Outsourcing Special Education Services

An intermediate agency in Massachusetts tries to contain costs without jeopardizing quality programs by ANNE S. McKENZIE AND ANNA M. BISHOP

As the leaders of an educational service agency, our job is to balance quality and affordability in education programs. In spring 2007, we confronted significant cost increases in special education. We knew we needed to explore cost-containment strategies.

At the same time, we realized if we focused solely on cost containment, parents and teachers might interpret our narrow focus as a lack of commitment to program quality. Often when a superintendent, business manager or special education director mentions costs, parents and teachers fear financial concerns will overshadow students’ needs. We had to identify cost-savings opportunities that would not compromise quality.

Anna Bishop Anne McKenzieAnna Bishop (left) and Anne McKenzie have overseen cost savings by outsourcing special education services in the Lower Pioneer Valley Educational Collaborative in West Springfield, Mass.

Outsourcing special education and related services provided a solution. Although the organization experienced difficulties during the decision-making process, the benefits of outsourcing have outweighed any problems. Our experience demonstrates that quality and cost effectiveness are not incompatible in education.

Shared Services
The Lower Pioneer Valley Educational Collaborative, organized in 1974, consists of seven school districts legally bound in a governance structure. Although the member districts are located in Hampden County, Mass., the collaborative provides educational programs and services to school districts and municipalities throughout western Massachusetts. The intermediate agency has an operating budget of approximately $20 million.

The collaborative’s primary purpose is to expand the quality of education in its member districts. To that end, we provide special education programs and career and technical education programs for students on the premise that numerous educational services can be offered more effectively and efficiently by pooling resources.

In 2008-09, the collaborative enrolled 176 students in special education programs and 400 students in career and technical education programs. Special education programs are located throughout the area in age-appropriate schools. All career and technical education programs are housed at our administrative office and career and technical education center in West Springfield, Mass. Our collaborative, one of the largest in the state, also offers school transportation, professional development, municipal Medicaid reimbursement, energy management, grant writing and special projects.

Methodical Process
Our educational service agency in western Massachusetts outsources a number of serv-ices. We purchase food services from a local school district, and we outsource custodial services for our career and technical education center and central office. Outsourcing reduces fringe-benefit expenses and other post-employment benefit liabilities, or OPEB. The most common OPEB is health insurance but could include dental, vision, life, long-term care or any other promised benefits other than pension. In outsourcing these positions, the agency has realized an estimated annual reduction in fringe benefits of $87,000 and an estimated OPEB liability reduction of nearly $1.3 million.

When we initially explored the concept of outsourcing, we recognized the need for a methodical and thoughtful approach. We weighed instructional impact against the potential cost savings from outsourcing. We asked questions about the proximity of a service to a student’s learning experience. We analyzed the effect outsourcing a particular service would have on teaching and learning.

Food services and custodial services did not have a direct impact on instruction so we initiated outsourcing with these serv-ices. Although important, custodial and food services are educational support serv-ices, not direct instructional services. Difficult financial circumstances compelled us to further reduce expenses. We evaluated direct and related services in special education to identify additional opportunities for outsourcing.

Capacity Limits
As we examined outsourcing therapy serv-ices, we realized how little we understood these services, practically or theoretically. We were uncertain of the quality of the services currently provided or how quality might be improved. Although one of us (McKenzie) holds a master’s degree in special education, none of the administrators in the education collaborative had any formal training as a speech language pathologist, occupational therapist or physical therapist. The lack of training made it difficult for us to ascertain quality and efficiency of service delivery.

We had other problems in addition to a lack of supervisory capacity. When therapists were absent for illness or personal reasons, we did not have an available pool of substitutes. Sometimes a provider/client relationship does not work for interpersonal reasons. If a student, teacher or family did not work well with a particular therapist, we could not remove the therapist and replace him or her with someone else.

If the student were to receive the service from a medical office, the student or the student’s family could choose a provider. We wondered why schools could not do the same thing. It seemed as though the system was designed more for the protection and convenience of the provider rather than the client.

Another problem we confronted was a budget increase due to health care inflation and employee raises. In FY07, related serv-ices (speech and language, occupational therapy, and physical therapy) represented 15 percent of the education collaborative’s special education budget. Related service therapists accounted for 12 full-time staff members or 19 percent of our special education staff. The large number of full-time therapists on staff contributed to high fringe-benefit expenses and other post-employment benefit liabilities.

Annual salary increases in our organization range from 2.5 to 3 percent. The collaborative also offers 3 to 5 percent in step increases (for each year of experience up to 10 or 15 years) and up to 10 percent for completion of a degree or a fixed amount of graduate credits.

According to the National Coalition on Health Care, employment-based health insurance benefits have increased by 120 percent since 1999. In 2008, employer health care costs rose by 5 percent on average in the United States. The increase in costs associated with a single employee at our agency from 2007 to 2008 ranged from 8 percent to 15 percent. By contracting for related services, we expected to contain costs, increase client and family control over service delivery, and better monitor practitioner effectiveness.

Because special education services are not subject to public procurement laws in Massachusetts, we could consider different companies and selectively request proposals. We solicited a proposal from Futures Education, a division of the Futures HealthCore. Futures HealthCore is a national educational services and management company with a local operation. We sought a firm to deliver serv-ices with proven management experience and measurable outcomes. We expected managers at the company we selected to employ licensed practicing therapists who understood the work from a research and practical perspective. We wanted a team of people who understood and kept abreast of research-based practice. Several colleagues in Massachusetts have partnered with Futures in various ways to improve special education services. More than two dozen school districts have brought in the company to analyze education delivery and make recommendations for improved efficiencies and resource reallocation.

In many cases, districts have hired the outside firm to assist in delivering special education services, among them Holyoke Public Schools, Everett Public Schools and Oxford Public Schools. Futures also has consulted with more than 120 school districts nationwide and serves 25,000 students in six states. Additionally, the company has conducted clinical and educational services analyses in another dozen states.

The proposal we received promised a 20 percent cost savings over current expenditures in the second year of the contract. The proposal also included management of services, and an evaluation conducted by a third-party contractor. In this case, the contractor was an international evaluation company that had completed evaluations for the state education agency and was an approved contractor on the state’s bid list.

District Concerns
Superintendents and special education directors in our member districts wanted to reduce special education costs, but they did not want to compromise quality. The biggest fear associated with using an outside agency to provide services is a perceived loss of control. Administrators worried we would find it difficult to ensure service quality and address issues quickly if the service providers, notably the therapists, were not employees of our collaborative.

Through the first year of our contract, these fears were unfounded. On rare occasions, a therapist and client did not work well together. In those cases, we would call the clinician assigned to our contract, explain our concerns and shortly -thereafter Futures would assign a different clinician if that was determined to be the best course of action.

Previously, with our own therapists on staff, the collaborative did not have the option of switching to a different service provider when the client and therapist could not establish a productive working relationship. We had a limited pool of therapists, limiting our flexibility in scheduling direct services.

Service Denials
When we initially explored the idea of outsourcing related services, we met with staff, board members, parents and administrators. We met with the therapists to discuss how we might increase the efficiency and accountability of the existing system. Several had ideas about how we might generate more revenue to offset costs. However, the suggestions involved investing money initially. We told staff we also wanted their feedback on a proposal from an outside agency.

Many assumed the only way an outside agency could guarantee a reduction in cost was by denying services to eligible students. Board members, parents and faculty expressed concerns regarding a potential loss of services, a detrimental effect on staff morale, a decline in quality and a loss of control. Some also raised the notion we were being deceptively drawn into a contract that would increase substantially when negotiating a renewal.

We discussed the concerns with the company. The company promised to interview all current employees and offer positions to qualified candidates. The company hoped to hire as many of our employees as possible and keep them working in the same programs to ensure continuity of care.

Many employees chose not to interview with the new company. Just as it is expensive to provide services in the public sector due to pension costs, other postretirement benefits (especially health care) and guaranteed salary increases for longevity in lieu of performance-based increases, it is expensive to leave the public sector for the same reasons.

As for a feared scaling back of student services, the company described the process it uses to determine appropriate services. The clinicians set functional, outcome-oriented goals with specific, individualized discharge criteria. The company emphasizes discharge because successful therapy programs are designed to achieve goals in the shortest appropriate time. Active attention to discharge planning ensures students receive services for a period of time that is clinically appropriate.
The company clarified that discharge from service is not the same as denial of service. The American Speech-Language-Hearing Association, the American Physical Therapy Association and research in occupational therapy support entry and exit or discharge criteria.

To solicit parent input, we mailed a letter to parents of all students receiving related services and invited them to a Q&A session with the proposed provider. Just four families out of 135 attended. It was clear three of the four were extremely concerned about the impact of the proposed change.

We scheduled a second meeting with these families to hear their grievances and concerns, which focused on the belief new staff might not care about their child. They considered the current therapists to be “like family.” These parents were nervous about a sense of loss and change. Although this was a legitimate concern, the primary purpose of therapy services is to help students benefit from special education, which in turn is designed to help students access the general education curriculum.

The purpose of related services is not to ensure a relationship with a specific professional. This is not to say that we do not value relationships. We recognize students work with different professionals throughout their years in school and benefit from experiences interacting with a variety of professionals.

After discussing HealthCore concerns in small groups and answering individual questions, we invited families and staff to the school board meeting at which the proposal would be discussed and possibly voted on. We encouraged teachers to prepare a presentation of their own for the board and encouraged parents to provide public comments. In addition to the teachers, therapists and three families, representatives from Futures HealthCore attended the meeting. The board heard statements from parents and asked questions. After a long discussion, the board approved the proposal from Futures.

Cost Savings
In a two-year period, the Lower Pioneer Valley Educational Collaborative has realized a cost savings of $208,300 in the operating budget. In 2009-10, the savings is expected to increase by $188,700. The reduction of staff has decreased other post-employment benefit liabilities by $370,800, which has a positive impact on the actuarial value of plan assets reported on our balance sheet.

At the end of the first year of the contract, Class Measures evaluated Futures on its contract fulfillment. Class Measures is a special-interest consultancy firm specializing in accountability at all levels — in the classroom, the school and within administering authorities (e.g., state education agencies and ministries of education).

Class Measures, with offices in Connecticut, Massachusetts and the United Kingdom, designed a review of therapy services provided by Futures to gauge the quality of support to students with special education needs and the extent to which Futures had fulfilled its contract with us. The evaluation process included document review, interviews and direct observation of therapists in classrooms. Evaluators interviewed Futures’ program managers and therapists, our personnel, the special education director from a member school district, parents and students.

The findings of the evaluation were positive. All interviewees expressed satisfaction with the quality of services. Evaluations and re-evaluations of students were timely and thorough. Overall, the report found the company’s delivery system was more efficient than the previous system, leading to a decrease in overall therapy costs and an increase in supporting documentation needed for Medicaid reimbursement.

In FY07, the year prior to outsourcing, the Lower Pioneer collaborative lost approximately $52,300 in Medicaid reimbursement revenue due to incomplete documentation. The loss of revenue related to 173 incidents of incomplete documentation. At the end of FY08, the first year of our contract with Futures, we only had 14 incidents of incomplete documentation, a 92 percent decrease in incomplete documentation, and revenue loss of $1,199.

Administrative Gains
Outsourcing related services also led to a drop in administrative overhead. The outsourcing of related services as well as the redistributing of job responsibilities resulted in the reduction of one full-time equivalent. We no longer have to commit administrative time and resources to direct supervision of therapy staff. This is not to say we contracted for services and walked away from any administrative obligations.

Our responsibilities and obligations connected to therapy services and personnel changed. We do not have to do supervision and evaluation in the typical sense — classroom observations and end-of-year evaluations. Our contract requires Futures to supervise and evaluate to monitor the quality of services. Program managers from Futures share information in quarterly reports.

Outsourcing also has eliminated the need for administrators to develop and monitor therapists’ schedules. We provide the service delivery grids from the students’ individual education plans and the company schedules the therapists. Administrators use the time previously spent creating and monitoring therapy schedules for more effective teacher supervision.

Intelligent Moves
As an educational service agency, our collaborative is responsible for increasing access to quality education programs and services at an affordable cost to local and state education agencies. Often we can provide the highest-level services at a reasonable cost.

However, there are times when we face constraints that limit our capacity to deliver and manage a program at a reasonable rate. These constraints can include collective bargaining agreements, rising health care costs and insufficient expertise in specialized fields, such as occupational therapy, physical therapy, speech and language therapy, psychological counseling and behavioral interventions.

The key is finding an outside agency with which you can effectively partner. We found an organization dedicated to improving the lives of people with disabilities and committed to increasing efficiency and quality in special education.

When executed methodically and coherently, outsourcing can offer solutions to financial limitations and foster intelligent resource allocation.

Anne McKenzie is executive director of the Lower Pioneer Valley Educational Collaborative in West Springfield, Mass. E-mail: amckenzie@lpvec.org. Anna Bishop is director of finance with the collaborative.