Report from the Study Committee on DES Contract Case Management and Related Liability

              REPORT
from the
STUDY COMMITTEE ON DES CONTRACT CASE MANAGEMENT
AND RELATED LIABILITY
MEMBERS
Representative Weiers, Cochair Senator Huppenthal, Cochair
Representative Wong Senator Richardson
Representative Aguirre Senator Henderson
Mr. Jack Cotter Mr. Darwin Cox
Mr. Phil Bayne
October 2,1995
Mission Statement
The Study Committee on DES Contract Case Management and Related Liability
was established by Laws of 1995, First Special Session, Ch. 1. Portion of Section 6 states:
It is the intent of the legislature that the chairmen of the house
and senate health and welfare appropriations subcommittees,
two legislators and one provider selected each by the president
of the senate and the speaker of the house of representatives, and
the department of economic security director or designee study the
issue of contract case management and related liability and report
their recommendations to the appointing authorities and the joint
legislative budget committee by October 1,1995.
Committee Activity
The committee held two meetings to take testimonty, discuss the issues and make
recommendations. Minutes fi- om the two meetings are attached.
STUDY COMMITTEE ON DES CONTRACT CASE
MANAGEMENT AND RELATED LIABILITY
RECOMMENDATIONS:
The committee recommends that a task force be appointed by the Speaker of the House
and the President of the Senate to make recommendations regarding the following:
1. The process and time frame for privatizing the following hctions now
performed by DES:
* case management
* parent aides
* foster care licensing/ supervision/ recmitment/ training
* adoption licensing/ supervision/ recmitmentltraining
* school liaison
* volunteer services
2. Budget and personnel issues related to the transfer of these services to the
private sector
3. The placement of licensing and contracting responsibilities under separate
centralized agencies
4. Liability issue related to contracted services
The task force should submit their recommendations to the appointing authorities and the
Joint Legislative Budget Committee no later than December 3 1, 1995.
This report is respectfully submitted by the following members:
i& 4hEk- &- Represe tative James Weiers
Mr. Phil B
RECEIVED - CHIEF GI- FRWq nccICE
ARIZONA STATE LEGISLATURE
SEP 1 4 1995
Forty- second Legislature - First Regular Session
STUDY COMMITTEE ON DES CONTRACT CASE MANAGEMENT
Minutes of Interim Meeting
Wednesday September 6, 1995
Senate Hearing Room 3 - 1 : 30 p. m.
( Tape 1, Side A)
The meeting was called to order at 1: 37 p. m. by Cochairman John Huppenthal and attendance
was noted by the secretary.
Members Present
Phil Bayne
Jack Cotter
Darwin Cox
Senator Henderson Representative Wong
Senator Richardson Representative Weiers, Cochairman
Representative Aguirre Senator Huppenthal, Cochairman
Members Absent
None
Speakers Present
Bill McCullough, Appropriations Committee Analyst, Arizona State Senate
Rene Rebillot, Assistant Attorney General and Unit Chief in the Economic Security Section,
Arizona Attorney General's Office
Maria Hoffman, Executive Director, Arizona Council of Centers for Children and
Adults ( ACCCA)
Margaret Cawley, Senior Fiscal Analyst, Joint Legislative Budget Committee ( JLBC)
Guest List ( Attachment 1)
Bill McCullough, Appropriations Committee Analyst, Arizona State Senate, reviewed the
Committee's charge to study the issue of contract case management and related liability, with
a report due by October 1st. He reported a total expenditure of $ 55 million for services for
abused or neglected children for in- home and out- of- home services.
Cochairman Huppenthal asked Members of the Committee to introduce themselves.
STUDY COMMITTEE ON DES
CONTRACT CASE MANAGEMENT
9/ 6/ 95
Responding to an inquiry by Mr. Wong in regard to the establishment of this Study Committee,
Cochairman Weiers explained that the Committee has been asked to investigate continuing
problems at Child Protective Services ( CPS) and to evaluate possible privatization.
Cochairman Huppenthal added that key issues to investigate include measures of quality,
contract, and liability.
Senator Richardson outlined his understanding that the Committee's charge is to examine the
issue of contract case management with private providers that contract with Arizona Department
of Economic Security ( DES), in order to find out if private providers are doing a better job than
the state.
Darwin Cox, Director of the Phoenix Division of the Casey Family Program, said the national
private foundation has provided $ 4 million of trust fund money for long- term foster care services
for children in Arizona. He noted that he was an administrator of children's services at DES
for many years and said he believes the issue may be one of a shift in the direction of public
policy.
Phil Bayne, Assistant Director, Division of Children and Family Services ( DCFS), Arizona
Department of Economic Security ( DES), stressed that his concern is with the liability issue.
He said that, while he is supportive of privatization, liability issues and relationships with
government should take precedence.
Presentation
Mr. Bayne made available the following materials ( Attachment 2) in order to acquaint Members
with the issue under review:
a chronology of contract staff conversion and related liability issues;
a March 10, 1994 letter from Catholic Family and comrnuiity Services ( CFCS)
to DCFS;
a DCFS August 25, 1995 report; and
a budget decision packet.
Mr. Bayne called attention to the March 10, 1994 letter which raises the concerns of CFCS and
Catholic Community Services of Tucson ( CCS) over liability issues arising from contracts with
the state to provide services to children and families, and two subsequent lawsuits. He reviewed
the timeline document which delineates the Administration for Children, Youth and Families
( ACYF) contract conversion process since the March 1994 CFCS letter, and explained the
contract staff conversion process. He responded to questions to clarify the problem raised and
pointed out that the state has been liable for unemployment if a person working under contract
for the state is laid off.
Rene Rebillot, Assistant Attorney General and Unit Chief in the Economic Security Section,
Arizona Attorney General's Office, addressed the liability issue, and said the real problem is one
STUDY COMMITTEE ON DES
CONTRACT CASE MANAGEMENT
2 9/ 6/ 95
of control and responsibility. She noted that the contracts she has seen require providers to
carry insurance and to indemnify the state, but if a contractor employee is supervised by a DES
employee, a potential liability situation arises which is handled on a case by case basis.
Mr. Weiers asked why contractor employees need to be supervised by the state if they are
capable of performing the work under the contract.
Mr. Bayne explained that supervisors assign cases and review work, and DES is seeking to
resolve the clouded liability issue raised when staff are employees of another agency. He
described the jobs performed by case managers in assessing the problems of a family and
arranging for services.
Senator Huppentfial asked if it would be preferable to turn over the whole case to a private
agency.
Mr. Bayne said it would be possible to do so if the courts and the responsible parties agree, but
pointed out that more money would be needed in the contract for the agencies to assume the
liability.
Mr. Weiers suggested that DES manpower could be reduced by transferring responsibility to the
private agencies, resulting in a reallocation of the funds.
Mr. Bayne cautioned that it might be difficult to meet the ongoing need during transition.
Mr. Cox asked if private agency supervision will increase or decrease DES liability.
Ms. Rebillot opined that liability would probably be reduced if supervision is in one place.
Senator Huppenthal pointed out that a jury might hold the state liable because it would be viewed
as the " deep pocket. "
Mr. Wong commented that since the state desires to move toward increased privatization and
minimized liability, the question becomes one of structuring the contracts to substantially limit
the state's liability, bearing in mind that it is unlikely that all liability can be eliminated. He
proposed that the private agencies could be required to report on a regular basis.
Mr. Bayne acknowledged that DCFS would be happy to consider a proposal of the kind referred
to by Mr. Wong, and pointed out that DCFS now contracts for many services.
Jack Cotter, Chief Executive Officer, Catholic Community Services of Southern Arizona ( CCS),
said CCS is a private sector agency committed to community based programming for the well-being
of children and families. He pointed out that the CCS contract indemnity was total until
June of 1990. For the last five years, however, the shared responsibilities are clearly spelled
out in the contract.
STUDY COMMITTEE ON DES
CONTRACT CASE MANAGEMENT
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Maria Hoffman, Executive Director, Arizona Council of Centers for Children and Adults
( ACCCA) distributed a position paper ( Attachment 3) setting out her remarks on contractual
relationships between DES and the private sector in Arizona. She stressed that the issue is one
of public policy, which private agencies have attempted to resolve directly with DES, and they
are in no way " out to get" DES. Ms. Hoffman highlighted the fact that the conversion of
employees from a private organization to DES is being driven by the liability issue. She
submitted that, just as the state has been able to resolve liability problems involving private
companies in road building, so should it be able to settle the problems that have arisen between
DES and private provider agencies. She reviewed her position paper and responded to
questions.
( Tape 1, Side B)
Ms. Hoffman stressed that it is important that Committee Members understand why the private
agencies have come forward to request a solution to the problem.
Mr. Cox observed that it was his experience as a state employee that the Catholic Services
agency provided better quality services than DES, and saved the state money. He noted that the
Council on Accreditation sets much higher standards than does the state, and expressed concern
over the self- regulation performed at DES.
Ms. Hoffman called attention to " Attachment A" appended to her position paper ( Attachment 3)
illustrating employee cost survey results, and argued that private agencies are more results
oriented and more cost effective. She called attention to numerous executive directors of
community based organizations present at the meeting, pledged to work to resolve the issue, and
concluded by making three recommendations:
1. DES should set licensing standards for non- residential services;
2. Use of outcome measures, as requested by ACCCA for the past twelve years;
3. Develop performance based contracts.
Senator Huppenthal paraphrased Ms. Hoffman's recommendation that, because liability might
be expected to decrease with increased privatization, the liability aspects should be managed as
a budgetary issue rather than as a point of service issue. Ms. Hoffman concurred with Senator
Huppenthal's summary of her position.
Mr. Bayne said his recommendation on the liability problem would be to complete the
conversion of staff, given that available resources do not allow resolution at this time. For the
future, however, it would be desirable to pursue enhancements in the contracts to ensure better
performance standards. He added that DES is interested in pursuing the privatization potential
where possible.
STUDY COMMITTEE ON DES
CONTRACT CASE MANAGEMENT
4 9/ 6/ 95
Mr. Cox suggested that DES could take the dollars involved in supervising private agency
employees to convert to below the line dollars and add to the contracts.
Margaret Cawley, Senior Fiscal Analyst, Joint Legislative Budget Committee ( JLBC), pointed
out that DES had requested to move money to the operating budget for more full- time
equivalents ( FTE's), but did not receive approval.
Mr. Bayne contended that a decision packet was submitted in regard to the transfer of money
from below the line to above the line to cover the staff. The conversion was subsequently frozen
and staff that had moved to state positions remain on staff, with an option to return to the
contractors. He added that the agency is attempting to further reduce staff and suggested
alternative ways to handle the problem by increasing above the line dollars or funding the
liability in the contracts as suggested. He said DES would like to boost contracts so that
supervision is paid by the private agencies.
Mr. Cotter pointed out that the contracts are capped, and highlighted the need to resolve the
liability issue in order to better serve families and children. He submitted that a change in
public policy may be the driving force behind the decisions being made.
Mr. Bayne submitted that resources will be available to relieve the liability problem if DES
recommendations are adopted.
Cochairman Huppenthal questioned whether the real issue is budgetary and organizational, rather
than one of liability. He opined that a solution will hinge on the apparent consensus that private
sector resources should increase in order to achieve higher quality services with less total
liability, and requested that legislative staff further research the budgetary issues before a report
can be made.
Without objection, the meeting adjourned at 3: 04 p. m.
Carole Price, Committee Secretary
( Original minutes with attachments and tape on file in the Office of the Chief Clerk. Copy of
minutes on file with the Secretary of the Senate.)
STUDY COMMITTEE ON DES
CONTRACT CASE MANAGEMENT
5 9/ 6/ 95
ARIZONA STATE LEGISLATURE
Forty- second Legislature - First Regular Session
STUDY COMMI'MEE ON DES CONTRACT CASE MANAGEMENT
AND RELATED LIABILITY
Minutes of Meeting
Wednesday, September 27, 1995
House Hearing Room 2 - 3: 30 p. m.
( Tape 1, Side A)
The meeting was called to order at 3: 41 p. m. by Cochairman Huppenthal and attendance
was noted by the secretary.
Members Present
Phil Bayne
Jack Cotter
Darwin Cox
Senator Henderson
Senator Richardson
Mr. Wong
Senator Huppenthal, Cochairman
Mr. Weiers, Cochairman
Members Absent
Mrs. Aguirre
Speakers Present
Pat Chumbley, House Majority Research Analyst
Marge Cawley, Fiscal Analyst, Joint Legislative Budget Committee ( JLBC)
Pat Chumbley, House Majority Research Analyst, reviewed a handout of
recommendations for possible adoption by the committee ( Attachment 1).
Mr. Bayne pointed out that with the exception of some areas of case management, the
items listed in Item # 1 are currently contracted out.
STUDY COMM. ON DES CONTRACT
CASE MGMT. & RELATED LIABILITY
SEPTEMBER 27, 1995
Mr. Cox referred to Item # 3, and asked if this references only contracting licensing that
the Department of Economic Security @ ES) provides or if it includes health and juvenile
corrections.
Mr. Weiers replied that this applies to the health aspects from DES and not to juvenile
corrections, and Ms. Chumbley agreed with his statement.
Mr. Cotter noted that the principal issue leading to this forum was the question of
whether or not contracted services are going to continue in the private sector, and if so,
there is a liability issue associated with that. He asked if the recommendations assume
that the conversion of present contract employees into DES will no longer be possible.
Mr. Weiers answered that he believes the intent is to stop conversion of present contract
employees into DES but the task force should be the body to do that.
Mr. Cox stated that there are two contracts involving conversion of employees still in
question. He asked if the committee will be making a recommendation as to whether or
not DES will be able to maintain its status quo in regard to these contracts or if they have
to redo them in a manner which will put the positions back out to private agencies.
Senator Huppenthal asked Cochairman Weiers if another item should be added to this
recommendation or if he is comfortable proceeding and dealing with that issue with the
task force. Mr. Weiers asked Ms. Chumbley her opinion.
Ms. Chumbley perceived that this a policy decision and she cannot advise him on it.
Marge Cawley, Fiscal Analyst, Joint Legislative Budget Committee ( JLBC), stated that
the providers would like to have something done this year, and the task force is too far
off for the specific predicament that they are in. She said she is not sure the situation has
been explained to the committee members clearly enough for a decision to be made; it
probably should be discussed. She agreed with Ms. Chumbley that it is a policy decision
which should be made by the committee.
Mr. Bayne stated that in the two contracts an employee of the provider was trained,
working, and being supervised on state premises; the issue of liability in this instance is
what needs to be addressed.
Mr. Weiers asked what additional money is involved in these two situations.
STUDY COMM. ON DES CONTRACT
CASE MGMT. & RELATED LIABILITY
2 SEPTEMBER 27, 1995
Mr. Cotter said that there are three existing contracts which are additionally insured in
order to protect the providers, at a total cost of $ 23,000. He said he would like to see
some resolution to this problem because the providers have to pay this amount.
Discussion followed among the members concerning the issue.
Mr. Wong asked why DES does not hire its own employees rather than utilizing
individuals from the providers.
Mr. Bayne said that is a good point and one of the concerns he has because of exposure
to liability. He said at this point, DES is looking at how it can contract more specifically
for services rather than individuals. In the meantime, the current issue exists and the
liability issue needs to be resolved.
Mr. Wong suggested that this practice be stopped immediately. He spoke in support of
the recommendations but submitted that another item be added requiring resolution of the
liability issue. He asked if a time frame for the task force to conclude its work has been
established.
Cochairman Huppenthal stated that a termination date can be added to the
recommendations.
Mr. Wong recommended that a termination date of no later than 60 days be set. He
asked the length of the contracts.
Mr. Cotter answered that the contracts run either through the close of the fiscal year or
December 31, 1995, depending on the recommendations of this committee.
Mr. Bayne explained that a parent aide works with parents to develop better parenting
skills. A school liaison works between Child Protective Services ( CPS) and the school
to update them on activities; generally this involves cases which have not required foster
care but it could go on to involve children in foster care. He said volunteer services
cover a range of items, such as providing supplemental services for children, working
with parents in the home or in the DES office, supplementing agencies, and recruiting,
training, or supervising volunteers.
Mr. Cotter indicated that the recommendations before the committee take precedence over
the particular issue that his contracting agency has. He said, hopefully, in addressing
these recommendations, the other problems will be resolved.
STUDY COMM. ON DES CONTRACT
CASE MGMT. & RELATED LIABILITY
3 SEPTEMBER 27, 1995
*.
The members agreed that the liability issue should be addressed by the task force and
discussion followed concerning a termination date.
Mr. Weiers moved, seconded by Mr. Wong, that the committee add to
its recommendations a termination date of December 31, 1995, and the
task force be directed to resolve the liability issue. The motion carried.
Without objection, the meeting adjourned at 4: 20 p. m.
( Attachment and tape are on file in the Office of the Chief Clerk).
STUDY COMM. ON DES CONTRACT
CASE MGMT. & RELATED LIABILITY
4 SEPTEMBER 27, 1995