Iowa City non-profit closing ‘start of trend,’ agency head warns

CEDAR RAPIDS – An Iowa lawmaker says there are more questions than answers about the abrupt closing of an Iowa City non-profit that has social services agencies scrambling to find care for clients with mental health issues.

“We're not getting the full story,” said Rep. Renee Schulte, R-Cedar Rapids, said May 17 about the closing of Life Skills Inc., which served about 125 clients in the Johnson County area. “You can't just turn clients loose without service. This should not happen to people who are mentally ill.”

This may be just the first chapter of the story, according to the founder of the 21-year-old agency.

“I'm afraid this is the start of a trend,” Life Skills Executive Director Gillian Fox said May 17. Smaller organizations like hers – Life Skills had an $801,000 budget - will not be able to withstand cuts in state and federal funding, especially limited Medicaid reimbursement rates.

“We're a very small fish in a very large sea,” Fox said. “We don't have the magnitude to survive massive budget cuts.”

Social service agencies are reporting “gloomy financial pictures,” Schulte acknowledged.

“These are lean times,” added Roger Munns of the state Department of Human Services. “Margins are thin for government-paid services. It's a matter of resources and there are going to be some agencies that decide they can't make it.”

That appears to be the case with Life Skills, said Rep. Mary Mascher, D-Iowa City. “Rather than have people go unpaid or give false hope, I think they decided to cut their losses and end it. That's unfortunate because a lot of families will go without services.”

Life Skills' clients, volunteers and the state were informed by letter May 15 of the closing. Fox told her staff of 14 full-timers and six part-timers May 10 the agency would close May 15.

Medicaid reimbursement was the primary reason for closing, she said. Last year, she said, providers took an across-the-board cut of at least 2.5 percent. Add higher costs for rent, utilities, gasoline and salaries “and you generate a reimbursement rate below your true costs.”

Life Skills' Medicaid reimbursement problems are not unique, said Schulte, a leader in an effort to reform Iowa's county-by-county mental health services delivery system.

The Legislature has taken steps to establish a framework for gathering recommendations for a state takeover that could begin to be implemented in the 2012 legislative session.

“This points to the how difficult it is to change and basically re-invent the system,” said Mascher. “We certainly have a broken system. We're trying to figure out what to do at the state level … but we're not going to be able to do it in one year.”

The DHS and Iowa City area agencies are working to provide those services to Life Skills' clients. As of Monday, about 90 to 100 had been accommodated, according to Schulte and Munns.

“These are not life-or-death services,” Munns said. Life Skills provided transportation, budgeting, house work, for example. “That's not to say they aren't important. They are. Without them, they need institutional care.”

Fox has filed to dissolve the corporation and soon will begin job hunting. Several of her employees have been hired by other agencies, she said.

Munns was unaware of any allegations that state or local funds were misused or unaccounted for.