Though conventional public schools enroll the vast majority of difficult-to-educate students, many such students who are not accepted by public schools end up at private schools. This report describes the role of private institutions in educating these students, incorporating case studies and analyzing various institutional arrangements. Part 1 introduces the subject; describes private programs (special education programs for students with disabilities, education for at-risk students, and education for incarcerated youth); and discusses alternative arrangements (charter schools, full inclusion, and cooperative agreements). Part 2 focuses on program analysis (performance measures, financial accountability, and student access) and policy issues (cost drivers, implications for school choice, and private schools, special education, and the courts). Part 3 looks at case studies of six Michigan facilities to indicate the diversity and capability of Michigan's nongovernment providers of education for difficult-to-educate students. Four appendixes present data on: financial incentives; states with legislation allowing public schools to contract for alternative education for at-risk students; defining characteristics of educational placements; and service providers and key contacts. (Contains 144 endnotes.) (SM)