Here's an explanation as it relates to the federal law:
http://specialed.principals.org/discidea/searchregs/300subpartE/Esec300.551.htm and also look at http:///nichcy.org/idealist.htm
If you find the IEP to be ineffective and your child is not benefitting from being at school or if the school cannot provide the individualised special education according to your son or daughter's individual need, a school/parent can elect to an "continuum of alternative service" even if it's outside of the district. Other parents use it to "homeschool" their child.
If a parent finds a service that can fulfill their son or daughter's specific IEP goals that the school cannot, through "continuum of alternative service" the school must provide this by law.
This is why it is absolutely IMPERATIVE THAT PARENTS & CARE TAKERS GET THEIR DUCKS IN ROW before they walk into the IEP meeting. You must know every inch of your child' spectrum, disorder, medical issue, because the schools do not know. They are not medical experts. They are education experts. They have education and mainstream models. But you might have a child that does not fit into their "model" here and needs something else in the form of an individualized special education.
The issue right now is that schools have been "regulated" at the federal/state level serve all special populations of children so some schools can choose to give you a "drop dead no" even if you or an advocate find an alternative that is the exact match for your son or daughter's needs. Only when a parent can prove that the school is only meeting this regulation on paper, not in the delivery of the IEP, can a child be eligible for alternative services.
Keep in mind, federal and state "regulations" cannot meet every "individual" need so there is wiggle room. Parents have the right to due process. I've read discussions where parents have challenged their school district based on the IDEA federal law set up for these special exceptions, hence the term "individual" and they have had good results.
Some schools do an outstanding job offering mainstreaming opportunities, special education services, least restrictive environments, and fulfilling IEPs, and some do not. I have been in special education environments that met the individual needs of a child while also providing special education opportunities. On the other hand, I have seen (I kid you not) 18 kids sitting in one room with one teacher where half were zoning out doing absolutely nothing.
I had to prove my child would not benefit from the school's definition of "least restrictive environment" and all the other definitions, labels and acronyms they have (I'm trying to be funny here...) in order to secure services elsewhere. I actually learned how to do this from a homeschool book.
I asked the school "you mean I can take my child out of school to be "homeschooled" and you would call it "services" but I can't put him into this special school where he can receive these same "services" as home?"
In Hamilton Co. Tennessee, a family sued the school because they wanted their son to attend this special program specifically for Autism. The schools said "no way." I think the parents won but it went into appeal... If you visit the FAPEPAGE and Wrightslaw they list the court cases.