As state and local agencies scrambled to fill a void with the closure of a juvenile justice and mental health treatment program based in Duluth, a clearer picture has emerged of how The Hills Youth and Family Services cratered this month after more than a century operating in the Woodland neighborhood.

The Hills will close its campus Friday after 112 years in operation. It started as a Catholic orphanage in 1909.

Discussions with the principals revealed an end to any slim hopes to resurrect The Hills, in part because of the provider’s many legal issues.

At the heart of the closure: outstanding debts to local banks related to entanglements between The Hills’ Duluth operation and its $26 million psychiatric residential treatment facility, Cambia Hills, which closed this spring roughly one year after opening north of the Twin Cities in East Bethel.

“We are extremely indebted to multiple banks right now,” CEO Leslie Chaplin said, describing how The Hills would still be around had it never risked embarking on its Cambia Hills facility.

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“It’s one thing to close a program open for one year, and another thing to close a program open for a century,” Chaplin said. “Unfortunately, the two are so closely tied together the one ended up pulling the other one down.”

The closure of both facilities leaves the state without 110 residential treatment beds 60 for treating young people with mental health disorders at Cambia Hills, and another 50 for the juvenile justice program located in Duluth.

“At a time when we need to grow the available community resources, this is a significant setback,” St. Louis County children and family services director Paula Stocke said. “Our state is sending kids to North Dakota for short-term mental health stabilization. Any time we lose choice or services in our community, there’s an impact.”

Paula Stocke (Submitted photo)
Paula Stocke (Submitted photo)

On Friday, Duluth’s Life House announced it was taking over The Hills’ Neighborhood Youth Services at the Washington Community Center in downtown Duluth. Employees at Neighborhood Youth Services became Life House employees Monday, meaning the tutoring, recreational activities and meals that take place at the center will experience no hiccups.

"We are very familiar with how to operate a drop-in center, and didn’t want any of those services to be interrupted, or any young people or children to fall through the cracks without services in the long term,” said Jordon Johnson, executive director for Life House, which serves young people experiencing homelessness and life on the streets.

Johnson described how familiarity with the work, and credibility with its community partners, allowed Life House to rescue Neighborhood Youth Services in short order — less than two weeks after The Hills announced its closure.

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"We know how to sustain and build programs, and have a lot of veteran staff committed to the mission and community at large who were willing to step up, knowing we can do it," Johnson said.

Department of Human Services officials from the state met last week with Northwood Children’s Services in Duluth about its 48-bed psychiatric residential treatment facility — the only existing youth facility in the state like it after the dissolution of Cambia Hills.

Northwood could not be reached for comment, but Gertrude Matemba-Mutasa, the assistant commissioner for the Community Supports Administration in the Minnesota Department of Human Services, said the state holds Northwood’s program in high esteem. Northwood’s psychiatric residential treatment option came online in 2018, and was the state’s first.

Gertrude Matemba-Mutasa (Submitted photo)
Gertrude Matemba-Mutasa (Submitted photo)

The psychiatric residential treatment facilities being developed in the state are designed to serve children with complex mental health needs for roughly six to eight months before transitioning them back into community settings in their hometowns.

“We are working very closely with Northwoods to make sure they can continue to be a success,” Matemba-Mutasa said. “If they want to expand, we’ll be there for them to make sure they expand successfully.”

As The Hills neared its end, its CEO, Chaplin, lamented how the Cambia Hills venture never reached its capacity due to pandemic guidelines.

“We never operated without COVID-19,” she said. “It was a very big barrier to the start up of that company.”

She also pointed a finger at the state for failing to nurture the program at Cambia Hills, which provided a level of service the state solicited when it posted a request for proposal in 2016.

“Instead of supporting a new facility the state asked people to open, they’re refusing financial support,” Chaplin said. “They’re not being a good partner — they’re not being a partner at all, and they’re allowing these things to happen.”

Chaplin claimed the state promised annual rate increases to the nearly $480 per day the facility was paid for each child in residential psychiatric treatment.

But a review of the original request for proposal included no escalators or promises for rate increases, and Matemba-Mutasa said state employees wouldn’t make those claims due to intricacies involved in the funding, which includes both state and federal dollars.

“It would just be speculation, and that would not be something we would say accurately happened,” Matemba-Mutasa said.

Matemba-Mutasa explained there was trouble with Cambia Hills beyond pandemic-related issues. In opening Cambia Hills, The Hills was jumping into a level of service it hadn’t provided before.

The provider struggled to adhere to Department of Human Services licensing guidelines. Six months after it opened, Cambia Hills was struck with a conditional use permit listing an accumulation of violations, including improper training, failure to conduct timely background checks, and errors administering medications.

Chaplin explained she was proud of the work being done at Cambia Hills, and that the program worked hard to make corrections and achieve efficiency.

“Nothing here is a reflection of operational inadequacies,” Chaplin said. “We had to cease operations due to insurmountable financial burdens exacerbated by the state.”

Bondholders floated an additional $1.5 million toward Cambia Hills operating costs, Chaplin said, until finally closing the spigot on finances. Bondholders are now in possession of the brand-new Cambia Hills facility. A guarantor agreement left The Hills inextricably linked to Cambria Hills' failures.

When pressed about its responsibility for the failure of a program it sought with the request for proposal in 2016, Matemba-Mutasa agreed the state holds some accountability for the collapse.

“When a provider fails it means that we have failed as well,” Matemba-Mutasa said. “We underestimated how much support was truly needed.”

She noted 52- and 40-bed psychiatric residential treatment facilities opening this fall in Grand Rapids and St. Peter, respectively, and said the state has devoted more technical assistance for the providers behind those facilities.

“We can’t afford to lose beds when we’re trying to build on the capacity the state has,” Matemba-Mutasa said. “We’re doing everything we can to ensure we don’t end up in the same situation as Cambia Hills.”

At The Hills, lawyers will be spending the coming months sorting out what happens to the 140-acre facility in Duluth, as well as the 15-year lease agreement The Hills held with Duluth Public Schools to educate juvenile offenders at Rockridge Academy.

The Hills is also negotiating with another provider to take over its mental health day treatment program.

Chaplin said she hoped the state learned from the collapse of The Hills.

"The best outcome for me is to make a difference for programs down the road," she said. "Otherwise, this is just going to keep happening."

This story was updated at 10:15 a.m. July 1, 2021, to remove an inaccuracy regarding The Hills' residential license. Prior to its closure, the Hills in Duluth had been licensed to provide residential treatment for juvenile offenders and children experiencing mental health disorders. It was originally posted at 8 a.m. June 29, 2021.