Lawmakers allege extortion by HHS contractor

LINCOLN — Two state lawmakers leveled charges of extortion Thursday against the state's largest child welfare contractor.

They made the accusations after state officials said the Kansas-based KVC threatened to stop managing care of more than 4,700 Nebraska children unless it received more money.

The state responded with a $1.8 million infusion of funds and a promise to develop a new payment method by the end of January.

The new method will reduce financial risks for the company, while increasing the risk that the state will have to plow more money into its two-year-old experiment in privatizing child welfare services.

State Sen. Bob Krist of Omaha denounced the agreement and the circumstances that led to it.

"We're being extorted, and I don't know how else to put it," he said.

He was joined by Sen. Gwen Howard of Omaha, a former child welfare worker and fellow member of the Legislature's Health and Human Services Committee.

Sandra Gasca-Gonzalez, president of KVC's Nebraska operations, took strong issue with the lawmakers' comments.

"From my perspective, we have been honest and we have been forthright about our finances," she said. "I don't think that's extortion. I think that's communication."

Kerry Winterer, CEO of the Nebraska Department of Health and Human Services, told committee members at a briefing that he understands their frustration and their emotion.

But he denied that the situation amounted to extortion.

"We have to do what we have to do in terms of moving these contracts forward," he said.

KVC is one of two private contractors that handle the bulk of duties for ensuring the safety and well-being of abused and neglected children and youthful troublemakers.

It oversees all cases in southeast Nebraska and one-third of those in the Omaha area. The Nebraska Families Collaborative handles the rest of the Omaha-area cases.

The $1.8 million agreement was only with KVC. Winterer said he expects to negotiate a similar agreement with the collaborative soon.

Gasca-Gonzalez said KVC formally notified the department in November that changes were needed for the company to continue. The new agreement was signed Dec. 24.

Winterer said the state was faced with a decision: watch KVC walk away on short notice, pay the additional $2.1 million per month that the company sought or negotiate a different agreement.

The state chose the third option, even though the HHS committee just days before called on the state to pull back from what it said was a failed privatization effort.

The committee, after a months-long investigation, concluded that the contracts had been "ill-advised" from the beginning and had produced "neither the outcomes nor the cost savings for which the state contracted."

Winterer justified the additional money because of changes in Medicaid coverage of residential treatment, which increased costs for the child welfare system generally.

He said the agreement bought time for the state to develop a case-rate methodology, in which payment would be based on the costs of caring for each child.

Under the current contracts, KVC and the collaborative get a flat payment, no matter how many children and families they are caring for or how much care the children require.

Gasca-Gonzalez said KVC has pushed for a change to a case rate for months, saying it "provides financial stability to the system."

"There has to be a way to predict what expenses are in the system," she said.

State officials promised to make the change a year ago, she said, but did not carry through. Winterer said he doesn't know the reason for the delay.

But he said department employees are working now on the complex task of developing a case rate.

The state made three unplanned infusions of money into the two contracts during the fiscal year that ended June 30, contributing to a 27 percent increase in spending on child welfare services.

Contact the writer:

402-473-9583, martha.stoddard@owh.com

« Metro/Region

Share