state and local sources, private insurance payments, and patient payments (see Figure 4.2 and Table 4.3). In 1995, 3.8 million individuals-more than 40 percent of all patients served by CHCs—were uninsured. Medicaid patients accounted for more than one third (38 percent) of the patient visits to CHCs in 1995.

The number of patients served by CHCs almost doubled between 1980 and 1995 (5 million to 9.3 million) (NACHC, 1997). During the same time, the funding required to support increases in staffing levels did not keep pace, often resulting in long waits for appointments. Medicaid reimbursements for CHCs have been increasing, but the amount of grant funding provided to support innovative programs and offset the costs of uncompensated care has fallen off since 1990 (see Figure 4.3 and Table 4.4) (Hawkins and Rosenbaum, 1997).

The Balanced Budget Act of 1997 introduced provisions that will change the structure of Medicaid and make a significant impact on community health centers. Cost-based reimbursement was important to CHCs because CHC patients tend to have multiple problems and their treatment tends to be more expensive, and also because CHCs offer more expanded services than most commercial plans, including translation, case management, and other support services.

Originally, Medicaid had to reimburse 100 percent of the cost of serving Medicaid patients, although many Medicaid waivers changing the amount and structure of reimbursement were already in effect by the time the Balanced Budget Act was enacted. In 1997, Congress changed the cost-based reimbursement provisions for Federally Qualified Health Centers, including CHCs. It eliminated the minimum payment standards that states previously were required to meet in setting reimbursement rates for community health centers, as well as for hospitals and nursing homes (Schneider, 1997). By 2002, Medicaid agencies will be required to reimburse only 70 percent of CHC patient costs, and by 2003, this requirement will be completely phased out (Schneider, 1997).

In environments in which Medicaid is shifting to managed care, CHCs are seeking to be included in provider panels and networks that serve low-income individuals. Medicaid managed care is having other effects on CHCs as well. Through default enrollment mechanisms in state mandatory Medicaid managed care programs, individuals who do not go through a process of choosing a primary care provider are assigned providers automatically. If these individuals are unaware that their assigned provider is not the CHC and seek care there, Medicaid will not provide reimbursement for services provided by the center.

With such a competitive health care marketplace, it remains to be seen whether CHCs can be sustained by capturing an expanding share of Medicaid patients. The changes in Medicaid reimbursement, particularly the loss of cost-based reimbursement, reductions in federal grant support, and increases in the number of uninsured families seeking care will combine to produce significant and ongoing financial challenges.

Children's Hospitals

Because they are philosophically committed to taking care of all children regardless of their parents' ability to pay for care, many children's hospitals are described as safety net providers. There are three primary types of children's hospitals:

  • freestanding children's acute-care hospitals;
  • nonfreestanding units such as a pediatrics department in a larger community hospital, a distinct children's center within an academic health center, or some other model; and
  • freestanding children's specialty and rehabilitation hospitals.

The United States has approximately 45 freestanding acute care children's hospitals, 222 pediatrics programs at teaching hospitals, and about 20 freestanding specialty and rehabilitation hospitals for

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