##### 



Exhibit 10.6.3

STATE OF NEW JERSEY

DEPARTMENT OF HUMAN SERVICES

DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

AND

AMERIGROUP NEW JERSEY, INC.

AGREEMENT TO PROVIDE HMO SERVICES

In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract
between AMERIGROUP New Jersey, Inc. and the State of New Jersey, Department of
Human Services, Division of Medical Assistance and Health Services (DMAHS),
effective date October 1, 2000, all parties agree that the contract shall be
amended, effective November 1, 2003, as follows:





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##### 



Non MCSA-November 1, 2003



|1. |  | Article 1,
Definitionssection - for the following definitions:
|-- |  | ----------------------------------------------------------------



| |  |  | Contractor;                              
| | - |  | -----------------------------------------
|
| |  |  | Managed Care Service Administrator (new);
|
| |  |  | NJ FamilyCare Plan H;                    
|
| |  |  | Non-Risk Contract (new);                 
|
| |  |  | Restricted Alien (new)                   



|   |  | shall be amended as reflected in the relevant pages of Article 1 attached
hereto and incorporated herein.                                                                                                                            
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Article 4, Provision of Health Care Services,Sections 4.1.1(E); 4.1.7;
4.2.4(B)7 and 4.2.4(C) shall be amended as reflected in Article 4,
Sections 4.1.1(E), 4.1.7, 4.2.4(B)7 and 4.2.4(C) attached hereto and
incorporated herein.
|  
|3. |  | Article 5, Enrollee Services,Sections 5.2(A)8 and 5.2(A)9 shall be
amended as reflected in Article 5, Sections 5.2(A)8 and 5.2(A)9 attached
hereto and incorporated herein.                                                        
|  
|4. |  | Article 7, Terms and Conditions,Sections 7.13(A); 7.26(C) and 7.26(K)
shall be amended as reflected in Article 7, Sections 7.13(A), 7.26(C) and
7.26(K) attached hereto and incorporated herein.                                   
|  
|5. |  | Article 8, Financial Provisions,Sections 8.5.1; 8.5.9; 8.8(N); 8.8(0);
8.8(P) shall be amended as reflected in Sections 8.5.1; 8.5.9 (new);
8.8(N) (new);8.8(0) (new);8.8(P) (new)attached hereto and incorporated
herein.         
|  
|6. |  | Appendix, Section B, Provision of Health Care Services,B.4.1, Plan H
Covered Durable Medical Equipment (new) shall be amended as reflected in
Section B, B.4.1 attached hereto and incorporated herein.                            





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Non MCSA-November 1, 2003

All other terms and conditions of the October 1, 2000 contract and subsequent
amendments remain unchanged except as noted above.

The contracting parties indicate their agreement by their signatures.

| |  |                         |  |                              |  |                       
| |  | ----------------------- |  | ---------------------------- |  | ----------------------
| |  | AMERIGROUP              |  | State of New Jersey         
| |  | New Jersey, Inc.        |  | Department of Human Services
| |  |                         |  |                              |  |                       
| |  | BY: /s/ Norine Yukon    |  | BY:                          |  |                       
| |  |                         |  |                              |  |                       
| |  |                         |  |                              |  | Matthew D. DOria     
| |  |                         |  |                              |  |                       
| |  | TITLE: President & CEO  |  | TITLE:                       |  | Acting Director, DMAHS
| |  |                         |  |                              |  |                       
| |  | DATE: September 3, 2003 |  | DATE                         |  |                       
| |  |                         |  |                              |  |                       

APPROVED AS TO FORM ONLY

Attorney General

State of New Jersey

|    |  |                        
|--- |  | -----------------------
|BY: |  |                        
|    |  |                        
|    |  | Deputy Attorney General

DATE:





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##### 



with the contractor. Marketing by an employee of the contractor is considered
direct; marketing by an agent is considered indirect.

CommissionertheCommissioner of the New Jersey Department of Human Services
or a duly authorized representative.

Complaintaprotest by an enrollee as to the conduct by the contractor or any
agent of the contractor, or an act or failure to act by the contractor or any
agent of the contractor, or any other matter in which an enrollee feels
aggrieved by the contractor, that is communicated to the contractor and that
could be resolved by the contractor within three (3) business days.

Complaint Resolution-completed actions taken to fully settle a complaint to
the DMAHS satisfaction.

Comprehensive Risk Contractarisk contract that covers comprehensive
services, that is, inpatient hospital services and any of the following
services, or any three or more of the following services:

1.    Outpatient
hospital services.
2.    Rural health clinic services.
3.    FQHC services.
4.    Other laboratory and X-ray services.
5.    Nursing facility (NF) services.
6.    Early and periodic screening, diagnosis and
treatment (EPSDT) services.
7.    Family planning services.
8.    Physician services.
9.    Home health services.

Conditionadisease, illness, injury, disorder, or biological or psychological
condition or status for which treatment is indicated.

ContestedClaima claim that is denied because the claim is an ineligible
claim, the claim submission is incomplete, the coding or other required
information to be submitted is incorrect, the amount claimed is in dispute, or
the claim requires special treatment.

Continuity ofCarethe plan of care for a particular enrollee that should
assure progress without unreasonable interruption.

Contractthe written agreement between the State and the contractor, and
comprises the contract, any addenda, appendices, attachments, or amendments
thereto.

Contracting Officertheindividual empowered to act and respond for the State
throughout the life of any contract entered into with the State.

Contractorthe Health Maintenance Organization with a valid Certificate of
Authority in New Jersey that contracts hereunder with the State for the
provision of comprehensive health care services to enrollees on a prepaid,
capitated basis, or for the provision of

|                               |  |    
|------------------------------ |  | ---
|Amended as of November 1, 2003 |  | I-5





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##### 



administrative services for a specified benefits package to specified
enrollees on a non-risk, reimbursement basis.

Contractors Planallservices and responsibilities undertaken by the
contractor pursuant to this contract.

Contractors Representativetheindividual legally empowered to bind the
contractor, using his/her signature block, including his/her title. This
individual will be considered the Contractors Representative during the life
of any contract entered into with the State unless amended in writing pursuant
to Article 7.

Copaymentthepart of the cost-sharing requirement for NJ FamilyCare Plan D
and H enrollees in which a fixed monetary amount is paid for certain
services/items received from the contractors providers.

Cost Avoidanceamethod of paying claims in which the provider is not
reimbursed until the provider has demonstrated that all available health
insurance has been exhausted.

Cost Neutralthe mechanism used to smooth data, share risk, or adjust for
risk That will recognize both higher and lower expected costs and is not
intended to create a net aggregate gain or loss across all payments.

Covered Servicessee Benefits Package"

Credentialingthecontractors determination as to the qualifications and
ascribed privileges of a specific provider to render specific health care
services.

Cultural Competencyaset of interpersonal skills that allow individuals to
increase their understanding, appreciation, acceptance of and respect for
cultural differences and similarities within, among and between groups and the
sensitivity to how these differences influence relationships with enrollees.
This requires a willingness and ability to draw on community-based values,
traditions and customs, to devise strategies to better meet culturally diverse
enrollee needs, and to work with knowledgeable persons of and from the
community in developing focused interactions, communications, and other
supports.

CWA or County Welfare Agency also known as County Board of Social
Servicesthe agency within the county government that makes determination of
eligibility for Medicaid and financial assistance programs.

Dayscalendar days unless otherwise specified.

DBIthe New Jersey Department of Banking and Insurance in the executive branch
of New Jersey State government.

Defaultsee Automatic Assignment"

|                               |  |    
|------------------------------ |  | ---
|Amended as of November 1, 2003 |  | I-6





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IPN or Independent Practitioner Networkonetype of HMO operation where
member services are normally provided in the individual offices of the
contracting physicians.

Limited-English-Proficient
Populationsindividualswith a primary language
other than English who must communicate in that language if the individual is
to have an equal opportunity to participate effectively in and benefit from
any aid, service or benefit provided by the health provider.

MaintenanceServicesinclude physical services provided to allow people to
maintain their current level of functioning. Does not include habilitative and
rehabilitative services.

Managed Careacomprehensive approach to the provision of health care which
combines clinical preventive, restorative, and emergency services and
administrative procedures within an integrated, coordinated system to provide
timely access to primary care and other medically necessary health care
services in a cost effective manner.

Managed Care Entityamanaged care organization described in Section
1903(m)(1)(A) of the Social Security Act, including Health Maintenance
Organizations (HMOs), organizations with Section 1876 or Medicare+Choice
contracts, provider sponsored organizations, or any other public or private
organization meeting the requirements of Section 1902(w) of the Social
Security Act, which has a risk comprehensive contract and meets the other
requirements of that Section.

Managed Care Organization(MCO) an entity that has, or is seeking to qualify
for, a comprehensive risk contract, and that is -



|1. |  | A Federally qualified HMO that meets the advance directives requirements
of 42 CFR 489 subpart I; or                                
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Any public or private entity that meets the advance directives
requirements and is determined to also meet the following conditions:



| | (i)  |  | Makes the services it provides to its Medicaid enrollees as
accessible (in terms of timeliness, amount, duration, and scope) as
those services are to other Medicaid recipients within the area served
by the entity; and
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) |  | Meets the solvency standards of 42 CFR 438.116.                                                                                                                                                                          

Managed Care Service Administrator (MCSA) - an entity in a non-risk based
financial arrangement that contracts to provide a designated set of services
for an administrative fee. Services provided may include, but are not limited
to: medical management, claims processing, provider network maintenance.

Mandatorythe requirement that certain DMAHS beneficiaries, delineated in
Article 5, must select, or be assigned to a contractor in order to receive
Medicaid services.

|                               |  |     
|------------------------------ |  | ----
|Amended as of November 1, 2003 |  | I-14





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##### 



NJ FamilyCare PlanDmeans the State-operated program which provides
managed care coverage to uninsured:



| |  | Parents/caretakers with children below the age of 19 who do
not qualify for AFDC Medicaid with family incomes up to and
including 200 percent of the federal poverty level; and                                                                                  
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Parents/caretakers with children below the age of 23 years and
children from the age of 19 through 22 years who are full time
students who do not qualify for AFDC Medicaid with family incomes up
to and including 250 percent of the federal poverty level; and
| 
| |  | Children below the age of 19 with family incomes between 201
percent and up to and including 350 percent of the federal poverty
level.                                                                                                                           

Eligibles with incomes above 150 percent of the federal poverty level are
required to participate in cost sharing in the form of monthly premiums
and copayments for most services with the exception of both Eskimos and
Native American Indians under the age of 19 years. These groups are
identified by Program Status Codes (PSCs) or Race Code on the eligibility
system as indicated below. For clarity, the Program Status Codes or Race
Code, in the case of Eskimos and Native American Indians under the age of
19 years, related to Plan D non-cost sharing groups are also listed.

|             |  |                 |     |                 |  |  |   | 
|------------ |  | --------------- | --- | --------------- |  |  | - | 
|PSC          |  | PSC             |     | Race Code      
|Cost Sharing |  | No Cost Sharing |     | No Cost Sharing
|             |  |                 |     |                
|301          |  |                 | 300 |                 |  |  | 3 | 
|493          |  |                 | 380 |                 |  |  |   | 
|494          |  |                 | 497 |                 |  |  |   | 
|495          |  |                 |     |                 |  |  |   | 
|498          |  |                 |     |                 |  |  |   | 

In addition to covered managed care services, eligibles under these
programs may access certain services which are paid fee-for-service and
not covered under this contract.

NJ FamilyCare PlanH-means the State-operated program which provides
managed care administrative services coverage to uninsured:



| |  | Adults and couples without dependent children under the age of 19 with family
incomes up to and including 100 percent of the federal poverty level;                                             
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Adults and couples without dependent children under the age of 23 years, who
do not qualify for AFDC Medicaid, with family incomes up to and
including 250 percent of the federal poverty level.
| 
| |  | Restricted alien parents not including pregnant women.                                                                                                                                          

Plan H eligibles will be identified by a capitation code. Capitation codes
drive the service package. The Program Status Code drives the cost-sharing
requirements.

Any of the Program Status Codes listed below can include restricted alien parents. Therefore, it is necessary to rely on the capitation code to identify Plan H eligibles.

|                               |  |     
|------------------------------ |  | ----
|Amended as of November 1, 2003 |  | I-19





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Eligibles with incomes above 150 percent of the federal poverty level are
required to participate in cost sharing in the form of monthly premiums and
copayments for most services. These groups are identified by the program
status code (PSC) indicated below. For clarity, the program status codes
related to Plan H non-cost sharing groups are also listed.

|                                   |  |                                                                                   
|---------------------------------- |  | ----------------------------------------------------------------------------------
|PSC                                |  | PSC                                                                               
|Cost Sharing                       |  | No Cost Sharing                                                                   
|                                   |  |                                                                                   
|498 (w/corresponding
cap code)
701 |  | 380, 310, 320, 330, 410, 420,
430, 470, 497 (with
corresponding cap codes)
700
763

NJ FamilyCare PlanI - means the State-operated program that provides certain
benefits on a fee-for-service basis through the DMAHS for Plan D
parents/caretakers with a program status code of 380.

N.J.S.A.New Jersey Statutes Annotated.

Non-Covered Contractor Servicesservicesthat are not covered in the
contractors benefits package included under the terms of this contract.

Non-Covered Medicaid Servicesallservices that are not covered by the New
Jersey Medicaid State Plan.

Non-Participating Provideraprovider of service that does not have a
contract with the contractor.

Non-Risk Contract - a contract under which the contractor 1) is not at
financial risk for changes in utilization or for costs incurred under the
contract; and 2) may be reimbursed by the State on the basis of the incurred
costs.

OITthe New Jersey Office of Information Technology.

Other HealthCoverageprivate non-Medicaid individual or group health/dental
insurance. It may be referred to as Third Party Liability (TPL) or includes
Medicare.

Out of Area Servicesallservices covered under the contractors benefits
package included under the terms of the Medicaid contract which are provided
to enrollees outside the defined basic service area.

Outcomestheresults of the health care process, involving either the
enrollee or provider of care, and may be measured at any specified point in
time. Outcomes can be medical,
dental, behavioral, economic, or societal in nature.

|                               |  |     
|------------------------------ |  | ----
|Amended as of November 1, 2003 |  | I-20





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Referral Servicesthosehealth care services provided by a health
professional other than the primary care practitioner and which are ordered
and approved by the primary care practitioner or the contractor.



| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exception A: An enrollee shall not be required to obtain a referral or
be otherwise restricted in the choice of the family planning provider
from whom the enrollee may receive family planning services.



| |                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exception B: An enrollee may access services at a Federally Qualified
Health Center (FQHC) in a specific enrollment area without the need for
a referral when neither the contractor nor any other contractor has a
contract with the Federally Qualified Health Center in that enrollment
area and the cost of such services will be paid by the Medicaid
fee-for-service program.

Reinsuranceanagreement whereby the reinsurer, for a consideration, agrees
to indemnify the contractor, or other provider, against all or part of the
loss which the latter may sustain under the enrollee contracts which it has
issued.

Restricted Alien - An individual who would qualify for Medicaid or NJ
FamilyCare, but for immigration status.

Risk Contract-acontract under which the contractor assumes risk for the cost
of the services covered under the contract, and may incur a loss if the cost
of providing services exceeds the payments made by the Department to the
contractor for services covered under the contract.

Risk Pool -an account(s) funded with revenue from which medical claims of
risk pool members are paid. If the claims paid exceed the revenues funded to
the account, the participating providers shall fund part or all of the
shortfall. If the funding exceeds paid claims, part or all of the excess is
distributed to the participating providers.

Risk Thresholdthemaximum liability, if the liability is based on referral
services, to which a physician or physician group may be exposed under a
physician incentive plan without being at substantial financial risk.

RoutineCaretreatment of a condition which would have no adverse effects if
not treated within 24 hours or could be treated in a less acute setting (e.g.,
physicians office) or by the patient.

Safety-net Providers or Essential Community Providerspublic-funded or
government-sponsored clinics and health centers which provide
specialty/specialized services which serve any individual in need of health
care whether or not covered by health insurance and may include medical/dental
education institutions, hospital-based programs, clinics, and health centers.

SAPStatutory Accounting Principles.

|                               |  |     
|------------------------------ |  | ----
|Amended as of November 1, 2003 |  | I-24





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|   |  | the individual will be disenrolled. This does not apply to situations
when the enrollee is out of State for care provided/authorized by the
contractor, for example, prolonged hospital care for transplants. For
full time students attending school and residing out of the country, the
contractor shall not be responsible for health care benefits while the
individual is in school.                                                                                                                                                                                                                                                                                 
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|E. |  | Existing Plans of Care. The contractor shall honor and pay for plans of
care for new enrollees, including prescriptions, durable medical
equipment, medical supplies, prosthetic and orthotic appliances, and any
other on-going services initiated prior to enrollment with the
contractor. Services shall be continued until the enrollee is evaluated
by his/her primary care physician and a new plan of care is established
with the contractor.                                                                                                                                                                                                                      
|  
|   |  | The contractor shall use its best efforts to contact the new enrollee
or, where applicable, authorized person and/or contractor care manager.
However, if after documented, reasonable outreach (i.e., mailers,
certified mail, use of MEDM system provided by the State, contact with
the Medical Assistance Customer Center. (MACC), DDD, or DYFS to confirm
addresses and/or to request assistance in locating the enrollee) the
enrollee fails to respond within 20 Working days of certified mail, the
contractor may cease paying for the pre-existing service until the
enrollee or, where applicable, authorized person, contacts the
contractor for re-evaluation.
|  
|   |  | For MCSA enrollees, the contractor shall case manage these services (Not
applicable to non-MCSA contractor).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|F. |  | Routine Physicals. The contractor shall provide for routine physical
examinations required for employment, school, camp or other
entities/programs that require such examinations as a condition of
employment or participation.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|G. |  | Non-Participating Providers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



| | 1. |  | The contractor shall pay for services furnished by
non-participating providers to whom an enrollee was referred, even
if erroneously referred, by his/her PCP or network specialist.
Under no circumstances shall the enrollee bear the cost of such
services when referral errors by the contractor or its providers
occur. It is the sole responsibility of the contractor to provide
regular updates on complete network information to all its
providers as well as appropriate policies and procedures for
provider referrals.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | The contractor may pay an out-of-network hospital provider,
located outside the State of New Jersey, the, New Jersey Medicaid
fee-for-service rate for the applicable services rendered.                                                                                                                                                                                                                                                                                                                                           

|                               |  |     
|------------------------------ |  | ----
|Amended as of November 1, 2003 |  | IV-2





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|   |  |                 
|-- |  | ----------------
|3. |  | DME             
|4. |  | Hearing aids    
|5. |  | Medical supplies
|6. |  | Orthotics       
|7. |  | TMJ treatment   

14.1.7           BENEFIT PACKAGE FOR NJ FAMILYCARE PLAN H (Section 4.1.7 Not applicable
to non-MCSA contractor).



| | A. |  | Services Included In The Contractors Benefits Package
for NJ FamilyCare Plan H. The following services shall be
provided and case managed by the contractor:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 1. |  | Primary Care
| | -- |  | ------------



| | a. |  | All physicians services, primary and specialty                                                                                                                                                                                                                            
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | In accordance with state
certification/licensure requirements, standards,
and practices, primary care providers shall also
include access to certified nurse midwives -
non-maternity, certified nurse practitioners,
clinical nurse specialists, and physician
assistants
|
| | c. |  | Services rendered at
independent clinics that provide ambulatory
services                                                                                                                                                                                                 
|
| | d. |  | Federally Qualified Health Center primary care
services                                                                                                                                                                                                                   



| | 2. |  | Emergency room services                                                                                                                                                                                                                                                                                                     
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3. |  | Home Health Care Services  Limited to
skilled nursing for a home bound beneficiary which is
provided or supervised by a registered nurse, and home
health aide when the purpose of the treatment is skilled
care; and medical social services which are necessary for
the treatment of the beneficiarys medical condition.
|
| | 4. |  | Inpatient Hospital Services, including
general hospitals, special hospitals, and rehabilitation
hospitals. The contractor shall not be responsible when
the primary admitting diagnosis is mental health or
substance abuse related.                                                                                        
|
| | 5. |  | Outpatient Hospital Services, including outpatient surgery                                                                                                                                                                                                                                                                  
|
| | 6. |  | Laboratory Services  All laboratory
testing sites providing services under this contract must
have either a Clinical Laboratory Improvement Act (CLIA)
certificate of waiver or a certificate of                                                                                                                           

|                               |  |      
|------------------------------ |  | -----
|Amended as of November 1, 2003 |  | IV-15





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##### 





| |     |  | registration along with a CLIA identification number. Those
providers with certificates of waiver shall provide only the
types of tests permitted under the terms of their waiver.
Laboratories with certificates of registration may perform a
full range of laboratory services.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 7.  |  | Radiology Services  Diagnostic and therapeutic                                                                                                                                                                                                                                   
|
| | 8.  |  | Prescription drugs, excluding over-the-counter
drugs Exception: See Article 8 regarding Protease Inhibitors
and other antiretrovirals.                                                                                                                                            
|
| | 9.  |  | Transportation Services  Limited to ambulance
for medical emergency only                                                                                                                                                                                                         
|
| | 10. |  | Diabetic supplies and equipment                                                                                                                                                                                                                                                   
|
| | 11. |  | DME - limited benefit, only covered when
medically necessary part of inpatient hospital discharge
plan  (see Appendix, Section B.4.1 for list of covered
items)                                                                                                                  



| | Services Available To NJ FamilyCare Plan H Under Fee-For-Service.
The following services are available to NJ FamilyCare Plan H
enrollees under fee-for-service:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 1. |  | Outpatient mental health services, limited to 60
days per calendar year.
| | -- |  | ------------------------------------------------------------------------
|
| | 2. |  | Abortion services                                                       



| | C. |  | Exclusions. The following services not covered for NJ
FamilyCare Plan H participants either by the contractor or the
Department include, but are not limited to:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |  |                                                     
|--- |  | ----------------------------------------------------
|1.  |  | Non-medically necessary services.                   
|   
|2.  |  | Intermediate Care Facilities/Mental Retardation     
|   
|3.  |  | Private duty nursing                                
|   
|4.  |  | Personal Care Assistant Services                    
|   
|5.  |  | Medical Day Care Services                           
|   
|6.  |  | Chiropractic Services                               
|   
|7.  |  | Dental services                                     
|   
|8.  |  | Orthotic devices                                    
|   
|9.  |  | Targeted Case Management for the chronically ill    
|   
|10. |  | Residential treatment center psychiatric programs   
|   
|11. |  | Religious non-medical institutions care and services

|                               |  |      
|------------------------------ |  | -----
|Amended as of November 1, 2003 |  | IV-16





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|    |  |                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|12. |  | Durable Medical Equipment - excludes any
equipment not listed in Appendix, Section B.4.1 and not
co gyred if not part of inpatient hospital discharge plan   
|    |  |                                                                                                                                                               
|13. |  | Early and Periodic Screening, Diagnosis and
Treatment (EPSDT) services (except for well child care,
including immunizations and lead screening and treatments)
|    |  |                                                                                                                                                               
|14. |  | Transportation Services, including
non-emergency ambulance, invalid coach, and lower mode,
transportation                                                     
|    |  |                                                                                                                                                               
|15. |  | Hearing Aid Services                                                                                                                                          
|    |  |                                                                                                                                                               
|16. |  | Blood and Blood Plasma, except administration
of blood, processing of blood, processing fees and fees
related to autologous blood donations are covered.      
|    |  |                                                                                                                                                               
|17. |  | Cosmetic Services                                                                                                                                             
|    |  |                                                                                                                                                               
|18. |  | Custodial Care                                                                                                                                                
|    |  |                                                                                                                                                               
|19. |  | Special Remedial and Educational Services                                                                                                                     
|    |  |                                                                                                                                                               
|20. |  | Experimental and Investigational Services                                                                                                                     
|    |  |                                                                                                                                                               
|21. |  | Medical Supplies (except diabetic supplies)                                                                                                                   
|    |  |                                                                                                                                                               
|22. |  | Infertility Services                                                                                                                                          
|    |  |                                                                                                                                                               
|23. |  | Rehabilitative Services for Substance Abuse                                                                                                                   
|    |  |                                                                                                                                                               
|24. |  | Weight reduction programs or dietary
supplements, except operations, procedures or treatment of
obesity when approved by the contractor                       
|    |  |                                                                                                                                                               
|25. |  | Acupuncture and acupuncture therapy, except
when performed as a form of anesthesia in connection with
covered surgery                                         
|    |  |                                                                                                                                                               
|26. |  | Temporomandibular joint disorder treatment,
including treatment performed by prosthesis placed
directly in the teeth                                          
|    |  |                                                                                                                                                               
|27. |  | Recreational therapy                                                                                                                                          
|    |  |                                                                                                                                                               
|28. |  | Sleep therapy                                                                                                                                                 
|    |  |                                                                                                                                                               
|29. |  | Court-ordered services                                                                                                                                        
|    |  |                                                                                                                                                               
|30. |  | Thermograms and thermography                                                                                                                                  
|    |  |                                                                                                                                                               
|31. |  | Biofeedback                                                                                                                                                   
|    |  |                                                                                                                                                               
|32. |  | Radial keratotomy                                                                                                                                             
|    |  |                                                                                                                                                               
|33. |  | Respite Care                                                                                                                                                  
|    |  |                                                                                                                                                               
|34. |  | Inpatient hospital services for mental health                                                                                                                 
|    |  |                                                                                                                                                               
|35. |  | Inpatient and outpatient services for substance abuse                                                                                                         
|    |  |                                                                                                                                                               
|36. |  | Partial hospitalization                                                                                                                                       

|                               |  |      
|------------------------------ |  | -----
|Amended as of November 1, 2003 |  | IV-17





---



##### 



|    |  |                                   
|--- |  | ----------------------------------
|37. |  | Skilled nursing facility services 
|    |  |                                   
|38. |  | Family Planning Services          
|    |  |                                   
|39. |  | Hospice Services                  
|    |  |                                   
|40. |  | Optometrist Services              
|    |  |                                   
|41. |  | Optical Appliances                
|    |  |                                   
|42. |  | Organ Transplant Services         
|    |  |                                   
|43. |  | Podiatrist Services               
|    |  |                                   
|44. |  | Prosthetic Appliances             
|    |  |                                   
|45. |  | Outpatient Rehabilitation Services
|    |  |                                   
|46. |  | Maternity and related newborn care



|4.1.8 |  | SUPPLEMENTAL BENEFITS                                                                                                                                                                                             
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|      |  | Any service, activity or product not covered under the State Plan may be
provided by the contractor only through written approval by the Department and
the cost of which shall be borne solely by the contractor.
|     
|4.1.9 |  | CONTRACTOR AND DMAHS SERVICE EXCLUSIONS                                                                                                                                                                           
|     
|      |  | Neither the contractor nor DMAHS shall be responsible for the following:                                                                                                                                          



| | A. |  | All services not medically necessary, provided, approved or arranged by
a contractors physician or other provider (within his/her scope of
practice) except emergency services.                                                                                                                                                                                                                                                                               
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | B. |  | Cosmetic surgery except when medically necessary and approved.                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | C. |  | Experimental organ transplants.                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | D. |  | Services provided primarily for the diagnosis and treatment of
infertility, including sterilization reversals, and related office
(medical or clinic), drugs, laboratory services, radiological and
diagnostic services and surgical procedures.                                                                                                                                                                                                               
|
| | E. |  | Respite Care                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | F. |  | Rest cures, personal comfort and convenience items, services and
supplies not directly related to the care of the patient, including but
not limited to, guest meals and accommodations, telephone charges, travel
expenses other than those services not in Article 4.1 of this contract,
take home supplies and similar cost. Costs incurred by an accompanying
parent(s) for an out-of-state medical intervention are covered under
EPSDT by the contractor.
|
| | G. |  | Services involving the use of equipment in facilities, the purchase,
rental or construction of which has not been approved by applicable laws
of the State of New Jersey and regulations issued pursuant thereto.                                                                                                                                                                                                                                              

|                               |  |      
|------------------------------ |  | -----
|Amended as of November 1, 2003 |  | IV-18





---



##### 





| | c. |  | It is strongly encouraged that the contractor
publish the formulary
on its internet weLsite.
| | -- |  | --------------------------------------------------------------------------------------------



| | 7. |  | If the formulary includes generic equivalents, the
contractor shall provide for a brand name exception process for
prescribers to use when medically necessary. For MCSA enrollees,
the contractor should implement a mandatory generic drug
substitution program consistent with Medicaid program requirements
(Not applicable to non-MCSA contractor).
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 8. |  | The contractor shall establish and maintain a procedure,
approved by DMAHS, for internal review and resolution of
complaints, such as timely access and coverage issues, drug
utilization review, and claim _management based on standards of
drug utilization review.                                                                                  



|C. |  | Pharmacy Lock-In Program. The contractor may implement for MCO enrollees
and must implement for MCSA enrollees (not applicable to non-MCSA
contractor)a pharmacy lock-in program including policies, procedures and
criteria for establishing the need for the lock-in which must be prior
approved by DMAHS and must include the following components to the
program:
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 1. |  | Enrollees shall be notified prior to the lock-in and must be
permitted to choose or change pharmacies for good cause.                                                                                                                                                                       
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | A seventy-two (72)-hour emergency supply of medication at
pharmacies other than the designated lock-in pharmacy shall. be
permitted to assure the provision of necessary medication required
in an interim/urgent basis when the assigned pharmacy does not
immediately have the medication.
|
| | 3. |  | Care management and education reinforcement of appropriate
medication/pharmacy use shall be provided. A plan for an education
program for enrollees shall be developed and submitted for review
and approval.                                                                               
|
| | 4. |  | The continued need for lock-in shall be periodically (at
least every two years) evaluated by the contractor for each
enrollee in the program.                                                                                                                                               
|
| | 5. |  | Prescriptions from all participating prescribers shall be
honored and may not be required to be written by the PCP only.                                                                                                                                                                    
|
| | 6. |  | The contractor shall fill medications prescribed by mental
health/substance abuse providers, subject to the limitations
described in Article 4.4C.                                                                                                                                          
|
| | 7. |  | The contractor shall submit quarterly reports on Pharmacy
Lock-in participants. See Section A.7.17 of the Appendices (Table
15).                                                                                                                                                            

|                               |  |      
|------------------------------ |  | -----
|Amended as of November 1, 2003 |  | IV-27





---



##### 





|5.2 |  | AID CATEGORIES ELIGIBLE FOR CONTRACTOR ENROLLMENT
|--- |  | -------------------------------------------------



| | A. |  | Except as specified in Article 5.3, all persons who are not
institutionalized, belong to one of the following eligibility
categories, and reside in any of the enrollment areas, as identified
in Article 5.1, are in mandatory aid categories and shall be
eligible for enrollment in the contractors plan in the manner
prescribed by this contract.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|   |  |                                                                                                                                                         
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|1. |  | Aid to Families with Dependent Children
(AFDC)/Temporary Assistance for Needy Families (TANF);                                                          
|   |  |                                                                                                                                                         
|2. |  | AFDC/TANF-Related, New Jersey Care... Special
Medicaid Program for Pregnant Women and Children;                                                         
|   |  |                                                                                                                                                         
|3. |  | SSI-Aged, Blind, Disabled, and Essential Spouses;                                                                                                       
|   |  |                                                                                                                                                         
|4. |  | New Jersey Care... Special Medicaid programs for
Aged, Blind, and Disabled;                                                                             
|   |  |                                                                                                                                                         
|5. |  | Division of Developmental Disabilities Clients
including the Division of Developmental Disabilities
Community Care Waiver;                              
|   |  |                                                                                                                                                         
|6. |  | Medicaid only or SSI-related Aged, Blind, and Disabled; :                                                                                               
|   |  |                                                                                                                                                         
|7. |  | Uninsured parents/caretakers and children who
are covered under NJ FamilyCare;                                                                          
|   |  |                                                                                                                                                         
|8. |  | Uninsured adults and couples without dependent
children under the age of 23 who are covered under NJ
FamilyCare (Not applicable to non-MCSA contractor).
|   |  |                                                                                                                                                         
|9. |  | Restricted alien parents, excluding pregnant
women (Not applicable to non-MCSA contractor).                                                             



| | B. |  | The contractor shall enroll the entire Medicaid case, i.e.,
all individuals included under the ten digit Medicaid
identification number.                                                                                                                                                                               
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | C. |  | DYFS. Individuals who are eligible through the Division of
Youth and Family Services may enroll voluntarily. All individuals
eligible through DYFS shall be considered a unique Medicaid case
and shall be issued an individual 12 digit Medicaid identification
number, and may be enrolled in his/her own contractor.
|
| | D. |  | The contractor shall be responsible for keeping its network
of providers informed of the enrollment status of each enrollee.                                                                                                                                                                                           
|
| | E. |  | Dual eligibles (Medicaid-Medicare) may voluntarily enroll.                                                                                                                                                                                                                                                             



|5.3 |  | EXCLUSIONS AND EXEMPTIONS
|--- |  | -------------------------



| |  |  | Persons who belong to one of the eligible populations (defined in 5.2A)
shall not be subject to mandatory enrollment if they meet one or more
criteria defined in this Article. Persons who fall into an excluded
category (Article 5.3.1A) shall not be eligible to enroll in the
contractors plan. Persons falling into the categories under Article
5.3.1B
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               |  |    
|------------------------------ |  | ---
|Amended as of November 1, 2003 |  | V-2





---



##### 





| |    |  | It is hereby understood and agreed by both parties that this
contract shall be effective and payments by DMAHS made to the
contractor suticct to the availability of State and federal funds.
It is further agreed by both parties that this contract can be
renegotiated or terminated, without liability to the State in order
to comply with state and federal requirements for the purpose of
maximizing federal financial participation.
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | J. |  | Upon termination of this contract, the contractor shall comply
with the closeout procedures in Article 7.13.                                                                                                                                                                                                                                                                                                                                 
|
| | K. |  | Rights and Remedies. The rights and remedies of the Department
provided in this Article shall not be exclusive and are in addition
to all other rights and remedies provided by law or under this
contract.                                                                                                                                                                                                                                  



|7.13 |  | CLOSEOUT REQUIREMENTS
|---- |  | ---------------------



| | A. |  | A closeout period shall begin one hundred-twenty (120) days
prior to the last day the contractor is responsible for coverage of
specific beneficiary groups oroperating under this contract. During
the closeout period, the contractor shall work cooperatively with,
and supply program information to, any subsequent contractor and
DMAHS. Both the program information and the working relationships
between the two contractors shall be defined by DMAHS.           
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | B. |  | The contractor shall be responsible for the provision of
necessary information and records, whether a part of the MCMIS or
compiled and/or stored elsewhere, to the new contractor and/or DMAHS
during the closeout period to ensure a smooth transition of
responsibility. The new contractor and/or DMAHS shall define the
information required during this period and the time frames for
submission. Information that shall be required includes but is not
limited to:



| | 1. |  | Numbers and status of complaints and grievances in process;                   
| | -- |  | ------------------------------------------------------------------------------
|
| | 2. |  | Numbers and status of hospital authorizations in process,
listed by hospital; 
|
| | 3. |  | Daily hospital logs;                                                          
|
| | 4. |  | Prior authorizations approved and disapproved;                                
|
| | 5. |  | Program exceptions approved;                                                  
|
| | 6. |  | Medical cost ratio data;                                                      
|
| | 7. |  | Payment of all outstanding obligations for medical care
rendered to enrollees;

|                               |  |       
|------------------------------ |  | ------
|Amended as of November 1, 2003 |  | VII-15





---



##### 





| |  |  | The contractor shall have the right to request an informal hearing
regarding disputes under this contract by the Director, or the designee
thereof. This shall not in any way limit the contractors or States
right to any remedy pursuant to New Jersey law.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|7.25 |  | MEDICARE RISK CONTRACTOR
|---- |  | ------------------------



| |  | To maximize coordination of care for dual eligibles while promoting the
efficient use of public funds, the contractor:
| |  | ----------------------------------------------------------------------------------------------------------------------



| | A. |  | Is recommended to be a Medicare+Choice contractor.
| | -- |  | --------------------------------------------------
|
| | B. |  | Shall serve all eligible populations.             



|7.26 |  | TRACKING AND REPORTING
|---- |  | ----------------------



| |  | As a condition of acceptance of a managed care contract, the contractor
shall be held to the following reporting requirements:
| |  | ------------------------------------------------------------------------------------------------------------------------------



| | A. |  | The contractor shall develop, implement, and maintain a system
of records and reports which include those described below and shall
make available to DMAHS for inspection and audit any reports,
financial or otherwise, of the contractor and require its providers
or subcontractors to do the same relating to their capacity to bear
the risk of potential financial losses in accordance with 42 C.F.R.
§ 434.38. Except where otherwise specified, the contractor shall
provide reports on hard copy, computer diskette or via electronic
media using a format and commonly-available software as specified by
DMAHS for each report.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | B. |  | The contractor shall maintain a uniform accounting system that
adheres to generally accepted accounting principles for charging and
allocating to all funding resources the contractors costs incurred
hereunder including, but not limited to, the American Institute of
Certified Public Accountants (AICPA) Statement of Position 89-5
Financial Accounting and Reporting by Providers of Prepaid Health
Care Services.                                                                                                                                                                                                               
|
| | C. |  | The contractor shall submit financial reports including, among
others, rate cell grouping costs, in accordance with the timeframes
and formats contained in Section A of the Appendices. The contractor
shall submit separate financial reports for MCSA enrollees in
accordance with the rate cell grouping for this population (Not
applicable to non-MCSA contractor).                                                                                                                                                                                                                                                                  
|
| | D. |  | The contractor shall provide its primary care practitioners
with quarterly utilization data within forty-five (45) days of the
end of the program quarter comparing the average medical care
utilization data of their enrollees to the average medical care
utilization data of other managed care enrollees. These data                                                                                                                                                                                                                                                                                                                   

|                               |  |       
|------------------------------ |  | ------
|Amended as of November 1, 2003 |  | VII-37





---



##### 





| | H. |  | The contractor shall annually and at the time changes are made report its
staffing positions including the names of supervisory personnel (Director
level and above and the QM/UR personnel), organizational chart, and any
position vacancies in these major areas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | I. |  | DMAHS shall have the right to create additional reporting requirements at
any time as required by applicable federal or State laws and regulations, as
they exist or may hereafter be amended and incorporated into this contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | J. |  | Reports that shall be submitted on an annual or semi-annual
basis, as specified in this contract, shall be due within sixty (60)
days of the close of the reporting period, unless specified
otherwise.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | K. |  | MCSA Paid Claims Reconciliation. On a quarterly basis, the
contractor shall provide paid claims data, via an encounter data
file or separate paid claims file, that meet the HIPAA format
requirements for audit and reconciliation purposes. The contractor
shall provide documentation that demonstrates a 100% reconciliation
of the amounts paid to the amounts billed to the DMAHS. The paid
claims data shall include at a minimum, claim type, provider type,
category of service, diagnosis code (5 digits), procedure/revenue
code, Internal Control Number or Patient Account Number under HIPAA,
provider ID, dates of services, that will allow the DMAHS to price
claims in comparison to Medicaid fee schedules for evaluation
purposes: (This section not applicable to non-MCSA contractor).



|7.27   |  | FINANCIAL STATEMENTS                    
|------ |  | ----------------------------------------
|      
|7.27.1 |  | AUDITED FINANCIAL STATEMENTS (SAP BASIS)



| | A. |  | Annual Audit. The contractor shall submit its audited annual financial
statements prepared in accordance with Statutory Accounting Principles
(SAP) certified by an independent public accountant no later than June 1
of each year, for  the immediately preceding calendar year as well as
for any company that is a financial guarantor for the contractor in
accordance with N.J.S.A. 8:38-11.6.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | B. |  | Audit of Rate Cell Grouping Costs                                                                                                                                                                                                                                                                                                                                                                    
|
| |    |  | The contractor shall submit, quarterly, reports found in Appendix,
Section A in accordance with the HMO Financial Guide for Reporting
Medicaid/NJ Family Care Rate Cell Grouping Costs (Appendix,
Section B7.3). These reports shall be reviewed by an independent
public accountant in accordance with the standard Agreed Upon
Procedures (Appendix, Section B).                               
|
| |    |  | The contractor shall require its independent public accountant to
prepare a letter and report of findings which shall be submitted to
DMAHS by June 1 of each                                                                                                                                                                                                                                        

|                               |  |       
|------------------------------ |  | ------
|Amended as of November 1, 2003 |  | VII-39





---



##### 





|8.5.1 |  | REGIONS
|----- |  | -------

Capitationrates for DYFS, NJ FamilyCare Plans B, C, and D and the non
risk-adjusted rates for AIDS and clients of DDD are statewide. Rates for all
other premium groups are regional in each of the following regions:



| |  |  | Region 1: Bergen, Hudson, Hunterdon, Morris, Passaic,
Somerset, Sussex, and Warren counties                  
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | Region 2: Essex, Union, Middlesex, and Mercer counties                                                       
|
| |  |  | Region 3: Atlantic, Burlington, Camden, Cape May,
Cumberland, Gloucester, Monmouth, Ocean, and Salem counties



|        |  | Contractors may contract for one or more regions but, except as
provided in Article 2, may not contract for part of a region.                                                                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|8.5.2   |  | MAJOR PREMIUM GROUPS                                                                                                                                                                                                                                                                                                               
|       
|        |  | The following is a list of the major premium groups. The individual
rate groups (e.g. children under 2 years, etc.) with their respective
rates are presented in the rate tables in the appendix.                                                                                                                                  
|       
|8.5.2.1 |  | AFDC/TANF, NJC PREGNANT WOMEN, AND NJ FAMILYCARE PLAN A CHILDREN                                                                                                                                                                                                                                                                   
|       
|        |  | This grouping includes capitation rates for Aid to Families with
Dependent Children (AFDC)/Temporary Assistance for Needy Families
(TANF), New Jersey Care Pregnant Women and Children, and NJ FamilyCare
Plan A children (includes individuals under 21 in PSC 380), but
excludes individuals who have AIDS or are clients of DDD.
|       
|8.5.2.2 |  | NJ FAMILYCARE PLANS B & C                                                                                                                                                                                                                                                                                                          
|       
|        |  | This grouping includes capitation rates for NJ FamilyCare Plans B and C
enrollees, excluding individuals with AIDS and/or DDD clients.                                                                                                                                                                                             
|       
|8.5.2.3 |  | NJ FAMILYCARE PLAN D CHILDREN                                                                                                                                                                                                                                                                                                      
|       
|        |  | This grouping includes capitation rates for NJ FamilyCare Plan D
children, excluding individuals with AIDS.                                                                                                                                                                                                                        
|       
|8.5.2.4 |  | NJ FAMILYCARE PLAN D PARENTS/CARETAKERS                                                                                                                                                                                                                                                                                            
|       
|        |  | This grouping includes capitation rates for NJ FamilyCare Plan D
parents/caretakers,
excluding individuals with AIDS, and include only enrollees 19 years of
age or older.                                                                                                                                                         

|                               |  |       
|------------------------------ |  | ------
|Amended as of November 1, 2003 |  | VIII-6





---



##### 





|8.5.7 |  | EPSDT INCENTIVE PAYMENT                                                                                                                                                                                                                                                                                                                                                                                                                               
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|      |  | The contractor shall be paid separately, $10 for every documented
encounter record for a contractor-approved EPSDT screening examination.
The contractor shall be required to pass the $10 amount directly to the
screening provider.                                                                                                                                                                                                                 
|     
|      |  | The incentive payment shall be reimbursed for EPSDT encounter records
submitted in accordance with 1) procedure codes specified by DMAHS, and 2)
EPSDT periodicity schedule.                                                                                                                                                                                                                                                                          
|     
|8.5.8 |  | ADMINISTRATIVE COSTS                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     
|      |  | The capitation rates, effective July 1, 2003, recognize costs for
anticipated contractor administrative expenditures due to Balanced Budget
Act regulations.                                                                                                                                                                                                                                                                                          
|     
|8.5.9 |  | NJ FAMILYCARE PLAN H ADULTS                                                                                                                                                                                                                                                                                                                                                                                                                           
|     
|      |  | The contractor shall be paid an administrative fee for NJ FamilyCare Plan
14 adults without dependent children, and restricted alien parents
excluding pregnant women, as defined in Article One (Not applicable to
non-MCSA contractor).                                                                                                                                                                                                             
|     
|8.6   |  | HEALTH BASED PAYMENT SYSTEM (HBPS) FOR THE ABD POPULATION WITHOUT
MEDICARE                                                                                                                                                                                                                                                                                                                                                                            
|     
|      |  | The DMAHS shall utilize a Health-Based Payment System (HBPS) for
reimbursements for the ABD population without Medicare to recognize larger
average health care costs and greater dispersion around the average than
other DMAHS populations. The contractor shall be reimbursed not only on
the basis of the demographic cells into which individuals fall, but also
on the basis of individual health status.                                       
|     
|      |  | The Chronic Disability Payment System (CDPS) (University of California,
San Diego) is the HBPS or the system of Risk Adjustment that shall be used
in this contract. The methodology for CDPS specific to New Jersey is
provided in the Actuarial Certification Letter for Risk Adjustment issued
separately to the contractor. Two base capitation rates and a DDD mental
health/substance abuse add-on are developed for this population. These
are:



| |  |  | ABD without Medicare, non-DDD                                             
| | - |  | --------------------------------------------------------------------------
|
| |  |  | ABD DDD without Medicare, physical health component                       
|
| |  |  | ABD - DDD without Medicare, Mental Health/Substance Abuse add-on-component



| |  | The Risk adjustment process has four major components.
| |  | ------------------------------------------------------



| |  |  | Development of base rates for the risk adjusted populations.
| | - |  | ------------------------------------------------------------

|                               |  |       
|------------------------------ |  | ------
|Amended as of November 1, 2003 |  | VIII-9





---



##### 





| |    |  | payment that is proportionate to the part of the month during which
the contractor provides coverage. Payments are calculated and made
to the last day of a calendar month except as noted in this
Article.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | J. |  | Risk Assumption. The capitation rates shall not include any
amount for recoupment of any losses suffered by the contractor for
risks assumed under this contract or any prior contract with the
Department.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | K. |  | Hospitalizations. For any eligible person who applies for
participation in the contractors plan, but who is hospitalized
prior to the time coverage under the plan becomes effective, such
coverage shall not commence until the date after such person is
discharged from the hospital and DMAHS shall be liable for payment
for the hospitalization, including any charges for readmission
within forty-eight (48) hours of discharge for the same diagnosis.
If an enrollees disenrollment or termination becomes effective
during a hospitalization, the contractor shall be liable for
hospitalization until the date such person is discharged from the
hospital, including any charges for readmission within forty-eight
(48) hours of discharge for the same diagnosis. The contractor must
notify DMAHS of these occurrences to facilitate payment to
appropriate providers.
|
| | L. |  | Continuation of Benefits. The contractor shall continue
benefits for all enrollees for the duration of the contract period
for which capitation payments have been made, including enrollees in
an inpatient facility until discharge. The contractor shall notify
DMAHS of these occurrences.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | M. |  | Drug Carve-Out Report. The DMAHS will provide the contractor
with a monthly electronic file of paid drug claims data for
non-dually eligible, ABD enrollees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | N. |  | MCSA Administrative Fee. The Contractor shall receive a
monthly
administrative fee, PMPM, for its MCSA enrollees, by the fifteenth
(15th) day of any month during which health care services will be available to
an enrollee (Not applicable to non-MCSA contractor).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | O. |  | Reimbursement for MCSA Enrollee Paid Claims. The contractor shall submit to
DMAHS a financial summary report of claims paid on behalf of MCSA enrollees on
a weekly basis. The report shall be summarized by category of service
corresponding to the MCSA benefits and payment dates, accompanied by an
electronic file of all individual claim numbers for which the State is being
billed (Not applicable to non-MCSA contractor).                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | P. |  | MCSA Claims Payment Audits. The contractor shall monitor and audit claims
payments to providers to identify payment errors, including duplicate payments,
overpayments, underpayments, and excessive payments. For such payment errors
(excluding underpayments), the contractor shall refund DMAHS the overpaid
amounts. The . contractor shall report the dollar amount of claims with payment
errors on a monthly basis, which is subject to                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                               |  |        
|------------------------------ |  | -------
|Amended as of November 1, 2003 |  | VIII-18





---



##### 





| |  |  | verification by the State. The contractor is responsible for
collecting funds due to the State from p: aviders, either through
cash payments or through offsets to payments due the providers (Not
applicable to non-MCSA contractor).
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|8.9 |  | CONTRACTOR ADVANCED PAYMENTS AND PIPS TO PROVIDERS
|--- |  | --------------------------------------------------



| | A. |  | The contractor shall make advance payments to its providers,
capitation, FFS, or other financial reimbursement arrangement, based
on a providers historical billing or utilization of services if the
contractors claims processing systems become inoperational or
experience any difficulty in making timely payments. Under no
circumstances shall the contractor default on the claims payment
timeliness provisions of this contract. Advance payments shall also
be made when compliance with claims payment timeliness is less than
ninety (90) percent for two (2) quarters. Such advance payments will
continue until the contractor is in full compliance with timely
payment provisions for two (2) successive quarters.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | B. |  | Periodic Interim Payments (PIPs) to Hospitals. The
contractor shall provide periodic interim payments to
participating, PIP-qualifying hospitals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



| | 1. |  | Designation of PIP-Qualifying Hospitals. Each
quarter, DMAHS shall determine which hospitals qualify for
monthly PIPs.                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | When Contractor is Required to Make PIPs. The
contractor shall make PIPs to a participating (network
provider), qualifying hospital when the average monthly payment
from the contractor to the hospital is at least $100,000 for
the most recent six-month period excluding outliers. An outlier
is defined as a single admission for which the payment to the
hospital exceeds $100,000. It should be noted that outlier
claims paid are included in the establishment of the monthly
PIPs and the reconciliation of the PIPs.
|
| | 3. |  | Methodologies to Establish Amount of PIPs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



| | a. |  | The contractor may work out a
mutually agreeable arrangement with the participating
PIP-qualifying hospitals for developing a methodology
for determining the amount of the PIPs and
reconciling the PIP advances to paid claims. If a
mutually agreeable arrangement cannot be reached, the
contractor shall make PIPs in accordance with the
methodology described in 3.b. below.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Beginning August 1, 2000, the
contractor shall provide a participating, PIP-qualifying
hospital with an initial 60-day PIP (representing two
30-day cash advances) which shall be reconciled using a
claims offset process, with the first 30-day PIP
reconciled                                                                                                                   

|                               |  |        
|------------------------------ |  | -------
|Amended as of November 1, 2003 |  | VIII-19





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##### 



Plan H Covered
Durable Medical Equipment

Alternating Pressure Pads
Bed Pans
Bladder Irrigation Supplies
Blood Glucose Monitors and Supplies
CanesCommodes
Note: Bathroom devices permanently attached are not covered
Crutches and Related Attachments
Fracture Frames
Gastrostomy Supplies
Hospital Beds (Manual, Semi-Electric, Full Electric) and Related Equipment
Ileostomy Supplies
Infusion Pumps
Intermittent Positive Pressure Breathing (IPPB) Treatments and Related Supplies
IV Poles
Jejunostomy Supplies
Lancets and Related DevicesLoop Heals/LoopToe DevicesLymphedema Pumps
Manual Wheelchairs and Related EquipmentNote: Motorized wheelchairs are not covered
Note: Types of covered wheelchairs include full-reclining; hemi; high-strength lightweight; high-strength lightweight; heavy duty; and semi-reclining.
Mattress OverlaysNote:Low air loss and air fluidized bed systems not covered
Nasogastric Tubing
Nebulizers and Related Supplies
Needles
Ostomy Supplies
Over-Bed Tables
Oxygen and Related Equipment and SuppliesNote: Liquid and gas systems and oxygen concentrators are covered
Note: Ventilation systems are not covered
Pacemaker Monitors
Parenteral Nutrition
Patient Lifts
Pneumatic AppliancesSitz Bath
Suction Machines and Related Supplies
Syringes
Tracheostomy Supplies
Traction/Trapeze Apparatus
Urinals
Urinary Pouches and Related Supplies
Urine Glucose Tests
Walkers and Related Attachments
Wheelchair Seating/Support Systems