(Part 2 of two-part series.)
Spending on community programs for developmentally disabled Nebraskans has nearly doubled in the past decade, but so has the number of deaths, as the state has moved people out of state institutions and into apartments, homes and group homes.
In the past decade, most of the media and Legislature’s attention has been focused on the state-run institution for developmentally disabled people, the Beatrice State Developmental Center. Chronic abuse and neglect in the institution led the feds to shut off Medicaid reimbursement and the U.S. Justice Department rushed in to oversee improvements.
Nebraska was forced to improve conditions at the state institution and move residents into communities, and state spending to treat people with developmental disabilities living in communities has nearly doubled, going from $147 million in 2006 to $290 million last year.
It’s much cheaper for the state to treat people in the community — whether in their own home, apartment or group homes — than in a state institution. The cost of caring for the 116 people who remain at BSDC has increased to nearly $383,000 annually per person. That’s over $1,000 per person, per day, and that’s not even counting federal spending, which pushes the total to $450,000 annually.
But the average cost to “habilitate” (teach life skills to) one developmentally disabled person in the community has skyrocketed 75 percent, from $34,725 in 2006 to nearly $61,000 this year — nearly equivalent to the cost of three years at the University of Nebraska-Lincoln.
The population served by the state in communities has increased from 4,220 in 2006 to 4,763 this year, according to DHHS stats.
Meanwhile, the number of abuse and neglect reports in community programs has steadily climbed from 1,063 in 2012 to 1,769 last year and the number of deaths has nearly doubled in a decade to six deaths per month.
DHHS notes that the number of abuse and neglect cases substantiated has fluctuated since 2008, but last year was unchanged at 36. However, the independent expert appointed to monitor BSDC improvements saw red flags in the state’s investigations of community programs, cautioning in her final report that more attention needed to be paid to abuse, neglect and deaths.
All deaths in the community are reviewed by a Mortality Review Committee, and all possible reports of abuse or neglect are reported to Adult Protective Services, but only a small fraction are ever substantiated, according to DHHS records.
The expert’s report said the state needed to improve its system for investigating abuse and neglect and use “sufficient methodologies and reconciliation of evidence to support the findings.”
Of 70 deaths in the community last year, a dozen were former BSDC residents and 22 were living in group homes, according to an internal DHHS report.
The state said 95 percent died of natural causes, and 4 percent were ruled accidental. However, autopsies were only performed on 62 cases. And four people who died had incidents of abuse or neglect investigated within the last year of their life, the report said.
All APS reports are confidential, so the public is unable to scrutinize the death investigations of some of the state’s most vulnerable people. Thirty-four percent of those who died last year were nonverbal.
The state refuses to release the names of the dead, or any information about them, citing privacy concerns. In state reports, the names of the dead were blacked out in heavy black swaths.
Most of these deaths are open-and-shut cases: In most cases, CPR wasn’t administered, police weren’t called and in three out of four deaths, the provider did not complete an investigation.
For-profits move in
For-profit corporations moved in to fill the gap left when counties got out of the business of providing human services years ago, and some of them have gotten more creative about how they pay their top officials.
In recent years, a major group home provider, Developmental Services of Nebraska, has changed the way it pays its top administrators.
In 2006, DSN CEO Brian Kanter and three other DSN directors set up a separate for-profit corporation called Collaborative Industries, Inc., to govern DSN.
Rather than pay its administrators directly, DSN pays Collaborative Industries for the services of its CEO and other administrators. According to DSN’s financial statements, that number is 13 percent of its net billings, plus expenses. That came to $2.24 million last year, in addition to the $9.2 million DSN spent on salaries and wages.
LeFevre continues to draw a salary as DSN’s CEO emeritus and a governing board member, even though he now lives in Minnesota. DSN’s tax filings show he earned $71,374 working for the company in 2013.
“We still meet with Scott often,” Kanter said. “He works part time.”
Kanter said LeFevere is “far away the most intelligent person I’ve ever met in my life.”
“I don’t foresee Scott ever fully not being a resource for DSN,” he said. “I think he’s a pioneer in Nebraska. He’s my mentor.”
Kanter said the new management structure was set up after DSN’s revenue shrank considerably in 2007, and right-sizing was done.
“This is how we’ve creatively solved that problem,” he said in an interview.
Allen Bergman, a Chicago consultant to group home providers, said nonprofits sometimes set up separate foundations to augment salaries. He has seen other nonprofits consolidate their human resources, maintenance or fiscal offices and reduce overhead.
Collaborative Industries provides a variety of services — such as training, development, human resources, marketing, fundraising or grant writing — to DSN and six other companies in Missouri, Nebraska and Iowa.
Kanter said the benefit of having a management company rather than fixed administration is the company works on a fee based on revenue. So if a company brings in $1 million in revenue, typically about 20 percent would go toward administration overhead. But if revenue goes down, the company has to either cut staff or pay. By contracting for administration, the fee just goes down.
“They get access to far more administration than they would be able to afford because that administration’s paid for by six other companies,” Kanter said.
The arrangement is not a way to get around state caps on overhead, he said.
“We’re within all of our caps,” he said. “DSN is well within any perameter that the state has.”
Lincoln Sen. Colby Coash is listed on Collaborative Industries’ website as “talent development coordinator,” but said after 15 years working for DSN and Collaborative, he resigned a few years ago and now occasionally does consulting work for the company.
Coash also heads up a special investigative committee of lawmakers that keeps tabs on BSDC’s progress and other issues in programs for developmentally disabled people.
Evans said he recently learned of two other group home providers contracting with a management company, and thinks the state should look into the practice.
“It appears to me to create the possibility for potential conflicts of interest,” he said. “Whether the practice is forbidden or not is another question.”
State DHHS officials were not familiar with DSN’s management arrangement, but said new rate methodology was implemented in 2013, with caps on overhead.
“We determine the payment for the services; we do not have oversight of their financials, of their business operations,” said Courtney Miller, interim director of developmental disabilities for DHHS. “Setting up an LLC would not change the per diem (rate).”
In its tax filings and audits, DSN also discloses several other related party transactions. DSN is also insured by Quality First Insurance LLC, which is partially owned by Collaborative Industries and a former CEO of DSN, according to its financial statements.
DSN is also still paying off a $2.6 million loan it owes Active Community Treatments, Inc. for purchasing the company, of which LeFevre owned 75 percent. Kanter said he started ACT and ran it for shareholders before it was sold to DSN.
Asked whether buying ACT when LeFevre was still DSN’s CEO and part-owner of ACT was a conflict of interest, Kanter said, “I think that’s a reasonable question. We’re required to go through a lot of standards… all of those were adhered. Those are IRS rules.”
He said DSN was audited by the IRS a few years ago “because of that transaction,” but no recommendations resulted.
LeFevre could not be reached for comment.
A former state DHHS employee said DSN made more money than other companies by taking on tough clients nobody else would take — mentally ill, sometimes dangerous people — to the point where many clients got 1-to-1 funding. But if they only staffed at 3-to-1, they made more money, he said.
“No other provider got that,” he said. “That’s how they got beaucoup bucks.”
He said service providers initially regularly checked up on group homes, but when Roger Stortenbecker was director of the statewide Developmental Disability System, that changed. Their oversight shrank to the point where they basically ensured clients’ treatment programs were being followed, he said.
Then in 2003, Stortenbecker went to work for DSN as chief operating officer.
“It was like 1,000 light bulbs went off in my head,” said the former employee.
Stortenbecker isn’t the only former DDS director who went to work for DSN. Carla Lasley was director before taking a job with DSN in 2004. She now serves as director of research and development for Collaborative Industries.
Kanter is proud of his company’s recruitment of their former state overseers.
“I think that’s something that we like to celebrate, to brag about,” he said. “We’ve got well over 100 years of experience in these walls, in Nebraska and outside Nebraska… if anything it should give people comfort in the organizations we work with. We’ve got some really intelligent experts.”
Of all these myriad business dealings, Kanter said, “I consider myself an extremely transparent person. We’re not doing anything that is not above board.”
“We want to provide the best, high-quality supports for people with disabilities,” he said.
Evans said an employee of a major provider told him, “A lot of people have made a lot of money over the years” in Nebraska’s group home industry.
“There’s some people who are millionaires as a result,” he said.
The state ombudsman, Marshall Lux, said the move from state institutions to community programs run by private companies requires diligence by the state.
“When you privatize a program, there has to be adequate oversight and regulation because it’s state money,” he said.
So far, he said, the jury is out on that.
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