Assessments can be performed by the state agency, the contractor, or an independent third party. Some of the most innovative approaches involve the use of independent third-party assessments. In Texas, the contractor performs a battery of assessments and then turns the material over to an independent third party who determines the level of care, which is absolutely binding on the contractor. Because these two agencies had extensive previous interactions, they are able to achieve agreement about the level of care for approximately 95 percent of the cases. There are real financial stakes for the contractor in correctly assessing the level of care because the flat-rate case payment is based on a historical average of the level of care needed for the target population. This average is about 3.6 on a scale of 1 to 6 where 1 is regular foster care and 6 is an intensive residential care facility. In the first year of the program, the average level of care was approximately 3.2. The second year, however, the average level of care was about 3.8-3.9, which exacerbated other financial strains facing the contractor.
In Kentucky, as well, an independent agency assesses level of care. The primary function of this agency is to adjudicate conflicts between the state and the contractor about the appropriateness of a referral. If the contractor disagrees about the appropriateness of the referral, it reviews the case with the state. If this review does not resolve the disagreement, the contractor can bring the case to the independent review agency, which examines the records and makes its own determination. As of the beginning of the second year of operation, this independent review had been used four times, with each party winning twice. Although the contractor is allowed to reject a limited number of cases over the course of a year, the contractor has continued to offer services to the children even when the level-of-care review supports their argument that the referral is inappropriate.