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Does the administration have a double standard in the care of the disabled?
As The Boston Globe reported last week, Governor Patrick has “unveiled an ambitious and potentially costly plan” to reform the way the state’s criminal justice system handles mentally ill people.
The governor has proposed both a major increase in staff at Bridgewater State Hospital and a new facility there where potentially violent patients could receive care, according to the Globe.
We support the administration’s commitment to expanding care at Bridgewater State. But we wonder whether this is yet more evidence of what appears to be a double standard on the part of the administration with regard to care of the mentally ill versus persons with developmental disabilities.
The administration appears to believe that congregate settings are necessary and appropriate for the mentally ill, but not appropriate for the developmentally disabled. In fact, we think Governor Patrick will be known as a builder of major institutional facilities for the mentally ill, yet as a closer of facilities for the developmentally disabled. This appears to us to reflect the absence of a comprehensive plan by this administration for care of all disabled people in the commonwealth.
Why are we building new state facilities and expanding state-run care for one group, yet tearing facilities down, eliminating an intensive care model, and privatizing most services for another group?
In addition to the plans for expansion of Bridgewater State for the mentally ill, the administration has taken major credit for the construction of the new Worcester Recovery Center and Hospital. That facility, which opened in August 2012 at a cost of $302 million, has 320 beds for persons with mental illness. The administration has billed it as “the largest non-transportation construction project (the state has) undertaken in more than 50 years.”
The administration has also apparently realized that intensive treatment models are necessary for the mentally ill. According to the Globe, the administration has declared that mentally ill people “should receive the appropriate care in the appropriate setting.” The Bridgewater proposal includes a plan for spending $10 million for an additional 130 full-time mental health clinicians at the complex. Patrick administration officials told the paper that if the Legislature approves this funding promptly, the additional staff could be working at Bridgewater by September.
The Bridgewater proposal further calls for $500,000 to study the possibility of retrofitting an existing state facility such as Taunton State Hospital or building yet another a new facility to treat and evaluate potentially violent people accused of committing crimes, according to the Globe. The plan gives no cost estimate for the new facility.
At the same time, the administration is closing or has closed four of six developmental centers for people with profound levels of intellectual disability and severe medical conditions, contending these centers are too institutional. Developmental centers provide an intensive level of care that must meet federal Intermediate Care Facility (ICF) standards. ICF rules specify more staffing and monitoring than do federal and state requirements for privatized, community-based care in group homes.
Even sheltered workshops are considered by the administration to be too institutional for the intellectually disabled, and the administration has announced plans to shut those down by June of next year. The administration is, at the same time, pouring additional funding into privatized group homes for the intellectually disabled, scattered in communities throughout the state.
The argument could be made that the administration views institutional care as appropriate for people with mental illness who are violent, and that’s why it is expanding facilities such as Bridgewater State. But that doesn’t explain the construction of the Worcester hospital center; and it doesn’t explain why the administration is eliminating the ICF care model at facilities for the developmentally disabled such as the Templeton Developmental Center, where many people with behavioral problems live.
The alleged assault by a Templeton resident that caused the death last year of Dennis Perry shows that even that facility may not be fully equipped to meet the needs of all the people who live there, and keep them safe. And yet, the administration is closing Templeton as an ICF and converting the facility to group homes, which will only reduce the level of staffing and supervision there. Also, the attempted rape of a woman by a resident of a group home in Chelmsford in 2011 shows that there are intellectually disabled persons with potentially violent impulses who live in the DDS community system.
It has been argued that another difference between facilities for the mentally ill, such as the Worcester hospital center, and developmental centers for the developmentally disabled is that the Worcester facility is meant to help people make a transition to independent living in the community, whereas developmental centers are not intended to do so. Therefore, according to this argument, the developmental centers should be closed, and the remaining system will be devoted either to serving all disabled people in the community or helping them get there.
Our response to that argument is that we have consistently stated that residents of developmental centers who want to benefit, or can benefit from community-based care should be encouraged to do so. As far as we know, there has never been any rule or policy that prevented anyone who wanted to leave a developmental center from doing so and moving into the community system.
As we argued in connection with the Chelmsford group home incident, the real issue is the care model. The administration wants to eliminate the intensive, ICF care model for people with developmental disabilities. The administration does acknowledge that people with mental illness should receive the appropriate care in the appropriate setting. And they appear to understand that the community system is not the appropriate setting for all mentally ill people. But for some reason, the administration hasn’t yet figured out that the community system isn’t the appropriate setting for all people with intellectual and developmental disabilities either.
We do believe that one day, the state will come to realize that institutional care for a certain segment of the developmentally disabled is needed, and there will be an effort to reconstruct our institutional facilities for them. Unfortunately, we’re making that future job much more difficult and expensive by tearing down the system that we have had in place and which we spent so much money to upgrade from the 1970’s onward.
State-funded provider execs paid more than $80m a year
More than 550 executives working for some 250 state-funded corporate providers of services to people with developmental disabilities in Massachusetts received a total of $80.5 million in annual compensation as of Fiscal Year 2012, based on nonprofit federal tax reports surveyed by COFAR.
The average compensation among all 559 executives surveyed was $143,969 per year. Among CEOs, the average compensation was $185,809, while executive directors were paid an average of $127,164 in salary and benefits.
According to the COFAR survey, provider executives making over $100,000 a year on average included 97 executive directors, 92 CEOs, 71 chief financial officers, 31 chief operating officers, and 83 vice presidents. CEOs or presidents of 14 providers made over $300,000 each.
“I think few people realize what the real cost of privatized care is in Massachusetts,” COFAR President Thomas Frain said. “Do Massachusetts taxpayers really need to be paying hundreds of corporate executives millions of dollars for grossly duplicative duties? This makes no sense at all.”
COFAR has long been critical of efforts by the Patrick administration and the Romney administration before it to outsource residential and other services to providers without adequate oversight of the growing privatized system. The system appears to have become top-heavy with corporate executives who do not provide direct-care services, but who nevertheless draw large salary and benefits packages.
Most of the providers surveyed are under contract to the Department of Developmental Services, which manages or provides services to people with intellectual disabilities who are over the age of 22. Frain noted that DDS pays more than $1 billion a year in contracts to service providers, which operate group homes and provide day programs, transportation and other services to tens of thousands of intellectually disabled persons in the DDS system.
State regulations capped state payments to provider executives at approximately $149,000, as of Fiscal Year 2011. The average compensation among the surveyed executives was slightly less than that amount. Money earned by executives above the state cap is supposed to come from sources other than state funds.
But while the state cap on executive salaries is intended to limit the total amount of state funds going into the pockets of provider executives, COFAR has reported that the state may not receive complete information on the total compensation paid to provider executives and may not have the capacity to oversee their finances adequately. Also, COFAR has raised concerns that increasing amounts of money going to provider executives has not translated into higher pay for direct-care workers in Massachusetts.
The state auditor reported last year that in one case involving the May Institute, a DDS provider, hundreds of thousands of dollars in state funds had been paid to company executives in excess of the regulatory cap. COFAR’s executive compensation survey found that the May Institute CEO received $404,900 in compensation in FY 2011 and that a total of 12 company executives were paid a total of $2.5 million that year.
At $404,900, the May Institute CEO was the fifth highest paid CEO on COFAR’s list. Community Systems, Inc. topped the COFAR list of the highest paid CEOs, with two employees listed on the company’s federal tax filing as serving as company CEOs in FY 2011 and drawing combined compensation of $526,755. Second on the list was Morgan Memorial Goodwill, whose CEO was listed as making $464,572 in FY 2012.
Community Systems federal tax filing states that the company, which is based in Forestdale, MA, took in $14.4 million in revenues in Fiscal Year 2011. Of that amount, the company received $11.6 million from DDS, according to a 2011 financial report filed with the state’s Operational Services Division.
(The Community Systems OSD report lists only compensation in FY 2011 for two executive directors and does not list the company CEOs. As a result, OSD appears to have disallowed only $21,000 in funding to the company as having been earned above the regulatory compensation cap. This appears to confirm COFAR’s finding that the OSD receives incomplete information from providers on executive compensation.)
In addition to the CEOs listed on the Community Systems federal tax report, two employees were listed as executive directors of the company that year and made a combined total of $276,538. The OSD report lists the two executive directors of the company as having made only $154,473.
The following chart, based on COFAR’s survey of some 250 providers, shows 30 of the providers with the top earning CEOs (click on it to enlarge).
Where’s the beef in Community First?
We’ve long maintained that the Patrick administration’s agenda of phasing down and closing state developmental centers would ultimately fail to free up additional funding for the community based system.
It’s been nearly three years since the administration announced its plan to close the Fernald, Templeton, Monson, and Glavin Centers and reportedly plow back as much as $45 million a year in the “savings” into beefing up the largely privatized community-based system of care. That $45 million savings projection was a cornerstone of the administration’s “Community First” initiative.
So far, the administration has succeeded in moving hundreds of residents out of developmental centers, starting with Fernald, which is now emptied of all but 14 of its residents, who have filed appeals of their transfers. But nothing remotely close to the $45 million in savings has materialized. In fact, the opposite has been the case — the administration has continued to cut community-based line items in the Department of Developmental Services budget.
In a November 20 email to members and other advocates, the Association of Developmental Disabilities Providers, which has wholeheartedly supported the closures of the developmental centers, stated the following :
For the last four fiscal years, in order to cope with the effects of the economic collapse of 2008, the Commonwealth’s budget has:
- deeply cut Family Support programs, leaving 10,000 families without service,
- inadequately addressed Chapter 257 rate reform by not introducing sufficient funding to rate making but instead forcing existing programs to redistribute already inadequate funding
- failed to address historically low salary needs of the community workforce (though the Legislature has recently added the first salary reserve dollars in four years)
- continued to require community programs to implement state mandates without sufficient funding, including closing sheltered workshops without funding to replace this model in favor of a more inclusive and empowering model.
- not backed it’s professed interest in Community First and Employment First with funding to make these efforts successful. (my emphasis)
Not exactly a ringing endorsement of the success of the administration’s community-based care delivery model and its promised use of of the savings from the developmental center closures. We hope the ADDP and the Arc of Massachusetts will reach the next logical step in their argument and urge the administration to cease and desist from closing the centers.
Unfortunately, the ADDP and the Arc of Massachusetts are supporting H.984, known as “The Real Lives Bill,” which appears to continue to rely on the premise that DDS clients should not be given the choice of living in developmental centers.
The bill, sponsored by Rep. Tom Sannicandro, is intended to provide for more choice for persons with intellectual disabilities. But it appears to specifically deny consumers the choice of “congregate services.” In other words, everyone should have a choice, as long as they choose only small, community-based settings. We believe, however, that the congregate services provided by developmental centers are appropriate for certain people who are unable to benefit from community based care. And now we’re seeing that closing the congregate care centers is not freeing up community-based funding.
Sannicandro’s bill does appear to recognize that the community-based system has not thus far benefitted from the developmental center phase-downs. The bill’s text reads:
Too many people are not receiving the assistance they need. The public Medicaid system is reeling from cost pressures. The time has come for individuals with disabilities, families, advocates and providers to work together with policy makers in the administration and legislature in crafting a support system that both increases quality and on average reduces costs whenever possible.
We agree with the language in Sannicandro’s bill on that last point. We just disagree that closing the developmental centers is the right way to go about it.
Update on our requests for cost records
After a month and a half, it’s troubling that the Patrick administration is apparently still unable to locate cost records we requested pertaining to a single community-based group home contract.
I just received a letter from the Department of Developmental Services, dated September 14, that they are in the process of searching for the documents, which I had requested on July 29. Meanwhile, the MassHealth Privacy Office in the Executive Office of Health and Human Services has been searching for these same records since August 9.
To recap, we’ve been trying to find out the sources of state funding for medical, nursing, clinical, and therapeutic services in a single DDS group home program run by the May Institute, a private provider. We have a copy of a $1.2 million contract with the May Institute, which provides for 24-hour residential services under the program for 14 individuals in four residences in the DDS Central Middlesex Area.
The FY 2009 contract, however, only provides for direct care and limited nursing services for the 14 residents. It does not mention medical, extended nursing, clinical or therapeutic services.
From what we’ve been able to determine, the administration has been basing its $20 million annual cost savings estimate in closing the Templeton, Monson, and Glavin Developmental Centers on a comparison of their budgets with the cost of community-based group contracts such as the May Institute contract. But here’s the rub. Our understanding is that the Templeton, Monson, and Glavin budgets do provide for medical, extended nursing, clinical, and therapeutic services.
Naturally, the community system will appear to be less expensive than the developmental centers if certain community-based costs are not taken into account. That’s why we want to find out exactly how much is being paid to fund those additional services to which the May Institute residents are reportedly entitled, and where that money is coming from.
By the way, we originally asked DDS on July 7 for the budgets of the Monson, Templeton, and Glavin Centers. A month later, we received a one-page document from the department with single, line-item amounts representing the total annual spending for each facility. There was no budgetary breakdown whatsoever for the facilities.
We appealed to the state’s Public Records Division for help, explaining that a budget of a state facility involves more than just a single line item. As a result, I received a second letter from DDS, also dated September 14, stating that the department was in the process of searching for the “additional (budgetary breakdown) information” I had requested.
I guess DDS considers a budget and a “budgetary breakdown” to be entirely separate concepts. Stay tuned.
Once again, we’re waiting for the administration’s cost records
It has been more than a month since we asked Secretary of Health and Human Services JudyAnn Bigby for public records detailing the costs of specified services in a particular group home program for intellectually disabled persons in Massachusetts.
It has been almost two months since we asked Commissioner of Developmental Services Elin Howe for the budgets of the Templeton, Monson, and Glavin developmental centers.
To date, we’ve received neither set of records.
As we’ve previously noted here, we’ve been attempting to compare the cost of an apparently typical vendor-run group home program with the three developmental centers. We wanted to see whether the Patrick administration was comparing apples to apples in claiming to the Legislature in the last two fiscal years that closing the Templeton, Monson, and Glavin centers will save tens of millions in state funds.
As we reported, a group home contract, which we did receive last May from DDS, specified a yearly cost per resident of $104,400. In its cost savings analysis, the administration compared a very similar residential cost based on group home contracts with an average calculated cost of care at Templeton, Monson, and Glavin.
The potential problem with the administration’s analysis that we found in examining the single group home contract was that it specified budgeted costs for only direct-care, supervisory, and minimal nursing staff. What about the extensive nursing, medical, clinical, and therapeutic staffing that exists at the developmental centers and to which the residents of DDS group homes are entitled?
The fact that those additional medical, clinical, and therapeutic costs were not in the group home contract we examined appeared to raise the question whether the administration’s savings analysis was accurate. One immediate question was: if those additional costs are not paid through DDS contracts, how are they paid? Secondly, what is the total amount of those community-based costs that the administration may have missed in its analysis?
Once we get the answers to those questions, we can determine for ourselves whether there would be a savings or not in closing the developmental centers.
On July 29, we sent Public Records requests to both Secretary Bigby and Commissioner Howe, asking for copies of any documents detailing funding for medical, nursing, clinical, and therapeutic services for individuals residing in the community-based group home program we had selected for review. About three weeks prior to that, we had asked DDS for the Templeton, Monson, and Glavin budgets for the same time periods as the group home contract.
On August 9, I received a letter from the records custodian at EOHHS, stating that the agency was in the process of identifying the records we had requested regarding the group home contract. Last week, I called the records custodian, and was told EOHHS was still working on our request. He wasn’t able to tell me when the records would be found.
We’ve appealed to the Public Records Division for the Templeton, Monson, and Glavin budget documents. We’re close to filing an appeal for the group home contract records.
But one piece of useful information may have emerged here. The fact that the August 9 response to our request came from EOHHS and not from DDS does appear to confirm that it is not DDS, but some other source at EOHHS, that funds medical, clinical, and therapeutic services in the DDS vendor-run group home system. We believe that other source of funding is MassHealth.
In any event, it’s getting clearer and clearer that the administration wasn’t counting all the community-based costs of care it incurs when it told the Legislature there would be major savings in closing the developmental centers.
Identifying the missing costs
The Patrick administration claims that the average per-person cost of Department of Developmental Services vendor-run group homes is less than the average per-person cost of state developmental centers for persons with intellectual disabilities.
But we’ve now identified some specific missing group home costs that we think the administration overlooked in its analysis.
An apparently typical DDS vendor contract, which we have reviewed, did not specify any psychological or therapeutic services, and only specified minimal nursing services. Developmental center budgets, on the other hand, do provide for all of those services.
This appears to be the first major confirmation we’ve been able to obtain, after months of Public Records Law requests from DDS, that the Patrick administration’s savings claims in closing four developmental centers in Massachusetts are based on an apples-to-oranges comparison. The administration has not fully responded to our follow-up questions about these costs.
I asked DDS Commissioner Elin Howe on June 16, after we had first reviewed the $1.2 million contract, whether medical, clincal, and therapeutic services were available to the residents of the program, and, if so, how those services were funded.
The email I received in response from DDS General Counsel Marianne Meacham, dated July 2, stated the following:
With regard to your questions regarding clinical services available to individuals in the particular…program site, as you know, a full array of clinical services (medical, physical therapy, speech therapy, occupational therapy, psychological, etc.) are available to the individuals in the program through community providers as needed and set forth in the individual’s individual support plan.
This carefully worded answer states only that medical, clinical, and therapeutic services “are available to individuals in the program,” but it doesn’t say how those services are funded — in other words, where the money comes from. Here’s why that is a key question:
In July 2010, the adminstration provided a cost analysis to the Legislature, which claimed a $20 million annual savings in closing the Templeton, Monson, and Glavin Developmental Centers and transferring most of their residents to vendor and state-operated group homes. In the cost analysis, the administration specified a “community residential” cost per client of $107,689. After adding an average “day services” (work and daily living skills programs) rate to that cost and an average transportation rate, the administration computed a total “community services cost” of $140,955 per client.
The administration then compared that $140,955 total community cost to an average per-person cost at the Templeton, Monson, and Glavin centers of $233,902. The administration’s conclusion was that serving a client in the community was $92,947 less expensive than in a developmental center.
After we asked DDS, starting last December, for all documents supporting its community residential cost figure, DDS provided, among other things, a spreadsheet listing total costs of close to 1,000 vendor contracts in FY 2009. We selected one of those contracts for closer review and asked DDS for a copy of it.
The Fiscal Year 2009 vendor contract with the May Institute, Inc. specified 24-hour staffing in a program serving 14 individuals. The contract further stipulated a rate per client of $286 per day, or $104,400 per year. This was quite close to the $107,689 community residential rate in the administration’s analysis.
However, as noted, the $104,400 community residential cost did not include clinical, therapeutic, or full medical costs of care available to community-based residents. The budgets of the Templeton, Monson, and Glavin centers do provide for those services.
On July 6, I emailed back to Meacham at DDS, asking once again how the medical, physical therapy, speech therapy, occupational therapy, psychological, etc. services available to residents of the May Institute program were funded for the residents of the May Institute program. To date, I’ve received no reply to my question.
This is why we need an independent study of the cost of closing the Templeton, Monson, and Glavin Centers.
Nonprofit vendor salaries drawing increased attention
Organizations such as the Massachusetts Providers Council may still be defensive about suggestions that scrutiny be applied to the sometimes excessive salaries drawn by executives of human service providers in Massachusetts and elsewhere.
But it’s becoming clear in the wake of the fallout over the recent $4.2 million severance package for a Blue Cross Blue Shield CEO and a number of other similar cases, that even in the nonprofit community, responsible voices are beginning to be raised urging serious consideration of the appropriateness of executive pay levels.
Here’s Ruth McCambridge, editor in chief of the influential Nonprofit Quarterly, discussing in an email to subscribers the Blue Cross severance package to former CEO Clive Killingsworth:
This case is a poster child for why the public does not trust our considerations of pay levels. While most of us are, of course, well within or below reasonable limits for pay, there are these high fliers among us, and in this case the money that Killingsworth walked away with came very directly from millions of families’ pockets, some of whom are legitimately concerned about such stuff as getting by from day to day.
Meanwhile, in an interview with the Nonprofit Quarterly last week, Paul Light of the Wagner School of Public Service at New York University, had this to say:
I think the nonprofit sector has an obligation to get the very best talent it can at the most reasonable cost appropriate to its role in the public service—more broadly defined. Yet you can’t simply say, “We’ve got to pay whatever the market demands, and that’s the only criteria we can use.”…
I don’t think you have to take that vow of poverty, but at the same time I wonder if the sector is obligated to set itself out there as being more a part of the community that it serves—obligated by basic issues of fairness to set reasonable market-sensitive pay, but also stay in touch with the world we serve.
Here in Massachusetts, State Senator Mark Montigny of New Bedford came closer this year than ever before in gaining passage of proposed legislation that would limit pay for both nonprofit executives and board members to $500,000 (a pretty generous threshold in our view, particularly for board members). Versons of Montigny’s measure passed the House and Senate in the form of budget amendments last month, but the measure was ultimately knocked out of the budget conference committee. However, the measure is still alive in the form of a bill before the Judiciary Committee, but has not yet been scheduled for a hearing.
Montigny’s bill is supported by Attorney General Martha Coakley, who has been investigating compensation of nonprofit board members, and found that several health insurers were paying tens of thousands of dollars to their trustees annually. Coakley’s spokesman, Brad Puffer, told The Globe last month that Coakley and her staff are concerned about situations in which “board members of any charity (nonprofit) are paid.”
Massachusetts already limits the amount of state funds that can be earmarked to pay for nonprofit salaries to $143,900. COFAR has reported that in a number of cases, state and federal records regarding salaries subject to that compensation limit don’t match each other.
Meanwhile, Coakley, along with Massachusetts State Auditor Suzanne Bump and Inspector General Gregory Sullivan have been investigating questionable financial practices, including high executive salaries, of nonprofit organizations involved in the state’s special education program. COFAR has called on Bump and Sullivan to expand their probe to examine the entire human services vendor system for persons with intellectual disabilities.
In sum, this is an issue that isn’t going away soon and can’t be ignored. Salaries and financial practices of human service vendors, insurers and other nonprofit organizations should be a major focus of state oversight. The other major focus should be on quality of care and services. To the extent that there are problems or a lack of state oversight in one of these two areas, we believe there are likely to be problems in the other.
This is where our money is going
Inspector General Gregory Sullivan has alleged numerous financial abuses in the state-funded Merrimack Special Education Collaborative, which coordinates special education programs among several school districts in Massachusetts.
Meanwhile, State Auditor Suzanne Bump is investigating whether the case is part of a larger pattern of abuse in the special education system in the state. And Sullivan’s findings are being reviewed by Attorney General Martha Coakley’s office.
While as many as three state agencies are now investigating this matter and potentially other special education contracts, it’s clear that state oversight of the special education system in Massachusetts has been lacking. The system has allowed one man, John Barranco, to allegedly fleece taxpayers of more than $10 million. The allegations include using a credit card for tens of thousands of dollars in personal items, gifts to a family member, and a no-show job to a lobbyst caught up in the Cognos software scandal involving former House Speaker Sal DiMasi.
We’ve just looked at the federal and state financial filings of the Merrimack Special Education Collaborative and related, nonprofit Merrimack Education Center, both of which Barranco allegedly controlled. These two organizations are clearly interrelated in a troubling way; and, as in the cases of some other contractors we’ve looked at, state and federal records don’t appear to match up with each other regarding the salaries of Barranco and other executives of the Special Education Collaborative and Education Center.
For instance, the federal IRS Form 990 for the Merrimack Education Center listed Barranco’s total compensation as $464,411 in FY 2009 and $525,198 in FY 2010.
However, the state Operational Services Division listed Barranco’s total compensation as $427,909 in FY 2009 and didn’t list any compensation for him in FY 2010 on its Uniform Financial Reports on the Merrimack Special Education Collaborative. (The OSD does not appear to have a UFR on file for the Education Center.) Is OSD unaware that Barranco apparently received more than a half million dollars in state-funded compensation in FY 2010?
According to the Globe, Barranco retired as executive director of the Special Education Collaborative in 2005 and appointed John Fletcher and Donna Goodell in 2007 as co-executive directors. Both Fletcher and Goodell were listed on OSD’s UFR for the Special Education Collaborative in FY 2009 as making over $200,000 each, and in FY 2010 as making about $150,000 each. In FY 2009, Barranco, despite his alleged retirement, was still listed on the UFR for the Collaborative as a third executive director.
The UFR and Form 990 reports raise numerous other questions about the financial accounting practices of both the Center and the Collaborative. For instance, although the OSD uses the UFR to disallow state funds for salaries of vendor executives in excess of $143,900, the 2009 UFR for the Collaborative indicates that no funds were disallowed for the Collaborative in 2009, even though five executives of the Collaborative — including Barranco, Goodell, and Fletcher — were listed as making over the threshold amount that year.
The FY 2009 and 2010 UFRs state that the Collaborative received $24.5 million from “Massachusetts local and quasi-governmental entities” (apparently the 10 member school districts in the Merrimack Valley) in FY 2009 and $15.9 million in FY 2010. In addition, the Collaborative received over $800,000 each year from the Department of Developmental Services.
Senate President Therese Murray has promised to introduce legislation to increase oversight of the special education collaboratives. But these collaboratives are only a part of the vast human services contracting industry in Massachusetts, and their alleged abuses are not unique to special education. The entire $2.6 billion vendor system needs better oversight.
Administration admits to discrepancies in vendor salary info
Patrick administration officials appear to be admitting we may be on to something when we pointed out the state may be getting different information than the federal government gets about salaries earned by human services contractors in Massachusetts.
In an email sent to us on May 11, Terry McCarthy, director of audit in the state Operational Services Division (OSD), acknowledged there were discrepancies between executive salary information provided to the OSD and to the federal Internal Revenue Service for the same contractors.
McCarthy stated that the OSD will “reexamine the cited (federal and state salary reports) for proper compensation disclosures,” and will seek explanations from two of the contractors we identfied for apparent discrepancies in their numbers.
At the same time, McCarthy put forward at least three explanations for the discrepancies, none of which fully satisfy our concerns about them.
First, a bit of background. Concern has mounted around the country about salaries of executives of nonprofits. In Massachusetts, that concern has largely centered around the pay of executives of hospitals and health insurers, but it has also extended to the hundreds of nonprofit vendors that contract with the state to provide human services to people with disabilities.
The OSD, which oversees the contracts with these vendors, requires them to provide detailed financial reports that disclose, among other things, the salaries made by their executives. In addition, a state regulation caps the amount of state funding that goes to pay these salaries at $143,986 a year, meaning that sources other than the state would have to fund salaries higher than that amount.
One of the purposes of this regulation capping executive salaries is to ensure that an adequate amount of state funding is put towards wages of direct-care workers.
COFAR examined state Uniform Financial Reports (UFRs), which are filed with the OSD, and Form 990s, which are filed with the IRS, for the May Institute, Vinfen, and Seven Hills, three of the largest contractors to the Department of Developmental Services. In each case, the UFRs for the Fiscal Year 2009 listed lower salaries and other compensation for the same executives than did 2009 IRS tax filings for the same firms.
The UFRs also listed a lower number of executives earning high levels of compensation than were listed on the Form 990s for the same firms. These discrepancies imply that OSD may be unaware of the total amount of state funding potentially being used to pay salaries of these executives.
In his response, McCarthy acknowledged that the total compensation of four of five identified Vinfen executives appeared to be underreported on the UFRs by $101,539, while the compensation of two executives of Seven Hills appeared to be underreported by $18,509. McCarthy said OSD will seek explanations from those contractors about those differences.
COFAR also reported that the 2009 IRS form for Seven Hills listed four employees making over the $143,986 threshold, while the state UFR listed only two employees making over that amount. The difference in reported compensation between the two forms was $385,000.
For Vinfen, the 2009 IRS form listed a total of 10 employees earning more than the threshold compensation amount, while the UFR listed only four employees earning more than that amount. The difference was $1.2 million.
McCarthy, as noted, stated that the OSD will reexamine the compensation disclosures made by these vendors. However, he also offered two explanations for the differences in the numbers of executives listed on the state and federal forms. One is that there are different filing deadlines for the two forms: the IRS forms lag behind the UFRs.
That may be, but it doesn’t seem a sufficient reason to list different salary numbers on each report or to report salaries for more people on the 990 forms than on the UFRs. Moreover, the 2009 Form 990 for Vinfen was signed by its president on May 14, 2010. The UFR was first submitted to OSD in November 2009 and refiled in April 2010 and then in December 2010. Again, there’s no apparent reason why the final UFR, which was submitted after the Form 990, would have less executives listed and lower salaries than the Form 990.
The second explanation offered by McCarthy was that the Form 990 has “more expansive” compensation disclosure requirements than the UFR. McCarthy said the UFR is limited to including individuals in policy making positions, and would therefore not include a highly paid clinician, for instance.
That doesn’t seem to jibe, however, with the OSD’s reimbursable cost regulation, which doesn’t say anything about exempting non-policy making individuals from the salary cap.
Also, all of the 13 individuals listed in the May Institute Form 990 as making over $150,000 are executive-level employees, starting at senior vice presidents on up to the president and CEO. Those people are all clearly policy-making individuals, yet only two of them are listed on the UFR.
Finally, McCarthy addressed our finding that there was more than a half million dollar difference in the reporting of the compensation of the CEO of the May Institute on the state and federal forms in 2009. This, he said, appeared to be largely due to a one-time $682,343 distribution to the CEO on a vested deferred compensation plan that had been previously reported annually as deferred compensation.
It wasn’t clear, however, whether McCarthy was saying that because this was a one-time distribution on a previously reported deferred compensaton plan that it didn’t need to be reported on the 2009 UFR. But even if the CEO’s compensation isn’t counted, the difference between the total compensation for the 12 other May Institute executives listed on the IRS form and the compensation for the one other executive listed on the state UFR is $2.8 million.
We’re glad the OSD will go back to these three vendors and check to see that their UFRs were filled out accurately. But we’re concerned that there is a potentially larger problem here. It seems OSD does not have the capacity to adequately oversee the contracting system in this state. One indication of that is that the latest online version of the May Institute 2009 UFR had been submitted by the contractor on March 22, 2010, more than a year ago, yet it still hadn’t been reviewed by OSD as of today’s date.
This administration needs to get a better handle on the human services contracting system in Massachusetts.
Seeking a chance to speak truth to power
State Rep. Anne Gobi (right) listens to Joan Douty (center) talk about her daughter's experience at Glavin
The administration, which also has no time to listen to people like Joan Douty, claims Glavin and the other centers must be closed because they’re too expensive to operate. But COFAR has maintained that the administration’s claimed cost savings in closing the centers appears to be based on an apples-to-oranges comparison of the average community-based resident and the average facility-based resident. Developmental center residents are older, more medically involved and more intellectually disabled on average than community-based residents.
Moreover, as COFAR and other advocates have noted, the centralized services model of the developmental centers is highly cost-efficient when compared to the dispersed clinical, medical, and day services that characterize the community system.
COFAR has called since last year for an independent study of the cost of closing or maintaining the developmental centers because previous budget amendments have resulted in flawed analyses done by the administration itself, concluding, of course, that the facilities should be closed.
But here’s the problem. In the Massachusetts Legislature, a handful of people make all the decisions, and Rep. Dempsey is one of them. There was no floor vote this week on Rep. Gobi’s amendment for the independent study. In a closed-door meeting in his office, Dempsey simply ordered that Gobi’s amendment be scuttled. It was not included in a catch-all budget amendment boosting human services line items that will be voted on this week.
Among those who Rep. Dempsey apparently has been listening to are the human service vendors in Massachusetts, who run most of the community-based group homes in the state and who are seeking more business when the developmental centers are closed. In a letter sent to Dempsey and other legislators a day before Gobi’s amendment was thrown out, the Association of Developmental Disabilities Providers continued to pump out misinformation about the developmental centers.
The ADDP letter called for rejection of Gobi’s amendment and repeated the dubious claim that the developmental centers are “expensive and inefficient to operate.” So why not agree to an independent study which would settle the question as to which system is most efficient? To that, the ADDP letter made the ridiculous assertion that “this issue has been the subject of study for 30 years.”
Among the other pieces of misinformation in the ADDP letter was the claim that the developmental centers aren’t needed because “families overwhelmingly choose community settings for their loved ones.” The ADDP letter didn’t mention that that’s because admissions to the developmental centers have been effectively blocked since the 1980s.
The fact is that families that are being transferred from the developmental centers targeted for closure have overwhelmingly chosen to be placed at other developmental centers or in state-operated group homes. They are avoiding the vendor-run system because they know it is beset with problems of poorly paid and under-trained staff.
The Senate now remains the only real hope for this sorely needed independent cost study. We believe the study should be done by a non-governmental entity selected by either the State Inspector General or State Auditor. Once again, though, the question remains whether Senate leaders will allow such an amendment to be debated in the light of day or whether they will do what the House did and quietly kill it in the proverbial smoke-filled room.
COFAR blog 