The Role of Intermediaries in Linking TANF Recipients with Jobs

Chapter II:
Defining the Roles and Responsibilities of Intermediaries in a Work-Based Assistance System

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Contents

Regardless of whether a state's welfare program is state or county administered, local welfare offices always have had significant control over how to structure the delivery of employment services for welfare recipients.  While some local welfare offices provided these services in-house prior to the implementation of TANF, others forged close relationships with the JTPA system, collaborated with the local community college, or contracted with community-based organizations.  In order to provide services in a timely manner to the expanded pool of recipients required to work or participate in work-related activities, most communities have had to develop new or expanded service delivery systems.  The shift from a human capital development to a work-first approach to serving welfare recipients also has required them to reorient their service delivery systems toward job search and placement rather than participation in longer-term education and training programs.

Within a work-based assistance system, a broad range of tasks must be performed to provide families with cash assistance and to help them make the transition to self-sufficiency.  The primary employment-related services provided to most TANF recipients are case management and job search and placement assistance.  Secondary employment-related services, provided on a more limited basis, include work experience, education, training, supported work, job retention, and advancement programs.  In deciding how to use intermediaries to provide these services, local welfare offices or their designee face three key decisions:

  1. How much responsibility to transfer to intermediaries
  2. Whether to transfer responsibility to a single intermediary or multiple intermediaries
  3. How and how much to reimburse intermediaries for the services they provide

Using these three key decisions as our framework, in this chapter, we examine the choices the local sites made regarding how to use intermediaries to help welfare recipients make the transition to employment.  A summary of our key findings is presented in Table II.1.

Table II.1:
Definging the Roles and Responsibilities of Intermediaries
How Much Responsibility to Transfer to Intermediaries
  • Nearly all of the sites transfer some employment-related responsibilities to intermediaries.
  • The primary responsibilities transferred to intermediaries most often are job-search and placement assistance, although a substantial number of communities also transfer responsibility for case management.
  • Some welfare offices that transfer significant responsibility for providing primary employment services to intermediaries continue to provide these services for at least some portion of the TANF caseload.  Some welfare offices, however, have no responsibility for providing employment-related services to TANF recipients.
  • When secondary employment-related services are provided, they are almost always provided by intermediaries, however, in most sites, these programs are still in the early stages of development.
  • The local sites' decisions regarding how much responsibility to transfer to intermediaries were influenced by their current and potential administrative capacity, previous experience with intermediaries, TANF administrative structure, caseload size, and legislative mandates.
Use of a Single Intermediary or Multiple Intermediaries
  • Most of the urban sites, but only a few of the rural sites transferred employment-related responsibilities to multiple intermediaries.
  • When responsibility for providing employment services was transferred to multiple intermediaries, sites relied on a variety of strategies to assign clients to a specific intermediary.
  • Caseload size, the amount of responsibility transferred to intermediaries and the decision to use one or multiple intermediaries all influence the number of TANF clients any one intermediary will serve.
Reimbursing Intermediaries for the Services They Provide
  • Most intermediaries are reimbursed for their services through a cost reimbursement rather than a pay-for-performance arrangement.  In an attempt to combine the benefits of these two payment systems, several of the sites have developed cost reimbursement payment systems that include performance bonuses or incentives.
  • The sites that reimburse intermediaries through a pay-for-performance system structure their reimbursements very differently, with some placing far greater emphasis on placement and/or retention than others.
  • Regardless of the way in which intermediaries are reimbursed for their services, there is considerable variation in the amount intermediaries are paid for the services they provide.  This variation exists between the sites and between intermediaries within some of the sites.

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How Much Responsibility to Transfer to Intermediaries

The amount of responsibility the local sites transferred to intermediaries ranged from full responsibility for all employment-related services to no responsibility (see Table II.2).  Of the 20 study sites, 18 transfer some responsibility for providing employment-related services to intermediaries.  The two sites that do not transfer any responsibility to intermediaries are both rural sites that provide all employment-related services in-house or rely on existing resources in the community.  Decisions regarding how much responsibility to transfer to intermediaries not only define the role intermediaries play in linking welfare recipients with jobs but also the extent to which the welfare office plays a role in helping welfare recipients to find and/or maintain employment.  Several key patterns emerge regarding how much responsibility the local sites transferred to intermediaries:

1.  The employment-related responsibilities transferred to intermediaries most often are job search and placement assistance, although a substantial number of communities also transfer responsibility for case management.

Intermediaries provide job search and placement assistance in all of the sites that transfer some work-related responsibilities to intermediaries.  In 12 of these (seven urban and five rural), intermediaries have responsibility for providing case management for the majority of the TANF caseload that is required to look for work; in three of the urban sites welfare office staff also provide case management, but for a relatively small portion of the overall caseload.

Given the emphasis on shifting the focus of the welfare office from determining eligibility to helping TANF recipients make the transition to unsubsidized paid employment, it is noteworthy that so many of the sites, especially in the urban areas, transferred primary responsibility for providing case management services to intermediaries.  Cleveland is the only urban site where former eligibility staff have been retrained to function as "self-sufficiency coaches," assuming responsibility for eligibility and case management.  The other urban sites that provide case management have separate staff, usually working in a separate unit, who have responsibility for this function.  When case management responsibilities are transferred, the intermediary is responsible not only for linking TANF recipients with jobs but also for working with the recipients to develop self-sufficiency plans and linking them with the resources they need to achieve the goals outlined in their plans.

Table II.2
Allocation of Employment-Related Responsibilities Between The Welfare Office and Intermediaries
  Responsibility Transferred to Intermediaries Responsibility Retained by the Welfare Office # of Primary Intermed. Method of Assignment
Eligibility Case Mgmt Job Search Secondary Services Eligibility Case Mgmt Job Search Secondary Services
Urban Sites (TANF Caseload)
San Diego, CA (38,000)   P P P P S S S 3 Geographic
Cleveland, OH (33,000)     P P P P   S 9 Discretion
Phoenix, AZ (15,219) S S S S P P P P 1 Geographic
San Antonio, TX (13,598)   P P P P       1  
St. Paul, MN (9,300)   P P P P S S S 7 Discretion
Hartford, CT (5,800)   P P P P       3 Discretion
Richmond, VA (4,539)     S S P P P P 1  
Omaha, NE (3,500)   P P S P S     2 Discretion
Little Rock, AK (2,168)   P P P P P     7 Geographic
Jacksonville, FL (3,984)   P P P P       1  
Rural Sites
New London, CT (2,400)   P P P P       3 Functional
Olmsted, MN (807)   P P P P     S 2 Functional
Wise, VA (757)         P P P P 0  
Scotts Bluff, NE (600)     S S P P P   1  
Napa, CA (590)   P P P P P     1 Functional
Yavapai, AZ (582)         P P P P 0  
Jefferson, AK (329)       S P P P P 0  
Suwannee, FL ( 311)   P P P P       1  
Columbiana, OH (200)     S S P P P P 1  
Uvalde, TX (200)   P P P P       1  
Notes:

P = Primary Responsibility; S = Secondary Responsibility

2.  Some welfare offices that transfer significant responsibility for providing primary employment services to intermediaries continue to provide these services for at least some portion of the TANF caseload.  Some welfare offices, however, have no responsibility for providing employment-related services to TANF recipients.

Many welfare offices developed some capacity for providing employment-related services to welfare recipients through their implementation of the JOBS program.  Several of the sites have continued to rely on this expertise to provide employment-related services to at least a portion of the TANF caseload (see Table II.2).  For example, in Maricopa County (Phoenix), full responsibility for TANF implementation was transferred to an intermediary in only part of the county; in the remainder of the county, former JOBS staff provide case management services and operate a semi-structured job search assistance program for all TANF recipients required to find employment.  In St. Paul and San Diego, welfare office staff provide case management and job search and placement services to a portion of the TANF caseload; the remainder of the caseload receives these services from an intermediary.  In Richmond, welfare office staff provide case management services for all TANF clients and job search and placement services are provided in-house for some clients and by intermediaries for others.  In Omaha, welfare office staff refer all clients to intermediaries for job search and placement services but provide case management in-house for almost half the caseload.  In many of the sites, job ready clients are referred to a resource room located at the welfare office to look for employment on their own.

Due to their smaller size, the rural welfare offices have maintained more responsibility for providing primary employment-related services to TANF recipients.  For example, in Wise County, welfare staff provide case management, job search assistance and placement and develop and monitor recipients' participation in work experience placements.  When appropriate, welfare office staff refer TANF clients to existing employment or training programs in the community.  Even in Columbiana and Scottsbluff, where intermediaries are used to provide primary employment services to some TANF recipients, welfare staff provide job search and placement assistance to the majority of the TANF caseload.  As its caseload declines, TANF staff in Columbiana are taking on more responsibility for helping clients find employment, reducing the number of clients served by Columbiana's primary intermediary.

Welfare offices in three of the ten states (Connecticut, Florida, and Texas) have no responsibility for providing employment-related services to TANF recipients.  In Connecticut and Texas, full responsibility for providing employment-related services has been transferred to the workforce development system.  In Florida, local WAGES coalitions decide who will provide employment services to TANF recipients.  Some local WAGES coalitions rely on the local community college to provide these service while others have used a competitive bidding process to select one or more intermediaries to provide them.

3.  When secondary employment-related services are provided, they are almost always provided by intermediaries, however, in most sites, these programs are still in the early stages of development.

Although some secondary services are provided in all of these sites, they do not reach large numbers of recipients and are in the very early stages of development.  When secondary employment services are provided they almost always are provided by intermediaries, usually using funds from the Welfare-to-Work program.  Unlike primary employment services that include similar elements across all of the sites, secondary services vary considerably.  In some sites the only secondary service provided is work experience; in others, short-term training or programs to promote job retention and advancement are emphasized.  Work experience programs and intensive case management and outreach for sanctioned families are the only secondary employment programs that are sometimes provided by welfare office staff.

Using Intermediaries to Help the Hard-to-Employ Find Employment
Cleveland (Cuyahoga County) stands apart from the other study sites in both its approach and the comprehensive nature of the secondary employment services it provides to TANF recipients.  In late 1998, Cleveland issued a request for proposals to identify intermediaries who could provide employment services to TANF recipients who are deemed "hard-to-employ."  Through this process, Cleveland now has 19 intermediaries who will provide specialized job search and supportive services for ex-offenders, recipients with chronic barriers to employment such as substance abuse or mental health and "intermittent" workers who can find, but do not retain employment.

All of these services are being funded with TANF funds, making it possible for the welfare office to set and, if necessary, redefine the eligibility criteria for receipt of these more specialized services.  The expectation is that TANF recipients referred to these more specialized intermediaries will receive more intensive services than recipients who receive regular job search and placement assistance; follow-up services may be provided for some participants for as long as 18 months.  The intermediaries that will provide these services are primarily local nonprofit organizations, including several that specialize in providing supportive and/or employment services to hard-to-employ populations outside of the TANF system.

4.  The local sites' decisions regarding how much responsibility to transfer to intermediaries were influenced by their current and potential administrative capacity, their previous experience with intermediaries, the TANF administrative structure, caseload size, and legislative mandates.

Even though the local sites are operating in a range of policy environments, these policies seemed to have little, if any, influence on the decisions the local sites made regarding how much responsibility to transfer to intermediaries.  Instead, the factors that most affected their decisions focused primarily on administrative considerations, including whether the local site had or could hire sufficient staff to provide services in-house and their previous experience working with intermediaries or their perceptions of the advantages of doing so.

Limited Administrative Capacity.  Lack of administrative capacity significantly influenced several local offices' decisions regarding how much responsibility to transfer to intermediaries.  For example, San Diego estimated that they would need 433 additional staff to provide employment services to the portion of their TANF caseload that was mandated to find employment.  Operating in an environment where there is considerable support for privatizing government operations, county officials enthusiastically embraced the decision to transfer significant responsibility to intermediaries rather than add this number of additional staff to the county's payroll.  In Omaha, where the welfare office is under a statewide hiring freeze, the decision to transfer significant responsibility to intermediaries was viewed as a necessity, rather than the optimum service delivery arrangement.

History.  Previous experience with intermediaries played a much greater role in the decision to use intermediaries in some of the local sites.  For example, having used intermediaries to provide case management and employment-related services under the JOBS program, Ramsey County (St. Paul) was able to build on established relationships with providers in the community to expand its capacity for providing employment-related services to TANF recipients.  Napa, operating one of the oldest one stop centers in the country, already had a comprehensive, well-functioning collaborative service system in place on which they could build.  New London chose to design a service delivery system that would take into account the strengths of the organizations already providing employment-related services in the community.

Administrative Structure.  In the sites where the welfare office retained administrative responsibility for TANF employment programs, responsibility for providing employment-related services was usually shared between the welfare office and intermediaries.  However, when administrative responsibility for TANF employment programs was transferred to the workforce development system, all responsibility for providing employment services was transferred to intermediaries, leaving the welfare system with no employment-related responsibilities.

Caseload Size.  The urban sites were more likely to transfer responsibility to intermediaries than the rural sites.  However, within the urban sites, caseload size did not seem to be the primary determinant of how much responsibility to transfer to intermediaries.  For example, the three sites with the largest TANF caseloads made very different decisions regarding how much responsibility to transfer to intermediaries.  One of the largest sites transferred responsibility for case management and job search and placement assistance to intermediaries for two-thirds of its TANF caseload.  A second transferred responsibility for job search and placement assistance but not case management for its entire TANF caseload.  A third currently provides all primary employment services in-house for the majority of its TANF caseload.

Legislative Mandates.  The legislatures in three of the states enacted legislation to encourage greater use of intermediaries.  The Arizona legislature mandated that full responsibility for operation of the TANF program (including eligibility determination) in a portion of Maricopa County (including part of Phoenix) be transferred to the private sector.  If the intermediary selected to operate the TANF program meets its performance goals, the legislature's long-range plan is to transfer statewide operation of the TANF program to the intermediary.  The legislatures in Arkansas and Florida mandated the creation of new administrative structures to increase the role of the private sector in the implementation of TANF.  In Arkansas, the state Transitional Employment Board (TEB) and local Transitional Employment Assistance (TEA) coalitions have responsibility for planning and coordinating the delivery of employment-related services for TANF recipients.  In Florida, this responsibility rests with the state Work and Gain Economic Self-Sufficiency (WAGES) Board and the local WAGES coalitions.

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Use of a Single Intermediary or Multiple Intermediaries

In the study sites, the roles and responsibilities of intermediaries have been further defined by the decisions the localities made regarding whether to transfer responsibility to a single intermediary or multiple intermediaries.  In the urban sites, these decisions primarily affected the number of clients intermediaries would serve and how clients are assigned to a particular intermediary.  In the few rural sites that chose to use multiple intermediaries these decisions influenced the range and/or type of services each intermediary would provide.  Key findings regarding the use of a single intermediary or multiple intermediaries are presented below.

1.  Most of the urban sites, but only a few of the rural sites, transferred primary employment-related responsibilities to multiple intermediaries.  When secondary services were provided, in most of the urban sites and some of the rural sites, they are almost always provided by multiple intermediaries.

Seven of the 10 urban sites and three of the rural sites transferred responsibility for providing primary employment services to multiple intermediaries (see Table II.2).  Given their larger caseload size, it is not surprising that the use of multiple intermediaries is more common in the urban areas than in the rural areas.  However, the size of the caseload in the urban sites did not appear to be the main factor that determined how many intermediaries were given responsibility for linking welfare recipients with jobs.  One of the largest urban sites transferred responsibility for primary employment services to nine intermediaries, the most of any of the sites.  Two additional urban sites, one medium-sized and one small, transferred responsibility to seven intermediaries.  The remaining sites transferred responsibility to only two or three intermediaries.

The larger sites that transferred responsibility for primary employment services to multiple intermediaries also transferred responsibility for secondary services to multiple intermediaries, although they tended to transfer responsibility for these more specialized services to a larger number of intermediaries.  The two largest sites, San Diego and Cleveland, transferred responsibility for secondary employment services to 19 and 24 intermediaries, respectively.  Intermediaries that provide secondary services often have more flexibility to define the services they will provide than intermediaries that provide primary employment services.  Consequently, in contrast to primary employment services, the secondary services provided by multiple intermediaries are not necessarily part of a continuum of services nor are they comparable to one another.

Creating "Managed Competition" Among Multiple Intermediaries
To compare the performance of difference types of intermediaries, San Diego County officials decided to divide the county into six service delivery areas.  Their plan was to have the County operate TANF employment programs in two of the six regions and to attract non-profit and for-profit organizations to operate the other four.  Intermediaries were permitted to bid to operate all four districts, however, the County planned to award no more than two districts to a single intermediary.  This restriction was made to ensure continuing competition and to encourage a diversity of approaches to providing employment services to TANF recipients.

Lockheed Martin and Maximus, both for-profit companies and Catholic Charities, a non-profit, were selected to act as intermediaries in the four regions.  (Lockheed Martin operates the TANF employment program in two of the regions.)  Each of the intermediaries and the County are all subject to the same performance outcome measures.  During an eight-month start-up period, the intermediaries were paid on a cost-reimbursement basis; now, they are reimbursed on a pay-for-performance basis.  Over time, the County plans to use the information it collects on the intermediaries' performance to determine whether one type of organization (i.e., for-profit, non-profit or public) does a better job of placing TANF recipients in employment.  If so, the County may decide to turn over full operation of its TANF programs to that sector.

2.  In the urban areas, when responsibility for providing primary employment services was transferred to multiple intermediaries, each intermediary provided the same services to a portion of the TANF caseload.  However, in the rural sites, multiple intermediaries were more specialized, providing employment services to specific subgroups of the TANF caseload or a narrowly defined set of employment services to all TANF clients.

When the local sites transferred responsibility for providing employment services to multiple intermediaries, they had to develop a strategy for allocating TANF clients and/or responsibilities to individual intermediaries.  In some sites, TANF clients are referred to intermediaries based on where they live.  In others, they are referred through a centralized referral process or based on specific criteria.  In some sites, the decision regarding which intermediary a client should be referred to is left up to individual welfare eligibility staff.  Given their smaller caseload size and smaller number of intermediaries, the referral process is usually far less complex in the rural sites than in the urban sites.  The various strategies used to assign TANF clients to intermediaries are discussed below.

Location.  In three of the 10 urban sites, TANF recipients are referred to an intermediary based on where they live.  In San Diego, the county is divided into six regions.  In four of the six regions, an intermediary acts as the "gatekeeper" for all employment services.  (The welfare office performs this function in the remaining regions.)  The intermediary can choose to provide all services themselves, can subcontract with other intermediaries to provide services or can refer clients to existing services in the community (including those providing secondary services through the WtW program).  Little Rock uses a more targeted neighborhood approach.  When the system is fully operational, clients will be referred to a "Family Development Center" in their neighborhood for employment services.  TANF staff will be co-located in the centers to provide easy access to all public benefits.  St. Paul and Cleveland are also in the process of developing neighborhood-based service delivery models.

Centralized process.  In Cleveland and Hartford, clients are referred to intermediaries through a centralized process.  In Cleveland, the process is managed by welfare office staff while in Hartford it is managed by the workforce development system.  This centralized referral process is designed to ensure that all intermediaries receive equal consideration when client referrals are made.

Staff discretion.  In St. Paul, welfare eligibility staff have primary responsibility for deciding to which intermediary a TANF client should be referred.  They make their decisions based on client choice and their knowledge about the intermediary and how well they can meet the clients' needs.

Functional specialization.  In the rural areas, sites that use multiple intermediaries refer clients to intermediaries in a more specialized manner.  New London, for example, uses one intermediary to conduct assessments, a second intermediary to provide case management and job search assistance, and a third intermediary to place TANF recipients in employment.  This process makes the intermediaries more interdependent than in most of the other sites, making communication that much more critical.  In Olmsted, clients are referred to one of three intermediaries based on their language needs or disability status.  Napa uses a one-stop collaborative model of service delivery with various service components delivered by members of the one-stop.

3.  Caseload size, the amount of responsibility transferred to intermediaries and the decision whether to use one or multiple intermediaries influence the number of TANF clients any one intermediary will serve and the kinds of organizations that will act as intermediaries.

The decisions the local sites made regarding how much responsibility to transfer to intermediaries and whether to transfer this responsibility to one intermediary or multiple intermediaries defines the scope and scale of services provided by individual intermediaries.  These decisions, in turn, influence the kind of organizations that act as intermediaries.  For-profit organizations are most likely to act as intermediaries in the sites that require intermediaries to provide a broad range of services and serve large numbers of clients.  Sites that define the responsibility of intermediaries more narrowly or use multiple intermediaries to provide a broader range of services make it possible for a broader range of organizations to act as intermediaries.  The use of intermediaries in San Diego and Cleveland illustrates how this plays out in practice.

San Diego and Cleveland, with TANF caseloads of 38,000 and 33,000 respectively, both allocate responsibility to multiple intermediaries.  To function as an intermediary in San Diego an organization had to have the capacity to provide comprehensive employment services for at least 1,000 TANF recipients.  San Diego selected three intermediaries, two for-profit and one non-profit to provide employment services in four of its six regions (one for-profit provides services in two regions).  To function as an intermediary in Cleveland an organization had to be able to provide job search and placement assistance to an unspecified number of TANF clients.  Among the nine intermediaries selected to provide primary employment services, seven are non-profit and two are for-profit organizations.  These intermediaries will provide employment services to as few as 25 and as many as 700 TANF recipients.

On average, the TANF intermediaries included in this study expect to serve 370 TANF clients, but the range of clients served is wide, with the smallest intermediary expecting to serve only 20 recipients and the largest expecting to serve 4,000 (see Table II.3.)  On average, for-profit organizations expect to serve the largest numbers of clients.  Forty percent of the for-profit intermediaries in the study sites expect to serve more than 500 clients, compared to only 10 percent of the non-profit organizations.  Because they are more likely than other types of organizations to serve large number of clients, for profits are projected to serve 40 percent of the total TANF caseload in the study sites, even though they account for only 15 percent of the intermediaries.

Table II.3
Number of TANF Clients To Be Served by
Various Categories of Intermediaries
(Primary and Secondary)
  Minimum Maximum Average
Total 20 4,000 370
Location
  • Urban
  • Rural
20
40
4,000
900
390
270
Type of Organization
  • Non-Profit
  • For-Profit
  • Educational
  • Public/Quasi­Public
20
50
60
50
2,000
4,000
900
1490
240
985
200
475

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Reimbursing Intermediaries for the Services They Provide

In addition to making critical decisions about how much responsibility to transfer to intermediaries and how to structure the delivery of services at the local level, local welfare offices or their designee must also decide how and how much to reimburse intermediaries for the services they provide.  The most common payment structures are cost reimbursement where organizations are paid for the costs they incur or pay-for-performance where organizations are paid based on their accomplishments.  Key findings regarding the use of different payment structures are summarized below.

1.  Most intermediaries are reimbursed for their services through a cost reimbursement rather than a pay-for-performance arrangement.  In an attempt to combine the benefits of these two payment systems, several of the sites have developed cost reimbursement payment systems that include performance bonuses or incentives.

The shift to a work-based assistance system and greater emphasis on program outcomes has encouraged administrators of TANF employment programs to reconsider how they should reimburse intermediaries for the services they provide.  The experiences of the study sites suggests that while a number of localities have shifted to performance-based payment arrangements, many still reimburse intermediaries on a cost-reimbursement basis.  Some localities combine the two, reimbursing the intermediary for part of their costs through a cost reimbursement mechanism and the remainder through a performance incentive structure (see Table II.4.)  Many of the local sites that rely on cost-reimbursement payment mechanisms include performance criteria in their cost reimbursement contracts and evaluate the success of their intermediaries against these criteria.

Table II.4
Type of Payment Arrangements TANF Intermediaries
Site Payment Arrangement
Arizona
Phoenix Cost reimbursement with performance incentives
Yavapai County na
Arkansas
Little Rock Cost reimbursement
Jefferson County Cost reimbursement
California
San Diego Cost reimbursement; shifting to pay-for-performance
Napa County Cost reimbursement
Connecticut
Hartford Pay-for-performance; shifting to cost reimbursement
New London County Cost reimbursement for case management and assessment
Pay-for-performance for job placement
Florida
Jacksonville Pay-for-performance
Suwannee County Cost reimbursement
Minnesota
St. Paul Cost reimbursement
Olmsted County Cost reimbursement
Nebraska
Omaha Cost reimbursement with performance incentives
Scottsbluff County Cost reimbursement with performance incentives
Ohio
Cleveland Pay-for-performance (job search and placement)
Partial cost reimbursement; partial pay-for-performance (specialized)
Cost reimbursement (training)
Columbiana County Pay-for-performance (job search and placement)
Cost reimbursement (training)
Texas
San Antonio Cost reimbursement
Uvalde County Cost reimbursement
Virginia
Richmond Cost reimbursement
Wise County na

Critics of pay-for-performance reimbursement mechanisms argue that this payment structure encourages program operators to "cream," that is, to provide services to job-seekers who are the most likely to succeed rather than to those most in need of assistance.  Critics of cost-reimbursement payment systems argue that program operators get paid even if the services they provide do not produce results, wasting taxpayers' money and reducing incentives to meet high performance standards.

It is too soon to know whether the way in which intermediaries are reimbursed for their services or the amount they are paid influence program outcomes.  Welfare offices or other relevant administrative entities that reimburse intermediaries on a cost basis believe they can demand high levels of performance from intermediaries as long as clear program goals are established and performance is monitored on an ongoing basis.  Those that reimburse intermediaries based on performance believe that pay-for-performance systems play a critical role in emphasizing the importance of placing recipients in jobs, not just engaging them in employment preparation activities.  All agree that administering a pay-for-performance reimbursement system is much more complicated than administering a cost-reimbursement system.

2.  The sites that reimburse intermediaries through a pay-for-performance system structure their reimbursements very differently, with some placing far greater emphasis on placement or retention than others.

The sites that have implemented pay-for-performance systems have structured their payment mechanisms very differently.  The sites differ in the points at which they paid intermediaries (e.g., enrollment, placement and/or retention) and how they allocate the total payment among the various payment points.  For example, Cleveland pays its intermediaries that provide job search and job placement services at two points:  30-day job retention (50 percent) and 90-day job retention (50 percent).  Hartford pays its intermediaries that provide the same services at three points:  enrollment (60 percent), placement (20 percent), and 90-day retention (20 percent).  The First Coast Workforce Development Board (Jacksonville FL) also pays its intermediary at three points, but concentrates more of its payment on job placement:  enrollment (30 percent), placement (60 percent) and 90-day job retention (10 percent).

Acknowledging that its specialized intermediaries who provide services to hard-to-employ populations face different challenges and have different goals, Cleveland uses a combined cost reimbursement and pay-for-performance system to reimburse these intermediaries.  They receive 36 percent of their contract in monthly installments to cover ongoing operating expenses; the remaining 64 percent is paid based on performance.  To encourage longer-term involvement with clients, intermediaries providing services to ex-offenders or holding "managed care" contracts to provide services to recipients with mental health, substance abuse or other chronic barriers to employment receive 40 percent of the pay-for-performance portion of their reimbursement 30 days after placement, 30 percent 90 days after placement and 30 percent 180 days after placement.  To encourage greater emphasis on helping recipients sustain employment, the payment for intermediaries providing services to intermittent workers is structured to provide less reimbursement for job placement and more for job retention; 10 percent of the pay-for-performance portion of their reimbursement is received 30 days after placement; 40 percent 90 days after placement and 50 percent 180 days after placement.

3.  Regardless of the way in which intermediaries are reimbursed for their services, there is wide variation in the amount intermediaries are paid for the services they provide.  This variation exists between the sites and between intermediaries within some of the sites.

The local sites have made different decisions about how much responsibility to allocate to intermediaries.  They also have made different decisions about how much to reimburse intermediaries for the services they provide, resulting in considerable variation in the amount intermediaries are paid.  In the eight study sites where we were able to obtain comparable reimbursement data, intermediaries were paid as little as $355 and as much as $6250 per recipient served.  (See Table II.5).  Some, but not all, of this variation reflects differences in the services intermediaries provide.  On average, intermediaries that provide only job search and placement assistance are reimbursed $1,320 per person while intermediaries that provide specialized employment services are reimbursed an average of $2970 per person.

Table II.5
Reimbursement per Person for Employment Services Provided
by Primary and Secondary Intermediaries
Type of Site Method of Reimbursement Minimum Maximum Average
Four Urban sites with multiple intermediaries
Site #1 (Comprehensive Servicesa)
Site #2 (Job Search and Placement)
Site #3 (Comprehensive Services)
Site #4 (Job Search and Placement)
Cost
Performance
Cost
Performance
$1,900
1,100
935
580
$3,055
3,995
1,135
2,520
$2,360
2,130
1,045
2,090
Type of organizationb
Nonprofit
For-profit
Educational
Public
na 580
635
355
1,000
6,250
4,640
4,775
5,000
1,785
2,390
2,660
1,680
Type of Services Provided (TANF)b
Job search and placement
Comprehensive servicesa
Training
Specialized (Hard-to-Employ)
na 400
930
355
1,010
5,000
3,055
6,250
5,000
1,320
1,825
2,605
2,970
Welfare-to-Work   745 4,745 3,685
Notes:

a  Comprehensive service includes case management and job search and placement assistance.

b  Based on data from eight sites: San Diego, CA; Napa County, CA; Hartford, CT; St. Paul, MN; Olmsted, MN; Cleveland, OH; Columbiana County, OH and Richmond VA.

Comparisons across four of the urban sites that used multiple intermediaries to provide primary TANF employment services suggest that there is considerable variation within and between the sites in how much intermediaries are reimbursed, even when they provide similar services.(1)  The average per-person reimbursement across the four sites ranges from $1,045 to $2,360.  The sites with the highest and lowest average reimbursement provide comprehensive services — job search and placement assistance and case management — to TANF clients, suggesting that differences in the range of responsibility transferred to the intermediaries do not fully account for the difference in the amount they are reimbursed for the services they provide.  In three of the four sites, the minimum and maximum payment amounts vary dramatically even though the intermediaries have responsibility for providing the same services.  In one site, the highest-paid intermediary is paid almost four times the lowest paid intermediary.  In sites where payments are comparable across intermediaries, program administrators negotiate a similar price with intermediaries regardless of how much they indicate it will cost to provide services.  In sites where there is considerable variation, program administrators accept the price set by intermediaries in their response to the agency's request for bids to provide services.

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Footnotes

1.  The reimbursements in the sites that have pay-for-performance arrangements in place are adjusted to reflect the intermediaries’ placement and retention goals.  Thus, the actual reimbursement paid per client is higher than what is reported here.


Where to?

Top of Page
Contents of This Section
Table of Contents of Report
Executive Summary
Introduction
Defining the Roles and Responsibilities of Intermediaries
Implementation of the “Intermediary” Function
Lessons Learned and Next Steps
Appendix A:  Site Descriptions
Appendix B:  Examples of Organizations Functioning as Intermediaries
Appendix C:  Number of Intermediaries by Type of Organization

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Last updated 06/02/00