service providers under contract in the managed care initiatives we

reviewed have assumed many of the responsibilites formerly held by

public child welfare agencies and, in some instances, have had to adjust to

the rapid growth of staff that accompanied the expansion of providers’

duties. Understanding and monitoring existing federal and state

requirements and managing provider networks are among their new

duties.

As case management functions have shifted to private providers, the

providers have taken on new administrative tasks that enable states to

continue claiming federal reimbursement for eligible activities now

performed by contractors. Some contracts require the service provider to

provide the information the public child welfare agency needs to file

claims for federal title IV-E reimbursement of the costs associated with

feeding and housing an eligible child in out-of-home care, as well as

certain administrative costs related to that child’s placement, such as case

management and licensing of foster homes. The tasks necessary to

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determine administrative costs can be very time consuming yet necessary

where the public agency is financing the capitated payments with federal

title IV-E dollars. Such is the case in Sarasota County’s managed care

initiative in Florida. The state had previously established a method for

determining administrative costs under its traditional, publicly operated

service system, based on the assumption that caseworkers’ activities were

reimbursable under title IV-E. However, the lead agency’s service-delivery

approach includes a mixture of Medicaid-funded functions—such as

clinical therapy—that title IV-E does not cover. To help determine eligible

administrative costs for this initiative, the state requires the providers’

staff to perform a time study for 2 weeks each quarter, when individual

workers record their various job activities in 15-minute increments.

According to lead agency officials, this requirement is a new activity that

has unexpectedly reduced staff time available for serving children and

families.

Another new administrative function for lead agencies is managing their

subcontracts with network providers. Whether changing the nature of

existing relationships or developing new ones, lead agencies—whose

general experience has been in directly providing services to children and

sometimes their families—must develop new capacities and expertise to

ensure network providers are qualified; expand, contract, or reconfigure

the network, when necessary; and monitor network providers’

performance and compliance with their contract requirements. Lead

agencies’ relationships with network providers may become strained

when, in the interest of cost efficiency or service quality, referral patterns

to individual providers fluctuate or nonperformers are dropped from the

network.

As private contractors have assumed the lead agency role, the nature of

their relationships with other community-based service providers has

changed. Where previously providers contracted directly with the public

agency, some now find themselves managing a network made up of former

competitors. For example, for Kansas’ foster care managed care initiative,

many of the community-based service providers were among the 16

bidders for the lead agency contracts, but only 3 of them won contracts.

Many of the unsuccessful bidders became network subcontractors, and

according to several providers’ staff, the stress of the competitive process

left some network providers resentful of the lead agency’s new oversight

role. Conversely, where there may have been fierce competition in the past

for the public agency’s business, increased collaboration among providers

may reduce the uncertainties of a competitive market. This has been the

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case in the managed care initiative in Sarasota County, Florida, where the

major service providers no longer view themselves as competitors,

according to providers’ staff, but are now collaborative partners in the

self-formed Coalition that is the provider network. In yet another scenario,

lead agencies have had to establish new relationships—sometimes

straining existing relationships—when new providers were brought into

the network. In order not to jeopardize the stability of existing placements

when Massachusetts’ Commonworks program was implemented, the state,

among other strategies, required the lead agencies to expand their

provider network to include those group or residential care providers

already serving youth who were transferred to the lead agency’s care.

Expanding the network in this way meant purchasing fewer services from

other network providers and possible financial jeopardy for some of them,

according to providers’ staff, which strained their relationship with the

lead agency.

Once community-based service providers, regardless of their size, became

lead agencies, they found that they needed to expand—sometimes very

rapidly—to accommodate their new responsibilities and new caseloads of

children and families. For many of these lead agencies, hiring and training

a larger workforce amid various other start-up activities became a difficult

task. For example, in Kansas’ foster care managed care initiative, the lead

agencies’ caseloads more than doubled in a matter of months and they

took on multiple areas of major new responsibilities. For example, they

had to accept all referrals, develop and manage a provider network,

manage cases of children that now also include their families, track and

report outcomes, and consider the financial risk of the case rate. These

responsibilities were combined with the basic business of

expansion—hiring, training, and acquiring space and equipment. In

addition, lead agencies had difficulty recruiting and retaining new workers

because of tremendous competition for social workers when the state kept

most of its social work staff and, therefore, did not provide a pool of

former state workers that lead agencies had expected to choose from.32

Early, Though

Limited, Positive

Results Encourage

Public Officials

While only a few locations are beginning to collect data and report results,

preliminary results indicate some cost savings and improvements in the

quality of care from the implementation of managed care. Public agency

officials responsible for the ongoing initiatives are encouraged by

improvements in the amount of services provided, overall service

32Wulczyn and Orlebeke, “Fiscal Reform for Child Welfare Systems.”

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availability, and increased public support for children in the child welfare

system.

Early Cost Savings Are

Seen in Some Managed

Care Initiatives

Some initiatives report cost savings resulting from the managed care

entity’s success in reducing or averting the need to place children in the

most costly out-of-home settings, such as residential care. The public

agencies involved attribute this success in part to the better coordination

of services that match client needs. For example, in Wisconsin’s

Wraparound Milwaukee program in Milwaukee County, the publicly

operated HMO has reduced the number of children in residential treatment

and, as a result, costs are almost 40 percent less per child than under the

previous system. Moreover, the program’s Mobile Crisis Team’s

gatekeeping functions and development of treatment plans have resulted

in a 55-percent reduction in inpatient hospital days as well as nearly 200

fewer children in need of residential care between 1994 and 1997.

Furthermore, reinvestment of moneys saved from reducing the use of

residential treatment has enabled the project to serve 44 percent more

children with the same moneys.

Child Welfare Officials Are

Encouraged by Other

Managed Care Effects

Child welfare officials are encouraged by other service-delivery

improvements as well. Most agency officials we surveyed believe children

and families are receiving more services that better match their needs

under managed care. For example, in Sarasota County’s managed care

initiative in Florida, the lead agency subcontracts with service providers

whose caseworkers are seeing clients more frequently and providing more

intensive services in the family’s home than public workers did prior to the

managed care initiative. Managed care has also improved services by

making them available to those who would otherwise not receive the

services they need. Kansas’ foster care initiative, for example, includes one

lead agency with a provider network dedicated to serving children and

families in the extremely rural, westernmost part of the state. Historically,

these children were hard to serve because of their remote location, but

they now have available to them a provider network offering an array of

services.

Other initiatives also report improvements that have resulted in children

and families achieving permanency goals more quickly under managed

care, but they have yet to document reduced costs. For example, in

Illinois’ Performance Contracting initiative in Cook County, private foster

care agencies are more aggressively moving children toward permanency

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by providing services, such as aftercare and counseling, that enable

children to rejoin their families, be adopted, or live with subsidized

guardians. After 3 months of operation, the initiative has yet to realize any

cost savings because of the additional state dollars invested in services for

foster care contractors to find children permanent homes. However, the

state projects that almost two-thirds more children will be in permanent

living arrangements at year’s end over the previous year’s total because

providers are now more effectively managing their cases.

In still other initiatives, early results are mixed. While private contractors

have met performance standards in some areas, they have fallen short in

others. Kansas’ foster care managed care initiative, for example, reported

that, after the first 10 months of operation, its lead agencies successfully

surpassed performance standards related to the quality of children’s care,

such as ensuring that children are safe from maltreatment and in stable

placements. However, they were less successful in meeting standards that

could result in cost efficiencies, such as reuniting families in a timely

manner. After its first year of operation, according to state officials,

managed care had not yet resulted in improvements in the rate that

children leave foster care for more permanent living arrangements, or

yielded cost savings.

Finally, public officials believe managed care is increasing community

awareness and support for the vulnerable population, particularly at-risk

adolescents, that resides within their boundaries. For example, the

managed care initiative in Boulder County, Colorado, targets adolescents

in or at risk of residential treatment whose likely permanency goal is to

live in the community and not with their families. According to initiative

officials, building community-based networks of care has increased

community concern and involvement with these adolescents, which

county officials believe will facilitate reintegration into the community.

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Observations and Agency Comments

Observations Child welfare agencies face growing caseloads of children and escalating

costs. At the same time, they must ensure that these children remain safe

and search for the most appropriate permanent living arrangements. In

addition, program officials and policymakers alike have been frustrated

with many of the characteristics of the current service delivery system that

is intended to provide care for these children and their families. They

observe a system that often keeps children in care longer than necessary,

in part, because of fragmented services and few financial incentives to

provide better services to move children out of care faster. Many public

officials responsible for the care of these children are looking to managed

care as a way to change how their state or locality approaches the

financing and delivery of child welfare services.

While there is no single managed care approach, in general, states and

localities are (1) experimenting with capitated payments to transfer

financial risk to providers and (2) managing children’s care through a

single point of entry to a full array of services. Simultaneously, they are

introducing quality assurance strategies to maintain a balance between the

desire to control costs and to ensure service quality and children’s safety.

In what has been a publicly managed system, however, new contractual

arrangements are shifting financial and service coordination

responsibilities to the private sector in some states. Where public agencies

opt to retain these responsibilities, they are changing their approach to

coordinating children’s care and purchasing needed services.

Public agencies experimenting with managed care view it as a strategy

that promotes flexibility in a fragmented service-delivery system while

attempting to ensure accountability for controlling costs and improving

service outcomes. Because they anticipate legislative and policy changes

that may reduce child welfare budgets, public and private agency officials

alike have felt a sense of urgency to proactively pursue or prepare

themselves for system reform. Even so, implementing managed care is a

dynamic process that will require time to evolve and evaluate its efficacy.

To date, the application of managed care arrangements in the child

welfare system is still in its infancy and remains largely untested.

States and localities expect to continue refining their initiatives as service

and cost data become available and evaluations assess the efficacy of

managed care to improve service outcomes for children and families. As

more children are served under managed care arrangements, however,

three outstanding issues need resolution. First, public agencies need to

address the cash flow problems associated with an approach that requires

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Observations and Agency Comments

public agencies to provide prospective, capitated payments to service

providers but receive reimbursement for the federal share of costs only

after the delivery of services. Where there is greater funding

flexibility—either through blended or pooled funding arrangements or

federal waivers, for example—public agencies stand a better chance of

reducing or eliminating the service access problems often associated with

different eligibility requirements in categorical funding streams. Second,

the need for good service and cost data is paramount if public agencies

expect to set reasonable and appropriate contract rates and performance

standards. Public agencies must continue to develop and adapt their

management information systems in order to make additional changes or

provide their managed care partners feedback that could further improve

policies and procedures for serving children and families in an effective,

yet cost-efficient, manner. Finally, public agencies must continue to

develop and refine strategies to hold their private partners accountable for

achieving desired outcomes and developing the capacity to continuously

measure and report their progress toward meeting performance goals.

Such efforts are necessary to enable public agencies to report to

policymakers at all levels on the effectiveness of the new system in

meeting the needs of children and families.

HHS and Public

Agency Comments

We obtained comments on a draft of this report from HHS and state and

county public child welfare officials responsible for the managed care

initiatives in the four case study sites. HHS provided two general comments

and additional technical information, which we incorporated in the report

as appropriate. First, HHS acknowledged that the federal role in child

welfare managed care has been limited. However, it said that ACF has

initiated and participated in a number of activities, such as internal

training sessions and national conferences, that provided information

about managed care concepts. Second, HHS noted that states’ Statewide

Automated Child Welfare Information Systems (SACWIS) should provide

data states need to implement managed care. We agree that SACWIS could

provide some necessary information; however, most states are still

developing their systems, and SACWIS’ overall usefulness in managed care is

unknown. Responsible child welfare officials from the four case study

sites generally agreed with the report’s findings and provided additional

technical information about their child welfare managed care initiatives,

which we incorporated in the report as appropriate.

Page 74 GAO/HEHS-99-8 Child Welfare Managed Care
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Appendix I 

Ongoing Child Welfare Managed Care

Initiatives

Table I.1 includes the 27 managed care initiatives about which we

collected more detailed information from our survey of state and local

officials. Where locations had multiple initiatives, we asked respondents to

provide additional information about only their largest initiative, as

determined by the number of children served. As of March 1998, multiple

initiatives were reported as ongoing in four locations—Illinois; Kansas;

Mesa County, Colorado; and Hamilton County, Ohio.

Table I.1: Information About 27 Ongoing Child Welfare Managed Care Initiatives, as of March 1998

Number of children

served

Location and

project name

Date

implemented

Geographic

scope Total

Percentage

of location’s

total child

welfare

population

Managed

care modela

Covered population and child

welfare program(s)

State-level initiatives

Georgia

Multi-Agency Team

for Children

(MATCH)

July 1994 Statewide 660 3 Public Residential treatment services for

severely emotionally disturbed

children

Illinois

Performance

Contracting

July 1997 One county 23,200 40 Public Relative foster care in Cook County

Indiana

The Dawn Project

May 1997 One county 106 1 MCO Wraparound services for seriously

emotionally disturbed children, aged

5 to 17, who have been impaired for

more than 6 months and involved

with multiple service systems in

Marion County

Kansas

Foster Care

Privatization

Mar. 1997 Statewide 4,950 66 Lead agency All foster care

Massachusetts

Commonworks

Jan. 1997 Statewide 683 2 ASO with

lead agency

Foster care for adolescents needing

group care or residential treatment

Michigan

Interagency Family

Preservation Initiative

Oct. 1995 Selected

sites

166 1 Lead agency Wraparound services for seriously

emotionally disturbed children

involved with multiple service

systems

Tennessee

Continuum of Care

Contracts

July 1996 Statewide 2,500 21 Public Foster care for older children with

moderate to severe emotional and

behavioral problems

Wisconsin

Safety Services

Program

Jan. 1998 One county 750 10b Lead agency Family preservation services for

noncourt families in Milwaukee

County

(continued)

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Ongoing Child Welfare Managed Care

Initiatives

Number of children

served

Location and

project name

Date

implemented

Geographic

scope Total

Percentage

of location’s

total child

welfare

population

Managed

care modela

Covered population and child

welfare program(s)

Local-level initiatives

Alameda County,

Calif.

Project Destiny

Apr. 1997 Countywide 24 1 Lead agency Foster care for seriously emotionally

disturbed children in residential

treatment

Boulder County,

Colo.

Integrated Managed

Partnership for

Adolescent

Community

Treatment (IMPACT)

pilot

July 1997 Countywide 270 30 Public Foster care for adolescents needing

group care or residential treatment

El Paso County,

Colo.

Sept. 1997 Countywide 85 50 ASO with lead

agency

Foster care for children placed by

Child Placement Agencies

Jefferson County,

Colo.

Child Welfare Pilot

Oct. 1997 Countywide 1,687 100 Public All child welfare services

Mesa County, Colo.

Child Welfare Pilot

Jan. 1998 Countywide 320 40 Public All child welfare services

District 4, Fla.

Privatization Pilot

Oct. 1997 Districtwide 318 c ASO with lead

agency

Foster care and independent living

services for adolescents

District 8, Fla.

Sarasota County

Privatization Pilot

Jan. 1997 One county 420 30 Lead agency All children needing protective

services, foster care, and adoption

services in Sarasota County

District 13, Fla.

Bridges Program

Jan. 1997 Two counties 88 c Lead agency Children needing foster care and

adoption services in Lake and

Sumter Counties

Albany County, N.Y. Jan. 1989 Countywide 1,750 20 Public Children needing preventive services

Broome County, N.Y.

Child Welfare Care

Management

Oct. 1996 One site 10 <1 Lead agency Children needing family preservation

services, foster care, and

independent living services; pilot on

hold

Oneida County, N.Y.

Kids Oneida

Jan. 1998 Countywide 7 <1 Lead agency Wraparound services for seriously

emotionally disturbed children in or

at risk of out-of-home placement

Onondaga County,

N.Y.

Family Support

Center Program

Oct. 1994 Countywide 155 c Public Children needing emergency foster

care services

(continued)

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Ongoing Child Welfare Managed Care

Initiatives

Number of children

served

Location and

project name

Date

implemented

Geographic

scope Total

Percentage

of location’s

total child

welfare

population

Managed

care modela

Covered population and child

welfare program(s)

Tompkins County,

N.Y.

Youth Advocate

Program

July 1996 Countywide 10 10 Lead agency Wraparound services for youth in

residential or institutional placements

Champaign County,

Ohio

Human

Services/Adriel

School

Oct. 1995 Countywide 21 20 Public Foster care for children needing

nonrelative, out-of-home placement

Crawford County,

Ohio

Out-of-County

Placement

Jan. 1997 Countywide 17 1 Lead agency Foster care for children placed

outside the county in therapeutic

family foster home, group care, or

residential treatment

Hamilton County,

Ohio

TrueCare Partnership

Jan. 1998 Countywide 3,220 35 MCO Foster care and independent living

services for children in outpatient

mental health and therapeutic

placements

Madison County,

Ohio

Adriel Out-of-Home

Care Placements

Jan. 1996 Countywide 27 50 Lead agency Foster care for children needing

nonrelative, out-of-home placement

Dodge County, Wis.d

Family Partnership

Initiative

Aug. 1997 Nine-county

area

40 5 Lead agency Wraparound services for

adolescents in child care institutions

or juvenile corrections

Milwaukee County,

Wis.

Wraparound

Milwaukee

June 1996 Countywide 600 8 Public Wraparound services for children in

or at risk of residential treatment

(Table notes on next page)

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Ongoing Child Welfare Managed Care

Initiatives

aOrganizational arrangements among public and private entities generally fell into one of the

following managed care models: (1) public model, which maintains the traditional management

and service-delivery structure while the public agency incorporates managed care elements into

its own practices and existing contracts with service providers; (2) lead agency model, where the

public agency contracts with a private entity that is responsible for coordinating and providing all

necessary services—either directly itself or by subcontracting with a network of service

providers—for a defined population of children and families; (3) administrative services

organization (ASO) model, where the public agency contracts with a private organization for

administrative services only, and direct services are structured as in the lead agency or public

models; and (4) managed care organization (MCO) model, where the public agency contracts

with a private organization as in the lead agency model, but the MCO arranges for the delivery of

all necessary services by subcontracting with other service providers and does not itself provide

direct services.

bPercentage is of Milwaukee County’s child welfare population; although Wisconsin has a

county-operated child welfare system, the state child welfare agency operates this managed care

initiative in Milwaukee County.

cData were not readily available.

dNine-county initiative includes Columbia, Dodge, Green Lake, Jefferson, Ozaukee, Sauk,

Sheboygan, Washington, and Winnebago Counties; Dodge County completed our survey for the

participating counties.

Source: State and local agency officials’ responses to GAO survey and follow-up telephone

conversations, as well as documentation describing the initiative, where provided.

Page 79 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

This appendix presents our survey of state and local public agencies

regarding their use of managed care arrangements in child welfare

programs. Each question includes the summary statistics and the actual

number of respondents that answered the question. In each case, we use

the format that we believe best represents the data, including frequencies,

means, and ranges.

Page 80 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 81 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 82 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 83 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 84 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 85 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 86 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 87 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 88 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 89 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

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Appendix II 

GAO Survey of State and Local Public

Agencies

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Appendix II 

GAO Survey of State and Local Public

Agencies

Page 92 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 93 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 94 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 95 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

Page 96 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix II 

GAO Survey of State and Local Public

Agencies

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Appendix II 

GAO Survey of State and Local Public

Agencies

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Appendix II 

GAO Survey of State and Local Public

Agencies

Page 99 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix III 

Comments From the Department of Health

and Human Services

Page 100 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix III 

Comments From the Department of Health

and Human Services

Now on p. 23.

Page 101 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix III 

Comments From the Department of Health

and Human Services

Now on p. 23.

Now on p. 64.

Page 102 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix III 

Comments From the Department of Health

and Human Services

Page 103 GAO/HEHS-99-8 Child Welfare Managed Care
Appendix IV 

GAO Contacts and Staff Acknowledgments

GAO Contacts David D. Bellis, Assistant Director, (202) 512-7278

Karen E. Lyons, Evaluator-in-Charge, (916) 486-6442

Staff

Acknowledgments

The following individuals also made important contributions to this report:

Rodina S. Tungol, Joel I. Grossman, and Joan K. Vogel.

(116005) Page 104 GAO/HEHS-99-8 Child Welfare Managed Care
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