EXHIBIT 10.4

ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
SECTION A. CONTRACT AMENDMENT

1. AMENDMENT NUMBER: 10
2. CONTRACT NO.: YH04-0001
3. EFFECTIVE DATE OF AMENDMENT: October 1, 2005
4. PROGRAM: DHCM
5. CONTRACTOR'S NAME AND ADDRESS:
   Phoenix Health Plan/Community Connection
   7878 N. 16th Street
   Phoenix, Arizona  85020
6. PURPOSE OF AMENDMENT:
   To amend Sections B, C, D and E and Attachments A, B, F, G, H, I and L.

7. THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
   A. CHANGES IN REQUIREMENTS: In accordance with Section E, Paragraph 30,
   "Changes", various changes in contract requirements are indicated in this
   contract restatement.

B. By signing this contract amendment, the Contractor is agreeing to the terms
   of the contract as amended.


NOTE: Please sign and date both and then return one to:
      Michael Veit, MD 5700
      AHCCCS Contracts and Purchasing
      701 E Jefferson Street
      Phoenix AZ 85034

8.  EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL
    CONTRACT NOT HERETOFORE CHANGED AND/OR AMENDED REMAIN UNCHANGED AND IN
    FULL EFFECT.

IN WITNESS WHEREOF THE PARTIES HERETO SIGN THEIR NAMES IN AGREEMENT

9.  NAME OF CONTRACTOR:
    PHOENIX HEALTH PLAN

    SIGNATURE OF AUTHORIZED INDIVIDUAL: /s/NANCY NOVICK
    TITLE: CHIEF EXECUTIVE OFFICER
    DATE: 9/7/05

10. ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM
    /s/MICHAEL VIET
    MICHAEL VEIT
    TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
    DATE: 9/6/05

TABLE OF CONTENTS
SECTION A. CONTRACT AMENDMENT						 1
SECTION B: CAPITATION RATES						 6
SECTION C: DEFINITIONS							 7
SECTION D: PROGRAM REQUIREMENTS						15
1. TERM OF CONTRACT AND OPTION TO RENEW					15
2. ELIGIBILITY CATEGORIES						16
3. ENROLLMENT AND DISENROLLMENT						17
4. ANNUAL ENROLLMENT CHOICE						19
5. OPEN ENROLLMENT							19
6. AUTO-ASSIGNMENT ALGORITHM						20
7. AHCCCS MEMBER IDENTIFICATION CARDS					20
8. MAINSTREAMING OF AHCCCS MEMBERS					20
9. TRANSITION OF MEMBERS						21
10.SCOPE OF SERVICES							21
11.SPECIAL HEALTH CARE NEEDS						29
12.BEHAVIORAL HEALTH SERVICES						30
13.AHCCCS POLICY MANUALS						32
14.MEDICAID SCHOOL BASED CLAIMING PROGRAM (MSBC)			32
15.PEDIATRIC IMMUNIZATIONS AND THE VACCINE FOR CHILDREN PROGRAM		33
16.STAFF REQUIREMENTS AND SUPPORT SERVICES				33
17.WRITTEN POLICIES, PROCEDURES AND JOB DESCRIPTIONS			35
18.MEMBER INFORMATION							35
19.SURVEYS								36
20.CULTURAL COMPETENCY							36
21.MEDICAL RECORDS							37
22.ADVANCE DIRECTIVES							37
23.QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT (QM/UM)		38
24.PERFORMANCE STANDARDS						40
25.GRIEVANCE SYSTEM							44
26.QUARTERLY GRIEVANCE SYSTEM REPORTS					44
27.NETWORK DEVELOPMENT							45
28.PROVIDER AFFILIATION TRANSMISSION					47
29.NETWORK MANAGEMENT							47
30.PRIMARY CARE PROVIDER  STANDARDS					48
31.MATERNITY CARE PROVIDER STANDARDS					49
32.REFERRAL MANAGEMENT PROCEDURES AND STANDARDS				49
33.APPOINTMENT STANDARDS						50
34.FEDERALLY QUALIFIED HEALTH CENTERS (FQHC) AND RHCS			51
35.PROVIDER MANUAL							51
36.PROVIDER  REGISTRATION						52
37.SUBCONTRACTS								53
38.CLAIMS PAYMENT/HEALTH INFORMATION SYSTEM				55
39.SPECIALTY CONTRACTS							56
40.HOSPITAL SUBCONTRACTING AND REIMBURSEMENT				57
41.NURSING FACILITY REIMBURSEMENT					57
42.PHYSICIAN INCENTIVES/PAY FOR PERFORMANCE				58
43.MANAGEMENT SERVICES AGREEMENT AND COST ALLOCATION PLAN		58
44.RESERVED								59
45.MINIMUM CAPITALIZATION  REQUIREMENTS					59
46.PERFORMANCE BOND OR BOND SUBSTITUTE					60
47.AMOUNT OF PERFORMANCE BOND						60
48.ACCUMULATED FUND DEFICIT						61
49.ADVANCES, DISTRIBUTIONS, LOANS AND INVESTMENTS			61
50.FINANCIAL VIABILITY STANDARDS / PERFORMANCE GUIDELINES		61
51.SEPARATE INCORPORATION						62
52.MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP			62
53.COMPENSATION								62
54.PAYMENTS TO CONTRACTORS						64
55.CAPITATION ADJUSTMENTS						65
56.INCENTIVES								65
57.REINSURANCE								66
58.COORDINATION OF BENEFITS / THIRD PARTY LIABILITY			69
59.COPAYMENTS								71
60.MEDICARE SERVICES AND COST SHARING					72
61.MARKETING								72
62.CORPORATE COMPLIANCE							72
63.RECORDS RETENTION							73
64.DATA EXCHANGE REQUIREMENTS						73
65.ENCOUNTER DATA REPORTING						74
66.ENROLLMENT AND CAPITATION TRANSACTION UPDATES			75
67.PERIODIC REPORT REQUIREMENTS						75
68.REQUESTS FOR INFORMATION						76
69.DISSEMINATION OF INFORMATION						76
70.OPERATIONAL AND FINANCIAL READINESS REVIEWS				76
71.OPERATIONAL AND FINANCIAL REVIEWS					76
72.SANCTIONS								77
73.BUSINESS CONTINUITY AND RECOVERY PLAN				78
74.TECHNOLOGICAL ADVANCEMENT						79
75.PENDING LEGISLATIVE / OTHER ISSUES					79
76.BALANCED BUDGET ACT OF 1997 (BBA)					80
77.HEALTHCARE GROUP OF ARIZONA						80
78.MEDICARE MODERNIZATION ACT (MMA)					80

SECTION E: CONTRACT CLAUSES						81

1) APPLICABLE LAW							81
2) AUTHORITY								81
3) ORDER OF PRECEDENCE							81
4) CONTRACT INTERPRETATION AND AMENDMENT				81
5) SEVERABILITY								81
6) RELATIONSHIP OF PARTIES						81
7) ASSIGNMENT AND DELEGATION						81
8) GENERAL INDEMNIFICATION						81
9) INDEMNIFICATION -- PATENT AND COPYRIGHT				82
10)COMPLIANCE WITH APPLICABLE  LAWS, RULES AND REGULATIONS		82
11)ADVERTISING AND PROMOTION OF CONTRACT				82
12)PROPERTY OF THE STATE						82
13)THIRD PARTY ANTITRUST VIOLATIONS					82
14)RIGHT TO ASSURANCE							82
15)TERMINATION FOR CONFLICT OF INTEREST					83
16)GRATUITIES								83
17)SUSPENSION OR DEBARMENT						83
18)TERMINATION FOR CONVENIENCE						83
19)TEMPORARY MANAGEMENT/OPERATION OF A CONTRACTOR AND
   TERMINATION								83
20)TERMINATION - AVAILABILITY OF FUNDS					84
21)RIGHT OF OFFSET							84
22)NON-EXCLUSIVE REMEDIES						84
23)NON-DISCRIMINATION							84
24)EFFECTIVE DATE							85
25)INSURANCE								85
26)DISPUTES								85
27)RIGHT TO INSPECT PLANT OR PLACE OF BUSINESS				85
28)INCORPORATION BY REFERENCE						85
29)COVENANT AGAINST CONTINGENT FEES					86
30)CHANGES								86
31)TYPE OF CONTRACT							86
32)AMERICANS WITH DISABILITIES ACT					86
33)WARRANTY OF SERVICES							86
34)NO GUARANTEED QUANTITIES						86
35)CONFLICT OF INTEREST							86
36)DISCLOSURE OF CONFIDENTIAL INFORMATION				86
37)COOPERATION WITH OTHER CONTRACTORS					87
38)ASSIGNMENT OF CONTRACT AND BANKRUPTCY				87
39)OWNERSHIP OF INFORMATION AND DATA					87
40)AHCCCSA RIGHT TO OPERATE CONTRACTOR					87
41)AUDITS AND INSPECTIONS						88
42)LOBBYING								88
43)CHOICE OF FORUM							88
44)DATA CERTIFICATION							88
45)OFF SHORE PERFORMANCE OF WORK PROHIBITED				88

SECTION F: INDEX - PROGRAM REQUIREMENTS AND CONTRACT CLAUSES		89

ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS				92
1) ASSIGNMENT AND DELEGATION OF RIGHTS AND RESPONSIBILITIES		92
2) AWARDS OF OTHER SUBCONTRACTS						92
3) CERTIFICATION OF COMPLIANCE - ANTI-KICKBACK AND LABORATORY
   TESTING								92
4) CERTIFICATION OF TRUTHFULNESS OF REPRESENTATION			92
5) CLINICAL LABORATORY IMPROVEMENT AMENDMENTS OF 1988			92
6) COMPLIANCE WITH AHCCCSA RULES RELATING TO AUDIT AND
   INSPECTION								92
7) COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS				92
8) CONFIDENTIALITY REQUIREMENT						93
9) CONFLICT IN INTERPRETATION OF PROVISIONS				93
10)CONTRACT CLAIMS AND DISPUTES						93
11)ENCOUNTER DATA REQUIREMENT						93
12)EVALUATION OF QUALITY, APPROPRIATENESS, OR TIMELINESS
   OF SERVICES								93
13)FRAUD AND ABUSE							93
14)GENERAL INDEMNIFICATION						93
15)INSURANCE								93
16)LIMITATIONS ON BILLING AND COLLECTION PRACTICES			93
17)MAINTENANCE OF REQUIREMENTS TO DO BUSINESS AND PROVIDE
   SERVICES								94
18)NON-DISCRIMINATION REQUIREMENTS					94
19)PRIOR AUTHORIZATION AND UTILIZATION REVIEW				94
20)RECORDS RETENTION							94
21)SEVERABILITY								94
22)SUBJECTION OF SUBCONTRACT						94
23)TERMINATION OF SUBCONTRACT						94
24)VOIDABILITY OF SUBCONTRACT						95
25)WARRANTY OF SERVICES							95
26)OFF SHORE PERFORMANCE OF WORK PROHIBITED				95

ATTACHMENT B: MINIMUM NETWORK STANDARDS (BY GEOGRAPHIC SERVICE AREA)	96
ATTACHMENT F: PERIODIC REPORT REQUIREMENTS				100
ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM					104
ATTACHMENT H (1): ENROLLEE GRIEVANCE SYSTEM STANDARDS AND POLICY	107
ATTACHMENT H(2)	PROVIDER CLAIM DISPUTE STANDARDS AND POLICY		112
ATTACHMENT I: ENCOUNTER SUBMISSION REQUIREMENTS				114
ATTACHMENT L: COST SHARING COPAYMENTS					117

SECTION B:  CAPITATION RATES

The Contractor shall provide services as described in this contract.  In
consideration for these services, the Contractor will be paid the attached
Contractor specific rates per member per month for the term October 1, 2005
through September 30, 2006.

See attached.

SECTION C: DEFINITIONS

1931
Eligible individuals and families under the 1931 provision of the Social
Security Act, with household income levels at or below 100% of the FPL.

ACOM
AHCCCS Contractor Operations Manual, available on the AHCCCS Website
at www.azahcccs.gov.

ADHS
Arizona Department of Health Services, the state agency mandated to serve
the public health needs of all Arizona citizens.

ADHS BEHAVIORAL HEALTH RECIPIENT
A Title XIX or Title XXI acute care member who is eligible for, and is
receiving, behavioral health services through ADHS and its subcontractors.

AGENT
Any person who has been delegated the authority to obligate or act on behalf
of another person or entity.

AHCCCS
Arizona Health Care Cost Containment System, which is composed of the
Administration, Contractors, and other arrangements through which health care
services are provided to an eligible person, as defined by A.R.S.
Section 36-2902, et seq.

AHCCCS BENEFITS
See "COVERED SERVICES".

AHCCCS MEMBER
See "MEMBER".

AHCCCSA
Arizona Health Care Cost Containment System Administration.

ALTCS
The Arizona Long Term Care System, a program under AHCCCSA that delivers long
term, acute, behavioral health and case management services to members, as
authorized by A.R.S. Section 36-2932.

AMBULATORY CARE
Preventive, diagnostic and treatment services provided on an outpatient basis
by physicians, nurse practitioners, physician assistants and other health care
providers.

AMPM
AHCCCS Medical Policy Manual.

ANNUAL ENROLLMENT CHOICE (AEC)
The opportunity, given each member annually, to change to another Contractor
in their GSA.

APPEAL RESOLUTION
The written determination by the Contractor concerning an appeal.

ARIZONA ADMINISTRATIVE CODE (A.A.C.)
State regulations established pursuant to relevant statutes.  For purposes
of this solicitation, the relevant sections of the AAC are referred to
throughout this document as "AHCCCS Rules".

A.R.S.
Arizona Revised Statutes.

BBA
The Balanced Budget Act of 1997.

BCCTP
Breast and Cervical Cancer Treatment Program, a Title XIX eligibility expansion
program for women who are not otherwise Title XIX eligible and are diagnosed
as needing treatment for breast and/or cervical cancer or lesions.

BIDDER'S LIBRARY
A repository of manuals, statutes, rules and other reference material located
at AHCCCSA. A limited, virtual library is located on the AHCCCS website
at www.azahcccs.gov.

BOARD CERTIFIED
An individual who has successfully completed all prerequisites of the
respective specialty board and successfully passed the required examination
for certification.

CAPITATION
Payment to Contractor by AHCCCSA of a fixed monthly payment per person in
advance for which the Contractor provides a full range of covered services as
authorized under A.R.S. Section 36-2904 and Section 36-2907.

CATEGORICALLY LINKED TITLE XIX MEMBER
Member eligible for Medicaid under Title XIX of the Social Security Act
including those eligible under 1931 provisions of the Social Security Act,
Sixth Omnibus Budget Reconciliation Act (SOBRA), Supplemental Security Income
(SSI), SSI-related groups. To be categorically linked, the member must be
aged 65 or over, blind, disabled, a child under age 19, a parent of a
dependent child, or pregnant.

CLAIM DISPUTE
A dispute involving a payment of a claim, denial of a claim, imposition of
a sanction or reinsurance.

CLEAN CLAIM
A claim that may be processed without obtaining additional information from
the provider of service or from a third party; but does not include claims
under investigation for fraud or abuse or claims under review for medical
necessity.

CMS
Centers for Medicare and Medicaid Services, an organization within the
U.S. Department of Health and Human Services, which administers the Medicare
and Medicaid programs and the State Children's Health Insurance Program.

COMPETITIVE BID PROCESS
A state procurement system used to select Contractors to provide covered
services on a geographic basis.

CONTINUING OFFEROR (INCUMBENT)
An AHCCCS Contractor during CYE 03 that submits a proposal pursuant to
this solicitation.

CONTRACT SERVICES
See "COVERED SERVICES".

CONTRACT YEAR (CY)
Corresponds to Federal fiscal year (Oct. 1 through Sept. 30).  For example,
Contract Year 04 is 10/01/03 - 9/30/04.

CONTRACTOR
An organization or entity agreeing through a direct contracting relationship
with AHCCCSA to provide the goods and services specified by this contract in
conformance with the stated contract requirements, AHCCCS statute and rules
and Federal law and regulations.

CONVICTED
A judgment of conviction has been entered by a Federal, State or local court,
regardless of whether an appeal from that judgment is pending.

COPAYMENT
A monetary amount specified by the Director that the member pays directly to
a Contractor or provider at the time covered services are rendered, as defined
in R9-22-107.

COVERED SERVICES
Health care services to be delivered by a Contractor which are designated in
Section D of this contract, AHCCCS Rules R9-22, Article 2 and R9-31,
Article 2 and the AMPM.  [42 CFR 438.210(a)(4[DMT1])]

CRS
The Children's Rehabilitative Services administered by ADHS, as defined
in R9-22-114.

CRS ELIGIBLE
An individual who has completed the CRS application process, as delineated
in the CRS Policy and Procedure Manual, and has met all applicable criteria
to be eligible to receive CRS related services.

CRS RECIPIENT
A CRS recipient is a CRS eligible individual who has completed the initial
medical visit at an approved CRS Clinic, which allows the individual to
participate in the CRS program.

CY
See "CONTRACT YEAR".

CYE
Contract Year Ending; same as "CONTRACT YEAR".

DAYS
Calendar days unless otherwise specified as defined in the text, as defined
in R9-22-101.

DIRECTOR
The Director of AHCCCSA.

DISCLOSING ENTITY
An AHCCCS provider or a fiscal agent.

DISENROLLMENT
The discontinuance of a member's ability to receive covered services through
a Contractor.

DME
Durable Medical Equipment, which is an item, or appliance that can withstand
repeated use, is designated to serve a medical purpose, and is not generally
useful to a person in the absence of a medical condition, illness or injury
as defined in R9-22-102.

DUAL ELIGIBLE
A member who is eligible for both Medicare and Medicaid.

ELIGIBILITY DETERMINATION
A process of determining, through a written application and required
documentation, whether an applicant meets the qualifications for Title XIX
or Title XXI.

EMERGENCY MEDICAL CONDITION
A medical condition manifesting itself by acute symptoms of sufficient
severity (including severe pain) such that a prudent layperson, who possesses
an average knowledge of health and medicine, could reasonably expect the
absence of immediate medical attention to result in: a) placing the patient's
health (or, with respect to a pregnant woman, the health of the woman or her
unborn child) in serious jeopardy; b) serious impairment to
bodily functions; or c) serious dysfunction of any bodily organ or part.
[42 CFR 438.114(a[DMT2])]

EMERGENCY MEDICAL SERVICE
Covered inpatient and outpatient services provided after the sudden onset
of an emergency medical condition as defined above. These services must be
furnished by a qualified provider, and must be necessary to evaluate or
stabilize the emergency medical condition.  [42 CFR 438.114(a[DMT3])]

ENCOUNTER
A record of a health care related service rendered by a provider or providers
registered with AHCCCSA to a member who is enrolled with a Contractor on
the date of service.

ENROLLEE
A Medicaid recipient who is currently enrolled with a contractor.
[42 CFR 438.10(a[DMT4])]

ENROLLMENT
The process by which an eligible person becomes a member of a contractor's
plan.

EPSDT
Early and Periodic Screening, Diagnosis and Treatment; services for persons
under 21 years of age as described in AHCCCS rules R9-22, Article 2.

FAMILY PLANNING SERVICES EXTENSION PROGRAM
A program that provides only family planning services for a maximum of 24
months to SOBRA women whose pregnancy has ended and who are not otherwise
eligible for full Title XIX services.

FEDERALLY QUALIFIED HEALTH CENTER  (FQHC)
An entity which meets the requirements and receives a grant and funding
pursuant to Section 330 of the Public Health Service Act.  An FQHC includes
an outpatient health program or facility operated by a tribe or tribal
organization under the Indian Self-Determination Act (PL 93-638) or an urban
Indian organization receiving funds under Title V of the Indian Health Care
Improvement Act.

FEE-FOR-SERVICE (FFS)
A method of payment to registered providers on an amount per service basis.

FES
Federal EEE Emergency Services program covered under R9-22-217, to treat an
emergency medical condition for a member who is determined eligible under
A.R.S. Section 36-2903.03 (D).

FFP
Federal financial participation (FFP) refers to the contribution that the
Federal government makes to the Title XIX and Title XXI program portions of
AHCCCS as defined in 42 CFR 400.203.

FISCAL YEAR (FY)
The budget year - Federal Fiscal Year: October 1 through September 30;
State fiscal year: July 1 through June 30.

FREEDOM TO WORK (TICKET TO WORK)
A Federal program that expands Title XIX eligibility to individuals, 16
through 64 years old, who are disabled and whose earned income, after
allowable deductions, is at or below 250% of the Federal Poverty Level.

GEOGRAPHIC SERVICE AREA (GSA)
A specific county or defined grouping of counties designated by AHCCCSA
within which a Contractor provides, directly or through subcontract, covered
health care to members enrolled with that Contractor.

GRIEVANCE SYSTEM
A system that includes a process for enrollee grievances, enrollee appeals,
provider claim disputes, and access to the state fair hearing system.

HEALTHCARE GROUP OF ARIZONA (HCG)
A prepaid medical coverage plan marketed to small, uninsured businesses and
political subdivisions within the state.

HEALTH MAINTENANCE ORGANIZATION (HMO)
Various forms of plan organization, including staff and group models that meet
the HMO licensing requirements of the Federal and/or State government and offer
a full array of health care services to members on a capitated basis.

HEALTH PLAN
See "CONTRACTOR".

HIFA
The CMS Health Insurance Flexibility and Accountability Demonstration
Initiative, which targets State Children's Health Insurance Program (Title XXI)
funding for populations with incomes below 200 percent of the Federal Poverty
Level, seeking to maximize private health insurance coverage options.

HIFA PARENTS
Parents of  Medicaid (SOBRA) and KidsCare eligible children who are eligible
for AHCCCS benefits under the HIFA Waiver.  All eligible parents must pay an
enrollment fee and a monthly premium based on household income.

IBNR
Incurred But Not Reported liability for services rendered for which claims
have not been received.

IHS
Indian Health Service authorized as a Federal agency pursuant to 25 U.S.C. 1661.

KIDSCARE
Individuals under the age of 19, eligible under the SCHIP program, in
households with income at or below 200% FPL.  All members, except Native
American members, are required to pay a premium amount based on the number of
children in the family and the gross family income.  Also referred to as
Title XXI.

LIEN
A legal claim, filed with the County Recorder's office in which a member
resides and in the county an injury was sustained, for the purpose of
ensuring that AHCCCS receives reimbursement for medical services paid.  The
lien is attached to any settlement the member may receive as a result of an
injury.

MANAGED CARE
Systems that integrate the financing and delivery of health care services
to covered individuals by means of arrangements with selected providers to
furnish comprehensive services to members; establish explicit criteria for
the selection of health care providers; have financial incentives for members
to use providers and procedures associated with the plan; and have formal
programs for quality, utilization management and the coordination of care.

MANAGEMENT SERVICES SUBCONTRACTOR
A person or organization that agrees to perform any administrative function
or service for the Contractor, specifically related to securing or fulfilling
the Contractor's obligations to AHCCCSA, under the terms of this contract.

MANAGING EMPLOYEE
A general manager, business manager, administrator, director, or other
individual who exercises operational or managerial control over, or who
directly or indirectly conducts the day-to-day operation of an institution,
organization or agency.

MATERIAL OMISSION
Facts, data or other information excluded from a report, contract, etc., the
absence of which could lead to erroneous conclusions following reasonable
review of such report, contract, etc.

MEDICAID
A Federal/State program authorized by Title XIX of the Social Security Act,
as amended.

MEDICAL EXPENSE DEDUCTION (MED)
Title XIX Waiver member whose family income is more than 100% of the Federal
Poverty Level and has family medical expenses that reduce income to or below
40% of the Federal Poverty Level.  MED's may have a categorical link to a
Title XIX category; however, their income exceeds the limits of the Title
XIX category.

MEDICARE
A Federal program authorized by Title XVIII of the Social Security Act,
as amended.

MEDICARE HMO
A Health Maintenance Organization or Comprehensive Medical Plan, which provides
Medicare services to Medicare beneficiaries pursuant to a Medicare risk
contract with CMS under Section 1876 of the Social Security Act.

MEMBER
An eligible person who is enrolled in the system, as defined in
A.R.S. Section 36-2901, A.R.S. Section 36-2981 and A.R.S. Section 36-2981.01.

NEW OFFEROR
An organization or entity that submits a proposal in response to this
solicitation and which has not been an AHCCCS Contractor during CYE 03.

NON-CONTRACTING PROVIDER
A person who provides services as prescribed in A.R.S. Section 36-2939 and who
does not have a subcontract with an AHCCCS Contractor.

OFFEROR
An organization or other entity that submits a proposal to the Administration
in response to this RFP, as defined in R9-22-106.

PERFORMANCE STANDARDS
A set of standardized indicators designed to assist AHCCCSA in evaluating,
comparing and improving the performance of its Contractors.  Specific
descriptions of health services measurement goals are found in Section D,
Paragraph 24, Performance Standards.

PMMIS
AHCCCSA's Prepaid Medical Management Information System.

POST STABILIZATION SERVICES
Medically necessary services, related to an emergency medical condition,
provided after the member's condition is sufficiently stabilized in order to
maintain, improve or resolve the member's condition so that the member could
alternatively be safely discharged or transferred to another location.
[42 CFR 438-114(a[DMT5])]

POTENTIAL ENROLLEE
A Medicaid eligible recipient who is not yet enrolled with a contractor.
[42 CFR 438.10(a[DMT6])]

PRIMARY CARE PROVIDER (PCP)
An individual who meets the requirements of A.R.S. Section 36-2901, and who is
responsible for the management of a member's health care.  A PCP may be a
physician defined as a person licensed as an allopathic or osteopathic
physician according to A.R.S. Title 32, Chapter 13 or Chapter 17 or a
practitioner defined as a physician assistant licensed under A.R.S. Title 32,
Chapter 25, or a certified nurse practitioner licensed under A.R.S. Title 32,
Chapter 15.

PRIOR PERIOD
The period of time, prior to the member's enrollment, during which a member is
eligible for covered services.  The time frame is from the effective date of
eligibility to the day a member is enrolled with a Contractor.

PROVIDER
Any person or entity who contracts with AHCCCSA or a Contractor for the
provision of covered services to members according to the provisions
A.R.S. Section 36-2901 or any subcontractor of a provider delivering services
pursuant to A.R.S. Section 36-2901.

QUALIFIED MEDICARE BENEFICIARY  (QMB)
A person, eligible under A.R.S. Section 36-2971(6), who is entitled to Medicare
Part A insurance and meets certain income and residency requirements of
the Qualified Medicare Beneficiary program.  A QMB, who is also eligible for
Medicaid, is commonly referred to as a QMB dual eligible.

RATE CODE
Eligibility classification for capitation payment purposes.

REGIONAL BEHAVIORAL HEALTH AUTHORITY (RBHA)
An organization under contract with ADHS, who administers covered behavioral
health services in a geographically specific area of the state.  Tribal
governments, through an agreement with ADHS, may operate a tribal regional
behavioral health authority (TRBHA) for the provision of behavioral health
services to Native American members living on-reservation.

REINSURANCE
A risk-sharing program provided by AHCCCSA to Contractors for the reimbursement
of certain contract service costs incurred for a member beyond a certain
monetary threshold.

RELATED PARTY
A party that has, or may have, the ability to control or significantly
influence a Contractor, or a party that is, or may be, controlled or
significantly influenced by a Contractor.  "Related parties" include, but are
not limited to, agents, managing employees, persons with an ownership or
controlling interest in the disclosing entity, and their immediate families,
subcontractors, wholly-owned subsidiaries or suppliers, parent companies,
sister companies, holding companies, and other entities controlled or managed
by any such entities or persons.

RISK GROUP
Grouping of rate codes that are paid at the same capitation rate.

RFP
Request For Proposal is a document prepared by AHCCCSA, which describes the
services required and instructs prospective offerors about how to prepare
a response (proposal), as defined in R9-22-106.

SCHIP
State Children's Health Insurance Program under Title XXI of the Social
Security Act.  The Arizona version of SCHIP is referred to as "Kidscare".
See Kidscare.

SCOPE OF SERVICES
See "COVERED SERVICES".

SOBRA
Section 9401 of the Sixth Omnibus Budget and Reconciliation Act, 1986,
amended by the Medicare Catastrophic Coverage Act of 1988,
U.S.C. 1396a(a)(10)(A)(ii)(IX), November 5, 1990.

SPECIAL HEALTH CARE NEEDS
Members with special health care needs are those members who have serious and
chronic physical, developmental or behavioral conditions, and who also require
medically necessary health and related services of a type or amount beyond that
required by members generally.

STATE
The State of Arizona.

STATE PLAN
The written agreements between the State and CMS which describe how the AHCCCS
program meets CMS requirements for participation in the Medicaid program and
the State Children's Health Insurance Program.

SUBCONTRACT
An agreement entered into by the Contractor with a provider of health care
services, who agrees to furnish covered services to members or with any other
organization or person who agrees to perform any administrative function or
service for the Contractor specifically related to fulfilling the Contractor's
obligations to AHCCCSA under the terms of this contract, as defined in
R9-22-101.

SUBCONTRACTOR
(1) A person, agency or organization with which the Contractor has contracted
or delegated some of its management functions or responsibilities to provide
covered services to its members; or (2) A person, agency or organization with
which a fiscal agent has entered into a contract, agreement, purchase order
or lease (or leases of real property) to obtain space, supplies, equipment or
services provided under the AHCCCS agreement.

SUPPLEMENTAL SECURITY INCOME (SSI)
Federal cash assistance program under Title XVI of the Social Security Act.

TEMPORARY ASSISTANCE TO NEEDY FAMILIES (TANF)
A Federal cash assistance program under Title IV of the Social Security Act
established by the Personal Responsibility and Work Opportunity Act of 1996.
It replaced Aid To Families With Dependent Children (AFDC).

THIRD PARTY
An individual, entity or program that is or may be liable to pay all or part
of the medical cost of injury, disease or disability of an AHCCCS applicant
or member, as defined in R9-22-1001.

THIRD PARTY LIABILITY
The resources available from a person or entity that is, or may be, by
agreement, circumstance or otherwise, liable to pay all or part of the medical
expenses incurred by an AHCCCS applicant or member, as defined in R9-22-1001.

TITLE XIX MEMBER
Member eligible for Federally funded Medicaid programs under Title XIX of the
Social Security Act including those eligible under 1931 provisions of the
Social Security Act, Sixth Omnibus Budget Reconciliation Act (SOBRA),
Supplemental Security Income (SSI), SSI-related groups, Title XIX Waiver
groups, Medicare Cost Sharing groups, Breast and Cervical Cancer Treatment
program and Freedom to Work.

TITLE XIX WAIVER MEMBER
All MED (Medical Expense Deduction) members, and adults or childless couples
at or below 100% of the Federal Poverty Level who are not categorically linked
to another Title XIX program.  This would also include Title XIX linked
individuals whose income exceeds the limits of the categorical program.

TITLE XXI MEMBER
Member eligible for acute care services under Title XXI of the Social Security
Act, referred to in Federal legislation as the "State Children's Health
Insurance Program" (SCHIP and HIFA).  The Arizona version of SCHIP is referred
to as "KidsCare."

TRIBAL FACILITY (638 TRIBAL FACILITY)
A facility that is operated by an Indian tribe and that is authorized to
provide services pursuant to Public Law 93-638, as amended.

WWHP
Well Woman Health check Program, administered by the Arizona Department of
Health Services and funded by the Centers for Disease Control and Prevention.
(See AMPM Chapter 400)

YEAR
See "Contract Year".

[END OF DEFINITIONS]

SECTION D: PROGRAM REQUIREMENTS

1. TERM OF CONTRACT AND OPTION TO RENEW

The initial term of this contract shall be 10/1/03 through 9/30/06, with two
one-year options to renew.   All contract renewals shall be through contract
amendment.  AHCCCSA shall issue amendments prior to the end date of the
contract when there is an adjustment to capitation rates and/or changes to
the scope of service contained herein.  Changes to scope of service include
but are not limited to changes in the enrolled population, changes in
covered services, changes in GSA's.

If the Contractor has been awarded a contract in more than one GSA, each such
contract will be considered separately renewable.  AHCCCSA may renew the
Contractor's contract in one GSA, but not in another.  In addition, if the
Contractor has had significant problems of non-compliance in one GSA, it may
result in the capping of the Contractor's enrollment in all GSAs.  Further,
AHCCCSA may require the Contractor to renew all currently awarded GSA's, or
may terminate the contract if the Contractor does not agree to renew all
currently awarded GSA's.

When AHCCCSA issues an amendment to the contract, the provisions of such
renewal will be deemed to have been accepted 60 days after the date of mailing
by AHCCCSA, even if the amendment has not been signed by the Contractor, unless
within that time the Contractor notifies AHCCCSA in writing that it refuses
to sign the renewal amendment.  If the Contractor provides such notification,
AHCCCSA will initiate contract termination proceedings.

Contractor's Notice of Intent Not To Renew:  If the Contractor chooses not to
renew this contract, the Contractor may be liable for certain costs associated
with the transition of its members to a different Contractor.  If the
Contractor provides AHCCCSA written notice of its intent not to renew this
contract at least 180 days before its expiration, this liability for
transition costs may be waived by AHCCCSA.

Contract Termination: In the event the contract, or any portion thereof, is
terminated for any reason, or expires, the Contractor shall assist AHCCCSA
in the transition of its members to other contractors, and shall abide by
standards and protocols set forth in Paragraph 9, Transition of Members.
In addition, AHCCCSA reserves the right to extend the term of the contract
on a month-to-month basis to assist in any transition of members.  The
Contractor shall make provision for continuing all management and
administrative services until the transition of all members is completed and
all other requirements of this contract are satisfied.  The Contractor shall
be responsible for providing all reports set forth in this contract and
necessary for the transition process and shall be responsible for the following:

a. Notification of subcontractors and members.
b. Payment of all outstanding obligations for medical care rendered to members.
c. Until AHCCCSA is satisfied that the Contractor has paid all such obligations,
   the Contractor shall provide the following reports to AHCCCSA:
	(1) A monthly claims aging report by provider/creditor including
	    IBNR amounts;
	(2) A monthly summary of cash disbursements;
	(3) Copies of all bank statements received by the Contractor.
d. Such reports shall be due on the fifth day of each succeeding month for the
   prior month.
e. In the event of termination or suspension of the contract by AHCCCSA, such
   termination or suspension shall not affect the obligation of the
   Contractor to indemnify AHCCCSA for any claim by any third party against
   the State or AHCCCSA arising from the Contractor's performance of this
   contract and for which the Contractor would otherwise be liable under this
   contract.
f. Any dispute by the Contractor, with respect to termination or suspension
   of this contract by AHCCCSA, shall be exclusively governed by the provisions
   of Section E, Paragraph 26, Disputes.

g. Any funds, advanced to the Contractor for coverage of members for periods
   after the date of termination, shall be returned to AHCCCSA within 30 days
   of termination of the contract.

2. ELIGIBILITY CATEGORIES

AHCCCS is Arizona's Title XIX Medicaid program operating under an 1115 Waiver
and Title XXI program operating under Title XXI State Plan authority.  Arizona
has the authority to require mandatory enrollment in managed care.  All members
eligible for AHCCCS benefits, with few exceptions, are enrolled with acute
care contractors and paid for on a capitated basis. AHCCCSA pays for health
care expenses on a fee for service (FFS) basis for Title XIX and Title XXI
eligible members who receive services through the Indian Health Service;
for Title XIX eligible members who are entitled to emergency services under the
Federal Emergency Services (FES) program; for Medicare cost sharing
beneficiaries under QMB programs.

The following describes the eligibility groups enrolled in the managed care
program and covered under this contract [42 CFR 434.6(a)(2[DMT7])].

Title XIX

1931 (Also referred to as TANF):  Eligible individuals and families under the
1931 provision of the Social Security Act, with household income levels at or
below 100% of the FPL.

SSI and SSI Related Groups:  Eligible individuals receiving Supplemental
Security Income (SSI) or who are aged, blind or disabled with household
income levels at or below 100% of the FPL.

Freedom to Work (Ticket to Work):  Eligible individuals under the Title XIX
expansion program that extends eligibility to individuals, 16 through 64
years old who meet SSI disability criteria, whose earned income, after
allowable deduction, is at or below 250% of the FPL and who are not
eligible for any other Medicaid program.  These members must pay a premium
to AHCCCSA ranging from $10 to $35, depending on income.

SOBRA: Under the Sixth Omnibus Budget and Reconciliation Act of 1986, eligible
pregnant women, with household income levels at or below 133% of the FPL,
and children in families with household incomes ranging from below 100% to
140% of the FPL, depending on the age of the child.

SOBRA Family Planning:  Family planning extension program that covers the
costs for family planning services only, for a maximum of 24 months following
the loss of SOBRA eligibility.

Breast and Cervical Cancer Treatment Program (BCCTP): Eligible individuals
under the Title XIX expansion program for women with income up to 250% of
the FPL, who are diagnosed with and need treatment for breast and/or cervical
cancer or cervical lesions and are not eligible for other Title XIX programs
pviding full Title XIX services.  Eligible members cannot have other
creditable health insurance coverage, including Medicare.

Title XIX Waiver Group

Non-MED: Eligible individuals and couples whose income is at or below 100%
of the FPL, and who are not categorically linked to another Title XIX program.

MED:   Eligible individuals and families whose income is above 100% of the
FPL with medical expenses that reduce income to or below 40% of the FPL.

Title XXI

KidsCare:  Individuals under the age of 19, whose income does not exceed
200% FPL.  All members, except Native American members, are required to pay
a premium amount to AHCCCSA based on the number of children in the family and
the gross family income.

HIFA Parents:  Non-Title XIX-eligible parents of KidsCare children or parents
of Title XIX SOBRA eligible children who are eligible under the HIFA
demonstration initiative waiver. HIFA parents are required to pay a one-time
enrollment fee and a monthly premium to AHCCCSA ranging from $15 to $25
per parent (except Native American members), based on household income.
Due to funding considerations, this program has an enrollment cap.

3. ENROLLMENT AND DISENROLLMENT

AHCCCSA has the exclusive authority to enroll and disenroll members.
The Contractor shall not disenroll any member for any reason unless directed
to do so by AHCCCSA.  The Contractor may request AHCCCSA to change the
member's enrollment in accordance with the ACOM Change of Plan Policy.
The Contractor may not request disenrollment because of an adverse change
in the member's health status, or because of the member's utilization of
medical services, diminished mental capacity, or uncooperative or disruptive
behavior resulting from his or her special needs.  An AHCCCS member may
request disenrollment from the Contractor for cause at any time.  Refer
those requests due to situations defined in Section A (1) of the ACOM Change
of Plan Policy to AHCCCSA to the AHCCCS Verification Unit via mail or at
(602) 417-4000 or (800) 962-6690.  For medical continuity requests, the
Contractor shall follow the procedures outlined in the ACOM Change of Plan
Policy, before notifying the AHCCCSA.  AHCCCSA will disenroll the member
when the member becomes ineligible for the AHCCCS program, moves out
of the Contractor's service areas, changes contractors during the member's
open enrollment/annual enrollment choice period, the Contractor does not,
because of moral or religious objections, cover the service the member
seeks or when approved for a Contractor change through the ACOM Change of
Plan Policy. [42 CFR 438.56[DMT8]] Eligibility for the various AHCCCS
coverage groups is determined by one of the following agencies:

Social Security Administration (SSA)
SSA determines eligibility for the Supplemental Security Income (SSI)
cash program.  SSI cash recipients are automatically eligible for
AHCCCS coverage.

Department of Economic Security (DES)
DES determines eligibility for the families with children under section
1931 of the Social Security Act, pregnant women and children under SOBRA,
the Adoption Subsidy Program, Title IV-E foster care children, Young Adult
Transitional Insurance Program, the Federal Emergency Services program
(FES), HIFA parents of SOBRA eligible children, the Title XIX Waiver Members.

AHCCCSA
AHCCCSA determines eligibility for the SSI/Medical Assistance Only groups,
including the FES program for this population (aged, disabled, blind), the
Arizona Long-Term Care System (ALTCS), the Qualified Medicare Beneficiary
program and other Medicare cost sharing programs, BCCTP, the Freedom to Work
program, the Title XXI KidsCare program, and HIFA parents of KidsCare children.

AHCCCS acute care members are enrolled with Contractors in accordance with the
rules set forth in R9-22, Article 17, R9-31-306, 307, 309 and 1719.

Health Plan Choice
All AHCCCS members eligible for services covered under this contract have a
choice of available contractors.  Information about these contractors will
be given to each applicant during the application process for AHCCCS benefits.
If there is only one contractor available for the applicant's Geographic
Service Area, no choice is offered as long as the contractor offers the
member a choice of PCPs.  Members, who do not choose prior to AHCCCSA
being notified of their eligibility, are automatically assigned to a
contractor based on family continuity or the auto-assignment algorithm. Once
assigned, AHCCCS sends a choice notice to the member and gives them 16 days
to choose a different contractor from the auto-assigned contractor.  See
Section D, Paragraph 6, Auto-Assignment Algorithm, for further explanation.

The Contractor will share with AHCCCSA the cost of providing information
about the acute care contractors to potential members and to those
eligible for annual enrollment choice.

Exceptions to the above enrollment policies for Title XIX members include
previously enrolled members who have been disenrolled for less than 90 days.
These members will be automatically enrolled with the same Contractor, if
still available. Members who have less than 30 days of continued
eligibility will not be enrolled with a Contractor, but will be placed on
Fee for Service.  FES members are not enrolled with a contractor.  Women, who
become eligible for the Family Planning Services Extension Program, will
remain assigned to their current contractor.  Some specialty groups will also
be FFS, such as persons approved only for the inpatient hospital stay.
These are inmates who are temporarily residing in a hospital.

The effective date of enrollment for a new Title XIX member with the
Contractor is the day AHCCCSA takes the enrollment action, generally the day
prior to the date the Contractor receives notification from AHCCCSA via the
daily roster.  However, the Contractor is responsible for payment of
medically necessary covered services retroactive to the member's beginning
date of eligibility.

KidsCare members must select a contractor prior to being determined eligible
and therefore, will not be auto-assigned.  If the HIFA parent does not choose,
they will be enrolled with their child's contractor following the enrollment
rules set forth in R9-31-1719.  When a member is transferred from Title XIX
to Title XXI and has not made a contractor choice for Title XXI, the member
will remain with their current contractor and a choice notice will be sent to
the member.  The member may then change plans no later than 16 days from the
date the choice notice is sent.

The effective date of enrollment for a Title XXI member, including HIFA
parents, will be the first day of the month following notification to the
contractor, with few exceptions.

Prior Period Coverage: AHCCCS provides prior period coverage for the period
of time, prior to the Title XIX member's enrollment, during which a member
is eligible for covered services.  The time frame is from the effective date
of eligibility to the day a member is enrolled with the Contractor.  The
Contractor receives notification from the Administration of the member's
enrollment.  The Contractor is responsible for payment of all claims for
medically necessary covered services provided to members during prior period
coverage. This may include services provided prior to the contract year
(See Section D, Paragraph 53, Compensation, for a description of the
Contractor's reimbursement from AHCCCSA for this eligibility time period.)

Newborns:  Newborns, born to AHCCCS eligible mothers enrolled at the time of
the child's birth, will be enrolled with the mother's contractor, when
newborn notification is received by AHCCCSA.  The Contractor is responsible
for notifying AHCCCSA of a child's birth to an enrolled member. Capitation
for the newborn will begin on the date notification is received by AHCCCSA
(except for cases of births during prior period coverage).
The effective date of AHCCCS eligibility will be the newborn's date of birth,
and the Contractor is responsible for all covered services to the newborn
whether or not AHCCCSA has received notification of the child's birth.
AHCCCSA is currently available to receive notification 24 hours a day, 7
days a week via phone or the AHCCCS website.  Eligible mothers of newborns
are sent a letter advising them of their right to choose a different
contractor for their child; the date of the change will be the date of
processing the request from the mother.  If the mother does not request a
change, the child will remain with the mother's contractor.

Newborns of FES mothers are auto-assigned to a contractor and mothers of these
newborns are sent a letter advising them of their right to choose a
different contractor for their child.  In the event the FES mother chooses a
different contractor, AHCCCS will recoup all capitation paid to the
originally assigned contractor and the baby will be enrolled retroactive
to the date of birth in the second contractor.  The second contractor
will receive prior period capitation from the date of birth to the day
before assignment and prospective capitation from the date of assignment
forward.  The second contractor will be responsible for all covered services
to the newborn from date of birth.

Enrollment Guarantees:  Upon initial capitated enrollment as a Title
XIX-eligible member, the member is guaranteed a minimum of five full months
of continuous enrollment.  Upon initial capitated enrollment as a Title
XXI-eligible member, the member is guaranteed a minimum of 12 full months
of continuous enrollment. Enrollment guarantees do not apply to HIFA parents.
The enrollment guarantee is a one-time benefit.  If a member changes from
one contractor to another within the enrollment guarantee period, the
remainder of the guarantee period applies to the new contractor.  The
enrollment guarantee may not be granted or may be terminated if the member
is incarcerated or, if a minor child is adopted.  AHCCCS Rule R9-22,
Article 17 and R9-31, Article 3 describes other reasons for which the
enrollment guarantee may not apply.

Native Americans:  Native Americans, on or off-reservation, may choose to
receive services from Indian Health Service (IHS), a PL 93-638 tribal
facility or any available contractor.  If a choice is not made within the
specified time limit, Native American Title XIX members living on-reservation
will be assigned to IHS.  Native American Title XIX members living
off-reservation will be assigned to an available contractor using AHCCCS'
Family Continuity Policy and auto-assignment algorithm.  Native American
Title XXI members must make a choice prior to being determined eligible.
Title XXI HIFA parent members' enrollment will follow the Title XIX
enrollment rules.  Native Americans may change from IHS to a contractor or
from a contractor to IHS at any time.

Member Rights:  Members may submit plan change requests to the Contractor
or the AHCCCS Administration.  A denial of any plan change request must
include a description of the member's right to appeal the denial.

4. ANNUAL ENROLLMENT CHOICE

AHCCCSA conducts an Annual Enrollment Choice (AEC) for members on their
annual anniversary date.  [42 CFR 438.56(c)(2)(ii[DMT9])] AHCCCSA may hold
an open enrollment as deemed necessary.  During AEC, members may change
contractors subject to the availability of other contractors within their
Geographic Service Area.  Members are mailed a printed enrollment form and
other information required by the Balanced Budget Act of 1997 (BBA) 60 days
prior to their AEC date and may choose a new contractor by contacting
AHCCCSA to complete the enrollment process.  If the member does not
participate in the AEC, no change of contractor will be made (except
for approved changes under the ACOM Change of Plan Policy) during the new
anniversary year.  This holds true if a contractor's contract is renewed
and the member continues to live in a contractor's service area.  The
Contractor shall comply with the ACOM Member Transition for Annual Enrollment
Choice, Open Enrollment and Other Plan Changes Policy and the AMPM.

5. OPEN ENROLLMENT

In the event that AHCCCSA does not award a CYE '04 contract to an incumbent
contractor, AHCCCSA will hold an open enrollment for those members enrolled
with the exiting contractor.  If those members do not elect to choose a
contractor, they will be auto assigned.  In addition to open enrollment,
AHCCCSA will make changes to both annual enrollment choice materials and
new enrollee materials prior to October 1, 2003 to reflect the change in
 available contractors.   The auto assignment algorithm will be adjusted to
exclude auto assignment of new enrollees to exiting contractors(s).  The
exact dates for the open enrollment and other changes described above have
not yet been determined, but will be communicated when they are finalized.

6. AUTO-ASSIGNMENT ALGORITHM

Once auto-assigned, AHCCCS sends a choice notice to the member and gives
them 16 days to choose a different contractor from the auto-assigned
contractor.  Members who do not exercise their right to choose and do not
have family continuity, are assigned to a contractor through an
auto-assignment algorithm.  The algorithm is a mathematical formula used to
distribute members to the various contractors in a manner that is predictable
and consistent with AHCCCSA goals.  The algorithm favors those contractors
with lower capitation rates in the latest contract award and higher rates
in selected Performance Measures.  For further details on the AHCCCS
Auto-Assignment Algorithm, refer to Attachment G.  AHCCCSA may change the
algorithm at any time during the term of the contract in response to
contractor-specific issues (e.g. imposition of an enrollment cap).
Capitation rates may be adjusted to reflect changes to a contractor's risk
due to changes in the algorithm.

7. AHCCCS MEMBER IDENTIFICATION CARDS

Contractors are responsible for paying the costs of producing AHCCCS member
identification cards.  The Contractor will receive an invoice the month
following the issue date of the identification card.

8. MAINSTREAMING OF AHCCCS MEMBERS

To ensure mainstreaming of AHCCCS members, the Contractor shall take
affirmative action so that members are provided covered services without
regard to payer source, race, color, creed, sex, religion, age, national
origin (to include those with limited English proficiency), ancestry, marital
status, sexual preference, genetic information, or physical or mental
handicap, except where medically indicated. Contractors must take into
account a member's culture, when addressing members and their concerns,
and must take reasonable steps to encourage subcontractors to do the same.
The Contractor must make interpreters of any language available free of
charge for all members to ensure appropriate delivery of covered services.
The Contractor must provide members with information instructing them about
how to access these services.

Examples of prohibited practices include, but are not limited to, the
following, in accordance with Title VI of the US Civil Rights Act of 1964,
42 USC, Section 2001, Executive Order 13166, and rules and regulation
promulgated according to, or as otherwise provided by law:

a. Denying or not providing a member any covered service or access to an
   available facility.
b. Providing to a member any covered service which is different, or is
   provided in a different manner or at a different time from that provided
   to other members, other public or private patients or the public at large,
   except where medically necessary.
c. Subjecting a member to segregation or separate treatment in any manner
   related to the receipt of any covered service; restricting a member in
   any way in his or her enjoyment of any advantage or privilege enjoyed by
   others receiving any covered service.
d. The assignment of times or places for the provision of services on the
   basis of the race, color, creed, religion, age, sex, national origin,
   ancestry, marital status, sexual preference, income status, AHCCCS
   membership, or physical or mental handicap of the participants to be served.

If the Contractor knowingly executes a subcontract with a provider with the
intent of allowing or permitting the subcontractor to implement barriers
to care (i.e. the terms of the subcontract act to discourage the full
utilization of services by some members), the Contractor will be in default
of its contract.

If the Contractor identifies a problem involving discrimination by one of
its providers, it shall promptly intervene and implement a corrective action
plan.  Failure to take prompt corrective measures may place the Contractor
in default of its contract.

9. TRANSITION OF MEMBERS

The Contractor shall comply with the AMPM, and the ACOM Member Transition
for Annual Enrollment Choice, Open Enrollment and Other Plan Changes Policy
standards for member transitions between contractors or GSAs, participation
in or discharge from CRS, to or from an ALTCS Contractor, IHS, a PL 93-638
tribal entity, and upon termination or expiration of a contract.  The
Contractor shall develop and implement policies and procedures, which comply
with these policies to address transition of:

a. Members with significant medical conditions such as a high-risk pregnancy
   or pregnancy within the last 30 days, the need for organ or tissue
   transplantation, chronic illness resulting in hospitalization or nursing
   facility placement, etc.;
b. Members who are receiving ongoing services such as dialysis, home health,
   chemotherapy and/or radiation therapy or who are hospitalized at the time
   of transition;
c. Members who have received prior authorization for services such as
   scheduled surgeries, out-of-area specialty services, nursing home admission;
d. Prescriptions, DME and medically necessary transportation ordered for the
   transitioning member by the relinquishing contractor; and
e. Medical records of the transitioning member (the cost, if any, of
   reproducing and forwarding medical records shall be the responsibility of
   the relinquishing AHCCCS contractor).

When relinquishing members, the Contractor is responsible for timely
notification to the receiving contractor regarding pertinent information
related to any special needs of transitioning members.  The Contractor, when
receiving a transitioning member with special needs, is responsible for
coordinating care with the relinquishing contractor in order that services
not be interrupted, and for providing the new member with contractor and
service information, emergency numbers and instructions about how to obtain
services.

10. SCOPE OF SERVICES

The Contractor shall provide covered services to AHCCCS members in accordance
with all applicable Federal, State and local laws, rules, regulations and
policies, including services listed in this document, listed by reference
in attachments, and AHCCCS policies referenced in this document.  The
services are described in detail in AHCCCS Rules R9-22, Article 2 and
 the AHCCCS Medical Policy Manual (AMPM), all of which are incorporated herein
by reference, except for provisions specific to the Fee-for-Service program,
and may be found in the Bidder's Library.  [42 CFR 438.210(a)(1[DMT10])]
The covered services must be medically necessary and are briefly described
below.  [42 CFR 438.210(a)(4[DMT11])] Except for annual well woman exams,
behavioral health and children's  dental services, covered services must be
provided by, or coordinated with, a primary care provider.  The Contractor
shall coordinate the services it provides to a member with services the
member receives from other entities, including behavioral health services
the member receives through an ADHS/RBHA provider.  The Contractor shall
ensure that, in the process of coordinating care, each member's privacy
is protected in accordance with the privacy requirements in 45 CFR Parts
160 and 164 Subparts A and E, to the extent that they are applicable.
[42 CFR 438.208(b)(4) and 438.224[DMT12]] Services must be rendered by
providers that are appropriately licensed or certified, operating within
their scope of practice, and registered as an AHCCCS provider.  The Contractor
shall provide the same standard of care for all members regardless of
the member's eligibility category. The Contractor shall ensure that the
services are sufficient in amount, duration, or scope to reasonably be
expected to achieve the purpose for which the services are furnished.
The Contractor shall not arbitrarily deny or reduce the amount, duration, or
scope of a required service solely because of diagnosis, type of illness,
or condition of the member.  The Contractor may place appropriate limits on
a service on the basis of criteria such as medical necessity; or for
utilization control, provided the services furnished can reasonably be
expected to achieve their purpose.   [42 CFR 438.210(a)(3[DMT13])]

Authorization of Services:  For the processing of requests for initial
and continuing authorizations of services, the Contractor shall have in
place, and follow, written policies and procedures. The Contractor shall
have mechanisms in place to ensure consistent application of review
criteria for authorization decisions.  Any decision to deny a service
authorization request or to authorize a service in an amount, duration,
or scope that is less than requested, shall be made by a health care
professional who has appropriate clinical expertise in treating the
member's condition or disease.  [42 CFR 438.210(b[DMT14][DMT15])]

Notice of Action: The Contractor shall notify the requesting provider, and
give the member written notice of any decision by the Contractor to deny
a service authorization request, or to authorize a service in an amount,
duration, or scope that is less than requested.  The notice shall meet
the requirements of 42 CFR  438.404, except for the requirement that the
notice to the provider be in writing.  [42 CFR 438.210(c)]

The Contractor shall ensure that its providers are not restricted or
inhibited in any way from communicating freely with members regarding the
members' health care, medical needs and treatment options, even if needed
services are not covered by the Contractor.

Ambulatory Surgery and Anesthesiology:  The Contractor shall provide
surgical services for either emergency or scheduled surgeries when provided
in an ambulatory or outpatient setting such as a freestanding surgical center
or a hospital based outpatient surgical setting.

Anti-hemophilic Agents and Related Services:  The Contractor shall provide
services for the treatment of hemophilia and Von Willebrands disease
(See Paragraph 57, REINSURANCE, Catastrophic Reinsurance).  AHCCCSA holds
a single-source specialty contract for anti-hemophilic agents and related
services for hemophilia.  Non-hemophilia related services are not covered
under this contract.   Non-hemophilia-related care is defined as any care
that is provided not related to the hemophilia services.

AHCCCSA's participating Contractors may access anti-hemophilic agents and
related pharmaceutical services for hemophilia or Von Willebrands under
the terms and conditions of this contract for members enrolled in their plans.
In that instance, the Contractor is the authorizing payor. As such, the
Contractor will provide prior authorization, care coordination, and
reimbursement for all components covered under the contract for their
members. Contractors utilizing the contract will comply with the terms
and conditions of the contract.  Contractors may use the AHCCCSA contract
or contract with a provider of their choice.

Audiology:  The Contractor shall provide audiology services to members
under the age of 21 including the identification and evaluation of hearing
loss and rehabilitation of the hearing loss through medical or surgical
means (i.e. hearing aids).  Only the identification and evaluation of
hearing loss are covered for members 21 years of age and older unless
the hearing loss is due to an accident or injury-related emergent condition.

Behavioral Health:  The Contractor shall provide behavioral health
services as described in Section D, Paragraph 12, Behavioral Health Services.

Children's Rehabilitative Services (CRS):  The program for children with
CRS-covered conditions is administered by the Arizona Department of
Health Services (ADHS) for children who meet CRS eligibility criteria.
The Contractor shall refer children to the CRS program who are
potentially eligible for services related to CRS covered conditions,
as specified in R9-22, Article 2 and A.R.S. Title 36, Chapter 2, Article 3.
The Contractor is responsible for care of members until Children's
Rehabilitative Services Administration (CRSA) determines those members
eligible.  In addition, the Contractor is responsible for covered services
for CRS eligible members unless and until the Contractor has received
written confirmation from CRSA that CRSA will provide the requested service.
The Contractor shall require the member's Primary Care Provider (PCP)
to coordinate the member's care with the CRS Program. For more detailed
information regarding eligibility criteria, referral practices, and
contractor-CRS coordination issues, refer to the CRS Policy and Procedures
Manual and the ACOM, including Section 409 "Notices of Action."

The Contractor shall respond to requests for services potentially covered
by CRSA in accordance with Section 409 "Notices of Action" of the ACOM.
The Contractor is responsible to address prior authorization requests if
CRSA fails to comply with the timeframes specified in Section 409. The
Contractor remains ultimately responsible for the provision of all
covered services to its members, including emergency services not related
to a CRS condition, emergency services related to a CRS condition rendered
outside the CRS network, and AHCCCS covered services denied by
CRSA for the reason that it is not a  service related to a CRS condition.

Referral to CRSA does not relieve the Contractor of the responsibility for
timely providing medically necessary AHCCCS services not covered by
CRSA. In the event that CRSA denies a medically necessary AHCCCS service for
the reason that it is not related to a CRS condition, the Contractor must
promptly respond to the service authorization request and authorize the
provision of medically necessary services. CRSA cannot contest the
Contractor prior authorization determination if CRSA fails to timely
respond to a service authorization request. Contractors, through their
Medical Directors, may request review from CRSA when it denies a service
for the reason that it is not covered by the CRS Program. The Contractor
may also request a hearing with the Administration if it is dissatisfied
with the CSRA determination. If the AHCCCS Hearing Decision determines
that the service should have been provided by CRSA, CRSA shall be
financially responsible for the costs incurred by the Contractor in
providing the service.

A member with private insurance is not required to utilize CRSA.  If the
member uses the private insurance network for a CRS covered condition, the
Contractor is responsible for all applicable deductibles and copayments.
When the private insurance is exhausted with respect to CRS covered
conditions, the Contractor shall refer the member to CRSA for determination
for CRS services.  The Contractor is not responsible to provide services
in instances when the CRS eligible member refuses to receive CRS covered
services through the CRS Program.  If the Contractor becomes aware that a
member with a CRS covered condition refuses to participate in the CRS
application process or refuses to receive services through the CRS Program,
the member may be billed by the provider in accordance with AHCCCS
regulations regarding billing for unauthorized services.

Chiropractic Services:  The Contractor shall provide chiropractic services
to members under age 21 when prescribed by the member's PCP and approved
by the Contractor in order to ameliorate the member's medical condition.
Medicare approved chiropractic services shall also be covered, subject
to limitations specified in CFR 410.22, for Qualified Medicare
Beneficiaries if prescribed by the member's PCP and approved by the
Contractor.

Dental:  The Contractor shall provide all members under the age of 21
with all medically necessary dental services including emergency dental
services, dental screening and preventive services in accordance with the
AHCCCS periodicity schedule, as well as therapeutic dental services,
dentures, and pre-transplantation dental services.  The Contractor shall
monitor compliance with the EPSDT periodicity schedule for dental
screening services. The Contractor is required to meet specific utilization
rates for members as described in Section D, Paragraph 24, Performance
Standards.  The Contractor shall ensure that members are notified when
dental screenings are due if the member has not been scheduled for a visit.
If a dental screening is not received by the member, a second notice must
be sent.  Members under the age of 21 may request dental services without
referral and may choose a dental provider from the Contractor's provider
network.  For members who are 21 years of age and older, the Contractor
shall provide emergency dental care, medically necessary dentures and
dental services for transplantation services as specified in the AMPM.

Dialysis:  The Contractor shall provide medically necessary dialysis,
supplies, diagnostic testing and medication for all members when provided
by Medicare-certified hospitals or Medicare-certified end stage renal
disease (ESRD) providers.  Services may be provided on an outpatient basis,
or on an inpatient basis if the hospital admission is not solely to provide
chronic dialysis services.

Early and Periodic Screening, Diagnosis and Treatment (EPSDT):  The
Contractor shall provide comprehensive health care services through primary
prevention, early intervention, diagnosis and medically necessary treatment
to correct or ameliorate defects and physical or mental illness discovered
by the screenings for members under age 21.  The Contractor shall ensure
that these members receive required health screenings, including those for
developmental/behavioral health, in compliance with the AHCCCS periodicity
schedule. The Contractor shall submit all EPSDT reports to the AHCCCS Division
of Health Care Management, as required by the AMPM.  The Contractor is
required to meet specific participation/utilization rates for members
as described in Section D, Paragraph 24, Performance Standards.

The Contractor shall ensure the initiation and coordination of a referral
to the ADHS/RBHA system for members in need of behavior health services.
The Contractor shall follow up with the RBHA to monitor whether members have
received these health services.

Emergency Services: The Contractor shall have and/or provide the following
as a minimum:

a. Emergency services facilities adequately staffed by qualified medical
   professionals to provide pre-hospital, emergency care on a 24-hour-a-day,
   7-day-a-week basis, for the sudden onset of a medically emergent condition.
   Emergency medical services are covered without prior authorization.
   The Contractor is encouraged to contract with emergency service facilities
   for the provision of emergency services.  The Contractor is also encouraged
   to contract with or employ the services of non-emergency facilities
   (e.g. urgent care centers) to address member non-emergency care issues
   occurring after regular office hours or on weekends.  The Contractor
   shall be responsible for educating members and providers regarding
   appropriate utilization of emergency room services including behavioral
   health emergencies.    The Contractor shall monitor emergency service
   utilization (by both provider and member) and shall have guidelines for
   implementing corrective action for inappropriate utilization;
b. All medical services necessary to rule out an emergency condition;
c. Emergency transportation; and
d. Member access by telephone to a physician, registered nurse, physician
   assistant or nurse practitioner for advice in emergent or urgent
   situations, 24 hours per day, 7 days per week.

Per the Balanced Budget Act of 1997, CFR 438.114[DMT16], the following
conditions apply with respect to coverage and payment of emergency services:

The Contractor must cover and pay for emergency services regardless of
whether the provider that furnishes the service has a contract with the
Contractor.

The Contractor may not deny payment for treatment obtained under either
of the following circumstances:

1. A member had an emergency medical condition, including cases in which the
   absence of medical attention would not have resulted in the outcomes
   identified in the definition of emergency medical condition CFR 438.114.
2. A representative of the Contractor (an employee or subcontracting
   provider) instructs the member to seek emergency medical services.

Additionally, the Contractor may not:

1. Limit what constitutes an emergency medical condition as defined in
   CFR 438.114, on the basis of lists of diagnoses or symptoms.
2. Refuse to cover emergency services based on the failure of the
   provider, hospital, or fiscal agent to notify the Contractor of the
   member's screening and treatment within 10 calendar days of presentation
   for emergency services.  This notification stipulation is only related
   to the provision of emergency services.
3. Require notification of Emergency Department treat and release visits
   as a condition of payment unless the plan has prior approval of the
   AHCCCS Administration.

A member who has an emergency medical condition may not be held liable
for payment of subsequent screening and treatment needed to diagnose the
specific condition or stabilize the patient.

The attending emergency physician, or the provider actually treating the
member, is responsible for determining when the member is sufficiently
stabilized for transfer or discharge, and such determination is binding on
the Contractor responsible for coverage and payment.  The Contractor
shall comply with BBA guidelines regarding the coordination of
post-stabilization care.

Eye Examinations/Optometry:  The Contractor shall provide all medically
necessary emergency eye care, vision examinations, prescriptive lenses,
and treatments for conditions of the eye for all members under the age of 21.
For members who are 21 years of age and older, the Contractor shall
provide emergency care for eye conditions which meet the definition of
an emergency medical condition. Also covered for this population is cataract
removal, and medically necessary vision examinations and prescriptive
lenses, if required, following cataract removal and other eye conditions as
specified in the AMPM.

Family Planning:  The Contractor shall provide family planning services
in accordance with the AMPM, for all members who choose to delay or
prevent pregnancy.  These include medical, surgical, pharmacological and
laboratory services, as well as contraceptive devices.  Information and
counseling, which allow members to make informed decisions regarding family
planning methods, shall also be included.  If the Contractor does not
provide family planning services, it must contract for these services
through another health care delivery system, which allows members freedom
of choice in selecting a provider.

The Contractor shall provide services to members enrolled in the Family
Planning Services Extension Program, a program that provides family
planning services only, for a maximum of 24 months, to women whose SOBRA
eligibility has terminated.  The Contractor is also responsible for
notifying AHCCCSA when a SOBRA woman is sterilized to prevent inappropriate
enrollment in the SOBRA Family Planning Services Extension Program.
Notification should be made at the time the newborn is reported or after
the sterilization procedure is completed.

Health Risk Assessment and Screening:  The Contractor shall provide these
services for non-hospitalized members, 21 years of age and older.
These services include, but are not limited to, screening for hypertension,
elevated cholesterol, colon cancer, sexually transmitted diseases,
tuberculosis and HIV/AIDS; nutritional assessment in cases when the member
has a chronic debilitating disease affected by nutritional needs;
mammograms and prostate screenings; physical examinations and diagnostic
work-ups; and immunizations. Required assessment and screening services
for members under age 21 are included in the AHCCCS EPSDT periodicity schedule.

Home and Community Based Services (HCBS):  Assisted living facility,
alternative residential setting, or home and community based services
(HCBS) as defined in R9-22, Article 2 and R9-28, Article 2 that meet the
provider standards described in R9-28, Article 5, and subject to the
limitations set forth in the AMPM.  This service is covered in lieu of
a nursing facility.

Home Health: This service shall be provided under the direction of a
physician to prevent hospitalization or institutionalization and may
include nursing, therapies, supplies and home health aide services. It
shall be provided on a part-time or intermittent basis.

Hospice:  These services are covered for members under 21 years of age
who are certified by a physician as being terminally ill and having six
months or less to live.  See the AMPM for details on covered hospice services.

Hospital:  Inpatient services include semi-private accommodations for
routine care, intensive and coronary care, surgical care, obstetrics and
newborn nurseries, and behavioral health emergency/crisis services.  If the
member's medical condition requires isolation, private inpatient
accommodations are covered.  Nursing services, dietary services and ancillary
services such as laboratory, radiology, pharmaceuticals, medical supplies,
blood and blood derivatives, etc. are also covered.  Outpatient hospital
services include any of the above, which may be appropriately provided on an
outpatient or ambulatory basis (i.e. laboratory, radiology, therapies,
ambulatory surgery, etc.).  Observation services may be provided on an
outpatient basis, if determined reasonable and necessary, when deciding
whether the member should be admitted for inpatient care.  Observation
services include the use of a bed and periodic monitoring by hospital nursing
staff and/or other staff to evaluate, stabilize or treat medical conditions
of a significant degree of instability and/or disability.

Immunizations:  The Contractor shall provide immunizations for adults
(21 years of age and older) to include diphtheria-tetanus, influenza,
pneumococcus, rubella, measles and hepatitis-B.  For all members under the
age of 21, immunization requirements include diphtheria, tetanus,
pertussis vaccine (DPT), inactivated polio vaccine (IPV), measles, mumps,
rubella (MMR) vaccine, H. influenza, type B (HIB) vaccine, hepatitis B
(Hep B) vaccine, varicella zoster virus (VZV) vaccine and pneumococcal
conjugate vaccine (PCV).  The Contractor is required to meet specific
immunization rates for members under the age of 21, which are described in
Paragraph 24, Performance Standards.

Indian Health Service (IHS):  AHCCCSA will reimburse claims on a FFS
basis for acute care services that are medically necessary, eligible for
100% Federal reimbursement, and are provided to Title XIX members enrolled
with the Contractor, in an IHS or a 638 tribal facility.  The Contractor
is responsible for reimbursement to IHS or tribal facilities for emergency
services provided to Title XXI Native American members enrolled with the
Contractor.  The Contractor may choose to subcontract with an IHS or 638
tribal facility as part of their provider network for the delivery of covered
services, however, the Contractor will be liable for the cost of the care in
the event they choose to do so.

Laboratory:  Laboratory services for diagnostic, screening and monitoring
purposes are covered when provided by a CLIA (Clinical Laboratory Improvement
Act) approved free standing, hospital, clinic, physician office or other
health care facility laboratory.

Upon written request, the Contractor may obtain laboratory test data on
members from a freestanding laboratory or hospital-based laboratory subject
to the requirements specified in A.R.S. Section 36-2903(R) and (S).
The data shall be used exclusively for quality improvement activities
and health care outcome studies required and/or approved by the
Administration.
Maternity:  The Contractor shall provide pre-conception counseling,
pregnancy identification, prenatal care, treatment of pregnancy related
conditions, labor and delivery services, and postpartum care for members.
Services may be provided by physicians, physician assistants, nurse
practitioners, or certified nurse midwives. Members may select or be assigned
to a PCP specializing in obstetrics.  All members, anticipated to have a
low-risk delivery, may elect to receive labor and delivery services in
their home, if this setting is included in the allowable settings of the
Contractor and the Contractor has providers in its network that offer home
labor and delivery services.  All members, anticipated to have a low-risk
prenatal course and delivery, may elect to receive prenatal care, labor and
delivery and postpartum care provided by licensed midwives, if these
providers are in the Contractor's network.  All licensed midwife labor and
delivery services must be provided in the member's home, as licensed
midwives do not have admitting privileges in hospitals or AHCCCS registered
freestanding birthing centers.  Members receiving maternity services from a
licensed midwife must also be assigned to a PCP for other health care and
medical services. The Contractor shall allow women and their newborns to
receive up to 48 hours of inpatient hospital care after a routine vaginal
delivery and up to 96 hours of inpatient care after a cesarean delivery.
The attending health care provider, in consultation with the mother, may
discharge the mother or newborn prior to the 48-hour minimum length of stay.
A normal newborn may be granted an extended stay in the hospital of birth
when the mother's continued stay in the hospital is beyond the 48 or 96 hour
stay.

The Contractor shall inform all assigned AHCCCS pregnant women of voluntary
prenatal HIV testing and the availability of medical counseling if the
test is positive. The Contractor shall provide information in the member
handbook and annually in the member newsletter, which encourages pregnant
women to be tested and provides instructions about where testing is
available.  Semi-annually, the Contractor shall report to AHCCCS the number
of pregnant women who have been identified as HIV/AIDS positive.  This
report is due no later than 30 days after the end of the second and fourth
quarters of the contract year.

Medical Foods:  Medical foods are covered within limitations defined in
the AMPM for members diagnosed with a metabolic condition included under
the ADHS Newborn Screening Program and specified in the AMPM. The medical
foods, including metabolic formula and modified low protein foods, must
be prescribed or ordered under the supervision of a physician.

Medical Supplies, Durable Medical Equipment (DME), Orthotic and Prosthetic
Devices:  These services are covered when prescribed by the member's PCP,
attending physician, practitioner, or by a dentist.  Medical equipment may
be rented or purchased only if other sources, which provide the items at
no cost, are not available.  The total cost of the rental must not exceed
the purchase price of the item.  Reasonable repairs or
adjustments of purchased equipment are covered to make the equipment
serviceable and/or when the repair cost is less than renting or purchasing
another unit.

Nursing Facility:  The Contractor shall provide services in nursing
facilities, including religious non-medical health care institutions, for
members who require short-term convalescent care not to exceed 90 days per
contract year.  In lieu of a nursing facility, the member may be placed
in an assisted living facility, an alternative residential setting, or
receive home and community based services (HCBS) as defined in
R9-22, Article 2 and R9-28, Article 2 that meet the provider standards
described in R9-28, Article 5, and subject to the limitations set forth
in the AMPM.

Nursing facility services must be provided in a dually-certified
Medicare/Medicaid nursing facility, which includes in the per-diem rate:
nursing services; basic patient care equipment and sickroom supplies;
dietary services; administrative physician visits; non-customized DME;
necessary maintenance and rehabilitation therapies; over-the-counter
medications; social, recreational and spiritual activities; and
administrative, operational medical direction services.  See Paragraph 41,
Nursing Facility Reimbursement, for further details.

The Contractor shall notify the Assistant Director of the Division of
Member Services, in writing, when a member has been residing in a
nursing facility for 75 days.  This will allow AHCCCSA time to follow-up
on the status of the ALTCS application and to prepare for potential
fee-for-service coverage, if the stay goes beyond the 90-day maximum.

Nutrition:  Nutritional assessments may be conducted as a part of the
EPSDT screenings for members under age 21, and to assist members 21 years
of age and older whose health status may improve with nutritional
intervention.  Assessment of nutritional status on a periodic basis may
be provided as determined necessary, and as a part of the health risk
assessment and screening services provided by the member's PCP.  AHCCCS
covers nutritional therapy on an enteral, parenteral or oral basis, when
determined medically necessary to provide either complete daily dietary
requirements or to supplement a member's daily nutritional and caloric
intake and when AHCCCS criteria specified in the AMPM are met.

Physician:  The Contractor shall provide physician services to include
medical assessment, treatments and surgical services provided by licensed
allopathic or osteopathic physicians.

Podiatry:  The Contractor shall provide podiatry services to include
bunionectomies, casting for the purpose of constructing or accommodating
orthotics, medically necessary orthopedic shoes that are an integral part
of a brace, and medically necessary routine foot care for patients
with a severe systemic disease which prohibits care by a nonprofessional
person.
Post-stabilization Care Services Coverage and Payment:  Pursuant to
42 CFR 438.114[DMT17], 422.113(c) and 422.133, the following conditions
apply with respect to coverage and payment of emergency and of
post-stabilization care services, except where otherwise noted in the contract:

The Contractor must cover and pay for post-stabilization care services
without authorization, regardless of whether the provider that furnishes
the service has a contract with the Contractor, for the following situations:

1. Post-stabilization care services that were pre-approved by the Contractor;
   or,
2. Post-stabilization care services were not pre-approved by the
   Contractor because the Contractor did not respond to the treating
   provider's request for pre-approval within one hour after being requested
   to approve such care or could not be contacted for pre-approval.
3. The Contractor representative and the treating physician cannot
   reach agreement concerning the member's care and a contractor physician
   is not available for consultation.  In this situation, the Contractor
   must give the treating physician the opportunity to consult with a
   contractor physician and the treating physician may continue with
   care of the patient until a contractor physician is reached or one
   of the criteria in CFR 422.113(c)(3) is met.

Pursuant to CFR 422.113(c)(3[DMT18]), the Contractor's financial
responsibility for post-stabilization care services that have not been
pre-approved ends when:

1. A contractor physician with privileges at the treating hospital
   assumes responsibility for the member's care;
2. A contractor physician assumes responsibility for the member's care
   through transfer;
3. A contractor representative and the treating physician reach an
   agreement concerning the member's care; or
4. The member is discharged.

Pregnancy Terminations:   AHCCCS covers pregnancy termination if the
pregnant member suffers from a physical disorder, physical injury, or
physical illness, including a life endangering physical condition caused by,
or arising from, the pregnancy itself, that would, as certified by a
physician, place the member in danger of death unless the pregnancy is
terminated; the pregnancy is a result of rape or incest.

The attending physician must acknowledge that a pregnancy termination has
been determined medically necessary by submitting the Certificate of
Necessity for Pregnancy Termination.  This certificate must be submitted to
the appropriate assigned Contractor Medical Director.  The Certificate
must certify that, in the physician's professional judgment, one or more
of the previously mentioned criteria have been met.

Prescription Drugs:  Medications ordered by a PCP, attending physician,
dentist or other authorized prescriber and dispensed under the direction
of a licensed pharmacist are covered subject to limitations related to
prescription supply amounts, contractor formularies and prior
authorization requirements.  Contractors may include over-the-counter
medications in their formulary, as defined in the AMPM.  An appropriate
over-the-counter medication may be prescribed, when it is determined to be
a lower-cost alternative to prescription drugs.

Primary Care Provider (PCP):  PCP services are covered when provided by
a physician, physician assistant or nurse practitioner selected by,
or assigned to, the member.  The PCP provides primary health care and serves
as a coordinator in referring the member for specialty medical services.
[42 CFR 438.208(b)] The [DMT19]PCP is responsible for maintaining the member's
primary medical record, which contains documentation of all
health risk assessments and health care services of which they are aware
whether or not they were provided by the PCP.

Radiology and Medical Imaging:  These services are covered when ordered
by the member's PCP, attending physician or dentist and are provided for
diagnosis, prevention, treatment or assessment of a medical condition.
Services are generally provided in hospitals, clinics, physician offices and
other health care facilities.

Rehabilitation Therapy:  The Contractor shall provide occupational, physical
and speech therapies.  Therapies must be prescribed by the member's PCP
or attending physician for an acute condition and the member must have the
potential for improvement due to the rehabilitation.  Physical therapy
for all members, and occupational and speech therapies for members under
the age of 21, are covered in both inpatient and outpatient settings.
For those members who are 21 and over, occupational and speech therapies
are covered in inpatient settings only.

Respiratory Therapy:  This therapy is covered in inpatient and outpatient
settings when prescribed by the member's PCP or attending physician, and
is necessary to restore, maintain or improve respiratory functioning.

Transplantation of Organs and Tissue, and Related Immunosuppressant Drugs:
These services are covered within limitations defined in the AMPM for
members diagnosed with specified medical conditions.  Such limitations include:
whether the stage of the disease is such that the transplant can affect
the outcome; the member has no other conditions that substantially reduce
the potential for successful transplantation; and whether the member will
be able to comply with necessary and required regimens of treatment. Bone
grafts are also covered under this service.  Services include pre-transplant
inpatient or outpatient evaluation; donor search; organ/tissue harvesting
or procurement; preparation and transplantation services; and convalescent
care.  In addition, if a member receives, or has received, a transplant
covered by a source other than AHCCCS, medically necessary non-experimental
services are provided, within limitations, after the discharge from the
acute care hospitalization for the transplantation. AHCCCS has contracted
with transplantation providers for the Contractor's use or the Contractor
may select its own transplantation provider.

Transportation:  These services include emergency and non-emergency
medically necessary transportation.  Emergency transportation, including
transportation initiated by an emergency response system such as 911, may
be provided by ground, air or water ambulance to manage an AHCCCS member's
emergency medical condition at an emergency scene and transport the member
 to the nearest appropriate medical facility.  Non-emergency
transportation shall be provided for members who are unable to provide
their own transportation for medically necessary services.

Triage/Screening and Evaluation:  These are covered services when provided
by acute care hospitals, IHS facilities and urgent care centers to
determine whether or not an emergency exists, assess the severity of the
member's medical condition and determine what services are necessary
to alleviate or stabilize the emergent condition. Triage/screening services
must be reasonable, cost effective and meet the criteria for severity
of illness and intensity of service.

11. SPECIAL HEALTH CARE NEEDS

The Contractor shall have in place a mechanism to identify and stratify
all members with special health care needs [42 CFR 438.240(b)(4[DMT20])].
The Contractor shall implement mechanisms to assess each member identified
as having special health care needs, in order to identify any ongoing
special conditions of the member which require a course of treatment or
regular care monitoring.  The assessment mechanisms shall use appropriate
health care professionals [42 CFR 438.208(c)(2[DMT21])].  The Contractor
shall share with other entities providing services to that member the
results of its identification and assessment of that member's needs so
that those activities need not be duplicated [42 CFR 438.208(b)(3[DMT22])].

For members with special health care needs determined to need a
specialized course of treatment or regular care monitoring, the Contractor
must have procedures in place to allow members to directly access a
specialist (for example through a standing referral or an approved
number of visits) as appropriate for the member's condition and identified
needs.  [42 CFR 438.208(c)(4[DMT23])]

The Contractor shall have a methodology to identify providers willing to
provide medical home services and make reasonable efforts to offer access
to these providers.

The American Academy of Pediatrics (AAP) describes care from a medical home as:
	* Accessible
	* Continuous
	* Coordinated
	* Family-centered
	* Comprehensive
	* Compassionate
	* Culturally effective

12. BEHAVIORAL HEALTH SERVICES

AHCCCS members, except for SOBRA Family Planning members, are eligible for
comprehensive behavioral health services.  With the exception of the
Contractor's providers' medical management of certain behavioral health
conditions as described under "medication Management Services" below,
the behavioral health benefit for these members is provided through the ADHS -
Regional Behavioral Health Authority (RBHA) system.  The Contractor shall be
responsible for member education regarding these benefits; provision of
limited emergency inpatient services; and screening and referral to the RBHA
system of members identified as requiring behavioral health services.

Member Education: The Contractor shall be responsible for educating members
in the member handbook and other printed documents about covered behavioral
health services and where and how to access services. Covered services include:

a. Behavior Management (behavioral health personal assistance, family
   support, peer support)
b. Case Management Services
c. Emergency/Crisis Behavioral Health Services
d. Emergency Transportation
e. Evaluation and Screening
f. Group Therapy and Counseling
g. Individual Therapy and Counseling
h. Family Therapy and Counseling
i. Inpatient Hospital
j. Inpatient Psychiatric Facilities (residential treatment centers and
   sub-acute facilities)
k. Institutions for Mental Diseases (with limitations)
l. Laboratory and Radiology Services for Psychotropic Medication Regulation
   and Diagnosis
m. Non-Emergency Transportation
n. Partial Care (Supervised day program, therapeutic day program, and
   medical day program)
o. Psychosocial Rehabilitation (living skills training; health promotion;
   pre-job training, education and development; job coaching and
   employment support)
p. Psychotropic Medication
q. Psychotropic Medication Adjustment and Monitoring
r. Respite Care (with limitations)
s. Therapeutic foster care services

Referrals:  As specified in Section D, Paragraph 10, Scope of Services,
EPSDT, the Contractor must provide developmental/behavioral health screenings
for members up to 21 years of age in compliance with the AHCCCS periodicity
schedule.  The Contractor shall ensure the initiation and coordination
of behavioral health referrals of these members to the RBHA when determined
necessary through the screening process. The Contractor is responsible for
RBHA referral and follow-up collaboration, as necessary, for other members
identified as needing behavioral health evaluation and treatment.
Members may also access the RBHA system for evaluation by self-referral
or be referred by schools, State agencies or other service providers.  The
Contractor is responsible for providing transportation to a member's first
RBHA evaluation appointment if a member is unable to provide his/her own
transportation.

Emergency Services: For those members who are not ADHS behavioral health
recipients, the Contractor is responsible for up to three days of inpatient
behavioral health services per emergency episode, not to exceed 12 days per
contract year.  A referral to the RBHA for evaluation and identification as
an ADHS behavioral health recipient should be initiated as soon as possible
after admission.

When members present in an emergency room setting, the Contractor is
responsible for all emergency medical services including triage, physician
assessment and diagnostic tests.  For members who are not ADHS behavioral
health recipients, the Contractor is responsible to provide medically
necessary psychiatric consultations or psychological consultations in
emergency room settings to help stabilize the member or determine the need
for inpatient behavioral health services.  ADHS is responsible for medically
necessary psychiatric consultations provided to ADHS behavioral health
recipients in emergency room settings.

Coordination of Care: The Contractor is responsible for ensuring that a
medical record is established by the PCP when behavioral health information
is received from the RBHA or provider about an assigned member even if the
PCP has not yet seen the assigned member.  In lieu of actually establishing
a medical record, such information may be kept in an appropriately labeled
file but must be associated with the member's medical record as soon as one
is established.  The Contractor shall require the PCP to respond to
RBHA/provider information requests pertaining to ADHS behavioral health
recipient members within 10 business days of receiving the request.  The
response should include all pertinent information, including, but not limited
to, current diagnoses, medications,  laboratory results, last PCP visit, and
recent hospitalizations.  The Contractor shall require the PCP to document or
initial signifying review of member behavioral health information received
from a RBHA behavioral health provider who is also treating the member.
All affected subcontracts shall include this provision by July 1, 2005.
For prior period coverage, the Contractor is responsible for payment of
all claims for medically necessary covered behavioral health services to
members who are not ADHS behavioral health recipients.

Medication Management Services: The Contractor shall allow PCPs to provide
medication management services (prescriptions, medication monitoring
visits, laboratory and other diagnostic tests necessary for diagnosis and
treatment of behavioral disorders) to members with diagnoses of depression,
anxiety and attention deficit hyperactivity disorder.  The Contractor
shall make available, on the Contractor's formulary, medications for the
treatment of these disorders.

The Contractor shall ensure that training and education are available to
PCPs regarding behavioral health referral and consultation procedures.
The Contractor shall establish policies and procedures for referral and
consultation and shall describe them in its provider manual.  Policies for
referral must include, at a minimum, criteria, processes, responsible parties
and minimum requirements no less stringent than those specified in this
contract for the forwarding of member medical information.

Transfer of Care:  When a PCP has initiated medication management services
for a member to treat a behavioral health disorder, and it is subsequently
determined by the PCP or contractor that the member should be transferred
to a RBHA prescriber for evaluation and/or continued medication management
services, the Contractor will require and ensure that the PCP or contractor
coordinates the transfer of care. All affected subcontracts shall include
this provision by July 1, 2005.  The Contractor shall establish policies
and procedures for the transition of members who are referred to the RBHA
for ongoing treatment.  The contractor shall ensure that PCPs maintain
continuity of care for these members.  The policies and procedures
must address, at a minimum, the following:

1. Guidelines for when a transition of the member to the RBHA for ongoing
   treatment is indicated.
2. Protocols for notifying the RBHA of the member's transfer, including
   reason for transfer, diagnostic information, and medication history.
3. Protocols and guidelines for the transfer of medical records, including
   but not limited to which parts of the medical record are to be copied,
   timeline for making the medical record available to the RBHA, observance
   of confidentiality of the member's medical record, and protocols for
   responding to RBHA requests for additional medical record information.
4. Protocols for transition of prescription services, including but not
   limited to notification to the RBHA of the member's current medications
   and timeframes for dispensing and refilling medications during the
   transition period. This coordination must ensure at a minimum, that
   the member does not run out of prescribed medications prior to the first
   appointment with a RBHA prescriber and that all relevant member
   pertinent medical information as outlined above and, including the reason
   for transfer is forwarded to the receiving RBHA prescriber prior to
   the member's first scheduled appointment with the RBHA prescriber.
5. Contractor activities to monitor to ensure that members are appropriately
   transitioned to the RBHA for care.

The Contractor shall ensure that its quality management program incorporates
monitoring of the PCP's management of behavioral health disorders and
referral to, coordination of care with and transfer of care to RBHA providers
as required under this contract.

13. AHCCCS POLICY MANUALS

The AHCCCS Medical Policy Manual (AMPM) and the AHCCCS Contractor Operations
Manual (ACOM) are hereby incorporated by reference into this contract.  The
Contractor is responsible for complying with the requirements set forth
within.  The AMPM and ACOM, with search capability and linkages to AHCCCS
rules, statutes and other resources, are available to all interested parties
through the AHCCCS Home Page on the Internet (www.azahcccs.gov).  Upon
adoption by AHCCCSA, AMPM and ACOM updates will be available through the
Internet at the beginning of each month.  The Contractor shall be
responsible for maintaining a copy current with these updates.

14. MEDICAID SCHOOL BASED CLAIMING PROGRAM (MSBC)

Pursuant to an Intergovernmental Agreement with the Department of Education,
and a contract with a Third Party Administrator, AHCCCSA reimburses
participating school districts for specifically identified Medicaid services
when provided to Medicaid eligible children who are included under the
Individuals with Disabilities Education Act (IDEA).  The Medicaid services
must be identified in the member's Individual Education Plan (IEP) as
medically necessary for the child to obtain a public school education.

MSBC services are provided in a school setting or other approved setting
specifically to allow children to receive a public school education. They
do not replace medically necessary services provided outside the school
setting or other MSBC approved alternative setting.  Currently, services
include audiology, therapies (OT, PT and speech/language); behavioral
healthevaluation and counseling; nursing and attendant care; and specialized
transportation.  The Contractor's evaluations and determinations, about
whether services are medically necessary, should be made independent of the
fact that the child is receiving MSBC services.

Contractors and their providers must coordinate with schools and school
districts that provide MSBC services to the Contractor's enrolled members.
Services should not be duplicative.  Contractor case managers, working with
special needs children, should coordinate with school or school district
case managers/special education teachers, working with these members.
Transfer of member medical information and progress toward treatment goals
between the Contractor and the member's school or school district is
required and should be used to enhance the services provided to members.

15. PEDIATRIC IMMUNIZATIONS AND THE  VACCINE FOR CHILDREN  PROGRAM

Through the Vaccine for Children Program, the Federal and State governments
purchase, and make available to providers free of charge, vaccines for
AHCCCS children under age 19.  The Contractor shall not utilize AHCCCS
funding to purchase vaccines for members under the age of 19.  If
vaccines are not available through the VFC Program, the Contractor shall
contact the AHCCCSA Division of Health Care Management, Clinical Quality
Management Unit.  Any provider, licensed by the State to administer
immunizations, may register with ADHS as a "VFC provider" and receive free
vaccines.  The Contractor shall not reimburse providers for the
administration of the vaccines in excess of the maximum allowable as set
by CMS.  The Contractor shall comply with all VFC requirements and monitor
its providers to ensure that, if providing immunizations to AHCCCS members
under the age of 19, the providers are registered with ADHS/VFC.

Arizona State law requires the reporting of all immunizations given to
children under the age of 19.  Immunizations must be reported at least
monthly to the ADHS.  Reported immunizations are held in a central database
known as ASIIS (Arizona State Immunization Information System), which can
be accessed by providers to obtain complete, accurate immunization records.
Software is available from ADHS to assist providers in meeting this reporting
requirement.  Contractors are encouraged to educate their provider network
about these reporting requirements and the use of this resource.

16. STAFF REQUIREMENTS AND SUPPORT SERVICES

The Contractor shall have in place the organization, management and
administrative systems capable of fulfilling all contract requirements.
For the purposes of this contract, the Contractor shall not employ or contract
with any individual that has been debarred, suspended or otherwise lawfully
prohibited from participating in any public procurement activity or from
participating in non-procurement activities under regulations issued under
Executive Order No. 12549 or under guidelines implementing Executive Order
12549. [42 CFR 438.610(a) and (b[DMT24])]. The Contractor is responsible for
maintaining a significant local (within the State of Arizona) presence.
This presence would include staff as described in a., b., d., e.,
f., g., i., k., n., o., p. and q. below.  The Contractor must obtain approval
from AHCCCS prior to moving functions outside the State of Arizona.
Such a request for approval must include a description of the processes in
place that assure rapid responsiveness to effect changes for contract
compliance.

The Contractor shall be responsible for any additional costs associated
with on-site audits or other oversight activities which result from
required system located outside of the State of Arizona.

At a minimum, the following staff is required:

a. A full-time Administrator/CEO/COO or designee must be available during
   working hours to fulfill the responsibilities of the position and to
   oversee the entire operation of the contractor.  The Administrator shall
   devote sufficient time to the Contractor's operations to ensure adherence
   to program requirements and timely responses to AHCCCS Administration.
b. A Medical Director who shall be an Arizona-licensed physician.  The
   Medical Director shall be actively involved in all-major clinical
   programs and QM/UM components of the Contractor.  The Medical Director
   shall devote sufficient time to the Contractor to ensure timely medical
   decisions, including after-hours consultation as needed.
c. A Chief Financial Officer/CFO who is available at all times to fulfill
   the responsibilities of the position and to oversee the budget and
   accounting systems implemented by the Contractor.
d. A Quality Management/ Coordinator who is an Arizona-licensed registered
   nurse, physician or physician's assistant.
e. A Utilization Management Coordinator who is an Arizona-licensed registered
   nurse, physician or physician's assistant.
f. A Maternal Health/EPSDT Coordinator who shall be an Arizona-licensed
   nurse, physician or physician's assistant; or have a Master's degree in
   health services, public health or health care administration or other
   related field.
g. A Behavioral Health Coordinator who shall be a behavioral health
   professional as described in Health Services Rule R9-20. The Behavioral
   Health Coordinator shall devote sufficient time to ensure that the
   Contractor's behavioral health referral and coordination activities are
   implemented per AHCCCSA requirements.
h. Prior Authorization staff to authorize health care 24 hours per day, 7
   days per week.  This staff shall include an Arizona-licensed nurse,
   physician or physician's assistant.  The staff will work under the
   direction of an Arizona-licensed registered nurse, physician, or
   physician's assistant.
i. Concurrent Review staff to conduct inpatient concurrent review.  This
   staff shall consist of an Arizona-licensed nurse, physician, physician's
   assistant.  The staff will work under the direction of an Arizona-licensed
   registered nurse, physician or physician's assistant.
j. Member Services Manager and staff to coordinate communications with members
   and act as member advocates.  There shall be sufficient Member Service
   staff to enable members to receive prompt resolution to their
   inquiries/problems, and to meet the Contractor's standards for
   resolution, telephone abandonment rates and telephone hold times.
k. Provider Services Manager and staff to coordinate communications between
   the Contractor and its subcontractors.  There shall be sufficient
   Provider Services staff to enable providers to receive prompt resolution
   to their problems or inquiries and appropriate education about
   participation in the AHCCCS program.
l. A Claims Administrator and Claims Processors to ensure the timely and
   accurate processing of original claims, resubmissions and overall
   adjudication of claims.
m. Encounter Processors to ensure the timely and accurate processing and
   submission to AHCCCSA of encounter data and reports.
n. A Grievance Manager who is responsible for oversight of the Contractor's
   grievance system for members and providers.
o. A Compliance Officer who will implement and oversee the Contractor's
   compliance program.  The compliance officer shall be an on-site management
   official, available to all employees, with designated and recognized
   authority to access records and make independent referrals to the AHCCCSA,
   Office of Program Integrity.  See Paragraph 62, Corporate Compliance, for
   more information.
p. Contractor Staff sufficient to implement and oversee compliance with both
   the Contractor's Cultural Competency Plan and the ACOM Cultural Competency
   Policy, and to oversee compliance with all AHCCCS requirements pertaining
   to limited English proficiency (LEP).
q. Clerical and Support staff to ensure appropriate functioning of the
   Contractor's operation.
r. Business Continuity Planning Coordinator as noted in the ACOM Business
   Continuity and Recovery Plan Policy
s. A Pharmacy Coordinator/Director to oversee and administer the prescription
   drug and pharmacy services benefit.  If the Pharmacy Coordinator/Director
   is not an Arizona licensed pharmacist, the services of a pharmacist may
   be obtained through a contract with a prescription benefit management
   company or a consultant.

The Contractor shall inform AHCCCS, Division of Health Care Management, in
writing within seven days, when an employee leaves one of the key positions
listed below.  The name of the interim contact person should be included
with the notification.  The name and resume of the permanent employee
should be submitted as soon as the new hire has taken place.

Administrator
Medical Director
Chief Financial Officer
Maternal Health/ EPSDT Coordinator
Grievance Manager
Compliance Officer

Member Services Manager
Provider Services Manager
Claims Administrator
Quality Management/Utilization Management Coordinator
Behavioral Health Coordinator

The Contractor shall ensure that all staff have appropriate training,
education, experience and orientation to fulfill the requirements of
the position.

17. WRITTEN POLICIES, PROCEDURES AND JOB DESCRIPTIONS

The Contractor shall develop and maintain written policies, procedures and
job descriptions for each functional area of its plan, consistent in format
and style.  The Contractor shall maintain written guidelines for developing,
reviewing and approving all policies, procedures and job descriptions.
All policies and procedures shall be reviewed at least annually to ensure
that the Contractor's written policies reflect current practices.  Reviewed
policies shall be dated and signed by the Contractor's appropriate manager,
coordinator, director or administrator.  Minutes reflecting the review and
approval of the policies by an appropriate committee are also acceptable
documentation.  All medical and quality management policies must be approved
and signed by the Contractor's Medical Director.  Job descriptions shall be
reviewed at least annually to ensure that current duties performed by the
employee reflect written requirements.

18.  MEMBER INFORMATION

The Contractor shall be accessible by phone for general member information
during normal business hours.  All enrolled members will have access to a
toll free phone number.  All informational materials, prepared by the
Contractor, shall be approved by AHCCCSA prior to distribution to members.
The reading level and name of the evaluation methodology used should be
included.

All materials shall be translated when the Contractor is aware that a
language is spoken by 3,000 or 10%, whichever is less, of the Contractor's
members, who also have limited English proficiency (LEP).

All vital materials shall be translated when the Contractor is aware that
a language is spoken by 1,000 or 5%, whichever is less, of the Contractor's
members, who also have LEP.  Vital materials must include, at a minimum,
Notices of Action, vital information from the member handbooks and
consent forms.

All written notices informing members of their right to interpretation and
translation services in a language shall be translated when the Contractor
is aware that 1,000 or 5% (whichever is less) of the Contractor's members
speak that language and have LEP.  [42 CFR 438.10(c)(3[DMT25])]

Oral interpretation services must be available and free of charge to all
members regardless of the prevalence of the language.  The Contractor must
notify all member of their right to access oral interpretation services and
how to access them.  Refer to the ACOM Member Information Policy.
[42 CFR 438.10(c)(4) and (5)]

The Contractor shall make every effort to ensure that all information
prepared for distribution to members is written at a 4th grade level.
Regardless of the format chosen by the Contractor, the member information
must be printed in a type, style and size, which can easily be read by
members with varying degrees of visual impairment.  The Contractor must
notify its members that alternative formats are available and how to
access them.  [42 CFR 438.10(d)]

When there are program changes, notification shall be provided to the
affected members at least 30 days before implementation.

The Contractor shall produce and provide the following printed information
to each member or family within 10 days of receipt of notification of the
enrollment date [42 CFR 438.10(f)(3)]:

I. A member handbook which, at a minimum, shall include the items listed
in the ACOM Member Information Policy.

The Contractor shall review and update the Member Handbook at least once a
year. The handbook must be submitted to AHCCCS, Division of Health Care
Management for approval by August 15th of each contract year, or within four
weeks of receiving the annual renewal amendment, whichever is later.

II. A description of the Contractor's provider network, which at a minimum,
includes those items listed in the ACOM Member Information Policy.

The Contractor must give written notice about termination of a contracted
provider, within 15 days after receipt or issuance of the termination
notice, to each member who received their primary care from, or is seen
on a regular basis by, the terminated provider.  Affected members must be
informed of any other changes in the network 30 days prior to the
implementation date of the change. [42 CFR 438.10(f)(4) and (5)]The
Contractor shall have information available for potential enrollees as
described in the ACOM Member Information Policy.

The Contractor will, on an annual basis, inform all members of their
right to request the following information [42 CFR 438.10(f)(6) and
42 CFR 438.100(a)(1) and (2)]:

a. An updated member handbook at no cost to the member
b. The network description as described in the ACOM Member Information Policy

This information may be sent in a separate written communication or included
with other written information such as in a member newsletter.

19. SURVEYS

The Contractor may be required to perform its own annual general or focused
member survey.  All such contractor surveys, along with a timeline for
the project, shall be approved in advance by AHCCCS DHCM.  The results and
the analysis of the results shall be submitted to the Health Plan Operations
Unit within 45 days of the completion of the project.  AHCCCSA may require
inclusion of certain questions.  The Contractor will not be required to
conduct its own member survey during CYE '06.

AHCCCSA may periodically conduct surveys of a representative sample of
the Contractor's membership and providers.  AHCCCSA will consider
suggestions from the Contractor for questions to be included in each
survey.  The results of these surveys, conducted by AHCCCSA, will become
public information and available to all interested parties upon request.
The draft reports from the surveys will be shared with the Contractor
prior to finalization.  The Contractor will be responsible for the cost
of these surveys based on its share of AHCCCS enrollment.

20. CULTURAL COMPETENCY

The Contractor shall have a Cultural Competency Plan that meets the
requirements of the ACOM Cultural Competency Policy.  An annual assessment
of the effectiveness of the plan, along with any modifications to the plan,
must be submitted to the Division of Health Care Management, no later than
45 days after the start of each contract year.  This plan should address
all services and settings. [42 CFR 438.206(c)(2)]

21. MEDICAL RECORDS

The member's medical record is the property of the provider who generates
the record.  Each member is entitled to one copy of his or her medical
record free of charge.  The Contractor shall have written policies and
procedures to maintain the confidentiality of all medical records.

The Contractor is responsible for ensuring that a medical record is
established when information is received about a member. If the PCP has
not yet seen the member, such information may be kept temporarily in an
appropriately labeled file, in lieu of establishing a medical record, but
must be associated with the member's medical record as soon as one is
established.

The Contractor shall have written policies and procedures for the
maintenance of medical records so that those records are documented
accurately and in a timely manner, are readily accessible, and permit
prompt and systematic retrieval of information.

The Contractor shall have written standards for documentation on the
medical record for legibility, accuracy and plan of care, which comply
with the AMPM.

The Contractor shall have written plans for providing training and
evaluating providers' compliance with the Contractor's medical records
standards.  Medical records shall be maintained in a detailed and
comprehensive manner, which conforms to good professional medical
practice, permits effective professional medical review and medical audit
processes, and which facilitates an adequate system for follow-up treatment.
Medical records must be legible, signed and dated.

When a member changes PCPs, his or her medical records or copies of
medical records must be forwarded to the new PCP within 10 business days
from receipt of the request for transfer of the medical records.

AHCCCSA is not required to obtain written approval from a member, before
requesting the member's medical record from the PCP or any other agency.
The Contractor may obtain a copy of a member's medical records without written
approval of the member, if the reason for such request is directly related
to the administration of the AHCCCS program.  AHCCCSA shall be afforded
access to all members' medical records whether electronic or paper within
20 business days of receipt of request.

Information related to fraud and abuse may be released so long as
protected HIV-related information is not disclosed (A.R.S. Section 36-664(I)).

22. ADVANCE DIRECTIVES

In accordance with 42 CFR 422.128, the Contractor shall maintain policies
and procedures addressing advanced directives for adult members that specify:

a. Each contract or agreement with a hospital, nursing facility, home
   health agency, hospice or organization responsible for providing personal
   care, must comply with Federal and State law regarding advance directives
   for adult members [42 CFR 438.6(i)(1)].  Requirements include:

   (1) Maintaining written policies that address the rights of adult members
       to make decisions about medical care, including the right to accept
       or refuse medical care, and the right to execute an advance directive.
       If the agency/organization has a conscientious objection to carrying
       out an advance directive, it must be explained in policies.  (A
       health care provider is not prohibited from making such objection
       when made pursuant to A.R.S. Section 36-3205.C.1.)
   (2) Provide written information to adult members regarding each
       individual's rights under State law to make decisions regarding
       medical care, and the health care provider's written policies
       concerning advance directives (including any conscientious objections).
       [42 CFR 438.6(i)(3)]
   (3) Documenting in the member's medical record whether or not the adult
       member has been provided the information and whether an advance
       directive has been executed.
   (4) Not discriminating against a member because of his or her decision
       to execute or not execute an advance directive, and not making it
       a condition for the provision of care.
   (5) Providing education to staff on issues concerning advance
       directives including notification of direct care providers of
       services, such as home health care and personal care, of any
       advanced directives executed by members to whom they are assigned to
       provide services.

b. Contractors shall require subcontracted PCPs, which have agreements with
   the entities described in paragraph a. above, to comply with the
   requirements of subparagraphs a. (2) through (5) above.  Contractors
   shall also encourage health care providers specified in subparagraph
   a. to provide a copy of the member's executed advanced directive, or
   documentation of refusal, to the member's PCP for inclusion in the
   member's medical record.

c. The Contractor shall provide written information to adult members that
   describe the following:

   (1) A member's rights under State law, including a description of
       the applicable State law
   (2) The organization's policies respecting the implementation of those
       rights, including a statement of any limitation regarding the
       implementation of advance directives as a matter of conscience.
   (3) The member's right to file complaints directly with AHCCCSA.
   (4) Changes to State law as soon as possible, but no later than 90
       days after the effective date of the change.  [42 CFR 438.6(i)(4)]

23. QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT (QM/UM)

Quality Management (QM):  The Contractor shall provide quality medical care
to members, regardless of payer source or eligibility category.  The
Contractor shall use and disclose medical records and any other health and
enrollment information that identifies a particular member in accordance
with Federal and State privacy requirements.  The Contractor shall execute
processes to assess, plan, implement and evaluate quality management and
performance improvement activities, as specified in the AMPM, that include
at least the following [42 CFR 438.240(a)(1) and (e)(2)]:

1. Conducting Performance Improvement Projects (PIPs);
2. QM monitoring and evaluation activities;
3. Investigation, analysis, tracking and trending of quality of care
   issues, abuse and/or complaints that includes:
   a. Acknowledgement letter to the originator of the concern
   b. Documentation of all steps utilized during the investigation and
      resolution process
   c. Follow-up with the member to assist in ensuring immediate health care
      needs are met
   d. Closure/resolution letter that provides sufficient detail to ensure
      that the member has an understanding of the resolution of their issue,
      any responsibilities they have in ensuring all covered, medically
      necessary care needs are met, and a contact name/telephone number to
      call for assistance or to express any unresolved concerns
   e. Documentation of implemented corrective action plan(s) or action(s)
      taken to resolve the concern
4. AHCCCS mandated performance measures; and
5. Credentialing, recredentialing and provisional credentialing processes
   for provider and organizations [42 CFR 438.206(b)(6)].

AHCCCS has established a uniform credentialing, recredentialing and
provisional credentialing policy.  The Contractor shall demonstrate that
its providers are credentialed [42 CFR 438.214] and:
   a. Shall follow a documented process for credentialing and recredentialing
      of providers who have signed contracts or participation agreements
      with the Contractor;
   b. Shall not discriminate against particular providers that serve
      high-risk populations or specialize in conditions that require costly
      treatment; and
   c. Shall not employ or contract with providers excluded from participation
      in Federal health care programs.

The Contractor shall submit, within timelines specified in Attachment F,
a written QM plan, QM evaluation of the previous year's QM program, and
Quarterly Quality Management Report that addresses its strategies for
performance improvement and conducting the quality management activities
described in this section. The Contractor shall conduct performance
improvement projects as required in the AMPM.

The Contractor may combine its quality management plan with the plan that
addresses utilization management as described below.

Utilization Management (UM):  The Contractor shall execute processes to
assess, plan, implement and evaluate utilization management activities,
as specified in the AMPM, that include at least the following:

1. Pharmacy Management; including the evaluation, reporting, analysis and
   interventions based on the data and reported through the UM Committee
2. Prior authorization and Referral Management;
   For the processing of requests for initial and continuing authorizations
   of services the Contractor shall:
   a) Have in effect mechanisms to ensure consistent application of
      review criteria for authorization decisions; and
   b) Consult with the requesting provider when appropriate
      [42 CFR 438.210(b)(2)]
   c) Monitor and ensure that all enrollees with special health care
      needs have direct access to care
3.  Development and/or Adoption of Practice Guidelines [42 CFR 438.236(b)],
    that
   a) Are based on valid and reliable clinical evidence or a consensus of
   health care professionals in the particular field;
   b) Consider the needs of the Contractor's members;
   c) Are adopted in consultation with contracting health care professionals;
   d) Are reviewed and updated periodically as appropriate;
   e) Are disseminated by Contractors to all affected providers and, upon
      request, to enrollees and potential enrollees [42 CFR 438.236(c)]; and
   f) Provide a basis for consistent decisions for utilization management,
      member education, coverage of services, and other areas to which the
      guidelines apply [42 CFR 438.236(d)]
4. Concurrent review;
   a) Consistent application of review criteria; Provide a basis for consistent
      decisions for utilization management, coverage of services, and other
      areas to which the guidelines apply;
   b) Discharge planning

5. Continuity and coordination of care;
6. Monitoring and evaluation of over and/or under utilization of services
   [42 CFR 438-240(b)(3)];
7. Evaluation of new medical technologies, and new uses of existing
   technologies;

8. Disease Management Program that reports results and provides for analysis
   of the program through the UM Committee; and
9. Quarterly Utilization Management Report (details in the AMPM)

The Contractor shall have a process to report UM data and management
activities through a UM Committee.  The Contractor's UM committee will
analyze the data, make recommendations for action, monitor the effectiveness
of actions and report these findings to the committee.  The Contractor
shall have in effect mechanisms to assess the quality and appropriateness of
care furnished to members with special health care needs.
[42 CFR 438.240(b)(4)]

The Contractor shall maintain a written UM plan that addresses its plan for
monitoring UM activities described in this section.  The plan must be
submitted for review by AHCCCS Division of Health Care Management within
timelines specified in Attachment F.

24. PERFORMANCE STANDARDS

Administrative Measures:

The maximum allowable speed of answer (SOA) is 45 seconds.  The SOA is
defined as the on line wait time in seconds that the member/provider waits
from the moment the call is connected in the Contractor's phone switch until
the call is picked up by a contractor representative or Interactive Voice
Recognition System (IVR).  If the Contractor has IVR capabilities, callers
must be given the choice of completing their call by IVR or by contractor
representative.

The Contractor shall meet the following standards for its member services
and centralized provider telephone line statistics. All calls to the line
shall be included in the measure.
a. The Monthly Average Abandonment Rate shall be 5% or less;
b. First Contact Call Resolution shall be 70% or better; and
c. The Monthly Average Service Level shall be 75% or better.

The Monthly Average Abandonment Rate (AR) is:
Number of calls abandoned in a 24-hour period
Total number of calls received in a 24-hour period

The ARs are then summed and divided by the number of days in the
reporting period.

First Contact Call Resolution Rate (FCCR) is:

Number of calls received in 24-hour period for which no follow up
communication or internal phone transfer is needed, divided
by Total number of calls received in 24-hour period

The daily FCCRs are then summed and divided by the number of days
in the reporting period.

The Monthly Average Service Level (MASL) is:
Calls answered within 45 seconds for the month reported
Total of month's answered calls + month's abandoned calls +  (if available)
month's calls receiving a busy signal

Note: Do not use average daily service levels divided by the days in
the reporting period.

On a monthly basis the measures are to be reported for both the Member
Services and Provider telephone lines.  For each of the Administrative
Measures a. through c., the Contractor shall also report the number of days
in the reporting period that the standard was not met.  The Contractor
shall include in the report the instances of down time for the centralized
telephone lines, the dates of occurrence and the length of time they were
out of service.  The reports should be sent to the Contractor's assigned
Operations and Compliance Officer in the Health Plan Operations Unit of
the Division of Health Care Management.  The deadline for submission of
the reports is the 15th day of the month following the reporting period (or
the first business day following the 15th).  Back up documentation for
the report, to the level of measured segments in the 24-hour period, shall
be retained for a rolling 12-month period.  AHCCCSA will review the
performance measure calculation procedures and source data for this report.

Performance Measures:

All Performance Measures described below apply to all member populations
[42 CFR 438.240(a)(2), (b)(2) and (c)].

Contractors must meet AHCCCS stated Minimum Performance Standards.
However, it is equally important that Contractors continually improve their
performance measure outcomes from year to year.  Contractors shall strive
to meet the ultimate standard, or benchmark, established by AHCCCS.

AHCCCS has established three levels of performance:

Minimum Performance Standard - A Minimum Performance Standard is the
minimal expected level of performance by the Contractor. If a Contractor
does not achieve this standard, or any measure rate declines to a level
below the AHCCCS Minimum Performance Standard, the Contractor will be
required to submit a corrective action plan and may be subject to sanctions.

Goal - A Goal is a reachable standard for a given performance measure
for the Contract Year.  If the Contractor has already met or exceeded the
AHCCCS Minimum Performance Standard for any measure, the Contractor must
strive to meet the established Goal for the measure(s).

Benchmark - A Benchmark is the ultimate standard to be achieved.
Contractors that have already achieved or exceeded the Goal for any
performance measure must strive to meet the Benchmark for the measure(s).
Contractors that have achieved the Benchmark are expected to maintain
this level of performance for future years.

A Contractor must show demonstrable and sustained improvement toward
meeting AHCCCS Performance Standards.  In addition to corrective action
plans, AHCCCS may impose sanctions on Contractors that do not meet the
Minimum Performance Standard and do not show statistically significant
improvement in a measure rate and/or require those Contractors to
demonstrate that they are allocating increased administrative resources
to improving rates for a particular measure or service area. AHCCCS also
may require a corrective action plan of any Contractor that shows a
statistically significant decrease in its rate, even if
it meets or exceeds the Minimum Performance Standard.

The corrective action plan must be received by AHCCCS within 30 days of
receipt of notification from AHCCCS.  This plan must be approved by
AHCCCS prior to implementation.  AHCCCS may conduct one or more follow-up
on-site reviews to verify compliance with a corrective action plan.

Performance Measures:  The Contractor shall comply with AHCCCS quality
management requirements to improve performance for all AHCCCS established
performance measures.  Complete descriptions of these measures can be found
in the most recently published results and analysis of acute-care
performance measures, or upon request from AHCCCSA.  The measures for
postpartum visits and low birth weight deliveries have been eliminated
as contractual performance standards.  The Contractor shall continue to
monitor rates for postpartum visits and low birth weight deliveries and
implement interventions as necessary to improve or sustain these rates.
These activities will be monitored by AHCCCSA during the Operational and
Financial Review.

CMS has been working in partnership with states in developing core
performance measures for Medicaid and SCHIP programs.  The current AHCCCS
established performance measures may be subject to change when these core
measures are finalized and implemented.
In addition, AHCCCS has established standards for the following measures:

EPSDT Participation:  The Contractor shall take affirmative steps to increase
member participation in the EPSDT program.  The participation rate is the
number of children younger than 21 years receiving at least one medical
screen during the contract year, compared to the number of children expected
to receive at least one medical screen.  The number of children expected to
receive at least one medical screen is based on the AHCCCS EPSDT periodicity
schedule and the average period of eligibility.

The following table identifies the Minimum Performance Standards, Goals and
Benchmarks for each measure:

Acute-care Contractor Performance Standards

Performance Indicator
CYE 06 Minimum Performance Standard
CYE 06 Goal
Benchmark (Healthy People Goals)

Immunization of Two-year-olds
4:3:1 Series
80%
83%
90%

4:3:1:3:3 Series
70%
75%
90%

DTaP - 4 doses
83%
86%
90%

Polio - 3 doses
89%
90%
90%

MMR - 1 dose
90%
90%
90%

Hib - 3 doses
76%
77%
90%

HBV - 3 doses
82%
88%
90%

Varicella - 1 dose
77%
81%
90%

Adolescent Immunizations
60%
63%
90%

Dental Visits
49%
56%
56%

Well-child Visits 15 Months
70%
72%
90%

Well-child Visits 3 - 6 Years
55%
67%
80%

Adolescent Well-care Visits
32%
34%
50%

EPSDT Participation
58%
80%
80%

Children's Access to PCPs
79%
82%
97%

Cervical Cancer Screening
61%
63%
90%

Breast Cancer Screening
57%
61%
70%

Adult Preventive/Ambulatory Care
80%
82%
96%

Timeliness of Prenatal Care
62%
68%
90%

Quality Improvement:

Contractors shall implement an ongoing quality assessment and performance
improvement programs for the services it furnishes to members.
[42 CFR 438.240(a)(1)]  Basic elements of the Contractor quality assessment
and performance improvement programs, at a minimum, shall comply with the
following requirements:

A.  Quality Assessment Program:

The Contractor shall have an ongoing quality assessment program for the services
it furnishes to members that includes the following:

1. The program shall be designed to achieve, through ongoing measurements and
   intervention, significant improvement, sustained over time, in clinical
   care and non-clinical care areas that are expected to have a favorable
   effect on health outcomes and member satisfaction.
2. The Contractor must [42 CFR 438.240(b)(2) and (c)]:
      a. Measure and report to the State its performance, using
         standard measures required by the State, or as required by CMS,
      b. Submit to the State, data specified by the State, that enables the
         State to measure the Contractor's performance; or
      c. Perform a combination of the activities.
3. The Contractor must have in effect mechanisms to detect both
   underutilization and overutilization of services.
4. The Contractor must have in effect mechanisms to assess the quality
   and appropriateness of care furnished to members with special health
   care needs.
5. The Contractor must have in place a process for internal monitoring
   of Performance Measure rates, using standard methodology established
   or adopted by AHCCCS, for each required Performance Measure.  The
   Contractor's Quality Assessment/Performance Improvement Program will
   report its performance on an ongoing basis to its administration.  It also
   will report this Performance Measure data to AHCCCSA in conjunction with
   its Quarterly EPSDT Progress Report, according to a format developed
   by AHCCCS.

B.  Performance Improvement Program:

The Contractor shall have an ongoing program of performance improvement
projects that focus on clinical and non-clinical areas, and that involve
the following [42 CFR 438.240(b)(1) and (d)(1)]:
   1. Measurement of performance using objective quality indicators.
   2. Implementation of system interventions to achieve improvement in quality
   3. Evaluation of the effectiveness of the interventions.
   4. Planning and initiation of activities for increasing or sustaining
      improvement.

The Contractor shall report the status and results of each project to the
AHCCCSA as requested.  Each performance improvement project must be completed
in a reasonable time period so as to generally allow information on the
success of performance improvement projects in the aggregate to produce
new information on quality of care every year.  [42 CFR 438.240(d)(2)]

C.  Data Collection Procedures:

When requested, the Contractor must submit data for standardized Performance
Measures and/or Performance Improvement Projects as required by AHCCCS
within specified timelines and according to AHCCCS procedures for collecting
and reporting the data.  Contractor is responsible for collecting valid
and reliable data, using qualified staff and personnel to collect the data.
Data collected for Performance Measures and/or Performance Improvement
Projects must be returned by the Contractor in the format and according
to instructions from AHCCCS, by the due date specified.  Any extension for
additional time to collect and report data must be made in writing in
advance of the initial due date.  Failure to follow the data collection and
reporting instructions that accompany the data request may result in
sanctions imposed on the Contractor.

The Contractor shall participate in immunization audits, at intervals
specified by AHCCCSA, based on random sampling to verify the immunization
status of members at 24 months of age.  If records are missing for more than
5 percent of the Contractor's final sample, the Contractor is subject to
sanctions by AHCCCSA.  An External Quality Review Organization (EQRO) may
conduct a study to validate the Contractor's reported rates.

25. GRIEVANCE SYSTEM

The Contractor shall have in place a written grievance system for
subcontractors, enrollees and providers, which defines their rights
regarding disputed matters with the Contractor.  The Contractor's grievance
system for enrollees includes a grievance process (the procedures for
addressing enrollee grievances), an appeals process and access to the
state's fair hearing process. The Contractor shall provide the
appropriate personnel to establish, implement and maintain the necessary
functions related to the grievance systems process.  Refer to
Attachments H(1) and H(2) for Enrollee Grievance System and Provider
Grievance System Standards and Policy, respectively.

The Contractor may delegate the grievance system process to subcontractors,
however, the Contractor must ensure that standards which are delegated
comply with applicable Federal and State laws, regulations and policies,
including, but not limited to 42 CFR Part 438 Subpart F.  The Contractor
shall remain responsible for compliance with all requirements.  The
Contractor shall also ensure that it timely provides written information
to both enrollees and providers, which clearly explains the grievance
system requirements.  This information must include a description of:
the right to a state fair hearing, the method for obtaining a state
fair hearing, the rules that govern representation at the hearing, the right
to file grievances, appeals and claim disputes, the requirements and
timeframes for filing grievances, appeals and claim disputes, the
availability of assistance in the filing process, the toll-free numbers
that the enrollee can use to file a grievance or appeal by phone, that
benefits will continue when requested by the enrollee in an appeal or state
fair hearing request concerning certain actions which are timely filed,
that the enrollee may be required to pay the cost of services furnished
during the appeal/hearing process if the final decision is adverse to the
enrollee, and that a provider may file an appeal on behalf of an enrollee
with the enrollee's written consent. Information to enrollees must meet
cultural competency and limited English proficiency requirements as
specified in Section D, Paragraph 18, Member Information, and Paragraph 20,
Cultural Competency.

The Contractor shall be responsible to provide the necessary professional,
paraprofessional and clerical services for the representation of the
Contractor in all issues relating to the grievance system and any other
matters arising under this contract which rise to the level of
administrative hearing or a judicial proceeding.   Unless there is an
agreement with the State in advance, the Contractor shall be responsible
for all attorney fees and costs awarded to the claimant in a judicial
proceeding.

26. QUARTERLY GRIEVANCE SYSTEM REPORTS

Enrollee Appeal and Provider Claim Dispute Report:  The Contractor must
submit the Enrollee Appeal and Provider Claim Dispute Report to AHCCCSA,
Division of Health Care Management, using the Quarterly Grievance System
Report Format,  no later than 45 days from the end of each quarter.

Enrollee Grievance Report:  The Contractor must accept, resolve and track
enrollee grievances as required in the ACOM Enrollee Grievance Policy.
The Contractor must submit the Enrollee Grievance Report no later than 45
days from the end of each quarter. The report must include the following:

	A.  Number of grievances received in the reporting period
		i.   Total
		ii.  By the categories used in the Contractor's executive
                     summary reports

	B.  Number of days to resolution
		i.   Number resolved within 10 days
		ii.  Number resolved in 11 or more days, but less than 29 days
		iii. Number resolved in 30 or more days, but less than 59 days
		iv. Number resolved in 60 to 90 days
 		v.  Average days to resolution

Report A. and B. above by the current quarter, prior quarter and current
quarter for the previous year.

The Contractor shall trend and analyze grievance, appeals and claim
disputes at least quarterly; any identified trends and corrective action
plans should be reported to AHCCCSA, Division of Health Care Management.

27. NETWORK DEVELOPMENT

The Contractor shall develop and maintain a provider network that is
designed to support a medical home for members and sufficient to provide
all covered services to AHCCCS members [42 CFR 438.206(b)(1)]. It shall
ensure covered services are provided promptly and are reasonably
accessible in terms of location and hours of operation.
[42 CFR 438.206(c)(1)(i) and (ii)]There shall be sufficient personnel
for the provision of covered services, including emergency medical care on
a 24-hour-a-day, 7-days-a-week basis [42 CFR 438.206(c)(1)(iii).
The proposed network shall be sufficient to provide covered services
within designated time and distance limits.  For Maricopa and Pima
Counties only, this includes a network such that 95% of its members
residing within the boundary area of metropolitan Phoenix and Tucson do not
have to travel more than 5 miles to see a PCP, dentist or pharmacy.
PCPs and specialists who provide inpatient services to the Contractor's
members shall have admitting and treatment privileges in a minimum of
one general acute care hospital within the Contractor's service area.
Hospitalists may satisfy this requirement. Contractors in Maricopa and/or
Pima counties must have at least one hospital contract in each of the
service districts specified in Attachment B. Contractors must provide
a comprehensive provider network that ensures its membership has access
at least equal to, or better than, community norms.  Services shall be
as accessible to AHCCCS members in terms of timeliness, amount, duration
and scope as those services are to non-AHCCCS persons within the same
service area [42 CFR 438.210(a)(2)].  The Contractor is expected to
consider the full spectrum of care when developing its network.  The
Contractor must also consider communities whose residents typically
receive care in neighboring states.  If the Contractor is unable to provide
those services locally, it must so demonstrate to AHCCCSA and shall provide
reasonable alternatives for members to access care.  These alternatives
must be approved by AHCCCSA.  If the Contractor's network is unable to provide
medically necessary services required under contract, the Contractor must
adequately and timely cover these services through an out of network
provider until a network provider is contracted.  The Contractor and out
of network provider must coordinate with respect to authorization and
payment issues in these circumstances. [42 CFR 438.206(b)(4) and (5)]

The Contractor is also encouraged to develop non-financial incentive
programs to increase participation in its provider network.

AHCCCS is committed to workforce development and support of the medical
residency and dental student training programs in the state of Arizona.
Working proactively with these programs is beneficial to protect their
viability, and also provides an excellent opportunity for the Contractors
to educate future providers on the principles of managed care.  In addition,
AHCCCS believes that these programs can influence the provider capacity
issues in Arizona.  In the future, AHCCCS would like to provide incentives
to those programs that are working to retain physicians in Arizona after
completion of the program.

AHCCCS encourages plans to work with the many residency programs currently
operating in the state and to investigate opportunities for resident
participation in contractor medical management and committee activities.
If any Contractor or Contractors enter into the Graduate Medical Education
Memorandum of Understanding with a residency program and assign members
to it, AHCCCSA may increase the auto-assignment algorithm to favor those
Contractors.

The Contractor shall not discriminate with respect to participation in
the AHCCCS program, reimbursement or indemnification against any provider
based solely on the provider's type of licensure or certification
[42 CFR 438.12(a)(1)].  In addition, the Contractor must not discriminate
against particular providers that service high-risk populations or
specialize in conditions that require costly treatment
[42 CFR 438.214(c)].  This provision, however, does not prohibit the
Contractor from limiting provider participation to the extent necessary
to meet the needs of the Contractor's members.  This provision also does not
interfere with measures established by the Contractor to control costs
consistent with its responsibilities under this contract
[42 CFR 438.12(b)(1)].  If a Contractor declines to include individual or
groups of providers in its network, it must give the affected providers
written notice of the reason for its decision [42 CFR 438.12(a)(1)].
The Contractor may not include providers excluded from participation in
Federal health care programs, under either section 1128 or section 1128A
of the Social Security Act [42 CFR 438.214(d)].

See Attachment B, Minimum Network Requirements, for details on network
requirements by Geographic Service Area.

Provider Network Development and Management Plan:  The Contractor shall
develop and maintain a provider network development and management plan,
which ensures that the provision of covered services will occur as stated
above. [42 CFR 438.207(b)] This plan shall be updated annually and submitted
to AHCCCSA, Division of Health Care Management, 45 days from the start of
each contract year.  The plan shall identify the methodology used by the
Contractor to determine a geographically appropriate distribution of
medical disciplines for primary care, obstetrical care and individual
medical specialties for its membership. The plan shall also contain a
description of the Contractor's criteria used to determine the numbers and
kinds of PCP providers and of specialists, and whether hospital privileges
are considered when making this determination.  A similar description
should be included for the dental and pharmacy networks and for the adequacy
of non-emergency transportation services.  The plan shall identify the
current status of the Contractor's network, and project future needs based
upon, at a minimum, membership growth; the number and types (in terms of
training, experience and specialization) of providers that exist in the
Contractor's service area, as well as the number of physicians
who have privileges with and practice in hospitals; the expected utilization
of service, given the characteristics of its population and its health care
needs; the numbers of providers not accepting new Medicaid patients;
and access of its membership to specialty services as compared to the
general population of the community. [42 CFR 438.206(b)(1)] The plan, at
a minimum, shall also include the following:

   a. Current network gaps and the methodology used to identify them;
   b. Immediate short-term interventions when a gap occurs, including
      expedited or temporary credentialing;
   c. Interventions to fill network gaps and barriers to those interventions;
   d. Outcome measures/evaluation of interventions;
   e. Ongoing activities for network development;
   f. Coordination between internal departments;
   g. Coordination with outside organizations;
   h. A description of network design by GSA for the general population,
      including details regarding special populations including, but not
      limited to, the developmentally delayed (Arizona Early Intervention
      Program (AzEIP), the homeless and those in border communities.

      The description should cover:
      i. how members access the system
      ii. relationships between various levels of the system
      iii. the plan for incorporating the medical home for members and the
           progress in its implementation

   i. A description of the adequacy of the geographic access to tertiary
      hospital services for the Contractor's membership.
   j. The assistance provided to PCPs when they refer members to specialists.
      The methods used to communicate the availability of this assistance
      to the providers.
   k. The methodology (ies) the Contractor uses to collect and analyze
      provider feedback about the network designs and implementation.
      When specific provider issues are identified, the protocols for
      handling them.

The plan must include answers to the following questions:
   a. How does the Contractor assess the medical and social needs of new
      members to determine how the contractor may assist the member in
      navigating the network more efficiently?
   b. What assistance is provided to members with a high severity of illness
      or higher utilization to better navigate the provider network?
   c. Does the Contractor utilize any of the following strategies to
      reduce unnecessary emergency department utilization by the membership?
      If so, how are members educated about these options?
      i. Physician coverage/call availability after-hours and on weekends
      ii. Same-day PCP appointments
      iii. Nurse call-in centers/information lines
      iv. Urgent Care facilities
   d. Are members with special health care needs assigned to specialists for
      their primary care needs?
   e. What are the most significant barriers to efficient network deployment
      within the Contractor's service area?  How can AHCCCS best support
      the Contractor's efforts to improve its network and the quality of care
      delivered to its membership?

28. PROVIDER AFFILIATION TRANSMISSION

The Contractor shall submit information quarterly regarding its provider
network.  This information shall be submitted in the format described in
the Provider Affiliation Transmission User Manual on October 15, January 15,
April 15, and July 15 of each contract year.  The manual may be found
in the Bidder's Library.  If the provider affiliation transmission is not
timely, accurate and complete, the Contractor may be required to submit
a corrective action plan and may be subject to sanction.

29. NETWORK MANAGEMENT

The Contractor shall have policies and procedures in place that pertain to
all service specifications described in the AMPM.  In addition, the
Contractor shall have policies on how the Contractor will [42 CFR 438.214(a)]:

a. Communicate with the network regarding contractual and/or program
   changes and requirements;
b. Monitor network compliance with policies and rules of AHCCCSA and
   the Contractor, including compliance with all policies and procedures
   related to the grievance process and ensuring the member's care is not
   compromised during the grievance process;
c. Evaluate the quality of services delivered by the network;
d. Provide or arrange for medically necessary covered services should the
   network become temporarily insufficient within the contracted service area;
e. Monitor the adequacy, accessibility and availability of its provider
   network to meet the needs of its members, including the provision of
   care to members with limited proficiency in English;
f. Process expedited and temporary credentials;
g. Recruit, select, credential, re-credential and contract with providers
   in a manner that incorporate quality management, utilization, office
   audits and provider profiling; and
h. Provide training for its providers and maintain records of such training.

Contractor policies shall be subject to approval by AHCCCSA, Division of
Health Care Management, and shall be monitored through operational audits.
A material change in Contractor policy or process requires 30 days advance
notice to affected providers and members. A material change is defined
as any change in overall business practice that could have an impact on 5%
or more of the members, providers, or AHCCCS program, or may significantly
impact the delivery of services provided by an AHCCCS Contractor.
Contractors are required to submit the member notices to AHCCCS for approval
30 days prior to the notice being sent.  Upon receipt of the member notice
for review, AHCCCSA may comment on the material change or may intervene if the
policy/process change will have an adverse affect to the overall system.

Provider notices do not require prior approval, however, the Contractor must
notify AHCCCSA of the material policy change 15 days prior to the provider
notice being sent out.  During the 15 day time period, AHCCCS shall have the
right to comment or may intervene if the change to policy/process will lead
to an adverse affect to the overall system.  This provision is not intended
to include contract negotiations between Contractors and providers.

Contractors shall give hospitals and physician groups 90 days notice prior
to a contract termination without cause.  Contracts between the Contractor
and single practitioners are exempt from this requirement.

All material changes in the Contractor's provider network must be approved
in advance by AHCCCSA, Division of Health Care Management
[42 CFR 438.207(c)].  A material change is defined as one which affects,
or can reasonably be foreseen to affect, the Contractor's ability to meet
the performance and network standards as described in this contract.
AHCCCSA will assess proposed changes in the Contractor's provider network
for potential impact on members' health care and provide a written response
to the Contractor.  For emergency situations, AHCCCSA will expedite the
approval process.

The Contractor shall notify AHCCCSA, Division of Health Care Management,
within one business day of any unexpected changes that would impair its
provider network.  This notification shall include (1) information about
how the change will affect the delivery of covered services, and (2)
the Contractor's plans for maintaining the quality of member care, if the
provider network change is likely to affect the delivery of covered services.

30. PRIMARY CARE PROVIDER  STANDARDS

The Contractor shall include in its provider network a sufficient number
of PCPs to meet the requirements of this contract.  Health care providers
designated by the Contractor as PCPs shall be licensed in Arizona as
allopathic or osteopathic physicians who generally specialize in family
practice, internal medicine, obstetrics, gynecology, or pediatrics; certified
nurse practitioners or certified nurse midwifes; or physician's assistants.
[42 CFR 438.206(b)(2)]

The Contractor shall assess the PCP's ability to meet AHCCCS appointment
availability and other standards when determining the appropriate number
of its members to be assigned to a PCP.  The Contractor should also consider
the PCP's total panel size (i.e. AHCCCS and non-AHCCCS patients) when
making this determination.  AHCCCS members shall not comprise the majority of
a PCP's panel of patients.  AHCCCSA shall inform the Contractor when a
PCP has a panel of more than 1,800 AHCCCS members (assigned by a single
Contractor or multiple Contractors), to assist in the assessment of the size
of their panel.  This information will be provided on a quarterly basis.
The Contractor will adjust the size of a PCP's panel, as needed, for the
PCP to meet AHCCCS appointment and clinical performance standards.

The Contractor shall have a system in place to monitor and ensure that each
member is assigned to an individual PCP and that the Contractor's data
regarding PCP assignments is current.  The Contractor is encouraged to
assign members with complex medical conditions, who are age 12 and younger,
to board certified pediatricians.  PCP's, with assigned members diagnosed
with AIDS or as HIV positive, shall meet criteria and standards set forth in
the AMPM.

To the extent required by this contract, the Contractor shall offer members
freedom of choice within its network in selecting a PCP [42 CFR 438.6(m)
and 438.52(d)].  The Contractor may restrict this choice when a member has
shown an inability to form a relationship with a PCP, as evidenced by
frequent changes, or when there is a medically necessary reason.  When a new
member has been assigned to the Contractor, the Contractor shall inform the
member in writing of his enrollment and of his PCP assignment within 10 days
of the Contractor's receipt of notification of assignment by AHCCCSA.  The
Contractor shall include with the enrollment notification a list of all
the Contractor's available PCPs, the process for changing the PCP assignment,
should the member desire to do so, as well as the information required in
the ACOM Member Information Policy.  The Contractor shall confirm any
PCP change in writing to the member.  Members may make both their initial
PCP selection and any subsequent PCP changes either verbally or in writing.

At a minimum, the Contractor shall hold the PCP responsible for the following
activities [42 CFR 438.208(b)(1)]:

a. Supervision, coordination and provision of care to each assigned member;
b. Initiation of referrals for medically necessary specialty care;
c. Maintaining continuity of care for each assigned member; and
d. Maintaining the member's medical record, including documentation of all
   services provided to the member by the PCP, as well as any specialty or
   referral services.  Services potentially requiring medical follow up are
   the only dental services whose documentation must be included in the medical
   record.

The Contractor shall establish and implement policies and procedures to
monitor PCP activities and to ensure that PCPs are adequately notified of,
and receive documentation regarding, specialty and referral services provided
to assigned members by specialty physicians, and other health care
professionals.  Contractor policies and procedures shall be subject to
approval by AHCCCSA, Division of Health Care Management, and shall be
monitored through operational audits.

Contractors will work with AHCCCSA to develop a methodology to reimburse
clinics for the homeless and school based clinics.  AHCCCSA and Contractors
will identify coordination of care processes and reimbursement mechanisms.
The Contractor will be responsible for payment of these services directly
to the clinics.

31. MATERNITY CARE PROVIDER STANDARDS

The Contractor shall ensure that a maternity care provider is designated
for each pregnant member for the duration of her pregnancy and postpartum
care and that maternity services are provided in accordance with the AMPM.
The Contractor may include in its provider network the following
maternity care providers:

a. Arizona licensed allopathic and/or osteopathic physicians who are
   general practitioners or specialize in family practice or obstetrics
b. Physician Assistants
c. Nurse Practitioners
d. Certified Nurse Midwives

Pregnant members may choose, or be assigned, a PCP who provides obstetrical
care.  Such assignment shall be consistent with the freedom of choice
requirements for selecting health care professionals while ensuring that
the continuity of care is not compromised.  Members who choose to
receive maternity services from a licensed midwife shall also be assigned
to a PCP for medical care, as primary care is not within the scope of
practice for licensed midwives.

All physicians and certified nurse midwives who perform deliveries shall
have OB hospital privileges or a documented hospital coverage agreement for
those practitioners performing deliveries in alternate settings.
Licensed midwives perform deliveries only in the member's home.  Labor
and delivery services may also be provided in the member's home by physicians,
certified nurse practitioners and certified nurse midwives who include
such services within their practice.

32. REFERRAL MANAGEMENT PROCEDURES AND STANDARDS

The Contractor shall have adequate written procedures regarding referrals
to specialists, to include, at a minimum, the following:

a. Use of referral forms clearly identifying the Contractor
b. A system for resolving disputes regarding the referrals
c. PCP referral shall be required for specialty physician services, except
   that women shall have direct access to in-network GYN providers, including
   physicians, physician assistants and nurse practitioners within the scope
   of their practice, without a referral for preventive and routine
   services [42 CFR 438.206(b)(2)].  In addition, for members with
   special health care needs determined to need a specialized course of
   treatment or regular care monitoring, the Contractor must have a mechanism
   in place to allow such members to directly access a specialist (for
   example through a standing referral or an approved number of visits) as
   appropriate for the member's condition and identified needs.  Any waiver
   of this requirement by the Contractor must be approved in advance by
   AHCCCSA.
d. Specialty physicians shall not begin a course of treatment for a
   medical condition other than that for which the member was referred,
   unless approved by the member's PCP.
e. A process in place that ensures the member's PCP receives all specialist
   and consulting reports and a process to ensure PCP follow-up of all
   referrals including EPSDT referrals for behavioral health services
f. A referral plan for any member who is about to lose eligibility and
   who requests information on low-cost or no-cost health care services
g. Referral to Medicare HMO including payment of copayments
h. Allow for a second opinion from a qualified health care professional
   within the network, or if one is not available in network, arrange for
   the member to obtain one outside the network, at no cost to the
   member [42 CFR 438.206(b)(3)].

The Contractor shall comply with all applicable physician referral
requirements and conditions defined in Sections 1903(s) and 1877 of the
Social Security Act.  Upon finalization of the regulations, the Contractor
shall comply with all applicable physician referral requirements and
conditions defined in 42 CFR Part 411, Part 424, Part 435 and Part 455.
Sections 1903(s) and 1877 of the Act prohibits physicians from making
referrals for designated health services to health care entities with
which the physician or a member of the physician's family has a financial
relationship.  Designated health services include:

a. Clinical laboratory services
b. Physical therapy services
c. Occupational therapy services
d. Radiology services
e. Radiation therapy services and supplies
f. Durable medical equipment and supplies
g. Parenteral and enteral nutrients, equipment and supplies
h. Prosthetics, orthotics and prosthetic devices and supplies
i. Home health services
j. Outpatient prescription drugs
k. Inpatient and outpatient hospital services

33. APPOINTMENT STANDARDS

For purposes of this section, "urgent" is defined as an acute, but not
necessarily life-threatening disorder, which, if not attended to, could
endanger the patient's health.  The Contractor shall have procedures in
place that ensure the following standards are met:

a. Emergency PCP appointments - same day of request
b. Urgent care PCP appointments - within 2 days of request
c. Routine care PCP appointments - within 21 days of request

For specialty referrals, the Contractor shall be able to provide:

a. Emergency appointments -   within 24 hours of referral
b. Urgent care appointments -   within 3 days of referral
c. Routine care appointments -  within 45 days of referral

For dental appointments, the Contractor shall be able to provide:

a. Emergency appointments -   within 24 hours of request
b. Urgent care appointments -  within 3 days of request
c. Routine care appointments - within 45 days of request

For maternity care, the Contractor shall be able to provide initial prenatal
care appointments for enrolled pregnant members as follows:

a. First trimester -           within 14 days of request
b. Second trimester -          within 7 days of request
c. Third trimester -           within 3 days of request
d. High risk pregnancies -     within 3 days of identification of high
                               risk by the Contractor or maternity care
                               provider, or immediately if an emergency exists

If a member needs non-emergent medically necessary transportation, the
Contractor shall require its transportation provider to schedule the
transportation so that the member arrives on time for the appointment, but
no sooner than one hour before the appointment; does not have to wait
more than one hour after making the call to be picked up; nor have to wait
for more than one hour after conclusion of the appointment for
transportation home.

The Contractor shall actively monitor the adequacy of its appointment
processes and reduce the unnecessary use of alternative methods such as
emergency room visits [42 CFR 438.206(c)(1)(i)].  The Contractor shall
actively monitor and ensure that a member's waiting time for a scheduled
appointment at the PCP's or specialist's office is no more than 45 minutes,
except when the provider is unavailable due to an emergency.

The Contractor shall have written policies and procedures about educating
its provider network regarding appointment time requirements.  The Contractor
must assign a specific staff member or unit within its organization to
monitor compliance with appointment standards.  The Contractor must develop
a corrective action plan when appointment standards are not met; if
appropriate, the corrective action plan should be developed in conjunction
with the provider [42 CFR 438.206(c)(1)(iv), (v) and (vi)].  Appointment
standards shall be included in the Provider Manual. The Contractor is
encouraged to include the standards in the provider subcontract.

34. FEDERALLY QUALIFIED HEALTH CENTERS (FQHC) and RURAL HEALTH CLINICS (RHC)

The Contractor is encouraged to use FQHCs/RHCs in Arizona to provide
covered services and must comply with the Federal mandates.  AHCCCS expects
the contractors to negotiate rates of payment with FQHCs/RHCs for
non-pharmacy services that are comparable to the rates paid to providers
that provide similar services.

Contractors are required to submit member information for Title XIX
members for each FQHC/RHC on a quarterly basis to the AHCCCSA Division
of Health Care Management.  AHCCCSA will perform periodic audits of the
member information submitted.  Contractors should refer to the AHCCCS
Division of Health Care Management's policy on FQHC/RHC reimbursement
for further guidance.  The FQHCs/RHCs registered with AHCCCS are listed
on the AHCCCS website (www.azahcccs.gov).

35. PROVIDER MANUAL

The Contractor shall develop, distribute and maintain a provider manual.
The Contractor shall ensure that each contracted provider is issued a
copy of the provider manual and is encouraged to distribute a provider
manual to any individual or group that submits claim and encounter data.
The Contractor remains liable for ensuring that all providers, whether
contracted or not, meet the applicable AHCCCS requirements such as covered
services, billing, etc.  At a minimum, the Contractor's provider manual
must contain information on the following:

a. Introduction to the Contractor which explains the Contractor's organization
   and administrative structure
b. Provider responsibility and the Contractor's expectation of the provider
c. Overview of the Contractor's Provider Service department and function
d. Listing and description of covered and non-covered services, requirements
   and limitations including behavioral health services
e. Emergency room utilization (appropriate and non-appropriate use of the
   emergency room)
f. EPSDT Services - screenings include a comprehensive history,
   developmental/behavioral health screening, comprehensive unclothed
   physical examination, appropriate vision testing, hearing testing,
   laboratory tests, dental screenings and immunizations
g. Dental services
h. Maternity/Family Planning services
i. The Contractor's policy regarding PCP assignments
j. Referrals to specialists and other providers, including access to
   behavioral health services provided by the ADHS/RBHA system
k. Grievance system process and procedures for providers and enrollees
l. Billing and encounter submission information
m. Information about policies and procedures relevant to the providers
   including, but not limited to, utilization management and claims submission
n. Reimbursement, including reimbursement for dual eligibles (i.e. Medicare
   and Medicaid) or members with other insurance
o. Cost sharing responsibility
p. Explanation of remittance advice
q. Prior authorization and notification requirements
r. Claims medical review
s. Concurrent review
t. Fraud and Abuse
u. Formulary information, including updates when changes occur, must be
   provided in advance to providers, including pharmacies.  The Contractor
   is not required to send a hard copy, unless requested, of the formulary
   each time it is updated. A memo may be used to notify providers of
   updates and changes, and refer providers to view the updated formulary
   on the Contractor's website.
v. AHCCCS appointment standards
w. Americans with Disabilities Act (ADA) requirements and Title VI, as
   applicable
x. Eligibility verification
y. Cultural competency information, including notification about Title VI
   of the Civil Rights Act of 1964. Providers should also be informed of
   how to access interpretation services to assist members who speak a
   language other the English or who use sign language.
z. Peer review and appeal process.
aa. Medication management services as described in Section D, Paragraph 12.
bb. Information about a member's right to be treated with dignity and
    respect as specified in 42 CFR 438.100.
cc. Notification that the contractor has no policies which prevent the
    provider from advocating on behalf of the member.

36. PROVIDER  REGISTRATION

The Contractor shall ensure that all of its subcontractors register with
AHCCCSA as an approved service provider and receive an AHCCCS Provider
ID Number.  A Provider Participation Agreement must be signed by each
provider who does not already have a current AHCCCS ID number.  The
original shall be forwarded to AHCCCSA.  This provider registration process
must be completed in order for the Contractor to report services a
subcontractor renders to enrolled members and for the Contractor to be paid
reinsurance.

37. SUBCONTRACTS

The Contractor shall be legally responsible for contract performance
whether or not subcontracts are used [42 CFR 438.230(a) and 434.6(c)].
No subcontract shall operate to terminate the legal responsibility of
the Contractor to assure that all activities carried out by the subcontractor
conform to the provisions of this contract.  Subject to such conditions, any
function required to be provided by the Contractor pursuant to this contract
may be subcontracted to a qualified person or organization.  All such
subcontracts must be in writing [42 CFR 438.6(L)].  See the ACOM Contractor
Claims Processing by Health Plan Subcontracted Providers Policy.

All subcontracts entered into by the Contractor are subject to prior
review and written approval by AHCCCS, Division of Health Care Management,
and shall incorporate by reference the terms and conditions of this
contract.  The following subcontracts, unless otherwise specified, shall
be submitted to AHCCCS, Division of Health Care Management for prior approval
at least 30 days prior to the beginning date of the subcontract:

a. Automated data processing
b. Third-party administrators
c. Management Services  (See also Section D, Paragraph 43)
d. Capitated or other risk subcontracts requiring claims processing by the
   subcontractor

The Contractor shall maintain a fully executed original of all subcontracts,
which shall be accessible to AHCCCSA within two business days of request
by AHCCCSA.   All requested subcontracts must have full disclosure of all
terms and conditions and must fully disclose all financial or other
requested information. Information may be designated as confidential but
may not be withheld from AHCCCS as proprietary. Information designated as
confidential may not be disclosed by AHCCCS without the prior written
consent of the Contractor except as required by law.  All subcontracts shall
comply with the applicable provisions of Federal and State laws, regulations
and policies.

Before entering into a subcontract which delegates Contractor duties or
responsibilities to a subcontractor, the Contractor must evaluate the
prospective subcontractor's ability to perform the activities to be
delegated.  If the Contractor delegates duties or responsibilities such
as utilization management or claims processing to a subcontractor, then the
Contractor shall establish a written agreement that specifies the
activities and reporting responsibilities delegated to the subcontractor.
The written agreement shall also provide for revoking delegation or imposing
other sanctions if the subcontractor's performance is inadequate.  In
order to determine adequate performance, the Contractor shall monitor
the subcontractor's performance on an ongoing basis and subject it to
formal review according to a periodic schedule.  The schedule for review
shall be submitted to AHCCCSA, Division of Health Care Management for prior
approval.   As a result of the performance review, any deficiencies must
be communicated to the subcontractor in order to establish a corrective action
plan.  The results of the performance review and the correction plan shall
be communicated to AHCCCS upon completion. [42 CFR 438.230(b)]

The Contractor must submit annually (within 90 days from the start of the
contract year) a statement whether any Contractor duties or responsibilities
have been delegated to a subcontractor.  If duties or responsibilities have
been delegated to a subcontractor, the Contractor must submit annually
(within 90 days from the start of the contract year) a report listing the
following:

* Subcontractor's name
* Delegated duties and responsibilities
* Most recent review date of the duties, responsibilities and financial
  position of the subcontractor
* Next scheduled review date
* Identified areas of deficiency
* Contractor's corrective action plan

The Contractor shall promptly inform AHCCCS, Division of Health Care
Management, in writing if a subcontractor is in significant non-compliance
that would affect their abilities to perform the duties and responsibilities
of the subcontract.

The Contractor shall not include covenant-not-to-compete requirements in
its provider agreements.  Specifically, the Contractor shall not contract
with a provider and require that the provider not provide services for any
other AHCCCS Contractor. In addition, except for cost sharing requirements,
the Contractor shall not enter into subcontracts that contain compensation
terms that discourage providers from serving any specific eligibility
category.  The Contractor must enter into a written agreement with any
provider (including out-of-state providers) the Contractor reasonably
anticipates will be providing services on its behalf more than 25 times
during the contract year [42 CFR 438.206(b)(1)].  Exceptions to this
requirement include the following:

a. If a provider who provides services more than 25 times during the
   contract year refuses to enter into a written agreement with the
   Contractor, the Contractor shall submit documentation of such refusal
   to AHCCCS, Division of Health Care Management within seven days of
   its final attempt to gain such agreement.
b. If a provider performs emergency services such as an emergency room
   physician or an ambulance company, a written agreement is not required.
c. Individual providers as detailed in the AMPM.
d. Hospitals, as discussed in Section D, Paragraph 40, Hospital
   Subcontracting and Reimbursement.
e. If a provider primarily performs services in an inpatient setting.
f. If upon the Medical Director's review, it is determined that the
   Contractor or members would not benefit by adding the provider to the
   contracted network.

Any other exceptions to this requirement must be approved by AHCCCS,
Division of Health Care Management.  If AHCCCS does not respond within
30 days, the requested exception is deemed approved.  The Contractor may
request an expedited review and approval.

Each subcontract must contain verbatim all the provisions of Attachment A,
Minimum Subcontract Provisions.  In addition, each subcontract must
contain the following [42 CFR 438.206(b)(1)]:

a. Full disclosure of the method and amount of compensation or other
   consideration to be received by the subcontractor.
b. Identification of the name and address of the subcontractor.
c. Identification of the population, to include patient capacity, to be
   covered by the subcontractor.
d. The amount, duration and scope of medical services to be provided, and
   for which compensation will be paid.
e. The term of the subcontract including beginning and ending dates,
   methods of extension, termination and re-negotiation.
f. The specific duties of the subcontractor relating to coordination of
   benefits and determination of third-party liability.
g. A provision that the subcontractor agrees to identify Medicare and
   other third-party liability coverage and to seek such Medicare or third
   party liability payment before submitting claims to the Contractor.
h. A description of the subcontractor's patient, medical and cost record
   keeping system.
i. Specification that the subcontractor shall cooperate with quality
   management/quality improvement programs, and comply with the utilization
   management and review procedures specified in 42 CFR Part 456, as
   specified in the AMPM.
j. A provision stating that a merger, reorganization or change in ownership
   of a subcontractor that is related to or affiliated with the Contractor
   shall require a contract amendment and prior approval of AHCCCSA.
k. Procedures for enrollment or re-enrollment of the covered population
   (may also refer to the Provider Manual).
l. A provision that the subcontractor shall be fully responsible for all
   tax obligations, Worker's Compensation Insurance, and all other applicable
   insurance coverage obligations which arise under this subcontract, for
   itself and its employees, and that AHCCCSA shall have no responsibility
   or liability for any such taxes or insurance coverage.
m. A provision that the subcontractor must obtain any necessary authorization
   from the Contractor or AHCCCSA for services provided to eligible and/or
   enrolled members.
n. A provision that the subcontractor must comply with encounter
   reporting and claims submission requirements as described in the subcontract.
o. Provision(s) that allow the Contractor to suspend, deny, refuse to
   renew or terminate any subcontractor in accordance with the terms of
   this contract and applicable law and regulation.
p. A provision that the subcontractor may provide the member with factual
   information, but is prohibited from recommending or steering a member
   in the member's selection of a Contractor.
q. A provision that compensation to individuals or entities that conduct
   utilization management activities is not structured so as to provide
   incentives for the individual or entity to deny, limit or discontinue
   medically necessary services to any enrollee (42 CFR 438.210(e)).

38. CLAIMS PAYMENT/HEALTH INFORMATION SYSTEM

The Contractor shall develop and maintain a claims payment system capable
of processing, cost avoiding and paying claims in accordance with
A.R.S. Sections 36-2903 and 2904 and Article 7 of the AHCCCS rules, a copy of
which may be found in the Bidder's Library.

The Contractor's claims payment system, as well as its prior authorization
and concurrent review process, must minimize the likelihood of having to
recoup already-paid claims.  Any individual recoupment in excess of $50,000
per provider within a contract year must be approved in advance by
AHCCCSA, Division of Health Care Management, Acute Finance Unit.  If AHCCCS
does not respond within 30 days, the recoupment request is deemed approved.
AHCCCS must be notified of any cumulative recoupment greater than $50,000
per provider per contract year.  A Contractor shall not recoup monies from
a provider later than 12 months after the date of original payment on a
clean claim, without prior approval from AHCCCSA, unless the recoupment is a
result of fraud, reinsurance audit findings, data validation or audits
conducted by the AHCCCSA Office of Program Integrity.

The Contractor is required to reimburse providers for previously recouped
monies if the provider was subsequently denied payment by the primary
insurer based on timely filing limits or lack of prior authorization and the
member failed to disclose additional insurance coverage other than AHCCCS.

Unless a subcontract specifies otherwise, Contractors with 50,000 or more
members shall ensure that 95% of all clean claims are paid within 30 days
of receipt of the clean claim and 99% are paid within 60 days of receipt of
the clean claim.  Unless a subcontract specifies otherwise, Contractors
with fewer than 50,000 members shall ensure that 90% of all clean claims are
paid within 30 days of receipt of the clean claim and 99% are paid within
60 days of receipt of the clean claim. Additionally, unless a shorter time
period is specified in contract, the Contractor shall not pay a claim
initially submitted more than 6 months after date of service or pay a
clean claim submitted more than 12 months after date of service.  Claim
payment requirements pertain to both contracted and non-contracted providers.
The receipt date of the claim is the date stamp on the claim or the date
electronically received.  The receipt date is the day the claim is received
at the Contractor's specified claim mailing address.  The paid date of the
claim is the date on the check or other form of payment. [42 CFR 447.45(d)]
Claims submission deadlines shall be calculated from the date of service or
the effective date of eligibility posting, whichever is later.  Remittance
advices accompanying the Contractor's payments to providers must contain, at
a minimum, adequate descriptions of all denials and adjustments, the reasons
for such denials and adjustments, the amount billed, the amount paid, and
provider rights for claim dispute.

Effective for all non-hospital clean claims with dates of service October
1, 2004 and thereafter, in the absence of a contract specifying other
late payment terms, Contractors are required to pay interest on late
payments.  Late claims payments are those that are paid after 45 days
of receipt of the clean claim (as defined in this contract).  In grievance
situations, interest shall be paid back to the date interest would have
started to accrue beyond the applicable 45 day requirement.  Interest
shall be at the rate of ten per cent per annum, unless a different rate
is stated in a written contract.  In the absence of interest payment
terms in a subcontract, interest shall accrue starting on the first
day after a clean claim is contracted to be paid.  For hospital
clean claims, a slow payment penalty shall be paid in accordance with
A.R.S. 2903.01.  When interest is paid, the Contractor must report the
interest separately from the health plan paid amount on the encounter.
Interest should be reported in the 837 CAS adjustment loop using reason
code "85".

Contractors are required to accept HIPAA compliant electronic claims
transactions from any provider interested and capable of electronic
submission; and must be able to make claims payments via electronic funds
transfer.  In addition, Contractors shall implement and meet the following
milestone in order to make claims processing and payment more efficient and
timely:

* Receive and pay 50% of all claims (based on volume of actual claims
  excluding claims processed by Pharmacy Benefit Managers (PBMs))
  electronically by July 1, 2006

The Contractor shall submit a monthly Claims Dashboard as specified in
the AHCCCS Claims Reporting Guide.  The Monthly report must be received
by the AHCCCSA, Division of Healthcare Management, no later than 15 days
from the end of each month.

The Contractor shall develop and maintain a health information system
that collects, analyzes, integrates, and reports data.  The system shall
provide information on areas including, but not limited to, service
utilization,  claim disputes and appeals. [42 CFR 438.242(a)]

The Contractor will ensure that changing or making major upgrades to the
information systems effecting claims processing, or any other major
business component, will be accompanied by a plan which includes a timeline,
milestones, and adequate testing before implementation.  At least six
months before the anticipated implementation date, the contractor shall
provide the system change plan to AHCCCSA for review and comment.

39. SPECIALTY CONTRACTS

AHCCCSA may at any time negotiate or contract on behalf of the Contractor
and AHCCCSA for specialized hospital and medical services.  AHCCCSA will
consider existing Contractor resources in the development and execution
of specialty contracts.  AHCCCSA may require the Contractor to modify
its delivery network to accommodate the provisions of specialty contracts.
Specialty contracts shall take precedence over, and supersede, existing
and future subcontracts for services that are subject to specialty
contracts.  AHCCCSA may consider waiving this requirement in particular
situations if such action is determined to be in the best interest of
the State; however, in no case shall reimbursement exceed that payable
under the relevant AHCCCSA specialty contract.

During the term of specialty contracts, AHCCCSA may act as an intermediary
between the Contractor and specialty contractors to enhance the cost
effectiveness of service delivery.   Adjudication of claims related to
such payments provided under specialty contracts shall remain the
responsibility of the Contractor.  AHCCCSA may provide technical
assistance prior to the implementation of any specialty contracts.

Currently, AHCCCSA only has specialty contracts for transplant services
and anti-hemophilic agents and related pharmaceutical services.   AHCCCSA
shall provide at least 60 days advance written notice to the Contractor
prior to the implementation of any specialty contract.

40. HOSPITAL SUBCONTRACTING AND REIMBURSEMENT

Maricopa and Pima counties only:  Effective October 1, 2003, legislation
authorizes the Inpatient Hospital Reimbursement Program (Program).
The Program is defined in the Arizona Revised Statutes (A.R.S.) 36-2905.01,
and requires hospital subcontracts to be negotiated between contractors
and hospitals in Maricopa and Pima counties to establish reimbursement
levels, terms and conditions.  Subcontracts shall be negotiated by the
Contractor and hospitals to cover operational concerns, such as timeliness
of claims submission and payment, payment of discounts or penalties and
legal resolution which may, as an option, include establishing arbitration
procedures.  These negotiated subcontracts shall remain under close scrutiny
by AHCCCSA to ensure availability of quality services within specific service
districts, equity of related party interests and reasonableness of rates.
The general provisions of this program encompass acute care hospital
services and outpatient hospital services that result in an admission.
The Contractor shall submit all hospital subcontracts and any amendments to
AHCCCSA, Division of Health Care Management.  For non-emergency patient-days,
the Contractor shall ensure that at least 65% of its members use contracted
hospitals.  AHCCCSA reserves the right to subsequently adjust the 65%
standard.  Further, if in AHCCCSA's judgment the number of emergency days at
a particular non-contracted hospital becomes significant, AHCCCSA may require
a subcontract at that hospital. In accordance with R9-22-718, unless
otherwise negotiated by both parties, the reimbursement for inpatient
services provided at a non-contracted hospital shall be based on the rates
as defined in A.R.S. Section 36-2903.01, multiplied by 95%.

All counties EXCEPT Maricopa and Pima:  The Contractor shall reimburse
hospitals for member care in accordance with AHCCCS Rule R9-22-705.  The
Contractor is encouraged to obtain subcontracts with hospitals in all GSA's
and must submit copies of these subcontracts, including amendments, to
AHCCCSA, Division of Health Care Management.

Out-of-State Hospitals:  The Contractor shall reimburse out-of-state
hospitals in accordance with AHCCCS Rule R9-22-705.  Contractors serving
border communities (excluding Mexico) are strongly encouraged to establish
contractual agreements with those out-of-state hospitals that are identified
by GSA in Attachment B.

Outpatient hospital services:  With passage of SB 1410 (Laws of 2004,
Chapter 279), effective for dates of service on and after July 1, 2005,
in absence of a contract, the default payment rate for outpatient hospital
services billed on a UB-92 will be based on the AHCCCS outpatient hospital
fee schedule, rather than a hospital-specific cost-to-charge ratio
(pursuant to ARS 36-2904).

Hospital Recoupments:  The Contractor may conduct prepayment and post-payment
medical reviews of all hospital claims including outlier claims.
Erroneously paid claims are subject to recoupment.  If the Contractor fails
to identify lack of medical necessity through concurrent review and/or
prepayment medical review, lack of medical necessity identified during
post-payment medical review shall not constitute a basis for recoupment
by the Contractor.  This prohibition does not apply to recoupments that
are a result of an AHCCCS reinsurance audit.  See also Section D,
Paragraph 38, Claims Payment System.  For a more complete description of
the guidelines for hospital reimbursement, please consult the Bidder's
Library for applicable statutes and rules.

41. NURSING FACILITY REIMBURSEMENT

The Contractor shall not deny nursing facility services if the nursing
facility is unable to obtain prior authorization in situations where acute
care eligibility and ALTCS eligibility overlap and the member is enrolled
with an AHCCCS acute care contractor.  In such situations, the Contractor
shall impose reasonable authorization requirements.  The Contractor's
payment responsibility, described above, applies only in situations where
the nursing facility has not been notified in advance of the member's
enrollment with an AHCCCS acute care contractor.  When ALTCS eligibility
overlaps AHCCCS acute care enrollment, the acute care enrollment takes
precedence.  Although the member could be ALTCS eligible for this time
period, there is no ALTCS enrollment that occurs on the same days as
AHCCCS acute enrollment.

The Contractor shall provide medically necessary nursing facility services
for any member who has a pending ALTCS application, who is currently residing
in a nursing facility and is eligible for services provided under this
contract.  If the member becomes ALTCS eligible and is enrolled with an
ALTCS Contractor before the end of the maximum 90 days per contract year
of nursing facility coverage, the Contractor is only responsible for
nursing facility coverage during the time the member is enrolled with
the Contractor.  Nursing facility services, covered by a third party insurer
(including Medicare) while the member is enrolled with the Contractor,
shall be applied to the 90 day per contract year limitation.

The Contractor shall notify the Assistant Director of the Division of
Member Services in writing, when a member has been residing in a nursing
facility for 75 days.  This will allow AHCCCSA time to follow-up on the
status of the ALTCS application process and to prepare for potential
fee-for-service coverage if the stay goes beyond the 90-day per contract
year maximum.

42. PHYSICIAN INCENTIVES/PAY FOR PERFORMANCE

Physician Incentives
Reporting of Physician Incentive Plans has been suspended by CMS until
further notice.  No reporting is required until suspension is lifted.

The Contractor must comply with all applicable physician incentive
requirements and conditions defined in 42 CFR 417.479.  These regulations
prohibit physician incentive plans that directly or indirectly make
payments to a doctor or a group as an inducement to limit or refuse
medically necessary services to a member.  The Contractor is required to
disclose all physician incentive agreements to AHCCCSA and to AHCCCS
members who request them.

The Contractor shall not enter into contractual arrangements that place
providers at significant financial risk as defined in CFR 417.479 unless
specifically approved in advance by the AHCCCSA Division of Health Care
Management.  In order to obtain approval, the following must be submitted
to the AHCCCSA Division of Health Care Management 45 days prior to the
implementation of the contract [42 CFR 438.6(g)]:

1. A complete copy of the contract
2. A plan for the member satisfaction survey
3. Details of the stop-loss protection provided
4. A summary of the compensation arrangement that meets the substantial
   financial risk definition.

The Contractor shall disclose to AHCCCSA the information on physician
incentive plans listed in 42 CFR 417.479(h)(1) through 417.479(I) upon
contract renewal, prior to initiation of a new contract, or upon request
from AHCCCSA or CMS.  Please refer to the Physician Incentive Plan
Disclosure by Contractors Policy in the Bidder's Library for details on
providing required disclosures.

The Contractor shall also provide for compliance with physician incentive
plan requirements as set forth in 42 CFR 422.208, 422.210 and 438.6(h).
These regulations apply to contract arrangements with subcontracted
entities that provide utilization management services.

Pay for Performance Any pay for performance that meets the requirements
of 42 CFR 417.479 must be approved by AHCCCS Division of Health Care
Management prior to implementation.

43. MANAGEMENT SERVICES AGREEMENT AND COST ALLOCATION PLAN

If a Contractor has subcontracted for management services, the management
service agreement and the corporate cost allocation plan must be approved
in advance by AHCCCSA, Division of Health Care Management.  The cost
allocation plan must be submitted with the proposed management fee
agreement.  AHCCCSA reserves the right to perform a thorough review of
actual management fees charged and/or corporate allocations made.  If
the fees or allocations actually paid out are determined to be unjustified
or excessive, amounts may be subject to repayment to the Contractor.
In addition, sanctions may be imposed.

44. RESERVED

45. MINIMUM CAPITALIZATION REQUIREMENTS

In order to be considered for a contract award, the Offeror must meet
a minimum capitalization requirement for each GSA bid.  The capitalization
requirement for both new and continuing offerors must be met within 30 days
after contract award. [42 CFR 438.116]

Minimum capitalization requirements by GSA are as follows:

Geographic Service Area (GSA)
Capitalization Requirement-New Contractors
Capitalization Requirement-Existing Contractors

Mohave/Coconino/Apache/Navajo
$4,400,000
$3,000,000

La Paz/Yuma
$3,000,000
$2,000,000

Maricopa
$5,000,000
$4,000,000

Pima/Santa Cruz
$4,500,000
$3,000,000

Cochise/Graham/ Greenlee
$2,150,000
$2,000,000

Pinal/Gila
$2,400,000
$2,000,000

Yavapai*
$1,600,000
$1,600,000

*Yavapai's minimum capitalization requirement for both new and existing
offerors is limited to $150 times the estimated number of members.

New Offerors:  To be considered for a contract award in a given GSA or
group of GSA's, a new offeror must meet the minimum capitalization
requirements listed above.  The capitalization requirement is subject to a
$10,000,000 ceiling regardless of the number of GSA's awarded.  This
requirement is in addition to the Performance Bond requirements defined
in Paragraphs 46 and 47 below and must be met with cash with no
encumbrances, such as a loan subject to repayment. The capitalization
requirement may be applied toward meeting the equity per member
requirement (see Section D, Paragraph 50, Financial Viability
Standards/Performance Guidelines) and is intended for use in operations
of the Contractor.

Continuing Offerors:  Continuing offerors that are bidding a county or
GSA in which they currently have a contract must meet the equity per
member standard (see Section D, Paragraph 50, Financial Viability
Standards/Performance Guidelines) for their current membership.
Continuing offerors that do not meet the equity standard must fund,
through capital contribution, the necessary amount to meet the minimum
capitalization requirement.  Continuing offerors that are bidding a new
GSA must provide the additional capitalization for the new GSA they are
bidding. The amount of the required capitalization for continuing offers
may differ from that for new offerors due to size of the existing offerors
current enrollment. (See the table of requirements by GSA above).

Continuing offerors will not be required to provide additional
capitalization if they currently meet the equity per member standard with
their existing membership and their excess equity is sufficient to cover
the proposed additional members, or they have at least $10,000,000 in equity.

46. PERFORMANCE BOND OR BOND SUBSTITUTE

The Contractor shall be required to provide a performance bond of standard
commercial scope issued by a surety company doing business in this State,
an irrevocable letter of credit, or a cash deposit ("Performance Bond") to
AHCCCSA for as long as the Contractor has AHCCCS-related liabilities of
$50,000 or more outstanding, or 15 months following the effective date of
this contract, whichever is later, to guarantee: (1) payment of the
Contractor's obligations to providers, non-contracting providers, and
non-providers; and (2) performance by the Contractor of its obligations
under this contract [42 CFR 438.116(a)(1) and (b)(1)].  The Performance
Bond shall be in a form acceptable to AHCCCSA as described in the ACOM
Performance Bond Policy available in the Bidder's Library.

In the event of a default by the Contractor, AHCCCSA shall, in addition to
any other remedies it may have under this contract, obtain payment under
the Performance Bond or substitute security for the purposes of the following:

a. Paying any damages sustained by providers, non-contracting providers and
   non-providers by reason of a breach of the Contractor's obligations under
   this contract,
b. Reimbursing AHCCCSA for any payments made by AHCCCSA on behalf of the
   Contractor, and
c. Reimbursing AHCCCSA for any extraordinary administrative expenses
   incurred by reason of a breach of the Contractor's obligations under
   this contract, including, but not limited to, expenses incurred after
   termination of this contract for reasons other than the convenience of
   the State by AHCCCSA.

In the event AHCCCSA agrees to accept substitute security in lieu of the
Performance Bond, irrevocable letter of credit or cash deposit, the
Contractor agrees to execute any and all documents and perform any and all
acts necessary to secure and enforce AHCCCSA's security interest in such
substitute security including, but not limited to, security agreements and
necessary UCC filings pursuant to the Arizona Uniform Commercial Code.  In
the event such substitute security is agreed to and accepted by AHCCCSA,
the Contractor acknowledges that it has granted AHCCCSA a security interest
in such substitute security to secure performance of its obligations under
this contract.  The Contractor is solely responsible for establishing the
credit-worthiness of all forms of substitute security.  AHCCCSA may,
after written notice to the Contractor, withdraw its permission for
substitute security, in which case the Contractor shall provide AHCCCSA
with a form of security described above.  The Contractor may not change
the amount, duration or scope of the performance bond without prior
written approval from AHCCCSA, Division of Health Care Management.

The Contractor shall not leverage the bond for another loan or create
other creditors using the bond as security.

47. AMOUNT OF PERFORMANCE BOND

The initial amount of the Performance Bond shall be equal to 80% of the
total capitation payment expected to be paid to the Contractor in the first
month of the contract year, or as determined by AHCCCSA.  The total
capitation amount shall include delivery and hospital supplemental payments.
This requirement must be satisfied by the Contractor no later than 30 days
after notification by AHCCCSA of the amount required.  Thereafter, AHCCCSA
shall evaluate the enrollment statistics of the Contractor on a monthly
basis to determine if the Performance Bond must be increased.  The
Contractor shall have 30 days following notification by AHCCCSA to increase
the amount of the Performance Bond.  The Performance Bond amount that must
be maintained after the contract term shall be sufficient to cover all
outstanding liabilities and will be determined by AHCCCSA.  The Contractor
may not change the amount of the performance bond without prior written
approval from AHCCCS, Division of Health Care Management.  Refer to the
ACOM Performance Bond and Equity Per Member Policy for more details.

48. ACCUMULATED FUND DEFICIT

The Contractor and its owners shall fund any accumulated fund deficit
through capital contributions in a form acceptable to AHCCCSA within 30 days
after receipt by AHCCCSA of the final audited financial statements, or as
otherwise requested by AHCCCSA.  AHCCCSA may, at its option, impose
enrollment caps in any or all GSA's as a result of an accumulated deficit,
even if unaudited.

49. ADVANCES, DISTRIBUTIONS, LOANS AND INVESTMENTS

The Contractor shall not, without the prior approval of AHCCCSA, make
any advances to a related party or subcontractor.  The Contractor shall
not, without similar prior approval, make any distribution, loan or loan
guarantee to any entity, including another fund or line of business
within its organization.  All investments, other than investments in
U.S. Government securities or Certificates of Deposit, also require
AHCCCSA prior approval.  (See the Reporting Guide for Acute Care
Contractors for alternatives to the prior approval of individual
investments.)  All requests for prior approval are to be submitted to
the AHCCCSA Division of Health Care Management.

50. FINANCIAL VIABILITY STANDARDS / PERFORMANCE GUIDELINES

AHCCCSA has established financial viability standards/performance
guidelines.  On a quarterly basis, AHCCCSA will review the following ratios
with the purpose of monitoring the financial health of the Contractor.
The two financial viability standards, the Current Ratio and Equity per
Member, are the standards that best represent the financial solvency of the
Contractor. Therefore, the Contractor must comply with these two
financial viability standards.

AHCCCSA will also monitor the Medical Expense Ratio, the Administrative
Cost Percentage, and the RBUC's Days Outstanding. These guidelines are
analyzed as part of AHCCCSA's due diligence in financial statement
monitoring.  Sanctions may not be imposed if the Contractor does not
meet these performance guidelines.  AHCCCSA takes into account
Contractors' unique programs for managing care and improving the heath
status of members when analyzing medical expense and administrative ratio
results.  However, if a critical combination of the Financial Viability
Standards and Performance Guidelines are not met, or if a Contractor's
experience differs significantly from other Contractors', additional
monitoring, such as monthly reporting, may be required.

FINANCIAL VIABILITY STANDARDS

Current Ratio
Current assets divided by current liabilities. "Current assets" includes
any long-term investments that can be converted to cash within 24 hours
without significant penalty (i.e., greater than 20%).

Standard: At least 1.00

If current assets include a receivable from a parent company, the parent
company must have liquid assets that support the amount of the
inter-company loan.

Equity per Member
Equity, less on-balance sheet performance bond, divided by the number
of non-SOBRA Family Planning Extension Services members enrolled at the
end of the period.

Standard: At least $150 for Contractors with enrollment < 100,000
$100 for Contractors with enrollment of 100,000+

For purposes of this measurement, the equity to be measured must be
supported by unencumbered current assets.

(Failure to meet this standard may result in an enrollment cap being
imposed in any or all contracted GSAs.)

PERFORMANCE GUIDELINES

Medical Expense Ratio
Total medical expenses divided by the sum of total capitation + Delivery
Supplement + Hospital Supplemental Payment +TPL+ Reinsurance + HIV/AIDS
Supplement less premium tax

Standard:  At least 84%

Administrative Cost Percentage
Total administrative expenses  divided by the sum of total capitation
+ Delivery Supplement + Hospital Supplemental Payment + TPL + Reinsurance
+ HIV/AIDS Supplement less premium tax

Standard: No more than 10%

Received But Unpaid Claims (Days Outstanding)
Received but unpaid claims divided by the average daily medical expenses
for the period, net of sub-capitation expense.

Standard:  No more than 30 days

51. SEPARATE INCORPORATION

Within 60 days of contract award, a non-governmental contractor shall have
established a separate corporation for the purposes of this contract,
whose sole activity is the performance of contract function with AHCCCS.

52. MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP

A proposed merger, reorganization or change in ownership of the Contractor
shall require prior approval of AHCCCSA and a subsequent contract
amendment.  The Contractor must submit a detailed merger, reorganization
and/or transition plan to AHCCCSA, Division of Health Care Management,
for review.  The purpose of the plan review is to ensure uninterrupted
services to members, evaluate the new entity's ability to support the
provider network, ensure that services to members are not diminished and
that major components of the organization and AHCCCS programs are not
adversely affected by such merger, reorganization or change in ownership.

53. COMPENSATION

The method of compensation under this contract will be Prior Period
Coverage (PPC) capitation, prospective capitation, delivery supplement,
hospitalized supplement for Medical Expense Deduction (MED) members,
HIV-AIDS supplement, reinsurance and third party liability, as described
and defined within this contract and appropriate laws, regulations or
policies.

Actuaries establish the capitation rates using practices established by
the Actuarial Standards Board.  AHCCCS provides the following data to
its actuaries to establish rates for the purposes of rebasing the
capitation rates.

a. Utilization and unit cost data derived from reported encounters
b. Both Audited and unaudited financial statements reported by Contractors
c. Local market basket inflation trends
d. AHCCCS fee for service schedule pricing adjustments
e. Programmatic or Medicaid covered service changes that affect reimbursement
f. Additional administrative requirements for Contractors
g. Other changes to medical practices that affect reimbursement

AHCCCS adjusts its rates to best match payment to risk.  This further
ensures the actuarial basis for the capitation rates.  The following risk
factors will be included:

a. Reinsurance (as described in Paragraph 57)
b. HIV/AIDS supplemental payment
c. Age/Gender for the 1931(b), SOBRA, KidsCare and BCCTP eligibility groups
d. Medicare enrollment for SSI members
e. Delivery supplemental payment
f. Hospitalized supplemental payments for MED members
g. Geographic Service Area adjustments
h. Risk sharing for Title XIX Waiver Group reimbursement
i. Risk sharing for PPC reimbursement
j. Member choice statistic for Title XIX Waiver Group
k. Member share of cost amounts

The above information is reviewed by AHCCCS' actuaries in renewal years
to determine if adjustments are necessary to maintain actuarially sound rates.
A Contractor may cover services for members that are not covered under the
State Plan; however those services are not included in the data provided
to actuaries for setting capitation rates [42 CFR 438.6(e)].  In addition
to the above data used to review the appropriateness of capitation rates,
during renewal years, AHCCCS may look at other factors that potentially
impact appropriate reimbursement including the medical cost experience of
members who exercise their right to choose a contractor upon initial
enrollment versus those who are auto assigned to a contractor.

Prospective Capitation:  The Contractor will be paid capitation for all
prospective member months, including partial member months.  This capitation
includes the cost of providing medically necessary covered services to
members during the prospective period coverage.

Prior Period Coverage (PPC) Capitation:  Except for SOBRA Family Planning,
KidsCare and HIFA Parents, the Contractor will be paid capitation for all
PPC member months, including partial member months.  This capitation includes
the cost of providing medically necessary covered services to members
during prior period coverage.  The PPC capitation rates will be set by
AHCCCSA and will be paid to the Contractor along with the prospective
capitation described below.  Contractors will not receive PPC capitation
for newborns of members who were enrolled at the time of delivery.

Reconciliation of PPC Costs to Reimbursement:  AHCCCSA will reconcile the
Contractor's PPC medical cost expenses to PPC capitation paid to the
Contractor during the year.  This reconciliation will limit the
Contractor's profits and losses to 2%.  Any losses in excess of 2% will
be reimbursed to the Contractor, and likewise, profits in excess of 2%
will be recouped.  Encounter data will be used to determine medical
expenses.  Refer to the ACOM PPC Reconciliation Policy for further details.

Risk Sharing for Title XIX Waiver Members:  AHCCCSA will reconcile the
Contractor's PPC and prospective medical cost expenses to PPC capitation,
prospective capitation, hospitalized supplemental payments, delivery
supplemental payments and HIV/AIDS supplemental payments paid to the
Contractor during the year.  This reconciliation will limit the Contractor's
profits and losses to 2%.  Any losses in excess of 2% will be reimbursed
to the Contractor, and likewise, profits in excess of 2% will be recouped.
Encounter data will be used to determine medical expenses.  Refer to the
ACOM Title XIX Waiver Reconciliation Policy for further details.

Delivery Supplement:  When the Contractor has an enrolled woman who
delivers during a prospective enrollment period, the Contractor will be
entitled to a supplemental payment.  Supplemental payments will not apply to
women who deliver in a prior period coverage time period.  AHCCCSA reserves
the right at any time during the term of this contract to adjust the amount
of this payment for women who deliver at home. The delivery supplemental
payment is not made if the hospitalized supplemental payment has already
been paid.

Hospitalized Supplemental Payment: If an MED member is an inpatient on
the date of application for AHCCCS eligibility, and the date of application
falls within the member's eligibility period, the Contractor is entitled to
a supplemental payment to help defray costs related to the inpatient stay.
The payment is a one-time supplement that is paid when the member is
enrolled with the Contractor and is subject to review during the term of
the contract.

HIV-AIDS Supplement:  On a quarterly basis, the Contractor shall submit
to AHCCCSA, Division of Health Care Management, an unduplicated monthly
count of members, by rate code, who are using approved HIV/AIDS drugs along
with the supporting pharmacy log.  The report shall be submitted, along
with the quarterly financial reporting package, within 60 days after the
end of each quarter.  AHCCCSA reserves the right to recoup any amounts
paid for ineligible members as well as an associated penalty for
incorrect encounter reporting.  The approved HIV/AIDS drug list is located
on the AHCCCS website at www.azahcccs.gov.

Refer to the ACOM Contractor HIV/AIDS Supplemental Payments Policy for
further details and requirements.

54.  PAYMENTS TO CONTRACTORS

Subject to the availability of funds, AHCCCSA shall make payments to the
Contractor in accordance with the terms of this contract provided that the
Contractor's performance is in compliance with the terms and conditions of
this contract.  Payment must comply with requirements of A.R.S. Title 36.
AHCCCSA reserves the option to make payments to the Contractor by wire or
National Automated Clearing House Association (NACHA) transfer and will
provide the Contractor at least 30 days notice prior to the effective date
of any such change.

Where payments are made by electronic funds transfer, AHCCCSA shall not be
liable for any error or delay in transfer or indirect or consequential
damages arising from the use of the electronic funds transfer process.
Any charges or expenses imposed by the bank for transfers or related
actions shall be borne by the Contractor.  Except for adjustments made to
correct errors in payment, and as otherwise specified in this section,
any savings remaining to the Contractor as a result of favorable claims
experience and efficiencies in service delivery at the end of the contract
term may be kept by the Contractor.

All funds received by the Contractor pursuant to this contract shall be
separately accounted for in accordance with generally accepted accounting
principles.

Except for funds received from the collection of permitted copayments and
third-party liabilities, the only source of payment to the Contractor for
the services provided hereunder is the Arizona Health Care Cost Containment
System Fund.  An error discovered by the State, with or without an audit,
in the amount of fees paid to the Contractor will be subject to adjustment
or repayment by AHCCCSA making a corresponding decrease in a current
Contractor's payment or by making an additional payment to the Contractor.
When a contractor identifies an overpayment, AHCCCSA must be notified and
reimbursed within 30 days of identification.

No payment due the Contractor by AHCCCSA may be assigned or pledged by
the Contractor.  This section shall not prohibit AHCCCSA at its sole option
from making payment to a fiscal agent hired by Contractor.

55. CAPITATION ADJUSTMENTS

Except for changes made specifically in accordance with this contract,
the rates set forth in Section B shall not be subject to re-negotiation
or modification during the contract period.  AHCCCSA may, at its option,
review the effect of a program change and determine if a capitation
adjustment is needed.  In these instances the adjustment will be
prospective with assumptions discussed with the Contractor prior to
modifying capitation rates.  The Contractor may request a review of a
program change if it believes the program change was not equitable;
AHCCCSA will not unreasonably withhold such a review.

If the Contractor is in any manner in default in the performance of any
obligation under this contract, AHCCCSA may, at its option and in addition
to other available remedies, adjust the amount of payment until there is
satisfactory resolution of the default.  The Contractor shall reimburse
AHCCCSA and/or AHCCCSA may deduct from future monthly capitation for any
portion of a month during which the Contractor was not at risk due to, for
example:

a. death of a member
b. member's incarceration (not eligible for AHCCCS benefits from the date
   of incarceration)
c. duplicate capitation to the same Contractor
d. adjustment based on change in member's contract type
e. voluntary withdrawal

If a member is enrolled twice with the same Contractor, recoupment will be
made as soon as the double capitation is identified.  AHCCCSA reserves the
right to modify its policy on capitation recoupments at any time during the
term of this contract.

56. INCENTIVES

AHCCCSA will be implementing an incentive program that utilizes financial
and/or non-financial incentives to promote program quality.  AHCCCSA will
use contractor clinical performance indicators in the development of an
incentive program.  Examples of incentive programs are listed below.

Auto assignment algorithm:  Effective CYE '06, AHCCCSA will adjust the
auto assignment algorithm methodology to incorporate contractor's clinical
performance indicator results in the calculation of target percentages.
AHCCCSA will use the following performance indicators:

	Prenatal Care in the First Trimester
	Well-Child Visits 3-6 Years

Administrative requirements:  Effective CYE '06, AHCCCSA may elect to
reduce Operational Financial Review (OFR) requirements for high performing
contractors.

Use of Website:  Contractors will be required to post their clinical
performance indicators compared to AHCCCS standard and statewide averages
on their website.  In addition, AHCCCSA will post contractor performance
indicators on its website.

57. REINSURANCE

Reinsurance is a stop-loss program provided by AHCCCSA to the Contractor
for the partial reimbursement of covered services, as described below, for
a member with an acute medical condition beyond an annual deductible level.
AHCCCSA "self-insures" the reinsurance program through a deduction to
capitation rates that is intended to be budget neutral.  Refer to the AHCCCSA
Reinsurance Claims Processing Manual for further details on the Reinsurance
Program.

Inpatient Reinsurance

Inpatient reinsurance covers partial reimbursement of covered inpatient
facility medical services.  See the table below for applicable deductible
levels and coinsurance percentages.  The coinsurance percent is the rate at
which AHCCCSA will reimburse the Contractor for covered inpatient services
incurred above the deductible.  The deductible is the responsibility of the
Contractor.  Per diem rates paid for nursing facility services provided
within 30 days of an acute hospital stay, including room and board,
provided in lieu of hospitalization for up to 90 days in any contract year
shall be eligible for reinsurance coverage.

The following table represents deductible and coinsurance levels:

Statewide Plan Enrollment
Annual Deductible*/Prospective Reinsurance
Title XIX Waiver Group Annual Deductible/Combined PPC and Prospective
   Reinsurance
Coinsurance

0-34,999
$20,000
$15,000
75%

35,000-49,999
$35,000
$15,000
75%

50,000 and over
$50,000
$15,000
75%

*applies to all members except for Title XIX Waiver Group members

a)  Prospective Reinsurance: This coverage applies to prospective enrollment
periods.  The deductible level is based on the Contractor's statewide
AHCCCS acute care enrollment (not including SOBRA Family Planning Extension
services) as of October 1st each contract year for all rate codes and
counties, as shown in the table above.  AHCCCSA will adjust the Contractor's
deductible level at the beginning of a contract year if the Contractor's
enrollment changes to the next enrollment level.  A Contractor at the
$35,000 or $50,000 deductible level may elect a lower deductible prior to
the beginning of a new contract year.  These deductible levels are subject
to change by AHCCCSA during the term of this contract.  Any change will have
a corresponding impact on capitation rates.

b) Prior Period Coverage Reinsurance:  Effective October 1, 2003, AHCCCSA
will no longer cover PPC inpatient expenses under the reinsurance program
for any members except Title XIX Waiver Group members. See section c) below
for additional information.

c)  Title XIX Waiver Members: A separate reinsurance deductible for the
Title XIX Waiver Group applies for both the prospective and prior period
coverage time periods.  There can only be one reinsurance case for prior
period and prospective enrollment.

Catastrophic Reinsurance

The reinsurance program includes a special Catastrophic Reinsurance program.
This program encompasses members diagnosed with hemophilia, von Willebrand's
Disease, and Gaucher's Disease.    For additional detail and restrictions
refer to the AHCCCS Reinsurance Claims Processing Manual and the AMPM.
There are no deductibles for catastrophic reinsurance cases.  All medically
necessary covered services provided during the contract year shall be
eligible for reimbursement at 85% of the AHCCCS allowed amount or the
Contractor's paid amount, depending on subcap code.  Reinsurance coverage
for anti-hemophilic blood factors will be limited to 85% of the AHCCCS
contracted amount or the Contractor's paid amount, whichever is lower.
Capitation rates may be adjusted to reflect any cost savings resulting
from the implementation of the AHCCCS anti-hemophilic blood factor contract.
All catastrophic claims are subject to medical review by AHCCCSA.

The Contractor shall notify AHCCCSA, Division of Health Care Management,
Reinsurance Unit, of cases identified for catastrophic reinsurance coverage
within 30 days of (a) initial diagnosis, (b) enrollment with the Contractor,
and (c) the beginning of each contract year.  Catastrophic reinsurance
will be paid for a maximum 30-day retroactive period from the date of
notification to AHCCCSA.  The determination of whether a case or type of
case is catastrophic shall be made by the Director or designee based on
the following criteria; 1) severity of medical condition, including
prognosis; and 2) the average cost or average length of hospitalization
and medical care, or both, in Arizona, for the type of case under
consideration.

HEMOPHILIA:  Catastrophic reinsurance coverage is available for all members
diagnosed with Hemophilia (ICD9 codes 286.0, 286.1, 286.2).

VON WILLEBRAND'S DISEASE:  Catastrophic reinsurance coverage is available
for all members diagnosed with von Willebrand's Disease who are non-DDAVP
responders and dependent on Plasma Factor VIII.

GAUCHER'S DISEASE:  Catastrophic reinsurance is available for members
diagnosed with Gaucher's Disease classified as Type I and are dependent
on enzyme replacement therapy.

Transplants

This program covers members who are eligible to receive covered major organ
and tissue transplantation including bone marrow, heart, heart/lung, lung,
liver, kidney, and other organ transplantation.  Bone grafts and cornea
transplantation services are not eligible for transplant reinsurance
coverage but are eligible under the regular inpatient reinsurance program.
Refer to the AMPM for covered services for organ and tissue transplants.
Reinsurance coverage for transplants is limited to 85% of the AHCCCS
contract amount for the transplantation services rendered, or 85% of the
Contractor's paid amount, whichever is lower. The AHCCCS contracted
transplantation rates may be found in the Bidder's Library.  When a member
is referred to a transplant facility for an AHCCCS-covered organ
transplant, the Contractor shall notify AHCCCSA, Division of Health Care
Management.

Other

For all reinsurance case types other than transplants, Contractors will be
reimbursed 100% for all medically necessary covered expenses provided in a
contract year, after the reinsurance case reaches $650,000.  Transplant
case types have another risk limitation methodology described in the
AHCCCSA Reinsurance Claims Processing Manual.

Encounter Submission and Payments for Reinsurance

a)  Encounter Submission: A Contractor shall prepare, review, verify,
certify, and submit, encounters for consideration to AHCCCSA.  Upon
submission, the Contractor certifies that the services listed were actually
rendered.  The encounters must be submitted in the format prescribed by
AHCCCSA. The Contractor must initiate and evaluate an encounter for
probable 1st and 3rd party liability before submitting the encounter for
reinsurance consideration, unless the encounter involves underinsured or
uninsured motorist liability insurance, 1st and 3rd party liability insurance
or a tort feasor.

The Contractor must maintain evidence that costs incurred have been paid
by the Contractor before submitting reinsurance encounters.  This information
is subject to AHCCCSA review.  Collections from 1st and 3rd parties should
be reflected by the Contractor as reductions in the encounters submitted
on a dollar-for-dollar basis.  For purposes of AHCCCSA reinsurance,
payments made by Contractor-purchased reinsurance are not considered 1st
and 3rd party collections.

All reinsurance claims must reach a clean claim status within fifteen
months from the end date of service, or date of eligibility posting,
whichever is later.  Encounters for reinsurance claims that have passed the
fifteen month deadline and are being adjusted due to a claim dispute or
hearing decision must be submitted within 90 calendar days of the date of
the claim dispute or hearing decision.  Failure to submit the encounter
within this timeframe will result in the loss of any related reinsurance
dollars.

b)  Encounter Processing:  AHCCCSA will accept for processing only
those encounters that are submitted directly by an AHCCCS Contractor and
that comply with the AHCCCSA Encounter Reporting User Manual.

c)  Payment of Inpatient and Catastrophic Reinsurance Cases:  AHCCCSA
will reimburse a Contractor for costs incurred in excess of the applicable
deductible level, subject to coinsurance percentages.  Amounts in excess
of the deductible level shall be paid based upon costs paid by the
Contractor, minus the coinsurance unless the costs are paid under a
subcapitated arrangement.  In subcapitated arrangements, the Administration
shall base reimbursement of reinsurance encounters on the lower of the
AHCCCS allowed amount or the reported health plan paid amount, minus the
coinsurance and Medicare/TPL payment and applicable quick pay discounts.

Reimbursement for these reinsurance benefits will be made to the
Contractor each month.  AHCCCSA will also provide a reconciliation of
reinsurance payments in the case where encounters used in the calculation
of reinsurance benefits are subsequently adjusted or voided.

When a member with an annual enrollment choice changes Contractors within
a contract year, for reinsurance purposes, all eligible inpatient costs,
nursing facility costs and inpatient psychiatric costs incurred for that
member will follow the member to the receiving contractor.  Therefore,
all submitted encounters from the contractor the member is leaving (for
dates of service within the current contract year) will be applied toward,
but not exceed, the receiving contractor's deductible level.  For further
details regarding this policy and other reinsurance policies refer to the
AHCCCS Reinsurance Claims Processing Manual.

d) Payment of Transplant Reinsurance Cases:   Reinsurance benefits are
based upon the lower of the AHCCCS contract amount or the Contractor's
paid amount, subject to coinsurance percentages.  Effective for dates of
service on or after October 1, 2004, Contractors are required to submit
all supporting service encounters for transplant services.  Reinsurance
payments will be linked to transplant encounter submissions.  Please refer
to the AHCCCS Reinsurance Claims Processing Manual for the appropriate
billing of transplant services. Reimbursement for these reinsurance benefits
will be made to the Contractor each month.

Reinsurance Audits

Pre-audit:  Medical audits on prospective and prior period coverage
reinsurance cases will be determined based on statistically valid
retrospective random sampling or on targeted cases/encounters selected based
on utilization trend information.  For closed contracts, a 100% audit may
be conducted.  AHCCCSA, Division of Health Care Management, Reinsurance
Unit, will generate the cases and/or encounters selected  and will notify
the Contractor of documentation needed for the medical audit process to
occur.  The Reinsurance Unit may select cases based on encounter data
received during the existing contract year to ensure timeliness of the
audit process.

Audit:  AHCCCSA will give the Contractor at least 45 days advance notice
of any audit.  The Contractor shall have all requested medical records
and financial documentation available to the nurse auditors.  Any documents
not requested in advance by AHCCCSA shall be made available upon request
of the Audit Team during the course of the audit.  The Contractor
representative shall be available to the Audit Team at all times during
AHCCCSA audit activities.  If an audit should be conducted on-site, the
Contractor shall provide the Audit Team with workspace, access to a
telephone, electrical outlets and privacy for conferences.

Audits may be completed without an on-site visit.  For these audits, the
Contractor will be asked to send the required documentation to AHCCCSA.
The documentation will then be reviewed by AHCCCS.

Audit Considerations:  Reinsurance consideration will be given to inpatient
facility contracts and hearing decisions rendered by the Office of Legal
Assistance.  Pre-hearing and/or hearing penalties discoverable during the
review process will not be reimbursed under reinsurance.

Per diem rates may be paid for nursing facility and rehabilitation services
provided the services are rendered within 30 days of an acute hospital
stay, including room and board, provided in lieu of hospitalization for up
to 90 days in any contract year. The services rendered in these sub-acute
settings must be of an acute nature and, in the case of rehabilitative or
restorative services, steady progress must be documented in the medical
record.

Audit Determinations: The Contractor will be furnished a copy of the
Reinsurance Post-Audit Results letter approximately 45 days after the
audit and given an opportunity to comment and provide additional medical
or financial documentation on any audit findings. AHCCCSA may limit
reinsurance reimbursement to a lower or alternative level of care if the
Director or designee determines that the less costly alternative could
and should have been used by the Contractor. A recoupment of reinsurance
reimbursements made to the Contractor may occur based on the results of
the medical audit. A Contractor whose reinsurance case is reduced or
denied shall be notified in writing by AHCCCSA and will be informed of
rationale for reduction or denial determination and the applicable grievance
and appeal process available.

58. COORDINATION OF BENEFITS / THIRD PARTY LIABILITY

Pursuant to federal and state law, AHCCCSA is the payer of last resort.
This means AHCCCSA shall be used as a source of payment for covered
services only after all other sources of payment have been exhausted.
The Contractor shall coordinate benefits in accordance with
42 CFR 433.135 et seq., ARS 36-2903, and A.A.C. R9-22-1001 et seq. so that
costs for services otherwise payable by the Contractor are cost avoided or
recovered from a liable first or third-party payer.  The Contractor
may require subcontractors to be responsible for coordination of benefits
for services provided pursuant to this contract.

Members with CRS condition: A member with private insurance is not
required to utilize CRSA.  If the member uses the private insurance
network for a CRS covered condition, the Contractor is responsible for all
applicable deductibles and copayments.  When the private insurance is
exhausted with respect to CRS covered conditions, the Contractor shall
refer the member to CRSA for determination for CRS services.

The two methods used in the coordination of benefits are cost avoidance
and post payment recovery.  The Contractor shall use these methods as
described in A.A.C. R9-22-1001 et seq. and federal and state law.  See
also Section D, Paragraph 60, Medicare Services and Cost Sharing.

Cost Avoidance:  The Contractor shall take reasonable measures to
determine the legal liability of third parties who are liable to pay for
covered services.  The Contractor shall cost-avoid a claim if it
establishes the probable existence of a third party or has information
that establishes that third party liability exists.  However, if the
probable existence of third party liability cannot be established or
third party liability benefits are not available to pay the claim at the
time the claim is filed, the Contractor must process the claim.

If a third party insurer (other than Medicare) requires the member to pay
any co-payment, coinsurance or deductible, the Contractor is responsible
for making these payments, even if the services are provided outside of the
Contractor network.  The Contractor is not responsible for paying
coinsurance and deductibles that are in excess of what the Contractor
would have paid for the entire service per a written contract with the
provider performing the service, or the AHCCCS FFS payment equivalent.
The Contractor must decide whether it is more cost-effective to provide
the service within its network or pay coinsurance and deductibles for a
service outside its network.  For continuity of care, the Contractor may
also choose to provide the service within its network.  If the Contractor
refers the member for services to a third-party insurer,other than Medicare,
and the insurer requires payment in advance of all co-payments, coinsurance
and deductibles, the Contractor must make such payments in advance.

If the Contractor knows that the third party insurer will not pay the
claim for a covered service due to untimely claim filing or as a result
of the underlying insurance coverage (e.g. the service is not a covered
benefit), the Contractor shall not deny the service, deny payment of the
claim based on third party liability, or require a written denial letter
if the service is medically necessary.  The Contractor shall communicate
any known change in health insurance information, including Medicare,
to AHCCCS Administration, Division of Member Services, not later than 10
days from the date of discovery using the approved AHCCCS correspondence.
Failure to report these cases may result in one of the remedies specified
in Section D, Paragraph 72, Sanctions.  If the Contractor does not know
whether a particular service is covered by the third party, and the
service is medically necessary, the Contractor shall contact the third
party and determine whether or not such service is covered rather than
requiring the member to do so.  In the event that the service is not covered
by the third party, the Contractor shall arrange for the timely provision
of the service.  (See also Section D, Paragraph 60, Medicare Services and
Cost Sharing.)

The requirement to cost-avoid applies to all AHCCCS covered services.  For
prenatal care and preventive pediatric services, AHCCCS may require the
Contractor to provide such service and then coordinate payment with the
potentially liable third party ("pay and chase").  In emergencies, the
Contractor shall provide the necessary services and then coordinate payment
with the third-party payer.  The Contractor shall also provide medically
necessary transportation so the member can receive medical benefits.
Further, if a service is medically necessary, the Contractor shall ensure
that its cost avoidance efforts do not prevent a member from receiving
such service and that the member shall not be required to pay any
coinsurance or deductibles for use of the other insurer's providers.

Post-payment Recoveries:  Post-payment recovery is necessary in cases where
the Contractor was not aware of third-party coverage at the time services
were rendered or paid for, or was unable to cost-avoid. The Contractor
shall identify, through the use of trauma code edits, utilizing diagnostic
codes 799.9 and 800 to 999.9 (excluding code 994.6), and other procedures.
The Contractor shall notify AHCCCSA's authorized representative within 10
business days of the identification of a third-party liability case with
reinsurance or fee-for service payments made by AHCCCS.  Failure to report
these cases may result in one of the remedies specified in Section D,
Paragraph 72, Sanctions.  The Contractor shall identify all potentially
liable third parties and pursue reimbursement from them except in the
circumstances below.

The Contractor shall not pursue reimbursement in the following
circumstances, unless the case has been referred to the Contractor by
AHCCCSA or AHCCCSA's authorized representative:

Uninsured/underinsured motorist insurance
Restitution Recovery
First-and third-party liability insurance
Worker's Compensation
Tortfeasors, including casualty
Estate Recovery
Special Treatment Trust Recovery

The Contractor shall report any cases involving the above circumstances
to AHCCCSA's authorized representative should the Contractor identify such
a situation.    The Contractor shall cooperate with AHCCCSA's authorized
representative in all collection efforts.  In joint cases involving both
AHCCCS fee-for-service or reinsurance and the Contractor, AHCCCSA's
authorized representative is responsible for performing all research,
investigation and payment of lien-related costs, subsequent to the referral
of any and all relevant case information to AHCCCSA's authorized
representative by the Contractor.  AHCCCSA's authorized representative is
also responsible for negotiating and acting in the best interest of all
parties to obtain a reasonable settlement in joint cases and may
compromise a settlement in order to maximize overall reimbursement, net
of legal and other costs.  The Contractor will be responsible for their
prorated share of the contingency fee.  The Contractor's share of the
contingency fee will be deducted from the settlement proceeds prior to
AHCCCSA remitting the settlement to the Contractor.  For total plan cases
involving only payments made by the Contractor, the Contractor is
responsible for performing all research, investigation, the mandatory filing
of initial liens on cases that exceed $250, lien amendments, lien releases,
and payment of other related costs in accordance with A.R.S. 36-2915 and
A.R.S. 36-2916. The Contractor shall use the AHCCCS approved casualty
recovery correspondence when filing liens and when corresponding to others
in regard to casualty recovery.  The Contractor may retain up to 100% of
its third-party collections if all of the following conditions exist:
a. Total collections received do not exceed the total amount of the
   Contractor's financial liability for the member;
b. There are no payments made by AHCCCS related to fee-for-service,
   reinsurance or administrative costs (i.e. lien filing, etc.); and
c. Such recovery is not prohibited by state or Federal law.

Reporting:  The Contractor may be required to report the amount of
third-party collections and cost avoidance.  In addition, upon AHCCCSA's
request, the Contractor shall provide an electronic extract of the Casualty
cases, including open and closed cases.  Data elements include, but are
not limited to: the member's first and last name; AHCCCS ID; date of
incident; claimed amount; paid/recovered amount; and case status.
The AHCCCSA TPL Section shall provide the format and reporting schedule for
this information to the Contractor. Prior to negotiating a settlement on a
total plan case, the Contractor shall notify AHCCCSA to ensure that there
is no reinsurance or fee for service payments that have been made by AHCCCS.
For total plan cases, the contractor shall report settlement information
to AHCCCS, utilizing the AHCCCS approved casualty recovery Notification
of Settlement form, within 10 business days from the settlement date.
Failure to report these cases may result in one of the remedies specified
in Section D, Paragraph 72, Sanctions.

AHCCCSA will provide the Contractor, on an agreed upon schedule, with a
complete file of all third-party coverage information (other than Medicare)
for the purpose of updating the Contractor's files.  The Contractor shall
notify AHCCCSA of any known changes in coverage within deadlines and in
a format prescribed by AHCCCSA.

Title XXI (KidsCare), HIFA Parents and BCCTP:  Eligibility for KidsCare,
HIFA Parents and BCCTP benefits require that the applicant/member not be
enrolled with any other creditable health insurance plan.  If the Contractor
becomes aware of any such coverage, the Contractor shall notify AHCCCSA
immediately.  AHCCCSA will determine if the other insurance meets the
creditable definition in A.R.S. 36-2982(G).

Contract Termination:  Upon termination of this contract, the Contractor
will complete the existing third party liability cases or make any
necessary arrangements to transfer the cases to AHCCCSA's authorized
TPL representative.

59. COPAYMENTS

Most of the AHCCCS members remain exempt from copayments while others are
subject to an optional copayment.  Those populations exempt or subject to
optional copayments may not be denied services for the inability to pay
the copayment. [42 CFR 438.108]

Any copayments collected shall belong to the Contractor or its subcontractors.

Attachment L provides detail of the populations and their related copayment
structure.

60. MEDICARE SERVICES AND COST SHARING

AHCCCS has members enrolled who are eligible for both Medicaid and Medicare.
These members are referred to as "dual eligibles".  Generally, Contractors
are responsible for payment of Medicare coinsurance and/or deductibles for
covered services provided to dual eligible members.  However, there are
different cost sharing responsibilities that apply to dual eligible members
based on a variety of factors.  Unless prior approval is obtained from
AHCCCSA, the Contractor must limit their cost sharing responsibility
according to the ACOM Medicare Cost Sharing Policy.  The Contractor shall
have no cost sharing obligation if the Medicare payment exceeds what
the Contractor would have paid for the same service of a non-Medicare member.

61. MARKETING

The Contractor shall submit all proposed marketing and outreach materials
and events that will involve the general public to the AHCCCS Marketing
Committee for prior approval in accordance with the ACOM Marketing Outreach
and Incentives Policy. [42 CFR 438.104] The Contractor must have signed
contracts with PCPs, specialists, dentists, and pharmacies in order for
them to be included in marketing materials.

62. CORPORATE COMPLIANCE

In accordance with A.R.S. Section 36-2918.01, all contractors are required
to notify the AHCCCS, Office of Program Integrity (OPI) immediately of all
suspected fraud or abuse.  The Contractor agrees to promptly (within ten
business days of discovery) inform OPI in writing of instances of suspected
fraud or abuse [42 CFR 455.1(a)(1)].  This shall include acts of suspected
fraud or abuse that were resolved internally but involved AHCCCS funds,
contractors or sub-contractors.

As stated in A.R.S. Section 13-2310, incorporated herein by reference, any
person who knowingly obtains any benefit by means of false or fraudulent
pretenses, representations, promises, or material omissions is guilty of
a Class 2 felony.

The Contractor agrees to permit and cooperate with any onsite review.  A
review by AHCCCS, OPI may be conducted without notice and for the purpose
of ensuring program compliance.  The Contractor also agrees to respond to
electronic, telephonic or written requests for information within the
timeframe specified by AHCCCSA.

The Contractor shall be in compliance with 42 CFR 438.608.  The Contractor
must have a mandatory compliance program, supported by other administrative
procedures, that is designed to guard against fraud and abuse.  The
Contractor shall have written criteria for selecting a Compliance Officer
and a job description that clearly outlines the responsibilities and the
authority of the position.  The Compliance Officer shall have the authority
to access records and independently refer suspected member fraud, provider
fraud and member abuse cases to AHCCCS, OPI or other duly authorized
enforcement agencies.

The compliance program, which shall both prevent and detect suspected fraud
or abuse, must include:

1. Written policies, procedures, and standards of conduct that articulate
   the organization's commitment to and processes for complying with all
   applicable federal and state standards.
2. The written designation of a compliance committee who are accountable
   to the Contractor's top management.
3. The Compliance Officer must be an onsite management official who reports
   directly to the Contractor's top management.  Any exceptions must be
   approved by AHCCCSA.
4. Effective training and education.
5. Effective lines of communication between the compliance officer and the
   organization's employees.
6. Enforcement of standards through well-publicized disciplinary guidelines.
7. Provision for internal monitoring and auditing.
8. Provision for prompt response to problems detected.
9. A Compliance Committee which will be made up of, at a minimum, the
   Compliance Officer, a budgetary official and other executive officials
   with the authority to commit resources.  The Compliance Committee will
   assist the Compliance Officer with monitoring, reviewing and assessing
   the effectiveness of the compliance program and timeliness of compliance
   reporting.

The Contractor is required to research potential overpayments identified
by AHCCCS, OPI.  After conducting a cost benefit analysis to determine if
such action is warranted, the Contractor should attempt to recover any
overpayments identified.  The AHCCCS OPI shall be advised of the final
disposition of the research and advised of actions, if any, taken by the
Contractor.

63. RECORDS RETENTION

The Contractor shall maintain books and records relating to covered services
and expenditures including reports to AHCCCSA and working papers used in
the preparation of reports to AHCCCSA.  The Contractor shall comply with all
specifications for record keeping established by AHCCCSA.  All books and
records shall be maintained to the extent and in such detail as required
by AHCCCS Rules and policies.   Records shall include but not be limited to
financial statements, records relating to the quality of care, medical
records, prescription files and other records specified by AHCCCSA.

The Contractor agrees to make available, at all reasonable times during the
term of this contract, any of its records for inspection, audit or
reproduction by any authorized representative of AHCCCSA, State or Federal
government.  The Contractor shall be responsible for any costs associated
with the reproduction of requested information.

The Contractor shall preserve and make available all records for a period
of five years from the date of final payment under this contract.  HIPAA
related documents must be retained for a period of six years per
45 CFR 164.530(j).

If this contract is completely or partially terminated, the records relating
to the work terminated shall be preserved and made available for a period
of five years from the date of any such termination.  Records which relate
to grievances, disputes, litigation or the settlement of claims arising
out of the performance of this contract, or costs and expenses of this
contract to which exception has been taken by AHCCCSA, shall be retained
by the Contractor for a period of five years after the date of final
disposition or resolution thereof.

64. DATA EXCHANGE REQUIREMENTS

The Contractor is authorized to exchange data with AHCCCSA relating to
the information requirements of this contract and as required to support
the data elements to be provided AHCCCSA in the formats prescribed by
AHCCCSA and in formats prescribed by the Health Insurance Portability
and Accountability Act (HIPAA).  Details for the formats may be found in the
draft HIPAA Transaction Companion Documents & Trading Partner Agreements,
and in the AHCCCS Technical Interface Guidelines, available in the
Bidder's Library.

The information so recorded and submitted to AHCCCSA shall be in accordance
with all procedures, policies, rules, or statutes in effect during the
term of this contract.  If any of these procedures, policies, rules,
regulations or statutes are hereinafter changed both parties agree to
conform to these changes following appropriate notification to both parties
by AHCCCSA.

The Contractor is responsible for any incorrect data, delayed submission or
payment (to the Contractor or its subcontractors), and/or penalty applied
due to any error, omission, deletion, or erroneous insert caused by
Contractor-submitted data.  Any data that does not meet the standards
required by AHCCCSA shall not be accepted by AHCCCSA.

The Contractor is responsible for identifying any inconsistencies
immediately upon receipt of data from AHCCCSA.  If any unreported
inconsistencies are subsequently discovered, the Contractor shall be
responsible for the necessary adjustments to correct its records at its
own expense.

The Contractor shall accept from AHCCCSA original evidence of eligibility
and enrollment in a form appropriate for electronic data exchange.
Upon request by AHCCCSA, the Contractor shall provide to AHCCCSA updated
date-sensitive PCP assignments in a form appropriate for electronic
data exchange.

The Contractor shall be provided with a Contractor-specific security code
for use in all data transmissions made in accordance with contract
requirements.  Each data transmission by the Contractor shall include the
Contractor's security code.  The Contractor agrees that by use of its
security code, it certifies that any data transmitted is accurate and
truthful, to the best of the Contractor's Chief Executive Officer, Chief
Financial Officer or designee's knowledge [42 CFR 438.606].  The Contractor
further agrees to indemnify and hold harmless the State of Arizona and
AHCCCSA from any and all claims or liabilities, including but not limited
to consequential damages, reimbursements or erroneous billings and
reimbursements of attorney fees incurred as a consequence of any error,
omission, deletion or erroneous insert caused by the Contractor in the
submitted input data.  Neither the State of Arizona nor AHCCCSA shall be
responsible for any incorrect or delayed payment to the Contractor's
AHCCCS services providers (subcontractors) resulting from such error,
omission, deletion, or erroneous input data caused by the Contractor in
the submission of AHCCCS claims.

The costs of software changes are included in administrative costs paid to
the Contractor.  There is no separate payment for software changes.  A
PMMIS systems contact will be assigned after contract award.  AHCCCSA will
work with the contractors as they evaluate Electronic Data Interchange options.

Health Insurance Portability and Accountability Act (HIPAA):  The
Contractor shall comply with the Administrative Simplification requirements
of Subpart F of the HIPAA of 1996 (Public Law 107-191, 110 Statutes 1936)
and all Federal regulations implementing that Subpart that are applicable
to the operations of the Contractor by the dates required by the
implementing Federal regulations.

65. ENCOUNTER DATA REPORTING

The accurate and timely reporting of encounter data is crucial to the
success of the AHCCCS program.  AHCCCSA uses encounter data to pay
reinsurance benefits, set fee-for-service and capitation rates, determine
disproportionate share payments to hospitals, and to determine compliance
with performance standards.  The Contractor shall submit encounter data to
AHCCCSA for all services for which the Contractor incurred a financial
liability and claims for services eligible for processing by the Contractor
where no financial liability was incurred, including services provided
during prior period coverage.  This requirement is a condition of
the CMS grant award.  [42 CFR 438.242(b)(1)]

A Contractor shall prepare, review, verify, certify, and submit, encounters
for consideration to AHCCCSA.  Upon submission, the Contractor certifies
that the services listed were actually rendered [42 CFR 455.1(a)(2)].
The encounters must be submitted in the format prescribed by AHCCCSA.

Encounter data must be provided to AHCCCSA by electronic media and must
be submitted in the PMMIS AHCCCSA supplied formats.  Specific requirements
for encounter data are described in the AHCCCSA Encounter Reporting User
Manual, a copy of which may be found in the Bidder's Library.  The
Encounter Submission Requirements are included herein as Attachment I.
Refer to Paragraph 64, Data Exchange Requirements, for further information.

An Encounter Submission Tracking Report must be maintained and made
available to AHCCCSA upon request.  The Tracking Report's purpose is to
link each claim to an adjudicated or pended encounter returned to the
Contractor.  Further information regarding the Encounter Submission
Tracking Report may be found in The AHCCCSA Encounter Reporting User's
Manual.

Each month AHCCCSA provides the Contractor with full replacement files
containing provider and medical procedure coding information.  These files
should be used to assist the Contractor in accurate Encounter Reporting.
Refer to Paragraph 64, Data Exchange Requirements, for further information.

66.  ENROLLMENT AND CAPITATION TRANSACTION UPDATES

AHCCCSA produces daily enrollment transaction updates identifying new
members and changes to members' demographic, eligibility and enrollment
data, which the Contractor shall use to update its member records.
The daily enrollment transaction update, which is run prior to the
monthly enrollment and capitation transaction update, is referred to as the
"last daily" and will contain all rate code changes made for the
prospective month, as well as any new enrollments and disenrollments.

AHCCCSA also produces a daily Manual Payment Transaction, which identifies
enrollment or disenrollment activity that was not included on the daily
enrollment transaction update due to internal edits.  The Contractor shall
use the Manual Payment Transaction in addition to the daily enrollment
transaction update to update its member records.

A weekly capitation transaction will be produced to provide contractors
with member-level capitation payment information.  This file will show
changes to the prospective capitation payments, as sent in the monthly file,
resulting from enrollment changes that occur after the monthly file is
produced.  This file will also identify mass adjustments to and/or manual
capitation payments that occurred at AHCCCS after the monthly file is produced.

The monthly enrollment and monthly capitation transaction updates are
generally produced two days before the end of every month.  The update will
identify the total active population for the Contractor as of the first day
of the next month.  These updates contain the information used by AHCCCSA
to produce the monthly capitation payment for the next month.  The Contractor
will reconcile their member files with the AHCCCS monthly update.  After
reconciling the monthly update information, the Contractor resumes posting
daily updates beginning with the last two days of the month.  The last two
daily updates are different from the regular daily updates in that they
pay and/or recoup capitation into the next month.  If the Contractor
detects an error through the monthly update process, the Contractor shall
notify AHCCCSA, Division of Health Care Management.

Refer to Paragraph 64, Data Exchange Requirements, for further information.

67. PERIODIC REPORT REQUIREMENTS

AHCCCSA, under the terms and conditions of its CMS grant award, requires
periodic reports, encounter data, and other information from the
Contractor.  The submission of late, inaccurate, or otherwise incomplete
reports shall constitute failure to report subject to the penalty
provisions described in this contract.

Standards applied for determining adequacy of required reports are as
follows [42 CFR 438.242(b)(2)]:

a. Timeliness:   Reports or other required data shall be received on or
   before scheduled due dates.
b. Accuracy:   Reports or other required data shall be prepared in strict
   conformity with appropriate authoritative sources and/or AHCCCS defined
   standards.
c. Completeness: All required information shall be fully disclosed in
   a manner that is both responsive and pertinent to report intent with
   no material omissions.

AHCCCS requirements regarding reports, report content and frequency of
submission of reports are subject to change at any time during the term
of the contract.  The Contractor shall comply with all changes specified
by AHCCCSA.

The Contractor shall be responsible for continued reporting beyond the
term of the contract.  For example, processing claims and reporting
encounter data will likely continue beyond the term of the contract because
of lag time in filing source documents by subcontractors.

The Contractor shall comply with all financial reporting requirements
contained in the Reporting Guide for Acute Health Care Contractors with
the Arizona Health Care Cost Containment System, a copy of which may be
found in the Bidder's Library.  The required reports, which are subject
to change during the contract term, are summarized in Attachment F,
Periodic Report Requirements.

68. REQUESTS FOR INFORMATION

AHCCCSA may, at any time during the term of this contract, request financial
or other information from the Contractor.  Responses shall fully disclose
all financial or other information requested.  Information may be
designated as confidential but may not be withheld from AHCCCS as
proprietary.  Information designated as confidential may not be disclosed
by AHCCCS without the prior written consent of the Contractor except as
required by law.  Upon receipt of such written requests for information,
the Contractor shall provide complete information as requested no later
than 30 days after the receipt of the request unless otherwise specified
in the request itself.

69. DISSEMINATION OF INFORMATION

Upon request, the Contractor shall assist AHCCCSA in the dissemination of
information prepared by AHCCCSA or the Federal government to its members.
The cost of such dissemination shall be borne by the Contractor.  All
advertisements, publications and printed materials that are produced by
the Contractor and refer to covered services shall state that such
services are funded under contract with AHCCCSA.

70. OPERATIONAL AND FINANCIAL READINESS REVIEWS

AHCCCSA may conduct Operational and Financial Readiness Reviews on all
contractors and will, subject to the availability of resources, provide
technical assistance as appropriate.  The Readiness Reviews will be
conducted prior to the start of business. The purpose of Readiness Reviews
is to assess new Contractors' readiness and ability to provide covered
services to members at the start of the contract year and current
Contractors' readiness to expand to new geographic service areas.  A new
Contractor will be permitted to commence operations only if the Readiness
Review factors are met to AHCCCSA's satisfaction.

71. OPERATIONAL AND FINANCIAL REVIEWS

In accordance with CMS requirements, AHCCCSA, or an independent external
agent, will conduct annual Operational and Financial Reviews for the
purpose of (but not limited to) ensuring operational and financial program
compliance [42 CFR 438.204].  The reviews will identify areas where
improvements can be made and make recommendations accordingly, monitor
the Contractor's progress towards implementing mandated programs and
provide the Contractor with technical assistance if necessary.  The
Contractor shall comply with all other medical audit provisions as required
by AHCCCS Rule R9-22-521 and R9-31-521.

The type and duration of the Operational and Financial Review will be
solely at the discretion of AHCCCSA.  Except in cases where advance
notice is not possible or advance notice may render the review less
useful, AHCCCSA will give the Contractor at least three weeks advance
notice of the date of the on-site review.  In preparation for the on-site
Operational and Financial Reviews, the Contractor shall cooperate fully
with AHCCCSA and the AHCCCSA Review Team by forwarding in advance such
policies, procedures, job descriptions, contracts, logs and other
information that AHCCCSA may request.  The Contractor shall have all
requested medical records on-site.  Any documents, not requested in
advance by AHCCCSA, shall be made available upon request of the Review
Team during the course of the review.  The Contractor personnel, as
identified in advance, shall be available to the Review Team at all
times during AHCCCSA on-site review activities.  While on-site, the
Contractor shall provide the Review Team with workspace, access to a
telephone, electrical outlets and privacy for conferences.  Certain
documentation submission requirements may be waived at the discretion of
AHCCCSA, if the Contractor has obtained accreditation from NCQA, JCAHO
or any other nationally recognized accrediting body.  The Contractor
must submit the entire accreditation report to AHCCCSA for such waiver
consideration.

The Contractor will be furnished a draft copy of the Operational and
Financial Review Report and given an opportunity to comment on any
review findings prior to AHCCCSA publishing the final report.  Operational
and Financial Review findings may be used in the scoring of subsequent
bid proposals by that Contractor.  Recommendations, made by the Review Team
to bring the Contractor into compliance with Federal, State, AHCCCS,
and/or contract requirements, must be implemented by the Contractor.

AHCCCSA may conduct a follow-up Operational and Financial Review to
determine the Contractor's progress in implementing recommendations and
achieving program compliance.  Follow-up reviews may be conducted at any
time after the initial Operational and Financial Review.

The Contractor shall not distribute or otherwise make available the
Operational and Financial Review Tool, draft Operational and Financial
Review Report nor final report to other AHCCCS Contractors.

AHCCCSA may conduct an Operational and Financial Review in the event
the Contractor undergoes a merger, reorganization, change in ownership
or makes changes in three or more key staff positions within a 12-month
period.

AHCCCSA may request, at the expense of the Contractor, to conduct on-site
reviews of functions performed at out-of-state locations.  AHCCCSA will
coordinate travel arrangements and accommodations with the Contractor at
their request.

72. SANCTIONS

AHCCCSA may impose monetary sanctions, suspend, deny, refuse to renew, or
terminate this contract or any related subcontracts in accordance with
AHCCCS Rules R9-22-606, ACOM Sanctions Policy and the terms of this
contract and applicable Federal or State law and regulations.
[42 CFR 422.208, 42 CFR 438.700, 702, 704 and 45 CFR 92.36(i)(1)]  Written
notice will be provided to the Contractor specifying the sanction to be
imposed, the grounds for such sanction and either the length of
suspension or the amount of capitation prepayment to be withheld.
The Contractor may dispute the decision to impose a sanction in accordance
with A.A.C. 9-34-401 et seq.  Intermediate sanctions may be imposed, but
are not limited to the following actions:

a. Substantial failure to provide medically necessary services that the
   Contractor is required to provide under the terms of this contract to
   its enrolled members.
b. Imposition of premiums or charges in excess of the amount allowed
   under the AHCCCS 1115 Waiver.
c. Discrimination among members on the basis of their health status of need
   for health care services.
d. Misrepresentation or falsification of information furnished to CMS
   or AHCCCSA.
e. Misrepresentation or falsification of information furnished to an
   enrollee, potential enrollee, or provider.
f. Failure to comply with the requirement for physician incentive plan
   as delineated in Paragraph 42.
g. Distribution directly, or indirectly through any agent or independent
   contractor, of marketing materials that have not been approved by
   AHCCCSA or that contain false or materially misleading information.
h. Failure to meet AHCCCS Financial Viability Standards.
i. Material deficiencies in the Contractor's provider network.
j. Failure to meet quality of care and quality management requirements.
k. Failure to meet AHCCCS encounter standards.
l. Violation of other applicable State or Federal laws or regulations.
m. Failure to fund accumulated deficit in a timely manner.
n. Failure to increase the Performance Bond in a timely manner.
o. Failure to comply with any provisions contained in this contract.
p. Failure to report third party liability cases as described in Paragraph 58.

AHCCCSA may impose the following types of intermediate sanctions:

a. Civil monetary penalties
b. Appointment of temporary management for a Contractor as provided in
   42 CFR 438.706 and A.R.S. Section 36-2903 (M).
c. Granting members the right to terminate enrollment without cause
   and notifying the affected members of their right to disenroll
   [42 CFR 438.702(a)(3)].
d. Suspension of all new enrollment, including auto assignments after
   the effective date of the sanction.
e. Suspension of payment for recipients enrolled after the effective
   date of the sanction until CMS or AHCCCSA is satisfied that the
   reason for imposition of the sanction no longer exists and is not
   likely to recur.
f. Additional sanctions allowed under statue or regulation that address
   areas of noncompliance.

Cure Notice Process:  Prior to the imposition of a sanction for
non-compliance, AHCCCSA may provide a written cure notice to the
Contractor regarding the details of the non-compliance.  The cure notice
will specify the period of time during which the Contractor must bring
its performance back into compliance with contract requirements.  If,
at the end of the specified time period, the Contractor has complied with
the cure notice requirements, AHCCCSA will take no further action.  If,
however, the Contractor has not complied with the cure notice requirements,
AHCCCSA may proceed with the imposition of sanctions. Refer to the ACOM
Sanctions Policy for details.

73. BUSINESS CONTINUITY AND RECOVERY PLAN

The Contractor shall adhere to all elements of the ACOM Business
Continuity and Recovery Plan Policy.  The Contractor shall develop a
Business Continuity and Recovery Plan to deal with unexpected events that
may affect its ability to adequately serve members. This plan shall,
at a minimum, include planning and training for:

* Electronic/telephonic failure at the Contractor's main place of business
* Complete loss of use of the main site
* Loss of primary computer system/records
* Communication between the Contractor and AHCCCSA in the event of a
  business disruption
* Periodic Testing

The Business Continuity and Recovery Plan shall be updated annually.
The Contractor shall submit a summary of the plan as specified in the
ACOM Business Continuity and Recovery Plan Policy 15 days after the start
of the contract year.  All key staff shall be trained and familiar with
the Plan.

74. TECHNOLOGICAL ADVANCEMENT

Contractors must have a website with links to the following information
and the ability to perform the following functions:

1. Formulary
2. Provider manual
3. Member handbook
4. Provider listing
5. Enrollment Verification
6. Claims inquiry
7. Accept HIPAA compliant electronic claims transactions (See paragraph 38)
8. Make Claims payments via electronic funds transfer (See paragraph 38)

By March 1, 2006, Contractors must have:
* A link to the AHCCCS website for Member and Provider Survey Results
* A link to the AHCCCS website for Performance Measure Results

By May 1, 2006, Contractors must provide searchable provider directories
on their web site.  Web based directories must include the following
search functions and must be updated at least monthly, if necessary:
1. Name
2. Specialty/Service
3. Languages spoken by Practitioner
4. Office locations (e.g. county, city or zip code)

75. PENDING LEGISLATIVE / OTHER ISSUES

The following constitute pending items that may be resolved after the
issuance of this contract.  Any program changes due to the resolution
of the issues will be reflected in future amendments to the contract.
Capitation rates may also be adjusted to reflect the financial impact of
program changes.

Arizona Early Intervention Program:  The Arizona Early Intervention
(AzEIP) Program is implemented through the coordinated activities of
the Arizona Department of Economic Security (DES), the Arizona Department
of Health Services (ADHS), Arizona State Schools for the Deaf and
Blind (ASDB), the Arizona Health Care Cost Containment System (AHCCCS),
and the Arizona Department of Education (ADE).  The AzEIP Program
is governed by the Individuals with Disabilities Act (IDEA), Part C
(P.L.105-17).  AzEIP, through Federal regulation, is stipulated as the
payor of last resort to Medicaid, and is prohibited from supplanting
another entitlement programs, including Medicaid.

AHCCCS is currently working with the Department of Economic Security to
provide increased Medicaid funding to this program. This may result in
additional coordination with the AzEIP program for the Contractors.
Any changes will be communicated to the Contractors and may result in
a future contract amendment.

Transportation:  AHCCCSA is evaluating its methodology, under capitation,
for providing transportation services to its members.  Options may
include contracting with a centralized transportation broker to provide
services to all AHCCCS members.

76. BALANCED BUDGET ACT OF 1997 (BBA)

In August 2002, CMS issued final regulations for the implementation of the
BBA.  AHCCCS continues to review all areas of the regulations to ensure
full compliance with the BBA; however, there are some issues that may
require further clarification from CMS.  Any program changes due to
the resolution of the issues will be reflected in amendments to the
contract. Capitation rates may also be adjusted to reflect the financial
impact of the program changes.

77. HEALTHCARE GROUP OF ARIZONA

AHCCCSA encourages all Contractors to participate in the Healthcare Group
(HCG) program.  Legislation was passed in 2002 that shifted
administrative responsibilities from HCG contractors to AHCCCSA.
Additionally, effective February 1, 2003, HCG's service package and
premium structure has been redesigned to better reflect the small group
product in the Arizona marketplace.  HCG has created a niche market,
as insurance companies are moving away from the Health Maintenance
Organization market.  HCG hopes to expand its enrollment significantly
during the next two years, which will result in a solid membership base
to spread risk, thereby increasing the attractiveness of the HCG product.
For additional information, contact AHCCCSA, Office of the Director.

78. MEDICARE MODERNIZATION ACT (MMA)
The Medicare Modernization Act of 2003 created a prescription drug benefit
called Medicare Part D for individuals who are eligible for Medicare
Part A and/or enrolled in Medicare Part B.  Beginning January 1, 2006,
AHCCCS will no longer cover prescription drugs, with very few exceptions,
for dual eligible members.  AHCCCS will not cover prescription drugs for
this population whether or not they are enrolled in Medicare Part D.
Capitation rates will be adjusted accordingly to account for this change.

Drugs Excluded from Medicare Part D:  AHCCCS will continue to cover those
drugs ordered by a PCP, attending physician, dentist or other authorized
prescriber and dispensed under the direction of a licensed pharmacist
subject to limitations related to prescription supply amounts, contractor
formularies and prior authorization requirements if they are excluded
from Medicare Part D coverage.

As the Medicare Modernization Act is fully implemented, there may be
required changes to business practices of AHCCCS and contractors or the
contract.  AHCCCS will identify potential impacts and work with contractors
to implement necessary program changes.

[END OF SECTION D]

SECTION E: CONTRACT CLAUSES

1) APPLICABLE LAW
Arizona Law  - The law of Arizona applies to this contract including,
where applicable, the Uniform Commercial Code, as adopted in the State
of Arizona.

Implied Contract Terms  - Each provision of law and any terms required by
law to be in this contract are a part of this contract as if fully
stated in it.

2) AUTHORITY
This contract is issued under the authority of the Contracting Officer who
signed this contract.  Changes to the contract, including the addition of
work or materials, the revision of payment terms, or the substitution of
work or materials, directed by an unauthorized state employee or made
unilaterally by the Contractor are violations of the contract and of
applicable law. Such changes, including unauthorized written contract
amendments, shall be void and without effect, and the Contractor shall
not be entitled to any claim under this contract based on those changes.

3) ORDER OF PRECEDENCE
The parties to this contract shall be bound by all terms and conditions
contained herein.  For interpreting such terms and conditions the
following sources shall have precedence in descending order:  The
Constitution and laws of the United States and applicable Federal
regulations; the terms of the CMS 1115 waiver for the State of Arizona;
the Constitution and laws of Arizona, and applicable State rules; the
terms of this contract, including all attachments and executed amendments
and modifications; AHCCCSA policies and procedures.

4) CONTRACT INTERPRETATION AND AMENDMENT
No Parol Evidence  - This contract is intended by the parties as a final
and complete expression of their agreement.  No course of prior dealings
between the parties and no usage of the trade shall supplement or explain
any term used in this contract.

No Waiver  - Either party's failure to insist on strict performance of any
term or condition of the contract shall not be deemed a waiver of that
term or condition even if the party accepting or acquiescing in the
non-conforming performance knows of the nature of the performance and fails
to object to it.

Written Contract Amendments  - The contract shall be modified only through
a written contract amendment within the scope of the contract signed by
the procurement officer on behalf of the State.

5) SEVERABILITY
The provisions of this contract are severable to the extent that any
provision or application held to be invalid shall not affect any other
provision or application of the contract, which may remain in effect
without the invalid provision, or application.

6) RELATIONSHIP OF PARTIES
The Contractor under this contract is an independent contractor.  Neither
party to this contract shall be deemed to be the employee or agent of the
other party to the contract.

7) ASSIGNMENT AND DELEGATION
The Contractor shall not assign any right nor delegate any duty under this
contract without prior written approval of the Contracting Officer, who will
not unreasonably withhold such approval.

8) GENERAL INDEMNIFICATION
The Contractor shall defend, indemnify and hold harmless the State from
any claim, demand, suit, liability, judgment and expense (including
attorney's fees and other costs of litigation) arising out of or relating
to injury, disease, or death of persons or damage to or loss of property
resulting from or in connection with the negligent performance of this
contract by the Contractor, its agents, employees, and subcontractors
or anyone for whom the Contractor may be responsible.  The obligations,
indemnities and liabilities assumed by the Contractor under this paragraph
shall not extend to any liability caused by the negligence of the State
or its employees.  The Contractor's liability shall not be limited by
any provisions or limits of insurance set forth in this contract.
The State shall reasonably notify the Contractor of any claim for which it
may be liable under this paragraph.  The Administration shall bear no
liability for subcontracts that a Contractor executes with other parties
for the provision of administrative or management services, medical services
or covered health care services, or for any other purposes.

9) INDEMNIFICATION -- PATENT AND COPYRIGHT
The Contractor shall defend, indemnify and hold harmless the State against
any liability including costs and expenses for infringement of any patent,
trademark or copyright arising out of contract performance or use by the
State of materials furnished or work performed under this contract.
The State shall reasonably notify the Contractor of any claim for which it
may be liable under this paragraph.

10) COMPLIANCE WITH APPLICABLE  LAWS, RULES AND REGULATIONS
The Contractor shall comply with all applicable Federal and State laws and
regulations including Title VI of the Civil Rights Act of 1964; Executive
Order 13166; Title IX of the Education Amendments of 1972 (regarding
education programs and activities); the Age Discrimination Act of 1975;
the Rehabilitation Act of 1973 (regarding education programs and
activities), and the Americans with Disabilities Act; EEO provisions;
Copeland Anti-Kickback Act; Davis-Bacon Act; Contract Work Hours and
Safety Standards; Rights to Inventions Made Under a Contract or Agreement;
Clean Air Act and Federal Water Pollution Control Act; Byrd Anti-Lobbying
Amendment.  The Contractor shall maintain all applicable licenses and
permits. [42 CFR 438.6(f)(1) and 42 CFR 438.100(d)]

11) ADVERTISING AND PROMOTION OF CONTRACT
The Contractor shall not advertise or publish information for commercial
benefit concerning this contract without the prior written approval of
the Contracting Officer.

12) PROPERTY OF THE STATE
Except as provided in this paragraph, any materials, including reports,
computer programs and other deliverables, created under this contract
are the sole property of AHCCCSA.  The Contractor is not entitled to a
patent or copyright on those materials and may not transfer the patent
or copyright to anyone else.  The Contractor shall not use or release these
materials without the prior written consent of AHCCCSA.

If the Contractor believes that any reports, computer programs, or other
deliverables created under this contract and submitted to AHCCCSA contains
trade secrets or other proprietary data, the Contractor shall include with
the submission a statement that explains and supports the Contractor's
claim that the submission contains such information. The Contractor also
shall stamp as confidential or otherwise specifically identify in the
submission all trade secrets and other proprietary data that the Contractor
believes should remain confidential.  AHCCCSA shall review the statement and
information and shall determine whether the information is a trade secret or
other proprietary data that shall remain confidential. If AHCCCSA determines
that the information is not a trade secret or other proprietary data that
shall remain confidential, AHCCCSA will inform the Contractor in writing of
such determination.  AHCCCSA will not voluntarily disclose any information
deemed confidential except as required by law.  Before any such disclosures
of confidential information are made, AHCCCSA will notify the Contractor in
writing.

13) THIRD PARTY ANTITRUST VIOLATIONS
The Contractor assigns to the State any claim for overcharges resulting from
antitrust violations to the extent that those violations concern materials
or services supplied by third parties to the Contractor toward fulfillment
of this contract.

14) RIGHT TO ASSURANCE
If AHCCCSA, in good faith, has reason to believe that the Contractor does
not intend to perform or continue performing this contract, the procurement
officer may demand in writing that the Contractor give a written assurance
of intent to perform.  The demand shall be sent to the Contractor by
certified mail, return receipt required.  Failure by the Contractor to
provide written assurance within the number of days specified in the
demand may, at the State's option, be the basis for terminating the contract.

15) TERMINATION FOR CONFLICT OF INTEREST
AHCCCSA may cancel this contract without penalty or further obligation if
any person significantly involved in initiating, negotiating, securing,
drafting or creating the contract on behalf of AHCCCSA is, or becomes at
any time while the contract or any extension of the contract is in effect,
an employee of, or a consultant to, any other party to this contract with
respect to the subject matter of the contract.  The cancellation shall be
effective when the Contractor receives written notice of the cancellation
unless the notice specifies a later time.

16) GRATUITIES
AHCCCSA may, by written notice to the Contractor, immediately terminate this
contract if it determines that employment or a gratuity was offered or
made by the Contractor or a representative of the Contractor to any officer
or employee of the State for the purpose of influencing the outcome of
the procurement or securing the contract, an amendment to the contract, or
favorable treatment concerning the contract, including the making of any
determination or decision about contract performance.  AHCCCSA, in addition
to any other rights or remedies, shall be entitled to recover exemplary
damages in the amount of three times the value of the gratuity offered
by the Contractor.

17) SUSPENSION OR DEBARMENT
The Contractor shall not employ, consult, subcontract or enter into any
agreement for Title XIX services with any person or entity who is debarred,
suspended or otherwise excluded from Federal procurement activity or from
participating in non-procurement activities under regulations issued under
Executive Order No. 12549 or under guidelines implementing Executive
Order 12549 [42 CFR 438.610(a) and (b)].  This prohibition extends to any
entity which employs, consults, subcontracts with or otherwise reimburses
for services any person substantially involved in the management of another
entity which is debarred, suspended or otherwise excluded from Federal
procurement activity.

The Contractor shall not retain as a director, officer, partner or owner
of 5% or more of the Contractor entity, any person, or affiliate of such
a person, who is debarred, suspended or otherwise excluded from Federal
procurement activity.

AHCCCSA may, by written notice to the Contractor, immediately terminate this
contract if it determines that the Contractor has been debarred, suspended
or otherwise lawfully prohibited from participating in any public procurement
activity.

18) TERMINATION FOR CONVENIENCE
AHCCCSA reserves the right to terminate the contract in whole or in part
at any time for the convenience of the State without penalty or recourse.
The Contracting Officer shall give written notice by certified mail, return
receipt requested, to the Contractor of the termination at least 90 days
before the effective date of the termination.  In the event of termination
under this paragraph, all documents, data and reports prepared by the
Contractor under the contract shall become the property of and be delivered
to AHCCCSA.  The Contractor shall be entitled to receive just and equitable
compensation for work in progress, work completed and materials accepted
before the effective date of the termination.

19) TEMPORARY MANAGEMENT/OPERATION OF A CONTRACTOR AND TERMINATION
Temporary Management/Operation by AHCCCSA: Pursuant to the Balanced Budget
Act of 1997, 42 CFR 438.700 et seq. and State Law ARS Section 36-2903, AHCCCSA
is authorized to impose temporary management for a Contractor under certain
conditions. Under federal law, temporary management may be imposed if
AHCCCS determines that there is continued egregious behavior by the
Contractor, including but not limited to the following: substantial
failure to provide medically necessary services the Contractor is required
to provide; imposition on enrollees premiums or charges that exceed those
permitted by AHCCCSA, discrimination among enrollees on the basis of
health status or need for health care services; misrepresentation or
falsification of information to AHCCCSA or CMS; misrepresentation or
falsification of information furnished to an enrollee or provider;
distribution of marketing materials that have not been approved by
AHCCCS or that are false or misleading; or behavior contrary to any
requirements of Sections 1903(m) or 1932 of the Social Security Act.
Temporary management may also be imposed if AHCCCSA determines that there
is substantial risk to enrollees' health or that temporary management is
necessary to ensure the health of enrollees while the Contractor is
correcting the deficiencies noted above or until there is an orderly
transition or reorganization of the Contractor.  Under federal law,
temporary management is mandatory if AHCCCSA determines that the Contractor
has repeatedly failed to meet substantive requirements in Sections 1903(m)
or 1932 of the Social Security Act.  In these situations, AHCCCSA shall
not delay imposition of temporary management to provide a hearing before
imposing this sanction.

State law ARS Section 36-2903 authorizes AHCCCSA to operate a Contractor as
specified in this contract. Prior to operation of the Contractor by
AHCCCSA pursuant to state statute, the Contractor shall have the opportunity
for a hearing.  If AHCCCSA determines that emergency action is required,
operation of the Contractor may take place prior to hearing.  Operation by
AHCCCSA shall occur only as long as it is necessary to assure delivery of
uninterrupted care to members, to accomplish orderly transition of those
members to other contractors, or until the Contractor reorganizes or
otherwise corrects contract performance failure.

Termination:  AHCCCSA reserves the right to terminate this contract in
whole or in part due to the failure of the Contractor to comply with any
term or condition of the contract and as authorized by the Balanced Budget
Act of 1997 and 42 CFR 438.708.  If the Contractor is providing services
under more than one contract with AHCCCSA, AHCCCSA may deem unsatisfactory
performance under one contract to be cause to require the Contractor to
provide assurance of performance under any and all other contracts.  In
such situations, AHCCCSA reserves the right to seek remedies under both
actual and anticipatory breaches of contract if adequate assurance of
performance is not received.  The Contracting Officer shall mail written
notice of the termination and the reason(s) for it to the Contractor by
certified mail, return receipt requested.  Pursuant to the Balanced Budget
Act of 1997 and 42 CFR 438.708, AHCCCSA shall provide the contractor with
a pre-termination hearing before termination of the contract.

Upon termination,  all documents, data, and reports prepared by the
Contractor under the contract shall become the property of and be delivered
to AHCCCSA on demand.

AHCCCSA may, upon termination of this contract, procure on terms and in
the manner that it deems appropriate, materials or services to replace
those under this contract.  The Contractor shall be liable for any excess
costs incurred by AHCCCSA in re-procuring the materials or services.

20) TERMINATION - AVAILABILITY OF FUNDS
Funds are not presently available for performance under this contract beyond
the current fiscal year.  No legal liability on the part of AHCCCSA for
any payment may arise under this contract until funds are made available
for performance of this contract.

21) RIGHT OF OFFSET
AHCCCSA shall be entitled to offset against any amounts due the Contractor
any expenses or costs incurred by AHCCCSA concerning the Contractor's
non-conforming performance or failure to perform the contract.

22) NON-EXCLUSIVE REMEDIES
The rights and the remedies of AHCCCSA under this contract are not exclusive.

23) NON-DISCRIMINATION
The Contractor shall comply with State Executive Order No. 99-4, which
mandates that all persons, regardless of race, color, religion, sex,
national origin or political affiliation, shall have equal access to
employment opportunities, and all other applicable Federal and state laws,
rules and regulations, including the Americans with Disabilities Act and
Title VI.  The Contractor shall take positive action to ensure that
applicants for employment, employees, and persons to whom it provides
service are not discriminated against due to race, creed, color, religion,
sex, national origin or disability.

24) EFFECTIVE DATE
The effective date of this contract shall be the date referenced on page 1
of this contract.

25) INSURANCE
A certificate of insurance naming the State of Arizona and AHCCCSA as the
"additional insured" must be submitted to AHCCCSA within 10 days of
notification of contract award and prior to commencement of any services
under this contract.  This insurance shall be provided by carriers rated
as "A+" or higher by the A.M. Best Rating Service.  The following types
and levels of insurance coverage are required for this contract:

a. Commercial General Liability: Provides coverage of at least $1,000,000
   for each occurrence for bodily injury and property damage to others as a
   result of accidents on the premises of or as the result of operations of
   the Contractor.
b. Commercial Automobile Liability: Provides coverage of at least $1,000,000
   for each occurrence for bodily injury and property damage to others
   resulting from accidents caused by vehicles operated by the Contractor.
c. Workers Compensation: Provides coverage to employees of the Contractor
   for injuries sustained in the course of their employment.  Coverage must
   meet the obligations imposed by Federal and State statutes and must also
   include Employer's Liability minimum coverage of $100,000.  Evidence of
   qualified self-insured status will also be considered.
d. Professional Liability (if applicable): Provides coverage for alleged
   professional misconduct or lack of ordinary skills in the performance
   of a professional act of service.

The above coverages may be evidenced by either one of the following:

a. The State of Arizona Certificate of Insurance: This is a form with
   the special conditions required by the contract already pre-printed on
   the form.  The Contractor's agent or broker must fill in the pertinent
   policy information and ensure the required special conditions are
   included in the Contractor's policy.
b. The Accord form: This standard insurance industry certificate of
   insurance does not contain the pre-printed special conditions required
   by this contract.  These conditions must be entered on the certificate
   by the agent or broker and read as follows:

The State of Arizona and Arizona Health Care Cost Containment System are
hereby added as additional insureds.  Coverage afforded under this
Certificate shall be primary and any insurance carried by the State or any
of its agencies, boards, departments or commissions shall be in excess
of that provided by the insured Contractor.  No policy shall expire, be
canceled or materially changed without 30 days written notice to the State.
This Certificate is not valid unless countersigned by an authorized
representative of the insurance company.

26) DISPUTES
The exclusive manner for the Contractor to assert any claim, grievance,
dispute or demand against AHCCCS shall be in accordance with Title
9 A.A.C. Chapter 34, Article 4.  Pending the final resolution of any
disputes involving this contract, the Contractor shall proceed with
performance of this contract in accordance with AHCCCS' instructions, unless
AHCCCS specifically, in writing, requests termination or a temporary
suspension of performance.

27) RIGHT TO INSPECT PLANT OR PLACE OF BUSINESS
AHCCCSA may, at reasonable times, inspect the part of the plant or place
of business of the Contractor or subcontractor that is related to the
performance of this contract, in accordance with A.R.S. Section 41-2547.

28) INCORPORATION BY REFERENCE
This solicitation and all attachments and amendments, the Contractor's
proposal, best and final offer accepted by AHCCCSA, and any approved
subcontracts are hereby incorporated by reference into the contract.

29) COVENANT AGAINST CONTINGENT FEES
The Contractor warrants that no person or agency has been employed or
retained to solicit or secure this contract upon an agreement or
understanding for a commission, percentage, brokerage or contingent fee.
For violation of this warranty, AHCCCSA shall have the right to annul
this contract without liability.

30) CHANGES
AHCCCSA may at any time, by written notice to the Contractor, make changes
within the general scope of this contract.  If any such change causes an
increase or decrease in the cost of, or the time required for, performance
of any part of the work under this contract, the Contractor may assert
its right to an adjustment in compensation paid under this contract.  The
Contractor must assert its right to such adjustment within 30 days from
the date of receipt of the change notice.  Any dispute or disagreement
caused by such notice shall constitute a dispute within the meaning of
Section E, Paragraph 26, Disputes, and be administered accordingly.

When AHCCCSA issues an amendment to modify the contract, the provisions of
such amendment will be deemed to have been accepted 60 days after the
date of mailing by AHCCCSA, even if the amendment has not been signed by the
Contractor, unless within that time the Contractor notifies AHCCCSA in
writing that it refuses to sign the amendment.  If the Contractor
provides such notification, AHCCCSA will initiate termination proceedings.

31) TYPE OF CONTRACT
Firm Fixed-Price

32) AMERICANS WITH DISABILITIES ACT
People with disabilities may request special accommodations such as
interpreters, alternative formats or assistance with physical accessibility.
Requests for special accommodations must be made with at least three days
prior notice by contacting AHCCCS Administration.

33) WARRANTY OF SERVICES
The Contractor warrants that all services provided under this contract will
conform to the requirements stated herein.  AHCCCSA's acceptance of
services provided by the Contractor shall not relieve the Contractor from
its obligations under this warranty.  In addition to its other remedies,
AHCCCSA may, at the Contractor's expense, require prompt correction of any
services failing to meet the Contractor's warranty herein.  Services
corrected by the Contractor shall be subject to all of the provisions of
this contract in the manner and to the same extent as the services
originally furnished.

34) NO GUARANTEED QUANTITIES
AHCCCSA does not guarantee the Contractor any minimum or maximum quantity
of services or goods to be provided under this contract.

35) CONFLICT OF INTEREST
The Contractor shall not undertake any work that represents a potential
conflict of interest, or which is not in the best interest of AHCCCSA or
the State without prior written approval by AHCCCSA.  The Contractor shall
fully and completely disclose any situation that may present a conflict
of interest.  If the Contractor is now performing or elects to perform
during the term of this contract any services for any AHCCCS contractor,
provider or Contractor or an entity owning or controlling same, the
Contractor shall disclose this relationship prior to accepting any
assignment involving such party.

36) DISCLOSURE OF CONFIDENTIAL INFORMATION
The Contractor shall not, without prior written approval from AHCCCSA,
either during or after the performance of the services required by this
contract, use, other than for such performance, or disclose to any person
other than AHCCCSA personnel with a need to know, any information, data,
material, or exhibits created, developed, produced, or otherwise obtained
during the course of the work required by this contract.  This
nondisclosure requirement shall also pertain to any information contained
in reports, documents, or other records furnished to the Contractor by
AHCCCSA.

37) COOPERATION WITH OTHER CONTRACTORS
AHCCCSA may award other contracts for additional work related to this
contract and Contractor shall fully cooperate with such other contractors
and AHCCCSA employees or designated agents, and carefully fit its own work
to such other contractors' work.  The Contractor shall not commit or
permit any act which will interfere with the performance of work by any
other contractor or by AHCCCSA employees.

38) ASSIGNMENT OF CONTRACT AND BANKRUPTCY
This contract is voidable and subject to immediate cancellation by AHCCCSA
upon the Contractor becoming insolvent or filing proceedings in bankruptcy
or reorganization under the United States Code, or assigning rights or
obligations under this contract without the prior written consent of AHCCCSA.

39) OWNERSHIP OF INFORMATION AND DATA
Any data or information system, including all software, documentation and
manuals, developed by the Contractor pursuant to this contract, shall be
deemed to be owned by AHCCCSA.  The Federal government reserves a
royalty-free, nonexclusive, and irrevocable license to reproduce, publish,
or otherwise use and to authorize others to use for Federal government
purposes, such data or information system, software, documentation and
manuals.  Proprietary software which is provided at established catalog or
market prices and sold or leased to the general public shall not be subject
to the ownership or licensing provisions of this section.

Data, information and reports collected or prepared by the Contractor in the
course of performing its duties and obligations under this contract shall
be deemed to be owned by AHCCCSA.  The ownership provision is in
consideration of the Contractor's use of public funds in collecting or
preparing such data, information and reports.  These items shall not be
used by the Contractor for any independent project of the Contractor or
publicized by the Contractor without the prior written permission of
AHCCCSA.  Subject to applicable state and Federal laws and regulations,
AHCCCSA shall have full and complete rights to reproduce, duplicate,
disclose and otherwise use all such information.  At the termination of the
contract, the Contractor shall make available all such data to AHCCCSA
within 30 days following termination of the contract or such longer period
as approved by AHCCCSA, Office of the Director.  For purposes of this
subsection, the term "data" shall not include member medical records.

Except as otherwise provided in this section, if any copyrightable or
patentable material is developed by the Contractor in the course of
performance of this contract, the Federal government, AHCCCSA and the State
of Arizona shall have a royalty-free, nonexclusive, and irrevocable right
to reproduce, publish, or otherwise use, and to authorize others to use,
the work for state or Federal government purposes.  The Contractor shall
additionally be subject to the applicable provisions of 45 CFR Part 74
and 45 CFR Parts 6 and 8.

40) AHCCCSA RIGHT TO OPERATE CONTRACTOR
If, in the judgment of AHCCCSA, the Contractor's performance is in material
breach of the contract or the Contractor is insolvent, AHCCCSA may directly
operate the Contractor to assure delivery of care to members enrolled with
the Contractor until cure by the Contractor of its breach, by demonstrated
financial solvency or until the successful transition of those members
to other contractors.

If AHCCCS undertakes direct operation of the Contractor, AHCCCS, through
designees appointed by the Director, shall be vested with full and exclusive
power of management and control of the Contractor as necessary to ensure
the uninterrupted care to persons and accomplish the orderly transition of
persons to a new or existing Contractor, or until the Contractor corrects
the Contract Performance failure to the satisfaction of AHCCCS.  AHCCCS
shall have the power to employ any necessary assistants, to execute any
instrument in the name of the Contractor, to commence, defend and conduct
in its name any action or proceeding in which the Contractor may be a party.

All reasonable expenses of AHCCCS related to the direct operation of the
Contractor, including attorney fees, cost of preliminary or other audits
of the Contractor and expenses related to the management of any office or
other assets of the Contractor, shall be paid by the Contractor or withheld
from payment due from AHCCCS to the Contractor.

41) AUDITS AND INSPECTIONS
The Contractor shall comply with all provisions specified in applicable
AHCCCS Rule R9-22-521 and AHCCCS policies and procedures relating to the
audit of the Contractor's records and the inspection of the Contractor's
facilities.  The Contractor shall fully cooperate with AHCCCSA staff
and allow them reasonable access to the Contractor's staff, subcontractors,
members, and records. [42 CFR 438.6(g)]

At any time during the term of this contract, the Contractor's or any
subcontractor's books and records shall be subject to audit by AHCCCSA
and, where applicable, the Federal government, to the extent that the books
and records relate to the performance of the contract or subcontracts.
[42 CFR 438.242(b)(3)]

AHCCCSA, or its duly authorized agents, and the Federal government may
evaluate through on-site inspection or other means, the quality,
appropriateness and timeliness of services performed under this contract.

42) LOBBYING
No funds paid to the Contractor by AHCCCSA, or interest earned thereon,
shall be used for the purpose of influencing or attempting to influence
an officer or employee of any Federal or State agency, a member of the
United States Congress or State Legislature, an officer or employee of a
member of the United States Congress or State Legislature in connection with
awarding of any Federal or State contract, the making of any Federal or
State grant, the making of any Federal or State loan, the entering into
of any cooperative agreement, and the extension, continuation, renewal,
amendment or modification of any Federal or State contract, grant, loan,
or cooperative agreement.  The Contractor shall disclose if any funds,
other than those paid to the Contractor by AHCCCSA, have been used or
will be used to influence the persons and entities indicated above and
will assist AHCCCSA in making such disclosures to CMS.

43) CHOICE OF FORUM
The parties agree that jurisdiction over any action arising out of or
relating to this contract shall be brought or filed in a court of competent
jurisdiction located in the State of Arizona.

44) DATA CERTIFICATION
The Contractor shall certify that financial and encounter data submitted
to AHCCCS is complete, accurate and truthful.  Certification of financial
data must be submitted concurrent with the data.  Data certification must
be submitted concurrently with the certified data.  Certification may be
provided by the Contractor CEO, CFO or an individual who is delegated
authority to sign for, and who report directly to the CEO or CFO.
42 CFR 438.604.606.

45) OFF SHORE PERFORMANCE OF WORK PROHIBITED
Due to security and identity protection concerns, direct services under this
contract shall be performed within the borders of the United States.  Any
services that are described in the specifications or scope of work that
directly serve the State of Arizona or its clients and may involve access
to secure or sensitive data or personal client data or development or
modification of software for the State shall be performed within the
borders of the United States.  Unless specifically stated otherwise in
the specifications, this definition does not apply to indirect or
"overhead" services, redundant back-up services or services that are
incidental to the performance of the contract.  This provision applies to
work performed by subcontractors at all tiers.

[END OF SECTION E]

SECTION F: INDEX - PROGRAM REQUIREMENTS AND CONTRACT CLAUSES

A
Accumulated Fund Deficit, 61
Advance Directives, 37
Advances, 61
Ambulatory, 22, 26
Annual Enrollment, 19
Appointment Standards, 50
Auto-Assignment, 18, 19, 20
Auto-Assignment Algorithm, 18, 19, 20

B
BBA, 19, 24, 25, 51, 80, 84
Behavioral Health, 21, 22, 24, 26, 30, 31, 32, 34, 50, 52
Breast and Cervical Cancer, 16, 17, 63, 71
Business Continuity Plan, 78

C
Capitalization, 59
Capitation, 18, 19, 20, 60, 62, 63, 64, 65, 74, 75, 77
Chiropractic, 23
Claims
   Clean, 55, 68
   Payment, 55, 57
Compensation, 62
Contraceptive, 25
Convalescent Care, 27, 29
Coordination of Benefits, 69
Coordination of Care, 31
Copayment, 50, 64, 70
Copayments, 71
Cost Avoidance, 69
Cost Sharing, 16, 17, 52, 69, 72
Covered Services, 21, 30
Credentialing, 38, 46
CRS, 21, 22, 23
Cultural Competency, 36
Cure Notice, 78

D
Data Exchange, 73
, 35, 55, 69, 70
Dental, 21, 23, 51, 52
Dialysis, 21, 23
Disenrollment, 75
Distributions, 61
DME, 21, 27
Dual Eligibles, 52, 72

E
Eligibility
   CRS, 22
Emergency, 16, 24, 26, 29, 50, 51, 54
Encounter, 34, 52, 55, 63, 64, 67, 68, 74, 75, 76, 78
Enrollment, 17, 19, 75
   Annual, 17, 19, 20, 21, 68
   Guarantees, 19
   Open, 17, 19
EPSDT, 23, 24, 25, 27, 30, 34, 42, 50, 52

F
Family Planning, 16, 18, 25, 52, 62
Fee-for-Service, 21, 27, 58, 70, 71, 74
Financial Viability Standards, 61
Formulary, 28, 31, 79
FQHC, 51
Fraud and Abuse, 37, 52, 72
Freedom to Work, 16, 17

G
Geographic Service Area, 15, 18, 19, 46, 57, 59, 61, 63, 76
Grievance, 44

H
HIFA, 17, 18, 19, 63, 71
HIFA Parents, 17, 18, 19, 63, 71
HIFA PARENTS, 17, 19, 71
HIPAA, 73, 74
HIV/AIDS, 25, 27, 37, 48, 62, 63, 64
Home Health, 21, 25, 37, 38, 50
Hospice, 25, 37
Hospital Subcontracting, 57

I
IBNR, 15
Identification Cards, 20
Immunizations, 25, 26, 33, 42, 52
Indian Health Service, 16, 17, 19, 21, 26, 29
Inpatient, 23, 26, 29, 30, 31, 34, 45, 50, 64, 66, 67, 68, 69
Investments, 61

K
KidsCare, 17, 18, 63, 71

L
Laboratory, 25, 26, 30, 31, 50, 52
Limited English Proficiency (LEP), 35
Loans, 61

M
Management Services, 30, 31, 53, 58, 59, 82
Maternity, 26, 49, 51, 52
Medicaid in the Public Schools (MIPS), 32
Medical Expense Deduction, 62
Medical Foods, 27
Member
   Education, 30
   Handbook, 36
   Information, 35, 36, 48
   Mainstreaming, 20
   Surveys, 36
   Transition, 21
Midwives, 26, 49

N
Network Management, 47
Non-Contracting Provider, 60
Nurse Practitioners, 26, 48, 49, 50
Nursing Facility, 21, 27, 37, 57, 58, 66, 68, 69
Nutrition, 27

O
Observation, 26
Omission, 74
Optometry, 25
Outpatient, 22, 23, 26, 29, 50, 57

P
Performance Bond, 60
Performance Standards, 23, 24, 26, 40, 41, 42, 74
Periodicity Schedule, 23, 24, 25, 31, 42
Pharmacy, 39, 45, 64
Physician Assistants, 26, 49, 50
Physician Incentives, 58
Podiatry, 27
Postpartum Care, 26, 41, 49
Post-stabilization, 25, 28
Pregnancy, 21, 25, 26, 28, 49
   Terminations, 28
Prenatal Care, 26, 27, 51, 65, 70
Prescription Drugs, 28, 50, 73
Prescription Medication, 23, 28, 30, 31, 50, 73
, 23, 26, 27, 28, 29, 31, 32, 37, 38, 42, 45, 48, 49, 50, 51, 52, 74, 80
Prior Authorization, 21, 24, 28, 39, 52, 55, 57, 80
Prior Period Coverage, 18, 19, 31, 62, 63, 64, 66, 68, 69, 74
Provider, 47, 48, 49, 51, 52
Provider Manual, 51, 55
Provider Registration, 52

Q
QMB, 17
Quality Management, 33, 34, 38

R
Radiology, 26, 29, 30, 50
Rate Code, 64, 66, 75
RBHA, 30, 31, 52
, 23, 24, 30, 31, 34, 49, 50, 51, 52, 71
Rehabilitation, 22, 27, 29, 30, 69
Reinsurance, 53, 57, 62, 63, 66, 67, 68, 69, 71, 74
Related Party, 57, 61
Reporting Requirements, 74, 75
Respiratory, 29
Reviews, 76
, 20, 77, 78, 80
Risk Sharing, 25, 64
Roster, 18, 75

S
SOBRA, 16, 17, 25, 60, 62, 63, 66
SOBRA Family Planning, 16, 25, 62, 66
SSI, 16, 17, 63
Staff Requirements, 33
Sterilization, 25
Subcontract, 20, 26, 51, 53, 54, 55, 57, 83
Subcontractor, 20, 53, 54, 55, 59, 61, 85, 88
Supplies, 23, 25, 26, 27, 50

T
TANF, 16
Technological Advancement, 79
Third Party, 15, 32, 54, 58, 62, 69, 70, 71, 82
Third Party Liability, 69
Ticket to Work, 16, 17
Title XIX, 16, 17, 18, 19, 26, 31, 51, 62, 63, 64, 66, 83
Title XIX Waiver, 16, 17, 62, 63, 64, 66
Title XXI, 16, 17, 18, 19, 26, 31, 71
Transplants, 21, 23, 29, 67
Transportation, 21, 24, 29, 30, 31, 32, 51, 70, 79
Triage, 29, 31

U
, 33, 34, 39

V
Vaccine for Children, 33
Vision, 25, 52

[END OF SECTION F]

ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS

[The following provisions must be included verbatim in every subcontract.]

1) ASSIGNMENT AND DELEGATION OF RIGHTS AND RESPONSIBILITIES
No payment due the Subcontractor under this subcontract may be assigned
without the prior approval of the Contractor.  No assignment or delegation
of the duties of this subcontract shall be valid unless prior written
approval is received from the Contractor.  (AAC R2-7-305)

2) AWARDS OF OTHER SUBCONTRACTS
AHCCCSA and/or the Contractor may undertake or award other contracts for
additional or related work to the work performed by the Subcontractor and
the Subcontractor shall fully cooperate with such other Contractors,
subcontractors or state employees.  The Subcontractor shall not commit or
permit any act which will interfere with the performance of work by any
other contractor, subcontractor or state employee. (AAC R2-7-308)

3) CERTIFICATION OF COMPLIANCE - ANTI-KICKBACK AND LABORATORY TESTING
By signing this subcontract, the Subcontractor certifies that it has not
engaged in any violation of the Medicare Anti-Kickback statute
(42 USC Sections 1320a-7b) or the "Stark I" and "Stark II" laws governing
related-entity referrals (PL 101-239 and PL 101-432) and compensation there
from.  If the Subcontractor provides laboratory testing, it certifies that
it has complied with 42 CFR Deacon 411.361 and has sent to AHCCCSA simultaneous
copies of the information required by that rule to be sent to the Centers
for Medicare and Medicaid Services. (42 USC Sections 1320a-7b; PL 101-239 and
PL 101-432; 42 CFR Sections 411.361)

4) CERTIFICATION OF TRUTHFULNESS OF REPRESENTATION
By signing this subcontract, the Subcontractor certifies that all
representations set forth herein are true to the best of its knowledge.

5) CLINICAL LABORATORY IMPROVEMENT AMENDMENTS OF 1988
The Clinical Laboratory Improvement Amendment (CLIA) of 1988 requires
laboratories and other facilities that test human specimens to obtain
either a CLIA Waiver or CLIA Certificate in order to obtain reimbursement
from the Medicare and Medicaid (AHCCCS) programs.  In addition, they must
meet all the requirements of 42 CFR 493, Subpart A.

To comply with these requirements, AHCCCSA requires all clinical laboratories
to provide verification of CLIA Licensure or Certificate of Waiver during
the provider registration process.  Failure to do so shall result in either
a termination of an active provider ID number or denial of initial
registration.  These requirements apply to all clinical laboratories.

Pass-through billing or other similar activities with the intent of avoiding
the above requirements are prohibited. The Contractor may not reimburse
providers who do not comply with the above requirements.  (CLIA of 1988;
42 CFR 493, Subpart A)

6) COMPLIANCE WITH AHCCCSA RULES RELATING TO AUDIT AND INSPECTION
The Subcontractor shall comply with all applicable AHCCCS Rules and Audit
Guide relating to the audit of the Subcontractor's records and the
inspection of the Subcontractor's facilities.  If the Subcontractor is an
inpatient facility, the Subcontractor shall file uniform reports and
Title XVIII and Title XIX cost reports with AHCCCSA.  (ARS 41-2548;
45 CFR 74.48 (d))

7) COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS
The Subcontractor shall comply with all federal, State and local laws,
rules, regulations, standards and executive orders governing performance
of duties under this subcontract, without limitation to those designated
within this subcontract. (Requirement for FFP, 42 CFR 434.70) [42 CFR 438.6(l)]

8) CONFIDENTIALITY REQUIREMENT
Confidential information shall be safeguarded pursuant to 42 CFR Part
431, Subpart F, ARS Section 36-107, 36-2903, 41-1959 and 46-135, AHCCCS Rules
and Health Insurance Portability and Accountability Act
(Public Law 107-191, 110 Statutes 1936).

9) CONFLICT IN INTERPRETATION OF PROVISIONS
In the event of any conflict in interpretation between provisions of this
subcontract and the AHCCCS Minimum Subcontract Provisions, the latter shall
take precedence.

10) CONTRACT CLAIMS AND DISPUTES
Contract claims and disputes arising under A.R.S. Section Title 36, Chapter 29
shall be adjudicated in accordance with AHCCCS Rules.

11) ENCOUNTER DATA REQUIREMENT
If the Subcontractor does not bill the Contractor (e.g., Subcontractor is
capitated), the Subcontractor shall submit encounter data to the Contractor
in a form acceptable to AHCCCSA.

12) EVALUATION OF QUALITY, APPROPRIATENESS,  OR TIMELINESS OF SERVICES
The Arizona Health Care Cost Containment System Administration (AHCCCSA)
or the U.S. Department of Health and Human Services may evaluate, through
inspection or other means, the quality, appropriateness or timeliness of
services performed under this subcontract.  (ARS 36-2903. C., (8.);
ARS 36-2903.02; AAC 9-22-522)

13) FRAUD AND ABUSE
If the Subcontractor discovers, or is made aware, that an incident of
potential fraud or abuse has occurred, the Subcontractor shall report the
incident to the prime Contractor as well as to AHCCCSA, Office of Program
Integrity.  All incidents of potential fraud should be reported to AHCCCSA,
Office of the Director, Office of Program Integrity.
(ARS 36-2918.01; AAC R9-22-511.)

14) GENERAL INDEMNIFICATION
The parties to this contract agree that AHCCCS shall be indemnified and held
harmless by the Contractor and Subcontractor for the vicarious liability
of AHCCCS as a result of entering into this contract.  However, the parties
further agree that AHCCCS shall be responsible for its own negligence.
Each party to this contract is responsible for its own negligence.

15) INSURANCE
[This provision applies only if the Subcontractor provides services directly
to AHCCCS members]

The Subcontractor shall maintain for the duration of this subcontract a
policy or policies of professional liability insurance, comprehensive
general liability insurance and automobile liability insurance in amounts
that meet AHCCCS requirements.  The Subcontractor agrees that any insurance
protection required by this subcontract, or otherwise obtained by the
Subcontractor, shall not limit the responsibility of Subcontractor to
indemnify, keep and save harmless and defend the State and AHCCCSA, their
agents, officers and employees as provided herein.  Furthermore, the
Subcontractor shall be fully responsible for all tax obligations, Worker's
Compensation Insurance, and all other applicable insurance coverage, for
itself and its employees, and AHCCCSA shall have no responsibility or
liability for any such taxes or insurance coverage.   (45 CFR Part 74)

16) LIMITATIONS ON BILLING AND COLLECTION PRACTICES
Except as provided in federal and state law and regulations, the
Subcontractor shall not bill, nor attempt to collect payment directly or
through a collection agency from a person claiming to be AHCCCS eligible
without first receiving verification from AHCCCSA that the person was
ineligible for AHCCCS on the date of service, or that services provided were
not AHCCCS covered services.   (AAC R9-22-702 and R9-22-201(J))
[42 CFR 438.106]

17) MAINTENANCE OF REQUIREMENTS TO DO BUSINESS AND PROVIDE SERVICES
The Subcontractor shall be registered with AHCCCSA and shall obtain and
maintain all licenses, permits and authority necessary to do business and
render service under this subcontract and, where applicable, shall comply
with all laws regarding safety, unemployment insurance, disability insurance
and worker's compensation.

18) NON-DISCRIMINATION REQUIREMENTS
The Subcontractor shall comply with State Executive Order No. 99-4, which
mandates that all persons, regardless of race, color, religion, sex,
national origin or political affiliation, shall have equal access to
employment opportunities, and all other applicable Federal and state laws,
rules and regulations, including the Americans with Disabilities Act and
Title VI.  The Subcontractor shall take positive action to ensure that
applicants for employment, employees, and persons to whom it provides
service are not discriminated against due to race, creed, color, religion,
sex, national origin or disability.
(Federal regulations, State Executive order # 99-4 & AAC R9-22-513)

19) PRIOR AUTHORIZATION AND UTILIZATION REVIEW
The Contractor and Subcontractor shall develop, maintain and use a system
for Prior Authorization and Utilization Review that is consistent with
AHCCCS Rules and the Contractor's policies. (AAC R9-22-522)

20) RECORDS RETENTION
a. The Subcontractor shall maintain books and records relating to covered
   services and expenditures including reports to AHCCCSA and working
   papers used in the preparation of reports to AHCCCSA.  The Subcontractor
   shall comply with all specifications for record keeping established
   by AHCCCSA.  All books and records shall be maintained to the extent and
   in such detail as required by AHCCCS Rules and policies.   Records
   shall include but not be limited to financial statements, records
   relating to the quality of care, medical records, prescription files and
   other records specified by AHCCCSA.

b. The Subcontractor agrees to make available at its office at all reasonable
   times during the term of this contract and the period set forth in
   the following paragraphs, any of its records for inspection, audit or
   reproduction by any authorized representative of AHCCCSA, State or
   Federal government.

c. The Subcontractor shall preserve and make available all records for a
   period of five years from the date of final payment under this contract.

d. If this contract is completely or partially terminated, the records
   relating to the work terminated shall be preserved and made available
   for a period of five years from the date of any such termination.  Records
   which relate to grievances, disputes, litigation or the settlement
   of claims arising out of the performance of this contract, or costs and
   expenses of this contract to which exception has been taken by AHCCCSA,
   shall be retained by the Subcontractor for a period of five years after
   the date of final disposition or resolution thereof.
   (45 CFR 74.53; ARS 41-2548)

21) SEVERABILITY
If any provision of these standard subcontract terms and conditions is held
invalid or unenforceable, the remaining provisions shall continue valid
and enforceable to the full extent permitted by law.

22) SUBJECTION OF SUBCONTRACT
The terms of this subcontract shall be subject to the applicable material
terms and conditions of the contract existing between the Contractor and
AHCCCSA for the provision of covered services.

23) TERMINATION OF SUBCONTRACT
AHCCCSA may, by written notice to the Subcontractor, terminate this
subcontract if it is found, after notice and hearing by the State, that
gratuities in the form of entertainment, gifts, or otherwise were offered
or given by the Subcontractor, or any agent or representative of the
Subcontractor, to any officer or employee of the State with a view towards
securing a contract or securing favorable treatment with respect to the
awarding, amending or the making of any determinations with respect to
the performance of the Subcontractor; provided, that the existence of the
facts upon which the state makes such findings shall be in issue and may
be reviewed in any competent court.  If the subcontract is terminated under
this section, unless the Contractor is a governmental agency, instrumentality
or subdivision thereof, AHCCCSA shall be entitled to a penalty, in addition
to any other damages to which it may be entitled by law, and to exemplary
damages in the amount of three times the cost incurred by the
Subcontractor in providing any such gratuities to any such officer or
employee. (AAC R2-5-501; ARS 41-2616 C.; 42 CFR 434.6, a. (6))

24) VOIDABILITY OF SUBCONTRACT
This subcontract is voidable and subject to immediate termination by
AHCCCSA upon the Subcontractor becoming insolvent or filing proceedings
in bankruptcy or reorganization under the United States Code, or upon
assignment or delegation of the subcontract without AHCCCSA's prior written
approval.

25) WARRANTY OF SERVICES
The Subcontractor, by execution of this subcontract, warrants that it has
the ability, authority, skill, expertise and capacity to perform the
services specified in this contract.

26) OFF SHORE PERFORMANCE OF WORK PROHIBITED
Due to security and identity protection concerns, direct services under this
contract shall be performed within the borders of the United States.  Any
services that are described in the specifications or scope of work that
directly serve the State of Arizona or its clients and may involve access
to secure or sensitive data or personal client data or development or
modification of software for the State shall be performed within the borders
of the United States.  Unless specifically stated otherwise in the
specifications, this definition does not apply to indirect or "overhead"
services, redundant back-up services or services that are incidental to
the performance of the contract.  This provision applies to work performed
by subcontractors at all tiers.

ATTACHMENT B: MINIMUM NETWORK STANDARDS (By Geographic Service Area)

INSTRUCTIONS:

Contractors shall have in place an adequate network of providers capable of
meeting contract requirements.  The information that follows describes the
minimum network requirements by Geographic Service Area (GSA). In some
GSA's there are required service sites located outside of the geographical
boundary of a GSA.  The reason for this relates to practical access to
care.  In certain instances, a member must travel a much greater distance
to receive services within their assigned GSA, if the member were not
allowed to receive services in an adjoining GSA or state.

Split zip codes occur in some counties.  Split zip codes are those which
straddle two different counties.  Enrollment for members residing in
these zip codes is based upon the county and GSA to which the entire zip
code has been assigned by AHCCCS.  The Contractor shall be responsible for
providing services to members residing in the entire zip code that is
assigned to the GSA for which the Contractor has agreed to provide services.
The split zip codes GSA assignments are as follows:

ZIP CODE
SPLIT BETWEEN THESE COUNTIES
COUNTY ASSIGNED TO
ASSIGNED GSA

85220
Pinal and Maricopa
Maricopa
12

85242
Pinal and Maricopa
Maricopa
12

85292
Gila and Pinal
Gila
8

85342
Yavapai and Maricopa
Maricopa
12

85358
Yavapai and Maricopa
Maricopa
12

85390
Yavapai and Maricopa
Maricopa
12

85643
Graham and Cochise
Cochise
14

85645
Pima and Santa Cruz
Santa Cruz
10

85943
Apache and Navajo
Navajo
4

86336
Coconino and Yavapai
Yavapai
6

86351
Coconino and Yavapai
Coconino
4

86434
Mohave and Yavapai
Yavapai
6

86340
Coconino and Yavapai
Yavapai
6

If outpatient specialty services (OB, family planning, and pediatrics) are not
included in the primary care provider contract, at least one subcontract is
required for each of these specialties in the service sites specified.

In Tucson (GSA 10) and Metropolitan Phoenix (GSA 12), the Contractor must
demonstrate its ability to provide PCP, dental and pharmacy services so that
members don't need to travel more than 5 miles from their residence.
Metropolitan Phoenix is defined on the Minimum Network Standard page
specific to GSA # 12.

At a minimum, the Contractor shall have a physician with admitting and
treatment privileges with each hospital in its network.  Contractors in GSA
10 and/or GSA 12 must have at least one hospital contract in each service
district.  This requirement is part of the Hospital Subcontracting and
Reimbursement Pilot Program, described more fully in Section D, Paragraph
35, Hospital Reimbursement.  A list of Phoenix and Tucson area hospitals
are included.

Provider categories required at various service delivery sites included in
the Service Area Minimum Network Standards are indicated as follows:

	H	Hospitals
	P	Primary Care Providers (physicians, certified nurse
                practitioners and physician assistants)
	D	Dentists
	Ph	Pharmacies

HOSPITALS IN PHOENIX METROPOLITAIN AREA (By service district, by zip code)

DISTRICT 1
85006		Banner Good Samaritan Medical Center
		St. Luke's Medical Center
85008		Maricopa Medical Center
85013		St. Joseph's Hospital & Medical Center
85020		John C. Lincoln Hospital - North Mountain


DISTRICT 2
85015		Phoenix Baptist Hospital & Medical Center
85027		John C. Lincoln Hospital - Deer Valley
85037		Banner Estrella Medical Center
85306		Banner Thunderbird Medical Center
85308		Arrowhead Community Hospital & Medical Center
85338		West Valley Hospital
85351		Walter O. Boswell Memorial Hospital
85375		Del E. Webb Memorial Hospital


DISTRICT 3
85031		Paradise Valley Hospital
85054		Mayo Clinic Hospital
85251		Scottsdale Healthcare - Osborn
85261		Scottsdale Healthcare - Shea



DISTRICT 4
85201		Mesa General Hospital Medical Center
		Mesa Lutheran Hospital
		Banner Mesa Medical Center
85202		Banner Desert Medical Center
85206		Valley Lutheran Hospital
85224		Chandler Regional Hospital
85281		Tempe St. Luke's Hospital

HOSPITALS IN TUCSON METROPOLITAN AREA   (By service district, by zip code)

DISTRICT 1
85719	University Medical Center
85741	Northwest Hospital
85745	Carondelet St. Mary's Hospital


DISTRICT 2
85711	Carondelet St. Joseph's Hospital
85712	El Dorado Hospital
	Tucson Medical Center
85713	Kino Community Hospital

ATTACHMENT F: PERIODIC REPORT REQUIREMENTS

The following table is a summary of the periodic reporting requirements for
AHCCCS acute care contractors and is subject to change at any time during
the term of the contract.  The table is presented for convenience only and
should not be construed to limit the Contractor's responsibilities in any
manner.  "Reporting Guide" refers to the Reporting Guide for Acute Health
Care Contractors with the Arizona Health Care Cost Containment System.

REPORT DHCM Finance
WHEN DUE
SOURCE/REFERENCE
SEND TO:

Monthly Financial Reporting Package
30 days after the end of the month, only when required by AHCCCSA
Reporting Guide
Financial Manager

Quarterly Financial Reporting Package
60 days after the end of each quarter
Reporting Guide
Financial Manager

FQHC Member Information
60 days after the end of each quarter
Reporting Guide
Section D, Paragraph 34
Financial Manager

HIV/AIDS Report
60 days after the end of each quarter
Reporting Guide
Section D, Paragraph 53
Financial Manager

Draft Annual Financial Reporting Package
90 days after the end of each fiscal year
Reporting Guide
Financial Manager

Final Annual Financial Reporting Package
120 days after the end of each fiscal year
Reporting Guide
Financial Manager

Non-Transplant Catastrophic Reinsurance covered Diseases
Annually, within 30 days of the beginning of the contract year, enrollment
   to the plan, and when newly diagnosed.
Section D, Paragraph 57
Reinsurance Manager

Cost Allocation Plans
Within 30 days of the effective date
Section D, Paragraph 43
Financial Manager

Claim recoupments >$50,000
Upon identification by Contractor
Section D, Paragraph 38
Financial Manager

Subcontracts
As required per Contract
Section D, Paragraph 37
Financial Manager

TPA Subcontracts
Within 30 days of the effective date
Section D, Paragraph 37
Financial Manager

Physician Incentive Plan (PIP) reporting
Suspended by CMS
 Section D, Paragraph 42
Financial Manager

Advances/Loans
Submit for approval prior to effective date
Section D, Paragraph 49
Financial Manager

DHCM Health Plan Operations

Report of all subcontracts which delegate Contractor duties and responsibilities
90 days after the beginning of the contract year
Section D, Paragraph 37
Operations and Compliance Officer

Provider Affiliation Transmission
15 days after the end of each quarter
Provider Affiliation Transmission Manual, submitted to PMMIS
   Provider-to-Contractor FTP
Operations and Compliance Officer

Claims Dashboard
15th day of each month following the reporting period
Section D, Paragraph 38
Operations and Compliance Officer

Administrative Measures
15th day of each month following the reporting period
Section D, Paragraph 24
Operations and Compliance Officer

Enrollee Appeal and Provider Claim Dispute Report
45 days after the end of each quarter
Section D, Paragraph 26
Operations and Compliance Officer

Enrollee Grievance Report
45 days after the end of each quarter
Section D, Paragraph 26
Operations and Compliance Officer

Provider Network Development and Management Plan
45 days after the first day of a new contract year
Section D, Paragraph 27
Operations and Compliance Officer

Cultural Competency Plan
45 days after the first day of a new contract year
ACOM Cultural Competency Policy
Operations and Compliance Officer

Business Continuity and Recovery Plan
15 days after the beginning of each contract year
ACOM Business Continuity and Recovery Plan Policy
Operations and Compliance Officer

Marketing Attestation Statement
45 days after the beginning of each contract year
ACOM Marketing Outreach and Incentives Policy
Operations and Compliance Officer

Marketing and Outreach Materials
30 days prior to dissemination
ACOM Marketing Outreach and Incentives Policy
Operations and Compliance Officer

Member Handbook
By August 15th of contract year, or within 4 weeks of receiving annual
   amendment, whichever is later.
Section D, Paragraph 18
Operations and Compliance Officer

Provider Network - Material Change
Submit change for approval prior to effective date
Section D, Paragraph 29
Operations and Compliance Officer

Provider Network - Unexpected change
Within one business day
Section D, Paragraph 29
Operations and Compliance Officer

System Change Plan
Six months prior to implementation
Section D, Paragraph 38
Operations and Compliance Officer

REPORT DHCM Data Analysis and Research
WHEN DUE
SOURCE/REFERENCE
SEND TO:

Corrected Pended Encounter Data
Monthly, according to established schedule
Encounter Manual
Encounter Administrator

New Day Encounter
Monthly, according to established schedule
Encounter Manual
Encounter Administrator
Medical Records for Data Validation
90 days after the request received from AHCCCSA
RFP Attachment I, Encounter Submission Requirements
Encounter Administrator

REPORT DHCM Clinical Quality Management
WHEN DUE
SOURCE/REFERENCE
SEND TO:

Comprehensive EPSDT Plan including Dental
Annually on December 15th
RFP Section D, Paragraph 24
DHCM/CQM

EPSDT Progress Report including Dental - Quarterly Update
15 days after the end of each quarter
AMPM, Chapter 400
DHCM/CQM

Quality Management Plan and Evaluation
Annually on December 15th
AMPM, Chapter 900
DHCM/CQM

Monthly Pregnancy Termination Report
End of the month following the pregnancy termination
AMPM, Chapter 400
DHCM/CQM

Maternity Care Plan
Annually on December 15th
AMPM, Chapter 400
DHCM/CQM

Sterilization
Immediately following procedure
AMPM, Chapter 400
DHCM/CQM

Semi-annual report of number of pregnant women who are HIV/AIDS positive
30 days after the end of the 2nd and 4th quarter of each contract year
AMPM, Chapter 400
DHCM/CQM

Performance Improvement Project Proposal (initial/baseline year of the project)
Annually on December 15th
AMPM, Chapter 900
DHCM/CQM

Performance Improvement Project Re-measurement Report
Annually on December 15th
AMPM, Chapter 900
DHCM/CQM

Performance Improvement Project Final Report
Within 180 days of the end of the project, as defined in the project
   proposal approved by AHCCCS DHCM
AMPM, Chapter 900
DHCM/CQM

QM Quarterly Report
45 Days after the end of each quarter
Section D, Paragraph 23
DHCM/CQM

Pediatric Immunization Audit
As requested
Section D, Paragraph 24
DHCM/CQM

REPORT DHCM Utilization Management
WHEN DUE
SOURCE/REFERENCE
SEND TO:

Quarterly Inpatient Hospital Showing
15 days after the end of each quarter
State Medicaid Manual and the AMPM, Chapter 1000
DHCM/UM

Utilization Management Plan and Evaluation
Annually on December 15th
AMPM, Chapter 900
DHCM/UM

UM Quarterly Report
45 Days after the end of each quarter
Section D, Paragraph 23
DHCM/UM

HIV Specialty Provider List
Annually, on December 15th
AMPM, Chapter 300
DHCM/UM

Transplant Report
15 days after the end of each month
AMPM, Chapter 1000
DHCM/UM

REPORT Office of Program Integrity
WHEN DUE
SOURCE/REFERENCE
SEND TO:

Provider Fraud/Abuse Report
Immediately following discovery
Section D, Paragraph 62
Office of Program Integrity Manager

Eligible Person Fraud/Abuse Report
Immediately following discovery
Section D, Paragraph 62
Office of Program Integrity Manager

REPORT Office of the Director
WHEN DUE
SOURCE/REFERENCE
SEND TO:

Prescription Drug Utilization Report*
Quarterly, within 45 days of quarter end
AMPM
Pharmacy Program Administrator

REPORT As Required/Needed
WHEN DUE
SOURCE/REFERENCE
SEND TO:

Contract Termination Reports
5 days after the end of each month
Section D, Paragraph 1
Financial Manager

Nursing Facility Stay
When a member has been residing in a nursing facility for 75 days
Section D, Paragraph 10, Nursing Facility
Division of Member Services Assistant Director

Key Position Change
Within 7 days after an employee leaves and as soon as new hire has taken place
Section D, Paragraph 16
DHCM Assistant Director

Third Party Liability Updates
Within 10 days of discovery
Section D, Paragraph 58
TPL Administrator

Third Party Liability Case Identification
Within 10 days of discovery
Section D, Paragraph 58
TPL Administrator

Certificate of Insurance
Within 10 days of contract award
Section E, #25
Contract Manager

Generic Extra Credit Requirement
As required per your contract
Per Contract Award Requirement
Per Your Contract

*Applicable in the event that the prescription drug benefit remains the
responsibility of the Contractor - see Paragraph 75, Pending Legislation
/ Other Issues, for more information.

ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM

Members who do not have the right to choose a Contractor or members who have
the right to choose but do not exercise this right, are assigned to a
Contractor through an auto-assignment algorithm.  The algorithm is a
mathematical formula used to distribute members to the various Contractors
in a manner that is predictable and consistent with AHCCCSA goals.

The algorithm employs a data table and a formula to assign cases (a case may
be a member or a household of members) to Contractors using the target
percentages developed.  The algorithm data table consists of all the
geographic service areas (GSA) in the state, all Contractors serving each
GSA, and the target percentages by risk group within each GSA.

The Contractor farthest away from its target percentage within a GSA and
risk group, the largest negative difference, is assigned the next case for
that GSA.  The equation used is:

		(t/T) - P = d

t =  The total members assigned to the GSA, per risk group category, for
     the Contractor
T =  The total members assigned to the GSA, per risk group category, all
     Contractors combined
P =  The target percentage of members per risk group for the Contractor
d =  The difference

The algorithm is calculated after each assignment to give a new difference
for each Contractor.  When more than one Contractor has the same difference,
and their differences are greater than all other Contractors, the Contractor
with the lowest Health Plan I.D. Number will be assigned the case.

Assignment by the algorithm applies to:

1. Members that are newly eligible to the AHCCCS program that did not
   choose a Contractor within the prescribed time limits.

2. Members whose assigned health plan is no longer available after the
   member moves to a new GSA and did not choose a new Contractor within the
   prescribed time limits.

3. Members whose assigned plan is no longer available at the beginning of
   a contract cycle that did not choose a Contractor within the prescribed
   time limits.

All Contractors, within a given geographic service area (GSA) and for each
risk group, will have a placement in the algorithm and will receive members
accordingly.  A Contractor with a more favorable target percentage in the
algorithm will receive proportionally more members.  Conversely, a Contractor
with a lower target percentage in the algorithm will receive proportionally
fewer members.  The algorithm favors Contractors with both lower final bids
and awarded rates.  The algorithm also favors those Contractors that score
higher on selected Performance Measures (See Section D, Paragraph 24,
Performance Measures).

For Contractors in the Maricopa and Pima/Santa Cruz GSAs with fewer than
25,000 members statewide, a temporary adjustment will be made to the
algorithm formula in order to ensure a minimum membership (see the discussion
entitled "Adjustment Methodology for Contractors with Fewer than 25,000
Members" for more information).

Development of the Target Percentages

Beginning in CYE '06, the algorithm target percentages will be developed
using the methodology described below.  However, for subsequent years,
AHCCCS reserves the right to change the algorithm methodology to assure
assignments are made in the best interest of the AHCCCS program and the State.

A Contractor's placement in the algorithm is based upon the following three
factors, which are weighted as follows:

#
Factor
Weighting

1
The final capitation rate bid submitted by the Contractor.  Final bids that
are below the bottom of the rate range will be assigned to the bottom of
the rate range for development of the target percentages.
30%

2
The Contractor's final awarded rate from AHCCCSA.
30%

3
The Contractor's ranking in Well-Child visits, 3, 4, 5, and 6 Years of Age
(weighted 75%) and Timeliness of Prenatal Care (weighted 25%) Performance
measures (measurement period CYE 2004, reported in CYE 2005).
40%

Points will be assigned to each Contractor by risk group by GSA.  Based
on the rankings of the final bid rates and the final awarded rates, each
Contractor will be assigned a number of points for each of these two
components separately as follows:

TABLE FOR FACTORS #1 AND #2
Number of Awards in GSA

Lowest Rate
2nd Lowest Rate
3rd Lowest Rate
4th Lowest Rate
5th Lowest Rate
6th Lowest Rate
7th Lowest Rate

2
60
40

3
44
32
24

4
35
28
22
15

5
30
25
20
15
10


6
26
23
19
15
11
6

7
25
20
17
14
11
8
5

Contractors that have equal bids in a GSA for the same risk group will be
given an equal percentage of the points for all of the positions combined.

The third component of the calculation, Performance Measure Rates(PMR), will
be assigned a number of points based on the Contractor's ranking among the
rates for the selected Performance Measures.  The higher the rate, the more
points assigned.    For this component, points will be assigned as follows:

TABLE FOR FACTOR #3
Number of Awards in GSA
Highest PMR
2nd Highest PMR
3rd Highest PMR
4th Highest PMR
5th Highest PMR
6th Highest PMR
7th Highest PMR

2
60
40

3
44
32
24

4
35
28
22
15

5
30
25
20
15
10

6
26
23
19
15
11
6

7
25
20
17
14
11
8
5

Contractors that have equal Performance Measure Rates will be given an equal
percentage of the points for all of the positions combined.

The points awarded for the three components will be combined as follows to
give the target percentage for each Contractor by GSA by risk group:

Final Bid Points (.30) + Awarded Bid Points (.30) + Performance Measure
Points (.40) = TARGET PERCENTAGE 100

Adjustment Methodology for Contractors with Fewer than 25,000 Members

At the beginning of the new contract cycle, the auto-assignment algorithm
for the Maricopa and Pima/Santa Cruz GSAs will be adjusted to favor
Contractors with fewer than 25,000 members statewide.  The adjusted
algorithm will be utilized until a target membership of 25,000 members
statewide, per Contractor, is reached.

The adjustment will be made to the final percentages developed using the
methodology above.  A pre-determined percentage, based on the table below,
will be added to the affected Contractor(s) and subtracted evenly from
the other Contractors.

Number of Contractors Below 25,000 Statewide Minimum Enrollment
Percentage Added To New Contractor Target
Percentage To Be Evenly Subtracted From Remaining Bidders

1
20%
20%

2
15%
30%

3
10%
30%

*In the event that there are more than three affected Contractors, AHCCCS
will disclose adjustment methodology by July 1, 2003.

In the event that a Contractor only receives an award in rural GSAs, AHCCCS
reserves the right to make a temporary adjustment to the auto-assignment
target to favor the new Contractor until a minimum enrollment is reached.

AHCCCSA reserves the right to adjust capitation rates for potential changes
to the populations risk due to the adjusted algorithm.

ATTACHMENT H (1): ENROLLEE GRIEVANCE SYSTEM STANDARDS AND POLICY

The Contractor shall have a written policy delineating its Grievance System
which shall be in accordance with applicable Federal and State laws,
regulations and policies, including, but not limited to 42 CFR Part 438
Subpart F.  The Contractor shall provide the ACOM Enrollee Grievance
Policy to all providers and subcontractors at the time of contract.  The
Contractor shall also furnish this information to enrollees within a
reasonable time after the Contractor receives notice of the enrollment.
Additionally, the Contractor shall provide written notification of any
significant change in this policy at least 30 days before the intended
effective date of the change.

The written information provided to enrollees describing the Grievance
System including the grievance process, the appeals process, enrollee
rights, the grievance system requirements and timeframes, shall be in
each prevalent non-English language occurring within the subcontractor's
service area and in an easily understood language and format.  The Contractor
shall inform enrollees that oral interpretation services are available in
any language, that additional information is available in prevalent
non-English languages upon request and how enrollees may obtain this
information.

Written documents, including but not limited to the Notice of Action, the
Notice of Appeal Resolution, Notice of Extension for Resolution, and
Notice of Extension of Notice of Action shall be translated in the
enrollee's language if information is received by the Contractor, orally
or in writing, indicating that the enrollee has a limited English proficiency.
Otherwise, these documents shall be translated in the prevalent
non-English language(s) or shall contain information in the prevalent
non-English language(s) advising the enrollee that the information is
available in the prevalent non-English language(s) and in alternative
formats along with an explanation of how enrollees may obtain this
information.  This information must be in large, bold print appearing in
a prominent location on the first page of the document.

At a minimum, the Contractor's Grievance System Standards and Policy shall
specify:

1. That the Contractor shall maintain records of all grievances and appeals.

2. Information explaining the grievance, appeal, and fair hearing procedures
   and timeframes describing the right to hearing, the method for obtaining
   a hearing, the rules which govern representation at the hearing, the right
   to file grievances and appeals and the requirements and timeframes for
   filing a grievance or appeal.

3. The availability of assistance in the filing process and the
   Contractor's toll-free numbers that an enrollee can use to file a
   grievance or appeal by phone if requested by the enrollee.

4. That the Contractor shall acknowledge receipt of each grievance and
   appeal. For Appeals, the Contractor shall acknowledge receipt of
   standard appeals in writing within five business days of receipt and
   within one business day of receipt of expedited appeals.

5. That the Contractor shall permit both oral and written appeals and
   grievances and that oral inquiries appealing an action are treated
   as appeals.

6. That the Contractor shall ensure that individuals who make decisions
   regarding grievances and appeals are individuals not involved in any
   previous level of review or decision making and that individuals who
   make decisions regarding:  1) appeals of denials based on lack of
   medical necessity, 2) a grievance regarding denial of expedited
   resolution of an appeal or 3) grievances or appeals involving clinical
   issues are health care professionals as defined in 42 CFR 438.2 with
   the appropriate clinical expertise in treating the enrollee's condition
   or disease.

7. The resolution timeframes for standard appeals and expedited appeals
   may be extended up to 14 days if the enrollee requests the extension or
   if the Contractor establishes a need for additional information and that
   the delay is in the enrollee's interest.

8. That if the Contractor extends the timeframe for resolution of a
   grievance or appeal when not requested by the enrollee, the Contractor
   shall provide the enrollee with written notice of the reason for the
   delay.

9. The definition of grievance as a member's expression of dissatisfaction
   with any aspect of their care, other than the appeal of actions.

10. That an enrollee must file a grievance with the Contractor and that
    the enrollee is not permitted to file a grievance directly with the State.

11. That the Contractor must dispose of each grievance in accordance with
    the ACOM Enrollee Grievance Policy, but in no case shall the timeframe
    exceed 90 days unless an extension is in effect.

12. The definition of action as the [42 CFR 438.400(b)]:
    a. Denial or limited authorization of a requested service, including the
       type or level of service;
    b. Reduction, suspension, or termination of a previously authorized
       service;
    c. Denial, in whole or in part, of payment for a service;
    d. Failure to provide services in a timely manner;
    e. Failure to act within the timeframes required for standard and
       expedited resolution of appeals and standard disposition of grievances;
       or
    f. Denial of a rural enrollee's request to obtain services outside the
       Contractor's network under 42 CFR 438.52(b)(2)(ii), when the contractor
       is the only Contractor in the rural area.

13. The definition of a service authorization request as an enrollee's
    request for the provision of a service [42 CFR 431.201].

14. The definition of appeal as the request for review of an action, as
    defined above.

15. Information explaining that a provider acting on behalf of an enrollee
    and with the enrollee's written consent, may file an appeal.

16. That an enrollee may file an appeal of:  1) the denial or limited
    authorization of a requested service including the type or level of
    service, 2) the reduction, suspension or termination of a previously
    authorized service, 3) the denial in whole or in part of payment for
    service, 4) the failure to provide services in a timely manner, 5) the
    failure of the Contractor to comply with the timeframes for dispositions
    of grievances and appeals and 6) the denial of a rural enrollee's
    request to obtain services outside the Contractor's network under
    42 CFR 438.52(b)(2)(ii) when the Contractor is the only Contractor in
    the rural area.

17. The definition of a standard authorization request.  For standard
    authorization decisions, the Contractor must provide a Notice of Action
    to the enrollee as expeditiously as the enrollee's health condition
    requires, but not later than 14 days following the receipt of the
    authorization with a possible extension of up to 14 days if the enrollee
    or provider requests an extension or if the Contractor establishes a
    need for additional information and delay is in the enrollee's best
    interest. [42 CFR 438.210(d)(1)]

18. The definition of an expedited authorization request.  For expedited
    authorization decisions, the Contractor must provide a Notice of Action
    to the enrollee as expeditiously as the enrollee's health condition
    requires, but not later than 3 business days following the receipt of
    the authorization with a possible extension of up to 14 days if the
    enrollee or provider requests an extension or if the Contractor
    establishes a need for additional information and delay is in the
    enrollee's interest. [42 CFR 438.210(d)(2)]

19. That the Notice of Action for a service authorization decision not
    made within the standard or expedited timeframes, whichever is applicable,
    will be made on the date that the timeframes expire. If the Contractor
    extends the timeframe to make a standard or expedited authorization
    decision, the contractor must give the enrollee written notice of the
    reason to extend the timeframe and inform the enrollee of the right to
    file a grievance if the enrollee disagrees with the decision.  The
    Contractor must issue and carry out its decision as expeditiously as
    the enrollee's health condition requires and no later than the date the
    extension expires.

20. That the Contractor shall notify the requesting provider of the decision
    to deny or reduce a service authorization request.  The notice to the
    provider need not be written.

21. The definition of a standard appeal and that the Contractor shall resolve
    standard appeals no later than 30 days from the date of receipt of the
    appeal unless an extension is in effect.

22. The definition of an expedited appeal and that the Contractor shall
    resolve all expedited appeals not later than three business days from
    the date the Contractor receives the appeal (unless an extension is in
    effect) where the Contractor determines (for a request from the enrollee),
    or the provider (in making the request on the enrollee's behalf indicates)
    that the standard resolution timeframe could seriously jeopardize the
    enrollee's life or health or ability to attain, maintain or regain maximum
    function.  The Contractor shall make reasonable efforts to provide oral
    notice to an enrollee regarding an expedited resolution appeal.

23. That if the Contractor denies a request for expedited resolution, it
    must transfer the appeal to the 30-day timeframe for a standard appeal.
    The Contractor must make reasonable efforts to give the enrollee prompt
    oral notice and follow-up within two days with a written notice of the
    denial of expedited resolution.

24. That an enrollee shall be given 60 days from the date of the Contractor's
    Notice of Action to file an appeal.

25. That the Contractor shall mail a Notice of Action:  1) at least 10 days
    before the date of a termination, suspension or reduction of previously
    authorized AHCCCS services, except as provided in (a)-(f) below;
    2) at least 5 days before the date of action in the case of suspected
    fraud; 3) at the time of any action affecting the claim when there has
    been a denial of payment for a service, in whole or in part; 4) within
    14 days from receipt of a request for a standard service authorization
    which has been denied or reduced unless an extension is in effect;
    5) within three business days from receipt of an expedited service
    authorization request unless an extension is in effect.  As described
    below, the Contractor may elect to mail the Notice of Action no later
    than the date of action when:
        a. The Contractor receives notification of the death of an enrollee;
        b. The enrollee signs a written statement requesting service
           termination or gives information requiring termination or reduction
           of services (which indicates understanding that the termination
           or reduction will be the result of supplying that information);
        c. The enrollee is admitted to an institution where he is ineligible
           for further services;
        d. The enrollee's address is unknown and mail directed to the enrollee
           has no forwarding address;
        e. The enrollee has been accepted for Medicaid in another local
           jurisdiction;

26. That the Contractor include, as parties to the appeal, the enrollee,
    the enrollee's legal representative, or the legal representative of a
    deceased enrollee's estate.

27. That the Notice of Action must explain:  1) the action the Contractor
    has taken or intends to take, 2) the reasons for the action, 3) the
    enrollee's right to file an appeal with the Contractor, 4) the procedures
    for exercising these rights, 5) circumstances when expedited resolution is
    available and how to request it and 6) the enrollee's right to receive
    continued benefits pending resolution of the appeal, how to request
    continued benefits and the circumstances under which the enrollee may be
    required to pay for the cost of these services.

28. That benefits shall continue until a hearing decision is rendered if:
    1) the enrollee files an appeal before the later of a) 10 days from the
    mailing of the Notice of Action or b) the intended date of the Contractor's
    action, 2) a) the appeal involves the termination, suspension, or reduction
    of a previously authorized course of treatment or b) the appeal involves a
    denial and the physician asserts that the requested service/treatment is a
    necessary continuation of a previously authorized service, 3) the services
    were ordered by an authorized provider and 4) the enrollee requests a
    continuation of benefits.

    For purposes of this paragraph, benefits shall be continued based on the
    authorization which was in place prior to the denial, termination,
    reduction, or suspension which has been appealed.

29. That for appeals, the Contractor provides the enrollee a reasonable
    opportunity to present evidence and allegations of fact or law in
    person and in writing and that the Contractor informs the enrollee of
    the limited time available in cases involving expedited resolution.

30. That for appeals, the Contractor provides the enrollee and his
    representative the opportunity before and during the appeals process
    to examine the enrollee's case file including medical records and other
    documents considered during the appeals process.

31. That the Contractor must ensure that punitive action is not taken
    against a provider who either requests an expedited resolution or
    supports an enrollee's appeal.

32. That the Contractor shall provide written Notice of Appeal Resolution
    to the enrollee and the enrollee's representative or the representative
    of the deceased enrollee's estate which must contain:  1) the results
    of the resolution process, including the legal citations or authorities
    supporting the determination, and the date it was completed, and 2) for
    appeals not resolved wholly in favor of enrollees:  a) the enrollee's
    right to request a State fair hearing (including the requirement that
    the enrollee must file the request for a hearing in writing) no later
    than 30 days after the date the enrollee receives  the Contractor's
    notice of appeal resolution and how to do so, b) the right to receive
    continued benefits pending the hearing and how to request continuation
    of benefits and c) information explaining that the enrollee may be held
    liable for the cost of benefits if the hearing decision upholds the
    Contractor.

33. That the Contractor continues extended benefits originally provided to
    the enrollee until any of the following occurs:  1) the enrollee
    withdraws appeal, 2) the enrollee has not specifically requested
    continued benefits pending a hearing decision within 10 days of the
    Contractor mailing of the appeal resolution notice, or 3) the AHCCCS
    Administration issues a state fair hearing decision adverse to the
    enrollee.

34. That if the enrollee files a request for hearing the Contractor must
    ensure that the case file and all supporting documentation is received
    by the AHCCCSA, Office of Legal Assistance (OLA) as specified by  OLA.
    The file provided by the Contractor must contain a cover letter that
    includes:
        a. Enrollee's name
        b. Enrollee's AHCCCS I.D. number
        c. Enrollee's address
        d. Enrollee's phone number (if applicable)
        e. date of receipt of the appeal
        f. summary of the Contractor's actions undertaken to resolve the
           appeal and summary of the appeal resolution

35. The following material shall be included in the file sent by the
    Contractor:

        a. the Enrollee's written request for hearing
        b. copies of the entire appeal file which includes all supporting
           documentation including pertinent findings and medical records;
        c. the Contractor's Notice of Appeal Resolution
        d. other information relevant to the resolution of the appeal

36. That if the Contractor or the State fair hearing decision reverses a
    decision to deny, limit or delay services not furnished while the appeal
    was pending, the Contractor shall authorize or provide the services
    promptly and as expeditiously as the enrollee's health condition requires.

37. That if the Contractor or State fair hearing decision reverses a decision
    to deny authorization of services and the disputed services were
    received pending appeal, the Contractor shall pay for those services, as
    specified in policy and/or regulation.

38. That if the Contractor or State fair hearing decision upholds a decision
    to deny authorization of services and the disputed services were received
    pending appeal, the Contractor may recover the cost of those services
    from the enrollee.

ATTACHMENT H(2)	PROVIDER CLAIM DISPUTE STANDARDS AND POLICY

The Contractor shall have in place a written claim dispute policy for
providers.  The policy shall be in accordance with applicable Federal and
State laws, regulations and policies.  The claim dispute policy shall include
the following provisions:

1. The Provider Claim Dispute Policy shall be provided to all subcontractors
   at the time of contract.  For providers without a contract, the claim
   dispute policy may be mailed with a remittance advice, provided the
   remittance is sent within 45 days of receipt of a claim.

2. The Provider Claim Dispute Policy must specify that all claim disputes
   challenging claim payments, denials or recoupments must be filed in
   writing with the Contractor no later than 12 months from the date of
   service, 12 months after the date of eligibility posting or within 60 days
   after the payment, denial or recoupment of a timely claim submission,
   whichever is later.

3. Specific individuals are appointed with authority to require corrective
   action and with requisite experience to administer the claim dispute
   process.

4. A log is maintained for all claim disputes containing sufficient
   information to identify the Complainant, date of receipt, nature of the
   claim dispute and the date the claim dispute is resolved.  Separate logs
   must be maintained for provider and behavioral health recipient claim
   disputes.

5. Within five business days of receipt, the Complainant is informed by
   letter that the claim dispute has been received.

6. Each claim dispute is thoroughly investigated using the applicable
   statutory, regulatory, contractual and policy provisions, ensuring that
   facts are obtained from all parties.

7. All documentation received by the Contractor during the claim dispute
   process is dated upon receipt.

8. All claim disputes are filed in a secure designated area and are retained
   for five years following the Contractor's decision, the Administration's
   decision, judicial appeal or close of the claim dispute, whichever is
   later.

9. A copy of the Contractor's Notice of Decision (hereafter referred to as
   Decision) will be communicated in writing to all parties.  The Decision
   must include and describe in detail, the following:

   a. the nature of the claim dispute
   b. the issues involved
   c. the reasons supporting the Contractor's Decision, including references
      to applicable statute, rule, applicable contractual provisions, policy
      and procedure
   d. the Provider's right to request a hearing by filing a written request
      for hearing to the Contractor no later than 30 days after the date the
      Provider receives the Contractor's decision.
   e. If the claim dispute is overturned, the requirement that the Contractor
      shall reprocess and pay the claim(s) in a manner consistent with the
      decision within 15 business days of the date of the Decision.

10. If the Provider files a written request for hearing, the Contractor must
    ensure that all supporting documentation is received by the AHCCCSA,
    Office of Legal Assistance, no later than five business days from the
    date the Contractor receives the provider's written hearing request.
    The file sent by the Contractor must contain a cover letter that includes:

    a. Provider's  name
    b. Provider's  AHCCCS ID number
    c. Provider's  address
    d. Provider's  phone number (if applicable)
    e. the date of receipt of claim dispute
    f. a summary of the Contractor's actions undertaken to resolve the claim
       dispute and basis of the determination

11. The following material shall be included in the file sent by the
    Contractor:

    a. written request for hearing filed by the Provider
    b. copies of the entire file which includes pertinent records; and the
       Contractor's Decision
    c. other information relevant to the Notice of  Decision  of the claim
       dispute

12. If the Contractor's Decision regarding a claim dispute is reversed through
    the appeal process, the Contractor shall reprocess and pay the claim(s)
    in a manner consistent with the decision within 15 business days of the
    date of the Decision.

ATTACHMENT I: ENCOUNTER SUBMISSION REQUIREMENTS

The Contractor will be assessed sanctions for noncompliance with encounter
submission requirements.  AHCCCSA may also perform special reviews of
encounter data, such as comparing encounter reports to the Contractor's
claims files.  Any findings of incomplete or inaccurate encounter data may
result in the imposition of sanctions or requirement of a corrective action
plan.

Pended Encounter Corrections

The Contractor must resolve all pended encounters within 120 days of the
original processing date.  Sanctions will be imposed according to the
following schedule for each encounter pended for more than 120 days unless
the pend is due to AHCCCSA error:

0 - 120 days    No sanction
121 - 180 days	$ 5 per month
181 - 240 days	$ 10 per month
241 - 360 days	$ 15 per month
361 + days	$ 20 per month

"AHCCCSA error" is defined as a pended encounter, which (1) AHCCCSA
acknowledges to be the result of its own error, and (2) requires a change
to the system programming, an update to the database reference table, or
further research by AHCCCSA.  AHCCCSA reserves the right to adjust the
sanction amount if circumstances warrant.

When the Contractor notifies AHCCCSA, in writing, that the resolution of
a pended encounter depends on AHCCCSA rather than the Contractor, AHCCCSA
will respond in writing within 30 days of receipt of such notification.
The AHCCCSA response will report the status of each pending encounter
problem or issue in question.

Pended encounters will not qualify as AHCCCSA errors if AHCCCSA reviews
the Contractor's notification and asks the Contractor to research the issue
and provide additional substantiating documentation, or if AHCCCSA disagrees
with the Contractor's claim of AHCCCSA error.  If a pended encounter being
researched by AHCCCSA is later determined not to be caused by AHCCCSA
error, the Contractor may be sanctioned retroactively.

Before imposing sanctions, AHCCCSA will notify the Contractor, in writing,
of the total number of sanctionable encounters pended more than 120 days.
Pended encounters shall not be deleted by the Contractor as a means of
avoiding sanctions for failure to correct encounters within 120 days.
The Contractor shall document deleted encounters and shall maintain a record
of the deleted CRNs with appropriate reasons indicated.  The Contractor shall,
upon request, make this documentation available to AHCCCSA for review.

Encounter Validation Studies

Per CMS requirement, AHCCCSA will conduct encounter validation studies of
the Contractor's encounter submissions, and sanction the Contractor for
noncompliance with encounter submission requirements.  The purpose of
encounter validation studies is to compare recorded utilization information
from a medical record or other source with the Contractor's submitted
encounter data.  Any and all covered services may be validated as part of
these studies.  Encounter validation studies will be conducted at least
yearly.

AHCCCSA may revise study methodology, timelines, and sanction amounts based
on agency review or as a result of consultations with CMS.  The Contractor
will be notified in writing of any significant change in study methodology.

AHCCCSA will conduct two encounter validation studies.  Study "A" examines
non-institutional services (form HCFA 1500 encounters), and Study "B"
examines institutional services (form UB-92 encounters).

AHCCCSA will notify the Contractor in writing of the sanction amounts and
of the selected data needed for encounter validation studies.  The Contractor
will have 90 days to submit the requested data to AHCCCSA.  In the case
of medical records requests, the Contractor's failure to provide AHCCCSA
with the records requested within 90 days may result in a sanction of
$1,000 per missing medical record.  If AHCCCSA does not receive a sufficient
number of medical records from the Contractor to select a statistically
valid sample for a study, the Contractor may be sanctioned up to 5% of its
annual capitation payment.

The criteria used in encounter validation studies may include timeliness,
correctness, and omission of encounters. These criteria are defined as
follows:

Timeliness:   The time elapsed between the date of service and the date that
the encounter is received at AHCCCS.  Ninety-five percent (95%) of all
encounters must be received by AHCCCSA no later than 240 days after the end
of the month in which the service was rendered, or the effective date of
enrollment with the Contractor, whichever is later.  For all encounters for
which timeliness is evaluated, a sanction per encounter error extrapolated
to the population of encounters may be assessed if the encounter record
is received by AHCCCSA more than 240 days after the date determined above.
It is anticipated that the sanction amount will be $1.00 per error
extrapolated to the population of encounters; however, sanction amounts may
be adjusted if AHCCCSA determines that encounter quality has changed, or
if CMS changes sanction requirements.  The Contractor will be notified of
the sanction amount in effect for the studies at the time the studies begin.

Correctness:   A correct encounter contains a complete and accurate
description of AHCCCS covered services provided to a member.  A sanction
per encounter error extrapolated to the population of encounters may be
assessed if the encounter is incomplete or incorrectly coded.  It is
anticipated that the sanction amount will be $1.00 per error extrapolated
to the population of encounters; however, sanction amounts may be adjusted
if AHCCCSA determines that encounter quality has changed, or if CMS
changes sanction requirements.  The Contractor will be notified of the
sanction amount in effect for the studies at the time the studies begin.

Omission of data:   An encounter not submitted to AHCCCSA or an encounter
inappropriately deleted from AHCCCSA's pending encounter file or historical
files in lieu of correction of such record.  For Study "A" and for Study
"B", a sanction per encounter error extrapolated to the population of
encounters may be assessed for an omission.  It is anticipated that the
sanction amount will be $5.00 per error extrapolated to the population of
encounters for Study "A" and $10.00 per error extrapolated to the population
of encounters for Study "B"; however, sanction amounts may be adjusted if
AHCCCSA determines that encounter quality has changed, or if CMS changes
sanction requirements.  The Contractor will be notified of the sanction
amount in effect for the studies at the time the studies begin.

For encounter validation studies, AHCCCSA will select all approved and
pended encounters to be studied no earlier than 240 days after the end of
the month in which the service was rendered.  Once AHCCCSA has selected the
Contractor's encounters for encounter validation studies, subsequent
encounter submissions for the period being studied will not be considered.

AHCCCSA may review all of the Contractor's submitted encounters, or may
select a sample.  The sample size, or number of encounters to be reviewed,
will be determined using statistical methods in order to accurately estimate
the Contractor's error rates.  Error rates will be calculated by dividing
the number of errors found by the number of encounters reviewed.  A 95%
confidence interval will be used to account for limitations caused by
sampling.  The confidence interval shows the range within which the true
error rate is estimated to be.  If error rates are based on a sample, the
error rate used for sanction purposes will be the lower limit of the
confidence interval.

Encounter validation methodology and statistical formulas are provided in
the AHCCCS Encounter Data Validation Technical Document, which is available
in the Bidders Library.  This document also provides examples, which
illustrate how AHCCCSA determines study sample sizes, error rates,
confidence intervals, and sanction amounts.

Written preliminary results of all encounter validation studies will be sent
to the Contractor for review and comment.  The Contractor will have a
maximum of 30 days to review results and provide AHCCCSA with additional
documentation that would affect the final calculation of error rates and
sanctions.  AHCCCSA will examine the Contractor's documentation and may
revise study results if warranted.  Written final results of the study will
then be sent to the Contractor and communicated to CMS, and any sanctions
will be assessed.

The Contractor may file a written challenge to sanctions assessed by
AHCCCSA not more than 35 days after the Contractor receives final study
results from AHCCCSA.  Challenges will be reviewed by AHCCCSA and a
written decision will be rendered no later than 60 days from the date of
receipt of a timely challenge.  Sanctions shall not apply to encounter errors
successfully challenged.  A challenge must be filed on a timely basis and
a decision must be rendered by AHCCCSA prior to filing a claim dispute and
request for hearing pursuant to A.A.C. 9-34-401 et seq.  Sanction amounts
will be deducted from the Contractor's capitation payment.

Encounter Corrections

Contractors are required to submit replacement or voided encounters in the
event that claims are subsequently corrected following the initial encounter
submission.  This includes corrections as a result of inaccuracies identified
by fraud and abuse audits or investigations conducted by AHCCCSA or the
Contractor.  Contractors shall refer to the Encounter Reporting
User Manual for instructions regarding submission of corrected encounters.

ATTACHMENT L: COST SHARING COPAYMENTS

I. EXEMPT POPULATIONS (REGARDLESS OF RATE CODE)
The following populations are exempt from copayments for ALL services
($0 copay):
* All members under the age of 19, including all KidsCare members
* All Pregnant Women
* All ALTCS enrolled members
* All persons with Serious Mental Illness receiving RBHA services
* All members who are receiving CRS services
* SOBRA Family Planning Services Only members

Additionally, no member may be asked to make a copayment for family planning
services or supplies.

II. STANDARD COPAYMENTS APPLY TO THE TITLE XIX WAIVER GROUP
Services to this population may not be denied for failure to pay copayment.

The standard copayments apply to the Title XIX Waiver Group, including
RBHA General Mental Health and Substance Abuse service members.  The
standard copayments are as follows:

Service
Copayment

Generic Prescriptions or Brand Name if generic not available
$  0  per Rx

Brand Name Prescriptions when generic is available
$ 0

Non Emergency Use of ER
$ 1

Physician Office Visits
$ 1

III. STANDARD COPAYMENTS APPLY TO THE FOLLOWING POPULATIONS
Services to this population may not be denied for failure to pay copayment.
* AHCCCS for Families with Children
* Supplemental Security Income with and without Medicare

Service
Copayment

Generic Prescriptions or Brand Name if generic not available
$  0

Brand Name Prescriptions when generic is available
$  0

Non Emergency Use of ER
$  1

Physician Office Visits
$  1

IV. OTHER CO-PAYS
HIFA Parents (Parents of KidsCare and SOBRA Children)
* Copayment is not mandatory
* EXCEPTION: Native American Contractor Enrolled Parents are exempt from
  any copayment

Service
Copayment

Generic Prescriptions or Brand Name if generic not available
$  0

Brand Name Prescriptions when generic is available
$  0

Non Emergency Use of ER
$  1

Physician Office Visits
$  0