Evaluation of the New York City Home Rebuilders Demonstration. 2.5.1 Fiscal Issues

09/14/1998

An inherent characteristic of the planning and implementation of HomeRebuilders was the coordination of program and fiscal staff in the agency. The flexibility of spending permitted agencies to individually determine a plan which balanced additional expenditures against savings from reduced care day usage. As one director describes it, this was a new "marriage" of budget and program staff. Virtually every program and budget administrator described the value of this new relationship. The following reflects how this relationship was operationalized.

Three Year Staffing Plan. The HomeRebuilders capitation funding required that agencies consider staffing, not in the context of static yearly caseloads, but in relationship to a fixed caseload of children moving in and out of care for the three year period. Under the traditional per diem rate, each agency budgets for a fixed level of children in care, expecting that children discharged each month will be replaced by new entrants. Minimal dollars are budgeted for aftercare for children who are in trial discharge. Under the capitation methodology, the agency was held responsible for its assigned fixed number of children for the three year period, for those in-care, and for preventing those out-of-care from returning.

Discussions with participants suggest that several upfront decisions had to be made in staffing the project to meet this new challenge. This included caseload sizes for in-care caseworkers, aftercare workers, hiring and designation of specialized staff such as substance abuse workers and housing specialists, and a plan for the adjustment of staffing ratios over the course of the demonstration period.

For example, Little Flower developed a staffing model for the three years based on expected discharge rates of children. The model included caseloads of eight families (15 children) per caseworker, one parent aide per two caseworkers, a supervisor per every four caseworkers, and increasing ratios of aftercare workers for up to 18 months after trial discharge. While they anticipated an immediate and gradual decline in the number of in-care caseworkers, there would be an increase in the need of aftercare workers. The total number of caseworkers would not begin to decline until the end of the first year.

In most agencies, the typical turnover and attrition rate was expected to make the necessary staff shrinkage palatable to staff during the last two years of the program. Little Flower replaced some staff during the first year and consolidated units as staff left during the last two years. At St. Christopher­Ottilie, an adoption worker was assigned to the project during the third year because of the unexpected shift of children to the adoption track. The executive director also felt that a higher supervisor ratio was needed for HomeRebuilders, but was unable to implement it. Further discussion about each agency's staffing decisions is provided in section 2.5.2.

Monitoring of Expenses Against Expected Length of Stay. The fiscal director at each agency used the expected rate of increased discharge each year (10 percent), to monitor their success in the demonstration and to monitor budget expenditure. Each agency developed periodic reporting to match expected number of discharges to actual number. At Little Flower, there appeared to be more intensive monitoring. They did not use the provided state CCRS data, but built an actuarial file of the children's length of stay from their own database. They monitored the expense and compared the number of actual discharges to the expected number and reviewed them case-by-case with program staff monthly. Unfortunately, they felt the monitoring process was hindered by the demands the city placed on the agencys' budget staff. Budget staff were required to provide detailed child-by-child expenditure data to reconcile the HomeRebuilders rates with the rates applied to the remainder of the agencies' children.

Three agencies spoke specifically about the need for better software and information tools to manage expectations about length of stay. Beyond the data provided by DSS, the information system must collect data on important characteristics of the children and their families that might affect length of stay. Suggested variables include substance abuse problems of the caregiver, death or incarceration of the caregiver, positive toxicology at birth for the child, and presence or severity of child abuse or neglect as reason for placement.

Flexible Spending. The demonstration allowed agencies to be more flexible in their expenditures for each case. They were not restricted to room and board, the primary categories of IV-E reimbursement, or the city's standards of payment. As stated by the fiscal director at Little Flower, "budget is usually the 'abominable no-man', but not in HomeRebuilders." For example, cars for visitation were made exclusively available to HomeRebuilders workers at this agency.

At New York Foundling, to expedite reunification, special funding was budgeted for trainers, housing, adoption attorney time, family social activities for visitation, and emergency household funds for such items as furniture, clothing, and food. Miracle Makers reported that new streamlined procedures for obtaining emergency funds were instituted. St. Christopher­Jennie Clarkson used flexible funding to pay rent for families. Staff reported that the usual city housing subsidy often took an inordinate amount of time to access and HomeRebuilders allowed the agency to enter into individual contracts with landlords. Obtaining adequate housing for families was often cited as a barrier to reunification, and this flexibility allowed the agency to alleviate a problem that hindered children from returning home.

The flexible funding allowed agencies to be reimbursed for services to families, not specifically directed at the child in care. At Little Flower, the use of case aides and additional training for foster parents permitted the use of birth parent visitation at the home of the foster parent and not always at the agency office. St Christopher­Ottilie also used flexible funds to train foster parents as aides/mentors to birth parents.

Although each agency implemented the concept of flexible spending somewhat differently, all caseworkers had more flexibility in service provision. Some were allowed to request cash to help a family buy groceries, clothing, prescriptions, other necessities, transportation to see their children, or activities during visitation. The total amount of money was limited at each agency. Realizing that funds were being used too rapidly, some agencies tightened access to these funds as the demonstration progressed. Prior to the end of the demonstration, some agencies did run out of flexible funds.

Agency Consideration of Financial Risk. Agency financial risk depended upon the extent to which agencies invested money upfront to develop resources and whether the dollars expended were recouped through fewer care days. If an agency believed they could cut care days by 10 percent and this translated into expected availability of one-half million dollars for new services, anything less than a 10 percent reduction could be a financial loss. A board of directors governs each of the participating agencies. The financial risks of the demonstration had to be presented and approved by each agency's board. At Little Flower, the board was initially concerned that the city and state would not follow through on their commitments. They requested monthly reports on the project. They were more supportive after the success of the first year. The Board of Directors at St. Christopher-Otillie required that an independent auditor verify the actuarial baseline for the capitation. Once completed, the board felt the risk was acceptable and proposed care day reduction achievable. No other agencies reported any board hesitancy for support of the program.

Several agencies stated that they had not anticipated the shift in the number of cases to adoption. Little Flower identified two problems in the planning. First, the 1988-1992 historical data used by the state did not reflect the policy shift toward adoption in the 1990s in New York City. Second, in their budget modeling, they used their internal electronic data and did not account for the added time and expense for adoption. In fact, the agency comptroller suggested that the early ending of the program might have protected them from the adoption costs that were accrued after the project ended early. At New York Foundling, the Fiscal Director senses that adoption goal decisions were made more expeditiously under HomeRebuilders. He was concerned about the legal costs, additional days in care during the adoption process, and the extra caseworker time required for adoption cases. Miracle Makers was not as affected by adoption shifts, since they served many kinship families which had slower rates of adoption.

Per Diem versus Capitation Payment for Service. The DSS sets a maximum state aid rate for each private agency's foster care program. The city then determines whether it will pay a percentage or the full amount of the maximum state aid rate. Agencies were concerned that the city would change the payment rate and upset the capitation rate set for HomeRebuilders. The city developed an understanding with each agency to hold the agency harmless from any system-wide reductions during the demonstration. Also, each agency would benefit from a system-wide increase during the period. In fact, the 1994-1995 city budget initiative reduced the foster care rate paid by the city. Reimbursement for children in the HomeRebuilders program was held harmless from the reduction. However, the children in the control group and the rest of each agency had their rates reduced. Agencies experienced revenue reduction and several agencies reported agency cash flow problems.

Medicaid per diem. Plans for the demonstration also called for a capitation rate for Medicaid payments for children in the project. The state agreed to fund applicable Medicaid payments at the current rate for actual care day usage and provide additional Medicaid funding at 65 percent of the current rate for each day saved, compared to historical usage pattern. For example, if during HomeRebuilders, an agency used 200 fewer care days than expected, the agency was to be paid 65 percent of their current Medicaid rate for the 200 days. In discussions with fiscal directors, it was not clear that most agencies made modifications in their budgets to use this extra funding. Little Flower budgeted for a medical HomeRebuilders Team that enhanced mental health staffing for children and families in the HomeRebuilders group.

Reconciliation of Per Diem/Cash Flow. The city reimbursed agencies on a quarterly basis. Agencies considered the methods for HomeRebuilders reimbursement cumbersome and burdensome. They were paid in two components following bill submissions: the regular agency per diem for each day a HomeRebuilders child spent in care, and a HomeRebuilders add-on to bring the year's total up to the agreed capitation amount. Agencies spoke of delays and requests for expansive justification of amounts each quarter. Two agencies reported hiring additional budget staff just for this function.

One agency, Miracle Makers, reported that it experienced cash flow problems during the second year as a result of the delays in payment. They decided to suspend some of the HomeRebuilders features including real estate security deposits for families and emergency cash funds for birth families. In addition, they chose to not fill vacant staff slots, including the budgeted, but never filled slot for a housing specialist. The agency's comptroller suggested that morale problems began at this time, with the rumor of layoffs from the program.

At the end of the year, each agency had to reconcile yearly expenditures with the city and state. At Little Flower, there was a deficit during the first year in relation to the planned 43 percent of total budget.As agreed, the state did a reconciliation and adjustment of the 3-year expenditure plan. The other five agencies were more conservative in their approaches and underspent during the first year. Unfortunately, this artificial surplus resulted in confusion in the city's fiscal office and delayed payments for the five agencies, according to one agency fiscal director.

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