Nonprofits Hold Key to State Budget Savings

Is it possible to cut state spending more and keep providing the services the people of Connecticut need?

Yes, says a new state report—by carefully expanding the use of qualified nonprofit health and human services providers that deliver quality programs and services at less cost. 

The bipartisan Commission on Nonprofit Health and Human Services found that Connecticut’s nonprofit community already provides services to the state at substantially less cost than state employees and institutions.

It’s a wide spending gap that reveals hundreds of millions in potential savings.  Policymakers facing a deadline to plug a $3.2 billion budget gap for the next fiscal year should take note. 

In most cases the cost difference between the state and nonprofit providers is so large that even if the wages, benefits and costs of care were increased among nonprofits, as the commission recommends, substantial taxpayer savings remain.

Confirms findings

The 28-member commission, created last year by the legislature, analyzed the funding provided to nonprofit providers of health and human services under state Purchase of Service contracts.

Among its many activities, the commission compared employee wages, benefits, and cost of services between public- and private-sector providers.

What the commission found confirms what many—including the Connecticut Regional Institute for the 21^st Century, Commission on Enhancing Agency Outcomes, CBIA’sStatecost, and others–have been saying: The state doesn’t have to spend as much as it is now to provide the people of Connecticut with essential services.

Rebalancing the cost of human services care and how it is provided—for example, by moving people out of state institutions and into community- or home-based programs–could be both efficient and cost-effective.

This is because the commission found state employee and retiree compensation and benefit costs are so substantial that they far outstrip similar costs in the nonprofit sector.

Institutional costs

In addition to substantial wage and benefit differences, there are also great differences in costs when comparing traditional, institutional care with community-based care. Institutional care is traditionally the method of choice for those requiring a higher level of healthcare. But times are changing, says the commission.

“Advancements in treatment methodologies, expansion of community-based services” and new drug therapies “have greatly reduced lengths of stay and even negated the need for institutionalization.

“Increasing numbers of individuals are now safely treated and served in their local communities,” living independently, with family members or in group homes.

In a sampling of data, the commission found cost differences between state institutions and nonprofit residential care. At a Department of Developmental Services residential facility, for example, annual client cost is $297,110, or $814 per day per client. Comparable residential services at a private institution were $136,371, or $373 per day.

In another example, annual inpatient costs at Connecticut Valley Hospital were $451,000, or $1,236 per day. On the other hand, residential services range from an annual $52,274 for a group home to $46,230 for supervised apartment living, or $11,804 for supportive housing. Outpatient treatment cost is $2,179 per year.

Next steps

“True cost savings can only be generated through a thoughtful and strategic planning process that recognizes and balances … both the risks and benefits that will impact clients and providers across the continuum of care” said the commission.

Still, among its many recommendations, the commission calls for the state to “support a robust community-based system of care that provides timely and accessible services across a broad continuum.”

Savings are there to be had; now it’s up to the state to pursue them.

For more information, contact CBIA’s Pete Gioia at 860.244.1945 or pete.gioia@cbia.com.