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                                                                   EXHIBIT 10.21



                            AGREEMENT NO. PSC 02-05
            BETWEEN THE STATE OF NEW MEXICO HUMAN SERVICES DEPARTMENT
                       AND LOVELACE COMMUNITY HEALTH PLAN

Amendment No. 1 ("Amendment") is entered into by and between the New Mexico
Human Services Department (hereinafter referred to "HSD") and LOVELACE COMMUNITY
HEALTH PLAN (hereinafter referred to as "CONTRACTOR" OR "MCO").

         WHEREAS, the parties have previously entered into Agreement PSC 02-05
Approved by the Department of Finance and Administration (DFA) on July 1, 2001
(the "Agreement") and

         WHEREAS, Article 37 of the Agreement allows for amendment of the
Agreement; and

         WHEREAS, the parties have determined that the term of the Agreement
should be extended for an additional year.

         WHEREAS, the Balanced Budget Act of 1997 requires certain changes to
the Agreement; and

         WHEREAS, based on the parties' experience since implementation of the
Agreement, the parties have agreed to certain changes in the Agreement
beneficial to the Agreement's goals;

         NOW THEREFORE, the parties do amend the Agreement as follows:

         1. All terms, definitions and conditions stated in the Agreement and
not modified by this Amendment shall remain in full force and effect. This
Amendment shall become effective July 1, 2003, provided it has been approved by
the Department of Finance and Administration, and the U.S. Department of Health
and Human Services, Center for Medicare/Medicaid Services (CMS). Any reference
to CMS in this document is a reference to the agency formerly known as Health
Care Financing Administration (HCFA);

         2. This Agreement is extended to expire at midnight June 30, 2004.

         3. In the event of a conflict between, on the one hand, the Agreement
as amended herein, and on the other hand, the regulations promulgated by the
Code of Federal Regulations (CFR) for Managed Care Organizations (MCOs) and the
Human Services Department, the federal and state regulations will prevail.

         IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as
of the date of execution by the State Contracts Officer, below.



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ARTICLE 1 (RECITALS), SECTION 1.2.(6). IS AMENDED TO READ AS FOLLOWS:

1.2.(6).          All applicable statutes, regulations and rules implemented by
                  the Federal Government, the State of New Mexico ("State"), and
                  HSD, concerning Medicaid services, managed care organizations,
                  health maintenance organizations, fiscal and fiduciary
                  responsibilities applicable under the Insurance Code of New
                  Mexico, NMSA 1978 ss.ss. 59A-1-1 et. seq., and any other
                  applicable laws.

ARTICLE 1 (RECITALS), SECTION 1.7. IS ADDED TO READ AS FOLLOWS:

1.7.              The parties to this contract acknowledge the need to work
                  cooperatively to address and resolve problems that may arise
                  in the administration and performance of this contract.

ARTICLE 1 (RECITALS), SECTION 1.8. IS ADDED TO READ AS FOLLOWS:

1.8               HSD may, in the administration of this contract, seek input on
                  health care related issues from any advisory group or steering
                  committee.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(1).A.V. IS AMENDED TO READ AS FOLLOWS:

2.1.(1).A.v.      The CONTRACTOR shall provide potential members upon request
                  and enrolled members with a directory to include MCO addresses
                  and telephone numbers. The CONTRACTOR shall also provide upon
                  request a listing of primary care and specialty providers with
                  the identity, location, phone number and qualifications to
                  include area of specialty, board certification and any area of
                  special expertise that would be helpful to individuals
                  deciding to enroll with the CONTRACTOR. This material must be
                  available in a manner and format that may be easily
                  understood. At the option of the CONTRACTOR, the directory may
                  be limited to primary care and self-refer providers.


ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(1).A.VI. IS AMENDED TO READ AS FOLLOWS:

2.1.(1).A.vi.     The CONTRACTOR shall provide potential members upon request
                  and enrolled members with a list of all items and services
                  that are available to members covered either directly or
                  through a method of referral and/or prior authorization. These
                  materials must be available in a manner and format that may be
                  easily understood.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(1).D. IS AMENDED TO READ AS FOLLOWS:

2.1.(1).D.        MCO Enrollment Information



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                  Once a member is determined to be an MCO mandatory member, HSD
                  provides specific information about services included in the
                  benefit packages, MCOs from which the member can choose, and
                  enrollment of the member(s). The CONTRACTOR shall have written
                  policies and procedures regarding the utilization of
                  information on race, ethnicity, and primary language spoken,
                  as provided by HSD to the CONTRACTOR at the time of enrollment
                  in the MCO of each Medicaid member.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(1).E.II. IS AMENDED TO READ AS FOLLOWS:

2.1.(1).E.ii.     The CONTRACTOR is responsible for providing members with a
                  member handbook and provider directory within a reasonable
                  time after the CONTRACTOR is notified by HSD of the member's
                  enrollment. The CONTRACTOR must notify all members at least
                  once per year of their right to request and obtain this
                  information. The member handbook shall include information
                  contained in 42 CFR, Section 438.10.F.2.


ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(1).E.III. IS AMENDED TO READ AS FOLLOWS:

2.1.(1).E.iii.    The CONTRACTOR shall send a provider directory and member
                  handbook to members or potential members requesting a copy and
                  as requested by HSD. The CONTRACTOR may direct a person
                  requesting a member handbook or a provider directory to an
                  internet site. However, a specific request for a printed
                  document shall be met. The CONTRACTOR shall provide a one
                  page, two-sided summary of its benefits which may be
                  distributed by HSD at its discretion. The CONTRACTOR must
                  notify all members at least once per year of their right to
                  request and obtain this information.


ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(1).E.IV.A.B.C. ARE AMENDED TO READ AS
FOLLOWS:

2.1.(1).E.iv.     Member handbooks shall be available in formats other than
                  English and in an appropriate manner that takes into
                  consideration the special needs of those who for example, are
                  visually limited or have limited reading proficiency, if, in
                  the CONTRACTOR'S or HSD's determination there is a prevalent
                  population of the CONTRACTOR'S Salud! members that are
                  conversant only in those other languages or require alternate
                  formats. In addition, oral interpretation must be made
                  available free of charge to potential members or members.
                  These oral interpretations must be available in all
                  non-English languages, not just those that are determined to
                  be prevalent by the CONTRACTOR and HSD. The CONTRACTOR must
                  notify potential members and members that oral interpretation
                  is



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                  available in any language and that written information is
                  available in prevalent languages and how to access this
                  information.

                  (1)      The format for the written material shall:
                           a)       Use easily understood language and format;
                           b)       Be available in alternative formats and in
                                    an appropriate manner that takes into
                                    consideration the special needs of those
                                    who, for example, are visually limited or
                                    have limited reading proficiency.

                  (2)      All potential members upon request and enrolled
                           members must be notified how to access these formats.

                  (3)      The handbook shall include:
                           a)       Limitations to the receipt of care from
                                    non-participating providers;
                           b)       Coordination of care by PCPs;
                           c)       The CONTRACTOR demographic information
                                    including the organization's toll-free
                                    member phone number;
                           d)       Services for which prior authorization or a
                                    referral is required, and the method
                                    of obtaining both;
                           e)       The provider directory, which need not
                                    physically be part of the handbook. This
                                    provider directory shall include the names,
                                    locations, telephone numbers of, and non-
                                    English languages spoken by current
                                    contracted providers in the member's service
                                    area, including the identification of
                                    providers who are not accepting new
                                    patients. At a minimum, this information
                                    shall include Primary Care Providers (PCPs),
                                    self referral specialists, and hospitals.
                           f)       Any restrictions on the member's freedom of
                                    choice among network providers;
                           g)       Notice to members on both the CONTRACTOR'S
                                    internal grievance and appeal processes
                                    and HSD's fair hearing process;
                           h)       Information on how to obtain services, such
                                    as after hours and emergency service,
                                    including the 911 telephone system or its
                                    local equivalent;
                           i)       The member's rights, protections, and
                                    responsibilities;
                           j)       Information on obtaining care in emergency
                                    or urgent conditions;
                           k)       Information on accessing behavioral health
                                    or other specialty services, including
                                    but not limited to EPSDT and family planning
                                    services, information regarding the member's
                                    rights to self-refer to in-plan and
                                    out-of-plan family planning providers; and a
                                    female member's right to self-refer to a
                                    women's health specialist within the network
                                    for covered care



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                                    necessary to provide women's routine and
                                    preventive health care services. This is in
                                    addition to the member's designated source
                                    of primary care if that source is not a
                                    women's health specialist.
                           l)       Information on the member's rights to
                                    terminate enrollment and the process for
                                    voluntarily disenrolling from the plan;
                           m)       Other information determined by HSD to be
                                    essential during the member's initial
                                    contact with the CONTRACTOR;
                           n)       The CONTRACTOR'S policy on referrals for
                                    specialty care and other benefits not
                                    furnished by the member's primary care
                                    provider;
                           o)       Information regarding advanced directives.
                           p)       Information on cost sharing if any;
                           q)       Additional information upon request,
                                    including information on how to obtain the
                                    CONTRACTOR'S structure and operation and
                                    physician incentive plans.


ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(1).F.III. IS ADDED TO READ AS FOLLOWS:

2.1.(1).F.iii.    The CONTRACTOR shall provide for a second opinion from a
                  qualified health care professional within the network, or
                  arrange for the member to obtain one outside the network if
                  there is not another qualified provider in the network, at no
                  cost to the member.


ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(1).I.I.D). IS AMENDED TO READ AS FOLLOWS:

2.1.(1).I.i.d)    The following information regarding the member's rights of
                  access to and coverage of emergency services shall include:

                           1.       The fact that the member has a right to use
                                    any hospital or other setting for emergency
                                    care;
                           2.       What constitutes emergency medical
                                    condition, emergency services, and post
                                    stabilization services;
                           3.       That an emergency condition is 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 placing the individual's health
                                    (or with respect to a pregnant woman, the
                                    health of a woman or her unborn child) in
                                    serious jeopardy, serious impairment to
                                    bodily function or serious dysfunction of
                                    any bodily organ or part;
                           4.       That post stabilization care covers services
                                    related to an emergency medical condition,
                                    that are provided after the



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                                    member is stabilized in order to maintain
                                    the stabilized condition or, to improve or
                                    resolve the member's condition;
                           5.       The fact that prior authorization is not
                                    required for emergency services in or out of
                                    the network with all emergency services
                                    reimbursed at least at the Medicaid network
                                    rate and that the CONTRACTOR shall not
                                    retroactively deny a claim for an emergency
                                    screening examination because the condition,
                                    which appeared to be an emergency medical
                                    condition under the prudent layperson
                                    standard (defined above), turned out to be
                                    non-emergency in nature;
                           6.       The locations of any emergency settings and
                                    other locations at which providers and
                                    hospital furnish emergency services and post
                                    stabilization services furnished under the
                                    contract.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(1).I.IV. IS AMENDED TO READ AS FOLLOWS:

2.1.(1).I.iv.     The CONTRACTOR shall provide affected members and/or legal
                  guardians with written updated information within 30 days of
                  the intended effective date of any material change. In
                  addition, the CONTRACTOR must make a good faith effort to give
                  written notice of termination of a contracted provider, within
                  fifteen days after receipt or issuance of termination notice
                  to each who received his or her primary care from, or was seen
                  on a regular basis by, the terminated provider.


ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(1).K. IS AMENDED TO READ AS FOLLOWS:

2.1.(1).K.        The CONTRACTOR shall be required to comply with the MAD
                  regulation 8.305.8.15. on Patient Bill of Rights. The
                  CONTRACTOR shall provide each member with written information,
                  in English or prevalent language, as appropriate, found in the
                  MAD patient Bill of Rights pursuant to MAD 8.305.8.15.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(1).K.II.A IS AMENDED TO READ AS FOLLOWS:

2.1.(1).K.ii.a    Members and, as appropriate, their families and/or legal
                  guardians have a right to participate with practitioners in
                  decision making regarding all aspects of their health care,
                  including development of the course of treatment. The
                  CONTRACTOR'S policy shall contain procedures for obtaining
                  informed consent.


ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(1).K.XI. IS ADDED TO READ AS FOLLOWS:

2.1.(1).K.xi.     Members have a right to be free from any form of restraint or
                  seclusion used as a means of coercion, discipline, convenience
                  or retaliation, as



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                  specified in other federal regulations on the use of
                  restraints and seclusion.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(1).L.II. IS AMENDED TO READ AS FOLLOWS:

2.1.(1).L.ii.     The Consumer Advisory Board shall serve to advise the
                  CONTRACTOR on issues concerning service delivery and quality,
                  member rights and responsibilities, the process for resolving
                  member grievances, and the needs of the groups they represent
                  as they pertain to Medicaid managed care. The Board shall meet
                  on at least a quarterly basis. The CONTRACTOR shall conduct
                  outreach activities in the state's regions to ensure member
                  input. The CONTRACTOR is responsible for keeping a written
                  record of the board meetings.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(1).M.VII IS AMENDED TO READ AS FOLLOWS:

2.1.(1).M.vii.    The CONTRACTOR shall comply with NCQA standards for
                  Utilization Management and follow NCQA timeliness standards
                  for routine, urgent and emergent situations. The
                  decision-making timeframes should accommodate the clinical
                  urgency of the situation and not delay the provision of
                  services to member for lengthy periods of time. These required
                  timeframes are not to be affected by "pend" decisions. A
                  possible extension of up to 14 additional calendar days may
                  apply if:

                  (i)      the member, or the provider, requests extension; or


                  (ii)     the CONTRACTOR justifies to HSD a need for additional
                           information and demonstrates how the extension is in
                           the member's interest.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(1).N. IS ADDED TO READ AS FOLLOWS:

A.       Coverage and authorization of services.

         The CONTRACTOR shall do the following:

         (1)      Identify, define, and specify the amount, duration, and scope
                  of each service that the CONTRACTOR is required to offer.

         (2)      Require that the services identified in paragraph (1) of this
                  section be furnished in an amount, duration, and scope that is
                  no less than the amount, duration, and scope for the same
                  services furnished to beneficiaries under fee-for-service
                  Medicaid as set forth in 42 CFR, Section 440.230.

         (3)      The CONTRACTOR:




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                  (i)      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.

                  (ii)     may 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 beneficiary;

                  (iii)    may place appropriate limits on a service -

                           (a)      on the basis of criteria applied under HSD,
                                    such as medical necessity; or
                           (b)      for the purpose of utilization control,
                                    provided the services furnished can
                                    reasonably be expected to achieve their
                                    purpose, as required in paragraph
                                    (A)(3)(i) of this section; and

         (4)      The CONTRACTOR shall specify what constitutes "medically
                  necessary services" in a manner that:

                  (i)      Is no more restrictive than that used by HSD as
                           indicated in State statutes and regulations, the
                           State Plan, and other State policy and procedures;
                           and

                  (ii)     Addresses the extent to which the CONTRACTOR is
                           responsible for covering services related to the
                           following:

                           (a)      the prevention, diagnosis, and treatment of
                                    health impairments;
                           (b)      the ability to achieve age-appropriate
                                    growth and development;
                           (c)      the ability to attain, maintain, or regain
                                    functional capacity.

(B)      Authorization of Services
         For the processing of requests for initial and continuing
         authorizations of services, the CONTRACTOR must:

         (1)      Require that its subcontractors have in place, and follow,
                  written policies and procedures;

         (2)      Have in effect mechanisms to ensure consistent application of
                  review criteria for authorization decisions;

         (3)      Consult with the requesting provider when appropriate; and

         (4)      Require that any decision to deny a service authorization
                  request or to authorize a service in an amount, duration, or
                  scope that is less than requested, be made by a health care
                  professional who has appropriate



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                  clinical expertise in treating the member's condition or
                  disease, such as the CONTRACTOR'S Medical Director.

(C)      Notice of adverse action.

         The CONTRACTOR must 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 must meet
         the requirement of 42 CFR Section 438.404, except that the notice to
         the provider need not be in writing.

D.       Compensation for utilization management activities.

         Each contract must provide that, consistent with 42 CFR, Sections
         438.6(h) and 422.208, 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 member.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(1).N. (DENIALS) IS CHANGED TO
SECTION  2.1.(1).O.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(2).F.VIII. IS AMENDED TO READ AS
FOLLOWS:

2.1.(2).F.viii.   The CONTRACTOR shall have written policies and procedures for
                  conducting member surveys.


ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(2).G.II. IS AMENDED TO READ AS FOLLOWS:

2.1.(2).G.ii.     Ensure that the QI program is applied to the entire range of
                  health services provided through the CONTRACTOR by assuring
                  that all major population groups, care settings, and service
                  types are included in the scope of the review. A major
                  population group is one which represents at least five percent
                  of a CONTRACTOR'S enrollment.


ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(2).J.X. IS ADDED TO READ AS FOLLOWS:

2.1.(2).J.x.      Ensure the delegate takes corrective action if the CONTRACTOR
                  identifies deficiencies.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(2).J.XI. IS ADDED TO READ AS FOLLOWS:



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2.1.(2).J.xi.     Revoke delegation or impose other sanctions if the delegate's
                  performance is inadequate, in accordance with CONTRACTOR'S
                  policy and procedures.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(2).L.IV. IS AMENDED TO READ AS FOLLOWS:

2.1.(2).L.iv.     Follow NCQA guidelines for the conduct of provider
                  satisfaction surveys; cooperate with HSD in conducting
                  provider satisfaction survey, including making available a
                  current, unduplicated provider file(s) available to HSD or its
                  EQRO upon request;

ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(2).M.I. IS AMENDED TO READ AS FOLLOWS:

2.1.(2).M.i.      HSD shall retain the services of an external quality review
                  organization in accordance with the Social Security Act,
                  Section 1902 (a) (30) [C], and the CONTRACTOR shall cooperate
                  fully with that organization and prove to that organization
                  the CONTRACTOR'S adherence to HSD's quality standards as set
                  forth in MAD Policy Section 8.305.8. HSD shall also contract
                  with an external review organization to audit a statistically
                  valid sample of the CONTRACTOR behavioral health UM decisions
                  including authorizations, reductions, terminations and
                  denials. This audit is intended to determine if authorized
                  service levels are appropriate with respect to accepted
                  standards of clinical care. The CONTRACTOR shall cooperate
                  fully with that organization.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(3). IS AMENDED TO READ AS FOLLOWS:

2.1.(3). Disease Management Indicators

         A.       Disease Management Programs and Performance Improvement
                  Projects are two of the tools that HSD has chosen to use to
                  measure a CONTRACTOR'S ability to identify problematic areas
                  within its operations and take actions which shall improve its
                  performance in those focus areas. Examples of these include
                  but, are not limited to, administrative functions (telephone
                  response rates), utilization management (timeliness of prior
                  authorizations), access to care, preventive care (improvement
                  of EPSDT screening rates), and care coordination.

         B.       The CONTRACTOR shall:

                  i.       Participate in disease management
                           programs/performance improvement projects annually.
                           HSD will coordinate with CONTRACTOR to select
                           programs that meet the NCQA requirements. Fifty
                           percent of the disease management
                           programs/performance improvement projects shall
                           relate to behavioral health;



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                  ii.      Adhere to timely and accurate collection of baseline
                           project indicator data (physical health, behavioral
                           health, administrative), which shall show the
                           CONTRACTOR'S performance rate for those indicators
                           identified for improvement by HSD;

                  iii.     Identify specific interventions that the CONTRACTOR
                           intends to use to improve performance in a given
                           area;

                  iv.      Demonstrate improvement in each quality indicator
                           within each calendar year of the contract; and

                  v.       Perform subsequent measurement and written assessment
                           of the ongoing effectiveness of named interventions.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(3).C.I. AND II. IS AMENDED TO READ AS
FOLLOWS:

2.1.(3).C.i.      Track, analyze, and report to HSD quarterly, certain
                  indicators identified specific to behavioral or physical
                  health that shall enable HSD to determine potential problems
                  areas within quality of care, access, or service delivery;

2.1.(3).C.ii.     Collect the requested data quarterly, perform analysis on the
                  data for the purpose of determining completeness and validity,
                  and report results to HSD quarterly;

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(3).D. IS ADDED TO READ AS FOLLOWS:

2.1.(3).D.        PHYSICAL AND BEHAVIORAL HEALTH PERFORMANCE MEASURES FOR FY
                  2004 MCO CONTRACTS.

                  A.       Managed Care Performance Measures:

                  For capitation payments made on or after June 25, 2003, HSD
                  shall withhold one-half of one (0.5) percent of the
                  CONTRACTOR'S payments. The withhold funds shall be released to
                  the CONTRACTOR no sooner than July 1st and no later than July
                  31st of 2004 only if, in the judgment of HSD, performance
                  targets in the contract are achieved. Withhold funds shall be
                  released to the CONTRACTOR based on the following scoring
                  system for each of the ten performance measures listed below:

                           1.       Dental Access to Care shall be worth 10
                                    points;
                           2.       Child Access to PCP shall be worth 10
                                    points;
                           3.       Diabetes Care shall be worth 10 points;
                           4.       Consumer/Family Based Services shall be
                                    worth 15 points;



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                           5.       RTC Readmissions shall be worth 10 points;
                           6.       Behavioral Health Discharge Follow-up after
                                    7 days shall be worth 5 points;
                           7.       Behavioral Health Discharge Follow-up after
                                    30 days shall be worth 5 points;
                           8.       Provider Payment Timeliness shall be worth
                                    15 points;
                           9.       Customer Support Services shall be worth 10
                                    points; and
                           10.      Encounter Data Reporting shall be worth 10
                                    points.

                  The percentage of the CONTRACTOR'S withhold funds to be
                  released shall be calculated by summing all earned points,
                  dividing the sum by 100, and converting to a percentage. No
                  partial whole number of points will be assigned if the
                  CONTRACTOR fails to completely meet performance measures
                  described in one through ten above. Points assigned for the
                  performance measures will be all or none (e.g. 15 points or 0
                  points).

                  To the extent that the following performance measures are not
                  based on HEDIS measures, the parties agree that the measure
                  shall be evaluated based on the standard reports for such
                  measures already submitted to HSD by CONTRACTOR, provided that
                  HSD shall have the right to audit and validate the information
                  or results as reported by CONTRACTOR.

                  For the current contract amendment the CONTRACTOR shall submit
                  HEDIS scores for calendar year 2003 according to the required
                  HEDIS submission schedule for evaluation under this
                  performance measurement section.

         B.       Performance Measures Requirements:

                  The ten performance measures shall be evaluated using the
                  following criteria:

                  1.       DENTAL ACCESS TO CARE:

                           The CONTRACTOR'S members between the ages of four and
                           twenty-one who were continuously enrolled with the
                           CONTRACTOR during the measurement period will have a
                           dental visit during the measurement year, as
                           evidenced by a minimum HEDIS score of 44.00.

                  2.       CHILD ACCESS TO PCP:

                           The CONTRACTOR'S members between the age of twelve
                           months through twenty-four months who are
                           continuously enrolled with the CONTRACTOR during the
                           measurement period, will have a visit with a
                           pediatrician, family physician, or other CONTRACTOR'S




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                           primary care provider during the measurement year, as
                           evidenced by a minimum HEDIS score of 96.00.

                  3.       DIABETES CARE, HbA1c:

                           Diabetic members who are continuously enrolled with
                           the CONTRACTOR during the measurement period will
                           have a glycohemoglobin (HbA1c) blood test during the
                           measurement year, as evidenced by a minimum HEDIS
                           score of 73.72.

                  4.       CONSUMER/FAMILY BASED SERVICES:

                           At least one-half of one (0.5) percent of the Salud!
                           behavioral health expenditures for FY 04 will be
                           expended for non-profit family and/or member
                           controlled/operated organizations. These
                           organizations shall be member-centered and
                           recovery-driven. These organizations shall develop
                           and direct activities that provide support, education
                           and access to services to consumers and families. HSD
                           shall provide the reporting format to the CONTRACTOR.
                           The CONTRACTOR shall report to HSD on a quarterly
                           basis.

                           For all three CONTRACTORS the total minimum
                           expenditure will be $434,166.00 (0.5% of
                           $86,833,000.00).

                           Cimarron's minimum expenditure will be $117,225.00.
                           Lovelace's minimum expenditure will be $104,200.00.
                           Presbyterian's minimum expenditure will be
                           $212,741.00.

                  5.       RTC RE-ADMISSIONS:

                           Nineteen percent or less of the CONTRACTOR'S members
                           who are discharged from a residential treatment
                           center (RTC) will be readmitted to the same level of
                           care or a higher level of care within thirty days of
                           discharge from the RTC.

                  6.       BEHAVIORAL HEALTH DISCHARGE FOLLOW-UP:

                           The CONTRACTOR'S members who are discharged from an
                           acute psychiatric hospital setting will receive
                           follow-up care within seven days of discharge as
                           evidenced by a minimum HEDIS score of 34.56.

                  7.       BEHAVIORAL HEALTH DISCHARGE FOLLOW-UP:



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                           The CONTRACTOR'S members who are discharged from an
                           acute psychiatric hospital setting will receive
                           follow-up care within thirty days of discharge as
                           evidenced by a minimum HEDIS score of 57.25.

                  8.       PROVIDER PAYMENT TIMELINESS:

                           The CONTRACTOR shall pay ninety percent of all clean
                           claims for physical and behavioral health within
                           thirty days and ninety-nine percent of all physical
                           and behavioral health clean claims within ninety
                           days.

                  9.       CUSTOMER SUPPORT SERVICES:

                           a.       Ninety percent of the CONTRACTOR'S member
                                    services calls shall be answered within
                                    thirty seconds or less based on the reported
                                    average.

                           b.       The CONTRACTOR shall conduct a Consumer
                                    Advisory Board meeting on a quarterly basis.

                  10.      ENCOUNTER DATA REPORTING:

                           The CONTRACTOR shall submit 100 percent of all
                           required encounter data on a timely basis for
                           submissions and necessary re-submissions as set forth
                           in the contract, 2.12.(5).B. The submissions and
                           required re-submissions shall have an error rate of
                           five percent or less for at least seventy-five
                           percent of the files.

         C.       Retention and Release of Withhold Funds:

                  1.       The retention of funds withheld shall be accomplished
                           as follows:

                           A.       The CONTRACTOR shall place all funds to be
                                    withheld by HSD, under part A. (Managed Care
                                    Performance Measures) of this section, in a
                                    separate account and shall provide to HSD a
                                    monthly statement of the account in order to
                                    verify that the withheld funds are being
                                    maintained during the period of time
                                    specified in this contract.

                  2.       The release of the funds withheld shall be made as
                           follows:

                           A.       The funds in the withheld funds account
                                    shall be released for use by the CONTRACTOR
                                    only after HSD has submitted in writing
                                    that, in HSD's judgment, the performance
                                    targets in the contract have been achieved
                                    for the period of time




                                       14
<PAGE>

                                    specified in the contract. HSD shall provide
                                    written confirmation no sooner than July 1st
                                    and no later than July 31st of 2004.

                  3.       The release of funds withheld shall be calculated as
                           follows:

                           A.       The difference between the total FY 2004
                                    capitation payments to the CONTRACTOR as of
                                    June 30, 2004 divided by 0.995 (99.5
                                    percent) and the total FY 2004 capitation
                                    payments to the MCO as of June 30, 2004.

                           B.       The difference calculated shall be
                                    multiplied by the percentage determined in
                                    Section A., Managed Care Withhold, above.

         D.       Challenge Pool Funding:

                  If the CONTRACTOR fails to earn any portion of its withheld
                  funds, these funds will immediately be placed in a challenge
                  pool. The challenge pool funds will be paid based upon the
                  performance across the average of the two HEDIS 2004 Use of
                  Services measurements.

                  A.  Challenge Pool Measurement. For purposes of the challenge
                      pool funds, the percentage of the CONTRACTOR'S qualifying
                      members meeting each target measurement will be weighted
                      together pursuant to the following:

                      1.            HEDIS WELL-CHILD VISITS IN THE THIRD,
                                    FOURTH, FIFTH, AND SIXTH YEAR OF LIFE.

                                    As annually reported to HSD, the percentage
                                    of members who were three, four, five, or
                                    six years old during the measurement year,
                                    who were continuously enrolled with the
                                    CONTRACTOR during the measurement year, and
                                    who received at least one primary care
                                    provider visit.
                                    a.       For this measurement, the
                                             CONTRACTOR shall determine
                                             continuous enrollment for a member
                                             pursuant to the HEDIS technical
                                             specifications.
                                    b.       The CONTRACTOR shall determine a
                                             primary care provider visit
                                             pursuant to the HEDIS technical
                                             specifications for administrative
                                             or hybrid methods.

                      2.            HEDIS ADOLESCENT WELL-CHILD VISIT.

                                    As annually reported to HSD, the year's
                                    percentage of members who were twelve
                                    through twenty-one years old



                                       15
<PAGE>

                                    during the measurement year, who were
                                    continuously enrolled with the CONTRACTOR
                                    during the measurement year, and who
                                    received at least one primary care provider
                                    visit.
                                    a.       For this measurement, the
                                             CONTRACTOR shall determine
                                             continuous enrollment for a member
                                             pursuant to the HEDIS technical
                                             specifications.
                                    b.       The CONTRACTOR shall determine a
                                             primary care provider visit
                                             pursuant to the HEDIS technical
                                             specifications for administrative
                                             or hybrid methods.

                  3.       For the purpose of weighting together the Use of
                           Service measurements, a CONTRACTOR who does not
                           submit data to HSD for either of the two target HEDIS
                           measurements above shall receive a zero score for any
                           unreported HEDIS target measurement.

         B.       Challenge Pool Payments

                  1.  A CONTRACTOR that earns all withhold funds described in
                      Section A shall not be eligible for any Challenge Pool
                      payment.

                  2.  The CONTRACTOR with the highest overall average of two
                      HEDIS 2004 measurements during the measurement year will
                      have released an amount that does not exceed one hundred
                      percent of the funds withheld from the CONTRACTOR.

                  3.  All other CONTRACTORS will have returned a percentage of
                      their withheld funds not already returned calculated as:
                      the CONTRACTOR'S average performance divided by the
                      highest CONTRACTOR average performance, times the amount
                      of the CONTRACTOR'S withheld funds that were not earned
                      under Section A.

     E.           Tracking Measures That Are Not Subject to the Managed Care
                  Withhold or Challenge Pool:

                  The following measures are not subject to the managed care
                  withhold or challenge pool and shall be reported to HSD:

                  1.       CERVICAL CANCER SCREENING:

                           Female members aged twenty-one to sixty-four who were
                           continuously enrolled with the CONTRACTOR during the
                           measurement year will receive one or more Pap tests
                           during the




                                       16
<PAGE>

                           measurement year or the two years prior to the
                           measurement year as evidenced by HEDIS reported data.

                  2.       DISTRIBUTION OF BEHAVIORAL HEALTH PROVIDERS:

                           As demonstrated by a quarterly geo-access report,
                           ninety percent of CONTRACTOR members in urban areas
                           will have access to a licensed behavioral health
                           provider within thirty miles. Ninety percent of
                           CONTRACTOR members in rural areas will have access to
                           a licensed behavioral health provider within sixty
                           miles. Ninety percent of CONTRACTOR members in
                           frontier areas will have access to a licensed
                           behavioral health provider within ninety miles. The
                           behavioral health provider must be in active
                           practice. Telemedicine and circuit-riders can be
                           utilized to fulfill this requirement. Compliance
                           shall be averaged over a six-month measurement
                           period.

                  3.       BEHAVIORAL HEALTH PENETRATION RATE:

                           The penetration rates for the following populations
                           shall be determined according to HEDIS methodology,
                           using appropriate encounter data:

                           a.       CONTRACTOR members up to the age of
                                    twenty-one who are continuously enrolled
                                    during the measurement year, there will be a
                                    behavioral health penetration rate of at
                                    least 7.7 percent.

                           b.       CONTRACTOR members ages nineteen through
                                    twenty who are continuous enrolled during
                                    the measurement year, there will be a
                                    behavioral health penetration rate of at
                                    least 10.5 percent.

                  4.       COMMUNITY BASED BEHAVIORAL HEALTH SERVICES:

                           The CONTRACTOR shall increase its expenditures on the
                           following community based services by a total of ten
                           percent:

                           Assertive Community Treatment (ACT);
                           Behavior Management Services (BMS);
                           Case Management for children and adults (CM);
                           Non-Emergency Room Crisis Services;
                           Home Based Services;
                           Intensive Outpatient Services (IOP);
                           Psychosocial Rehabilitation Services (PSR);
                           Respite Services for children/adolescents and adults;




                                       17
<PAGE>

                           Shelter Care Services for children/adolescents;
                           Transitional Living Services for children/adolescents
                           and adults;
                           Day Treatment Program (DTP); and
                           Multi-Systemic Therapy (MST).

                           HSD shall provide a reporting format to the
                           CONTRACTOR. The CONTRACTOR shall report to HSD on a
                           quarterly basis using this format.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(4).C. IS AMENDED TO READ AS FOLLOWS:

2.1.(4).C.        The CONTRACTOR shall meet time and distance standards for PCPs
                  and pharmacies as determined by HSD or as described in MAD
                  Policy 8.305.8.18. The CONTRACTOR shall have systems to track
                  and report this data and such data shall be available to HSD
                  upon request.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(4).D. IS AMENDED TO READ AS FOLLOWS:

2.1.(4).D.        The CONTRACTOR shall meet provider appointment and pharmacy
                  in-person prescription fill time standards as described in MAD
                  Policy 8.305.8.18; shall approve or deny requests for DME
                  within seven (7) working days of the initial request. Members
                  shall be able to obtain prescribed medical supplies and
                  non-specialized DME within 24 hours, when needed on an urgent
                  basis. All new, customized, made-to-measure equipment shall be
                  delivered within 150 days of the request date. All repairs or
                  modifications shall be delivered within 60 days of the request
                  date.


ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(4).E.I. IS AMENDED TO READ AS FOLLOWS:

2.1.(4).E.i.      Routine and non-specialized supplies

                  The CONTRACTOR shall:
                  a)       Ensure supplies are delivered consistent with
                           clinical need;
                  b)       Have an emergency response plan for medical equipment
                           or supplies needed on an emergent basis;
                  c)       Ensure that members and/or their family receive
                           adequate instruction on use of the supplies or
                           equipment;
                  d)       Be able to deliver the transportation benefit
                           statewide;
                  e)       Have a sufficient transportation network available to
                           meet the transportation needs of members. This
                           includes requiring an appropriate number of handivans
                           for members who are wheelchair or
                           ventilator-dependent or have other equipment needs;
                  f)       Require that all transportation vehicles be equipped
                           with a communication device for use in case of an
                           emergency;



                                       18
<PAGE>

                  g)       Have CPR certified drivers to transport members whose
                           clinical needs dictate.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(4).I IS ADDED TO READ AS FOLLOWS:

2.1.(4).I         The CONTRACTOR shall meet and require its providers to meet
                  State standards for timely access to care and services, taking
                  into account the urgency of the need for services; establish
                  mechanisms to ensure compliance by providers; monitor
                  providers regularly to determine compliance; and take
                  corrective action if there is a failure to comply.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(6).A.III IS AMENDED TO READ AS FOLLOWS:

2.1.(6).A.iii     Develop and implement written policies and procedures, which
                  govern how members with multiple and complex special physical,
                  and behavioral health care needs shall be identified.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(6).A.IV. IS AMENDED TO READ AS FOLLOWS:

2.1.(6).A.iv      Develop and implement written policies and procedures,
                  governing how care coordination shall be provided for members
                  with special health care needs. A member or family shall have
                  a right to refuse care coordination or case management.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.1.(6).B.VII IS AMENDED TO READ AS FOLLOWS:

2.1.(6).B.vii     Coordination of Services with Children, Youth and Families
                  Department (CYFD). The CONTRACTOR shall have written policies
                  and procedures requiring coordination with the CYFD Protective
                  Services and Juvenile Justice Divisions to ensure that members
                  receive medically necessary services regardless of the
                  member's custody status. These policies and procedures shall
                  specifically address compliance with the current New Mexico
                  Children's Code. If Child Protective Services (CPS), Juvenile
                  Justice or Adult Protective Services (APS) has an open case on
                  a member, the CYFD social worker or Juvenile Probation Officer
                  assigned to the case shall be involved in the assessment and
                  planning for the course of treatment, including decisions
                  regarding the provision of services for the member. The
                  CONTRACTOR shall designate a single contact point for these
                  cases.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.1.(7).B. IS AMENDED TO READ AS FOLLOWS:

2.1.(7).B.        Subsequent Change in PCP Initiated by Member. Members may
                  initiate a PCP change at any time, for any reason. The request
                  can be made in writing or by telephone. If a request is made
                  by the 20th of a month it becomes effective as of the first of
                  the following month. If a request is



                                       19
<PAGE>

                  made after the 20th of the month the change becomes effective
                  the first of the month after the following month.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.2.(3).A.IV. IS AMENDED TO READ AS FOLLOWS:

2.2.(3.).A.       HSD shall determine eligibility for enrollment in the managed
                  care program. All Medicaid eligible members are required to
                  participate in the Medicaid managed care program except for
                  the following:

                  iv.      Members participating in the Health Insurance Premium
                           (HIPP) Program or the Breast and Cervical Cancer
                           (BCC) Medicaid Program.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.2.(5).B. IS AMENDED TO READ AS FOLLOWS:

2.2.(5).B.        Hospitalized Members
                  A member who is hospitalized in a general acute-care,
                  rehabilitation or freestanding psychiatric hospital at the
                  time he/she first enrolls with the CONTRACTOR may enroll with
                  the CONTRACTOR. However, the CONTRACTOR shall not be
                  responsible for the costs of such hospitalization, except
                  newborns born to a member mother, until the member is
                  discharged from the hospital or there is a change in the level
                  of care. Instead, HSD shall pay the appropriate provider(s) on
                  a fee-for-service basis for all provider-submitted claims
                  related to a member who is hospitalized in a general acute
                  care, rehabilitation or freestanding psychiatric hospital at
                  the time such member enrolls with the CONTRACTOR, until such
                  time as the member is discharged from the hospital.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.2.(5).C. IS AMENDED TO READ AS FOLLOWS:

2.2.(5).C.        Members in Placement in Residential Treatment Centers
                  If a child or adolescent becomes Medicaid eligible or enrolls
                  with the CONTRACTOR while residing in an accredited or
                  non-accredited residential treatment center, he or she shall
                  be immediately eligible for enrollment and the CONTRACTOR
                  shall assume financial responsibility for the member as of the
                  effective date of enrollment.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.2.(5).D. IS AMENDED TO READ AS FOLLOWS:

2.2.(5).D.        Members in Treatment Foster Care Placements
                  If a child or adolescent was residing in a treatment foster
                  care placement at the time managed care enrollment began, they
                  shall be exempt from enrolling in an MCO until he or she is
                  discharged from treatment foster care.



                                       20
<PAGE>

ARTICLE 2 (SCOPE OF WORK), SECTION 2.2.(6). IS AMENDED TO READ AS FOLLOWS:

2.2.(6).          Enrollment Process for Members

                  Current members may request a change in MCOs during the first
                  ninety (90) days of a twelve (12) month enrollment period.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.2.(6).C. IS AMENDED TO READ AS FOLLOWS:

2.2.(6).C.        Member Switch and Loss of Medicaid Eligibility
                  A current CONTRACTOR  member has the opportunity to change
                  CONTRACTORS during the first ninety (90) days of a twelve (12)
                  month period. HSD shall notify the CONTRACTOR members of their
                  opportunity to select a new CONTRACTOR provider. A member is
                  limited to one ninety day switch period per CONTRACTOR. After
                  exercising the switching rights, and returning to a previously
                  selected CONTRACTOR, the member shall remain with the
                  CONTRACTOR until his/her twelve (12) month lock-in period
                  expires before being permitted to switch CONTRACTORS.

                  If a member loses Medicaid eligibility for a period of two
                  months or less, he/she will be automatically reenrolled with
                  the former CONTRACTOR. If the member misses the annual
                  disenrollment opportunity during this two month time, he/she
                  may request to be assigned to another CONTRACTOR.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.2.(6).E.II. IS AMENDED TO READ AS FOLLOWS:

2.2.(6).E.ii      The CONTRACTOR shall develop a detailed plan for the
                  transition of an individual member, which includes member and
                  provider education about the CONTRACTOR, and the CONTRACTOR
                  process to assure any existing courses of treatment are
                  revised as necessary;

ARTICLE 2 (SCOPE OF WORK) SECTION 2.2.(6).E.X. IS AMENDED TO READ AS FOLLOWS:

2.2.(6).E.x.      The CONTRACTOR is responsible for payment of all inpatient
                  services provided by a general acute-care, rehabilitation or
                  freestanding psychiatric hospital until discharge from the
                  hospital or transfer to a different level of care, if the
                  member is hospitalized in such a facility at the time the
                  member becomes exempt or switches enrollment;

ARTICLE 2 (SCOPE OF WORK) SECTION 2.2.(6).E.XI. IS AMENDED TO READ AS FOLLOWS:

2.2.(6).E.xi.     The CONTRACTOR is responsible for payment until disenrollment
                  or switch enrollment, if an enrolled member is placed in a
                  residential treatment center or treatment foster care, or is
                  admitted to a nursing




                                       21
<PAGE>

                  facility or intermediate care facility for the mentally
                  retarded as a long term or permanent placement; and

ARTICLE 2 (SCOPE OF WORK), SECTION 2.2.(7).A.IV. IS AMENDED TO READ AS FOLLOWS:

2.2.(7).A.iv.     The CONTRACTOR shall 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 (except when his or
                  her continued enrollment with the CONTRACTOR seriously impairs
                  the CONTRACTOR'S ability to furnish services to either this
                  particular member or other members). The CONTRACTOR shall
                  provide adequate documentation that the CONTRACTOR'S request
                  for termination is proper;

ARTICLE 2 (SCOPE OF WORK), SECTION 2.2.(7).B. IS AMENDED TO READ AS FOLLOWS:

2.2.(7).B.        Member Initiated Disenrollment
                  1.       A member who is required to participate in managed
                           care may request to be disenrolled from the
                           CONTRACTOR "for cause" at anytime, even during a
                           lock-in period. The following are causes for
                           disenrollment:
                           i.       The member moves out of the Contractor's
                                    service area.
                           ii.      The CONTRACTOR does not, because of moral or
                                    religious objections, cover the service the
                                    member seeks.
                           iii.     The member needs related services (for
                                    example, a caesarian section and a tubal
                                    ligation) to be performed at the same time
                                    and there is no network provider able to do
                                    this and another provider determines that
                                    receiving the services separately would
                                    subject the member to unnecessary risk.
                           iv.      Other reasons, including but not limited to,
                                    poor quality of care, lack of access to
                                    services covered under the contract, or lack
                                    of access to providers experienced in
                                    dealing with the member's health care needs.
                  2.       This request shall be submitted in writing to HSD for
                           review. HSD shall complete the review and furnish a
                           written decision to the member and the CONTRACTOR.
                           The effective date of an approved disenrollment must
                           be no later than the first day of the second month
                           following the month in which the member files the
                           request. If HSD fails to make the determination
                           within this timeframe, the disenrollment is
                           considered approved. A member who is denied
                           disenrollment shall have access to the State fair
                           hearing process.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.2.(7).D. IS ADDED TO READ AS FOLLOWS:



                                       22
<PAGE>

2.2.(7).D         Retroactive Reenrollment
                  A member who is no longer enrolled with the CONTRACTOR,
                  whether in error or otherwise, shall not be retroactively
                  reenrolled by the CONTRACTOR unless HSD submits its request
                  for re-enrollment to the CONTRACTOR within 30 days of the date
                  the CONTRACTOR received enrollment data from HSD indicating
                  that the member was no longer enrolled with the CONTRACTOR or
                  eligible for Medicaid Managed Care provided however that
                  nothing in this section shall restrict the appropriate
                  enrollment of newborns in accordance with the provision of
                  2.2.(5).A. The CONTRACTOR may not be obligated to accept
                  retroactive reenrollment.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.3, IS AMENDED TO READ AS FOLLOWS:

2.3      The CONTRACTOR shall establish and maintain a comprehensive network of
         providers capable of serving all members who enroll in the MCO.
         Pursuant to Section 1932(b)(7) of the Social Security Act, the
         CONTRACTOR shall not discriminate against providers that serve
         high-risk populations or specialize in conditions that require costly
         treatment, and with respect to participation, reimbursement, or
         indemnification for any provider acting within the scope of that
         provider's license or certification under applicable state law solely
         on the basis of the provider's license or certification. In addition,
         the CONTRACTOR shall not discriminate against providers with respect to
         participation, reimbursement, or indemnification for any provider
         acting within the scope of that provider's license or certification
         under applicable state law solely on the basis of the provider's
         license or certification. If the 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. The
         CONTRACTOR shall not be required to contract with providers beyond the
         number necessary to meet the needs of its members. The CONTRACTOR shall
         be allowed to use different reimbursement amounts for different
         specialties or for different practitioners in the same specialty. The
         CONTRACTOR shall be allowed to establish measures that are designed to
         maintain quality of services and control of costs and are consistent
         with its responsibility to members.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.3(1).C IS ADDED TO READ AS FOLLOWS:

2.3.(1).C.        The CONTRACTOR, in establishing and maintaining the network of
                  appropriate providers, shall consider its:

                  i.       Anticipated Medicaid enrollment;

                  ii.      Expected utilization of services, taking into
                           consideration the characteristics and health care
                           needs of specific Medicaid populations represented in
                           the CONTRACTOR'S population;



                                       23
<PAGE>

                  iii.     Numbers and types (in terms of training, experience,
                           and specialization) of providers required to furnish
                           the contracted Medicaid services;

                  iv.      Numbers of network providers who are not accepting
                           new Medicaid patients; and

                  v.       Geographic location of providers and Medicaid
                           members, considering distance, travel time, the means
                           of transportation ordinarily used by Medicaid member,
                           and whether the location provides physical access for
                           Medicaid members with disabilities.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.3.(1).D. IS ADDED TO READ AS FOLLOWS:

2.3.(1).D         The CONTRACTOR shall ensure that the network providers offer
                  hours of operation that are no less than the hours of
                  operation offered to commercial enrollees or comparable to
                  Medicaid fee-for-service, if the provider serves only Medicaid
                  enrollees.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.3.(11).A. IS AMENDED TO READ AS FOLLOWS:

2.3.(11).A.       The CONTRACTOR shall contract with public health providers for
                  services as described in Section MAD 8.305.6.15 and those
                  defined as public health services under State law, NMSA 1978
                  ss.ss. 24-1-1, et. seq.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.3.(16).B IS AMENDED TO READ AS FOLLOWS:

2.3.(16).B.       The CONTRACTOR shall give each member, including adolescents,
                  the opportunity to use his or her own primary care provider or
                  go to any family planning center for family planning services
                  without requiring a referral. Each female member shall also
                  have the right to self-refer to a women's health specialist
                  within the network for covered care necessary to provide
                  women's routine and preventive health care services. This is
                  in addition to the member's designated source of primary care
                  if that source is not a women's health specialist. Clinics and
                  providers, including those funded by Title X of the Public
                  Health Service Act, shall be reimbursed by the CONTRACTOR for
                  all family planning services regardless of whether they are a
                  participating or non-participating provider. Unless otherwise
                  negotiated, the CONTRACTOR shall reimburse providers of family
                  planning services at the Medicaid rate.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.3.(17).A.III. IS AMENDED TO READ AS FOLLOWS:

2.3.(17).A.iii.   Build a statewide behavioral health provider network that
                  ensures access to all levels of behavioral health services,
                  across a continuum from the most to the least restrictive
                  setting. The network shall be sufficient to




                                       24
<PAGE>

                  ensure that the standards in MAD Policy 8.305 for access to
                  care providers who want to refer members for behavioral health
                  care and vice versa;

ARTICLE 2 (SCOPE OF WORK), SECTION 2.3.(17).B.II. IS AMENDED TO READ AS FOLLOWS:

2.3.(17).B.ii     The CONTRACTOR shall provide care coordination for members
                  with multiple and complex special physical, mental,
                  neurobiological, emotional and/or behavioral health care needs
                  on an as needed basis, depending upon the clinical profile of
                  the member. The CONTRACTOR shall have written policies and
                  procedures, which govern how members with these multiple and
                  complex needs shall be identified and how these specific care
                  coordination services shall be provided.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.3.(17).C IS AMENDED TO READ AS FOLLOWS:

2.3.(17).C        The CONTRACTOR shall provide care coordination for members
                  with multiple and complex special physical, mental,
                  neurobiological, emotional and/or behavioral health care needs
                  on an as needed basis, depending upon the clinical profile of
                  the member. The CONTRACTOR shall have written policies and
                  procedures, which govern how members with these multiple and
                  complex needs shall be identified and how these specific care
                  coordination services shall be provided.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.3.(20). IS AMENDED TO READ AS FOLLOWS:

2.3.(20)          Recredentialing

                  The CONTRACTOR shall formally recredential its network
                  providers at least every three years.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.4.(1). IS AMENDED TO READ AS FOLLOWS:

2.4.(1).          Inpatient Hospital Services

                  The benefit package includes hospital inpatient acute care,
                  procedures, and services asset forth in MAD Program Manual
                  section MAD-721, HOSPITAL SERVICES. The CONTRACTOR shall
                  comply with the maternity length of stay in the Health
                  Insurance Portability and Accounting Act of 1996. Coverage for
                  a hospital stay following a normal vaginal delivery may
                  generally not be limited to less than 48 hours for both the
                  mother and newborn child. Health coverage for a hospital stay
                  in connection with childbirth following a cesarean section may
                  generally not be limited to less than 96 hours for both mother
                  and newborn child.

ARTICLE 2, (SCOPE OF WORK), SECTION 2.4.(5).A. IS AMENDED TO READ AS FOLLOWS:



                                       25
<PAGE>

2.4.(5).A.        The benefit package includes emergency and poststabilization
                  care services. Emergency services are covered inpatient and
                  outpatient services that are furnished by a provider that is
                  qualified to furnish these services and are needed to evaluate
                  or stabilize an emergency condition. An emergency condition
                  shall meet the definition of emergency as per NMAC
                  8.305.1.7.V. Emergency services shall be provided in
                  accordance with NMAC 8.305.7.11F. Poststabilization care
                  services are covered services related to an emergency
                  condition that are provided after a patient is stabilized in
                  order to maintain the stabilized condition or to improve or
                  resolve the patient's condition, such that within reasonable
                  medical probability, no material deterioration of the
                  patient's condition is likely to result from or occur during
                  discharge of the patient or transfer of the patient to another
                  facility.

ARTICLE 2, (SCOPE OF WORK), SECTION 2.4.(5).B.III. IS AMENDED TO READ AS
FOLLOWS:

2.4.(5).B.iii.    The CONTRACTOR is required to pay for all emergency and
                  poststabilization care services that are medically necessary
                  until the emergency condition is stabilized and maintained.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.4.(23). IS AMENDED TO READ AS FOLLOWS:

2.4.(23).         Reproductive Health Services
                  The benefit package includes reproductive health services as
                  set forth in MAD Program Policy, Section 762, REPRODUCTIVE
                  HEALTH SERVICES. The CONTRACTOR shall provide Medicaid members
                  with sufficient information to allow them to make informed
                  choices including: the types of family planning services
                  available; the member's right to access these services in a
                  timely and confidential manner; and the freedom to choose a
                  qualified family planning provider who participates in the
                  CONTRACTOR network or from a provider who does not participate
                  in the CONTRACTOR network. A female member shall have the
                  right to self-refer to a women's health specialist within the
                  network for covered care necessary to provide women's routine
                  and preventive health care services. This is in addition to
                  the member's designated source of primary care if that source
                  is not a women's health specialist.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.4.(28) IS AMENDED TO READ AS FOLLOWS:

2.4.(28).A.       The benefit package includes prevention, screening,
                  diagnostics, ameliorative services, and other medically
                  necessary behavioral health care and substance abuse treatment
                  or services for Medicaid members under twenty-one (21) years
                  of age whose need for behavioral health services is identified
                  during an Early and Periodic Screening, Diagnostic, and
                  Treatment (EPSDT) screen.



                                       26
<PAGE>

ARTICLE 2 (SCOPE OF WORK), SECTION 2.4.(31).A. IS AMENDED TO ADD AS FOLLOWS:

2.4.(31).A.       The CONTRACTOR shall implement written policies and
                  procedures with respect to advance directives. The CONTRACTOR
                  shall provide adult members with written information on
                  advance directives policies to include a description of
                  applicable state law. The information must reflect changes in
                  State law as soon as possible, but no later than 90 days after
                  effective date of the change.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.5.(1). IS AMENDED TO READ AS FOLLOWS:

2.5.(1).          The CONTRACTOR shall develop and implement a Cultural
                  Competency/Sensitivity Plan, through which the CONTRACTOR
                  shall ensure that it provides, both directly and through its
                  health care providers and subcontractors, culturally competent
                  services to its SALUD! members. The CONTRACTOR shall
                  participate with the State's efforts to promote the delivery
                  of services in a culturally competent manner to all members,
                  including those with limited English proficiency and diverse
                  cultural ethnic backgrounds.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.5.(2).B.I IS AMENDED TO READ AS FOLLOWS:

2.5.(2).B.i       Incorporate cultural competence into utilization management,
                  quality improvement and planning for the course of treatment.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.6 IS AMENDED IN ITS ENTIRETY TO READ AS
FOLLOWS:

2.6.              INDIVIDUALS WITH SPECIAL HEALTH CARE NEEDS

2.6.(1)           General Requirements

                  Individuals with special health care needs have ongoing health
                  conditions, high or complex service utilization, and low to
                  severe functional limitations. The primary purpose of the
                  definition is to identify these individuals so that the
                  CONTRACTOR can facilitate access to appropriate services. The
                  definition also allows for a flexible targeting of individuals
                  based on clinical justification and discontinuing targeted
                  efforts when such efforts are no longer needed.

2.6.(1).A.        CONTRACTOR Requirements:

                  i.       The CONTRACTOR shall produce a special handbook or
                           create an insert to include in its member services
                           handbook a description of



                                       27
<PAGE>

                           providers and programs available to individuals with
                           special health care needs.
                  ii.      The CONTRACTOR shall identify from among its members
                           individuals with special health care needs, using the
                           criteria for identification and information provided
                           by the state to the MCO.

2.6.(1).B.        The CONTRACTOR shall work with HSD to develop and implement
                  written policies and procedures which govern how members with
                  multiple and complex physical and behavioral health care needs
                  shall be identified. The CONTRACTOR shall have an internal
                  operational process, in accordance with policy and procedure,
                  to target members for the purpose of applying stratification
                  criteria to identify individuals with special health care
                  needs.

2.6.(1).C.        SALUD! Enrollment for Individuals with Special Health Care
                  Needs

                  The CONTRACTOR shall have written policies and procedures to
                  facilitate a smooth transition of a member to another
                  CONTRACTOR, when a member chooses and is approved to switch to
                  another CONTRACTOR.

2.6.(2)           Information and Education for Individuals with Special Health
                  Care Needs

2.6.(2)A.         The CONTRACTOR shall develop and distribute, as appropriate,
                  information and materials specific to the needs of individuals
                  with special health care needs, and, in the case of children
                  with special health care needs, their caregivers. This
                  includes information, such as a list of items and services
                  that are in the SALUD! benefit package and those that are
                  carved out, how to plan for and arrange transportation, how to
                  access behavioral health care without going through the PCP,
                  how to present for care in an emergency room unfamiliar with
                  the individual's special health care needs, and the
                  availability of a care coordinator. This information could be
                  included in a special member handbook on individuals with
                  special needs or in an insert to the member handbook.

2.6.(2).B.        The CONTRACTOR shall make available health education programs
                  to assist individuals with special health care needs, and, in
                  the case of children with special health care needs, the
                  caregiver(s), in understanding how to cope with the day-to-day
                  stress of living with the limitation or providing care.

2.6.(2).C.        The CONTRACTOR shall provide a list of key CONTRACTOR resource
                  people and their phone numbers.

2.6.(2).D.        The CONTRACTOR shall designate a single entity that can be
                  called for information during the enrollment process and after
                  becoming a member.



                                       28
<PAGE>

2.6.(3).          Choice of Specialist as Primary Care Provider (PCP) for
                  Individuals with Special Health Care Needs

                  The CONTRACTOR shall develop and implement written policies
                  and procedures governing the process for member selection of a
                  PCP, including the right to choose a specialist as a PCP, if
                  warranted and agreed upon by the specialist provider.

2.6.(4).          Specialty Providers for Individuals with Special Health Care
                  Needs

                  The CONTRACTOR shall have policies and procedures in place to
                  allow direct access to necessary specialty care, consistent
                  with SALUD! access appointment standards for clinical urgency.

2.6.(5).          Transportation for Individuals with Special Health Care Needs

2.6.(5).A.        The CONTRACTOR shall have written policies and procedures in
                  place to ensure that the appropriate level of transportation
                  is arranged based on the individual's clinical condition.

2.6.(5).B.        The CONTRACTOR shall have past member and service data
                  available at the time services are requested to expedite
                  appropriate arrangements.

2.6.(5).C.        The CONTRACTOR shall ensure that CPR-certified drivers
                  transport individuals with special health care needs whose
                  clinical need dictates.

2.6.(5).D         The CONTRACTOR shall have written policies and procedures to
                  ensure that transportation mode is clinically appropriate,
                  including access to non-emergency ground ambulance carriers.

2.6.(5).E.        The CONTRACTOR shall develop and implement written policies
                  and procedures to ensure that individuals can access and
                  receive authorization for needed transportation services under
                  certain unusual circumstances without the usual advance
                  notification.

2.6.(5).F.        The CONTRACTOR shall develop and implement a written policy
                  regarding the transportation of minors if a parent or legal
                  guardian shall not be in attendance to ensure the minor's
                  safety.

2.6.(5).G.        The CONTRACTOR shall distribute clear and detailed written
                  information to individuals with special health care needs and,
                  if needed, their caregivers on how to obtain transportation
                  services and also make this information available to network
                  providers.

2.6.(6).          Care Coordination for Individuals with Special Needs



                                       29
<PAGE>

2.6.(6).A.        The CONTRACTOR shall have an internal operational process, in
                  accordance with policy and procedure, to target Medicaid
                  members for purposes of applying stratification criteria to
                  identify those who are potential Individuals with Special
                  Health Care Needs. The CONTRACTOR will provide HSD with the
                  applicable policy and procedure describing the targeting and
                  stratification process.

2.6.(6).B.        The CONTRACTOR shall have written policies and procedures for
                  accessing the need for care coordination.

2.6.(6).C.        The CONTRACTOR shall have written policies and procedures for
                  educating individuals with special health care needs and, in
                  the case of children with special health care needs,
                  parent(s), legal guardians, that care coordination is
                  available and when it may be appropriate to their needs.

2.6.(6).D.        The CONTRACTOR shall have written policies and procedures for
                  educating providers about the availability of care
                  coordination, its value as a resource in caring for
                  individuals with special health care needs, and how to access
                  it.

2.6.(7).          Emergency, Inpatient and Outpatient Ambulatory Surgery
                  Hospital Requirements for Individuals with Special Health Care
                  Needs

2.6.(7).A.        The CONTRACTOR shall develop and implement written policies
                  and procedures for educating individuals with special care
                  needs, and with complicated clinical histories, and their
                  caregivers, on how to utilize emergency room care, including
                  what clinical history to present when emergency care or
                  inpatient admission are needed.

2.6.(7).B         The CONTRACTOR shall develop and implement written policies
                  and procedures governing how coordination with the PCP and
                  hospitalists shall occur when an individual with a special
                  health care need is hospitalized.

2.6.(7).C         The CONTRACTOR shall develop and implement written policies
                  and procedures to ensure that the ER physician has access to
                  the individual's medical history.

2.6.(7).D.        The CONTRACTOR shall develop and implement written policies
                  and procedures for obtaining any necessary referrals from PCPs
                  for hospitals that require in-house staff to examine or treat
                  individuals having outpatient or ambulatory surgical
                  procedures performed.

2.6.(8)           Rehabilitation Therapy Services (Physical, Occupational,
                  Speech Therapy) for Individuals with Special Health Care Needs



                                       30
<PAGE>

2.6.(8).A.        The CONTRACTOR shall develop and implement therapy clinical
                  practice guidelines specific to the chronic or long term
                  conditions of their individuals with special health care needs
                  population, based on Medicaid managed care policy on medical
                  necessity.

2.6.(8).B.        The CONTRACTOR shall be informed about and coordinate with
                  other therapy services being delivered by: Special
                  Rehabilitation Services, the Home and Community Based Waiver
                  programs or by the schools to avoid unnecessary duplication.

2.6.(8).C.        The CONTRACTOR shall involve families of members, physicians
                  and therapy providers to identify issues that should be
                  addressed in developing the new criteria.

2.6.(8).D.        The CONTRACTOR shall develop and implement utilization prior
                  approval and continued stay criteria, including timeframes,
                  that are appropriate to the chronicity of the member 's status
                  and anticipated development process.

2.6.(9).          Durable Medical Equipment (DME) and Supplies for Individuals
                  with Special Health Care Needs

2.6.(9).A.        Subject to any requirements to procure a physician's order to
                  provide supplies to members, the CONTRACTOR shall develop and
                  implement a process to permit members utilizing supplies on an
                  ongoing basis to submit a list of supplies monthly. The
                  CONTRACTOR shall contact the member or the member's legal
                  guardian when requested supplies cannot be delivered (require
                  back-ordering, etc.) and make other arrangements, consistent
                  with clinical need.

2.6.(9).B.        The CONTRACTOR shall develop and implement a system for
                  monitoring compliance with standards for DME and medical
                  supplies, and instituting corrective action, if the provider
                  is out of compliance.

2.6.(9).C.        The CONTRACTOR shall have an emergency response plan for DME
                  and medical supplies needed on an emergent basis.

2.6.(10).         Clinical Practice Guidelines for Provision of Care to
                  Individuals with Special Health Care Needs

                  The CONTRACTOR shall develop clinical practice guidelines,
                  practice parameters and/or other specific criteria that
                  consider the needs of individuals with special health care
                  needs and provide guidance in the provision of acute and
                  chronic medical and behavioral health care




                                       31
<PAGE>

                  services to this population. The guidelines should be
                  professionally accepted standards of practice and national
                  guidelines.

2.6.(11).         Utilization Management (UM) for Services to Individuals with
                  Special Health Care Needs

                  The CONTRACTOR shall develop written policies and procedures
                  to exclude from prior authorization any item or service in the
                  course of treatment, and/or extend the authorization
                  periodicity, for services provided for a chronic condition.
                  There should be a process for review and periodic update of
                  the course of treatment, as indicated.

2.6.(12).         Consumer Surveys Specific to Individuals with Special Health
                  Care Needs

                  The CONTRACTOR shall add questions about individuals with
                  special health care needs to the most current HEDIS CAHPS
                  survey.

2.6.(13).         Individuals with Special Health Care Needs Performance
                  Improvement Project

                  The CONTRACTOR shall perform a performance improvement project
                  specific to individuals with special health care needs.

ARTICLE 2 (SCOPE OF WORK), SECTION 2.9 IS AMENDED IN ITS ENTIRETY TO READ AS
FOLLOWS:

2.9      GRIEVANCE SYSTEM

         The CONTRACTOR shall have a grievance system in place for members that
         includes a grievance process related to dissatisfaction, and an appeals
         process related to a CONTRACTOR action, including the opportunity to
         request an HSD fair hearing.

         A grievance is a member's expression of dissatisfaction about any
         matter or aspect of the CONTRACTOR or its operation other than a
         CONTRACTOR action.

         An appeal is a request for review by the CONTRACTOR of a CONTRACTOR
         action. An action is the denial or limited authorization of a requested
         service, including the type or level of service; the reduction,
         suspension, or termination of a previously authorized service; the
         denial, in whole or in part, of payment for a service; or the failure
         to provide services in a timely manner. An untimely service
         authorization constitutes a denial and is thus considered an action.



                                       32
<PAGE>

         The member, legal guardian of the member for minors or incapacitated
         adults, or a representative of the member as designated in writing to
         the CONTRACTOR, has the right to file a grievance or an appeal of a
         CONTRACTOR action on behalf of the member. A provider acting on behalf
         of the member and with the member's written consent, may file a
         grievance and/or an appeal of a CONTRACTOR action.

         General Requirements for Grievance & Appeals
         1.       The CONTRACTOR shall implement written policies and procedures
                  describing how the member may register a grievance or an
                  appeal with the CONTRACTOR and how the CONTRACTOR resolves the
                  grievance or appeal.

         2.       The CONTRACTOR shall provide a copy of its policies and
                  procedures for resolution of a grievance and/or an appeal to
                  all service providers in the CONTRACTOR'S network.

         3.       The CONTRACTOR shall have available reasonable assistance in
                  completing forms and taking other procedural steps. This
                  includes, but is not limited to, providing interpreter
                  services and toll-free numbers that have adequate TTY/TTD and
                  interpreter capability.

         4.       The CONTRACTOR shall name a specific individual(s) designated
                  as the CONTRACTOR'S Medicaid member grievance coordinator with
                  the authority to administer the policies and procedures for
                  resolution of a grievance and/or an appeal, to review
                  patterns/trends in grievances and/or appeals, and to initiate
                  corrective action.

         5.       The CONTRACTOR shall ensure that the individuals who make
                  decisions on grievances and/or appeals are not involved in any
                  previous level of review or decision-making. The CONTRACTOR
                  shall also ensure that health care professionals with
                  appropriate clinical expertise will make decisions for the
                  following:
                  a)   An appeal of a CONTRACTOR denial that is based on lack of
                       medical necessity;
                  b)   A CONTRACTOR denial that is upheld in an expedited
                       resolution;
                  c)   A grievance or appeal that involves clinical issues.

         6.       Upon enrollment, the CONTRACTOR shall provide members, at no
                  cost, with a member information sheet or handbook that
                  provides information on how they and/or their
                  representative(s) can file a grievance and/or an appeal, and
                  the resolution process. The member information shall also
                  advise members of their right to file a request for an
                  administrative hearing with the HSD Hearings Bureau, upon
                  notification of a CONTRACTOR action, or concurrent with or
                  following an appeal of the CONTRACTOR




                                       33
<PAGE>

                  action. The information shall meet the standards for
                  communication specified in MAD policy 8.305.8.15.(13).

         7.       The CONTRACTOR must ensure that punitive or retaliatory action
                  is not taken against a member or a provider that files a
                  grievance and/or an appeal, or a provider that supports a
                  member's grievance and/or appeal.

         GRIEVANCE
         A grievance is a member's expression of dissatisfaction about any
         matter or aspect of the CONTRACTOR or its operation other than a
         CONTRACTOR action.

         1.       A member may file a grievance either orally or in writing with
                  the CONTRACTOR within 90 calendar days of the date the
                  dissatisfaction occurred. The legal guardian of the member for
                  minors or incapacitated adults, a representative of the member
                  as designated in writing to the CONTRACTOR, or a provider
                  acting on behalf of the member and with the member's written
                  consent, has the right to file a grievance on behalf of the
                  member.

         2.       Within five (5) working days of receipt of the grievance, the
                  CONTRACTOR shall provide the grievant with written notice that
                  the grievance has been received and the expected date of its
                  resolution.

         3.       The investigation and final CONTRACTOR resolution process for
                  grievances shall be completed within thirty (30) calendar days
                  of the date the grievance is received by the CONTRACTOR and
                  shall include a resolution letter to the grievant.

         4.       The CONTRACTOR may request an extension from HSD of up to
                  fourteen (14) calendar days if the member requests the
                  extension, or the CONTRACTOR demonstrates to HSD that there is
                  need for additional information, and the extension is in the
                  member's interest. For any extension, not requested by the
                  member, the CONTRACTOR shall give the member written notice of
                  the reason for the extension within two (2) working days of
                  the decision to extend the timeframe.

         5.       Upon resolution of the grievance the CONTRACTOR shall mail a
                  resolution letter to the member. The resolution letter must
                  include but not be limited to the following:

                  (a)      all information considered in investigating the
                           grievance;
                  (b)      findings and conclusions based on the investigation;
                           and
                  (c)      the disposition of the grievance.

         APPEALS




                                       34
<PAGE>

         An appeal is a request for review by the CONTRACTOR of a CONTRACTOR
         action.

         1.       A member may file an appeal of a CONTRACTOR action within 90
                  calendar days of receiving the CONTRACTOR'S notice of action.
                  The legal guardian of the member for minors or incapacitated
                  adults, a representative of the member as designated in
                  writing to the CONTRACTOR, or a provider acting on behalf of
                  the member with the member's written consent, has the right to
                  file an appeal of an action on behalf of the member.

                  An "action" is defined as:

                  (a)      the denial or limited authorization of a requested
                           service, including the type or level of service;
                  (b)      the reduction, suspension, or termination of a
                           previously authorized service;
                  (c)      the denial, in whole or in part, of payment for a
                           service;
                  (d)      the failure of the CONTRACTOR to provide services in
                           a timely manner, as defined by HSD; or
                  (e)      the failure of the CONTRACTOR to complete the
                           authorization request in a timely manner as defined
                           in 42 CFR Section 438.408.

         2.       The CONTRACTOR shall have a process in place that assures that
                  an oral inquiry from a member seeking to appeal an action is
                  treated as an appeal (to establish the earliest possible
                  filing date for the appeal). An oral appeal must be followed
                  by a written appeal that is signed by the member.

         3.       Within five (5) working days of receipt of the appeal, the
                  CONTRACTOR shall provide the grievant with written notice that
                  the appeal has been received and the expected date of its
                  resolution. The CONTRACTOR shall confirm in writing receipt of
                  oral appeals, unless the member or the provider requests an
                  expedited resolution.

         4.       The CONTRACTOR has thirty (30) calendar days from the date the
                  oral or written appeal is received by the CONTRACTOR to
                  resolve the appeal.

         5.       The CONTRACTOR may extend the thirty (30) day timeframe by 14
                  calendar days if the member requests the extension, or the
                  CONTRACTOR demonstrates to HSD that there is need for
                  additional information, and the extension is in the member's
                  interest. For any extension not requested by the member, the
                  CONTRACTOR must give the member written notice of the
                  extension and the reason for the extension within two (2)
                  working days of the decision to extend the timeframe.



                                       35
<PAGE>

         6.       The CONTRACTOR shall provide the member and/or the
                  representative a reasonable opportunity to present evidence,
                  and allegations of the fact or law, in person as well as in
                  writing.

         7.       The CONTRACTOR shall provide the member and/or the
                  representative the opportunity, before and during the appeals
                  process, to examine the member's case file, including medical
                  records, and any other documents and records considered during
                  the appeals process. The CONTRACTOR shall include as parties
                  to the appeal, the member and his or her representative, or
                  the legal representative of a deceased member's estate.

         8.       For all appeals, the CONTRACTOR shall provide written notice
                  within the thirty (30) calendar day timeframe of the appeal
                  resolution to the member and the provider, if the provider
                  filed the appeal.

                  a.       The written notice of the appeal resolution must
                           include but not be limited to the following
                           information:
                           (i)      the result(s) of the appeal resolution; and
                           (ii)     the date it was completed.

                  b.       The written notice of the appeal resolution for
                           appeals not resolved wholly in favor of the member
                           must include but not be limited to the following
                           information:
                           (i)      the right to request an HSD fair hearing and
                                    how to do so;
                           (ii)     the right to request receipt of benefits
                                    while the hearing is pending, and how to
                                    make the request; and
                           (iii)    that the member may be held liable for the
                                    cost of those benefits if the hearing
                                    decision upholds the CONTRACTOR'S action.

         9.       The CONTRACTOR may continue benefits while the appeal and/or
                  the HSD fair hearing process is pending.

                  a.       The CONTRACTOR shall continue the member's benefits
                           if all of the following are met:
                           (i)      The member or the provider files a timely
                                    appeal of the CONTRACTOR action (within
                                    10 days of the date the CONTRACTOR mails the
                                    notice of action);
                           (ii)     The appeal involves the termination,
                                    suspension, or reduction of a previously
                                    authorized course of treatment;
                           (iii)    The services were ordered by an authorized
                                    provider;
                           (iv)     The time period covered by the original
                                    authorization has not expired; and
                           (v)      The member requests extension of the
                                    benefits.



                                       36
<PAGE>

                  b.       The CONTRACTOR shall provide benefits until one of
                           the following occurs:
                           (i)      The member withdraws the appeal;
                           (ii)     Ten days have passed since the date the
                                    CONTRACTOR mailed the resolution letter,
                                    providing the resolution of the appeal was
                                    against the member and the member has
                                    taken no further action;
                           (iii)    An HSD Administrative Law Judge issues a
                                    hearing decision adverse to the member;
                           (iv)     The time period or service limits of a
                                    previously authorized service has expired.

                  c.       If the final resolution of the appeal is adverse to
                           the member, that is, the CONTRACTOR'S action is
                           upheld, the CONTRACTOR may recover the cost of the
                           services furnished to the member while the appeal was
                           pending to the extent that services were furnished
                           solely because of the requirements of this section,
                           and in accordance with the policy set forth in 42 CFR
                           Section 431.230(b).

                  d.       If the CONTRACTOR or the HSD Administrative Law Judge
                           reverses a decision to deny, limit, or delay
                           services, and these services were not furnished while
                           the appeal was pending, the CONTRACTOR must authorize
                           or provide the disputed services promptly and as
                           expeditiously as the member's health condition
                           requires.

                  e.       If the CONTRACTOR or the HSD Administrative Law Judge
                           reverses a decision to deny, limit or delay services
                           and the member received the disputed services while
                           the appeal was pending, the CONTRACTOR must pay for
                           these services.

         EXPEDITED RESOLUTION OF APPEALS
         An expedited resolution of an appeal is an expedited review by the
         CONTRACTOR of a CONTRACTOR action.

         1.       The CONTRACTOR shall establish and maintain an expedited
                  review process for appeals when the CONTRACTOR determines that
                  taking the time for a standard resolution could seriously
                  jeopardize the member's life or health or ability to attain,
                  maintain, or regain maximum function. Such a determination is
                  based on:
                  (i)      a request from the member;
                  (ii)     a provider's support of the member's request;
                  (iii)    a provider's request on behalf of the member; and
                  (iv)     the CONTRACTOR'S independent determination.



                                       37
<PAGE>

         2.       The CONTRACTOR shall ensure that the expedited review process
                  is convenient and efficient for the member.

         3.       The CONTRACTOR shall resolve the appeal within three (3)
                  working days of receipt of the request for an expedited
                  appeal.

         4.       The CONTRACTOR may extend the timeframe by up to 14 calendar
                  days if the member requests the extension, or the CONTRACTOR
                  demonstrates to HSD that there is need for additional
                  information, and the extension is in the member's interest.
                  For any extension not requested by the member, the CONTRACTOR
                  shall make reasonable efforts to give the member prompt oral
                  notification and follow-up within two (2) days.

         5.       The CONTRACTOR shall ensure that punitive action is not taken
                  against a member or a provider who requests an expedited
                  resolution or supports a member's expedited appeal.

         6.       The CONTRACTOR shall provide expedited resolution of an appeal
                  in response to an oral or written request from the member or
                  provider on behalf of the member.

         7.       The CONTRACTOR shall inform the member of the limited time
                  available to present evidence and allegations in fact or law.

         8.       If the CONTRACTOR denies a request for an expedited resolution
                  of an appeal, it shall:

                  (i)      transfer the appeal to the thirty (30) day timeframe
                           for standard resolution, in which the 30-day period
                           begins on the date the CONTRACTOR received the
                           request; and
                  (ii)     make reasonable efforts to give the member prompt
                           oral notice of the denial, and follow up with a
                           written notice within two (2) calendar days;
                  (iii)    inform the member in the written notice of the right
                           to file a grievance if the member is dissatisfied
                           with the CONTRACTOR'S decision to deny an expedited
                           resolution.

         9.       The CONTRACTOR shall document in writing all oral requests for
                  expedited resolution and shall maintain the documentation in
                  the case file.

         Special Rule for Certain Expedited Service Authorization Decisions
         In the case of certain expedited service authorization decisions that
         deny or limit services, the CONTRACTOR shall, within 72 hours of
         receipt of the request for service, automatically file an appeal on
         behalf of the member, make a best effort to give the member oral notice
         of the decision of the automatic appeal, and make a best effort to
         resolve the appeal.



                                       38
<PAGE>

         OTHER RELATED CONTRACTOR PROCESSES

         1.       Notice of CONTRACTOR Action (this also applies to Article 2
                  Section 2.1.(1).N. ii., Denials in the current contract and
                  renumbered in this Amendment as Section 2.1.(1).O.ii.)

                  a.       The CONTRACTOR shall mail a notice of action to the
                           member or provider and all those parties affected by
                           the decision within 10 days of the date of an action.
                           The notice must contain but not be limited to the
                           following:

                           (i)      The action the CONTRACTOR has taken or
                                    intends to take;
                           (ii)     The reasons for the action;
                           (iii)    The member's or the provider's right to file
                                    an appeal of the CONTRACTOR action through
                                    the CONTRACTOR;
                           (iv)     The member's right to request an HSD fair
                                    hearing and what the process would be;
                           (v)      The procedures for exercising the rights
                                    specified;
                           (vi)     The circumstances under which expedited
                                    resolution of an appeal is available and how
                                    to request it;
                           (vii)    The member's right to have benefits continue
                                    pending resolution of an appeal, how to
                                    request the benefits be continued, and the
                                    circumstances under which the member may be
                                    required to pay the costs of these services.

         2.       Information About Grievance System to Providers and
                  Subcontractors
                  The CONTRACTOR must provide information specified in 42 CFR
                  Section, 438.10(g)(1) about the grievance system to all
                  providers and subcontractors at the time they enter into a
                  contract.

         3.       Grievance and/or Appeal Files
                  a.       All grievance and/or appeal files shall be maintained
                           in a secure, designated area and be accessible to HSD
                           upon request, for review. Grievance and/or appeal
                           files shall be retained for six (6) years following
                           the final decision by the CONTRACTOR, HSD, an
                           Administrative Law Judge, judicial appeal, or closure
                           of a file, whichever occurs later.

                  b.       The CONTRACTOR will have procedures for assuring that
                           files contain sufficient information to identify the
                           grievance and/or appeal, the date it was received,
                           the nature of the grievance and/or appeal, notice to
                           the member of receipt of the grievance and/or appeal,
                           all correspondence between the CONTRACTOR and the
                           member, the date the grievance and/or appeal is
                           resolved, the resolution, and notices of final
                           decision to the member and all other pertinent
                           information.



                                       39
<PAGE>

                  c.       Documentation regarding the grievance shall be made
                           available to the member, if requested.

         4.       Reporting
                  a.       The CONTRACTOR shall provide information requested or
                           required by the Centers for Medicare and Medicaid
                           Services.

                  b.       The CONTRACTOR shall provide a quarterly report to
                           HSD of all grievances received from or about Medicaid
                           members, by the CONTRACTOR or its subcontractors in
                           compliance with the timelines and procedures set
                           forth in Section 2.12.(2).

SECTION 2 (SCOPE OF WORK), SECTION 2.10.(2). IS AMENDED TO READ AS FOLLOWS:

2.10.(2).         The CONTRACTOR shall have and maintain adequate protections
                  against financial loss due to outlier (catastrophic) cases and
                  member utilization that is greater than expected. The
                  CONTRACTOR shall submit to HSD such documentation as is
                  necessary to prove the existence of this protection, which may
                  include policies and procedures of reinsurance. Information
                  provided to HSD on the CONTRACTOR's reinsurance must be
                  computed on an actuarially sound basis.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.10.(6).B. IS AMENDED TO READ AS FOLLOWS:

2.10.(6).B.       Per Member Cash Reserve
                  The CONTRACTOR shall maintain three (3) percent of the monthly
                  capitated payments per member with an independent trustee
                  during each month of the first year of the Agreement;
                  provided, however, that if this Agreement replaces or extends
                  a previous agreement with HSD to provide Medicaid managed
                  care, then continued maintenance of the per member cash
                  reserve established and maintained by CONTRACTOR pursuant to
                  such previous agreement shall be deemed to satisfy this
                  requirement. The CONTRACTOR shall maintain this cash reserve
                  for the duration of the Agreement. HSD shall adjust this cash
                  reserve requirement annually, or as needed, based on the
                  number of the CONTRACTOR'S members. Each CONTRACTOR shall
                  maintain its own cash reserve account. This account may be
                  accessed solely for payment for services to that CONTRACTOR'S
                  members in the event that the CONTRACTOR becomes insolvent.
                  Money in the reserve account remains the property of the
                  CONTRACTOR and any interest earned (even if retained in the
                  account) shall be the property of the CONTRACTOR.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.10.(8).A. IS AMENDED TO READ AS FOLLOWS:

2.10.(8).         Timely Payments



                                       40
<PAGE>

                  A.       The CONTRACTOR shall make timely payments to both its
                           contracted and non-contracted providers.
                           i.       The CONTRACTOR shall promptly pay for all
                                    covered emergency services, including
                                    medically necessary testing to determine if
                                    a medical emergency exists, that are
                                    furnished by providers that do not have
                                    arrangements with the CONTRACTOR. This
                                    includes all covered emergency services
                                    provided by a nonparticipating provider,
                                    including those when the time required to
                                    reach the CONTRACTOR'S facilities or the
                                    facilities of a provider with which the
                                    CONTRACTOR has contracted, would mean risk
                                    of permanent damage to the member's health.
                           ii.      The CONTRACTOR shall pay 90 percent of all
                                    clean claims from practitioners who are in
                                    individual or group practice or who practice
                                    in shared health facilities within 30 days
                                    of date of receipt, and shall pay 99 percent
                                    of all such clean claims within 90 days of
                                    receipt. A "clean claim" means a manually or
                                    electronically submitted claim from a
                                    participating provider that: contains
                                    substantially all the required data elements
                                    necessary for accurate adjudication without
                                    the need for additional information from
                                    outside of the health plan's system. It does
                                    not include a claim from a provider who is
                                    under investigation for fraud or abuse, or a
                                    claim under review for medical necessity, or
                                    one that is not materially deficient or
                                    improper, including lacking substantiating
                                    documentation currently required by the
                                    health plan; or one that has no particular
                                    or unusual circumstances requiring special
                                    treatment that prevent payment from being
                                    made by the health plan within thirty days
                                    of the date of receipt if submitted
                                    electronically or forty-five days if
                                    submitted manually.
                           iii.     Consistent with the requirements of MAD Reg.
                                    8.305.11.9.B(1), which applies to clean
                                    claims submitted electronically, and NMSA
                                    Section59A-2-9.2, the CONTRACTOR shall pay
                                    interest at the rate of one and one-half
                                    percent a month on:
                                    (1)      the amount of a clean claim
                                             electronically submitted by a
                                             contracted provider and not paid
                                             within thirty days of the date of
                                             receipt; and
                                    (2)      the amount of a clean claim
                                             manually submitted by a contracted
                                             provider and not paid within
                                             forty-five days of the date of
                                             receipt.
                                    (3)      Interest payments shall accrue and
                                             begin on the 31st day for
                                             electronic submissions and the 46th
                                             day for hard copy.



                                       41
<PAGE>

ARTICLE 2 (FIDUCIARY RESPONSIBILITIES), SECTION 2.10.(11) IS ADDED TO READ AS
FOLLOWS:

2.10.(11)         Special Contract Provisions As required by 42 CFR 438.6 (c
                  )(5): Pursuant to 42 CFR Section 438.6(c)(5), contract
                  provisions for reinsurance, stop-loss limits or other risk
                  sharing methodologies must be computed on an actuarially sound
                  basis.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.12.(4).A., B. AND C IS AMENDED TO READ AS
FOLLOWS:

2.12.(4).A.       The CONTRACTOR is required to submit data to HSD. Subject to
                  the provisions of Section 4.2 of this Agreement, HSD shall
                  define the format and data elements after having consulted
                  with the CONTRACTOR on the definition of these elements.

2.12.(4).B.       The CONTRACTOR is responsible for identifying and reporting to
                  HSD immediately upon discovery any inconsistencies in its
                  automated reporting, CONTRACTOR shall make necessary
                  adjustments to its reports at its own expense.

2.12.(4).C.       HSD, in conjunction with its fiscal agent, intends to
                  implement electronic data interchange standards for
                  transactions related to managed health care. Subject to the
                  provisions of Section 4.2 of this Agreement, the CONTRACTOR
                  shall work with HSD to develop the technical components of
                  such an interface.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.12.(5).B. IS AMENDED TO READ AS FOLLOWS:

2.12.(5).B.       Encounter Submission Time Frames
                  The CONTRACTOR shall submit encounters to HSD within 120 days
                  of the date of service or discharge, regardless of whether the
                  encounter is from a subcontractor or subcapitated arrangement.
                  Encounters that do not clear edit checks shall be returned to
                  the CONTRACTOR for correction and re-submission. The
                  CONTRACTOR shall correct and resubmit the encounter data to
                  HSD.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.12.(5).C IS AMENDED TO READ AS FOLLOWS:

2.12.(5).C.       Encounter Data Elements
                  Encounter data elements are based on the Medicaid-Medicare
                  Common Data Initiative (McData Set) which is a minimum core
                  data set for states and MCOs developed by CMS and HSD for use
                  in managed care. Subject to the provisions of Section 4.2 of
                  this Agreement, HSD may




                                       42
<PAGE>

                  increase or reduce or make mandatory or optional, data
                  elements as it deems necessary.

ARTICLE 2 (SCOPE OF WORK) SECTION 2.13.(6).A. IS AMENDED TO READ AS FOLLOWS:

2.13.(6).A.       Submitting to HSD encounters, according to the specifications
                  included in the SALUD! Systems Manual, within 120 days of the
                  date of service or discharge, regardless of whether the
                  encounter is from a subcontractor or subcapitated arrangement;

ARTICLE 2 (SCOPE OF WORK) SECTION 2.13.(6).E. IS AMENDED TO READ AS FOLLOWS:

2.13.(6).E.       Including written contractual requirements for subcontractors
                  or providers that pay their own claims to submit encounters to
                  the CONTRACTOR on a timely basis to ensure that the CONTRACTOR
                  can submit encounters to HSD within 120 days of the date of
                  service or discharge;

ARTICLE 2 (SCOPE OF WORK), SECTION 2.14 IS ADDED TO READ:

2.14     CARE COORDINATION

         (1)      General  Requirements

         Care coordination is defined as a service that assists clients with
         special health care needs. Care coordination is provided on an as
         needed basis. Care coordination is member-centered, family-focused
         (when appropriate), culturally competent and strength-based service.
         Care coordination helps to ensure that the medical and behavioral
         health needs of the Salud! population are identified and related
         services are provided and coordinated with the individual member and
         family as appropriate. Care coordination operates within the MCO by
         means of a dedicated care coordination staff functioning independently
         but is structurally linked to the other MCO systems, such as quality
         assurance, member services and grievances. Clinical decisions shall be
         based on the medically necessary covered services and not fiscal
         considerations. If both physical and behavioral health conditions
         exist, the care shall be coordinated between both physical and
         behavioral health staff, and the responsibility for the care
         coordination shall be based upon what is in the best interest of the
         member.

         (2)      Primary Elements of Care Coordination

         The CONTRACTOR shall use the following primary elements for care
         coordination:

                  A.       Identify proactively the eligible populations;
                  B.       Identify proactively the needs of the eligible
                           population;




                                       43
<PAGE>

                  C.       Designate an individual who has primary
                           responsibility for coordinating health services and
                           serves as the single point of contact for the member;
                  D.       Inform the member regarding the care coordinator's
                           name and how to contact him/her;
                  E.       Ensure access to a qualified provider who is
                           responsible for developing and implementing a
                           comprehensive treatment plan or plan of care as per
                           applicable provider regulation.
                  F.       Ensure the provision of necessary services and
                           actively assist members and providers in obtaining
                           such services;
                  G.       Ensure appropriate coordination between physical and
                           behavioral health services and non-Salud! services;
                  H.       Coordinate with designated case managers and/or
                           medical/behavioral health service providers;
                  I.       Monitor progress of the members to ensure that
                           services are received and assist in resolving
                           identified problems;
                  J.       Be responsible for linking individuals to case
                           management when needed if a local case
                           manager/designated provider is not available.

ARTICLE 3 (LIMITATION OF COST) IS AMENDED TO READ AS FOLLOWS:

In no event shall capitation fees or other payments provided for in the
Agreement exceed the payment limits set forth in 42 C.F.R. Section 447.361 and
447.362. In no event shall HSD pay twice for the provision of services.

ARTICLE 4 (HSD RESPONSIBILITY) SECTION 4.1.(18). IS AMENDED TO READ AS FOLLOWS:

4.1.(18).         Amend its fee-for-service and other provider agreements, or
                  take such other action as may be necessary to encourage health
                  care providers paid by HSD to enter into contracts with the
                  CONTRACTOR at the applicable Medicaid reimbursement rate for
                  the provider, absent other negotiated arrangements, and take
                  all available measures to have any Medicaid participating
                  provider who is not contracted with the CONTRACTOR accept the
                  applicable Medicaid reimbursement as payment in full for
                  covered services provided in an emergency to a member who is
                  enrolled with the CONTRACTOR. The applicable Medicaid
                  reimbursement rate is defined to exclude disproportionate
                  share and medical education payments.

ARTICLE 4 (HSD RESPONSIBILITY) SECTION 4.1.(20). IS ADDED TO READ AS FOLLOWS:

4.1.(20).         Ensure that no requirement or specification established or
                  provided by HSD under this section conflicts with requirements
                  or specifications established pursuant to the federal Health
                  Insurance Portability and Accountability Act (HIPAA) and the
                  regulations promulgated thereunder.



                                       44
<PAGE>

                  All requirements and specifications established or provided by
                  HSD under this section shall comply with the requirements of
                  Section 4.2 of this Agreement.

ARTICLE 4 (HSD RESPONSIBILITY) SECTION 4.1.(21). IS ADDED TO READ AS FOLLOWS:

4.1.(21).         Cooperate with CONTRACTOR in CONTRACTOR'S efforts to achieve
                  compliance with HIPAA requirements.

ARTICLE 4 (HSD RESPONSIBILITY) SECTION 4.2. IS AMENDED TO READ AS FOLLOWS:

4.2.(1).          HSD and/or its fiscal agent shall implement electronic data
                  standards for transactions related to managed health care. In
                  the event HSD and/or any of its agents are unable to accept
                  standard transactions on or after October 1, 2003, the
                  CONTRACTOR and HSD shall address any additional costs
                  associated with such an event through an amendment to this
                  contract.

4.2.(2).          In the event that HSD and/or its fiscal agent requests that
                  the CONTRACTOR or its subcontractors deviate from or provide
                  information in addition to the information called for in
                  required and optional fields included in the standard
                  transaction code sets established under HIPAA, such request
                  shall be made by amendment to this Agreement in accordance
                  with the provisions of Article 37.

ARTICLE 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE), SECTION 5.1
IS AMENDED TO READ AS FOLLOWS:

5.1               HSD shall make payments under capitated risk contracts which
                  are actuarially sound. Rates shall be developed in accordance
                  with generally accepted actuarial principles and practices.
                  Rates must be appropriate for the populations to be covered,
                  the services to be furnished under the contract and be
                  certified as meeting the foregoing requirements by actuaries.
                  The actuaries must meet the qualification standards
                  established by the American Academy of Actuaries and follow
                  the practice standards established by the Actuarial Standards
                  Board. To the extent, if any, it is determined by the
                  appropriate taxing authority, that the performance of this
                  Agreement by the CONTRACTOR is subject to taxation, the
                  amounts paid by HSD to the CONTRACTOR under this Agreement,
                  shall include such tax(es). The CONTRACTOR is responsible for
                  reporting and remitting all applicable taxes to the
                  appropriate taxing agency.

ARTICLE 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE) SECTION 5.2.
IS AMENDED TO READ AS FOLLOWS:



                                       45
<PAGE>

5.2      The monthly rates set forth in Attachments A and B shall be subject to
         renegotiation during the Agreement if HSD determines that it is
         necessary due to change in Federal or State law or in the
         appropriations made available for these tasks as set forth in Article
         14, Appropriations, and Article 12, Contract Modification. Rates shall
         in all events be actuarially sound. In addition, in the event that HSD
         implements a significant or material program change under this or any
         other provision of this Agreement, such change including but not
         limited to the rates paid hereunder and the costs associated with the
         change, shall be adjusted appropriately pursuant to a mutually
         agreeable amendment to this Agreement in accordance with the provisions
         of Article 37.

ARTICLE 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE), SECTION
5.3.(1). IS AMENDED TO READ AS FOLLOWS:

5.3.(1).          HSD shall pay a capitated amount to the CONTRACTOR for the
                  provision of the managed care benefit package at the rates
                  specified below. The monthly rate for each member is based on
                  actuarially sound capitation rate cells. Medicaid members
                  shall be held harmless against any liability for debts of a
                  CONTRACTOR that were incurred within the Agreement in
                  providing covered services to the Medicaid member.

ARTICLE 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE), SECTION
5.3.(4). IS ADDED TO READ AS FOLLOWS:

5.3.(4).          42 CFR Section 438.6(c), which regulates participation in the
                  Medicaid program, requires that all payments under risk
                  contracts and all risk-sharing mechanisms in contracts must be
                  actuarially sound and approved as such by the Centers for
                  Medicare and Medicaid Strategies (CMS) prior to
                  implementation. To meet the requirement for actuarial
                  soundness, all capitation rates must be certified by an
                  actuary meeting the qualification standards of the American
                  Academy of Actuaries following generally accepted actuarial
                  principles, as set forth in the standards of practice
                  established by the Actuarial Standards Board. Accordingly, the
                  State's offer of all capitation rates referred to in the
                  attached Schedule of this contract is contingent on both
                  certification by the State's actuary and final approval by
                  CMS, prior to becoming effective for payment purposes. In the
                  event such certification or approval is not obtained for any
                  or all capitation rates subject to this regulation, the State
                  reserves the right to renegotiate these rates. The state's
                  decision to renegotiate the rates under the circumstances
                  described above is binding on the CONTRACTOR.

ARTICLE 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE) SECTION
5.5.(1) IS AMENDED TO READ AS FOLLOWS:



                                       46
<PAGE>

5.5.(1).          The capitation rates shall remain in effect as referenced in
                  Attachments A and B for the first twenty-four (24) months
                  following the effective date of the original Agreement and
                  thereafter the capitation rates shall be effective for twelve
                  (12) months. Capitation rates may be reviewed if this
                  Agreement is extended with the CONTRACTOR pursuant to this
                  Agreement. Upon mutual agreement of the CONTRACTOR and HSD,
                  the capitation rates may be adjusted based on factors such as
                  changes in the scope of work, a Native American MCO is
                  established or a Navajo Medicaid Agency created, CMS requires
                  a modification of the state's waiver or new or amended federal
                  or state laws or regulations are implemented, inflation,
                  significant changes in the demographic characteristics of the
                  member population, or the disproportionate enrollment
                  selection of the CONTRACTOR by members in certain rate
                  cohorts. Any changes to the rates shall be actuarially sound
                  and negotiated and implemented pursuant to Articles 12
                  (Contract Modification) and 37 (Amendments) of this Agreement.

ARTICLE 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE) SECTION
5.6.(4) IS AMENDED TO READ AS FOLLOWS:

5.6.(4).          HSD shall have the discretion to recoup payments for members
                  who are incorrectly enrolled with more than one CONTRACTOR
                  including members categorized as newborns or X5; payments made
                  for members who die prior to the enrollment month for which
                  payment was made; and/or payments for members whom HSD later
                  determines were not eligible for Medicaid during the
                  enrollment month for which payment was made. Notwithstanding
                  the foregoing, in the absence of fraud on the part of
                  CONTRACTOR, HSD shall not have the right to recoup any payment
                  made to the CONTRACTOR if either the CONTRACTOR (and/or its
                  subcontractors) provided any health care services to the
                  member during the relevant period of time or more than
                  twenty-four months have elapsed since the payments were made
                  unless HSD is required by a federal agency to go beyond the
                  twenty-four month period. To allow for claim submission lags,
                  HSD will not request a payment recoupment until 120 days has
                  elapsed from the date of which the enrollment error was made.
                  Any process that automates the recoupment procedures will be
                  mutually agreed upon in advance by HSD and the CONTRACTOR and
                  documented in writing. The CONTRACTOR has the right to dispute
                  any recoupment requests in accordance with Article 15
                  (DISPUTES).

ARTICLE 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE), SECTION
5.6.(8). IS AMENDED TO READ AS FOLLOWS:



                                       47
<PAGE>

5.6.(8).          On a periodic basis, HSD shall provide the CONTRACTOR with
                  coordination of benefits and third party liability information
                  for enrolled members. The CONTRACTOR shall:

ARTICLE 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE), SECTION
5.6.(8).B IS AMENDED TO READ AS FOLLOWS:

5.6.(8).B.        Have the sole right of subrogation, and to recovery of and/or
                  to attempt to recover any third-party resources available to
                  Medicaid members but shall make records pertaining to Third
                  Party Collections (TPL) for members available to HSD for audit
                  and review.

ARTICLE 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE), SECTION
5.8.(3) IS AMENDED TO READ AS FOLLOWS:

5.8.(3).          The CONTRACTOR is required to pay for all emergency and
                  poststabilization care services that are medically necessary
                  until the emergency medical condition is stabilized and
                  maintained such that within reasonable medical probability, no
                  material deterioration of the patient's condition is likely to
                  result from or occur during discharge of the patient or
                  transfer of the patient to another facility.

ARTICLE 5 (COMPENSATION & PAYMENT REIMBURSEMENT FOR MANAGED CARE), SECTION 5.9
IS ADDED TO READ AS FOLLOWS:

5.9.     The CONTRACTOR shall accept the capitation rate paid each month by the
         HSD as payment in full for all services to be provided pursuant to this
         Agreement, including all administrative costs associated therewith. A
         minimum of eighty-five percent (85%) of all the CONTRACTOR'S income
         generated under this Agreement, including but not limited to Third
         Party Recoupments and Interest, shall be expended on the medical and
         related services required under this Agreement to be provided to the
         CONTRACTOR'S Medicaid Members. If the CONTRACTOR does not expend a
         minimum of eighty-five percent (85%) on medical and related services of
         the Agreement, the HSD will withhold an amount so that the CONTRACTOR'S
         ratio for service expenditures are eighty-five percent (85%). The HSD
         will calculate the CONTRACTOR'S income at the end of the State Fiscal
         Year to determine if eighty-five percent (85%) was expended on the
         medical and related services required under the contract utilizing
         reported information and the Department of Insurance Reports.
         Administrative costs and other financial information will be monitored
         on a regular basis by the HSD.

         Members shall be entitled to receive all covered services for the
         entire period for which payment has been made by the HSD. Any and all
         costs incurred by the CONTRACTOR in excess of the capitation payment
         will be borne in full by the CONTRACTOR. Interest generated through
         investment of funds paid to the



                                       48
<PAGE>

         CONTRACTOR pursuant to this Agreement shall be the property of the
         CONTRACTOR.

ARTICLE 8 (ENFORCEMENT) SECTION 8.1.(2).B. IS AMENDED TO READ AS FOLLOWS:

8.1.(2).B.        Directed Plans of Correction.  The CONTRACTOR shall be
                  required to provide to HSD, within fourteen (14) days, a
                  response to the directed plan of correction as directed by
                  HSD.

ARTICLE 8 (ENFORCEMENT), SECTION 8.1.(2).C.III IS AMENDED TO READ AS FOLLOWS:

8.1.(2).C.iii.    The limit on, or specific amount of, civil monetary penalties
                  that HSD may impose upon the CONTRACTOR varies depending upon
                  the nature and severity of the CONTRACTOR'S action or failure
                  to act, as specified below:
                  a.       A maximum of $25,000 for each of the following
                           determinations: failure to provide medically
                           necessary services; misrepresentation or false
                           statements to members, potential members, or health
                           care provider(s); or failure to comply with physician
                           incentive plan requirements and marketing violations.
                  b.       A maximum of $100,000 for each of the following
                           determinations: discrimination; or misrepresentation
                           or false statements to HSD or CMS.
                  c.       A maximum of $15,000 for each member HSD determines
                           was not enrolled, or reenrolled, or enrollment was
                           terminated because of a discriminatory practice. This
                           is subject to an overall limit of $100,000 under (b.)
                           above.
                  d.       A maximum of $25,000 or double the amount of excess
                           charges whichever is greater, for premiums or charges
                           in excess of the amount permitted under the Medicaid
                           program. HSD will deduct from the penalty the amount
                           of overcharge and return it to the affected
                           member(s).

ARTICLE 8. (ENFORCEMENT), SECTION 8.1.(2).L. IS AMENDED TO READ AS FOLLOWS:

8.1.(2).L.        Temporary Management
                  1.       Optional imposition of sanction. HSD may impose
                           temporary management to oversee the operations of the
                           CONTRACTOR upon a finding by the Secretary of HSD
                           that there is continued egregious behavior by the
                           CONTRACTOR, including but not limited to behavior
                           that is described in 42 CFR Section 438.700, or that
                           is contrary to any requirements of 42 USC, Sections
                           42 USC 1396b (m) or 1396u-2; there is substantial
                           risk to members health; or the sanction is necessary
                           to ensure the health of the CONTRACTOR'S members
                           while improvement is made to remedy violations under
                           42



                                       49
<PAGE>

                           CFR Section 438.700; or until there is an orderly
                           termination or reorganization of the CONTRACTOR.

                  2.       The CONTRACTOR does not have the right to a
                           predetermination hearing prior to the appointment of
                           temporary management if the conditions above are not
                           met.

                  3.       Required imposition of sanction. HSD shall impose
                           temporary management (regardless of any other
                           sanction that may be imposed) if it finds that the
                           CONTRACTOR has repeatedly failed to meet substantive
                           requirements in 42 USC, Section 1396b (m) or 1396u-2
                           or 42 CFR 438, Subpart I (Sanctions).

                  4.       Hearing. HSD shall not delay imposition of temporary
                           management to provide a hearing before imposing this
                           sanction.

                  5.       Duration of Sanction. HSD shall not terminate
                           temporary management until it determines that the
                           CONTRACTOR can ensure that the sanctioned behavior
                           will not recur.

ARTICLE 8. (ENFORCEMENT), SECTION 8.1.(2).M. IS AMENDED TO READ AS FOLLOWS:

8.1.(2).M.        Terminate Enrollment
                  HSD shall grant members the right to terminate enrollment
                  without cause as described in 42 CFR Section 438.702 (a) (3),
                  and shall notify the affected members of their right to
                  terminate enrollment.

ARTICLE 8. (ENFORCEMENT), SECTION 8.1.(2).O. IS AMENDED TO READ AS FOLLOWS:

8.1.(2).O.        Intermediate Sanctions

                  1.       Basis for imposition of Sanctions: HSD will impose
                           the foregoing sanctions if HSD determines that the
                           CONTRACTOR acts or fails to act as follows:
                           (a)      fails substantially to provide medically
                                    necessary services and items that the
                                    CONTRACTOR is required to provide, under law
                                    or under its contract with HSD, to a member
                                    covered under the contract;
                           (b)      imposes on members premiums or charges that
                                    are in excess of the premiums or charges
                                    permitted under the Medicaid program;
                           (c)      acts to discriminate among members on the
                                    basis of their health status or need for
                                    health care services. This includes
                                    termination of enrollment or refusal to
                                    reenroll a member, except as permitted by
                                    the Medicaid program, or any practice that
                                    would reasonably be expected to discourage



                                       50
<PAGE>

                                    enrollment by members whose medical
                                    condition or history indicate probable need
                                    for substantial future medical services;
                           (d)      misrepresents or falsifies information that
                                    it furnishes to HSD or CMS;
                           (e)      misrepresents or falsifies information that
                                    it furnishes to a member, potential member,
                                    or health care provider;
                           (f)      fails to comply with Federal requirements
                                    for physician incentive plans, including
                                    disclosures;
                           (g)      has distributed directly, or becomes aware
                                    of material distributed indirectly through
                                    any agent or independent subcontractor,
                                    marketing materials that have not been
                                    approved by HSD or that contain false or
                                    materially misleading information; or
                           (h)      fails to perform in any other contract
                                    areas.

                  2.       HSD's determination of any of the above may be based
                           on findings from onsite reviews; surveys or audits;
                           member or other complaints; financial status; or any
                           other source.

                  3.       HSD retains authority to impose additional sanctions
                           under state statutes or state regulations that
                           address areas of noncompliance specified in 42 CFR
                           Section 438.700, as well as additional areas of
                           noncompliance.

                  4.       Intermediate Sanctions: The Secretary of HSD or
                           designee will impose upon the CONTRACTOR any of the
                           following intermediate sanctions:
                           (a)      civil monetary penalties in the amounts
                                    specified in the 42 CFR, Section 438.704;
                           (b)      appointing temporary management for the
                                    CONTRACTOR or a State Monitor as provided in
                                    42 CFR Section 438.706;
                           (c)      granting members the right to terminate
                                    enrollment without cause (affected members
                                    will be notified by HSD of their right to
                                    disenroll);
                           (d)      suspending all new enrollment, including
                                    default enrollment after the effective date
                                    of sanction;
                           (e)      suspending of payment for members enrolled
                                    after the effective date of the sanction
                                    until HSD or CMS is satisfied that the
                                    reason for imposing the sanction no longer
                                    exists and is not likely to recur.

ARTICLE 8 (ENFORCEMENT) 8.1. (2).Q. IS AMENDED TO READ AS FOLLOWS:

8.1.(2).Q.        The Secretary of HSD or the designee has the authority to
                  terminate the contract and enroll the CONTRACTOR'S members in
                  another MCO or




                                       51
<PAGE>

                  other MCOs, or provide their Medicaid benefits through other
                  options included in the State plan, if HSD determines that the
                  CONTRACTOR has failed to do either of the following:

                  1.       Carry out the substantive terms of its contract; or
                  2.       Meet applicable requirements in Sections 1932,
                           1903(m), and 1905 of the Social Security Act.

ARTICLE 8 (ENFORCEMENT) 8.1.(2).R. IS ADDED TO READ AS FOLLOWS:

8.1.(2).R.        Notice of sanction: Except as provided in this Article
                  regarding Temporary Management, before imposing any of the
                  intermediate sanctions specified, HSD must give the CONTRACTOR
                  timely written notice that explains the basis and nature of
                  the sanction and any other due process protections that HSD
                  elects to provide.

                  a.       Pre-termination hearing: Before terminating the
                           contract, HSD must provide the CONTRACTOR a
                           pre-termination hearing, which consist of the
                           following procedures:
                           1.       HSD shall give the CONTRACTOR written notice
                                    of its intent to terminate, the reason for
                                    the termination, and the time and place of
                                    the hearing.
                           2.       After the hearing, HSD shall give the
                                    CONTRACTOR written notice of the decision
                                    affirming or reversing the proposed
                                    termination of the contract and, for an
                                    affirming decision, the effective date of
                                    termination.
                           3.       For an affirming decision, give members of
                                    the CONTRACTOR notice of the termination and
                                    information, consistent with their options
                                    for receiving Medicaid services following
                                    the effective date of termination.
                           4.       The pre-termination hearing procedures shall
                                    proceed according to Section 15.3 (Dispute
                                    Procedures) of the Agreement.

                  b.    HSD will give the CMS Regional Office written notice
                        whenever it imposes or lifts a sanction for one of the
                        violations listed in Section 8.1.(2).O. of this Article.
                        The notice will be given no later than 30 days after HSD
                        imposes or lifts a sanction; and must specify the
                        affected CONTRACTOR, the kind of sanction, and the
                        reason for HSD's decision to impose or lift the
                        sanction.

ARTICLE 8 (ENFORCEMENT) SECTION 8.3 IS AMENDED TO READ AS FOLLOWS:

8.3.     Notice and Cure
         HSD shall provide reasonable written notice of its decision to impose
         sanctions on the CONTRACTOR and, as HSD may deem necessary and proper,
         subsequently to members and others who may be directly interested. Such
         written notice shall set forth the effective date and the reason(s) for
         the




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<PAGE>

         sanctions. Prior to imposing sanctions, HSD shall afford the CONTRACTOR
         a reasonable opportunity to cure, unless such opportunity would result
         in immediate harm to members, or the improper diversion of Medicaid
         program funds.

ARTICLE 9 (TERMINATION) SECTION 9.1.(17) IS AMENDED TO READ AS FOLLOWS:

9.1.(17).         By the CONTRACTOR, on at least sixty (60) days prior written
                  notice in the event that HSD is unable to make future payments
                  of undisputed capitation payments due to a lack of a state
                  budget or legislative appropriation;

ARTICLE 9 (TERMINATION) SECTION 9.1.(18). IS ADDED TO READ AS FOLLOWS:

9.1.(18).         By either party, upon 90 days written notice, in the event of
                  a material change in the Medicaid managed care program,
                  regardless of the cause of or reason for such change, if the
                  parties after negotiating in good faith are unable to agree on
                  the terms of an amendment to incorporate such change; and

ARTICLE 9 (TERMINATION) SECTION 9.1.(19). IS RENUMBERED TO READ AS FOLLOWS:

9.1.(19).         By the CONTRACTOR on sixty (60) days prior written notice with
                  cause, or one hundred eighty (180) days written notice without
                  cause.

ARTICLE 10 (TERMINATION AGREEMENT), SECTION 10.3 IS ADDED TO READ AS FOLLOWS:

10.3.    Dispute Procedure Involving Contract Termination Proceedings. In the
         event HSD seeks to terminate this Agreement with the CONTRACTOR, the
         CONTRACTOR may appeal the termination directly to the HSD Secretary
         within ten (10) days of receiving HSD's termination notice.

         (1)      The HSD Secretary shall acknowledge receipt of the
                  CONTRACTOR'S appeal request within three (3) calendar days of
                  the date the appeal request is received.
         (2)      The HSD Secretary will conduct a formal hearing on the
                  contract termination issues raised by the CONTRACTOR.
         (3)      The CONTRACTOR and MAD, or its successor, shall be allowed to
                  present evidence in the form of documents and testimony.
         (4)      The parties to the hearing are the CONTRACTOR and MAD, or its
                  successor.
         (5)      The hearing shall be recorded by a court reporter paid for
                  equally by HSD and the CONTRACTOR. Copies of transcripts of
                  the hearing shall be paid by the party requesting the copy.
         (6)      The court reporter shall swear witnesses under oath.




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<PAGE>

         (7)      The HSD Secretary shall determine which party presents its
                  issues first and shall allow both sides to question each
                  other's witnesses in the order determined by the Secretary.
         (8)      The HSD Secretary may, but is not required, to allow opening
                  statements from the parties before taking evidence.
         (9)      The HSD Secretary may, but it not required, to request written
                  findings of fact, conclusions of law and closing argument or
                  any combination thereof. Or, the Secretary may, but is not
                  required, to allow only oral closing argument.
         (10)     The HSD Secretary shall render a written decision and mail the
                  decision to the CONTRACTOR within sixty (60) days of the date
                  the request for a hearing is received.
         (11)     MAD, or its successor, and the CONTRACTOR may be represented
                  by counsel or another representative of choice at the hearing.
                  The legal or other representative shall submit a written
                  request for an appearance with the Secretary within fifteen
                  (15) days of the date of the hearing request.
         (12)     The civil rules of procedure and rules of evidence shall not
                  apply, but the Secretary may limit evidence that is redundant
                  or not relevant to the contract termination issues presented
                  for review.
         (13)     The Secretary's written decision shall be mailed by certified
                  mail, postage prepaid, to the CONTRACTOR. Another copy of the
                  decision shall be sent to the MAD director.

ARTICLE 14 (APPROPRIATIONS) SECTION 14.1 IS AMENDED TO READ AS FOLLOWS:

14.1     The terms of this Agreement are contingent upon sufficient
         appropriations or authorizations being made by either the Legislature
         of New Mexico, Health and Human Services (HHS)/Centers for Medicare and
         Medicaid Services (CMS), or the U.S. Congress for the performance of
         this Agreement. If sufficient appropriations and authorizations are not
         made by either the Legislature, HHS/CMS or the Congress, this Agreement
         shall be subject to termination or amendment. Subject to the provisions
         of Article 27 of this Agreement, HSD's decision as to whether
         sufficient appropriations or authorizations exist shall be accepted by
         the CONTRACTOR and shall be final and binding. Any changes to the Scope
         of Work and compensation to CONTRACTOR effected pursuant to this
         Section 14.1 shall be negotiated, reduced to writing and signed by the
         parties in accordance with Article 37 (Amendments) of this Agreement
         and any other applicable state or federal rules, regulations or
         statutes.

ARTICLE 14 (APPROPRIATIONS) SECTION 14.2 IS AMENDED TO READ AS FOLLOWS:

14.2     To the extent CMS, legislation or congressional action impacts the
         amount of appropriation available for performance under this contract,
         HSD has the right to amend the Scope of Work, in its discretion, which
         shall be effected by HSD sending written notice to the CONTRACTOR. Any
         changes to the Scope of Work and compensation to CONTRACTOR effected
         pursuant to this Section



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<PAGE>

         14.2 shall be negotiated, reduced to writing and signed by the parties
         in accordance with Article 37 (Amendments) of this Agreement and any
         other applicable state or federal rules, regulations or statutes.

ARTICLE 15 (DISPUTES), SECTION 15.3.(1). IS AMENDED TO READ AS FOLLOWS:

15.3.    Dispute Procedures for Other than Contract Termination Proceedings

         (1)      Except for contract termination (specified in Section 8.1.(2)
                  (Q), any dispute concerning sanctions imposed under this
                  Agreement shall be reported in writing to the MAD director
                  within fifteen (15) days of the date the reporting party
                  receives notice of the sanction. The decision of the Director
                  regarding the dispute shall be delivered to the parties in
                  writing within thirty (30) days of the date the Director
                  receives the written dispute. The decision shall be final and
                  conclusive unless, within fifteen (15) days from the date of
                  the decision, either party files with the HSD Secretary a
                  written appeal of the decision of the Director.

ARTICLE 26 (ERRONEOUS ISSUANCE OF PAYMENT OR BENEFITS) IS AMENDED TO READ AS
FOLLOWS:

In the event of an error which causes payment(s) to the CONTRACTOR to be issued
by HSD, the CONTRACTOR shall reimburse the State within thirty (30) days of
written notice of such error for the full amount of the payment, subject to the
provisions of Section 5.6(4) of this Agreement. Interest shall accrue at the
statutory rate on any amounts not paid and determined to be due after the
thirtieth (30th) day following the notice.

ARTICLE 27 (EXCUSABLE DELAYS) IS AMENDED TO READ AS FOLLOWS:

The CONTRACTOR shall be excused from performance hereunder for any period that
it is prevented from performing any services hereunder in whole or in part as a
result of an act of nature, war, civil disturbance, epidemic, court order, or
other cause beyond its reasonable control, and such nonperformance shall not be
a default hereunder or ground for termination of the Agreement.

In addition the CONTRACTOR shall be excused from performance hereunder during
any period for which the State of New Mexico has failed to enact a budget or
appropriate monies to fund the managed care program provided that the CONTRACTOR
notifies HSD, in writing, of its intent to suspend performance and HSD is unable
to resolve the budget or appropriation deficiencies within forty-five (45) days.

In addition, the CONTRACTOR shall be excused from performance hereunder for
insufficient payment by HSD provided that the CONTRACTOR notifies HSD in writing
of its intent to suspend performance and HSD is unable to remedy the monetary
shortfall within 45 days.



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<PAGE>

ARTICLE 28 (MARKETING), SECTION 28.2. IS AMENDED IN ITS ENTIRETY TO READ AS
FOLLOWS:

28.2     HSD shall review and approve the content, comprehension level, and
         language(s) of all marketing materials directed at members before use.

         (1)      The CONTRACTOR shall distribute its marketing materials to its
                  entire service area;
         (2)      The CONTRACTOR shall not seek to influence enrollment in
                  conjunction with the sale or offering of any private
                  insurance, not including public/private partnerships; and
         (3)      The CONTRACTOR shall specify the methods by which the entity
                  assures HSD that marketing materials are accurate and do not
                  mislead, confuse, or defraud the members or HSD. Statements
                  that will be considered inaccurate, false, or misleading
                  include, but are not limited to, any assertion or statement
                  (whether written or oral )that:
                  (a)      the member must enroll in the MCO in order to obtain
                           benefits or in order not to lose benefits; or
                  (b)      The MCO is endorsed by CMS, the Federal or State
                           Government, or similar entity.

ARTICLE 28 (MARKETING) SECTION 28.3.(1). IS AMENDED TO READ AS FOLLOWS:

28.3.(1).         Marketing and/or outreach materials shall meet requirements
                  for all communication with Medicaid members, as set forth in
                  Section MAD 8.305.5.16, MEDICAID MANAGED CARE MARKETING
                  GUIDELINES.

ARTICLE 28 (MARKETING), SECTION 28.4.(1).G. IS AMENDED TO READ AS FOLLOWS:

28.4.(1).G.       Directly or indirectly conducting door-to-door, telephonic or
                  other "Cold Call" marketing. "Cold Call" marketing is defined
                  as any unsolicited personal contact by the MCO with a
                  potential member for the purpose of marketing. Marketing means
                  any communication from an MCO to a Medicaid member who is not
                  enrolled in that entity, that can reasonably be interpreted as
                  intended to influence the member to enroll in that particular
                  MCO's Medicaid product, or either not to enroll in, or to
                  disenroll from, another MCO's Medicaid product. The CONTRACTOR
                  may send informational material regarding their benefit
                  package to potential members.

ARTICLE 28 (MARKETING), SECTION 28.8. IS AMENDED TO READ AS FOLLOWS:

28.8              Health Education and Outreach Materials may be distributed to
                  the CONTRACTOR'S members by mail or in connection with
                  exhibits or other organized events, including but not limited
                  to health fair, booths at




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<PAGE>

                  community events and health plan hosted health improvement
                  events. Health Education means programs, services or
                  promotions that are designed or intended to inform the
                  CONTRACTOR'S actual or potential members upon request about
                  the issues related to health lifestyles, situations that
                  affect or influence health status or methods or modes of
                  medical treatment. Outreach is the means of educating or
                  informing the CONTRACTOR'S actual or potential members about
                  health issues. Health Education and Outreach materials include
                  but are not limited to general distribution brochures, member
                  newsletters, posters, member handbooks. HSD shall not approve
                  health education materials.

ARTICLE 32 (CONFIDENTIALITY), SECTION 32.1 IS AMENDED TO READ AS FOLLOWS:

32.1     Any confidential information, as defined in State or Federal law, code,
         rules or regulations or otherwise applicable by the Code of Ethics,
         regarding HSD's members or providers given to or developed by the
         CONTRACTOR and its subcontractors shall not be made available to any
         individual or organization by the CONTRACTOR and its subcontractors
         without the prior written approval of HSD. Specifically the CONTRACTOR
         shall ensure that medical records and any other health and enrollment
         information that identifies a particular member, that the CONTRACTOR
         uses and discloses such individually identifiable health information in
         accordance with the privacy requirements in 45 CFR parts 160 and 164,
         subparts A and E, to the extent that these requirements are applicable.

ARTICLE 32 (CONFIDENTIALITY) SECTION 32.5. IS ADDED TO READ AS FOLLOWS:

32.5     The CONTRACTOR and HSD shall each comply with all requirements
         established under HIPAA regarding the privacy of individually
         identifiable health information and notices.

ARTICLE 33 (COOPERATION WITH MEDICAID FRAUD CONTROL UNIT) SECTION 33.1. IS
AMENDED TO READ AS FOLLOWS:

33.1     The CONTRACTOR shall make an initial report to HSD within five working
         days when, in CONTRACTOR'S professional judgment, suspicious activities
         may have occurred. The CONTRACTOR shall then take steps to establish
         whether or not, in its professional judgment, potential fraud has
         occurred. The CONTRACTOR will then make a report to the HSD and submit
         any applicable evidence in support of its findings. If HSD decides to
         refer the matter to the New Mexico State Medicaid Fraud Control Unit of
         the Attorney General's Office (MFCU), HSD will notify the CONTRACTOR
         within five working days of making the referral. The CONTRACTOR shall
         cooperate fully with any and all requests from MFCU for additional
         documentation or other types of collaboration in accordance with
         applicable law.




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<PAGE>

CONTRACTOR

BY:  /s/ ILLEGIBLE                          DATE:   6/12/03
    -------------------------------
TITLE:   PRESIDENT


STATE OF NEW MEXICO

BY:  /s/ ILLEGIBLE                          DATE:   6/30/03
    -------------------------------
         SECRETARY
         HUMAN SERVICES DEPARTMENT



APPROVED AS TO FORM AND LEGAL SUFFICIENCY:

BY:  /s/ ILLEGIBLE                          DATE:   6/19/03
    -------------------------------
         GENERAL COUNSEL
         HUMAN SERVICES DEPARTMENT



OFFICE OF THE ATTORNEY GENERAL


BY:  /s/ ILLEGIBLE                          DATE:   8/5/03
    -------------------------------


THE RECORDS OF THE TAXATION AND REVENUE DEPARTMENT REFLECT THAT THE CONTRACTOR
IS REGISTERED WITH THE TAXATION AND REVENUE DEPARTMENT OF THE STATE OF NEW
MEXICO TO PAY GROSS RECEIPTS AND COMPENSATING TAXES.

TAXATION AND REVENUE DEPARTMENT
ID NUMBER  02 02 1710002

BY:  /s/ Julie Rico                         DATE:   6/23/03
    -------------------------------



DEPARTMENT OF FINANCE AND ADMINISTRATION

BY:  /s/ ILLEGIBLE                          DATE:   8/26/03
    -------------------------------
         STATE CONTRACTS OFFICER



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