Private Pays, but Not for Kids

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The business section of The New York Times ran a feature story
in August titled, “A Business Built on the Troubles of Teenagers.” The opening paragraph described the travails of a parent,

Mary Ann Davies, whose 16-year-old daughter had a drug problem. The article said Davies had spent more than $100,000 in the past year to send her daughter to one privately run residential program after another. She had committed herself to spend another $100,000 over the next two years for a boarding school in New York.

The Times went on to state that an increasing number of desperate parents are doing the same, forking over an average of $5,000 per month for residential care for their troubled children. “Those numbers,” the writer notes, “have drawn the attention of some big money investors” in the companies that run the programs.

Yes, the suffering of parents and their children has become a growth industry in America. I guess it was inevitable. After all, the prison industry has gone corporate in some states. So has education. Then there is the all-time money-making machine: health care.

However inevitable it may be, it is still disgusting. Here are some samples from the article:

• Joseph Kenary, the president of the corporate finance business at CapitalSource Finance, says that if the programs are “run well, if they’re full, they generate pretty attractive return on a cash-on-cash basis.”
• Venture capital firms like Warburg Pincus and the Sprout Group, a division of Credit Suisse First Boston, have found this a promising business opportunity.
• “All indications are that the market is still growing. The consensus is that increasing numbers of children are in trouble and are not growing up very well,” said Lon Woodbury, an educational consultant.
• Industry analysts estimate that the companies typically generate profit margins of 10 to 20 percent. Kirsten Edwards, an equity research analyst at ThinkEquity Partners, a research and investment banking firm, said larger companies were more efficient because they could spread out the cost of their curricula, marketing and overhead as they expand.

Much of the article dealt with the incredible growth in both the number of parents seeking help for their troubled kids and the corresponding increase in the number of programs offering assistance. Woodbury reports a 20 to 30 percent increase in the number of such programs since 1990, adding that “there is still plenty of room” for new ones.

One corporate provider, Aspen Education Group, grew from six programs in 1998 to 31 this year. Another, Three Springs, “has seized on the market growth in the last five years, adding six new programs,” bringing its total to 25, and plans to keep expanding.

I wonder if this is what Dr. Janusz Korchak had in mind when he started his first residence for troubled children in 1912. Do you think he would have accompanied those children to Poland’s Treblinka death camps for the sake of his profit margin? How about Fritz Redl and David Wineman? Do you think they focused on spreading the costs of their marketing and overhead when they began their groundbreaking work in the mid-1940s with delinquent youth in Detroit? I wonder if Father Edward Flanagan began his Boys Town mission in 1917 with an eye toward its cash-on-cash basis.

It is a sad day when the field of youth services has come to this. Remember, every dollar contributing to that 10- to 20-percent profit margin is a dollar taken from the pocket of some youth worker who is probably making at or below a livable wage. Or it is a dollar less that could have been charged to some discouraged and terrified parent who wonders every day whether the next phone call will be from a morgue.

Which brings us back to Mary Ann Davies, profiled in The Times. Just how is she going to pay for her daughter’s care? “She said she was also wondering how she and her husband would meet all the bills,” the story says. “Already, they have dipped into their home equity. ‘We’re going to have to reconcile this at some point, and it’s going to be tough,’ she said. ‘I don’t think we have a choice.’ ”

Mark Redmond is executive director of Spectrum Youth and Family Services and the author of The Goodness Within, Reaching Out to Troubled Teens with Love and Compassion. Contact: