Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Federally Funded Health Centers and 
Low Income Childrens Health Care 
Improving SCHIP Enrollment and 
Adapting to a Managed Care Environment 
JUNE GIBBS BROWN 
Inspector General 
DECEMBER 2000 
OEI-06-98-00321  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them.  This statutory mission is carried out through a 
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's Region VI prepared this report under the direction of Chester B. Slaughter, Regional 
Inspector General and Judith V. Tyler, Deputy Regional Inspector General. 
Principal OEI staff included: 
DALLAS  HEADQUARTERS 
Nancy Juhn, Ph.D., Project Leader  Joan Richardson, Program Specialist

Nancy Watts

Scott Whitaker

Lisa White

To obtain copies of this report, please call the Dallas Regional Office at 214-767-3310. 
Reports are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  E X E C U T I V E   S U M M A R Y  
PURPOSE 
To examine the experience of Federally funded health centers in implementing the State 
Childrens Health Insurance Program (SCHIP) and in delivering health care to children 
covered by SCHIP. 
BACKGROUND 
Federally funded health centers have been major safety-net providers for low income families 
since the 1960s. These centers have struggled in the 1990s to continue their mission as States 
move toward Medicaid managed care.  Beyond adapting to their changing health care 
environment, SCHIP have underscored a need for assertive outreach by health centers to 
enroll uninsured children, many of whom are already their patients.  Although there are two 
types of SCHIP programs, Medicaid expansion programs and separate child health programs, 
this report, we will use SCHIP inclusively without differentiating program types.  To study 
health centers and their role under SCHIP, we conducted a national survey of a 
representative sample of 405 health centers from all 50 States, including the District of 
Columbia and Puerto Rico.  A few States were not yet able to address all aspects of a fully 
operating SCHIP program, but could still respond regarding their experiences in the changing 
health care environment. 
FINDINGS 
As trusted health care providers within needy communities, these centers can serve as one of 
the most appropriate agents for enrolling children in the SCHIP.  For health centers, 
emergence of the SCHIP provides a significant additional funding source as they continue to 
make health care available to uninsured children.  Thus, the mutual needs of both States and 
health centers can be well-served through their stronger collaboration.  However, the health 
centers must also be prepared for changes in reimbursement methods. 
Outreach and Enrollment 
Eighty-three percent of health centers conduct their own SCHIP outreach, which primarily 
entails screening current clients for SCHIP eligibility.  Forty-two percent have also relied on 
outside resource assistance, such as funds and/or manpower, to aid their outreach efforts. 
State SCHIP enrollment training for health center staff is four times more likely to increase 
reported health center enrollment success. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
i  Sixty-one percent of health centers do not have outstationed eligibility workers, even 
though only 7 percent are designated as low use sites, i.e. having few Medicaid eligible 
clients. 
Health centers that have outstationed eligibility workers or are authorized to use presumptive 
eligibility are substantially more likely to receive State enrollment training which, in turn, 
increases reported enrollment success. 
Two-thirds of health centers cited welfare stigma, fear that applying for SCHIP will 
jeopardize immigration status, and complicated application forms as barriers to enrollment. 
Lengthy processing times for eligibility determinations reduce the likelihood of having 
children actually enroll in SCHIP. 
Adapting to a Changing Health Care Environment 
Sixty-three percent of health centers contracted with a managed care organization that covers 
children, although half of these centers obtained their contracts recently.  Those centers 
involved in managed care are beginning to accept financial risk for patient care and move 
away from traditional cost-based reimbursement.  However, enabling services such as 
transportation, translation and outreach, critical for access to care, are not always reimbursed 
under managed care. 
Only 32 percent of centers indicated that their States required Medicaid managed care 
organizations to include them in provider networks.  Health centers are more likely to form 
their own managed care organizations, in part, when the States do not require inclusion of 
health centers in Medicaid managed care provider networks. 
Relatively few health centers (21%) were making changes to specifically adapt to the phase-
out of Medicaid cost-based reimbursement.  However, health centers were altering their 
business infrastructures in response to changes in the general health care environment. 
RECOMMENDATIONS 
The Health Care Financing Administration (HCFA) should: 
Promote enrollment of children in SCHIP through the health centers by encouraging 
States to provide enrollment training for health center staff and to increase the 
number of health centers with outstationed eligibility workers and designated as 
presumptive eligibility sites, where applicable. 
Encourage States to promote inclusion of health centers, that are ready for managed 
care, in the Medicaid and/or SCHIP managed care provider networks, and to expand 
reimbursement to include enabling services. 
The Health Resources and Services Administration (HRSA) should continue to help health 
centers prepare for the phase-out of Medicaid cost-based reimbursement. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
ii  AGENCY COMMENTS 
The HCFA and HRSA generally concur with our recommendations.  The HCFA states that it 
is already addressing many of our recommendations, particularly with regard to eligibility and 
outreach issues. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
iii  T A B L E   O F   C O N T E N T S  
PAGE 
EXECUTIVE SUMMARY  i

INTRODUCTION  1

FINDINGS

Outreach Activities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

Adapting to a Changing Health Care Environment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8

RECOMMENDATIONS  11

ENDNOTES  14

BIBLIOGRAPHY  17

APPENDICES

A: Discussion of Regression Model  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  A-1

B: Chi-square Test Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  B-1

C: Point Estimates and Confidence Intervals from Key Survey Questions . . . . . . . . . . . .  C-1

D: Agency Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  D-1

Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321  I N T R O D U C T I O N  
PURPOSE 
To examine the experience of Federally funded health centers in implementing the State 
Childrens Health Insurance Program (SCHIP) and in delivering health care to children 
covered by SCHIP. 
BACKGROUND 
State Childrens Health Insurance Program 
Title XXI of the Social Security Act, under The Balanced Budget Act of 1997, created 
SCHIP.  Authorized for ten years, and funded at $20.3 billion from 1998-2002,1 the program 
targets children in low-income families (generally under 200% of the Federal poverty level) 
with the intent of providing States with an opportunity to design health care delivery systems 
that are similar in scope and structure to coverage that is available through private insurance. 
Nearly two million children were enrolled in SCHIP during Federal Fiscal Year 1999.2  The 
Health Care Financing Administration (HCFA) is responsible for administering SCHIP, with 
joint oversight by the Health Resources and Services Administration (HRSA). 
The authorizing legislation provides States flexibility in designing their SCHIP programs by 
allowing them to adopt one of three models.  According to HCFA at the time of this study,3 
27 States, including Puerto Rico and the District of Columbia, opted to expand their 
Medicaid programs, 13 States selected a combination of Medicaid expansion and a separate 
SCHIP program, while 16 States elected only to create a separate SCHIP program.4  Most 
States that created a separate SCHIP program also established an independent agency to 
administer the program. 
Program benefits vary by model chosen.  If Medicaid expansions are used, the same benefits 
and administrative rules used by the existing Medicaid program apply.  States which 
previously expanded Medicaid for children, or created a separate SCHIP program, are 
allowed to expand eligibility beyond 200 percent of the Federal poverty level to 50 
percentage points higher than their existing eligibility limits.5  Some States that created a 
separate SCHIP program had established additional benefits above Federally legislated 
SCHIP minimum standards. 
Federally Funded Health Centers 
Generally located in communities with low to moderate family incomes, Federally funded 
health centers have been  major safety-net providers for low income children since the 1960s. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
1   Centers are funded by Section 330 of the Public Health Service Act, which is administered 
by HRSA, with some receiving State and local funds as well.  In addition to primary health 
care services, these clinics also provide enabling services such as translation, health 
education, and transportation which are important to serving the SCHIP population.  Since 
services for children are a large program component for many of these centers, they hold 
considerable promise in helping realize the goals of the SCHIP legislation.  Our prior OIG 
study of health centers showed that, due to the level of trust and service they have established 
in their communities, they possess great aptitude for outreach and enrollment.6 
Besides SCHIP implementation, Federally funded health centers have experienced other 
substantial changes in the health care system, particularly due to State movement towards 
Medicaid managed care in the 1990s.  Recognizing the need to adapt to this environment, 
some centers have assertively joined or created managed care organizations or undertaken 
special developmental efforts like infrastructure enhancements.7  Our prior case study report 
indicated that HRSA also makes technical assistance and training opportunities available to 
aid centers in adapting to managed care.8  The transition from Medicaid cost-based 
reimbursement9 continues to challenge centers as they seek to better manage costs and devise 
appropriate reimbursement formulae within their health plan contracts.10 
Other Recent SCHIP Studies 
Another OIG report, The Childrens Health Insurance Program, States Application and 
Enrollment Processes: An Early Report From the Front Lines (OEI-05-98-00310), found 
that application length and complexity were barriers to enrollment in Medicaid and the 
SCHIP.  Additional work in the field by the United States General Accounting Office (GAO) 
focused on outreach mechanisms and enrollment between Medicaid and SCHIP and a 
comparison of optional benefits. The GAO report stated that outreach activities for Medicaid 
and SCHIP were similar; however, more documentation was required for Medicaid than for 
SCHIP eligibility determinations in half of the ten States they sampled.11 
METHODOLOGY 
In 1999, we published CHIPs Impact on Changing Service Delivery of Federal Health 
Centers: Six Case Studies, OEI-06-98-00320 which employed a case study approach to focus 
on the experiences of individual centers in implementing SCHIP.  Based on issues developed 
from this case study report, we designed a structured survey to obtain representative, national 
information on centers experiences and issues regarding separate child health programs and 
Medicaid expansions.  The results of this national survey are reported here.  For the rest of 
this report, we will use SCHIP inclusively for the separate child health program and Medicaid 
expansions without differentiating model types unless otherwise noted12. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
2
 Study Focus 
The survey focused on health centers involvement in SCHIP planning, outreach activities 
and enrollment, and health centers adjustments to the changing health care environment, 
particularly for provision of childrens health care services.  The term outreach by health 
centers as used in this report means encouraging clients to establish SCHIP eligibility rather 
than encouraging a choice of a particular provider.  Health centers executive directors were 
the primary survey respondents.  Having conducted in-person interviews with them for our 
case study report, we learned that they are highly knowledgeable about various aspects of 
their health centers and SCHIPs impact on them.  Since our study focused on the health 
centers perspectives, we did not attempt to validate center responses, including statements 
about the SCHIP activities of their States and/or State Primary Care Associations (PCA). 
Sample 
Using the HRSA 1998 Uniform Data System (UDS) database, we selected a simple random 
sample of 462 centers from the total of 615 Federally funded health centers receiving Section 
330 grant funding.  These grantees include Community Health Centers, Homeless Centers 
and Migrant Heath Centers.  In this report, for brevity, we use the term health centers to 
represent each of these Section 330 grantees. 
The HRSA 1998 UDS provided general information regarding the centers in our sample. 
Our study sample included a diverse population of health centers.  Forty percent of the 
patients served by health centers in our sample were between the ages of 0-19, totaling over 
two million children.  These centers also serve a high proportion of racial/ethnic minority 
populations, including Native Americans (2%), Asians/Pacific Islanders (3%), African 
Americans (22%) and Hispanics (28%). 
Data Collection 
The survey data were collected primarily via the Internet and also by mail.  On December 10, 
1999, we initially mailed structured survey forms to 94 health centers lacking Internet access. 
During the first week of January 2000, the remaining 368 health centers in our sample 
received an e-mail message containing a link to an electronic survey at an Internet site.13 
Data collection was completed by February 19, 2000. 
A total of 405 (88%) of the sampled health centers returned completed surveys, and included 
responses from health centers in all 50 States, the District of Columbia and Puerto Rico. 
Throughout this report, the term States is also applied to the District of Columbia and/or 
Puerto Rico.  At the time of our survey, a few States (Hawaii, Washington, Wyoming and 
Puerto Rico) had approved SCHIP plans, but were not yet enrolling children.  As a result, 
some of these centers were not able to address all aspects of a fully operating program, but 
could still respond regarding their experience in the changing health care environment. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
3
 Statistical Analysis 
This sample design and our strong response rate yield national results that are statistically 
significant at a 95 percent degree of confidence with a 5 percent margin of error, unless 
otherwise noted in the Appendix.  Descriptive data are expressed as proportions (%), and 
statistical differences between categorical variables were assessed using a Chi-square test. 
For this analysis, we also used logistic multivariate regression models to further 
explain/predict key variables.  Of particular interest is understanding what factors contribute 
to health centers success in enrolling eligible children in SCHIP.  The actual number of 
children enrolled in SCHIP by each health center was not available.  Therefore, the regression 
model employed a dichotomous dependent variable that simply indicates whether or not the 
center reported  SCHIP enrollment.  After controlling for other factors, these explanatory 
variables for enrollment outcomes were: date of SCHIP plan approval, State SCHIP model, 
outreach activities, enrollment training for health centers, use of presumptive eligibility, use 
of outstationed eligibility workers, and application processing times.14 
The tables in the Appendix present relevant statistics for key survey questions, including 
standard errors and confidence intervals based on t-statistics.  For calculating standard errors, 
we used finite population correction factors since our sample represents two-thirds of the 
true population.  Consequently, findings presented in this report are based upon strong 
statistical inference about population characteristics.  The Appendix also includes values of 
the Chi-square test and parameter estimates of the regression results.  All tests were 
performed at a significance level of a=0.05. 
Non-Respondent Analysis 
To detect non-respondent bias, we tested data for significant differences between respondents 
(405 centers) and non-respondents (57 centers) by the following characteristics: State, 
SCHIP model type and number of children a health center serves.  We did not find significant 
differences between these two groups. 
We conducted our study in accordance with the Quality Standards for Inspections issued by 
the Presidents Council on Integrity and Efficiency. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
4
 F I N D I N G S  
OUTREACH ACTIVITIES 
Most health centers (83%) conduct their own SCHIP outreach, which primarily 
entails screening current clients; 42 percent have relied on outside resource 
assistance. 
The most frequent outreach methods are screening and identifying eligible children from 
existing clients (76%), posting SCHIP information fliers and/or posters in their health centers 
(73%), and providing SCHIP information through their health providers (64%).  It appears 
that center outreach was mainly limited to existing clients since most centers utilized in-house 
activities rather than reaching out to new SCHIP eligible populations.  Although one health 
center in our case study report was aggressively canvassing its local community for eligible 
applicants, we didnt find this type of outreach activity common among the centers in our 
national survey. 
Outside resources received for outreach were funds and/or manpower.  The top sources of 
outside resources were grants (42%) and contracts (19%) for SCHIP.  Some centers (38%) 
reported that they also received outside resources from various State or local organizations. 
Eleven percent of the centers indicated that the Robert Wood Johnson Foundation provided 
outreach resources. 
ENROLLMENT 
Understanding factors contributing to health centers enrollment of eligible children in SCHIP 
is of particular interest.  By February, 2000, when we concluded data collection, 73 percent 
of responding health centers reported they had already enrolled children in SCHIP.  The 
logistic regression analysis explains what events or activities most influenced these early 
enrollments (See Appendix A). 
State outreach activities enhance health centers SCHIP enrollment. 
Centers which reported State outreach (74%), were 2.5 times more likely to have enrolled 
children than those centers who said their States had not conducted outreach. (25%)15 
Among this 25 percent of centers, 13 percent indicated that State outreach activities were in 
the planning stage. The fact that not all centers were aware of State outreach activities is not 
necessarily an indicator of actual State activity, but may suggest the degree to which State 
activity is perceptible or the effectiveness of methods used in reaching community level 
providers.  Also, a few States had not fully implemented SCHIP, which may have affected 
their outreach activities. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
5
 Of those centers which reported State outreach, the most frequent State outreach methods 
cited by health centers were public service announcements (60%), information distribution 
through schools (46%) and newspaper advertisements (42%). 
State SCHIP enrollment training is four times more likely to increase health center 
enrollment, and centers that have outstationed eligibility workers or are a 
presumptive eligibility site are more likely to receive such State training. 
Health centers are almost four times more likely to enroll children if they are receiving 
SCHIP enrollment training from their States.16  Enrollment training provides health center 
staff with a better understanding of the SCHIP enrollment process and the ability to assist 
clients in completing enrollment forms.  A related factor underpinning enrollment success is 
that centers with outstationed eligibility workers or a presumptive eligibility site designation 
are more likely to receive this State training.  Health centers with outstationed eligibility 
workers are 2.4 times more likely to be trained, and health centers designated as presumptive 
eligibility sites are 1.7 times more likely.17 
States have the option of employing presumptive eligibility, which extends immediate 
Medicaid or SCHIP coverage to children until a formal eligibility determination is made. 
Determinations are made by designated presumptive eligibility sites, which can include health 
centers, hospitals or other providers.  Health centers designated as presumptive eligibility 
sites reported enrolling children in SCHIP more often than those centers that were not.18 
Fifty-seven percent of centers indicated that presumptive eligibility was applicable in their 
States.  Of those centers, 44 percent reported that they were a presumptive eligibility site for 
SCHIP. 
Sixty-one percent of health centers do not have outstationed eligibility workers, 
even though only 7 percent are designated as low use sites. 
Among the 61 percent of the health centers that did not have outstationed eligibility workers, 
only 7 percent were reported to be low use sites.  According to HCFA Medicaid 
regulations governing low-income eligibility groups, the State agency must have staff 
available at each outstation location during the regular office hours of the State Medicaid 
agency to accept applications and to assist applicants with the application process.19  The 
proposed rule on implementing regulations for SCHIP specifies that States that implemented 
Medicaid expansions must follow the existing Medicaid rules on application assistance.20  As 
one of the designated outstation locations, health centers are exempted when they are low 
use sites, i.e., outstation locations that are infrequently used by the low-income eligibility 
groups.  However, States have the discretion to determine what constitutes a low use site 
without regard to a minimum standard.21 
Thirty-nine percent of the health centers had outstationed eligibility workers with most 
receiving some State funding.  Of the health centers with outstationed eligibility workers,  45 
percent indicated that the State provided full funding for the position and another 30 percent 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
6
 indicated that the positions were partially funded by the State.  Twenty-five percent of 
centers provided their own funding for outstationed eligibility workers.  Bearing in mind that 
patient load varies widely, the number of outstationed eligibility workers in terms of full time 
equivalents (FTEs) ranged from 0.1 FTE to 13 FTEs per center, with 68 percent reporting up 
to 1.0 FTE in their center. 
Two-thirds of health centers reported enrollment barriers, citing welfare stigma, 
immigration status, and complicated application forms as key concerns. 
Sixty-four percent of the health centers perceived that their clients were experiencing 
enrollment barriers, indicating these are national issues. The top three barriers cited were: 
clients negative perceptions of government welfare programs (68%), concerns that 
application may affect immigrant status (59%) and complicated application forms (41%). 
Our earlier case study report of selected States, confirmed that some applicant families fear 
that applying for SCHIP benefits would jeopardize their immigration status, under public 
charge provisions, or alert the Immigration and Naturalization Service (INS) if they were 
here illegally.  Likewise, another OIG study found that language complexity and application 
length were deterrents to potential applicants.22 
Short processing times for eligibility determinations increase the likelihood of 
having children actually enroll in SCHIP. 
Centers, for which enrollment decisions were made within one month, were twice as likely to 
have enrolled children in SCHIP.23  Of health centers that had experience with the SCHIP 
enrollment process, 43 percent said that eligibility was determined in less than one month. 
However, more centers (50%) indicated that it took more than one month; 37 percent 
reported that it took one to two months and another 13 percent indicated it took more than 
two months.  Eight percent of centers did not know the time frame for  enrollment decisions. 
State SCHIP models influence health center SCHIP enrollment outcomes, but use of 
enrollment brokers has little effect. 
The SCHIP model chosen by a State seems to affect enrollment outcomes.24  Health centers 
under a combined model or a separate SCHIP program are about three times more likely to 
enroll children than centers operating under a Medicaid expansion model.25  A GAO report26, 
which compared Medicaid and SCHIP application processes, noted that Medicaid 
applications required more documentation than SCHIP applications.  This added burden for 
those who can only apply under a Medicaid expansion plan might be a barrier to enrollment 
as well. 
Twenty-four percent of the health centers indicated that their States were using enrollment 
brokers, State contractors who administer the enrollment process.  The use of enrollment 
brokers showed no significant relationship with centers reported success in enrolling 
children.27 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
7  ADAPTING TO A CHANGING HEALTH CARE ENVIRONMENT 
Although the introduction of the SCHIP program provides a potentially valuable funding 
source for health centers, they must also be prepared for other changes in reimbursement 
methods.  The recent challenges to health centers in the health care environment are the 
general movement of Medicaid programs to managed care and the phase-out of Medicaid 
cost-based reimbursement to health centers. 
Sixty-three percent of health centers had managed care contracts that cover 
children, although half of these centers obtained their contracts recently. 
Health centers either had no managed care experience, or extensive but sometimes recent 
experience.  Health centers have faced critical changes in their health care delivery systems, 
most notably conversion of State Medicaid programs from fee-for-service to managed care. 
Those centers with managed care contracts appeared adept at gaining inclusion, with 82 
percent of them having garnered contracts with more than one managed care organization 
(MCO).  Yet, the managed care experience for many centers has been relatively recent with 
over half (53%) first entering into a contract between 1996 and 1999. 
The health centers are more likely to form their own managed care organizations, in 
part, when the States do not require inclusion of health centers in Medicaid 
managed care provider networks. 
Our findings revealed that health centers were significantly more likely to have a managed 
care contract if their State requires Medicaid MCOs to include safety-net providers, such as 
health centers, in their provider networks.28  However, only 32 percent of the Federally 
funded health centers indicated that their States had such requirements.  Nine percent of the 
centers reported that their States offered incentives for MCOs to include them in their 
provider networks, while some States employed both strategies.  When such State 
requirements do not exist, health centers are more likely to form their own MCOs.29 
If center-owned managed care organizations were available, centers tended to be involved in 
them.  Thirty-four percent said that a health center-owned MCO operated in their State. Of 
these centers, 63 percent indicated that a center-owned MCO was currently operating in the 
area they served, and 90 percent of those centers were involved. The nature of center 
involvement with these MCOs varied, but most reported their center was contracted to 
provide services (96%), had a financial investment (68%) and/or was represented on the 
board of directors (69%). 
Health centers involved in managed care are beginning to accept financial risk for 
patient care. 
Although these centers receive various types of reimbursement under their managed care 
contracts, almost half  were assuming some financial risk through primary care capitation 
reimbursement.  While the reimbursement methods reported are not mutually exclusive, the 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
8
 most common ones centers reported under their largest SCHIP and/or Medicaid managed 
care contract included: cost-based (55%), primary care capitation (48%), full capitation 
(17%), and risk withholding (12%).  Thus, beyond the cost-based reimbursement30 all centers 
experienced previously under Medicaid, some centers are gaining operating experience under 
other reimbursement structures common to the growing managed care environment. 
However, 37 percent of centers are still outside of managed care altogether and have yet to 
adjust to these other reimbursement methods. 
Enabling services, critical to health center patients for accessing care, are not 
always reimbursed under managed care. 
Not considered routine medical services in the private sector, enabling services such as 
transportation, translation, outreach, case management, health education, and other social 
services to assist patients, are often essential for the populations served by these centers to 
access health care.31  In addition to primary and preventive health services, most Federally-
funded health centers provide some level of enabling services.  However, only 19 percent of 
the  health centers under a managed care contract receive direct reimbursement for enabling 
services.  Among those centers, reimbursement for these services were most frequently 
reported for: case management (49%), transportation (41%), health education (33%) and 
outreach (31%).  Centers that receive cost-based reimbursement have enabling services built 
into their cost report and are thereby paid for them. 
Just 18 percent of centers were receiving reimbursement from their contracted MCO for 
translation services, although 34 percent indicated that one or more languages, other than 
English, were predominantly spoken in the community they serve.  Thirty-five percent of 
health centers reported that SCHIP applications were not available in a language other than 
English, or  they were not aware of the availability of bilingual applications.  As indicated 
earlier, health centers serve a high proportion of ethnic minority populations for whom 
English is a second language.  HCFAs proposed SCHIP implementation regulations32 
suggest that a State may overcome language barriers by establishing a methodology for 
determining the prevalent language or languages in a geographic area and making information 
available in the languages that prevail throughout the State or in limited geographic areas 
where appropriate.33 
Relatively few health centers (21%) were making changes to specifically adapt to 
the phase-out of Medicaid cost-based reimbursement. 
Under the Balanced Budget Act of 1997, Medicaid cost-based reimbursement to health 
centers is being phased out, although the Balanced Budget Refinement Act of 199934 
extended the phase-out period by two years until 2005.  Some States, at their option, may 
continue to pay 100% of Medicaid reasonable costs although most are expected to phase-out 
of Medicaid cost-based reimbursement. Consequently, many health centers are anticipating a 
reduction in revenues under the Medicaid expansion component of SCHIP.  Medicaid is, and 
has been, the largest funding source for these centers, followed by HRSAs Section 330 
grants.35  Current funding levels indicate that SCHIP will provide a significant portion of 
health center revenues. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
9
 Only 21 percent of health centers reported making changes to adapt to the phase-out of cost 
based reimbursement.  Within that group, one strategy employed by 61 percent of those 
centers,  has been to seek out foundation grants/contracts and more State and local subsidies 
to supplement their revenues.  Other options, pursued to a lesser degree, were to reduce 
administrative staff (47%) and/or reduce clinical staff (39%). Few centers chose to increase 
administrative staff (4%) or eliminate childrens programs/services (5%).  However, many 
centers have presently been able to put off adjusting to new reimbursements, with 52 percent 
having received an extension to continue under cost-based reimbursement for an additional 
period of time. 
Health centers are altering their business infrastructures in response to changes in 
the health care environment. 
Whether a direct response to SCHIP, managed care, or changing reimbursement methods, 
health centers indicated some changing dynamics in their operations. Sixty-two percent of 
centers made changes to their administrative procedures.  Of those centers, 90 percent were 
upgrading their management information system (MIS) and 49 percent were increasing front 
desk staff for public/private insurance verifications.  For some, the introduction of the SCHIP 
program created a center need to add a marketing budget (41%).  Among the 36 percent of 
centers that increased clinical staff, the most common additions were: more nursing staff 
(54%), medical assistants (47%) and family physicians (41%).  These changes were intended 
to increase productivity of physician time.36 
Health centers played a role in SCHIP planning, and are positive about their 
continued role in serving children. 
Federally funded health centers have been major safety-net providers for low income children 
since the 1960s.  In regard to SCHIP particularly, the health centers have contributed to 
planning for its implementation and are optimistic about their part in its future. 
Health centers were primarily involved in SCHIP planning through their States Primary Care 
Associations (PCA), although some were also active individually as well.  Seventy-one 
percent of centers reported involvement in the planning process in some capacity. Of these, 
77 percent felt that their involvement had a positive impact on the outcome of their States 
SCHIP plans.  The centers that did not participate in the planning process reported that their 
States did not request their input, or that they were unaware of opportunities to participate.37 
Despite challenges, most health centers appear optimistic about the future, with 80 percent 
expecting to serve more children and 12 percent expecting to serve the same number of 
children.  Only eight centers (2%) thought that they would serve fewer children in the future, 
while 24 centers (6 %) indicated that they did not know if they will serve more or less. 
Losing children to other managed care providers and reduction in Medicaid eligibles, due to 
welfare reform, were the main reasons why some centers believed they would serve fewer 
children in the future. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
10  R E C O M M E N D A T I O N S  
As trusted, established health care providers within needy communities, Federally funded health 
centers are one of the most appropriate agents to help fulfill the goals of the SCHIP program.  In 
return, SCHIP enables these centers to benefit from additional funding as they continue to make 
health care available to the uninsured.  While HCFA and HRSA have assisted States and health 
centers with SCHIP implementation, more work lies ahead for both agencies, States and health 
centers to ensure health centers future viability. 
We believe that close coordination among HCFA, HRSA, and State Medicaid and SCHIP agencies 
that work with under-served populations can be highly effective in providing health care to needy 
children through Medicaid and SCHIP.  To continue improving and supporting health centers 
performance in those areas indicated by our findings, we recommend the following: 
HCFA should encourage State actions and policies that promote successful 
enrollment of children in SCHIP through the health centers.  HCFA should: 
Encourage States to provide SCHIP enrollment training to all health centers.  Health 
centers that received enrollment training from their States were more likely to enroll children 
in SCHIP than those centers that received none.  State enrollment training was the most 
significant factor that influenced successful enrollment for health centers. 
Promote State adherence to regulations which require the States that implemented 
Medicaid expansions to appropriately allocate outstationed eligibility workers to health 
centers.  Our findings indicate that outstationed eligibility workers play a key role in health 
center enrollment of children in SCHIP.  While only a few centers indicated that they were a 
low-use site, more than half of them did not have outstationed eligibility workers in their 
facilities. 
Encourage States to designate more health centers as presumptive eligibility sites, 
where applicable.  Under the Balanced Budget Act of 1997, States may establish 
presumptive eligibility for the Medicaid program.  States with separate or combined SCHIP 
models have considerable flexibility in incorporating presumptive eligibility in their SCHIP 
program.  We found that being a presumptive eligibility site increases the likelihood that a 
health center will receive enrollment training and, subsequently, enroll children in SCHIP. 
Support continued State outreach activities and enhanced outreach at local community 
levels where health centers are.  States outreach activities such as public service 
announcements, information distribution through schools and newspaper advertisements 
stimulate health centers SCHIP enrollment. However, one-fourth of the centers indicated 
that either their States were in the outreach planning stage or they were not yet aware of any 
outreach activities conducted by the State.  States should continue with their current SCHIP 
outreach efforts while monitoring to see that the outreach activities are conducted in 
communities where health centers are present. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
11  Promote quicker SCHIP eligibility determinations.  We found that centers whose States

made enrollment decisions within one month, were twice as likely to

have enrolled children in SCHIP. 

Encourage States to promote inclusion of health centers, that are ready for managed

care, in Medicaid and/or SCHIP managed care provider networks.  Thirty-seven percent

of health centers indicated that they did not have managed care contracts that cover children. 

However, health centers are more likely to have managed care contracts if the State requires

the MCOs to include safety-net providers, such as health centers. 

Recommend that States promote MCO reimbursement for enabling services. Enabling

services such as transportation, translation and other social services are often critical for the

patients served by these centers to access health care.  However, only 19 percent of

respondent health centers were receiving direct reimbursement for enabling services from

their managed care contracts.

HRSA should continue to support health center adjustments to the changing health 
care environment.  HRSA should: 
Continue preparing health centers for the phase-out of Medicaid cost-based 
reimbursement.  Only 21 percent of health centers reported making changes to adapt to the 
phase-out of Medicaid cost based reimbursement.  Of those, most (61%) sought out 
additional subsidies rather than making operational changes.  Moreover, more than half of the 
centers under managed care contracts were still reimbursed using traditional cost-based 
methods.  Health centers should be encouraged to aggressively utilize managed care training, 
managed care contract review and on-site technical assistance from HRSAs Bureau of 
Primary Health Care's Office of Program and Policy Development to help prepare for the 
conversion from cost-based reimbursement. 
Promote the formation of health center managed care networks to assure effective 
health center participation in Medicaid and/or SCHIP managed care programs.  If 
States do not require MCOs to  include health centers and/or one is not available in a centers 
service area, then HRSA should provide assistance to aid health centers that are ready for 
managed care in forming center-owned MCOs in communities that will support them.  In 
cases where a center-owned MCO was currently operating in their service area (63%), most 
centers (90%) were participants. 
HRSA, in coordination with HCFA, should consider further examination of the 
impact of SCHIP outreach activities. 
To better understand the effectiveness of outreach activities, future review or evaluations 
which are consolidated with existing Department initiatives are needed. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
12
 Agency Comments 
For this report, both HCFA and HRSA  provided written comments, the full texts of which 
are included in Appendix D.  Both agencies generally concur with our recommendations, and 
both offered technical comments which are reflected in our revisions.  As HCFA points out, 
many of the recommendations are already being addressed by them, particularly with regard 
to eligibility and outreach issues. 
Outstationed Eligibility Workers   HCFA and HRSA suggested revisions to our 
recommendation to HCFA regarding outstationed eligibility worker requirements.  HCFA 
suggested reframing the recommendation to focus on States ensuring outstationed eligibility 
workers are located in the most appropriate settings and on States expanding the use of 
outstationing as an enrollment technique.  HRSA suggested the need for informing States of 
their obligation for outstationing workers and providing reimbursement for them, as they 
believe our data indicate that most States are not adhering to the requirement. 
Since the sole focus of our study was to examine the experiences of  health centers in a 
SCHIP environment from their perspective, we do not believe our data warrant the changes 
regarding State roles and responsibilities suggested by HCFA and HRSA.  Conceptually, we 
agree that schools and community centers are probably valuable points of entry for children 
into SCHIP, but we cannot claim that in this report.  We believe that we have clearly 
indicated that health centers, except low-use sites, are required  to have outstationed 
eligibility workers placed by States. 
MCO Reimbursement For Enabling Services  HCFA thought it would be helpful for us 
to define enabling services so that they can determine which ones are already mandatory 
Medicaid services and which are optional. A full list of  enabling services is referenced in the 
report. 
HCFAs assuring that States provide reimbursement to MCOs for mandatory enabling 
services is a good plan in our view.  However, whether the particular enabling service is 
mandatory or not, we urge HCFA to promote State support of MCO reimbursement for all 
these services.  We found that enabling services are often critical for the patients served by 
these health centers. Only 19 percent of health centers indicated that they were receiving 
direct reimbursement for enabling services from their managed care contracts. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
13
 E N D N O T E S  
1.	 Sara Rosenbaum, Kay Johnson, Colleen Sonosky, Anne Markus and Chris DeGraw, The 
Childrens Hour: The State Childrens Health Insurance Program, Health Affairs, 
January/February 1998, pp. 75-89. 
2.	 The State Childrens Health Insurance Program Annual Enrollment Report, October 1, 
1998-September 30, 1999 
3.	 The HCFA SCHIP website, State Childrens Health Insurance Program (SCHIP) Status 
Report.  (updated as of October 27, 1999). 
4.	 The HCFA SCHIP website, Status of State Plan (as of June 21, 2000) states that Illinois, 
Indiana, North Dakota, New York and Texas, have changed to a Combined program. 
Thus, there are 23 Medicaid expansion States, 18 Combined program States and 15 
Separate SCHIP program States. 
5.	 Neal Halfon, Moira Inkelas, Helen DuPlessis and Paul W. Newacheck, Challenges in 
Securing Access to Care for Children, Health Affairs, March/April 1999, pp. 48-63. 
6.	 CHIPs Impact on Changing Service Delivery of Federal Health Centers: Six Case 
Studies, October 1999, OEI-06-98-00320. 
7.  Ibid. OEI-06-98-00320 
8.	 HRSA created the Center for Managed Care in 1996 to assist centers in adapting to 
changes in the health care system. 
9.	 Cost-based reimbursement is the full reimbursement of allowable expenses from an 
annual cost report. 
10.  Ibid. OEI-06-98-00320. 
11.	 Medicaid and SCHIP: Comparisons of Outreach, Enrollment Practices, and Benefits, 
GAO, GAO/HEHS-00-86, April 2000. 
12.	 During our data collection stage, States had chosen a variety of SCHIP models, and were 
at different levels of implementation.  Because of this,  we asked health centers to 
comment on the parts of the SCHIP program model and/or implementation with which 
they were familiar. In this report, we used SCHIP as the term to cover all the different 
model types and implemented programs described by the health centers. 
13.  The Internet survey was created using the Raosoft Ezsurvey software. 
14.  See Appendix A for complete logit regression models. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
14  15.	 See Appendix A for the regression results.  The remaining 1 percent of the centers

indicated that they did not know whether or not their States were conducting outreach. 

16.  See Appendix A for the regression results.

17.  See Appendix A for auxiliary logit regression model. 

18.  See Appendix B for the Chi-Square test results.

19.	 Code of Federal Regulations, Title 42, Volume 3, 42CFR435.904 passim (revised as of 

October 1, 1999).

20.	 Federal Register, Vol.  64, No.  215, 42CFR457.110 (November 8, 1999).

Page 60892 of the preamble for the proposed rule on implementing regulations for SCHIP

specifies under Enrollment simplification that States that implement Medicaid

expansions must follow all Medicaid rules relating to application assistance and eligibility

determination.  States selecting a separate child health program are encouraged to

consider outstationing eligibility at sites that are frequented by families with children.

21.	 Code of Federal Regulations, Title 42, Volume 3, 42CFR435.904 passim (revised as of 

October 1, 1999).

22.	 The Childrens Health Insurance Program: States Application and Enrollment

Processes: An Early Report From the Front Lines, May 1999, OEI-05-98-00310.

23.  See Appendix A for the regression results.

24.  See Appendix A for the regression results. 

25.  See Appendix A for the regression results.

26.  Ibid. GAO, April 2000.

27.  Chi-Square test for this relationship was not significant.

28.  See Appendix B for the Chi-Square test results.

29.  See Appendix B for the Chi-Square test results.

30.	 Capitation payment is a fixed monthly payment of a specified set of services for each

enrollee.

31.	 Helen Halpin Schauffler, Jessica Wolin, Community Health Clinics under Managed

Competition: Navigating Uncharted Waters, Journal of Health Politics, Policy and Law,

Vol.  21, No.  3, Fall 1996, pp. 461-488.

32.  Federal Register, Vol.  64, No.  215, 42CFR457.110 (November 8, 1999).

33. 	 Ibid. 42CFR457.110.

Federally Funded Health Centers and SCHIP __________  OEI-06-98-00321

15
 34.  Balanced Budget Refinement Act of 1999, (P.L. 106-113), section 603. 
35.	 Health Care Access: Programs for Underserved Populations Could Be Improved, GAO, 
GAO/T-HEHS-00-81, March 2000. 
36.  Anecdotal evidence from the qualitative case study report, OEI-06-98-00320. 
37.	 It is unclear whether centers believed that their influence affected the SCHIP models 
chosen by States or SCHIP implementation after the State model had been selected. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
16
 B I B L I O G R A P H Y  
Feld, Peter, Courtney Matlock, and David R. Sandman, Insuring the Children of New York Citys 
Low-Income Families: Focus Group Findings on Barriers to Enrollment in Medicaid and Child 
Health Plus, The Commonwealth Fund, December 1998. 
The George Washington University Center for Health Policy Research, Expansions of Coverage, 
Managed Care Create New Outreach Challenges, Health Policy, Child Health, Vol. 2, No. 1, 
Winter 1995. 
Grogan, Colleen M. and Michael K. Gusmano, How Are Safety-Net Providers Faring Under 
Medicaid Managed Care, Health Affairs, March/April 1999, pp. 233-237. 
Halfon, Neal, Moira Inkelas, Helen DuPlessis and Paul W. Newacheck, Challenges in Securing 
Access to Care for Children, Health Affairs, March/April 1999, pp. 48-63. 
Immigration and Naturalization Service, Department of Justice, Public Charge Fact Sheet, May 25, 
1999. 
Lipson, Debra J., Medicaid Managed Care and Community Providers: New Partnerships, Health 
Affairs, July/August 1997, pp.91-107. 
Office of Inspector General, Department of Health and Human Services, CHIPs Impact on 
Changing Service Delivery of Federal Health Centers, OEI-06-98-00320, October 1999. 
Office of Inspector General, Department of Health and Human Services, The Childrens Health 
Insurance Program: State Application and Enrollment Processes An Early Report from the Front 
Lines, OEI-05-98-00310, 1999. 
Rosenbaum, Sara, Kay Johnson, Colleen Sonosky, Anne Markus and Chris DeGray, The Childrens 
Hour: The State Childrens Health Insurance Program, Health Affairs, January/February 1998, pp. 
75-89. 
Rosenbaum, Sara, Barbara M. Smith, Peter Shin, Marcie H. Zakheim, Karen Shaw, Colleen A. 
Sonosky and Lee Repasch, Negotiating The New Health System: A National Study of Medicaid 
Managed Care Contracts, The George Washington University Center for Health Policy Research, 
February 1998. 
Ross, Donna Cohen and Wendy Jacobson, Free and Low-Cost Health Insurance: Children You 
Know are Missing Out, Center on Budget and Policy Priorities, 1998. 
Selden, Thomas M., Jessica S. Banthin, and Joel W. Cohen, Medicaids Problem Children: Eligible 
But Not Enrolled, Health Affairs, May/June 1998, pp.192-200. 
United States General Accounting Office, Medicaid and SCHIP: Comparisons of Outreach, 
Enrollment Practices, and Benefits, GAO/HEHS-00-86, April 2000. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
17  APPENDIX  A 
Discussion of Regression Model 
Empirical Model and Data 
We used the logit model to explain which factors had significant impact on SCHIP enrollment 
outcomes in health centers.  This model allows us to estimate the probability of a health center 
enrolling children in SCHIP (p), or center not enrolling children(1-p), based on the linear 
combination of independent variables. That is, Ln(p/ 1-p) =$ 0+ $1X1 +$2X2+ . . . . +$kXk + . 
More explicitly, our model of health centers SCHIP enrollment can be written: 
Model 1: Base Model

Enroll =  b0  +  b1 Combi + b2 Separate 

+  b3 ST_Out + b4 HC_Out + b5 ST_HC_Out 
+  b6 Out_worker + b7 Presump + b8 Train 
+  b10  ST_Out + b11  HC_Out + b12 ST_HC_Out 
+  b13  Month + b14 App_Time 
+  b15 Q2_Kid + b16  Q2_Kid + b17 Q2_Kid +  g 
Model 1a : Auxiliary Model

Train =  b0  +  b1 Out_worker +  b2 Presump  +  g

Variable descriptions are included in Table A-2 below. 
Results 
Empirical findings of the Base Model indicate that receiving SCHIP enrollment training from the 
State had the strongest impact on a health centers SCHIP enrollment outcome.  However, variables 
that indicate health centers with outstationed eligibility workers and centers designated as 
presumptive eligibility sites were not significantly related to the probability of enrolling children (See 
Table A-2).  This finding was contrary to our prior expectation based on results from our qualitative 
studies, and Chi-Square statistics indicating that there was a significant association (p < 0.001) 
between those two variables and the dependent variable.  As a result, we examined the relationship 
between SCHIP training and outstationed worker and presumptive eligibility site variables.  We 
found that there was an indirect effect of these variables on enrollment.  As indicated earlier, we 
employed an auxiliary regression model.  The results showed that although  outstationed worker and 
presumptive eligibility site did not have direct impact on health centers SCHIP enrollment, the 
effects of these variables were working through enrollment training.  Table A-1 presents the auxiliary 
regression results. 
Table A-1: Auxiliary Regression Estimates 
Dependent Variable: TRAIN  (N=371 ,Concordant=47.5%) 
Independent Variables  Parameter Estimate  Standard Error  Pr > Chi-Square  Odds Ratio 
OUT_WORKER  0.8880  0.2251  0.0001  2.430 
PRESUMP  0.5089  0.2525  0.0439  1.663 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
A-1  States SCHIP model type also had a significant effect on a health centers SCHIP enrollment 
outcome.  Health centers under a combined model or a separate SCHIP program are about three 
times more likely to enroll children than centers under the Medicaid expansions model.  State 
outreach activities were also significant and health centers that reported State outreach were 2.5 
times more likely to have enrolled children than those centers which reported their States had not 
conducted outreach.  In addition, eligibility determination time and approval date of States SCHIP 
plan also had a significant effect on health centers enrollment.  Table A-2 presents the base model 
regression results with the variable descriptions. 
Table A-2: BASE Regression Model 
Dependent Variable: ENROLL 
(n =371, c =82.7%) 
Independent  odds  Descriptions 
Variables  ratio  (All variables are binary, except MONTH is a continuous variable.) 
MEDI_EXP  reference  State SCHIP model is Medicaid Expansion 
COMBI  3.141*  State SCHIP model is Combined program 
SEPARATE  2.947*  State SCHIP model is Separate program 
ST_OUT  2.500*  health center reporting their States SCHIP Outreach Activities 
HC_OUT  0.996  health center reporting their own center SCHIP outreach Activities 
ST_HC_OUT  0.167  Interaction variable between ST_OUT * HC_OUT 
OUT_WORKER  1.430  health center has  outstationed eligibility workers at their site 
PRESUMP  1.882  health center is designated as presumptive eligibility site for SCHIP 
enrollment 
TRAIN  3.922*  health center  received SCHIP enrollment training from their State 
MONTH  1.113*  number of month each State had their SCHIP plan approved. 
(subtracting  States approval date from January, 2000) 
SHORT_APP_TIME  2.143*  eligibility determination took less than one month 
Q1_KID^  reference  number of kids(<1622) served in health center falls in 0-25% 
distribution 
Q2_KID^  1.472  number of kids(1623-3567) served in health center falls in 26-
50%distribution 
Q3_KID^  1.133  number of kids(3568-7049) served in health center falls in 51-75% 
distribution 
Q4_KID^  0.925  number of kids(>7049) served in health center falls in 76-100% 
distribution 
MCO  1.418  health center has a managed care contract 
* significant at 0.05. 
^Using 1998 HRSA UDS data, number of children (ages 0-19) served by sampled health centers. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
A-2  APPENDIX B 
Chi-square Test Results 
Frequency  Center a presumptive eligibility site for SCHIP 
Column percent 
Actually enrolled children under  Yes  No  Not  TOTAL 
SCHIP  applicable 
Yes  86  87  109  282 
85.15  66.92  76.22  75.4 
No  15  43  34  92 
14.85  33.08  23.78  24.60 
Total  101  130  143  374 
27.01  34.76  38.24  100 
Statistic  a  DF  Critical chi-sq Value  Computed chi-sq Value  Probability 
Chi Square  0.01  2  9.21  10.264  0.006 
Frequency  State requiring managed care contractors to mandate health centers 
Column percent  in their provider network 
Health centers that have managed  Yes  No  Dont Know  TOTAL 
care contracts that include children 
97  74  79  250 
Yes  71.85  69.81  52.67  63.94 
38  32  71  141 
No  28.15  30.19  47.33  36.06 
TOTAL  135  106  150  391 
34.53  27.11  38.36  100 
Statistic  a  DF  Critical chi-sq Value  Computed chi-sq Value  Probability 
Chi Square  0.01  2  9.21  13.518  0.001 
Frequency  State requiring managed care contractors to mandate health centers 
Column percent  in their provider network 
Health center-owned managed care  Yes  No  Dont Know  TOTAL 
organizations in the State 
51  46  42  139 
Yes  37.78  42.20  27.81  35.19 
65  60  59  184 
No  48.15  55.05  39.07  46.58 
19  3  50  72 
Dont Know  14.07  2.75  33.11  18.23 
TOTAL  135  109  151  395 
34.18  27.59  38.23  100 
Statistic  a  DF  Critical chi-sq Value  Computed chi-sq Value  Probability 
Chi Square  0.01  4  13.28  41.642  0.001 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
B-1
 APPENDIX C 
Point Estimates and Confidence Intervals from Key Survey Questions 
All Health Centers -- Point Estimates and Confidence Intervals 
for Key Survey Questions 
Point Estimate  Standard Error  95% Confidence 
Proportion of All Health Centers  (in percent)  (in percent)  Interval 
Are States conducting outreach activities 
(n=405) 
< yes  74  1.3  71.5 - 76.5 
< no  12  0.9  10.1 - 13.9 
< no, but funds allocated  8  0.8  6.5 - 9.5 
< no, but developing  5  0.6  3.8 - 6.2 
< dont know  1  0.3  0.4 - 1.6 
Centers reporting they do conduct 
outreach activities  83  1.1  80.9 - 85.1 
(n=405) 
Center received outside resources for 
outreach (funds/manpower)  42  1.4  38.9 - 44.5 
(n=405) 
Actually enrolled children under SCHIP 
(n=405) 
< yes  73  1.3  70.3 - 75.4 
< no  27  1.3  24.6 - 29.7 
State provided training on CHIP enrollment 
to centers staff 
(n=405) 
< yes  55  1.4  52.5 - 58.1 
< no  41  1.4  37.9 - 43.5 
< dont know  4  0.6  2.8 - 5.1 
Centers having outstationed eligibility 
workers  39  1.4  36.2 - 41.8 
(n=405) 
Of centers having outstationed eligibility 
workers, State funds the position 
(n=159) 
< Fully  45  3.4  38.3 - 51.7 
< Partially  30  3.1  23.9 - 36.1 
< Not at all  25  3.0  19.1 - 30.9 
Of centers not having outstationed 
eligibility workers, State designated as 
low use 
(n=246)  7  1.3  4.5 - 9.5 
< yes  82  1.9  78.3 - 85.7 
< no  11  1.5  8 - 14 
< dont know 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
C-1
 All Health Centers -- Point Estimates and Confidence Intervals 
for Key Survey Questions 
Point Estimate  Standard Error  95% Confidence 
Proportion of All Health Centers  (in percent)  (in percent)  Interval 
How long to know eligibility from a 
completed application 
(n=295) 
< Few days  7  1.1  4.7 - 8.9 
< One to two weeks  12  1.4  9.2 - 14.5 
< Less than one month  24  1.8  20.2 - 27.2 
< One to two months  37  2.0  32.6 - 40.6 
< More than two months  13  1.4  10.4 - 16.0 
< Dont know  8  1.1  5.6 - 10.0 
Center a presumptive eligibility site for 
SCHIP 
(n=405)  25  1.3  23.0 - 27.9 
< IS a presumptive eligibility site  32  1.4  29.4 - 34.8 
< is NOT presumptive eligibility site  36  1.4  32.8 - 38.3 
< Not applicable in our State  7  0.7  5.5 - 8.4 
< Dont know 
Experiencing enrollment barriers 
(n=405) 
< ARE experiencing  64  1.4  61.2 - 66.7 
Have managed care contract that covers 
children 
(n=405)  37  1.4  34.0 - 39.5 
< no  63  1.4  60.5 - 66.0 
< yes 
Type or reimbursement currently receiving 
under largest SCHIP and/or Medicaid 
managed care contract 
(n=256) 
< Cost-based  55  2.4  50.8 - 60.1 
< Full capitation  17  1.8  13.7 - 20.7 
< Primary care capitation  48  2.4  43.0 - 52.3 
< Primary care case management  10  1.4  7.3 - 13.0 
< Risk withholding  12  1.6  9.1 - 15.2 
Center receiving direct reimbursement for 
enabling services through MCO 
(n=256) 
< yes  19  1.9  15.5 - 22.8 
< no  81  1.9  77.2 - 84.5 
State requires MCO to include health 
centers in provider networks 
(n=405) 
< yes, Medicaid/Medicaid expansion only  18  1.1  16.1 - 20.5 
< yes, separate SCHIP program only  1  0.3  0.4 - 1.6 
< yes, for both programs  13  1.0  10.9 - 14.7 
< no  27  1.3  24.6 - 29.7 
< dont know  41  1.4  37.9 - 43.5 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
C-2  All Health Centers -- Point Estimates and Confidence Intervals 
for Key Survey Questions 
Point Estimate  Standard Error  95% Confidence 
Proportion of All Health Centers  (in percent)  (in percent)  Interval 
Is there a health center-owned MCO in 
State 
(n=405)  34  1.4  31.6 - 37.0 
< yes  46  1.4  42.8 - 48.5 
< no  20  1.2  18.0 - 22.5 
< dont know 
Does center-owned MCO operate in your 
service area 
(n=139) 
< yes  63  3.6  55.5 - 69.7 
< no  37  3.6  30.3 - 44.5 
Which best describes action taken by 
center to adapt to phase-out of cost-based 
reimbursement 
(n=365) 
< Center not affected due to  16  1.2  13.8 - 18.6 
freestanding program 
< Center received an extension to  52  1.7  48.2 - 54.8 
continue cost-based reimbursement 
< Center has made changes  32  1.6  29.3 - 35.4 
Has center made changes in 
ADMINISTRATIVE PROCEDURES 
(n=405) 
< yes  62  1.4  59.2 - 64.7 
< no  38  1.4  35.3 - 40.8 
Has center made changes in CLINICAL 
STAFFING 
(n=405) 
< Not made any changes  48  1.5  44.8 - 50.5 
< Decreased clinical staff  16  1.1  14.0 - 18.1 
< Increased clinical staff  36  1.4  33.6 - 39.0 
Health centers expect to serve more, fewer, 
or same number of children three years 
from now  (n=405) 
< More  80  1.2  78.0 - 82.5 
< Fewer  2  0.4  1.4 - 3.1 
< Same  12  0.9  9.8 - 13.4 
< Dont know  6  0.7  4.8 - 7.5 
Note: Some estimates are based on a sample size of less than 405. Not all centers in our sample were able to respond 
to all the questions in the survey because some questions were not applicable to the centers and/or their States. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
C-3
 APPENDIX D 
Agency Comments 
In this appendix, we present comments from the Health Care Financing Administration and the 
Health Resources and Services Administration. 
Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
D-1  Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
D-2  Page 2 - June Gibbs Brown 

considered "enabling" such as translation services are required of all Medicaid providers,

however, we believe that most other enabling services would only be optional services for States

under Medicaid. 

It is often difficult to separate "assertive outreach" by health centers or health plans from

marketing. It might be useful t6 point out that the term outreach as used in this report means

encouraging clients to establish Medicaid eligibility rather than encouraging a choice of a

particular provider. 

Our specific comments are as follows: 

OIG Recommendation 

HCFA should encourage State actions and policies that promote successful enrollment of children

in SCHIP through the health centers. 

HCFA Response 

In general we concur with this recommendation. Please see below for specific discussion of each

sub -recommendation. 

C  Encourage States to provide SCHIP enrollment training to all health centers. 
We believe that this report needs to more fully discuss what is meant by enrollment training. 
Specifics should be given as to what type of training is envisioned and the specific type of training 
each worker within the center should be receiving. However, in principle we agree that enrollment 
training should be provided to these health centers in I order to further the efforts States are 
already making to simplify enrollment processes. Such training is necessary to ensure that parents 
understand the enrollment process and are able to understand and can fill out enrollment forms. 
Information is one key to success. 
C	 Promote State adherence to regulations which require the States that implemented 
Medicaid expansions to appropriately allocate outstationed. eligibility workers to 
health centers. 
We suggest re-framing this recommendation to focus on working with States to ensure that 
outstationed eligibility workers are being located in the most appropriate settings (e.g., health 
centers, schools, community centers) and to encourage States to expand the use of outstationing 
as an enrollment technique. We believe that establishing outstationed eligibility workers in areas 
convenient to families is another key step to achieving successful enrollment. For example, in rural 
areas it may be necessary to provide door-to-door outreach and establish outstations so families 
can sign up near their homes. 
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C  Encourage States to designate more health centers as presumptive eligibility sites, 
where applicable. 
We agree that States should be encouraged to designate health centers as presumptive eligibility 
sites. Federally funded health centers can do presumptive eligibility (PE) determinations for 
Medicaid or Medicaid expansions under Title XXI. Currently there is no explicit presumptive 
eligibility authority in Title XXI, however, States can do PE-like eligibility determinations within 
the current eligibility guidelines in SCHIP. 
C	 Support continued State outreach activities and enhanced outreach at local 
community levels where health centers are. 
We agree with this recommendation, however there needs to be more recognition of current State 
outreach and enrollment simplification activities, including targeted outreach through health 
centers. 
C  Promote quicker Medicaid/SCHIP eligibility determinations. 
We agree with this recommendation and are already making efforts in this area. We believe that 
one way to promote quicker eligibility determinations is to simplify eligibility applications. States 
may want to explore the use of electronic applications to improve the speed and ease of 
application submittal. Some States are cutting once lengthy applications down to a few pages, are 
accepting applications by mail and are -eliminating unnecessary verification requirements. We are 
also encouraging States, through 1115 demonstration proposals, to incorporate innovative 
outreach strategies to find and enroll eligible children. 
C	 Encourage States to promote inclusion of health centers, that are ready for 
managed care, in Medicaid/SCHIP managed care provider networks. 
We agree with the recommendation. For this population it is imperative that managed care 
networks include safety-net providers, such as health centers, as they are the backbone of a health 
care delivery system for low-income children. 
C  Recommend that States promote MCO reimbursement for enabling services 
We agree that States should be promoting MCO reimbursement for enabling services. However, 
as stated above we think it would be helpful for the report to highlight what is meant by 
"enabling" services. It can then be determined which of these enabling services are already 
mandatory Medicaid services and which are optional. We can then accurately delineate which 
services (e.g., translation) States should already be providing reimbursement to MCOs and which 
services we should encourage states to employ. 
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OIG Recommendation 

HRSA should continue to support health center adjustments to the changing health care

environment. 

HCFA Response 

We concur with this recommendation. 

OIG Recommendation 

HRSA, in coordination with HCFA, should consider further examination of the impact of

SCHIP/Medicaid expansions outreach activities. 

HCFA Response 

Several efforts are currently underway to look at the effectiveness of outreach, including the

States' evaluations and annual reports; the overall evaluation of SCHIP that is underway by

Mathematica Policy Research; as well as the ongoing HCFA/HRSA monitoring efforts. We have

heard concerns from several States noting the many site visits and evaluations that are being done

simultaneously and seemingly with the same purpose. We would recommend giving the States'

programs additional time to further develop and expand their programs before HCFA increases its

monitoring and evaluation of the effectiveness of outreach efforts. We also recommend that any

future review or evaluations be consolidated with existing Department initiatives. 

Attachment 
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TECHNICAL  COMMENTS 
C	 In general, the references to SCHIP/Medicaid expansions throughout the report are 
misleading and not consistent with the terminology in the forthcoming final SCHIP 
regulation. As a rule, references to SCHIP programs are references to any program 
that receives enhanced Federal matching funds up to the amount of the available 
SCHIP allotment. There are two types of SCHIP programs - Medicaid expansion 
programs and separate child health programs - that may be referred to. Although 
the Medicaid rules apply in States that implement Medicaid expansion SCHIP 
programs, the funding is structured differently. 
C	 On page 1, the reference to the intent to provide the same "quality" of health care 
as private insurance may be misleading. We recommend characterizing the intent of 
SCHIP as providing States with an opportunity to design health care delivery 
systems that are similar in scope and structure to coverage that is available through 
private insurance. 
C	 On page 6, it would be useful to provide some examples of "enrollment training. 
What activities does enrollment training encompass? 
C	 In the second paragraph on page 6, we are concerned about the references to 
States using "presumptive eligibility." Our analysis of the States' SCHIP 
evaluations (submitted to HCFA in March/April 2000) has concluded that States 
are using the term presumptive eligibility in very different ways and in varying 
degrees. In fact, most States are not using presumptive eligibility for children in 
either Medicaid or SCHIP. This point is consistent with the third recommendation 
to expand the availability of presumptive eligibility providers. 
C	 On page 9 of the draft report, there is a discussion of the "phase out" of "Medicaid 
cost-based reimbursement" and the same phrase is used throughout the draft 
report. HCFA has taken the position that the phase-out was of the mandatory 
levels of cost-based reimbursement; States, at their option, may continue to pay 
100% of Medicaid reasonable costs. In other words, the statute no longer says that 
States MUST pay 100% of reasonable costs, but a State MAY still do so. 
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 Federally Funded Health Centers and SCHIP  __________  OEI-06-98-00321 
D-7  Health Resources and Services Administration's Comments on the Office of the 
Inspector General Draft Report "Federally Funded Health Centers and Low Income 
Children's Health Care: improving SCHIP Enrollment and, Adapting to a Managed 
Care Environment (code OEI-06-98-00321) 
General Comments 
Ile Health Resources and Services Administration (HRSA) appreciates the opportunity to 
provide our comments on the Office of Inspector General (OIG) draft report, "Federally 
Funded Health Centers and Low Income Children's Health Care: Improving SCHIP 
Enrollment and Adapting to a Managed Care Environment" (Code OEI-06-98-00321). 
Technical Comments 
On Page 2, under the bold heading, "Methodology", second sentence beginning "The first 
phase in a two part study, that inspection employed a case study approach......., doesn't 
make sense and needs to be rephrased. 
On Page 3, the first paragraph titled "Sample", second sentence beginning "These grantees 
include Primary health Centers, ........., we suggest an alternate clarification: "These grantees 
include Community Health Centers,........ 
On Page 6, in the next to last paragraph discussing "sixty-one percent of health centers......., 
this section should include a statement to the effect that all FQHC's except low-use sites, are 
required by Federal regulations to have out stationed eligibility workers and that the cost of 
these workers are born by Medicaid. This requirement needs to be clearly indicated on this 
page. In addition, we recommend an addition of the finding that most states are not adhering 
to this requirement. 
On Page I 1, under the bold heading "HCFA should......., we suggest that an added 
paragraph is placed that would include verbiage regarding the requirement for placement and 
payment for out stationed eligibility workers. For example, the paragraph could start out: 
Inform states about their obligation to place out stationed eligibility workers in FQHCs and 
to provide Medicaid reimbursement for these workers. 
On Page 12, under the bold heading "HRSA should continue....., while we agree with it 
conceptually, the second recommendation is of concern because of the financial risk of such 
an organization and that the success of such an entity is beyond the role of the Federal 
funding agency but rather lies with the support of both the state and local community and 
agencies. It is critical to look closely at the particular marketplace before determining what to 
do in the community. At this point we are supporting the development of health center 
owned plans only through the Loan Guarantee Program. 
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