Company profits by special education

NASHVILLE, Tenn. -- Mark Claypool left social work jaded by how special education students were shuffled around and ignored in public schools. He had one radical idea: The best way to teach special education students would be to turn a profit while doing it.

"It would have been more traditional to do this in a not-for-profit fashion," Claypool said. "But the CEO for a not-for-profit walks around with his hand out all day long to keep the doors open and the lights turned on. I didn't want to do that."

Claypool founded Educational Services of America in Nashville in 1999 as one of the few companies even attempting to make money by running special education private schools.

With programs in 16 states, ESA owns and operates more than 120 private and charter schools. It hires the teachers and sets up the curriculum for about 7,800 students with learning, developmental or behavioral problems.

Critics from within public education have said it's wrong and ineffective to turn a profit off special education students, but the company generated $75 million in revenue this year, and Claypool expects revenue to grow to $90 million next year. The privately owned company would not disclose profits.

Only about 2 percent of all special education students -- about 100,000 -- are taught in private schools set up exclusively for special education, according to recent data from the U.S. Department of Education.

And there are only about 125 private special education programs trying to make a profit, said Sherry L. Kolbe, executive director of the National Association of Private Special Education Centers.

Claypool said none among that small group can match what ESA is doing: Providing nationwide service in alternative education, special education and college prep.

ESA schools offer instruction for students with many kinds of disabilities, from mental retardation to high-functioning autism. One of its rapidly growing programs helps high school special education graduates who want college degrees.

"The idea was that there are a lot of young adults with learning disabilities, and the expectation wasn't there that they were going to go to college," Claypool said. "And it should have been because they're often quite bright."

The College Living Experience, which soon will have six campuses nationwide, allows students to live in their own apartments while teaching them how to shop for groceries, eat at restaurants and dress appropriately.

ESA got its biggest financial boost in 2004, when New York-based private equity firm Trimaran Capital Partners invested in ESA and became a majority partner. (Financial terms were not disclosed.) ESA's other funding comes from many sources, both traditional and controversial.

The company gets some money from tuition but also through vouchers and contracts with states and school districts, which have drawn the ire of some education advocates who say private businesses should not be getting tax dollars.

"We jokingly say we're agnostic about funding, and we are," Claypool said. "We have our eyes wide open. We don't get locked into one funding stream. We're kind of apolitical about those kinds of issues."

ESA schools cost from $8,000 per student up to $49,000 per school year for a student with complicated handicaps that require one-on-one instruction.

The company runs more than 30 schools in Florida, where a voucher program has allowed parents to place special needs students in private, charter or other public schools since 2000. The company also runs programs in California, Pennsylvania, New Hampshire, Texas and throughout the Southeast and Midwest.

ESA sees the most competition for at-risk students, with companies like Baltimore-based Alternatives Unlimited, which has 30 schools focused primarily on alternative education. Other companies, like Colton, Calif.-based Advanced Education Services Inc., offer broader services but are nonprofit.

Most public education advocates say voucher programs for special education provide for less accountability and do nothing to help struggling public schools.

"It's been plagued with problems from the very beginning," said National Education Association special education policy analyst Patti Ralabate. "There is this lure for voucher money to serve people with disabilities, and they end up being fly-by-night types of schools that end up not serving students well."

Ralabate said she didn't know anything specific about ESA schools, but said parents sacrifice their rights to direct their children's education when they place them in private schools.

"They're using these kids basically to make a profit, and that's not something that's in the best interest of kids," Ralabate said.

Claypool counters public schools are overcrowded already and can't handle the additional challenges of special ed students. He also said ESA can charge school districts less per student than what they would get from the state.

He said ESA schools run more efficiently because they don't deal with paperwork and bureaucracy. For instance, ESA teachers usually don't have to have state teaching licenses, something not allowed in public schools.

Claypool said many good teachers come from out of state or are specialists but don't have teaching licenses, and requiring them to go back to college would not be "remotely beneficial."

All ESA teachers are required to hold bachelor's degrees, he said.

There is no uniform standard for licensing private school teachers nationwide; the rules are set up by each state. In many states no license is required, so ESA is free to hire anyone the company believes is an effective teacher.

Joni Roy moved her four autistic children to Tampa, Fla., so they could attend the soon-to-open Florida Autism Center of Excellence, a charter school managed by ESA. The Florida Department of Education gave the school a grant, but ESA hires the teachers and is in charge of the curriculum.

Roy, who recently left behind her hurricane-damaged home in Louisiana, said her children weren't getting help in public schools. "We felt like this was something we had to do to give them the best opportunity possible to succeed."

Claypool said ESA competes with different for-profit companies, depending on the market, but no one else provides private nationwide coverage in special education, alternative education and college programs.

"It's not a snake oil kind of deal," he said. "We're not selling a cure. This is just good execution of industry standard practices that work with these kids."