Late last year, it had negotiated with the state for additional money to make up for added costs incurred when Medicaid changes took effect in July and when more children than anticipated came into the system in the Lincoln area.

The state had agreed to give KVC $1.8 million more this year to cover at least some of those costs.

But talks bogged down on negotiations with lead contractors, who wanted a payment system based on costs per case, rather than an overall fixed amount to provide services.

"Bottom line is that it was going to cost more money through that method with KVC than we were willing to pay," Adams said.

At that point, he said, the two came to a mutual agreement that KVC would not continue the contract.

KVC had invested $14 million of its own money since 2009. And President Sandra Gasca-Gonzalez said the organization no longer could continue to invest its own dollars.

The state will take over the work for the 4,700 children and their families KVC serves in 19 counties.

"Our main objective is that the services continue to be provided with minimal disruption to children, families and staff and that providers get paid," Adams said.