The HSE recently told Fresh Start it had capped at €5,000 a week the amount it can pay the company per child it cares for.
Fresh Start, the largest private provider of childcare services in the country, put its 220 staff on protective notice on Monday.
Fresh Start’s clinical director and co-owner Ian Gargan said they anticipate cutting up to 50 staff and reducing the number of care units by five.
This includes two units which each cater for a single child and three units each catering for two children.
Dr Gargan said the cost of caring for a child in a single occupancy unit was €8,500 per week.
He said this was down to high staff-to-child ratios and the level of expertise required.
Dr Gargan said all private residential childcare providers were called to a meeting with the HSE in September and asked for transparent pricing models.
He said that Fresh Start “wrote a very comprehensive report and accounted for every penny”, but was told in mid-October that weekly payments per child were to be capped at €5,000.
“The only way we can deal with this is to lay off staff and reduce the number of units,” he said.
Fresh Start has 29 children in its care.
Last year, the company was paid €9.6 million by the HSE. Dr Gargan said the cost depended on the level of intervention required and that one-on-one care (one staff member per child), at a cost of €4,800, was little more than “a babysitting service”.
He believes other private childcare providers were considering legal action on foot of the cap.
The HSE said last night it is facing a major financial challenge this year.
More than 400 children are in HSE residential care, at an annual cost of about €100m.