where some see reason for despair, Matt Stone sees possibility.

Stone is the Massachusetts manager for Youth Villages, a nonprofit that aims to replace some residential services for troubled youth with intensive in-home counseling. Founded in Tennessee in 1986, Youth Villages expanded throughout the southeast and, in 2007, opened its first Bay State office. Stone and his team of social workers, most from out of state, started with five kids here and are now serving 40 clients as a contractor with the state. And he thinks a significant chunk of the 8,700 youths now placed outside their homes — in foster care, group homes, or other outside-the-home residential settings — might do better with Youth Villages or other in-home counseling services.

“We ask for the really hard cases, the ones no one else wants,” Stone says. “We tell them, ‘If you’ve already checked the residential box, give them to us instead.’”

The approach centers on intensive in-home counseling (at least three times a week) and on improving a youth’s total environment: family, school, and peer relationships. While Stone is quick to say that for some kids, residential services really are the only option — “it’s not safe for them to be at home” — he thinks taking a kid out of the home fails to address the environment that may have caused the problems in the first place. When the child leaves treatment, they may seem healthier, but once they’re back in their old surroundings, the old problems emerge.

The cost is $125 per child per day, while residential placement services can cost nearly three times as much. And the organization’s mission seems at one with the Department of Children and Families’ stated goal of keeping as many kids at home as possible: The current number of out-of-home placements, 8,700, represents a 14 percent decline since 2003.

Allen Grossman, a professor at Harvard Business School who wrote a 2008 case study of Youth Villages, says the organization’s focus on outcomes is essential to its success. Following every kid for two years after treatment ends allows Youth Villages to tell which practices are working and which are not. Nationally, two years after treatment, 80 percent of Youth Villages clients are living at home and attending school. Grossman says it’s hard to find comparative data for kids in state custody — most states, like Massachusetts, don’t track the effectiveness of all the dollars they spend on child services. But, according to academic studies, only 40 percent of kids in out-of-home treatment are faring as well as the Youth Villages clients two years later. Youth Villages, Grossman says, “is twice as effective.”

A spokeswoman for the Massachusetts’ Department of Children and Families says the state is beefing up its tracking procedures as part of new national regulations. In October 2010, the state will begin gathering data — such as financial self-sufficiency, housing, and educational status — on kids who have “aged out” of the system.