Exhibit 10.1
Molina Contract Amendment
AGREEMENT NO. PSC: 06-630-8000-0010 A2
Between the State of New Mexico Human Services Department
and Molina Healthcare
Amendment No. 2 (“Amendment”) is entered into by and between the New Mexico
Human Services Department (hereinafter referred to “HSD”) and Molina Healthcare
(hereinafter referred to as “CONTRACTOR” OR “MCO”).
     WHEREAS, the parties have previously entered into an Agreement PSC:
06-630-8000-0010 Approved by the Department of Finance and Administration
(DFA) on July 1, 2005 (the “Agreement”) and
     WHEREAS, Article 37 of the Agreement allows for amendment of the Agreement;
and
     WHEREAS, the parties have determined that the term of the Agreement should
be extended for an additional year; and
     WHEREAS, HSD released a request for proposals (“RFP”) to provide Medicaid
managed care services, including Health Insurance Flexibility and Affordability
(HIFA) 1115 waiver, also known as State Coverage Insurance (“SCI”), for HSD’s
Medical Assistance Division (“MAD”); and
     WHEREAS, CONTRACTOR was selected by HSD in connection with the RFP process
as a party to provide SCI services and the parties entered into a separate
agreement to provide SCI services, such agreement known as, State Coverage
Insurance Agreement No. PSC: 06-630-8000-0024, as amended (“SCI Contract”); and
     WHEREAS, the parties have determined that it would be beneficial to
coordinate certain aspects of the Agreement and the SCI Contract wherever
appropriate, including but not limited to Article 2, Section 2.14, regarding
Care Coordination and the requirement that the CONTRACTOR coordinate with the
SE; and Article 19 — Subcontracts; and
     WHEREAS, the parties recognize that the SCI program will be governed solely
by the SCI contract and the Salud! program will be governed by this Agreement,
as amended; and
     WHEREAS, changes to Federal or State law and regulation require certain
changes to the Agreement; and

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     WHEREAS, based on the parties’ experience since implementation of the
Agreement, the parties have agreed to certain changes in the Agreement
beneficial to the Agreement’s goals;
     NOW THEREFORE, the parties do amend the Agreement as follows:

  1.   All terms, definitions and conditions stated in the Agreement and not
modified by this Amendment shall remain in full force and effect. This Amendment
shall become effective July 1, 2007, provided it has been approved by the
Department of Finance and Administration, and the U.S. Department of Health and
Human Services, Center for Medicare/Medicaid Services (CMS). Any reference to
CMS in this document is a reference to the agency formerly known as Health Care
Financing Administration (HCFA);     2.   In the event of a conflict between the
Agreement as amended herein and the regulations promulgated by the Code of
Federal Regulations (CFR) for managed care organizations (MCOs) and HSD, the
federal and state regulations will prevail. This Agreement, as amended, will
take precedence when delays in the promulgation of regulations present
operational barriers in the performance of this Agreement. HSD/MAD agrees that,
in the event of a material conflict between this Agreement and any regulation
effective after the date of execution of this Agreement, the parties shall have
the right to renegotiate to reach a mutually agreeable resolution of the
conflict and to memorialize that agreement.

     IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 as of
the date of execution by the State Contracts Officer, below.
Article 2 (SCOPE OF WORK) Section 2.1.(1). is amended to read as follows:
The CONTRACTOR shall perform professional services, including, but not
necessarily limited to, the following:

2.1   PROGRAM ADMINISTRATION

  (1)   Member Services

HSD/MAD shall implement procedures governing the following activities by the
CONTRACTOR or entities acting on behalf of the CONTRACTOR: Development of
information and educational media; provision of materials explaining the
enrollment options and process to potential members; and provision of
informational presentations to eligible members, members, member advocates and
other interested parties.

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The CONTRACTOR shall have a member services function that coordinates
communication with members and acts as a member advocate. There should be
sufficient staff to allow members to resolve problems or inquiries.
The CONTRACTOR’S applicable staff shall meet, as requested, with HSD/MAD staff
on a periodic basis. These meetings are to plan outreach and Medicaid enrollment
activities and events which will be jointly conducted by the CONTRACTOR and
HSD/MAD staff.
Article 2 (SCOPE OF WORK) Section 2.1.(2).C.ii. is amended to read as follows:

2.1.(2).C.ii.   define and submit annually to HSD/MAD a written copy of the UM
program description, UM plan and UM evaluation in which:

  (a)   the UM description includes the program structure and accountability
mechanisms;     (b)   the UM plan supports the goals described in the UM program
description. The plan will define specific indicators that will be used for
periodic performance tracking and trending and processes or mechanisms for
assessment and intervention, based on principles of continuous quality
improvement; and     (c)   a comprehensive UM program evaluation includes an
evaluation of the overall effectiveness of the UM plan including the impact of
the plan on the quality of utilization management and administrative activities.
The evaluation requires an overview of the UM activities and an analysis of any
impact from the previous reporting period. The review and analysis will be used
in the development of the following year’s UM plan.

Article 2 (SCOPE OF WORK) Section 2.1.(2).F.ii.(a). is amended to read as
follows:

2.1.(2).F.ii. (a)   objectives, scope, and Performance Improvement Projects
(PIP) plan and activities consistent with federal regulation and Quality
Assessment and Performance Improvement Program requirements for PIP and

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Performance Measurement Program as per 42 CFR 438.240. For more detailed
information refer to “EQRO Managed Care Organization Protocol” found at
http://www.cms.hhs.gov/MedicaidManagCare/.
Article 2 (SCOPE OF WORK) Section 2.1.(2).G.ii. is amended to read as follows:

2.1.(2).G.ii.    have an annual QI work plan that includes immediate objectives
for each contract period and long-term objectives for the entire contract
period. This work plan shall contain the scope of the objectives, activities
planned, timeframe, data indicators for tracking performance and other relevant
information;

Article 2 (SCOPE OF WORK) Section 2.1.(2).G.ix. is amended to read as follows:

2.1.(2).G.ix.    have written policies and procedures for continuity and
coordination of care as they relate to the delivery of physical health services
and coordinating care for ISHCN with the Single Statewide Entity (SE) and/or
other state departments;

Article 2 (SCOPE OF WORK) Section 2.1.(2)J.iv. is amended to read as follows:

2.1.(2).J.iv.    an evaluation of the overall effectiveness of the QI program,
used for the development of the following year’s plan.

Article 2 (SCOPE OF WORK) Section 2.1.(2).N.i. and ii. is amended to read as
follows:

2.1.(2).N.i.    HSD/MAD shall retain the services of an EQRO in accordance with
the Social Security Act, Section 1902 (a)(30) [C], and the CONTRACTOR shall
cooperate fully with that organization and prove to that organization the
CONTRACTOR’S adherence to HSD/MAD’s managed care regulations and quality
standards as set forth in MAD Policy Section 8.305.8.

2.1.(2).N.ii.    HSD/MAD shall also contract with an EQRO to audit a
statistically valid sample of the CONTRACTOR’S physical health UM decisions,
including authorizations, reductions, terminations and denials. This audit is
intended to determine if authorized service levels are appropriate with respect
to accepted standards of clinical care. The EQRO will audit the CONTRACTOR’S
Performance Improvement Project (PIP) and Performance Measurement Programs based
on CMS criteria. The CONTRACTOR shall cooperate fully with that organization.

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Article 2 (SCOPE OF WORK) Section 2.1.(2).P. is amended to read as follows:

2.1.(2).P.    Disease Management       Disease management is a comprehensive
plan following nationally recognized components for chronic disease
interventions including population identification/stratification process,
collaborative practice models, patient self-management education process,
evidence-based practice guidelines, process and outcomes measurements, and
internal quality improvement processes.       Disease management (DM) applies a
strategy of delivering health services using interdisciplinary clinical teams,
continuous analysis of relevant data, and cost-effective technology to improve
the health outcomes of individuals with specific diseases. HSD/MAD seeks to
improve the health status of all individuals in the population with specific
diseases. DM programs and Performance Measures are two of the tools that HSD/MAD
has chosen to use to measure the CONTRACTOR’S ability to impact health outcomes.
Examples of chronic illnesses/diseases are: Diabetes, Cardiovascular Disease,
Chronic Obstructive Pulmonary Disease, Obesity and Asthma. HSD/MAD expects that
each CONTRACTOR shall improve its ability to manage chronic illness to meet the
goals set by HSD/MAD for DM.

Article 2 (SCOPE OF WORK) Section 2.1.(2).R. is amended to read as follows:

2.1.(2).R.    Managed Care Performance Measures for 2007 Salud! Managed Care
Program

  i.   Managed Care Performance Measures:         The CONTRACTOR will be
provided with a copy of the HSD/MAD’s performance measures and relative portions
of the HSD/MAD Strategic Plan.         For capitation payments made on or after
June 30 of the applicable contract year, the CONTRACTOR shall withhold one-half
of one percent (0.5%), net of premium taxes, of HSD/MAD’s capitation payments
and hold such funds on HSD/MAD’s behalf. The withheld funds shall be released to

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      the CONTRACTOR, employing a Pay for Performance methodology, no sooner
than July 1st and no later than October 31st after the applicable contract year
only if, in the judgment of HSD/MAD, performance targets in the contract are
achieved.         HEDIS will be the methodology used for all performance
measures, unless HSD/MAD determines to use a non-HEDIS methodology or a HEDIS
measure does not exist.         For those performance measures utilizing a HEDIS
methodology, HSD/MAD agrees that the measures will be evaluated using the HEDIS
technical specifications applicable to the measurement year.         For those
measures that HSD/MAD determines to use a non-HEDIS measure, or for which a
HEDIS measure does not exist, HSD/MAD will provide the CONTRACTOR the
methodology to be used to measure the CONTRACTOR’S performance before July 1 of
the applicable contract year.         The CONTRACTOR shall collaborate with
HSD/MAD in all approaches to conduct performance measure and quality improvement
activities and all reporting requirements established by the New Mexico
Legislature.         Withheld funds shall be released to the CONTRACTOR based on
the following scoring system for each of the performance measures listed below:

  (a)   PM #1 — Annual Dental Visit (Combined Rate) shall be worth 10 points;  
  (b)   PM #2 — Breast Cancer Screening shall be worth 10 points;     (c)   PM
#3 — Comprehensive Diabetes Care (HbA1c Testing) shall be worth 10 points;    
(d)   PM #4 — Well Child visits in the first fifteen (15) months of life shall
be worth 5 points; Well Child visits for ages three, four, five and six years of
age shall be worth 5 points;     (e)   PM #5 — Children and Adolescents Access
to Primary Care Practitioners (PCPs) ages twelve (12) to twenty-

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      four (24) months shall be worth 2.5 points; ages twenty-five (25) months
through six (6) years shall be worth 2.5 points; ages seven (7) through eleven
(11) shall be worth 2.5 points; and ages twelve (12) through nineteen (19) years
shall be worth 2.5 points;     (f)   PM #6 — Childhood Immunization Status
(Combo 2) shall be worth 10 points;     (g)   PM #7 — Use of Appropriate
Medications for People with Asthma ages five to nine years shall be worth 5
points; ages ten (10) through seventeen (17) years shall be worth 5 points;    
(h)   PM #8 — Cervical Cancer Screening shall be worth 10 points;     (i)   PM
#9 — Encounter Data Reporting shall be worth 10 points; and     (j)   PM #10 —
Timely submission, accuracy, and analysis of HSD/MAD required reports shall be
worth 10 points.

The percentage of the CONTRACTOR’S withheld funds to be released shall be
calculated by summing all earned points, dividing the sum by one hundred (100),
and converting to a percentage (Withheld Percentage). No partial number of
points will be assigned if the CONTRACTOR fails to completely meet performance
measures described in (a) through (i) above, except with respect to performance
measure (j) PM #10. Compliance relative to timely submission, accuracy and
analysis will be considered based upon quarterly submissions and such criteria
shall be applied consistently across all MCOs. The CONTRACTOR shall comply with
all PM #10 requirements or be liable to lose between two and one half (2.5)
points per quarter and ten (10) points annually. The maximum penalty will be
assessed for repeated noncompliance within the applicable contract year. Other
penalties or sanctions may be imposed for incomplete, inaccurate or untimely
reports/analysis. HSD/MAD staff shall notify the CONTRACTOR, in writing, of
changes to required reports at least forty-five (45) business days prior to
implementing the reporting change. The CONTRACTOR shall he held harmless if
HSD/MAD fails to meet this requirement for any

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      changes to existing reports. However, the CONTRACTOR is not otherwise
relieved of any responsibility for the submission of late, inaccurate, or
otherwise incomplete reports (See section 2.12.(1).D. Reporting). Points
assigned for the other performance measures will be all or none (e.g., ten
(10) points or zero (0)).         To the extent that the following performance
measures are not based on HEDIS measures, the parties agree that the measure
shall be evaluated based on the standard reports for such measures already
submitted to HSD/MAD by the CONTRACTOR, provided that HSD/MAD shall have the
right to audit and validate the information or results as reported by
CONTRACTOR.     ii.   Performance Measures Requirements:         The performance
measures shall be evaluated using the following criteria:

  (a)   PM #1 — Annual Dental Visit (Combined Rate)         The percentage of
enrolled members two to twenty-one years of age, who had at least one dental
visit during the measurement year. The final audited HEDIS score for the Dental
Care Combined Rate will be fifty percent (50%) or greater.     (b)   PM #2 —
Breast Cancer Screening         The percentage of enrolled women 40 through
69 years of age who had a mammogram to screen for breast cancer during the
measurement period. The final audited HEDIS score for the Breast Cancer
Screening will be fifty-three percent (53%) or greater.     (c)   PM #3 —
Comprehensive Diabetes Care (HbA1c Testing)         The percentage of members
eighteen (18) through seventy-five (75) years of age with diabetes (Type 1 and
Type 2) who had an HbA1c Test during the measurement year. The final audited
HEDIS score for the Comprehensive Diabetes Care (HbA1c Testing) will be
eighty-two percent (82%) or greater.

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  (d)   PM #4 — Well Child Visits         The percentage of enrolled members who
turned fifteen (15) months during the measurement year who had six (6) or more
Well Child visits with a primary care practitioner during the first fifteen
(15) months of life. And the percentage of enrolled members who were three (3)
through six (6) years of age who received one or more Well Child visits with a
primary care practitioner during the measurement year. The final audited HEDIS
score for Well Child visits in the first fifteen (15) months of life will be
forty-five percent (45%) or greater. Well Child visits for ages three, four,
five and six years of age will be sixty-two percent (62%) or greater.     (e)  
PM #5 — Children and Adolescents Access to Primary Care Practitioners (PCPs)    
    The percentage of enrollees twelve (12) to twenty-four (24) months, and
twenty-five (25) months through six (6) years who had a visit with a primary
care practitioner during the measurement year. Ages seven (7) through eleven
(11) years, and twelve (12) through nineteen (19) years who had a visit with a
primary care practitioner during the measurement year or the year prior to the
measurement year. The final audited HEDIS score for Children Access to Primary
Care Practitioners for ages twelve (12) months to twenty-four (24) months will
be ninety-two percent (92%) or greater; ages twenty-five (25) months to six
(6) years will be eighty-one percent (81%) or greater; ages seven (7) to eleven
(11) years will be eighty-two percent (82%) or greater; ages twelve (12) through
nineteen (19) years will be seventy-nine percent (79%) or greater.     (f)   PM
#6 — Childhood Immunizations (Combo 2)         The percentage of children two
(2) years of age who received Combo 2 immunizations on or before their second
birthday. The final audited HEDIS score for Childhood Immunizations Status
(Combo 2) will be seventy-six percent (76%) or greater.

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  (g)   PM #7: Use of Appropriate Medications for People with Asthma         The
percentage of members five (5) through nine (9) years of age, and ten
(10) through seventeen (17) years of age, who are identified as having
persistent asthma and who were appropriately prescribed medication during the
measurement year. The final audited HEDIS score for Use of Appropriate Asthma
Medications ages five (5) to nine (9) years of age will be eighty-six percent
(86%) or greater; for ages ten (10) to seventeen (17) years of age will be
eighty-six percent (86%).     (h)   PM #8 — Cervical Cancer Screening.        
The percentage of enrolled women 21 through 64 years of age who received one or
more Pap tests to screen for cervical cancer during the measurement period. The
final audited HEDIS score for the Cervical Cancer Screening will be sixty-nine
percent (69%) or greater.     (i)   PM #9 — Encounter Data Reporting         The
CONTRACTOR shall submit 99 percent (99%) of all required encounter data on a
timely basis for submissions and necessary re-submissions as set forth in the
Contract. The submissions and required re-submissions shall have an annual error
rate of three percent (3%) or less for at least ninety percent (90%) of the
files.     (j)   PM #10 — Timely Submission, Accuracy, and Analysis of HSD/MAD
Required Reports         The CONTRACTOR shall achieve and maintain compliance
with all format and content changes required by HSD/MAD reports. The CONTRACTOR
shall submit a systems analysis of the data interpretation (i.e., tracking and
trending). “Timely submission” shall mean that the report was submitted on or
before the date it was due. “Accuracy” shall

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      mean the report was substantially prepared according to the specific
written guidance, including reporting template, provided by HSD/MAD to the
CONTRACTOR. The CONTRACTOR shall not be penalized if an error in a previously
submitted report is identified by the CONTRACTOR and reported to HSD/MAD prior
to HSD/MAD’s identification of the error. Corrected reports in this type of
situation will be submitted to HSD/MAD in a timeframe determined by HSD/MAD
after consulting with the CONTRACTOR.

  iii.   Retention and Release of Withheld Funds

  (a)   The retention of funds withheld shall be accomplished as follows:      
  The CONTRACTOR shall place all funds described in section R.i. (Managed Care
Performance Measures) in a separate account and shall provide to HSD/MAD a
monthly statement of the account in order to verify that the withheld funds are
being maintained during the period of time specified in this contract.     (b)  
The release of the funds withheld shall be made as follows:         The funds in
the withheld funds account shall be released for use by the CONTRACTOR only
after HSD/MAD has submitted in writing that in HSD/MAD’s judgment, the
performance targets in the contract have been achieved for the period of time
specified in the contract. HSD/MAD shall provide written confirmation no sooner
than July 1 and no later than October 31, of the appropriate contract year, or
within thirty (30) days of verification, whichever comes first.     (c)   The
release of funds withheld shall be calculated by taking the amount of capitation
payments withheld by the CONTRACTOR pursuant to section R.i. as of June 30th of
the applicable contract year and multiplying by the Withheld Percentage for the
applicable contract year.

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  (d)   Funds remaining in the withheld funds account as a result of the
CONTRACTOR’S inability to meet performance goals shall be released by HSD/MAD to
the CONTRACTOR and be entirely appropriated to the following two initiatives.
The final distribution of the dollars for these initiatives shall be determined
by HSD/MAD. The CONTRACTOR shall submit a report detailing all expenditures to
HSD/MAD on a quarterly basis until all funds are disbursed.

  1.   The purpose of the Pay for Performance (P4P) Program is to recognize and
reward providers who share HSD/MAD’s commitment to improving health, achieving
superior clinical outcomes, and reducing administrative burdens to increase
clinical care time.

It is the intent of HSD/MAD to improve immunization rates for all children
through a collaborative effort involving the CONTRACTOR, the Department of
Health, local health departments, and a spectrum of key stakeholders across the
state.
The CONTRACTOR will work with HSD/MAD to develop a P4P initiative to improve the
state immunization rate by (a) providing the immunization and (b) reporting
immunizations.
The CONTRACTOR, in conjunction with HSD/MAD shall establish and implement
measures that can be compared to national data and evaluate progress towards
attaining the established target for the measure.

  2.   The CONTRACTOR will establish and provide for HSD/MAD approval a
financial incentive model that rewards CONTRACTOR providers for the achievement
of outcomes and adherence to protocols in childhood immunizations.

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The model must include minimum requirements for provider participation and the
methodology for distribution of the financial incentive. At a minimum, the model
must include a mechanism to measure childhood immunizations, determine an
increase in childhood immunizations and determine an increase in utilization of
the New Mexico State Immunization Information System (SIIS).
The CONTRACTOR must establish a consistent means for comparing outcomes based on
CONRACTOR experience and national standards as well as targets established by
HSD/MAD.
The CONTRACTOR must demonstrate a statistically significant increase in the
percent of children receiving immunizations during the year with the goal of
meeting national standards.

  vii.   Tracking Measures that are not subject to the Managed Care Withhold or
Challenge Pool

The following measures are not subject to the Managed Care Withhold and shall be
reported to HSD/MAD:

  (a)   TM #1 — Breast Cancer Screening     (b)   TM #2 — Children/Adolescent
Well Care Visits/EPSDT Screens     (c)   TM #3 — Teen Maternity Care     (d)  
TM #4 — Obesity     (e)   TM #5 — Customer Support Services

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  (f)   TM #6 — EPSDT Preventive Dental Care     (g)   TM #7 — Cervical Cancer
Screening     (h)   TM #8 — Diabetes Disease Management (HbA1c Testing)     (i)
  TM #9 — EPSDT Waiver Services     (j)   TM #10 — Childhood Immunizations (0-35
months)     (k)   TM #11 — Provider Payment Timeliness

Article 2 (SCOPE OF WORK) Section 2.1.(2).U.i.(d). through (j) is amended to
read as follows:

2.1.(2)U.i. (d)   develop and implement written policies and procedures
governing how care coordination shall be provided for members with special
health care needs, as required by federal regulation. These policies shall
address the development of a member’s individual plan of care, based on a
comprehensive assessment of the goals, capacities and medical condition of the
member and the needs and goals of the family. Also included shall be the
criteria for evaluating a member’s response to care and revising the plan when
indicated. A member and family shall be involved in the development of the plan
of care, as appropriate. A member or family shall have a right to refuse care
coordination or case management;

  (e)   develop and implement written policies and procedures governing how care
coordination shall be provided for members with physical health and behavioral
health complex needs. These policies shall address mechanisms for exchanging
relevant clinical information between the CONTRACTOR’S and the SE’s care
coordinators and Medical Directors, as permitted under federal privacy laws, to
ensure services are delivered in a coordinated manner. In addition, the policies
shall address coordination with other entities such as protective services and
the schools to ensure services across various systems are coordinated for these
members, in accordance with federal privacy laws;

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  (f)   develop and implement policies and procedures which define care
coordination, including the targeted case management programs, according to
HSD/MAD policy on each. Direct, face-to-face meetings may be required as
indicated for the targeted case management programs;     (g)   measure and
evaluate outcomes and monitor progress of members to ensure that services are
received and assist in resolution of identified problems and prevent duplication
of services;     (h)   specify how care coordination shall be supported by an
internal information system;     (i)   develop and implement policy and
procedures to establish working relationships between care coordinators and
providers; and     (j)   continue to work with the School Based Health Center
providers to identify and coordinate with the child’s primary care provider
(PCP).

Article 2 (SCOPE OF WORK) Section 2.1.(2).U.ii.(d). is amended to read as
follows:

2.1.(2).U.ii.(d).     Coordination With Waiver Programs. The CONTRACTOR shall
provide all covered benefits to members who are waiver participants. The
applicable waiver programs include, but are not limited to, the Developmentally
Disabled Waiver, the Disabled and Elderly Waiver, the Medically Fragile Waiver
and the AIDS Waiver. An integral part of each waiver is the provision of case
management. The CONTRACTOR shall coordinate closely with the waiver case manager
to ensure that case information is shared, that necessary services are provided
and that they are not duplicative. HSD/MAD shall monitor utilization to ensure
that the CONTRACTOR provides to members who are waiver participants all benefits
included in the CONTRACTOR benefit package. The CONTRACTOR shall have policies
and procedures governing coordination of services with home and community-based
Medicaid waiver programs to assist with complex care coordination.

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Article 2 (SCOPE OF WORK) Section 2.2.(5). is amended to read as follows:

2.2.(5).    Special Situations

  A.   Newborn Enrollment

Newborns of Medicaid eligible CONTRACTOR enrolled mothers are eligible for a
period of twelve (12) months starting with the month of birth. The newborn is
enrolled retroactive to the date of birth with the same CONTRACTOR the mother
had during the birth month, as soon as the newborn’s Medicaid eligibility is
approved. If the child’s mother is not a member of a CONTRACTOR at the time of
the birth, then the child is enrolled during the next applicable enrollment
cycle.

  B.   Hospitalized Members

If the member is hospitalized at the time of disenrollment from Salud! or upon
an approved switch from one contractor to another, the CONTRACTOR shall be
responsible for payment for all covered inpatient facility and professional
services provided within a licensed acute care facility, or a non-psychiatric
specialty unit or hospitals as designated by the New Mexico Department of
Health. The payer at the date of admission (MCO or FFS) remains responsible for
services until the date of discharge. Services provided within a psychiatric
unit of an acute care hospital are the responsibility of the SE and are excluded
under this Amendment.
For the purpose of this CONTRACT:

  1.   When a member is moved from or to a PPS exempt unit within an acute care
hospital, the move is considered a “discharge.”     2.   When a member is moved
from or to a specialty hospital as designated by DOH or HSD/MAD, the move is
considered a “discharge.”     3.   When a member is moved from or to a PPS
exempt hospital, the move is considered a “discharge.”     4.   When a member
leaves the acute care hospital setting to a home/community setting, the move is
considered a “discharge.”

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  5.   When a member leaves the acute care hospital setting to an institutional
setting, the “discharge” date is based upon approval of the abstract and/or
HSD/MAD.

Note: It is not a “discharge” when a member is moved from one acute care
facility to another acute care facility, including out-of-state acute care
facilities.
If a member is hospitalized and is disenrolled from managed care/FFS due to a
loss in Medicaid coverage, the MCO or FFS, respectively, is only financially
liable for the inpatient hospitalization and associated professional services
until such time that the member/client is determined to be ineligible for
Medicaid.

  C.   Native Americans

The CONTRACTOR shall:

  i.   make documented efforts to contract with the appropriate urban Indian
clinics, tribally owned health centers, and IHS facilities for the provision of
medically necessary services;     ii.   ensure that translation services are
reasonably available when needed, both in providers’ offices and in contacts
with the CONTRACTOR;     iii.   ensure appropriate medical transportation for
Native American members residing in rural and remote areas; and     iv.   ensure
that culturally appropriate materials are available to Native Americans.

  D.   Members Placed in Nursing Facilities.

If a member is placed in a nursing facility for what is expected to be a long-
term or permanent placement, the CONTRACTOR remains responsible for the member
until the member is disenrolled by HSD/MAD. Disenrollment shall be defined by
HSD/MAD to include the approval date of the abstract and/or other requirements.
Failure of a nursing facility to maintain and/or submit a timely abstract
authorization for an institutionalized member that causes the

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system to enroll the member into managed care is considered an error in
enrollment. The CONTRACTOR is not responsible for payment of any medical
services delivered and all capitations shall be recouped.

  E.   Members Receiving Hospice Services.

Members who have elected and are receiving hospice services at the time of
enrollment shall be exempt from enrolling in an MCO unless they revoke their
hospice election.
Article 2 (SCOPE OF WORK) Section 2.3.(14).A.i. is amended to read as follows:

2.3.(14).    Standards For Provider Credentialing and Recredentialing

  A.   Individual Providers

  i.   The CONTRACTOR shall have written policies and procedures for the
credentialing process that may not be discriminatory under applicable state or
federal law, which include the CONTRACTOR’S initial credentialing of
practitioners, as well as its subsequent re-credentialing, recertifying and/or
re- appointment of practitioners. The credentialing process shall be completed
within one hundred eighty (180) days from receipt of a fully completed
application and all required documentation unless there are extenuating
circumstances.

Article 2 (Scope of Work) Section 2.4 is amended to read as follows:

2.4   Benefits/Services

The CONTRACTOR shall be required to provide a comprehensive, coordinated and
fully integrated system of health care services. The CONTRACTOR does not have
the option of deleting access to benefits from the Medicaid defined benefit
package. Access to Medicaid benefits must be available for physical health
services directly by the CONTRACTOR’S network or with respect to behavioral
health services through the CONTRACTOR’S referral and coordination system to the
Statewide Entity.
Behavioral health services provided by the CONTRACTOR’S network providers will
be covered by the CONTRACTOR even when the primary

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diagnosis is a behavioral health diagnosis. Facility costs, including emergency
room costs, will be covered by the CONTRACTOR when billed on an acute
care/general hospital facility claim form, including behavioral health services
provided by hospital staff.
Laboratory and Radiology Services
The lab and radiology costs shall be the responsibility of the MCO when a BH
provider orders lab or radiology work that is performed by an outside,
independent laboratory or radiology facility, including those lab and radiology
services provided for persons within a psychiatric unit, a freestanding
psychiatric hospital or the UNM Psychiatric emergency room.
Lab and radiology services shall be the responsibility of the SE when they are
provided within and billed by a free standing psychiatric hospital, a PPS exempt
unit of a general acute care hospital or UNM Psychiatric ER. In the event that a
psychiatrist orders lab work but completes that lab work in their
office/facility and bills for it, the SE is responsible for the payment.
The following services are included in the covered benefit package of this
Agreement:
Article 2 (SCOPE OF WORK) Section 2.4.(23). “Pregnancy Termination Procedures”
is deleted. Section 2.4.(23). is added to now read as follows:

2.4.(23).    Telehealth Services

The benefit package will include telehealth services consistent with the HSD/MAD
Program Policy Manual.
Article 2 (SCOPE OF WORK) Section 2.4.(27).C. is amended to read as follows:

2.4.(27).C.   The CONTRACTOR shall make preventive services available to
members. The CONTRACTOR shall periodically remind and encourage their members to
use benefits, including physical examinations, which are available and designed
to prevent illness (e.g., HIV counseling and testing for pregnant women).      
The services shall follow current national standards and are recommended by the
U.S. preventive services task force, the Centers for Disease Control and
Prevention, and the American College of Obstetricians and Gynecologists.

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Article 2 (SCOPE OF WORK) Section 2.6.(13). is amended to read as follows:

2.6.(13).   Individuals with Special Health Care Needs Performance Measure      
The CONTRACTOR shall initiate a quality strategy related to the identification
and care of ISHCN members within the QM annual plan utilizing a performance
measure specific to ISHCN.

Article 2 (SCOPE OF WORK) Section 2.9.(3).B. is amended to read as follows:

2.9.(3).B.   Notice of CONTRACTOR Action       The CONTRACTOR shall mail a
notice of action to the member or provider and those parties affected by the
decision within ten (10) days of the date of an action for previously authorized
services as permitted under 42 CFR 431.213 and 431.214 and within fourteen
(14) days of the action for newly requested services. Denials of claims which
may result in client financial liability require immediate notification. The
notice must contain, but not be limited to, the following:

Article 2 (SCOPE OF WORK) Section 2.9.(7).B. is amended to read as follows:

2.9.(7).   Reporting

  B.   The CONTRACTOR shall provide to HSD/MAD monthly reporting of all provider
and consumer grievances utilizing the state provided reporting templates and
grievance codes. The CONTRACTOR shall provide a quarterly report to HSD/MAD of
the analysis of all provider and member grievances received from or about
Medicaid members, by the CONTRACTOR or its subcontractors, during the quarter.
The analysis will include the identification of any indications of trends as
well as any interventions taken to address those trends. This reporting will
adhere to the timelines and procedures set forth in Section 2.12(2). In
addition, the CONTRACTOR shall provide monthly aggregate reporting, as required
by HSD/MAD, of all grievances including those informal grievances.

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Article 2 (SCOPE OF WORK) Section 2.10.(7). is amended to read as follows:

2.10.(7).   Inspection and Audit for Solvency Requirements

    The CONTRACTOR shall meet all requirements for licensure within the State
with respect to inspection and auditing of financial records. The CONTRACTOR
shall provide to HSD/MAD and/or its designee, all financial records required by
HSD/MAD or its designee so that they may inspect and audit the CONTRACTOR’S
financial records at least annually or at HSD/MAD’s discretion.

Article 2 (SCOPE OF WORK) Section 2.10.(8).A.ii. is amended to read as follows:

2.10.(8).A.ii.   The CONTRACTOR is required to date-stamp all claims in a manner
that will allow determination of the calendar date of receipt. The CONTRACTOR
shall pay ninety percent (90%) of all clean claims from practitioners who are in
individual or group practice or who practice in shared health facilities within
thirty (30) days of date of receipt, and shall pay ninety-nine percent (99%) of
all such clean claims within ninety (90) days of receipt. A “clean claim” means
a manually or electronically submitted claim from a participating provider that
contains substantially all the required data elements necessary for accurate
adjudication, whether paid or denied, without the need for additional
information from outside of the health plan.

Article 2 (SCOPE OF WORK) Section 2.10.(8).A.iii.(d). is amended to read as
follows:

2.10.(8).A.iii.(d).   The CONTRACTOR shall be required to report the number and
allowed amount of clean claims that were not processed within the 45-day HSD/MAD
requirement, including the amount of interest paid to providers. Such reports
will be submitted in a time frame determined by HSD/MAD.

Article 2 (SCOPE OF WORK) Section 2.11.(11). is added to read as follows:

2.11.(11).   EMPLOYEE EDUCATION CONCERNING FALSE CLAIMS       The CONTRACTOR and
all subcontractors shall:

  A.   Establish written policies for all employees, agents, or contractors,
that provide detailed information regarding the New Mexico Medicaid False Claims
Act, NMSA 1978, §§27-14-1, et seq.; and the Federal False Claims Act established
under sections 3729 through 3733 of title 31, United States Code, administrative
remedies for false claims and statement established under chapter 38 of title
31, United States Code, including but not limited to, preventing and

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      detecting fraud, waste, and abuse in Federal health care programs (as
defined in section 1128B(f) of the Social Security Act);     B.   Include as
part of such written policies, detailed provisions regarding the entity’s
policies and procedures for detecting and preventing fraud, waste and abuse; and
    C.   Include in any employee handbook, a specific discussion of the laws
described in subparagraph (A), the rights of employees to be protected as
whistleblowers, and the CONTRACTOR’S or subcontractor’s policies and procedures
for detecting and preventing fraud, waste, and abuse.

    HSD/MAD may, at its sole discretion, exempt the PROVIDER from the
requirements set forth in this section; however, HSD/MAD shall not exclude the
CONTRACTOR or subcontractor, if the CONTRACTOR or subcontractor receives at
least $5,000,000 in annual payments from the HSD/MAD.       The following
definitions apply to this section:

  1.   An “employee” includes any officer or employee of the CONTRACTOR.      
2.   A “subcontractor” or “vendor” includes any agent or person which or who, on
behalf of the CONTRACTOR, furnishes, or otherwise authorizes the furnishing of
Medicaid or other health care program items or services, performs billing or
coding functions or is involved in monitoring of health care provided by the
PROVIDER.

Article 2 (SCOPE OF WORK) Section 2.12. paragraph one is amended to read as
follows:

2.12   REPORTING       The CONTRACTOR shall provide to HSD/MAD routine
managerial, financial, utilization and quality reports. The content, format, and
schedule for submission shall be determined by HSD/MAD in advance for the
financial reporting period and shall conform to reasonable industry and/or to
CMS standards. HSD/MAD shall notify CONTRACTOR, in writing, of changes to
required/routine reports at least forty-five (45) business days prior to
implementing the reporting change. The CONTRACTOR shall be held harmless if
HSD/MAD fails to meet this requirement for any changes

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    to existing reports. However, the CONTRACTOR is not otherwise relieved of
any responsibility for the submission of late, inaccurate, or otherwise
incomplete reports (see section 2.12.(1).D. Reporting). The first submission of
a report revised by HSD/MAD to include a change in data requirement or
definition will not be subject to penalty for accuracy. HSD/MAD, in order to
reduce administrative duplication, may provide exceptions to the requirement for
the submission of specific hard copy reports. HSD/MAD will notify each MCO
regarding the change in routine reporting requirements.

Article 2 (SCOPE OF WORK) Section 2.12.(3).H. is amended to read as follows:

2.12.(3).H.   Financial Reporting Requirement       Reports post-marked with the
due date will be considered as timely submission. If report due date falls on a
weekend or holiday, receipt of the report the next business day is acceptable.  
    Reporting requirements include, but are not limited to, the following:

              Definition   Frequency   Objective   Due Date
Calendar-Year
Independently Audited
Financial Statements
  Annual   Examine for Solvency and CMS Compliance   June 1
 
           
Calendar-Year Medicaid- Specific Audited Schedule of Revenue and Expenses
  Annual   Examine and determine for Solvency and CMS Compliance   June 1
 
           
Quarterly Medicaid specific unaudited Schedule of Revenue and Expenses
  Quarterly   Examine and compare Administrative Expenditures by Line of
Business   45 days from the end of quarter or the 15th day of the second month
following the end of a quarter

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              Definition   Frequency   Objective   Due Date
Department of Insurance Reports
  Quarterly Quarters 1, 2 & 3 (45 days from end of quarter) annually on 3/1  
Examine and confirm Solvency and CMS Compliance   45 days from the end of
quarter or the 15th of the month, March 1 for Annual Statement
 
           
Expenditures by Category of Services for hospital, pharmacy, physician, dental,
transportation and other
  Quarterly   Determine Cost
Efficiency   45 days from end of Qtr or the 15th day of the second month
following the end of the quarter
 
           
Expenditures of services to FQHCs and RHCs
  Quarterly   Enable HSD/MAD to make wraparound payments to FQHCs and RHCs  
30 days from end of Qtr
 
           
Expenditures specifically made to IHS and tribal 638 facilities
  Quarterly   Enable HSD/MAD to reconcile the payments made by the CONTRACTOR to
IHS and tribal 638 facilities, against the supplemental capitation payments made
by HSD/MAD to the CONTRACTOR   30 days from end of Qtr
 
           
Identify the Fidelity Bond or Insurance Protection by Amount of Coverage in
relation to Annual Payments. Identify MCO Directors, Officers Employees or
Partners.
  Annual   Examine and confirm Solvency and CMS Compliance   Initially and upon
renewal
 
           
Analysis of Stop-loss protection with Detail of Panel Composition
  Quarterly   Examine to determine Solvency, Rate Payment.   30 days from end of
Qtr

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              Definition   Frequency   Objective   Due Date
Reinsurance Policy
  Annual   Assess Solvency and CMS Compliance   Initially and upon renewal
 
           
Cash Reserve Statement
  Quarterly   Examine and confirm Solvency and CMS Compliance   30 days from end
of Qtr
 
           
Claims Payment
Timeliness
  Monthly   Compliance with the BBA payment timeliness requirements for 30- days
and 90-days.   15 days from end of the month

Article 2 (SCOPE OF WORK) Section 2.12.(8). is amended to read as follows:

2.12.(8).   Provider Network Reports       The CONTRACTOR shall notify HSD/MAD
within five (5) working days of any unexpected changes to the composition of its
provider network that negatively affect member access or the CONTRACTOR’S
ability to deliver all services included in the benefit package in a timely
manner. Any anticipated material changes in the CONTRACTOR’S provider network
shall be reported to HSD/MAD in writing when the CONTRACTOR knows of the
anticipated change or within thirty (30) calendar days, whichever comes first.
The notice submitted to HSD/MAD shall include the following information: nature
of the change; information about how the change affects the delivery of covered
services or access to the services; and the CONTRACTOR’S plan for maintaining
the access and quality of member care.       In the event that substantial or
material provider network changes occur, including when it is determined that a
provider is otherwise unable to meet its contractual obligation, the CONTRACTOR
shall be required to submit transition plans to HSD/MAD. The CONTRACTOR shall
provide member demographic information, date or anticipated date of transition,
any special conditions or barriers to transition, and other related information
requested by HSD/MAD.

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Article 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE)
Section 5.6.(4). is amended to read as follows:

5.6.(4).    HSD/MAD shall recoup payments made by HSD/MAD pursuant to the time
periods governed by this Agreement for the following:

  A.   members incorrectly enrolled with more than one CONTRACTOR;     B.  
members categorized as newborns or X5 except as provided for in
Article 2.2.(5).A, 2.13.(5). and 5.6.(2). of this Agreement;     C.   members
who die prior to the enrollment month for which payment was made; and/or     D.
  members whom HSD/MAD later determines were not eligible for Medicaid during
the enrollment month for which payment was made.     E.   In the event of an
error, which causes payment(s) to the CONTRACTOR to be issued by HSD/MAD,
HSD/MAD shall recoup the full amount of the payment. Interest shall accrue at
the statutory rate on any amounts not paid and determined to be due after the
thirtieth (30th) day following the notice. Any process that automates the
recoupment procedures will be discussed in advance by HSD/MAD and the CONTRACTOR
and documented in writing, prior to implementation of a new automated recoupment
process. The CONTRACTOR has the right to dispute any recoupment action in
accordance with contractual provision.     F.   For individuals who were
enrolled with more than one CONTRACTOR, the CONTRACTOR from whom the capitation
payment is recouped shall have the right to recoup incurred expenses from the
CONTRACTOR who retains the capitation payment.

Article 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE)
Section 5.6.(6). is added to read as follows:

5.6.(6).    If the member is hospitalized at the time of disenrollment from
Salud! or upon an approved switch from one contractor to another, the CONTRACTOR
shall be responsible for payment for all covered inpatient facility and
professional services provided within a licensed acute care facility, or a
non-psychiatric specialty unit or

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    hospitals as designated by the New Mexico Department of Health. The payer at
the date of admission (MCO or FFS) remains responsible for services until the
date of discharge. Services provided within a psychiatric unit of an acute care
hospital are the responsibility of the SE and are excluded under this Amendment.
      For the purpose of this CONTRACT:

  1.   When a member is moved from or to a PPS exempt unit within an acute care
hospital, the move is considered a “discharge.”     2.   When a member is moved
from or to a specialty hospital as designated by DOH or HSD/MAD, the move is
considered a “discharge.”     3.   When a member is moved from or to a PPS
exempt hospital, the move is considered a “discharge.”     4.   When a member
leaves the acute care hospital setting to a home/community setting, the move is
considered a “discharge.”     5.   When a member leaves the acute care hospital
setting to an institutional setting, the “discharge” date is based upon approval
of the abstract and/or HSD/MAD.

Note: It is not a “discharge” when a member is moved from one acute care
facility to another acute care facility, including out-of-state acute care
facilities.
If a member is hospitalized and is disenrolled from managed care/FFS due to a
loss in Medicaid coverage, the MCO or FFS, respectively, is only financially
liable for the inpatient hospitalization and associated professional services
until such time that the member/client is determined to be ineligible for
Medicaid.
Article 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE) Section 5.9
the first paragraph is amended to read as follows:

5.9   The CONTRACTOR shall accept the capitation rate paid each month by the
HSD/MAD as payment in full for all services to be provided pursuant to this
Agreement, including all administrative costs associated therewith. The
CONTRACTOR’S income generated under this Agreement includes but is not limited
to Third

27

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    Party Recoupments and Interest. HSD/MAD shall determine by annual agreement
with the Contractor and notify the CONTRACTOR in writing, of the minimum percent
of the CONTRACTOR’S income to be expended on the provision of medical health
services required under this Agreement. Although HSD/MAD will calculate the
CONTRACTOR’S income and expenditures at the end of the State Fiscal Year to
determine if the minimum percent was expended on the medical health services the
final determination of compliance will be determined by the average ratio of the
total income and expenditures over the term of the Agreement, utilizing reported
information and the Department of Insurance Reports. Administrative costs shall
be no higher than the allowable percent, including administrative expenses for
all CONTRACTOR-delegated entities. No later than 180 days after each anniversary
of this Agreement, the CONTRACTOR will calculate its medical costs, as defined
herein, from the inception of the Agreement. To the extent that medical costs
incurred from the inception of the Agreement are less than the specified
percentage of income generated under this Agreement for the same period, the
CONTRACTOR will post with the State a performance bond in the amount of that
difference. Within 180 days of the termination of this Agreement, the CONTRACTOR
will calculate its medical costs from the inception of this Agreement to the
termination date. To the extent that medical costs incurred from the inception
of the Agreement to the termination date are less than the composite specified
percentage of the income generated under this Agreement for the same period, the
CONTRACTOR will pay such amount to the State no later than 195 days after the
termination of the Agreement. Administrative costs, to be no higher than the
specified percentage including administrative expenses for all
CONTRACTOR-delegated entities and other financial information will be monitored
on a regular basis by HSD/MAD. If during any 12 month period ending on each
anniversary date of the Agreement less than 80% of income generated under this
agreement is spent of medical costs, CONTRACTOR shall be subject to potential
financial penalties and/or to sanctions including but not limited to a
corrective action plan as defined in Section 8.1 of this Agreement. Financial
information will be monitored on a regular basis by HSD/MAD. Upon mutual
agreement of the parties, this requirement may be renegotiated pursuant to
Article 12 due to revision of governmental or regulatory costs, taxes or fees.
HSD/MAD agrees that payments by the CONTRACTOR to providers through a provider
quality incentive program are to be categorized as medical health expenses or
services under this Agreement and are properly included by CONTRACTOR in meeting
the requirement that no less than the specified percentage of revenues are
expended on

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medical health services under this Agreement. The CONTRACTOR agrees that any
provider quality incentive program will be submitted to HSD/MAD for approval and
will utilize performance measures designed to provide an incentive to
CONTRACTOR’S provider network to improve quality, access, and satisfaction for
Salud! members. The determination of allowable Administrative expenses under
this Agreement shall be consistent with state and CMS requirements. The
following are HSD/MAD’s designated administrative expense functions:
Article 19 (SUBCONTRACTS) Section 19.4 (Subcontracting Requirements) is amended
to include 19.4.(10):

19.4.(10).    The CONTRACTOR will establish and provide for HSD/MAD approval a
plan to utilize the New Mexico State Immunization Information System (SIIS).    
  The goal of SIIS is to improve immunization rates for all New Mexico children
through an innovative public-private partnership. SIIS is working to develop an
integrated, statewide computerized registry to network each child’s full
immunization history. This system will ensure that health care providers have
rapid access to complete and up-to-date immunization records.       The
CONTRACTOR will collaborate with HSD/MAD and the Department of Health (DOH) in
the implementation of the SIIS to ensure the secure, electronic exchange of
immunization records to support the elimination of vaccine preventable diseases.
      The CONTRACTOR will ensure that all subcontractors comply with the SIIS
initiative.

Article 38 (ENTIRE AGREEMENT) is amended to include:
Except for those revisions required by CMS, state or federal requirements,
revisions to the original Agreement shall require an amendment agreed to by both
parties. Capitation payments shall remain in effect as specified in Articles 5.5
(Changes in Capitation Rates), Article 12 (Contract Modification) and Article 36
(Amendments).

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MOLINA
July 1, 2007 — June 30, 2008

              Rate Cohort   Cohort Description   Year 11 Rates   Composite PMPM
1  
TANF / AFDC, CYFD 0 - 2 Months
  $**     2  
TANF /AFDC, 2 Months -20 Years
  $**     3  
TANE / AFDC 21 - 49 Female
  $**     4  
TAND / AFDC 21 - 49 Male
  $**     5  
TANF / AFDC 50 +
  $**     6  
SSI & Waiver 2 months - 1 Year Male & Female
  $**     7  
SSI & Waiver 1 - 20 Years Male & Female
  $**     8  
SSI & Waiver 21 - 39 Female
  $**     9  
SSI & Waiver 21 - 39 Male
  $**     10  
SSI & Waiver 40 +, Aged 65 +
  $**     11  
PW, MA15-49
  $**     12  
CYFD 2 Months - 20 Years
  $**        
 
         
 
      $ **

                              CONTRACTOR       State of NM HSD Representative
 
                           
BY:
  /s/ Ann O. Wehr       BY:   /s/ C. Ingram            
 
                           
 
                           
TITLE:
  CEO       TITLE:   Director            
 
                           
 
                           
DATE:
  6/20/07       DATE:   7/1/07            
 
                           

**   Pursuant to New Mexico Administrative Code Section 8.305.11.9, confidential
treatment under Exchange Act Rule 24b-2 has been requested for these rate
amounts.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date of
execution by the State Contracts Officer, below.

                      CONTRACTOR            
 
                    By:   /s/ Ann O. Wehr         Date: 5/21/07                
     
 
  Title:                
 
                   

             
 
            STATE OF NEW MEXICO    
 
           
By:
  /s/ Kathryn Fall       Date: 7/9/07
 
           
 
  Secretary        
 
  Human Services Department        
 
            Approved as to Form and Legal sufficiency:    
 
           
By:
  /s/ Paul Ritzma       Date: 6/24/07
 
           
 
  General Counsel        
 
  Human Services Department        
 
            TAXATION AND REVENUE DEPARTMENT    
 
            ID NUMBER: 02-215219-009    
 
           
By:
  /s/ Julie Rico       Date: 7/12/07
 
           
 
            DEPARTMENT OF FINANCE AND ADMINISTRATION    
 
           
By:
  /s/ Angie Yardio       Date: 07/30/07
 
           
 
  State Contracts Officer        

EFFECTIVE
JUL 1 2007
CONTRACT REVIEW BUREAU

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