How Private Equity Is Reshaping Special Education

Emily had a lot of fight in her.

The petite 7-year-old had blonde hair and blue eyes. She was also diagnosed with autism, and she had been struggling ever since her mother, Sarah, moved her and her brother hours away from their dad during the pandemic. After the move, Emily became increasingly frustrated with her inability to articulate her thoughts and began boiling over into rages that required interventions at the public school she attended.

So in August 2021, Sarah moved Emily to New Story, a private school in State College, Pennsylvania, dedicated to serving children with special needs, in the hopes that the teachers there would know how to keep her little girl calm. But at New Story, Emily seemed to be having even more meltdowns, and the school called Sarah to intervene when her daughter broke down. So Sarah left work, again and again, to comfort her daughter with bear hugs.

She would rather miss work than let New Story teachers use their preferred tactic: corralling the first grader with gym mats that Emily would fight and scratch so hard, she’d come home with foam lodged beneath her bloody fingernails.

Then one afternoon in April last year, Sarah asked a family friend to pick up Emily from New Story. When the friend arrived, the little girl was on the playground, pinned down under the weight of four adults.

That night, Sarah decided that this nightmare had to end. Emily would not return to New Story. A year later, her daughter still hasn’t talked about the incident at home or in therapy. New Story calls itself a “safe, nurturing environment for our students and their families,” but Emily has a different term for her old school: “the mean people.”

After nearly two semesters of second grade at a public school, Sarah said her daughter has progressed faster, academically and behaviorally, than she did at New Story. When Emily has an in-class meltdown, public school staff discreetly shepherd her to a quiet sensory room to calm down.

“Now, at the very least, I know that she is safe and she can communicate that to me,” said Sarah, who asked that we use pseudonyms to protect her daughter. Their identities are known to Business Insider.

Sarah didn’t know it at the time, but when she enrolled Emily in New Story, she was unwittingly signing on to an experiment in American education, one that worries former staff, US senators, and special-education researchers alike: New Story is the country’s first large-scale special-education-school network owned by a private-equity firm.

In 2019, the Boston-based private-equity arm of Audax Group, which manages $36 billion for investors, including the Kentucky Teachers Retirement System and the Pennsylvania State Employees’ Retirement System, purchased a mid-Atlantic special-education-school network called New Story Schools for an undisclosed price. Under Audax, New Story has purchased other local school chains, like Pennsylvania’s River Rock Academy, as well as various behavioral-services companies, and rolled them up under New Story’s corporate umbrella. The deals have created what New Story calls one of the largest special-education companies in the US, serving children with autism, behavioral problems, and other issues.

Now, Audax is reportedly looking to flip the company. More than a quarter of private-equity-owned companies across industries are sold to other private-equity firms, so the new owners may look much like the current one.

Nate Smallwood for BI

To some, private equity’s business model appears antithetical to special education. In a basic private-equity deal, a firm pools money from investors like public pensions to buy a business, improve it (or load it up with debt), and sell it. Fast expansion means the firm can sell the business, typically four to seven years after buying it, and make a profit of 15% to 20% or more. Private equity targets companies that can grow fast, often by acquiring similar businesses.

A private-equity firm also makes money well before offloading the business, including by collecting fees from its investors and charging the businesses it owns for management and advisory services.

Special-education schools bring in a reliable income stream, typically from public funds: School districts and states pay New Story anywhere from $27,000 to $95,000 per student, and some schools operate year-round. (The average public school district in Pennsylvania, where New Story operates the most schools, spends about $23,000 per child across all types of public education. Additional services, such as providing an individual aide or specialized therapy, can push those costs much higher.) And a fragmented nationwide market means that a company like New Story — which Audax grew from 15 schools to a network of 75 schools and centers across seven states — has plenty of opportunities for expansion.

This year, New Story expects to bring in $305 million in revenue, the analytics firm Mergermarket said. The company serves a few thousand students, a tiny slice of the 8 million Americans between the ages of 3 and 21 who receive special-education services each year — a 25% increase from 2011, according to government data. (In 2021-22, 2% of these children attended public or private schools dedicated to students with disabilities.)

Under Audax, New Story gutted departments focused on quality and education and struggled with turnover.

To understand how New Story changed under private-equity ownership and what private-equity takeovers could mean for the special-education landscape, Business Insider reviewed more than 3,000 pages of public records and spoke to 20 current and former New Story employees and parents. Many of them said that under Audax, New Story pushed to expand at the expense of student safety and academic progress. While parental complaints and even lawsuits alleging mistreatment are not uncommon at special-education schools, records of complaints and interviews with parents and educators show that New Story’s focus on profit under private-equity ownership added an alarming layer of stress to special education.

Under Audax, New Story gutted departments focused on quality and education and struggled with turnover. The company’s hiring practices grew so lax in some instances — including hiring an administrator who was fired from her previous school for failing to report suspected sexual abuse — that state regulators expressed alarm. Some parents, like Sarah, grew concerned about the inappropriate use of restraints and isolation.

Shanon Taylor, a professor at the University of Nevada, Reno, who studies privately run special-education schools, told BI that private equity’s push to make big profits is fundamentally at odds with special education’s mission. Since the schools are generally paid flat reimbursement rates by school districts or insurers, she said private-equity firms make money by cutting costs.

“They’ll cut the number of employees. They’ll pay employees less. They’ll hire less-qualified employees so they can pay them less. They’re going to defer maintenance on their facilities and not have the equipment necessary in those facilities,” Taylor said, speaking about private-equity firms generally. “All of those things then are impacting the services to these vulnerable populations.”

As a parent of two adults with special needs, Taylor said she would not have sent her children to a private-equity-owned school.

“Most people don’t even realize that the school that you may be sending your child to — because you’re looking for a specialized setting — may not be run with the best interest of your child at heart,” she said.

Top policymakers are concerned, too.

“Private equity has no place in education — especially special education,” Sen. Sherrod Brown of Ohio told BI. “From nursing homes to retail to housing, we have seen private equity kill too many jobs, dismantle too many businesses, raise prices, and hurt too many patients in our state, and I am deeply alarmed it is now working to undermine — and endanger — a student’s fundamental right to a free and appropriate public education.” New Story runs 12 schools and centers in Ohio.

Brown’s colleague, Sen. Bob Casey of Pennsylvania, where New Story operates 27 schools, agreed. “Public education dollars should be spent ensuring that students with disabilities have their individual education needs met by qualified teachers and health professionals, not padding the pockets of wealthy private equity executives,” he said. Casey chairs the Senate’s Health Subcommittee on Children and Families.

‘A moneymaking machine’

New Story was founded in 1997 by Paul Volosov, a certified school psychologist who created several for-profit businesses to support adults and children with special needs and other challenges.

Volosov wasn’t a perfect owner. Before New Story was acquired by Audax, its schools were the focus of a handful of lawsuits alleging improper treatment of students and employees. And Volosov drew internal scrutiny for his erratic behavior and off-color remarks about women and religion, some former employees said. Volosov stayed on as New Story’s CEO until January 2022, when he transitioned to chairman.

Audax filled the company’s four C-suite roles with people who had no education or behavioral-health experience.

But former staffers said some of New Story’s problems under Volosov were magnified with Audax’s ownership. After the education and quality departments were slashed in summer 2022, staff said the disconnect between corporate objectives and the classroom widened. Audax filled the company’s four C-suite roles with people who had no education or behavioral-health experience.

“Since the expansion, I think it’s just a moneymaking machine,” said Jim Grinnen, a former regional manager of education for New Story’s central Pennsylvania region. He joined the company in 2018 and left in 2021. “Being a special educator, knowing why I got into it 25 years ago, it just makes your stomach turn when you’re seeing these rich people give speeches in front of you with no clue what we’re doing here.”

Despite those concerns, some parents and educators have expressed satisfaction with the level of care New Story offered. For some families, New Story schools were a last resort, taking a difficult child when no one else would. In Pennsylvania Department of Education records, 11 superintendents and other public school administrators praised one arm of New Story, an 11-campus alternative-education school called River Rock Academy that enrolls disruptive students.

“It is a company that truly cares about the students and treats them as if they were their own. The company provides a high level of service,” wrote the superintendent of one Pennsylvania school district in River Rock’s application for relicensure.

In an October letter to BI, New Story’s senior vice president of operations for Pennsylvania, Christina Spielbauer, highlighted the improvements the “deeply mission-oriented” company has made under Audax, including hiring over 221 new staff members last summer and investing $2 million last year into facilities. Spielbauer wrote that the company was “open to sharing more information” with BI.

Nathaniel Garnick, a spokesman for the company, subsequently declined to answer a list of questions or make New Story or Audax representatives available to interview. Garnick issued two statements, one on behalf of Audax and another on behalf of New Story. He wrote that the company has invested almost $50 million into New Story facilities and improved the student-teacher ratio.

“Rather than focus on the positive impact we have every day on thousands of students with severe emotional and behavioral issues, it is unfortunate that Business Insider has chosen to cherry-pick a handful of isolated incidents in an effort to sully the reputation of our hard working, dedicated team who put their hearts and souls into the work they do,” Garnick wrote.

Speaking for Audax, he wrote that staff shortages mean schools are “ill-equipped to confront the escalating mental health crisis on their own.”

“Our investment has enabled New Story to expand access and provide vital support to a significantly underserved population of students who often cannot attend traditional public schools,” he wrote.

Trying to do more with fewer people

Craig Richards loves teaching and doesn’t shy away from a challenge. The elementary-school teacher started a chess club in the Reading School District, one of Pennsylvania’s poorest and worst-performing districts. He’s also worked in a youth detention center, and his wife is a teacher.

In 2017, Richards joined River Rock Academy, which specializes in educating students who can’t stay in their

Under its new owners, Richards told Business Insider, River Rock subordinated student care to profits.

public schools because of misconduct. He said staff members at River Rock were caring and tried their best to educate a group of students who often wanted to be anywhere else. Richards left the school after two years. While he was away, New Story bought the school. When he returned for the 2022-23 academic year, he found that the tenor had shifted: Under its new owners, he told Business Insider, River Rock subordinated student care to profits.

“Now since it’s New Story, they’re definitely more money-driven. They’re trying to do more with fewer people,” Richards said.

Several former staff members in Pennsylvania said New Story schools there chronically lacked substitute teachers. When Richards missed roughly a week of work during the last academic year for the flu and another three days to take care of his daughter when she broke her foot, behavioral staff — not teachers — covered his classroom.

Asking staff to double as subs might be reasonable if New Story expanded its staff for such needs. But Richards said the school employed fewer staff under New Story than during his first stint, putting extra pressure on teachers to work no matter what.

“It definitely made you feel a little less human. You’re not allowed to be sick, your daughter can’t have a problem, because we don’t have enough people here,” he said.

Teacher and staff turnover is a perennial problem for public and private schools nationally that was exacerbated by the pandemic. The people who spoke to BI said New Story turnover is high, even at the top levels. For instance, two Pennsylvania education directors left in spring 2023, according to records obtained by BI — one after just months in the role. Neither was immediately replaced. One Ohio school had four directors, including a 25-year-old, in 2022.

Such director turnover is highly unusual, Judith McKinney, a Virginia-based special-education advocate, said. In her five years evaluating private schools with Virginia’s Department of Education, she said directors typically stayed at the same school for years, sometimes decades.

Several grad students working at Green Tree School were so deeply alarmed that they registered their concerns with the Pennsylvania Department of Education

At River Rock, Richards struggled with new curriculum demands under New Story’s ownership. His school previously reimbursed teachers who bought worksheets and other items on a popular online marketplace called Teachers Pay Teachers. But last year, River Rock began directing teachers to upload their own worksheets or other material to share with colleagues across River Rock’s 11 schools — a closed, unpaid version of Teachers Pay Teachers.

When Richards sought other curriculum resources, he was pointed to a school closet that contained donated materials.

“One of the manuals didn’t even have the first unit — it was ripped out,” he said. “I’m like, ‘Can we look at getting something else?’ I had ideas of books we could use. They wouldn’t.”

Though he loved his colleagues and some aspects of the job, when a position to manage a local running store came up, Richards eagerly took it. He left in June — just two semesters after his return.

(In state paperwork, River Rock said it offers teachers “a variety of textbooks and resources including a resource bank available to them to provide appropriate course content to students based on their individual need.”)

Grinnen, the former Pennsylvania administrator, told BI that his schools also struggled with curriculum resources, including having to give 12th graders textbooks written for second graders. That surprised him since the company seemed to have deep pockets to open new locations. Some schools acted more like holding pens than educational facilities, Grinnen said.

Donnell McLean, who briefly ran a New Story campus in Virginia, said the school’s lack of a standardized curriculum led to some students being warehoused.

There was “not a lot of challenging work, especially for the higher-functioning students,” McLean said.

Last spring, several graduate students working at Philadelphia’s Green Tree School were so deeply alarmed by what they saw that they registered their concerns with the Pennsylvania Department of Education. This, along with other complaints, prompted several visits to Green Tree by PDE employees in April and June. One state employee wrote to her supervisor that her visit’s “purpose is to do a walk through to determine how much instruction is actually going on based on the complaints that were received.” (Subsequent communication about employees’ trips was redacted in PDE records obtained by BI.)

In Ohio, New Story administrators told BI they pushed back against the company’s plans to increase school enrollment and convert some schools into centers with a half day for school and a half day for therapy. Such a switch would allow New Story to make more money per student by billing insurance companies for more therapy.

While enrollment data is difficult to come by across states, Ohio offers a window into how New Story has increased enrollment without similar teacher increases. Four New Story-branded Ohio schools collectively added 106 students from 2022 to 2024 — a 52% increase — but lost 31 licensed staff, per state data. (BI did not include a recently opened New Story school in this analysis.)

Private equity has been piling into other autism services and similar behavioral-health companies.

Meanwhile, huge additions to the ranks of support staff quickly changed New Story’s employee composition. In 2022, support staff comprised 41% of New Story’s staff — but 87% this year. For comparison, BI examined 19 other private, secular Ohio special-education schools’ data. From 2022 through 2024, those schools’ rosters were, on average, made up of about half support staff and half teachers. None had more than 75% support staff, who are generally paid less than teachers and have less training.

(New Jersey, Pennsylvania, and Virginia do not track staff numbers for privately run schools.)

New Story employees questioned other corporate changes. Some staff disagreed with a plan to give bonuses to administrators based on student enrollment, something the company discussed across states, two people said.

“Our rationale was we never wanted to create a financial incentive to enroll a student that we couldn’t properly serve or to keep a student that was ready to return to their public school,” said one of the employees who said they pushed back on the plan.

Not all teachers take issue with New Story’s approach. Natalie Stoup teaches seven autistic and intellectually and developmentally disabled students at New Story’s New Cumberland, Pennsylvania, campus. Stoup, who has taught for 27 years, said she has loved her two years at the school.

“I absolutely really have a strong respect for the program,” she told BI. “I think they’re doing wonderful things.”

Blackstone’s autism bet

While New Story is the first large-scale, private equity-owned special-education school network, Audax’s bet comes as private equity has been piling into other autism services and similar behavioral-health companies. Many of the biggest private-equity players have snapped up autism-services providers in the wake of state and federal changes requiring more payments for mental-health and autism services.

That shift made the industry look much more profitable and scalable, magic words for private-equity players like the industry giant Blackstone. In 2018, the firm bought a majority stake in the behavioral-therapy provider Center for Autism and Related Disorders. Blackstone then put the business into bankruptcy proceedings in June, citing labor costs and lease obligations for centers it closed. Forbes reported last year that former employees attributed the company’s challenges to a “model that put profits ahead of patient care.” (New Story bought CARD’s Virginia locations during bankruptcy, and the bulk of the company was sold back to the founder.)

When employee costs rise quickly, companies like CARD and New Story can’t pass on the costs to their customers as fast as other businesses, like a restaurant raising menu prices. Insurance reimbursement and school tuition haven’t kept pace with the post-pandemic economic landscape, increasing pressure on behavioral-health companies to make money by trimming costs and expanding.

NBC News reported that CARD’s staff training decreased under Blackstone’s ownership and many employees left after wages stayed stagnant for three years. (Blackstone claimed that it increased training, though staff documents reviewed by NBC News showed the opposite.) Like New Story, CARD’s private-equity-installed CEO had no special education or behavioral-health experience.

Other private-equity-owned healthcare companies have recently come under intense regulatory scrutiny. The Biden administration is pressing for transparency for private-equity-owned nursing homes, while the Federal Trade Commission is suing an anesthesiology company and its PE owner for creating what it calls an anticompetitive scheme. PE’s special-education and autism-related companies have, so far, largely flown under the radar.

Restraining kids without uniform policies

Educational and disciplinary data about privately run schools like New Story is virtually impossible to obtain — and New Story doesn’t volunteer it. The schools are not required to publicly report testing data, attendance, or other markers of school success. And because of the varied student populations, such data would be difficult to compare to public or private schools. In Pennsylvania and Virginia, state Department of Education spokespeople said their agencies don’t even keep track of how many students attend private schools.

Nickie Coomer, a Colorado College education professor who has written about the privatization of special education, told BI that this data gap is a major regulatory hole, one that private-equity companies are happy to exploit.

“There’s not a lot of accountability about how we’re adhering to the laws we have in place to protect kids with disabilities,” she said. “There’s no governance, no elected school board … It’s the antithesis of what schools should be.”

One key metric for student safety that’s reported at public schools is restraint usage. In most districts, when a student could endanger themselves or others, staff may use restraints, including physically immobilizing the student or isolating them so they can calm down. As with other data, New Story’s restraint usage is not publicly reported.

Parents BI talked to had a wide array of experiences, from Sarah’s ordeal to others who say New Story’s restraint practices have been appropriate and effective for their children. One father of a student who graduated State College’s New Story school in 2022 told BI that his young adult son, who frequently needs to be held down at home to avoid self-harm, was always appropriately restrained and the incidents were properly documented.

Interviews with multiple staff members indicate that their training on how to handle challenging student situations varied from school to school.

Donnell McLean, the former Virginia school director, said he never received any restraint training through New Story. Instead, he relied on what he knew from his prior job. In Virginia, public schools are legally required to document any restraint use and notify parents — but McLean said he didn’t always receive reports from his staff after they restrained students.

In 2022, an Ohio school director at a New Story school fired an employee who restrained an 11-year-old with such force that his parents sent photos of hand-shaped bruises on the boy’s shoulder.

Shyara Hill, a parent of three students at the New Story-owned Green Tree School in Philadelphia, told the Pennsylvania Department of Education that she wasn’t properly notified when one of her children was placed in isolation. In emails and phone calls to the agency last spring, Hill detailed other troubling incidents at the school. She reported that one of her children was hurt in a classroom fight but wasn’t examined by a nurse; one was repeatedly bullied with no staff intervention; and one came home soiled after staffing shortages prevented them from visiting the restroom.

“The school has not followed the agreement, safety protocols, [or] parent notification plan and has not responded to several communications from myself and [my] child’s attorney,” Hill wrote in the email, obtained in a public records request from the state Department of Education.

(Neither Hill nor her attorney responded to requests for comment.)

Documents that River Rock sent to Pennsylvania’s Department of Education state that restraints “will be used as a last resort” and will be reported to the agency.

A staffer with a criminal record

BI’s review of records and litigation turned up alarming lapses in New Story’s vetting of new hires as Audax rapidly expanded operations.

This summer, the company hired Amy Hall Kostoff to oversee student services across seven Pennsylvania campuses and serve as the educational director for one of them.

Hall Kostoff was fired in April 2022 from her tenured job as an assistant supervisor at a Pennsylvania county special-education center for failing to properly report suspected sexual abuse involving two students, one of whom is nonverbal. In March 2023, the state’s acting secretary of education assessed that Hall Kostoff was dishonest during the subsequent investigation.

A representative for the public school that fired Hall Kostoff declined to comment, including about New Story’s background check.

Hall Kostoff, who was still employed at New Story as of late March, declined to comment.

Pennsylvania Department of Education records show that employees were concerned about the hiring practices at Philadelphia’s Green Tree School. One department employee wrote to her colleagues in April that staff records at Green Tree were “missing a lot of information,” including about background checks and teacher certifications. That employee later wrote that her background check of one Green Tree staff member turned up convictions for public intoxication, disorderly conduct, and indecent exposure — the latter of which would legally prohibit employment at a school. BI was unable to corroborate the PDE employee’s claims, and it’s unclear if the charges stemmed from incidents in or out of school, or if that employee continued working for Green Tree. The staff member did not respond to requests for comment.

New Story has terminated other staff members accused of wrongdoing, including an occupational therapist in Pennsylvania who was arrested in 2022 and charged with attempting to solicit a minor for sex. A company spokeswoman told a local newspaper the charges did not involve a New Story student.

In 2022, the principal of a New Story-owned school in Rochelle Park, New Jersey, told police that graduates of the school had received sexually inappropriate messages from their former gym teacher, who was still employed there. The teacher wrote to the female students about how he “was sexually attracted to students while they attended the school,” and he named specific students, a police report said. (The students told police that no inappropriate behavior occurred while they attended the school.) The teacher also asked another former student if they wanted to smoke weed and gave the former student his Snapchat handle. The police report said the teacher was placed on leave pending an internal investigation; it is unclear whether further action was taken. A detective advised against pursuing charges because the former students are adults, and the messages, “though inappropriate,” were not illegal, he wrote. Asked if the teacher was still employed, New Story’s spokesman declined to answer and the school’s principal did not respond to a request for comment.

Love, Emily

In State College, Emily is thriving in public elementary school. She splits her time between mainstream and special-education classes, spending time with her peers in a way she never did at New Story, where she was the school’s only young student.

(Researchers told BI that students miss out on building key social skills when they’re sequestered in special-education programs.)

This year, Emily has attended a birthday party and playdates, the kinds of childhood interactions Sarah feared she’d never experience.

“I want my children to be sound, functioning, responsible adults, but I don’t want to break their spirits,” Sarah said.

She said that public school employees have been kinder — a New Story staff member once said Emily had a “nasty side” — and that Emily is behaving better.

She recently asked Sarah how to sign a card with “love, Emily.”

Do you have a story to share? Email this reporter on a non-work device at mmorris@businessinsider.com.