Five years ago the Robert Wood Johnson Foundation launched a new national program, Making the Grade: State and Local Partners to Establish School-Based Health Centers, to support up to ten states in developing financial and other strategies to foster replication of school-based health centers. In June 1998, the Making the Grade states — Colorado, Connecticut, Louisiana, Maryland, New York, North Carolina, Oregon, Rhode Island, and Vermont — came together to discuss the directions they had taken and the lessons they had learned. Moderating the conversation and reflecting on implications of various state strategies was Steve Rosenberg, the Program’s long-time consultant on health care financing.

Initially replication strategies were planned around widely anticipated federal health care reform dollars and expanded state general funds. But within a year of Making the Grade grant awards, extraordinary change swept the health care and political environments. Grantee states were challenged to understand the changes, revamp their strategies, and, in many instances, re-tool their staffs and refine their political skills to pursue replication of the school-based health centers. In a world now dominated by market priorities, managed care, and conservative politics, most Making the Grade states pulled back from replication strategies that emphasized federal and state grant initiatives.
In 1993, when Making the Grade was announced, support for federal health care reform was strong and prospects for comprehensive health insurance legislation were good. A year and a half later, the Health Security Act was dead; the marketplace was ascendant, and government spending on health care was increasingly privatized, primarily through the spread of Medicaid managed care. In 1998, managed care’s dominance in shaping the re-organization of health services was reinforced when most states chose to implement the new State Child Health Insurance Program (SCHIP) by directing those dollars through managed care delivery systems.
The collapse of federal health care reform and the conservative Republican electoral sweep in November 1994 transformed the political landscape in Washington and the state capitals. In both venues leaders came to power who resisted new public spending on health care and supported market solutions for health financing and services problems.1  With the exception of Louisiana, Making the Grade states directed their attention to linking the centers to Medicaid managed care arrangements as part of a general strategy to increase funding through patient care revenues. Related to this third party revenue strategy was a broadly shared belief that school-based health centers had to align themselves with mainstream health care culture.
To date, the dollar return on this strategy has been low, but alternative mechanisms for funding are unclear. Last year’s passage of SCHIP greatly expanded public financing for children’s health services. It also magnified the role of managed care in serving low-income children and thus heightened the need for school-based health centers to create or improve relationships with health plans. While all Making the Grade states except North Carolina are permitting SCHIP dollars to pay for services provided by school-based health centers, not all have fully linked the centers to the plans or figured out how they will finance the gap between third party reimbursements and total operating costs.

The increased accountability demanded by managed care and the assumption that health plans have adequate provider networks to serve their beneficiaries has placed new pressures on school-based health centers to justify their existence. Making the Grade consultant Steve Rosenberg commented that the market is continually asking, “What are you and prove to us you have value in the marketplace.” The key to a successful state strategy will be in clarifying the public purpose of the centers. He suggests that these purposes are reflected in three basic models for school-based health centers: a medical home model, a public health model, and an add-on model.

  • Under a medical home model, school-based health centers are identified as providers of primary care and preventive services. Funding the centers is viewed as a mechanism for expanding the child health care delivery system. As a provider of non-duplicative care, the centers should receive a significant portion of their budget through patient care reimbursement.
  • Under a public health or health care linking model (also referred to as an access model), a school-based health center is responsible for identifying and responding to the major health problems within the school community. A state strategy to support a public health vision of school-based health centers would understand that only a small portion of these activities will be supported through third party payments and would identify other sources of funding to support the public health mission.
  • Finally, there are add-on programs. Essentially these are programs that may do good things but may duplicate others in the community. Add-on programs may also provide services that are not medically required, or for which there are no data demonstrating an impact on health outcomes. A peer counseling program organized by a health center might be one such service.
In theory, defining a model gives policymakers a clear sense of which streams of public moneys should support school-based health centers. In practice these three models oversimplify the course states have taken. In a number of states, the distinctions between the models are blurred and centers have multiple goals that vary sometimes by region of a state. It appears, however, that the prospects for long-term public funding for school-based health centers rests in no small part on states’ ability to articulate why and how they are useful in the larger health care delivery system.
The nine Making the Grade states experienced the turbulence of the past five years in different ways and adjusted their replication strategies accordingly. Their funding plans and the issues they confronted are reported by each of the states in the paragraphs that follow. The reflections of Steve Rosenberg on the strengths and weaknesses of the policy debates conclude the executive summary.


In Vermont where a small school-based health center program has been launched, the centers are viewed as advancing public health policy via the schools. To date, three centers have been established in rural communities. The centers are not expected to serve as medical homes but rather assure the provision of key physical and mental health services as well as preventive health services. Since 95 percent of the state’s school-age children are insured before the State Child Health Insurance Program is implemented and the state is well supplied with pediatric and family practice physicians, state officials believe there will be no difficulty linking children to medical homes. One of the school-based health center roles will be to make sure all children have community-based primary care providers.

Because health centers will be fulfilling public health functions, it is not expected that they will receive significant patient care revenues. Instead, the basic state funding strategy focuses on using state-administered EPSDT dollars and dollars used to pay for “related health services” for special education students. The EPSDT dollars have been carved out of the Medicaid program to support a Medicaid claiming process which pays schools for providing administrative functions on behalf of the Medicaid program. Schools are also paid for providing comprehensive, preventive health services to Medicaid-enrolled students. The program, named the EPSDT School-Based Health Access Program, generates a million dollars a year. The state requires that if a school is going to participate in the Medicaid claiming program and seek a school-based health center, the school must direct 40 percent of funds generated by refinancing towards the school-based health center. Schools are also being reimbursed for health related services provided to Medicaid-insured students enrolled in special education. The state also obligates schools with school-based health centers to allocate 40 percent of their “related services” revenues to school-based health centers.

While the state is optimistic that the state-administered Medicaid dollars will provide a substantial portion of the support needed to sustain existing centers, securing funds for program expansion is a different challenge with which the state continues to grapple.


Drawing on the experience of its first four school-based health centers, Rhode Island began developing its statewide replication strategy a year ago. To date the state has not decided which school-based health center model it is implementing, rather it has focused on short-term financing issues, including helping centers find additional funds to cover operating costs not supported by the state grant and assisting grantees to maximize billing — which means helping them in their relationships with managed care plans.

The first priority has been to assure that the centers are included in the managed care provider networks. When RIteCare, the state’s two-year-old Medicaid managed care program, was launched, the RIteCare contract defined school-based health centers as essential community providers and required plans to contract with centers in their service areas. Translating this requirement into reimbursement to the centers for care provided has been hard work. The managed care plans are concerned about health center quality and sometimes, probably for financial reasons, a child’s primary care provider does not want to permit a child to receive service at the centers. However, the state has developed quality standards for the centers and implemented a Continuous Quality Improvement program as a way to encourage managed care cooperation. Four of the five managed care plans have signed contracts with the school-based health centers and some, though limited, RIteCare dollars are accruing to the centers.

Although the state is still early in its formulation of financing strategies, data from the centers indicate that even with a generous child health insurance program, the state will have to identify, at a minimum, $750,000 per year to help fund the 20 school-based health centers the state hopes to establish in all middle and high schools in five core Rhode Island urban areas. Negotiating the relationships between health plans and the centers and securing long-term state funding are the twin challenges the Rhode Island financing strategy faces.


Oregon sees school-based health centers as primarily fulfilling a public health mission, with the localities rather than the state defining what the public health priorities are. However, state support for an emphasis on preventive services is reinforced by data from its Office of Medical Assistance Programs that documented that for young people ages 14-19 enrolled in the Oregon Health Plan for Fiscal Year 1996, only five percent had seen their primary care provider for a preventive health service. Supporting expanded use of preventive care is a key component of state interest in school-based health centers.

The state’s approach to replicating school-based health centers is to pursue a community designed and financed model that draws on technical assistance and limited funding from the state as well as benefits from a supportive statewide policy environment. Future funding of school-based health centers may look something like this: The state will provide partial support to all school-based health centers; a typical grantee might receive 30 percent of its operating budget. State participation not only will guarantee part of the core budget but will also serve as a mechanism for accountability. Third-party reimbursement and/or support from the sponsoring agency will total about 30 percent; the county will contribute 10 percent as will private donors such as business partners, and the schools will be expected to provide 20 percent of operating costs.

Oregon does not require that managed care plans contract with school-based health centers and the centers have faced significant difficulty in negotiating contracts with the plans. However, the state has submitted a request to HCFA that would permit the state to use a larger portion of the SCHIP dollars to directly fund safety net providers. With the state controlling more of the SCHIP funds, the state could expand support to those providers caring for SCHIP enrollees.

Oregon, like Vermont, is a state with a large proportion of insured children — at least 92 percent. While the state continues to broaden its insurance coverage for children and adolescents, focus is turning to delivery system issues. Increasingly the mantra is heard that insurance alone does not assure that care is delivered.

The Oregon replication strategy requires that school-based health centers engage a number of partners to establish a sufficient funding base. The state notes that their experience demonstrates that the strategy can work. During the past six years the number of centers has more than doubled, growing from 18 to 39 — with additional new centers scheduled to open in the current school year.


North Carolina has also doubled the number of its school-based health centers, growing from 20 to 40 over the past five years. In this large state with 100 counties, there are substantial areas that are medically underserved. In some low-income areas, as many as 25 percent of children are uninsured. And in North Carolina as in Oregon, even insured children face barriers to care. For example, less than 20 percent of adolescents enrolled in Medicaid have received the comprehensive primary care services available through EPSDT. For these reasons, the state is supporting school-based health centers as a way of increasing low-income and uninsured students’ access to care and assuring that preventive care is provided.

Financing strategies are based on (1) building financial linkages between school-based health centers and managed care arrangements as well as other third party payers, (2) partnering with private foundations, and (3) increasing state funding.

The Medicaid managed care program, a mostly primary care case management program, is called Carolina Access. Participating physicians are paid fee-for-service with the primary care physicians receiving an administrative fee for their gate-keeping activities. Only one county, the largest — Mecklenberg County (Charlotte) — has a capitated program. The state Office of Medical Assistance, private providers, and the Health Department School Health Office have joined together to develop standards for school-based health centers. Centers that meet standards will not have to receive prior approval to bill Medicaid for the services provided. Two standards have already resulted from these discussions include: 1) at least 80 percent of all students enrolled in the school-based health centers should have an age-appropriate well-care visit, and 2) all enrolled students should have a well-care visit within one year of enrolling.

The SCHIP legislation, which was expected to supplement the Medicaid portion of the centers’ patient care revenue stream, has excluded school-based health centers from participation. Despite intense lobbying by representatives of communities with school-based health centers, at least for this first year, the North Carolina SCHIP will not reimburse centers for care provided to its enrollees.

A second financial strategy to support the centers has been to work collaboratively with foundations. The largest foundation in the state, The Duke Endowment, and several others are providing seed dollars for planning and start-up for both school-based and school-linked programs as well as supporting traditional school health services.

A third and final strategy is to increase state funding for school-based health centers for the first time since its initial funding in 1991. The state hopes to do this both through the Maternal and Child Health block grant dollars and through an increase in funding for the adolescent health initiative in the budget for the next biennium.


With 159 centers, New York has the largest school-based health center program in the country. To receive state funding these centers must meet standards that emphasize the provision of comprehensive services and, in partnership with its sponsoring institution, the capacity to serve as a medical home. The standards also indicate that the centers are intended to serve public health functions, including provision of health education and preventive care.2

At present the school-based health centers receive $10 million in state grant funds (including general fund, Maternal and Child Health Block Grant, and Making the Grade dollars); and $6 million in Medicaid fee-for-service revenues. Centers are also supported with approximately $6.3 million in in-kind contributions by sponsoring institutions. This financing strategy for school-based health centers, however, is now in transition.

New York is committed to financing indigent health care through managed care and this means that the state is also committed to integrating school-based health centers into Medicaid and SCHIP managed care programs. For the past two years the state has granted the centers a temporary carve-out from its mandatory Medicaid managed care program . It was expected that the centers would use this time to negotiate contracts with the plans. The carve-out is expected to end shortly. Due to delays and difficulties in negotiations, the contract deadline has been postponed twice. Recently it was postponed again from October 1 until at least December 31,1998.

In New York the centers have been reimbursed at the hospital outpatient rate, sometimes up to $70 per visit — which accounts for the $6 million in Medicaid revenues. Managed care plans are refusing to pay that rate, which has created a stand-off between the plans and the school-based health centers. The centers contend that they cannot survive the reduction in Medicaid payments; the state argues that the reduction will be offset by an increase in coverage for uninsured children through Child Health Plus (the New York SCHIP). The plans maintain that they will not pay $70 a visit and do not need the centers to offer an adequate provider network. Both parties have been unyielding. A great deal of work remains to be done to resolve the competing claims of school-based health centers and managed care plans.


When Maryland became involved in Making the Grade, its vision for school-based health centers was based on a devolution strategy called the Systems Reform Initiative (SRI) which was intended to support greater local control of state dollars spent at the community level. Given the local control aspects of devolution, the state did not articulate its own mission for school-based health centers. Under devolution, at the state level categorical dollars would be pooled and those funds would be distributed to the 24 Maryland local jurisdictions. These jurisdictions would make funding decisions based on the needs of their communities. The state believed local communities would see school-based health centers as an answer to some community needs. With the state already supporting school-based health centers with generous fee-for-service Medicaid reimbursement that covered mental health as well as physical health services, the assumption was that together these resources would provide basic funding for the centers when combined with in-kind contributions from the school system and grants for special activities. Both the SRI and Medicaid funding strategies have since unraveled.

Implementation of the Systems Reform Initiative has been a slow process with delays in amassing the required “savings” for investment in the program as well as difficulties in putting the administrative structure in place. Thus the Systems Reform Initiative is no longer seen as a major funding source and the state has begun to re-engineer its financing vision.

The other pillar of Maryland’s funding strategy, its generous fee-for-service Medicaid strategy, collapsed a year ago when HealthChoice, the Medicaid managed care program, was implemented. Managed care plans participating in HealthChoice are required to reimburse the centers for up to four acute care visits per semester with one follow up per acute visit. But to receive payment for any services, the school-based health centers must negotiate contracts with each participating plan. To date no contracts have been signed. The lack of success in contracting under HealthChoice is significant because the Maryland SCHIP program has been folded into HealthChoice. While schools have been identified as a place for SCHIP enrollment, no special funds from the “ten percent” dollars will be available to support direct service delivery.

A significant shift from the original financing vision is the greater role for private partners. Initially the state focused almost exclusively on public funding and public policy setting. Recently, private entities, especially large health care systems, have expressed interest in the school-based health centers. One of these systems is now subsidizing two school-based health centers. The state plans to nurture this development as an alternative model for financing the centers.

Despite the bumpy road, five new centers opened this year bringing the Maryland total to forty-three. Part of the growth is due to the state’s distribution of a $300,000 seed fund over the past two years and the new partnerships with private providers. The state’s primary challenge will be to sustain these fledgling efforts. Ultimately the Health Department needs to develop a budget package to help support the centers. However, before it submits a request to the legislature, the department needs a solid year of billing in all the jurisdictions with school-based health centers to document the gap between third party revenues and the total operating cost of a center. The state is concerned, however, that the jurisdictions most effective at billing are covering only 30 percent of their budgets. The remaining costs are supported by a mix of local support, grants, and in-kind contributions.


Funding for school-based health centers is solidly based on line item support in the state budget. Louisiana’s original financing strategy involved Medicaid reimbursement, pooled funding, use of block grants, a local match and some state funds. In the first few years the state even spent time on Medicaid managed care. But Louisiana is still not doing anything with managed care and what the state has learned over time is that its best finance strategy is a political one. School-based health centers work with their legislators who become advocates for funding more centers. As a result Louisiana has an annual state appropriation of $3.25 million to support school-based health centers. And this is added to a Maternal and Child Health Block Grant allocation of between $600,000 and $1 million annually plus Making the Grade funds and local match contributions.

The policy has worked: the number of school-based health center sites has increased from four in 1991 to 30 in 1998. About 60 to 65 percent of each site’s budget is derived from state resources. Local match is running between 30 and 35 percent; Medicaid revenue is only about three percent despite the fact that about a third of the centers’ population is Medicaid eligible. Like North Carolina, the state views its centers as meeting public health objectives — assuring access to preventive care and addressing the primary problems of the population being served. If they have adequate weekend and after-hours back-up from their sponsoring institution, the centers may also serve some patients as their medical home.

School-based health centers did well during the SCHIP hearings in Louisiana. Everyone who testified before the Governor’s commissioner, whether they represented a university or a provider group, included school-based health centers in their strategy. The centers are part of the delivery system in the state. With Medicaid being extended to kids up to age 18 and covered up to 133 percent of the federal poverty level (FPL) in year one of a three-year expansion to 200 percent FPL, the state anticipates a potential third-party payment turn-around. A worry is that maybe the students will not come to the centers when they have other options. Advocates don’t think so but that remains to be seen. Customers will vote with their feet.


Connecticut refers to its school-based health center program as having a multiple personality: the centers integrate medical, public health and social service models.

The state’s financing strategy is based primarily on a grants program that funds 45 of the 51 school-based health centers in the state. The grants are supported by a state general appropriations budget of just under $4.5 million. An emerging second strategy is an increasing emphasis on patient care revenues. Like other states, the conversion of Medicaid to a managed care program has engaged the Health Department and the school-based health centers in efforts to link the centers to managed care plans. While it has taken two and a half years, nearly all the required contracts between school-based health centers and managed care are in place. The state Medicaid managed care Request for Proposals required plans to include school-based health centers in their networks, but the state learned that that was just the first step. Intense negotiation among the plans, school-based health centers, the Medicaid Office and the Health Department was essential to secure those contracts. Now the state has launched its SCHIP program, HUSKY (Health Care for Uninsured Children and Youth), a non-Medicaid insurance product with a more limited service package than Medicaid that requires co-pays. The state must now take the lead in a second round of negotiations to assure that the new HUSKY contracts are concluded.3

Despite success in the contracting process, the revenues generated as a result have ranged from a negative ten percent due to the cost of billing up to a positive ten percent (of operating costs). Most health centers are realizing five percent of their operating costs or less. Currently most sites receive between 60-65 percent of their budget from the state and 30 – 35 percent from local resources. Medicaid revenues average three percent.

Although revenue returns are disappointing, other benefits are emerging. Oxford Health Plan contributed health education materials for an asthma support program through a school-based health center in Stamford. The state is also discussing with HealthRight, another Medicaid managed care plan, the possibility of an EPSDT project in New London and Groton. EPSDT compliance in Connecticut has historically been low, particularly for adolescents. Under this arrangement HealthRight will utilize its outreach workers who do home visiting to inform parents about EPSDT. If the children are not already enrolled in the local school-based health center, the outreach worker will enroll them. HealthRight will provide the school-based health center with a monthly list of its enrollees who need an EPSDT exam. The school-based health centers will provide the service and the plans will pay the centers.

The Connecticut legislature created an oversight council to track the implementation of Medicaid managed care. School-based health centers have a number of supporters on that council who are concerned about managed care’s impact on safety net providers. The council has played an advocacy role to make sure school-based health centers do not fall through the cracks during managed care implementation.

A debate occurring within the Health Department is whether the recent infusion of money for child health insurance will make the state investment in the health care delivery system unnecessary. Among some legislators there is a feeling that with HUSKY, all kids have been covered so state support of a delivery system is unnecessary. The Health Department will have to gather data to respond to that concern.


Colorado’s strategy to support school-based health centers has been strongly market-oriented, encouraging the health plans to use publicly-funded health insurance dollars — both Medicaid and SCHIP — to support the centers. To a lesser extent, the state is also attempting to identify dollars that can pay for uncovered costs. This strategy reflects a belief that at least in larger Colorado communities there are sufficient resources — whether from a local hospital or school or foundation — to support a significant portion of a school-based health center budget. Three pieces of legislation passed in 1997 provide a foundation for creating public revenue streams for the centers:

  • Senate Bill 5 increases Medicaid managed care enrollment to 75 percent of Medicaid beneficiaries by the year 2000 and also defines school-based health centers as essential community providers (ECP). Managed care plans contracting with Medicaid are encouraged to make good faith efforts to contract with ECPs that provide services in their service areas;
  • Child Health Plan Plus (the Colorado SCHIP) implements insurance expansion through a private model. It also uses the ECP definition of Senate Bill 5. Given the high rate of uninsured kids seen by many of the centers, with an increasing number of contracts in place between the plans and the health centers, CHP Plus has great potential to expand their third party revenue;
  • Senate Bill 101, “Medicaid Reimbursement for Schools,” authorizes participating school districts to become Medicaid providers. Thirty percent of the dollars recovered could be used by the schools to purchase health insurance for students or purchase primary care services directly for low income students. This means Colorado schools could use Medicaid to help support their school-based health centers. Unlike Vermont, however, the schools aren’t required to do so.Colorado also has some significant private initiatives. Kaiser School Connections is a dues subsidy program supported by Kaiser. Three school-based health center programs participate through 10 of their sites. The initiative basically represents a splitting of the primary care capitation — with the school-based health centers receiving 60 percent of the cap, and 40 percent for Kaiser. Kaiser provides the medical supervision in collaboration with the school-based health centers. Another private initiative is with PacificCare in Denver. PacificCare provides a grant to participating school-based health centers in return for HCFA 1500 billing data to build a utilization history as a basis for an on-going capitation arrangement with the school-based health centers.Other financing comes from local in-kind support and private foundation participation. The state requires its grantees to secure substantial local contributions. These dollars provide a financial base, help fund mental health, and document community support.Foundation dollars continue to be important. School-based health centers receive contributions from United Way, the recently-created Rose Foundation, HealthOne, Blue Cross/Blue Shield and others. Blue Cross will likely be privatized next year, resulting in the creation of a new, very large foundation. The hope is that this foundation will help support the centers as well.

    A new contributor to state policy is the Colorado Association for School-based Health Care (CASBHC). This provider association includes nine of the twelve entities that sponsor school-based health centers. To facilitate contracting between school-based health centers and managed care, CASBHC has developed standards for three levels of certification for school-based health centers. The certification categories describe the service package for different types of school-based health centers without forcing them into a one-size-fits-all approach. Certification categories cover scope of services, physical plant, availability, quality assurance, and financing. Along with these categories, CASBHC has developed some quality assurance protocols and clinical outcome indicators that are based on HEDIS measures.


    The experiences of the nine Making the Grade states demonstrate a variety of efforts to secure access to existing public and private funding streams as well as generate state fiscal support for school-based health centers. At present, the onus appears to be on school-based health centers to prove their worth, a task which will require documentation of the numbers of children they are serving, their insurance status, and services provided to them. This information will provide evidence needed to lobby for inclusion in health plan networks, and for state or local revenues to cover those health promotion and education services that are often excluded from insurance coverage. “Do not,” urged Rosenberg, “confuse political support, which also is essential to secure public dollars, with whether you provide a necessary service. To those of you who currently enjoy strong political support but whose mission is less than clear, I can only urge you to make good use of this time to do the data gathering essential to document functions you are fulfilling.”


1. Passage of the federal State Child Health Insurance Program in August 1997 is a notable exception to legislative opposition to new health care funding. However, most states chose to administer this program through private rather than public programs.

2. Guidelines for School-Based Health Centers in New York, New York State Department of Health, 1996. Document can be located online, State resources: New York.

3. For an extended discussion of the State Child Health Insurance Program and School-Based Health Centers, see Jane Koppelman and Julia Graham Lear, “The New Child Health Insurance Expansions: How Will School-Based Health Centers Fit In?,” on the Making the Grade web site.