In order for a school or school district to participate in the Medicaid program and receive Medicaid reimbursement, there must be a provider agreement between the state Medicaid agency and the actual health care provider. Schools may enroll as Medicaid providers, either by qualifying to provide services directly, or, under certain conditions, by contracting with independent practitioners to provide the services. There are several arrangements schools may choose to provide Medicaid services.
MODEL 1, Direct Employment of Health Professionals: The school (or school district) itself employs health professionals such as physicians, nurse practitioners and nurses, or operates a clinic, i.e., has direct supervision and control over the clinic activities. The arrangement between schools and providers governs how and by whom Medicaid is billed for services and to whom payment may be made. Where the school employs the staff which provides the health services (or operates a clinic), the school can enter a provider agreement with the Medicaid program and receive Medicaid payments for the covered services provided.
MODEL 2, Contracting with Health Practitioners or Clinics: The school (or school district) contracts with health practitioners or clinics to furnish services. Under this type of arrangement, the health practitioner or the clinic (not the school) is the provider of services, and payments under Medicaid must be made, with limited exception, only to the provider of the services.
However, Federal Medicaid requirements permit Medicaid providers to voluntarily reassign their right to payment to a governmental entity, such as a school district. Consequently, if the school and the provider are willing to work out an agreement under which the provider reassigns payment to the school, the school may both bill and receive payment directly from the state Medicaid agency. Under these circumstances, the provider must be separately qualified and enrolled as a Medicaid provider and must have a separate provider number. In addition, assignment to the school must be accomplished in a way that satisfies all applicable Federal requirements. For example, in accepting assignment of Medicaid claims, the school is also accepting the providers’ responsibility for collection of probable third party liability, unless the state has been granted a waiver from cost-avoidance methods of seeking third party liability in accordance with Federal regulations (42 CFR 433.139) or the services provided are preventive pediatric services (see the Third Party Liability section of this guide for more information on these requirements).
MODEL 3, Combination of Direct Employing and Contracting: The school (or school district) uses a combination of employed health professionals and contract health professionals to furnish services. In general, when a school provides a service through employed staff and contracts with additional health professionals to supplement the care and services being provided by its own employees, the school can qualify as the provider and receive payment from the state Medicaid agency for the services being provided by both the employed and contract health staff. A key element in making the determination that the school is the provider is that the school itself provides the service through its own employees and includes certain contract health professionals only to supplement that which it is already providing. For example, the school may employ one physical therapist and contract with other physical therapists to supplement the services provided. No additional provider agreements are required for contracted providers under this type of arrangement.
MODEL 4, Mix of Employed and Contracted Providers: This model is similar to model 3 in which the school (or school district) uses a mix of employed and contracted providers. This model is used where the school provides some services directly but wishes to contract out entire service types without directly employing even a single practitioner in a service category. The school may establish itself as an organized health care delivery system under which it provides at least one service directly, such as case management, but provides additional services solely under contract. Under this model, payment may be made to the school on behalf of those contracted providers who have voluntarily agreed to enter into this arrangement with the school.
It is also important that the service being provided by the school or school district employees is the same service that the contract health professionals provide. In other words, if a school or school district operates a clinic and employs most of the necessary health professional to provide clinic services but contracts with a physician to provide services and direction of the clinic, in order for the school to be considered the provider of the services, the services furnished by the physician could not be billed to the Medicaid agency as physician services but must be billed as clinic services. That is, the contract physician is simply supplementing the service that the school/school district is providing. Under section 1902(x) of the Act, every physician used or employed by the school must have a unique physician identifier which appears on Medicaid claims for services under the direction of that physician. This is true whether or not the physician practices independently or in a clinic setting, and whether or not the physician is a Medicaid provider.
 Medicaid and School Health: A Technical Assistance Guide, August 1997, pp. 17 and 18.