Prepared by:
Making the Grade National Program Office
The George Washington University
Washington, DC

Rosenberg & Associates
Point Richmond, California

Given the fiscally conservative climate in Washington, DC., states cannot rely on federal grant initiatives, federal protection for cost-based reimbursement, or federal mandates for inclusion of school-based health center programs in Medicaid managed care arrangements. Nor can the states rely on private insurance or other commercial sources to support the centers. The expansion of privately financed managed care and the continuation of ERISA exclusions has eroded opportunities to enlist private dollars in support of school-based health centers. Each state must develop its own approach to supporting the centers. A critical precondition for creating a financial strategy is for each state to address the following basic questions:

• Whom should the school-based health center serve if the center is to secure public funding?

• What specific services must be provided?

• How will these services be paid for and who (or what) will receive payment for the services?

This paper discusses approaches to answering these questions.

Since the first comprehensive school-based health centers were established in the early 1970s, states and localities have increasingly looked to schools as reasonable and innovative sites for assuring access to health care for children and adolescents. Between 1985 and 1992, the number of such programs around the nation grew from 40 to more than 400. According to a national survey conducted by the Making the Grade National Program Office, by 1994 there were 607 school-based health centers in 41 states and the District of Columbia (see figure 1, page 6). Nearly half of these programs are located in high schools and over one quarter are located in elementary schools (Schlitt, et. al., 1995). Fueling the recent exponential growth of the centers has been the development of a number of state government initiatives to support school-based health center programs.

At present, most states fund school-based health centers through grant programs that draw from either Maternal and Child Health (MCH) block grant dollars or state general funds. The Making the Grade survey found that in school year 1993-1994, 32 states allocated an estimated $38.8 million to local governments or health care institutions to support the centers. Twenty-five states allocated $12 million in MCH dollars to school-based health centers, while another group of 25 states appropriated $22.3 million in general fund support for the centers (see figure 2, page 6). Three states designated funds from the US Department of Education's "Drug Free Schools and Communities" program. Illinois is the only state that commits a portion of its federal Social Services block grant, Title XX, to its school-based health center program. Several states, including California, Florida, Louisiana, Massachusetts, and Missouri, fund their school-based initiatives through special taxes, such as supplemental sales taxes and tobacco excise taxes.

Other major funding for school-based health centers comes from federal grants, private foundations, and local dollars. Since the Making the Grade survey, 27 centers have received grants from the federal Bureau of Primary Care. Private foundation initiatives in Connecticut and Michigan are investing an additional $6 million in centers in those states. The Robert Wood Johnson Foundation will provide nearly $18 million for school-based health centers through its national program, Making the Grade: State and Local Partnerships to Establish School-Based Health Centers.

Local support remains vital. All school-based health centers receive help from their host schools; other local agencies contribute varying levels of support. Twenty-three school-based health centers supported by the Robert Wood Johnson Foundation, through its previous grant program the School-Based Adolescent Health Care Program, reported that one-third of their budgets were provided in-kind by local sources. In Oregon's Multnomah County, in Fiscal Year 1995, local tax dollars provided $1.4 million or 64 percent of the total operating budget for the ten school-based health centers in Portland.

States that have initiated funding for school-based health center initiatives, in most cases, have asked their health departments to take the lead in program and policy development. In response, the health departments have organized the state grant-making process -- writing the grant application guidelines, developing service standards and quality assurance measures, and determining staffing requirements. Within the health departments an individual or office generally has responsibility for providing technical assistance to local programs as well as facilitating the development of state policies to support the centers.

During the early phase of state support for school-based health centers, the states have considered these initiatives small-scale pilot programs whose characteristics were hand-tailored to fit the small number of communities in which the centers were located. However, as demand for the centers increases and they become part of the state's larger strategy of assuring health care for all children, the policy questions become more complex and require more detailed responses. How should states determine the need for such centers? How can start-up funds for the centers be secured? How will on-going support be obtained? Fundamental premises underlying such questions must be tested: Are the centers to serve all children or only some children? Are there spending priorities for public dollars?

If a state is to assure the availability of school-based health centers as a component of its health care system for school-aged children, the state will need to establish funding priorities by defining where they wish to locate school-based health centers (targeting criteria) and by establishing the services the school-based health centers will provide (service criteria). This paper reviews possibilities for targeting and service criteria and articulates the financing issues that states must confront as they move to fit school-based health center programs into an on-going, soundly-financed system of health care for children.

Dryfoos, JG. Full-services schools: A revolution in health and social services for children, youth, and families. San Francisco: Jossey-Bass, 1994.

Schlitt, JJ, Garfinkel, S. Where the kids are. State government news 1995; 38(6):20-24.

Schlitt, JJ, Rickett K, Montgomery L, Lear JG. State initiatives to support school- based health centers: A national survey. J of Adolesc Health 1995; 17:68-76.

Most school-based health centers have been started and sustained with private and public grant dollars. Funds from patient care reimbursement, whether through private insurance or Medicaid, have only recently contributed measurably to the center budgets (see Table 1, page 8). This limited support from patient care revenues has been due to several factors:

• If privately insured students use the health centers, they are likely to have policies with large deductibles and limited coverage for primary health care and mental health services. While nine states and the District of Columbia have passed the Child Health Insurance Reform Plan (CHIRP), which requires insurers to provide coverage for complete preventive health services for children 0 - 19, to date few health centers are reporting significant revenues from private insurance. The potential gains from CHIRP may be offset by the movement of privately-insured families to ERISA-protected, self-insured plans, which need not comply with CHIRP requirements.

• Adolescents from low-income families are less likely than their younger counterparts to be Medicaid insured. As a result, school-based health centers located in high schools have high rates of uninsured patients (see figure 3, page 9).

• Not all services provided to Medicaid-insured students are reimbursable due to state-specific Medicaid plan limitations or exclusions.

• Because patient care revenue potential is perceived as minimal, many school-based health centers have elected not to bill either patients or their insurers for services provided. These school-based health centers and their sponsoring organizations conclude that the cost of billing would exceed the revenues generated.

Despite barriers to billing, those who organize school-based health centers increasingly believe that patient care revenues are essential to funding the centers. Health care reform discussions have contributed to a perception that in the very near future all personal health services -- even those targeted to low-income students -- will be paid for through a patient care funding mechanism, whether by fee-for-service or pre-paid arrangements. Thus, the critical question: Can these centers fit into the emerging system of health care financing?

The shift from a grants-based strategy towards a greater reliance on patient care revenues is complicated by a concern that a billing or service-focused financing strategy may threaten the unique set of services currently offered by the centers. The centers were established to provide a comprehensive mix of medical and mental health care, health education and preventive services. Health center professionals provide clinical care, sponsor counseling groups, provide classroom education and work with parents, athletic staff and students to encourage a healthier school environment. Many of these activities are not billable, but most health centers believe these activities are among the most important things they do. To tie the work of the center to a traditional reimbursement system is to risk forcing the health center to alter its package of care from a multi-faceted social model to a medical model of care that de-emphasizes mental health and other less billable services.

             Newacheck PW, McManus MA, Gephart J. Health insurance coverage of adolescents: A current profile and assessment of trends. Pediatrics 1992: 90(4):589-596.

Perino J, Brindis C. Payment for services rendered: Expanding the revenue base of school-based clinics. Center for Reproductive Health Policy Research, University of California, San Francisco, Report to the Stuart Foundations, 1994.

Recent events with major impact on funding strategies for school-based health centers

State and federal governments have utilized a variety of strategies to support health programs targeted on specific populations. These include funding multi-site demonstration programs, establishing preferential payment-for-service formulae, and promulgating rules and regulations that create a favorable environment for the desired services. A number of recent events affect the ability of federal or state governments to use these approaches for the benefit of school-based health centers.

The federal government role in long-term funding strategies is constrained by the collapse of health care reform at the federal level and election of a fiscally-conservative Congress. One component of the proposed Health Security Act that received bipartisan support in both the House and Senate was a section providing for a large-scale federal grant initiative for school-based health centers. Funding for this initiative was to come from cost-saving changes in the plan. Failure of the overall plan eliminated projected savings and the likelihood of a large federal grant initiative. The post-election anti-Washington sentiment and the impact of presidential campaign politics on the Congressional legislative process only increases the difficulties confronting federal efforts. As a result, there is increased pressure on the states to solve their own health care funding crises.

States are facing continued fiscal pressures due to explosive Medicaid growth. In the post-Clinton reform environment, states are facing continued Medicaid budget pressures. In five years state Medicaid expenditures more than doubled, growing from $22.5 billion in 1988 to $53.6 billion in 1993 (see figure 4, page 12). Now many state Medicaid offices no longer have the flexibility to initiate or expand innovative access programs, including school-based health care. Congressional proposals to reduce federal public health dollars and curb Medicaid spending either through block grants or federal spending caps will exacerbate the states' financial difficulties.

States are responding to fiscal pressures by developing Medicaid managed care programs. As Medicaid spending has accelerated, politically-sensitive state governments are targeting their Medicaid cost-savings on AFDC clients. These beneficiaries are being enrolled in Medicaid managed care plans, primarily through the creation of Section 1115 and 1915(b) waiver programs that, with HCFA approval, permit mandatory assignment of Medicaid beneficiaries to managed care (see figure 5, page 13). Thus, those school-based health centers that have learned how to implement fee-for-service billing systems may find themselves unable to collect payment for services because their Medicaid patients are now enrolled in managed care.

Federal eligibility standards for cost-based reimbursement are increasingly restricted and reduce revenue potential for school-based health centers. One method some school-based health centers have used to increase reimbursement from Medicaid has been to enter into contractual relationships with federally-qualified health care (FQHC) clinics. These clinics receive cost-based reimbursement under both Medicare and Medicaid because they serve communities federally-designated as "medically underserved." As FQHC satellite facilities, school-based health centers may receive cost-based reimbursement for care provided to Medicaid beneficiaries. With the federal government facing budget limitations, the identification of communities eligible for "medically underserved" status has become more restrictive. Expansion, and indeed, retention of the FQHC programs is increasingly uncertain as managed care programs have spread. Currently, litigation (NACHC v. Shalala) is challenging the right of the US Department of Health and Human Services to waive FQHC entitlements under Medicaid managed care programs.

School-based health centers have not been defined as "Essential Community Providers" and are therefore not automatically entitled to any special treatment that may be accorded "safety net" services. In an effort to retain cost-based reimbursement for programs targeted on the underserved, a number of health care providers have been identified at the federal or state level as "Essential Community Providers" (ECPs). School-based health centers have not been included in any federal or state definition of "essential community provider," nor are designated essential community providers such as community health centers required to contract with the school-based health centers. Given the legislative and regulatory environment, expansion of ECP designations at the federal and state levels may be difficult.

HCFA appears to be narrowing FQHC and ECP protections. Pending a decision in the NACHC v. Shalala case, the agency maintains that while cost-based reimbursement for FQHC providers is protected under 1915(b) waivers, 1115 waivers give states broader authority to waive all protections for FQHC providers. Moreover, even under a 1915(b) waiver, the state need not protect all FQHCs or ECPs but need only assure that Medicaid beneficiaries retain access to one such provider. Thus, contracts between a school-based health center and a FQHC might not assure participation in a managed care plan or cost-based reimbursement.

The Employee Retirement Income Security Act (ERISA) exempts large numbers of employers from complying with state laws regulating health insurance. ERISA, the federal law governing self-insured employers, precludes states from placing any requirements on self-funded health insurance programs, including managed care. Increasing numbers of employers are self-insuring their employees so that nationally almost half of all privately insured workers come under self-insured plans. As a result, there is a shrinking private insurance market from which states might seek support for school-based health centers via sales or other taxes. While school-based health centers may well be viewed positively by the private sector, ERISA legislation may limit a state's ability to require its participation in school-based health center initiatives or to control how that participation takes place. Cooperation among private insurers, major employers and government agencies may bring about a partnership to support school-based health centers, but the state's role in such efforts at this point appears likely to be advisory rather than directive. Note, however, that the April 1995 decision in the New York Conference of Blue Cross and Blue Shield Plans et al. v. Travelers Insurance Co. et al. may increase the ability of states to finance and regulate health care.

National Health Policy Forum, Issue Brief No. 656. ERISA and state flexibility: Exploring options from a state perspective, Fall 1994.

Rosenberg & Associates. Financing adolescent school-related health centers under the proposed National Health Security Act. Author, Point Richmond, CA, January 1994.

Defining a school-based health center: An essential step towards a financing policy

Because federal Medicaid regulations do not define school-based health centers as participating entities within the program, if a state is to develop special Medicaid-related funding strategies for the centers, the state Medicaid program needs to define the centers as a reimbursable ambulatory care provider-type, that is, a particular health care delivery system unit that can be shown to meet specific standards. Examples of ambulatory care provider types include hospital or health department-sponsored out-patient clinics, federally qualified health centers (FQHC), rural health centers, physicians and physician practice groups, and certified nurse practitioners.

There are advantages, particularly related to reimbursement, to designating school-based health centers as a specific provider type. For example, federal law stipulates that FQHCs and rural health centers (RHC) are entitled to reimbursement for the full cost of providing services to both Medicare and Medicaid beneficiaries. This arrangement allows the centers to include in their payment rate the costs of providing non-medical health services (social work and mental health services, case management, outreach, transportation, community health education, etc.) that are not typically reimbursed in a private medical practice. School-based health centers affiliated with FQHCs and RHCs have the potential for realizing cost-based reimbursement through their sponsor.

States as regulators of Medicaid rate payments can also establish a special reimbursement rate for school-based health centers that, similar to the FQHCs, compensates school-based providers for a broad scope of services to Medicaid beneficiaries. To pursue such a strategy, however, the State Medicaid program must define a school-based health center -- both by identifying the population to be served and by delineating the specific services to be provided.

(1) Options for targeting criteria: defining the communities to be served by state-supported school-based health centers.

Limited resources preclude the expansion of centers into every community that might desire one. Decisions must be made. Priority-setting among communities (i.e. targeting) might utilize one or a combination of the following factors: income, age, insurance status, and health care access.

(a) Low-income

While all school-age children need a broader set of services than is covered under most health insurance, upper-income communities appear more able to finance their own needs. Parents may be more likely to have full-family employer-based health insurance coverage, as well as the time and money to coordinate the different needs of their children. However, working families with low to moderate incomes may have more limited resources, in terms of both time and money. A state may wish to locate centers in those communities with a significant proportion of poor and near-poor households.

A rationale for using low-income as a targeting criterion is that health services research has documented that low income children experience greater health problems than children as a whole.

• The high child poverty rate in the United States substantially increases the health problems of children. The frequency rates for many medical problems are double to triple the norm among low-income children. Child deaths due to diseases are triple to quadruple those of other children, and low-income children have much greater percentages of conditions limiting school activity, lost school days, and severely impaired vision (Starfield B, 1992).

(b) Age

Age may be used as a targeting criterion to improve health care access for a specifically-defined age group that experiences greater access barriers than other age groups, or may have greater needs. Historically, adolescents ages 10-19 have been a primary target group for school-based health care because national data suggest that, as a whole, adolescents are less healthy and utilize health services less frequently than their pre-adolescent peers.

As more communities place school-based health centers in elementary schools, states must carefully assess the political ramifications of targeting populations generally thought to be less in need and better served by traditional health care systems.

Some of the data confirming the health needs of adolescents are as follows:

(c) Insurance Status

As employer-based health insurance declines and children of working parents become increasingly less likely to be insured, states may choose to target communities with significant numbers of uninsured school-age children. Recent publications have documented the increased numbers of uninsured children and the implications for health care access:

(d) Inadequate primary care access

Barriers to ambulatory care due to inaccessible or limited numbers of primary care providers may constitute another criterion for community selection. Evidence of access problems for school-age children have been reported in leading medical journals.

• Hospital admissions in New York City for ambulatory care-sensitive conditions, which suggest inappropriate emergency room utilization and inadequate primary care availability, are significantly associated with area and income for children aged 6-17 (Billings et al. 1993).

• A recent article in the New England Journal of Medicine by the Medicaid Access Study Group points out that for Medicaid beneficiaries, obtaining ambulatory care outside of emergency rooms is difficult (Medicaid Access Study Group, 1994).

In summary, it might be argued that the children for whom school-based health centers are most useful are adolescents, ages 10 - 19, from low-income families. Many of these young people are without health insurance, and even for those who have Medicaid or some other form of coverage, access to care may be limited by social conditions including the absence of appropriate providers in their community. In addition, the range of care for chronic physical, mental health and behavioral conditions, and the social support to help them manage ongoing problems, is not routinely available through existing health care provider organizations.

States will likely have many more needy communities than can be served by a state-sponsored program. Therefore, it may be important for a state to add additional criteria, such as community support or evidence of parental leadership. States may also choose to rank-order communities in terms of variables such as the availability of local matching dollars, or the perceived likelihood of success. The viability of a state-sponsored school-based health center program will be significantly enhanced by the development of explicit criteria for the kinds of needy communities where the program is most likely to be effective.

(2) Defining school-based health center services

To determine the costs of operating a school-based health center as well as to lay the groundwork for discussions with managed care plans, states must define the required components of school-based health care and identify standards for how services are to be rendered. The School Health Policy Initiative at Montefiore Medical Center, in collaboration with groups of national experts, has developed both a set of operating principles for school-based health centers and an outline of recommended services to be provided by the centers (Brellochs, 1995).

Service criteria typically include a statement of program objectives. An example for a school-based health center might be: "to assist students to function appropriately in their social and educational environment by meeting their physical, social and behavioral needs in a comprehensive primary care center with-in a school-based health program." Services to achieve this objective can include:

1. State standards for school-based health centers are spelled out in documents supporting a number of state grant initiatives. While state Medicaid programs have not yet become involved in the definition of school-based health centers, state health departments have become increasingly so. In the process of initiating grant pro-grams for school-based health centers, the health departments have established program goals, described service and staffing standards, and defined prototypes for replication. Of the 50 states surveyed by the Making the Grade National Program Office, 22 have established state school-based health program guidelines, ranging from suggested to mandated program standards (see Table 2 below). Twelve of these standards, judged by the Program Office to be well-defined and comprehen-sive, are summarized in the appendix. Nine states reported that program guidelines were under development. With few exceptions, states define school-based health centers as vehicles for coordinating and delivering accessible primary physical and mental health services to students. The states' definition of required or desired services are fairly uniform. The services to be provided include: preventive health care, acute care, routine examinations, immunizations, social services, health education and mental health counseling. Reproductive health services are more frequently suggested than required for centers serving older students. What becomes clear from conversations with state officials is that the process of defining the school-based health center service package is difficult given the value attached to a strong programmatic role for local officials and community groups. Extensive discussions involving a mix of state and local representatives are essential to establish consensus on the service package (Schlitt JJ, et al)

   Table 2. State Guidelines For School-Based Health Centers1
   Required/Suggested Guidelines2		In Develop-ment3	No Guidelines4
   Colorado Connecticut Delaware Florida Georgia Hawaii Illinois Indiana Louisiana Maine Massachusetts	Michigan Nebraska New Jersey New Mexico New York North Carolina Ohio Oregon Pennsylvania Texas Virginia	Arkansas Iowa Maryland Missouri Rhode Island Tennessee Utah Vermont West Virginia	Alabama Alask