Document:

exv10w32w7

 

Exhibit 10.32.7

TEXAS HEALTH AND HUMAN SERVICES COMMISSION

ALBERT HAWKINS

EXECUTIVE COMMISSIONER

August 25, 2006

Aileen McCormick, President and CEO AMERIGROUP Texas, Inc.

6700 West Loop South, Suite 200
Bellaire,
Texas 77401

Re: HHSC Contract No: 529-03-0002-00001-J HHSC

          Legacy # 529-03-450-J

Dear Ms. McCormick:

Enclosed is the fully executed Contract Amendment # 12 between the Health and Human
Services Commission and AMERIGROUP Texas, Inc., to modify the monthly capitation amounts
for Harris County Service Area, and to extend the contract thru 12/31/06.

Should you have any questions, please contact your Health Plan Manager or myself at (512)
491-1430 or sheryl.sauls@hhsc.state.tx.us.

	 	 	 
	Sincerely,
	 	 
	 
	 	 
	/s/ Shery Sauls
 

Shery Sauls
Contr

	 	 

Contract Manager

Enclosure

cc: Administrative Services Development, HHSC (Mail Code: BH-1500)

P. O. Box 13247 • Austin, Texas 78711 • 4900 North Lamar, Austin, Texas 78751

 

 

	 	 	HHSC Contract# 529-03-0002-00001J
	STATE OF TEXAS
	 	 
	 
	 	HHSC Legacy # 529-03-450J
	COUNTY OF TRAVIS	 	 

AMENDMENT #12

TO THE AGREEMENT BETWEEN THE

HEALTH & HUMAN SERVICES COMMISSION

AND

AMERIGROUP TEXAS, INC.

FOR HEALTH SERVICES

TO THE

MEDICAID STAR+PLUS PROGRAM

IN THE

HARRIS COUNTY SERVICE DELIVERY AREA

     THIS CONTRACT AMENDMENT (the “Amendment”) is entered into between the HEALTH
& HUMAN SERVICES COMMISSION (“HHSC”), an administrative agency within the executive
department of the State of Texas, and AMERIGROUP TEXAS, INC. (“HMO”), a health maintenance
organization organized under the laws of the State of Texas, possessing a certificate of
authority issued by the Texas Department of Insurance to operate as a health maintenance
organization, and having its principal office at 1200 East Copeland Road, Suite 200,
Arlington, Texas 76011. HHSC and HMO may be referred to within this Amendment individually
as a “Party” and collectively as the “Parties.”

     The Parties hereby agree to amend their Agreement as set forth herein.

ARTICLE 1. PURPOSE.

Section 1.01 Authorization.

     This Amendment is executed by the Parties in accordance with Article 15.2 of the
Agreement.

Section 1.02 Effective Date.

     Except as specified below, the Effective Date of this Amendment is September 1, 2006.
Upon execution by the parties, the term of this Agreement is extended through December 31,
2006, unless extended or terminated sooner by HHSC, in accordance with this Agreement.

ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF

THE PARTIES Section 2.01 Modification of Article 13, Payment Provisions

Article 13, Payment Provisions, is amended by modifying Section
13.1.2, as follows:

     13.1.2 The monthly capitation amounts for the Harris
County Service Area are as follows:

HHSC Contract# 529-03-0002-00001J

					
	 	 	 	 	 
	    HHSC Legacy # 529-03-450J
	 	Page 1 of 2
	 	Effective Date: September 1, 2006

 

 

	 	 	 
	 	 	FY 2007
	Member Risk Groups	 	Monthly Capitation Amounts
	 	 	9/1/2006 - 8/31/2007
	CBA Waiver Clients-Dual Eligible	 	 
	 	 	 
	CBA Waiver Clients-Medicaid Only
	 	***REDACTED***
	 	 	 
	Other Community Clients-Dual Eligible	 	 
	 	 	 
	Other Community Clients-Medicaid Only	 	 
	 	 	 
	Nursing Facility Clients-Medicaid Only	 	 

     Section 2.02 Modification of Article 19, Term

     Article 19, Term, is amended by modifying Section 19.1, as follows:

     19.1 The effective date of this contract is September
1, 2003. The contract will terminate on December 31,
2006, unless extended or terminated earlier as provided
for elsewhere in this contract.

ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES

     The Parties contract and agree that the terms of the Agreement will remain in
effect and continue to govern except to the extent modified in this Amendment.

     By signing this Amendment, the Parties expressly understand and agree that this
Amendment is hereby made a part of the Agreement as though it were set out word for word
in the Agreement.

     IN WITNESS HEREOF, HHSC and the HMO have each caused this Amendment to be signed
and delivered by its duly authorized representative.

	 	 	 	 	 
	 

	 	AMERIGROUP TEXAS INC.
	 	HEALTH & HUMAN SERVICES COMMISSION
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	Aileen McCormick
	 	Albert Hawkins
	 

	 	President and CEO
	 	Executive Commissioner

HHSC Contract# 529-03-0002-00001J

					
	 	 	 	 	 
	HHSC Legacy # 529-03-450J
	 	Page 2 of 2
	 	Effective Date: September 1, 2006exv10w32w9

 

Exhibit 10.32.9

Contractual Document (CD)

			
	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	 	 	 
	Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions
	 	Version 1.4          

Texas Health & Human Service Commission

Version 1.4

 

 

Contractual Document (CD)

			
	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	 	 	 
	Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions
	 	Version 1.4          

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	 	 	DOCUMENT	 	EFFECTIVE	 	 
	STATUS'	 	REVISION	 	DATE	 	DESCRIPTION3
	 
	 	 	 	 	 	 	 	 
	Baseline

	 	n/a	 	 	 	Initial version of the Uniform Managed Care Contract
Terms & Conditions
	 
	 	 	 	 	 	 	 	 
	Revision

	 	1.1	 	June 30, 2006
	 	Revised version of the Uniform Managed Care Contract
Terms & Conditions that includes provisions applicable to
MCOs participating in the STAR+PLUS Program. 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Article 2, “Definitions,” is amended to add or modify the
following definitions: 1915(c) Nursing Facility Waiver;
Community-based Long Term Care Services; Court-
ordered Commitment; Default Enrollment; Dual Eligibles;
Eligibles; Functionally Necessary Covered Services;
HHSC Administrative Services Contractor; HHSC HMO
Programs or HMO Programs; Medicaid HMOs; Medical
Assistance Only; Member; Minimum Data Set For Home
Care (MSD-HC); Nursing Facility Cost Ceiling; Nursing
Facility Level of Care; Outpatient Hospital Service;
Qualified and Disabled Working Individual (QDWI);
Qualified Medicare Beneficiary; Service Coordination;
Service Coordinator; Specified Low-income Medicare
Beneficiary (SMBL); STAR+PLUS or STAR+PLUS
Program; STAR+PLUS HMO; Supplemental Security
Income (SSI).
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Article 4, “Contract Administration and Management,” is
amended to add Sections 4.02(a)(12) and 4.04.1, relating
to the STAR+PLUS Service Coordinator.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Article 8, “Amendments and Modifications,” Section 8.06
is amended to clarify that CMS must approve all
amendments to STAR and STAR+PLUS HMO contracts.
Article 10, ‘Terms and Conditions of Payment,” Section
10.05.1 is added to include the Capitation Rate structure
provisions relating to STAR+PLUS. Section 10.11 is
modified to apply only to STAR and CHIP. Section
10.11.1 is added to include the Experience Rebate
provisions relating to STAR+PLUS.
	 
	 	 	 	 	 	 	 	 
	Revision

	 	1.2	 	September 1, 2006
	 	Revised version of the Uniform Managed Care Contract
Terms & Conditions that includes provisions applicable to
MCOs participating in the STAR and CHIP Programs.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Section 4.04(a) is amended to change the reference from
‘Texas Board of Medical Examiners” to “Texas Medical
Board”.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Article 5 is amended to clarify the following sections:
	 

	 	 	 	 	 	 	 	5.02(e)(5), regarding disenrollment of Members; 5.02(i),
regarding disenrollment of foster care children; and
5.04(b), regarding CHIP eligibility and enrollment for
babies of CHIP Members
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Article 10 is amended to clarify the following sections:
	 

	 	 	 	 	 	 	 	10.01(d), regarding the fixed monthly Capitation Rate
components; 10.10(c), regarding updating the state

 

 

Contractual Document (CD)

			
	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	 	 	 
	Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions
	 	Version 1.4          

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	system for Members who become eligible for SSI.
Section 10.17 is added regarding recoupment for federal
disallowance.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Article 17 is amended to clarify the following section:
	 

	 	 	 	 	 	 	 	17.01, naming HHSC as an additional insured.
	 
	 	 	 	 	 	 	 	 
	Revision

	 	1.3	 	September 1, 2006
	 	Article 2 is amended to modify and add the following
definitions to include the CHIP Perinatal Program- Appeal,
CHIP Perinatal Program, CHIP Perinatal HMO, CHIP
Perinate, CHIP Perinate Newborn, Covered Services,
Complaint, Delivery Supplemental Payment, Eligibles,
Experience Rebate, HHSC Administrative Services
Contractor, Major Population Group, Member, Optional
Service Area, and Service Management.
Article 5 is amended to add the following sections: 5.04.1
CHIP Perinatal eligibility and enrollment; 5.05(c) CHIP
Perinatal HMOs.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Article 10 is amended to apply to the CHIP Perinatal
Program. Section 10.06(a) is amended to add the
Capitation Rates Structure for CHIP Perinates and CHIP
Perinate Newborns. Section 10.06(e) is added to include
a description of the rate-setting methodology for the CHIP
Perinatal Program. 10.09(b) is modified to include CHIP
Perintal Program; Section 10.11 is amended to add the
CHIP Perinatal Program to the STAR and CHIP
Experience Rebate. Section 10.12(c) amended to clarify
cost sharing for the CHIP Perinatal Program.
	 
	Revision

	 	1.4	 	September, 1 2006
	 	Contract amendment did not revise Attachment A HHSC
Uniform Managed Care Terms and Conditions

 

			
	 	 	Status should be represented as “Baseline” for initial issuances, “Revision” for changes to the Baseline version, and
“Cancellation” for withdrawn versions
	 
	2	 	Revisions should be numbered in accordance according to the version of the issuance and sequential numbering of
the revision e.g. “1.2” refers to the first version of the document and the second revision.
Brief description of the changes to the document made in the revision.

 

 

Contractual Document (CD)

			
	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	 	 	 
	Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions
	 	Version 1.4          

TABLE OF CONTENTS

	 	 	 	 	 
	Article 1. Introduction

	 	 	2	 
	Section 1.01 Purpose

	 	 	2	 
	Section 1.02 Risk-based contract

	 	 	2	 
	Section 1.03 Inducements

	 	 	2	 
	Section 1.04 Construction of the Contract

	 	 	2	 
	Section 1.05 No implied authority

	 	 	3	 
	Section 1.06 Legal Authority

	 	 	3	 
	Article 2. Definitions

	 	 	3	 
	 
	 	 	 	 
	Article 3. General Terms & Conditions

	 	 	15	 
	 
	 	 	 	 
	Section 3.01 Contract elements

	 	 	15	 
	Section 3.02 Term of the Contract

	 	 	15	 
	Section 3.03 Funding

	 	 	15	 
	Section 3.04 Delegation of authority

	 	 	15	 
	Section 3.05 No waiver of sovereign immunity

	 	 	15	 
	Section 3.06 Force majeure

	 	 	15	 
	Section 3.07 Publicity

	 	 	15	 
	Section 3.08 Assignment

	 	 	16	 
	Section 3.09 Cooperation with other vendors and prospective vendors

	 	 	16	 
	Section 3.10 Renegotiation and reprocurement rights

	 	 	16	 
	Section 3.11 RFP errors and omissions

	 	 	16	 
	Section 3.12 Attorneys’ fees

	 	 	16	 
	Section 3.13 Preferences under service contracts

	 	 	16	 
	Section 3.14 Time of the essence

	 	 	16	 
	Section 3.15 Notice

	 	 	17	 
	 
	 	 	 	 
	Article 4. Contract Administration & Management

	 	 	17	 
	 
	 	 	 	 
	Section 4.01 Qualifications, retention and replacement of HMO employees

	 	 	17	 
	Section 4.02 HMO’s Key Personnel

	 	 	17	 
	Section 4.03 Executive Director

	 	 	17	 
	Section 4.04 Medical Director

	 	 	18	 
	Section 4.04.1 STAR+PLUS Service Coordinator

	 	 	18	 
	Section 4.05 Responsibility for HMO personnel and Subcontractors

	 	 	18	 
	Section 4.06 Cooperation with HHSC and state administrative agencies

	 	 	19	 
	Section 4.07 Conduct of HMO personnel

	 	 	19	 
	Section 4.08 Subcontractors

	 	 	20	 
	Section 4.09 HHSC’s ability to contract with Subcontractors

	 	 	21	 
	Section 4.10 HMO Agreements with Third Parties

	 	 	21	 
	 
	 	 	 	 
	Article 5. Member Eligibility & Enrollment

	 	 	21	 
	 
	 	 	 	 
	Section 5.01 Eligibility Determination

	 	 	21	 
	Section 5.02 Member Enrollment & Disenrollment

	 	 	21	 
	Section 5.03 STAR enrollment for pregnant women and infants

	 	 	22	 
	Section 5.04 CHIP eligibility and enrollment

	 	 	22	 
	Section 5.04.1 CHIP Perinatal eligibility, enrollment and disenrollment

	 	 	22	 
	Section 5.05 Span of Coverage

	 	 	23	 
	Section 5.06 Verification of Member Eligibility

	 	 	23	 
	Section 5.07 Special Temporary STAR Default Process

	 	 	23	 
	 
	 	 	 	 
	Article 6. Service Levels & Performance Measurement

	 	 	23	 
	 
	 	 	 	 
	Section 6.01 Performance measurement

	 	 	23	 

 

 

	 	 	 	 	 
	Article 7. Governing Law & Regulations

	 	 	24	 
	 
	 	 	 	 
	Section 7.01 Governing law and venue

	 	 	24	 
	Section 7.02 HMO responsibility for compliance with laws and regulations

	 	 	24	 
	Section 7.03 TDI licensure/ANHC certification and solvency

	 	 	24	 
	Section 7.04 Immigration Reform and Control Act of 1986

	 	 	25	 
	Section 7.05 Compliance with state and federal anti-discrimination laws

	 	 	25	 
	Section 7.06 Environmental protection laws

	 	 	25	 
	Section 7.07 HIPAA

	 	 	25	 
	Article 8. Amendments & Modifications

	 	 	25	 
	 
	 	 	 	 
	Section 8.01 Mutual agreement

	 	 	25	 
	Section 8.02 Changes in law or contract

	 	 	25	 
	Section 8.03 Modifications as a remedy

	 	 	25	 
	Section 8.04 Modifications upon renewal or extension of Contract

	 	 	26	 
	Section 8.05 Modification of HHSC Uniform Managed Care Manual

	 	 	26	 
	Section 8.06 CMS approval of Medicaid amendments

	 	 	26	 
	Section 8.07 Required compliance with amendment and modification procedures

	 	 	26	 
	 
	 	 	 	 
	Article 9. Audit & Financial Compliance

	 	 	26	 
	 
	 	 	 	 
	Section 9.01 Financial record retention and audit

	 	 	26	 
	Section 9.02 Access to records, books, and documents

	 	 	26	 
	Section 9.03 Audits of Services, Deliverables and inspections

	 	 	27	 
	Section 9.04 SAO Audit

	 	 	27	 
	Section 9.05 Response/compliance with audit or inspection findings

	 	 	27	 
	 
	 	 	 	 
	Article 10. Terms & Conditions of Payment

	 	 	28	 
	 
	 	 	 	 
	Section 10.01 Calculation of monthly Capitation Payment

	 	 	28	 
	Section 10.02 Time and Manner of Payment

	 	 	28	 
	Section 10.03 Certification of Capitation Rates

	 	 	28	 
	Section 10.04 Modification of Capitation Rates

	 	 	28	 
	Section 10.05 STAR Capitation Structure

	 	 	28	 
	Section 10.05.1STAR+PLUS Capitation Structure

	 	 	29	 
	Section 10.06 CHIP Capitation Rates Structure

	 	 	29	 
	Section 10.06.01 CHIP Perinatal Program Capitation Structure

	 	 	30	 
	Section 10.07 HMO input during rate setting process

	 	 	30	 
	Section 10.08 Adjustments to Capitation Payments

	 	 	30	 
	Section 10.09 Delivery Supplemental Payment for CHIP, CHIP Perinatal and STAR HMOs

	 	 	31	 
	Section 10.10 Administrative Fee for SSI Members

	 	 	31	 
	Section 10.11 STAR, CHIP, and CHIP Perinatalal Experience Rebate

	 	 	32	 
	Section 10.11.1 STAR+PLUS Experience Rebate

	 	 	33	 
	Section 10.12 Payment by Members

	 	 	34	 
	Section 10.13 Restriction on assignment of fees

	 	 	34	 
	Section 10.14 Liability for taxes

	 	 	34	 
	Section 10.15 Liability for employment-related charges and benefits

	 	 	34	 
	Section 10.16 No additional consideration

	 	 	35	 
	Section 10.17 Federal Disallowance

	 	 	35	 
	Article 11. Disclosure & Confidentiality of Information

	 	 	35	 
	 
	 	 	 	 
	Section 11.01 Confidentiality

	 	 	35	 
	Section 11.02 Disclosure of HHSC’s Confidential Information

	 	 	35	 
	Section 11.03 Member Records

	 	 	36	 
	Section 11.04 Requests for public information

	 	 	36	 
	Section 11.05 Privileged Work Product

	 	 	36	 
	Section 11.06 Unauthorized acts

	 	 	36	 
	Section 11.07 Legal action

	 	 	37	 
	Article 12. Remedies & Disputes

	 	 	37	 
	 
	 	 	 	 
	Section 12.01 Understanding and expectations

	 	 	37	 
	Section 12.02 Tailored remedies

	 	 	37	 
	Section 12.03 Termination by HHSC

	 	 	39	 
	Section 12.04 Termination by HMO

	 	 	41	 

 

 

Contractual Document (CD)

			
	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	 	 	 
	Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions
	 	Version 1.4          

	 	 	 	 	 
	Section 12.05 Termination by mutual agreement

	 	 	41	 
	Section 12.06 Effective date of termination

	 	 	41	 
	Section 12.07 Extension of termination effective date

	 	 	41	 
	Section 12.08 Payment and other provisions at Contract termination

	 	 	41	 
	Section 12.09 Modification of Contract in the event of remedies

	 	 	41	 
	Section 12.10 Turnover assistance

	 	 	41	 
	Section 12.11 Rights upon termination or expiration of Contract

	 	 	42	 
	Section 12.12 HMO responsibility for associated costs

	 	 	42	 
	Section 12.13 Dispute resolution

	 	 	42	 
	Section 12.14 Liability of HMO

	 	 	42	 
	Article 13. Assurances & Certifications

	 	 	43	 
	 
	 	 	 	 
	Section 13.01 Proposal certifications

	 	 	43	 
	Section 13.02 Conflicts of interest

	 	 	43	 
	Section 13.03 Organizational conflicts of interest:

	 	 	43	 
	Section 13.04 HHSC personnel recruitment prohibition

	 	 	44	 
	Section 13.05 Anti-kickback provision

	 	 	44	 
	Section 13.06 Debt or back taxes owed to State of Texas

	 	 	44	 
	Section 13.07 Certification regarding status of license, certificate, or permit

	 	 	44	 
	Section 13.08 Outstanding debts and judgments

	 	 	44	 
	 
	 	 	 	 
	Article 14. Representations & Warranties

	 	 	44	 
	 
	 	 	 	 
	Section 14.01 Authorization

	 	 	44	 
	Section 14.02 Ability to perform

	 	 	44	 
	Section 14.03 Minimum Net Worth

	 	 	44	 
	Section 14.04 Insurer solvency

	 	 	44	 
	Section 14.05 Workmanship and performance

	 	 	45	 
	Section 14.06 Warranty of deliverables

	 	 	45	 
	Section 14.07 Compliance with Contract

	 	 	45	 
	Section 14.08 Technology Access

	 	 	45	 
	 
	 	 	 	 
	Article 15. Intellectual Property

	 	 	45	 
	 
	 	 	 	 
	Section 15.01 Infringement and misappropriation

	 	 	45	 
	Section 15.02 Exceptions

	 	 	46	 
	Section 15.03 Ownership and Licenses

	 	 	46	 
	 
	 	 	 	 
	Article 16. Liability

	 	 	47	 
	 
	 	 	 	 
	Section 16.01 Property damage

	 	 	47	 
	Section 16.02 Risk of Loss

	 	 	47	 
	Section 16.03 Limitation of HHSC’s Liability

	 	 	47	 
	Article 17. Insurance & Bonding

	 	 	47	 
	 
	 	 	 	 
	Section 17.01 Insurance Coverage

	 	 	47	 
	Section 17.02 Performance Bond

	 	 	48	 
	Section 17.03 TDI Fidelity Bond

	 	 	49	 

 

 

Contractual Document (CD)

			
	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	 	 	 
	Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions
	 	Version 1.4          

Article 1. Introduction

     Section 1.01 Purpose.

     The purpose of this Contract is to set forth the terms and conditions for the HMO’s
participation as a managed care organization in one or more of the HMO Programs administered by
HHSC. Under the terms of this Contract, HMO will provide comprehensive health care services to
qualified Program recipients through a managed care delivery system.

     Section 1.02 Risk-based contract.

     This is a Risk-based contract.

     Section 1.03 Inducements.

     In making the award of this Contract, HHSC relied on HMO’s assurances of the
following:

     (1) HMO is an established health maintenance organization that arranges for the delivery
of health care services, is currently licensed as such in the State of Texas and is fully
authorized to conduct business in the Service Areas;

     (2) HMO and the HMO Administrative Service Subcontractors have the skills, qualifications,
expertise, financial resources and experience necessary to provide the Services and Deliverables
described in the RFP, HMO’s Proposal, and this Contract in an efficient, cost-effective manner,
with a high degree of quality and responsiveness, and has performed similar services for other
public or private entities;

     (3) HMO has thoroughly reviewed, analyzed, and understood the RFP, has timely raised all
questions or objections to the RFP, and has had the opportunity to review and fully understand
HHSC’s current program and operating environment for the activities that are the subject of the
Contract and the needs and requirements of the State during the Contract term;

     (4) HMO has had the opportunity to review and understand the State’s stated objectives in
entering into this Contract and, based on such review and understanding, HMO currently has the
capability to perform in accordance with the terms and conditions of this Contract;

     (5) HMO also has reviewed and understands the risks associated with the HMO Programs as
described in the RFP, including the risk of non-appropriation of funds.

     Accordingly, on the basis of the terms and conditions of this Contract, HHSC desires to
engage HMO to perform the Services and provide the Deliverables described in this Contract under
the terms and conditions set forth in this Contract.

     Section 1.04 Construction of the Contract.

     (a) Scope of Introductory Article.

     The provisions of any introductory article to the Contract are intended to be a general
introduction and are not intended to expand the scope of the Parties’ obligations under the
Contract or to alter the plain meaning of the terms and conditions of the Contract.

     (b) References to the “State”

     References in the Contract to the “State” shall mean the State of Texas unless otherwise
specifically indicated and shall be interpreted, as appropriate, to mean or include HHSC and other
agencies of the State of Texas that may participate in the administration of the HMO Programs,
provided, however, that no provision will be interpreted to include any entity other than HHSC as
the contracting agency.

     (c) Severability.

     If any provision of this Contract is construed to be illegal or invalid, such interpretation
will not affect the legality or validity of any of its other provisions. The illegal or invalid
provision will be deemed stricken and deleted to the same extent and effect as if never
incorporated in this Contract, but all other provisions will remain in full force and effect.

     (d) Survival of terms.

     Termination or expiration of this Contract for any reason will not release either Party from
any liabilities or obligations set forth in this Contract that:

     (1) The Parties have expressly agreed shall survive any such termination or expiration;
or

     (2) Arose prior to the effective date of termination and remain to be performed or by their
nature would be intended to be applicable following any such termination or expiration.

     (e) Headings.

     The article, section and paragraph headings in this Contract are for reference and
convenience only and may not be considered in the interpretation of this Contract.

     (f) Global drafting conventions.

     (1) The terms “include,” “includes,” and
“including” are terms of inclusion, and where used in this Contract, are deemed to be followed by
the words ‘without limitation.”

     (2) Any references to “sections,” “appendices,” “exhibits” or “attachments” are deemed to
be references to sections, appendices, exhibits or attachments to this Contract.

     (3) Any references to laws, rules, regulations, and manuals in this Contract are deemed
references to these documents as amended, modified, or supplemented from time to time during the
term of this Contract.

Page 2 of 49

 

 Contractual Document (CD)

			
	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	 	 	 
	Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions
	 	Version 1.4          

     Section 1.05 No implied authority.

     The authority delegated to HMO by HHSC is limited to the terms of this Contract. HHSC is
the state agency designated by the Texas Legislature to administer the HMO Programs, and no other
agency of the State grants HMO any authority related to this program unless directed through
HHSC. HMO may not rely upon implied authority, and specifically is not delegated authority under
this Contract to:

     (1) make public policy;

     (2) promulgate, amend or disregard
administrative regulations or program policy decisions made by State and federal agencies
responsible for administration of HHSC Programs; or

     (3) unilaterally communicate or negotiate with any federal or state agency or the Texas
Legislature on behalf of HHSC regarding the HHSC Programs.

     HMO is required to cooperate to the fullest extent possible to assist HHSC in communications
and negotiations with state and federal governments and agencies concerning matters relating to
the scope of the Contract and the HMO Program(s), as directed by HHSC.

     Section 1.06 Legal Authority.

     (a) HHSC is authorized to enter into this Contract under Chapters 531 and 533, Texas
Government Code; Section 2155.144, Texas Government Code; and/or Chapter 62, Texas Health & Safety
Code. HMO is authorized to enter into this Contract pursuant to the authorization of its governing
board or controlling owner or officer.

     (b) The person or persons signing and executing this Contract on behalf of the Parties, or
representing themselves as signing and executing this Contract on behalf of the Parties, warrant
and guarantee that he, she, or they have been duly authorized to execute this Contract and to
validly and legally bind the Parties to all of its terms, performances, and provisions.

Article 2. Definitions

     As used in this Contract, the following terms and conditions shall have the meanings assigned
below:

     1915(c) Nursing Facility Waiver means the HHSC waiver program that provides home
and community based services to aged and disabled adults as cost-effective alternatives to
institutional care in nursing homes.

     Abuse means provider practices that are inconsistent with sound fiscal, business, or
medical practices and result in an unnecessary cost to the Medicaid or CHIP Program, or in
reimbursement for services that are not Medically Necessary or that fail to meet professionally
recognized standards for health care. It also includes Member practices that result in
unnecessary cost to the Medicaid or CHIP Program.

     Account Name means the name of the individual who lives with the child(ren) and who
applies for the Children’s Health Insurance Program coverage on behalf of the child(ren).

     Action (Medicaid only) means:

(1) the denial or limited authorization of a requested Medicaid service, including the type or
level of service;

(2) the reduction, suspension, or termination of a previously authorized service;

(3) the denial in whole or in part of payment for service;

(4) the failure to provide services in a timely manner;

(5) the failure of an HMO to act within the timeframes set forth in the Contract and 42
C.F.R. §438.408(b); or

(6) for a resident of a rural area with only one HMO, the denial of a Medicaid Members’ request
to obtain services outside of the Network.

An Adverse Determination is one type of Action.

     Acute Care means preventive care, primary care, and other medical care provided
under the direction of a physician for a condition having a relatively short duration.

     Acute Care Hospital means a hospital that provides acute care services

     Adjudicate means to deny or pay a clean claim.

     Administrative Services see HMO Administrative Services.

     Administrative Services Contractor see HHSC Administrative Services Contractor.

     Adverse Determination means a determination by an HMO or Utilization Review agent that
the Health Care Services furnished, or proposed to be furnished to a patient, are not Medically
Necessary or not appropriate.

     Affiliate means any individual or entity owning or holding more than a five percent
(5%) interest in the HMO or in which the HMO owns or holds more than a five percent (5%) interest;
any parent entity; or subsidiary entity of the HMO, regardless of the organizational structure of
the entity.

     Agreement or Contract means this formal, written, and legally enforceable
contract and amendments thereto between the Parties.

     Allowable Expenses means all expenses related to the Contract between HHSC and the
HMO that are incurred during the Contract Period, are not reimbursable or recovered from another
source, and that conform with the HHSC Uniform Managed Care Manual’s “Cost Principles for
Administrative Expenses.”

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     AAP means the American Academy of Pediatrics.

     Approved Non-Profit Health Corporation (ANHC) means an organization formed in
compliance with Chapter 844 of the Texas Insurance Code and licensed by TDI. See also HMO.

     Appeal (Medicaid only) means the formal process by which a Member or his or her
representative request a review of the HMO’s Action, as defined above.

     Appeal (CHIP and CHIP Perinatal Program only) means the formal process by
which a Utilization Review agent addresses Adverse Determinations.

     Auxiliary Aids and Services includes:

     (1) qualified interpreters or other effective methods of making aurally delivered
materials understood by persons with hearing impairments;

     (2) taped texts, large print, Braille, or other effective methods to ensure visually
delivered materials are available to individuals with visual impairments; and

     (3) other effective methods to ensure that materials (delivered both aurally and visually)
are available to those with cognitive or other Disabilities affecting communication.

     Behavioral Health Services means Covered Services for the treatment of mental,
emotional, or chemical dependency disorders.

     Benchmark means a target or standard based on historical data or an objective/goal.

     Business Continuity Plan or BCP means a plan that provides for a quick and smooth
restoration of MIS operations after a disruptive event. BCP includes business impact analysis, BCP
development, testing, awareness, training, and maintenance. This is a day-to-day plan.

     Business Day means any day other than a Saturday, Sunday, or a state or federal
holiday on which HHSC’s offices are closed, unless the context clearly indicates otherwise.

     CAHPS means the Consumer Assessment of Health Plans Survey. This survey is
conducted annually by the EQRO.

     Call Coverage means arrangements made by a facility or an attending physician with an
appropriate level of health care provider who agrees to be available on an as-needed basis to
provide medically appropriate services for routine, high risk, or Emergency Medical Conditions or
Emergency Behavioral Health Conditions that present without being scheduled at the facility or
when the attending physician is unavailable.

     Capitation Rate means a fixed predetermined fee paid by HHSC to the HMO each month
in accordance with the Contract, for each enrolled
Member in a defined Rate Cell, in exchange for the HMO arranging for or providing a defined set of
Covered Services to such a Member, regardless of the amount of Covered Services used by the
enrolled Member.

     Capitation Payment means the aggregate amount paid by HHSC to the HMO on a monthly
basis for the provision of Covered Services to enrolled Members in accordance with the Capitation
Rates in the Contract.

     Case Head means the head of the household that is applying for Medicaid.

     C.F.R. means the Code of Federal Regulations.

     Chemical Dependency Treatment means treatment provided for a chemical dependency
condition by a Chemical Dependency Treatment facility, chemical dependency counselor or hospital.

     Children’s Health Insurance Program or CHIP means the health insurance program
authorized and funded pursuant to Title XXI, Social Security Act (42 U.S.C. §§ 1397aa-1397jj) and
administered by HHSC.

     Child (or Children) with Special Health Care Needs (CSHCN) means a
child (or children) who:

     (1) ranges in age from birth up to age nineteen (19) years;

     (2) has a serious ongoing illness, a complex chronic condition, or a disability that has
lasted or is anticipated to last at least twelve (12) continuous months or more;

     (3) has an illness, condition or disability that results (or without treatment would be
expected to result) in limitation of function, activities, or social roles in comparison with
accepted pediatric age-related milestones in the general areas of physical, cognitive,
emotional, and/or social growth and/or development;

     (4) requires regular, ongoing therapeutic intervention and evaluation by appropriately
trained health care personnel; and

     (5) has a need for health and/or health-related services at a level significantly above
the usual for the child’s age.

     CHIP HMO Program, or CHIP Program, means the State of Texas program in which HHSC
contracts with HMOs to provide, arrange for, and coordinate Covered Services for enrolled CHIP
Members.

     CHIP HMOs means HMOs participating in the CHIP HMO Program.

     CHIP Perinatal HMOs means HMOs participating in the CHIP Perinatal Program.

     CHIP Perinatal Program means the State of Texas program in which HHSC contracts with
HMOs to provide, arrange for, and coordinate Covered Services for enrolled CHIP Perinate and CHIP
Perinate Newborn Members. Although the CHIP

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Perinatal Program is part of the CHIP Program, for Contract administration purposes it is
identified independently in this Contract. An HMO must specifically contract with HHSC as a CHIP
Perinatal HMO in order to participate in this part of the CHIP Program.

     CHIP Perinate means a CHIP Perinatal Program Member identified prior to birth.

     CHIP Perinate Newborn means a CHIP Perinate who has been born alive.

     Chronic or Complex Condition means a physical, behavioral, or developmental condition
which may have no known cure and/or is progressive and/or can be debilitating or fatal if left
untreated or under-treated.

     Clean Claim means a claim submitted by a physician or provider for medical care or
health care services rendered to an enrollee, with documentation reasonably necessary for the HMO
to process the claim. The HMO may not require a physician or provider to submit documentation
that conflicts with the requirements of Texas Administrative Code, Title 28, Part 1, Chapter 21,
Subchapters C and T.

     CMS means the Centers for Medicare and Medicaid Services, formerly known as the
Health Care Financing Administration (HCFA), which is the federal agency responsible for
administering Medicare and overseeing state administration of Medicaid and CHIP.

     COLA means the Cost of Living Adjustment.

     Community-based Long Term Care Services means services provided to STAR+PLUS Members
in their home or other community based settings necessary to provide assistance with activities of
daily living to allow the Member to remain in the most integrated setting possible.
Community-based Long-term Care includes services available to all STAR+PLUS Members as well as
those services available only to STAR+PLUS Members who qualify under the 1915(c) Nursing Facility
Waiver services.

     Community Resource Coordination Groups CRCGs means a statewide system of local
interagency groups, including both public and private providers, which coordinate services for
“multi-need” children and youth. CRCGs develop individual service plans for children and
adolescents whose needs can be met only through interagency cooperation. CRCGs address Complex
Needs in a model that promotes local decision-making and ensures that children receive the
integrated combination of social, medical and other services needed to address their individual
problems.

     Complainant means a Member or a treating provider or other individual designated
to act on behalf of the Member who filed the Complaint.

     Complaint (CHIP and CHIP Perinatal Programs only) means any dissatisfaction, expressed
by a Complainant, orally or in writing to the HMO, with any aspect of the HMO’s operation,
including, but not limited to, dissatisfaction with plan administration, procedures related to
review or Appeal of an Adverse Determination, as defined in Texas Insurance Code, Chapter 843,
Subchapter G; the denial, reduction, or termination of a service for reasons not related to medical
necessity; the way a service is provided; or disenrollment decisions. The term does not include
misinformation that is resolved promptly by supplying the appropriate information or clearing up
the misunderstanding to the satisfaction of the CHIP Member.

     Complaint (Medicaid only) means an expression of dissatisfaction expressed by a
Complainant, orally or in writing to the HMO, about any matter related to the HMO other than an
Action. As provided by 42 C.F.R. §438.400, possible subjects for Complaints include, but are not
limited to, the quality of care of services provided, and aspects of interpersonal relationships
such as rudeness of a provider or employee, or failure to respect the Medicaid Member’s rights.

     Complex Need means a condition or situation resulting in a need for coordination or
access to services beyond what a PCP would normally provide, triggering the HMO’s determination
that Care Coordination is required.

     Comprehensive Care Program: See definition for Texas Health Steps.

     Confidential Information means any communication or record (whether oral, written,
electronically stored or transmitted, or in any other form) consisting of:

     (1) Confidential Client information, including HIPAA-defined protected health
information;

     (2) All non-public budget, expense, payment and other financial information;

     (3) All Privileged Work Product;

     (4) All information designated by HHSC or any other State agency as confidential, and all
information designated as confidential under the Texas Public Information Act, Texas
Government Code, Chapter 552;

     (5) The pricing, payments, and terms and conditions of the Contract, unless disclosed
publicly by HHSC or the State; and

     (6) Information utilized, developed, received, or maintained by HHSC, the HMO, or
participating State agencies for the purpose of fulfilling a duty or obligation under this
Contract and that has not been disclosed publicly.

     Consumer-Directed Services means the
Member or his legal guardian is the employer of and

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retains control over the hiring, management, and termination of an individual providing
personal assistance or respite.

     Continuity of Care means care provided to a Member by the same PCP or specialty
provider to ensure that the delivery of care to the Member remains stable, and services are
consistent and unduplicated.

     Contract or Agreement means this formal, written, and legally enforceable
contract and amendments thereto between the Parties.

     Contract Period or Contract Term means the Initial Contract Period plus any
and all Contract extensions.

     Contractor or HMO means the HMO that is a party to this Contract and is an
insurer licensed by TDI as an HMO or as an ANHC formed in compliance with Chapter 844 of the Texas
Insurance Code.

     Core Service Area (CSA) means the core set Service Area counties defined by HHSC for
the STAR and/or CHIP HMO Programs in which Eligibles will be required to enroll in an HMO. (See
Attachment B-6 to the HHSC Managed Care Contract document for detailed information on the Service
Area counties.)

     Co-payment (CHIP only) means the amount that a Member is required to pay when
utilizing certain benefits within the health care plan. Once the payment is made, further payment
is not required by the Member.

     Corrective Action Plan means the detailed written plan that may be required by HHSC
to correct or resolve a deficiency or event causing the assessment of a remedy or damage against
HMO.

     Court-Ordered Commitment means a commitment of a STAR, STAR+PLUS or CHIP Member to a
psychiatric facility for treatment ordered by a court of law pursuant to the Texas Health and
Safety Code, Title VII Subtitle C.

     Covered Services means Health Care Services the HMO must arrange to provide to
Members, including all services required by the Contract and state and federal law, and all
Value-added Services negotiated by the Parties (see Attachments B-2, B-2.1, B-2.2 and B-3 of the
HHSC Managed Care Contract relating to “Covered Services” and “Value-added Services”). Covered
Services include Behavioral Health Services.

     Credentialing means the process of collecting, assessing, and validating
qualifications and other relevant information pertaining to a health care provider to determine
eligibility and to deliver Covered Services.

     Cultural Competency means the ability of individuals and systems to provide services
effectively to people of various cultures, races, ethnic backgrounds, and religions in a manner
that
recognizes, values, affirms, and respects the worth of the individuals and protects and preserves
their dignity.

     Date of Disenrollment means the last day of the last month for which HMO receives
payment for a Member.

     Day means a calendar day unless specified otherwise.

     Default Enrollment means the process established by HHSC to assign a mandatory STAR,
STAR+PLUS, or CHIP Perinate enrollee who has not selected an MCO to an MCO.

     Deliverable means a written or recorded work product or data prepared, developed, or
procured by HMO as part of the Services under the Contract for the use or benefit of HHSC or the
State of Texas.

     Delivery Supplemental Payment means a one-time per pregnancy supplemental payment for
STAR, CHIP and CHIP Perinatal HMOs.

     DADS means the Texas Department of Aging and Disability Services or its successor
agency (formerly Department of Human Services).

     DSHS means the Texas Department of State Health Services or its successor agency
(formerly Texas Department of Health and Texas Department of Mental Health and Mental
Retardation).

     Disease Management means a system of coordinated healthcare interventions and
communications for populations with conditions in which patient self-care efforts are
significant.

     Disproportionate Share Hospital (DSH) means a hospital that serves a higher than
average number of Medicaid and other low-income patients and receives additional reimbursement from
the State.

     Disabled Person or Person with Disability means a person under sixty-five (65) years
of age, including a child, who qualifies for Medicaid services because of a disability.

     Disability means a physical or mental impairment that substantially limits one or
more of an individual’s major life activities, such as caring for oneself, performing manual
tasks, walking, seeing, hearing, speaking, breathing, learning, and/or working.

     Disability-related Access means that facilities are readily accessible to and usable
by individuals with disabilities, and that auxiliary aids and services are provided to ensure
effective communication, in compliance with Title III of the Americans with Disabilities Act.

     Disaster Recovery Plan means the document developed by the HMO that outlines details
for the restoration of the MIS in the event of an emergency or disaster.

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     DSM-IV means the Diagnostic and Statistical Manual of Mental Disorders, Fourth
Edition, which is the American Psychiatric Association’s official classification of behavioral
health disorders.

     Dual Eligibles means Medicaid recipients who are also eligible for Medicare.

     ECI means Early Childhood Intervention, a federally mandated program for infants and children
under the age of three with or at risk for developmental delays and/or disabilities. The federal
ECI regulations are found at 34 §C.F.R. 303.1 et seq. The State ECI rules are found at 25 TAC
§621.21 et seq.

     EDI means electronic data interchange.

     Effective Date means the effective date of this Contract, as specified in the HHSC
Managed Care Contract document.

     Effective Date of Coverage means the first day of the month for which the HMO has
received payment for a Member.

     Eligibles means individuals residing in one of the Service Areas and eligible to
enroll in a STAR, STAR+PLUS, CHIP, or CHIP Perinatal HMO, as applicable.

     Emergency Behavioral Health Condition means any condition, without regard to the
nature or cause of the condition, which in the opinion of a prudent layperson possessing an
average knowledge of health and medicine:

     (1) requires immediate intervention and/or medical attention without which Members would
present an immediate danger to themselves or others, or

     (2) which renders Members incapable of controlling, knowing or understanding the
consequences of their actions.

     Emergency Services means covered inpatient and outpatient services furnished by a
provider that is qualified to furnish such services under the Contract and that are needed to
evaluate or stabilize an Emergency Medical Condition and/or an Emergency Behavioral Health
Condition, including Post-stabilization Care Services.

     Emergency Medical Condition means a medical condition manifesting itself by acute
symptoms of recent onset and 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 care could result in:

     (1) placing the patient’s health in serious jeopardy;

     (2) serious impairment to bodily functions;

     (3) serious dysfunction of any bodily organ or part;

     (4) serious disfigurement; or

     (5) in the case of a pregnant women, serious jeopardy to the health of a woman or her
unborn child.

     Encounter means a Covered Service or group of Covered Services delivered by a
Provider to a Member during a visit between the Member and Provider. This also includes
Value-added Services.

     Encounter Data means data elements from Fee-for-Service claims or capitated services
proxy claims that are submitted to HHSC by the HMO in accordance with HHSC’s required format for
Medicaid and CHIP HMOs.

     Enrollment Report/Enrollment File means the daily or monthly list of Eligibles that
are enrolled with an HMO as Members on the day or for the month the report is issued.

     EPSDT means the federally mandated Early and Periodic Screening, Diagnosis and
Treatment program contained at 42 U.S.C. 1396d(r). The name has been changed to Texas Health Steps
(THSteps) in the State of Texas.

     Exclusive Provider Organization (EPO) means the vendor contracted with HHSC to operate
the CHIP EPO in Texas.

     Expansion Area means a county or Service Area that has not previously provided
healthcare to HHSC’s HMO Program Members utilizing a managed care model.

     Expansion Children means children who are generally at least one, but under age 6, and
live in a family whose income is at or below 133 percent of the federal poverty level (FPL).
Children in this coverage group have either elected to bypass TANF or are not eligible for TANF in
Texas.

     Experience Rebate means the portion of the HMO’s net income before taxes that is
returned to the State in accordance with Section 10.11 for the STAR, CHIP and CHIP Perinatal
Programs and 10.11.1 for the STAR+PLUS Program (“Experience Rebate”).

     Expedited Appeal means an appeal to the HMO in which the decision is required quickly
based on the Member’s health status, and the amount of time necessary to participate in a standard
appeal could jeopardize the Member’s life or health or ability to attain, maintain, or regain
maximum function.

     Expiration Date means the expiration date of this Contract, as specified in HHSC’s
Managed Care Contract document.

     External Quality Review Organization (EQRO) means the entity that contracts with HHSC
to provide external review of access to and quality of healthcare provided to Members of HHSC’s HMO
Programs.

     Fair Hearing means the process adopted and implemented by HHSC in 25 T.A.C. Chapter
1, in

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compliance with federal regulations and state rules relating to Medicaid Fair Hearings.

     Fee-for-Service means the traditional Medicaid Health Care Services payment system
under which providers receive a payment for each unit of service according to rules adopted
pursuant to Chapter 32, Texas Human Resources Code.

     Force Majeure Event means any failure or delay in performance of a duty by a Party
under this Contract that is caused by fire, flood, hurricane, tornadoes, earthquake, an act of God,
an act of war, riot, civil disorder, or any similar event beyond the reasonable control of such
Party and without the fault or negligence of such Party.

     FQHC means a Federally Qualified Health Center, certified by CMS to meet the
requirements of §1861(aa)(3) of the Social Security Act as a federally qualified health center,
that is enrolled as a provider in the Texas Medicaid program.

     FPL means the Federal Poverty Level.

     Fraud means an intentional deception or misrepresentation made by a person with the
knowledge that the deception could result in some unauthorized benefit to himself or some other
person. It includes any act that constitutes fraud under applicable federal or state law.

     FSR means Financial Statistical Report.

     Functionally Necessary Covered Services means Community-based Long Term Care
services provided to assist STAR+PLUS Members with activities of daily living based on a
functional assessment of the Member’s activities of daily living and a determination of the
amount of supplemental supports necessary for the STAR+PLUS Member to remain independent or in
the most integrated setting possible.

     Habilitative and Rehabilitative Services means Health Care Services described in
Attachment B-2 that may be required by children who fail to reach (habilitative) or have lost
(rehabilitative) age appropriate developmental milestones.

     Health Care Services means the Acute Care, Behavioral Health Care and health-related
services that an enrolled population might reasonably require in order to be maintained in good
health.

     Health and Human Services Commission or HHSC means the administrative agency
within the executive department of Texas state government established under Chapter 531, Texas
Government Code, or its designee, including, but not limited to, the HHS Agencies.

     Health-related Materials are materials developed by the HMO or obtained from a third
party relating to the prevention, diagnosis or treatment of a medical condition.

     HEDIS. the Health Plan Employer Data and Information Set, is a registered trademark of
NCQA. HEDIS is a set of standardized performance measures designed to reliably compare the
performance of managed health care plans. HEDIS is sponsored, supported and maintained by NCQA.

     HHS Agency means the Texas health and human service agencies subject to HHSC’s
oversight under Chapter 531, Texas Government Code, and their successor agencies.

     HHSC Administrative Services Contractor (ASC) means an entity performing HMO
administrative services functions, including member enrollment functions, for STAR, STAR+PLUS,
CHIP, or CHIP Perinatal HMO Programs under contract with HHSC.

     HHSC HMO Programs or HMO Programs mean the STAR, STAR+PLUS, CHIP, and CHIP
Perinatal HMO Programs.

     HHSC Uniform Managed Care Manual means the manual published by or on behalf of HHSC
that contains policies and procedures required of all HMOs participating in the HHSC Programs.

     HIPAA means the Health Insurance Portability and Accountability Act of 1996, P.L.
104-191 (August 21, 1996), as amended or modified.

     HMO or Contractor means the HMO that is a party to this Contract, and is
either:

     (1) an insurer licensed by TDI as a Health Maintenance Organization in accordance with
Chapter 843 of the Texas Insurance Code, or

     (2) a certified Approved Non-Profit Health Corporation (ANHC) formed in compliance with
Chapter 844 of the Texas Insurance Code.

     HMO Administrative Services means the performance of services or functions, other than
the direct delivery of Covered Services, necessary for the management of the delivery of and
payment for Covered Services, including but not limited to Network, utilization, clinical and/or
quality management, service authorization, claims processing, management information systems
operation and reporting.

     HMO’s Service Area means all the counties included in any HHSC-defined Core or
Optional Service Area, as applicable to each HMO Program and within which the HMO has been
selected to provide HMO services.

     Home and Community Support Services Agency or HCSS means an entity licensed to
provide home health, hospice, or personal assistance services provided to individuals in their own
home or independent living environment as prescribed by a physician or individualized service plan.
Each HCSS must provide clients with a plan of care that includes specific services the agency
agrees to perform. The

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encies are licensed and monitored by DADS or its successor.

     Hospital means a licensed public or private institution as defined by Chapter 241,
Texas Health and Safety Code, or in Subtitle C, Title 7, Texas Health and Safety Code.

     ICF-MR means an intermediate care facility for the mentally retarded.

     Individual Family Service Plan (IFSP) means the plan for services required by the
Early Childhood Intervention (ECI) Program and developed by an interdisciplinary team.

     Initial Contract Period means the Effective Date of the Contract through August
31, 2008.

     Inpatient Stay means at least a 24-hour stay in a facility licensed to provide
hospital care.

     JCAHO means Joint Commission on Accreditation of Health Care Organizations.

     Joint Interface Plan (JIP) means a document used to communicate basic system
interface information. This information includes: file structure, data elements, frequency, media,
type of file, receiver and sender of the file, and file I.D. The JIP must include each of the
HMO’s interfaces required to conduct business under this Contract. The JIP must address the
coordination with each of the HMO’s interface partners to ensure the development and maintenance
of the interface; and the timely transfer of required data elements between contractors and
partners.

     Key HMO Personnel means the critical management and technical positions identified by
the HMO in accordance with Article 4.

     Linguistic Access means translation and interpreter services, for written and spoken
language to ensure effective communication. Linguistic access includes sign language
interpretation, and the provision of other auxiliary aids and services to persons with
disabilities.

     Local Health Department means a local health department established pursuant to
Health and Safety Code, Title 2, Local Public Health Reorganization Act §121.031.

     Local Mental Health Authority (LMHA) means an entity within a specified region
responsible for planning, policy development, coordination, and resource development and
allocation and for supervising and ensuring the provision of mental health care services to
persons with mental illness in one or more local service areas.

     Major Population Group means any population, which represents at least 10% of the
Medicaid, CHIP, and/or CHIP Perinatal Program population in any of the counties in the Service
Area served by the HMO.

     Material Subcontractor or Major Subcontractor means any entity that
contracts with the HMO for all or part of the HMO Administrative Services, where the value of the
subcontracted HMO Administrative Service(s) exceeds $100,000, or is reasonably expected to exceed
$100,000, per State Fiscal Year. Providers in the HMO’s Provider Network are not Material
Subcontractors.

     Mandated or Required Services means services that a state is required to offer to
categorically needy clients under a state Medicaid plan.

     Marketing means any communication from the HMO to a Medicaid or CHIP Eligible who is
not enrolled with the HMO that can reasonably be interpreted as intended to influence the Eligible
to:

     (1) enroll with the HMO; or

     (2) not enroll in, or to disenroll from, another MCO.

     Marketing Materials means materials that are produced in any medium by or on behalf
of the HMO and can reasonably be interpreted as intending to market to potential Members.
Health-related Materials are not Marketing Materials.

     MCO means managed care organization.

     Medicaid means the medical assistance entitlement program authorized and funded
pursuant to Title XIX, Social Security Act (42 U.S.C. §1396 et seq.) and administered by HHSC.

     Medicaid HMOs means contracted HMOs participating in STAR and/or STAR+PLUS.

     Medical Assistance Only (MAO) means a person that does not receive SSI benefits but
qualifies financially and functionally for limited Medicaid assistance.

     Medical Home means a PCP or specialty care Provider who has accepted the
responsibility for providing accessible, continuous, comprehensive and coordinated care to Members
participating in a HHSC HMO Program.

     Medically Necessary means:

     (1) Non-behavioral health related Health Care Services that are:

(a) reasonable and necessary to prevent illnesses or medical conditions, or provide
early screening, interventions, and/or treatments for conditions that cause suffering or
pain, cause physical deformity or limitations in function, threaten to cause or worsen a
handicap, cause illness or infirmity of a Member, or endanger life;

(b) provided at appropriate facilities and at the appropriate levels of care for the
treatment of a Member’s health conditions;

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(c) consistent with health care practice guidelines and standards that are endorsed by
professionally recognized health care organizations or governmental agencies;

(d) consistent with the diagnoses of the conditions;

(e) no more intrusive or restrictive than necessary to provide a proper balance of
safety, effectiveness, and efficiency;

(f) are not experimental or investigative; and

(g) are not primarily for the convenience of the Member or Provider; and

     (2) Behavioral Health Services that are:

     (a) are reasonable and necessary for the diagnosis or treatment of a mental health or
chemical dependency disorder, or to improve, maintain, or prevent deterioration of functioning
resulting from such a disorder;

     (b) are in accordance with professionally accepted clinical guidelines and standards of
practice in behavioral health care;

     (c) are furnished in the most appropriate and least restrictive setting in which services
can be safely provided;

     (d) are the most appropriate level or supply of service that can safely be provided;

     (e) could not be omitted without
adversely affecting the Member’s mental and/or physical health or the quality of care
rendered;

     (f) are not experimental or investigative; and

     (g) are not primarily for the convenience of the Member or Provider.

     Member means a person who:

     (1) is entitled to benefits under Title XIX of the Social Security Act and Medicaid, is in a
Medicaid eligibility category included in the STAR or STAR+PLUS Program, and is enrolled in the
STAR or STAR+PLUS Program and the HMO’s STAR or STAR+PLUS HMO;

     (2) is entitled to benefits under Title XIX of the Social Security Act and Medicaid, is in a
Medicaid eligibility category included as a voluntary participant in the STAR or STAR+PLUS
Program, and is enrolled in the STAR or STAR+PLUS Program and the HMO’s STAR or STAR+PLUS HMO;

     (3) has met CHIP eligibility criteria and is enrolled in the HMO’s CHIP HMO; or

     (4) has met CHIP Perinatal Program eligibility criteria and is enrolled in the HMO’s CHIP
Perinatal Program.

     Member Materials means all written materials produced or authorized by the HMO and
distributed to Members or potential members containing information concerning the HMO Program(s).
Member Materials include, but are not limited to, Member ID cards, Member handbooks, Provider
directories, and Marketing Materials.

     Member Month means one Member enrolled with the HMO during any given month. The
total Member Months for each month of a year comprise the annual Member Months.

     Member(s) with Special Health Care Needs (MSHCN) includes a Child or Children with a
Special Health Care Need (CSHCN) and any adult Member who:

     (1) has a serious ongoing illness, a Chronic or Complex Condition, or a Disability that
has lasted or is anticipated to last for a significant period of time, and

     (2) requires regular, ongoing therapeutic intervention and evaluation by
appropriately trained health care personnel.

     Minimum Data Set for Home Care (MDS-HC) means the assessment instrument included in
the Uniform Managed Care Manual that is used to collect data such as health, social support and
service use information on persons receiving long term care services outside of an institutional
setting.

     MIS means Management Information System.

     National Committee for Quality Assurance (NCQA) means the independent
organization that accredits HMOs, managed behavioral health organizations, and accredits and
certifies disease management programs. HEDIS and the Quality Compass are registered trademarks
of NCQA.

     Net Income before Taxes means an aggregate excess of Revenues over Allowable
Expenses.

     Network or Provider Network means all Providers that have a contract with the HMO, or
any Subcontractor, for the delivery of Covered Services to the HMO’s Members under the Contract.

     Network Provider or Provider means an appropriately credentialed and licensed
individual, facility, agency, institution, organization or other entity, and its employees and
subcontractors, that has a contract with the HMO for the delivery of Covered Services to the HMO’s
Members.

     Non-capitated Services means those Medicaid services identified in Attachment B-1,
Section 8.2.2.8.

     Non-provider Subcontracts means contracts between the HMO and a third party that
performs a function, excluding delivery of health care services, that the HMO is required to
perform under its Contract with HHSC.

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     Nursing Facility Cost Ceiling means the annualized cost of serving a client in a
nursing facility. A per diem cost is established for each Medicaid nursing facility resident based
on the level of care needed. This level of care is referred to as the Texas Index for Level of
Effort or the TILE level. The per diem cost is annualized to achieve the nursing facility ceiling.

     Nursing Facility Level of Care means the determination that the level of care
required to adequately serve a STAR+PLUS Member is at or above the level of care provided by a
nursing facility.

     OB/GYN means obstetrician-gynecologist.

     Open Panel means Providers who are accepting new patients for the HMO Program(s)
served.

     Operational Start Date means the first day on which an HMO is responsible for
providing Covered Services to Members of an HMO Program in a Service Area in exchange for a
Capitation Payment under the Contract. The Operational Start Date may vary per HMO Program and
Service Area. The Operational Start Date(s) applicable to this Contract are set forth in the HHSC
Managed Care Contract document.

     Optional Service Area (OSA) means an HHSC defined county or counties, contiguous to a
CSA, in which CHIP or CHIP Perinatal HMOs provide health care coverage to CHIP Eligibles. The CHIP
or CHIP Perinatal HMO must serve the associated Core Service Area in order to provide coverage in
the OSA. The HHSC Managed Care Contract document includes OSAs, if applicable.

     Operations Phase means the period of time when HMO is responsible for providing the
Covered Services and all related Contract functions for a Service Area. The Operations Phase
begins on the Operational Start Date, and may vary by HMO Program and Service Area.

     Outpatient Hospital Services means diagnostic, therapeutic, and rehabilitative
services that are provided to Members in an organized medical facility, for less than a 24-hour
period, by or under the direction of a physician. To distinguish between the types of services
being billed, hospitals must indicate a three-digit type of bill (TOB) code in block 4 of the UB-92
claim form. Most commonly for hospitals, this code will be 131 for an outpatient hospital claims.

     Out-of-Network (OON) means an appropriately licensed individual, facility, agency,
institution, organization or other entity that has not entered into a contract with the HMO for the
delivery of Covered Services to the HMO’s Members.

     Parties means HHSC and HMO, collectively. Party means either HHSC or HMO,
individually.

     Pended Claim means a claim for payment, which requires additional information before
the claim can be adjudicated as a clean claim.

     Population Risk Group means a distinct group of members identified by age, age range,
gender, type of program, or eligibility category.

     Post-stabilization Care Services means Covered Services, related to an Emergency
Medical Condition that are provided after a Medicaid Member is stabilized in order to maintain the
stabilized condition, or, under the circumstances described in 42 §§C.F.R. 438.114(b)&(e) and 42
C.F.R. §422.113(c)(iii) to improve or resolve the Medicaid Member’s condition.

     Primary Care Physician or Primary Care Provider (PCP) means a physician or
provider who has agreed with the HMO to provide a Medical Home to Members and who is responsible
for providing initial and primary care to patients, maintaining the continuity of patient care,
and initiating referral for care.

     Provider types that can be PCPs are from any of the following practice areas: General
Practice, Family Practice, Internal Medicine, Pediatrics, Obstetrics/Gynecology (OB/GYN),
Pediatric and Family Advanced Practice Nurses (APNs) and Physician Assistants (when practicing
under the supervision of a physician specializing in Family Practice, Internal Medicine,
Pediatrics or Obstetrics/Gynecology who also qualifies as a PCP under this contract), , Federally
Qualified Health Centers (FQHCs), Rural Health Clinics (RHCs) and similar community clinic s; and
specialist physicians who are willing to provide a Medical Home to selected Members with special
needs and conditions.

     Proposal means the proposal submitted by the HMO in response to the RFP.

     Provider or Network Provider means an appropriately credentialed and licensed
individual, facility, agency, institution, organization or other entity, and its employees and
subcontractors, that has a contract with the HMO for the delivery of Covered Services to the HMO’s
Members.

     Provider Contract means a contract entered into by a direct provider of health
care services and the HMO or an intermediary entity.

     Provider Network or Network means all Providers that have contracted with the HMO
for the applicable HMO Program.

     Proxy Claim Form means a form submitted by Providers to document services delivered
to Members under a capitated arrangement. It is not a claim for payment.

     Public Health Entity means a HHSC Public Health Region, a Local Health
Department, or a hospital district.

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     Public Information means information that:

     (1) Is collected, assembled, or maintained under a law or ordinance or in connection with the
transaction of official business by a governmental body or for a governmental body; and

     (2) The governmental body owns or has a right of access to.

     Qualified and Disabled Working Individual (QDWI) means an individual whose
only Medicaid benefit is payment of the Medicare Part A premium.

     Qualified Medicare Beneficiary (QM) means a Medicare beneficiary whose only Medicaid
benefits are payment of Medicare premiums, deductibles, and coinsurance for individuals who are
entitled to Medicare Part A, whose income does not exceed 100% of the federal poverty level, and whose
resources do not exceed twice the resource limit of the SSI program.

     Quality Improvement means a system to continuously examine, monitor and revise
processes and systems that support and improve administrative and clinical functions.

     Rate Cell means a Population Risk Group for which a Capitation Rate has been
determined.

     Rate Period 1 means the period of time beginning on the Operational Start Date and
ending on August 31, 2007.

     Rate Period 2 means the period of time beginning on September 1, 2007 and ending
on August 31, 2008.

     Real-Time Captioning (also known as CART, Communication Access Real-Time Translation)
means a process by which a trained individual uses a shorthand machine, a computer, and real-time
translation software to type and simultaneously translate spoken language into text on a computer
screen. Real Time Captioning is provided for individuals who are deaf, have hearing impairments,
or have unintelligible speech. It is usually used to interpret spoken English into text English
but may be used to translate other spoken languages into text.

     Readiness Review means the assurances made by a selected HMO and the examination
conducted by HHSC, or its agents, of HMO’s ability, preparedness, and availability to fulfill
its obligations under the Contract.

     Request for Proposals or RFP means the procurement solicitation instrument
issued by HHSC under which this Contract was awarded and all RFP addenda, corrections or
modifications, if any.

     Revenue means all managed care revenue received by the HMO pursuant to this Contract
during the Contract Period, including retroactive adjustments made by HHSC. This would include any
funds earned on Medicaid or CHIP managed care funds such as investment income, earned interest, or
third party administrator earnings from services to delegated Networks.

     Risk means the potential for loss as a result of expenses and costs of the HMO exceeding
payments made by HHSC under the Contract.

     Routine Care means health care for covered preventive and medically necessary
Health Care Services that are non-emergent or non-urgent.

     Rural Health Clinic (RHC) means an entity that meets all of the requirements for
designation as a rural health clinic under 1861(aa)(1) of the Social Security Act and approved for
participation in the Texas Medicaid Program.

     Service Coordination means a specialized care management service that is performed
by a Service Coordinator and that includes but is not limited to:

     (1) identification of needs, including physical health, mental health services and for
STAR+PLUS Members, long term support services,

     (2) development of a Service Plan to address those identified needs;

     (3) assistance to ensure timely and a coordinated access to an array of providers and
Covered Services;

     (4) attention to addressing unique needs of Members; and

     (5) coordination of Plan services with social and other services delivered outside the
Plan, as necessary and appropriate.

     Service Coordinator means the person with primary responsibility for providing
service coordination and care management to STAR+PLUS Members.

     Scope of Work means the description of Services and Deliverables specified in this
Contract, the RFP, the HMO’s Proposal, and any agreed modifications to these documents.

     SDX means State Data Exchange.

     SED means severe emotional disturbance as determined by a Local Mental Health Authority.

     Service Area means the counties included in any HHSC-defined Core and Optional
Service Area as applicable to each HMO Program.

     Service Management is an administrative service in the STAR, CHIP and CHIP Perinatal
Programs performed by the HMO to facilitate development of a Service Plan and coordination of
services among a Member’s PCP, specialty providers and non-medical providers to ensure Members with
Special Health Care Needs and/or Members needing high-cost treatment have access to, and
appropriately utilize, Medically Necessary Covered Services, Noncapitated Services, and other
services and supports.

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     Service Plan (SP) means an individualized plan developed with and for Members with
Special Health Care Needs, including persons with disabilities or chronic or complex conditions.
The SP includes, but is not limited to, the following:

     (1) the Member’s history;

     (2) summary of current medical and social needs and concerns;

     (3) short and long term needs and goals;

     (4) a list of services required, their frequency, and

     (5) a description of who will provide such services.

     The Service Plan should incorporate as a component of the plan the Individual Family
Service Plan (IFSP) for members in the Early Childhood Intervention (ECI) Program

     The Service Plan may include information for services outside the scope of covered benefits
such as how to access affordable, integrated housing.

     Services means the tasks, functions, and responsibilities assigned and delegated to
the HMO under this Contract.

     Significant Traditional Provider or STP (for Medicaid) means primary care
providers and long-term care providers, identified by HHSC as having provided a significant
level of care to Fee-for-Service clients. Disproportionate Share Hospitals (DSH) are also
Medicaid STPs.

     Significant Traditional Provider or STP (for CHIP) means primary care
providers participating in the CHIP HMO Program prior to May 2004, and Disproportionate Share
Hospitals (DSH).

     Skilled Nursing Facility Services (CHIP only) Services provided in a facility that
provides nursing or rehabilitation services and Medical supplies and use of appliances and
equipment furnished by the facility.

     Software means all operating system and applications software used by the HMO to
provide the Services under this Contract.

     SPMI means severe and persistent mental illness as determined by the Local Mental
Health Authority.

     Specialty Hospital means any inpatient hospital that is not a general Acute Care
hospital.

     Specialty Therapy means physical therapy, speech therapy or occupational therapy.

     Specified Low-Income Medicare Beneficiary (SLMB) means a Medicare
beneficiary whose only Medicaid benefit is payment of the Medicare Part B premium.

     SSA means the Social Security Administration.

     SSI Administrative Fee means the monthly per member per month fee paid to an HMO to
provide administrative services to manage the healthcare of the HMO’s voluntary SSI beneficiaries. These
services are described in more detail under Section 10.10 of this document.

     Stabilize means to provide such medical care as to assure within reasonable medical
probability that no deterioration of the condition is likely to result from, or occur from, or
occur during discharge, transfer, or admission of the Member.

     STAR+PLUS or STAR+PLUS Program means the State of Texas Medicaid managed care program
in which HHSC contracts with HMOs to provide, arrange, and coordinate preventive, primary, acute
and long term care Covered Services to adult persons with disabilities and elderly persons age 65
and over who qualify for Medicaid through the SSI program and/or the MAO program. Children under
age 21, who qualify for Medicaid through the SSI program, may voluntarily participate in the
STAR+PLUS program.

     STAR+PLUS HMOs means contracted HMOs participating in the STAR+PLUS Program.

     State Fiscal Year (SFY) means a 12-month period beginning on September 1 and
ending on August 31 the following year.

     Subcontract means any agreement between the HMO and other party to fulfill the
requirements of the Contract.

     Subcontractor means any individual or entity, including an Affiliate, that has
entered into a Subcontract with HMO.

     Subsidiary means an Affiliate controlled by such person or entity directly or
indirectly through one or more intermediaries.

     Supplemental Security Income (SSI) means a Federal income supplement program funded by
general tax revenues (not Social Security taxes) designed to help aged, blind and disabled people
with little or no income by providing cash to meet basic needs for food, clothing and shelter.

     T.A.C. means Texas Administrative Code.

     TDD means telecommunication device for the deaf. It is interchangeable with the term
Teletype machine or TTY.

     TDI means the Texas Department of Insurance.

     Temporary Assistance to Needy Families (TANF) means the federally funded
program that provides assistance to single parent families with children who meet the categorical
requirements for aid. This program was formerly known as the Aid to Families with Dependent
Children (AFDC) program.

     Texas Health Network (THN) is the name of the Medicaid primary care case management
program in Texas.

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     Texas Health Steps (THSteps) is the name adopted by the State of Texas for the
federally mandated Early and Periodic Screening, Diagnosis and Treatment (EPSDT) program. It
includes the State’s Comprehensive Care Program extension to EPSDT, which adds benefits to the
federal EPSDT requirements contained in 42 U.S.C. §1396d(r), and defined and codified at 42 C.F.R.
§§440.40 and 441.56-62. HHSC’s rules are contained in 25 T.A.C., Chapter 33 (relating to Early and
Periodic Screening, Diagnosis and Treatment).

     Texas Medicaid Bulletin means the bi-monthly update to the Texas Medicaid Provider
Procedures Manual.

     Texas Medicaid Provider Procedures Manual means the policy and procedures manual
published by or on behalf of HHSC that contains policies and procedures required of all health
care providers who participate in the Texas Medicaid program. The manual is published annually and
is updated bimonthly by the Texas Medicaid Bulletin.

     Texas Medicaid Service Delivery Guide means an attachment to the Texas Medicaid
Provider Procedures Manual.

     Third Party Liability (TPL) means the legal responsibility of another individual or
entity to pay for all or part of the services provided to Members under the Contract (see 1 TAC
§354.2301 et seq., relating to Third Party Resources).

     Third Party Recovery (TPR) means the recovery of payments on behalf of a Member by
HHSC or the HMO from an individual or entity with the legal responsibility to pay for the Covered
Services.

     TP 40 means Type Program 40, which is a Medicaid program eligibility type
assigned to pregnant women under 185% of the federal poverty level (FPL).

     TP 45 means Type Program 45, which is a Medicaid program eligibility code
assigned to newborns (under 12 months of age) who are born to mothers who are Medicaid eligible
at the time of the child’s birth.

     Transition Phase includes all activities the HMO is required to perform between the
Contract Effective Date and the Operational Start Date for a Service Area.

     Turnover Phase includes all activities the HMO is required to perform in order to
close out the Contract and/or transition Contract activities and operations for a Service Area to
HHSC or a subsequent contractor.

     Turnover Plan means the written plan developed by HMO, approved by HHSC, to be employed during the Turnover Phase. The Turnover
Plan
describes HMO’s policies and procedures that will assure:

     (1) The least disruption in the delivery of Health Care Services to those Members who are
enrolled with the HMO during the transition to a subsequent health plan;

     (2) Cooperation with HHSC and the subsequent health plan in notifying Members of the
transition and of their option to select a new plan, as requested and in the form required or
approved by HHSC; and

     (3) Cooperation with HHSC and the subsequent health plan in transferring information to
the subsequent health plan, as requested and in the form required or approved by HHSC.

     URAC /American Accreditation Health Care Commission means the independent
organization that accredits Utilization Review functions and offers a variety of other
accreditation and certification programs for health care organizations.

     Urgent Behavioral Health Situation means a behavioral health condition that requires
attention and assessment within twenty-four (24) hours but which does not place the Member in
immediate danger to himself or herself or others and the Member is able to cooperate with
treatment.

     Urgent Condition means a health condition including an Urgent Behavioral Health
Situation that is not an emergency but is severe or painful enough to cause a prudent layperson,
possessing the average knowledge of medicine, to believe that his or her condition requires
medical treatment evaluation or treatment within twenty-four (24) hours by the Member’s PCP or PCP
designee to prevent serious deterioration of the Member’s condition or health.

     Utilization Review means the system for retrospective, concurrent, or prospective
review of the medical necessity and appropriateness of Health Care Services provided, being
provided, or proposed to be provided to a Member. The term does not include elective requests for
clarification of coverage.

     Value-added Services means additional services for coverage beyond those specified
in the RFP. Value-added Services must be actual health care services or benefits rather than
gifts, incentives, health assessments or educational classes. Temporary phones, cell phones,
additional transportation benefits, and extra home health services may be Value-added Services,
if approved by HHSC. Best practice approaches to delivering Covered Services are not considered
Value-added Services.

     Waste means practices that are not cost-efficient.

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Article 3. General Terms & Conditions

     Section 3.01 Contract elements.

     (a) Contract documentation.

     The Contract between the Parties will consist of the HHSC Managed Care Contract document and
all attachments and amendments.

     (b) Order of documents.

     In the event of any conflict or contradiction between or among the contract documents,
the documents shall control in the following order of precedence:

     (1) The final executed HHSC Managed Care Contract document, and all amendments thereto;

     (2) HHSC Managed Care Contract Attachment A — “HHSC’s Uniform Managed Care Contract Terms
and Conditions,” and all amendments thereto;

     (3) HHSC Managed Care Contract Attachment B — “Scope of Work/Performance Measures,” and
all attachments and amendments thereto;

     (4) The HHSC Uniform Managed Care Manual, and all attachments and amendments thereto;

     (5) HHSC Managed Care Contract Attachment C-3 — “Agreed Modifications to HMO’s
Proposal;”

     (6) HHSC Managed Care Contract Attachment C-2, “HMO Supplemental Responses,” and

     (7) HHSC Managed Care Contract Attachment C-1 — “HMO’s Proposal.”

     Section 3.02 Term of the Contract.

     The term of the Contract will begin on the Effective Date and will conclude on the Expiration
Date. The Parties may renew the Contract for an additional period or periods, but the Contract
Term may not exceed a total of eight (8) years. All reserved contract extensions beyond the
Expiration Date will be subject to good faith negotiations between the Parties and mutual
agreement to the extension(s).

     Section 3.03 Funding.

     This Contract is expressly conditioned on the availability of state and federal appropriated
funds. HMO will have no right of action against HHSC in the event that HHSC is unable to perform
its obligations under this Contract as a result of the suspension, termination, withdrawal, or
failure of funding to HHSC or lack of sufficient funding of HHSC for any activities or functions
contained within the scope of this Contract. If funds become unavailable, the provisions of
Article 12 (“Remedies and Disputes”) will apply. HHSC will use all reasonable efforts to ensure
that such funds are available, and will negotiate in good
faith with HMO to resolve any HMO claims for payment that represent accepted Services or
Deliverables that are pending at the time funds become unavailable. HHSC shall make best efforts to
provide reasonable written advance notice to HMO upon learning that funding for this Contract may
be unavailable.

     Section 3.04 Delegation of authority.

     Whenever, by any provision of this Contract, any right, power, or duty is imposed or conferred
on HHSC, the right, power, or duty so imposed or conferred is possessed and exercised by the
Commissioner unless any such right, power, or duty is specifically delegated to the duly appointed
agents or employees of HHSC. The Commissioner will reduce any such delegation of authority to
writing and provide a copy to HMO on request.

     Section 3.05 No waiver of sovereign immunity.

     The Parties expressly agree that no provision of this Contract is in any way intended to
constitute a waiver by HHSC or the State of Texas of any immunities from suit or from liability
that HHSC or the State of Texas may have by operation of law.

     Section 3.06 Force majeure.

     Neither Party will be liable for any failure or delay in performing its obligations under the
Contract if such failure or delay is due to any cause beyond the reasonable control of such Party,
including, but not limited to, unusually severe weather, strikes, natural disasters, fire, civil
disturbance, epidemic, war, court order, or acts of God. The existence of such causes of delay or
failure will extend the period of
performance in the exercise of reasonable diligence until after the causes of delay or failure
have been . removed. Each Party must inform the other in writing with proof of receipt within
five (5) Business Days of the existence of a force majeure event or otherwise waive this right as
a defense.

     Section 3.07 Publicity.

     (a) HMO may use the name of HHSC, the State of Texas, any HHS Agency, and the name of the
HHSC HMO Program in any media release, public announcement, or public disclosure relating to the
Contract or its subject matter only if, at least seven (7) calendar days prior to distributing
the material, the HMO submits the information to HHSC for review and comment. If HHSC has not
responded within seven (7) calendar days, the HMO may use the submitted information. HHSC
reserves the right to object to and require changes to the publication if, at HHSC’s sole
discretion, it determines that the publication does not accurately reflect the terms of the
Contract or the HMO’s performance under the Contract. .

     (b) HMO will provide HHSC with one (1) electronic copy of any information described in
Subsection 3.07(a) prior to public release. HMO will

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provide additional copies, including hard copies, at the request of HHSC.

     (c) The requirements of Subsection 3.07(a) do not apply to:

     (1) proposals or reports submitted to HHSC, an administrative agency of the State of
Texas, or a governmental agency or unit of another state or the federal government;

     (2) information concerning the Contract’s terms, subject matter, and estimated
value:

     (a) in any report to a governmental body to which the HMO is required by law to
report such information, or

     (b) that the HMO is otherwise required by law to disclose; and

     (3) Member Materials (the HMO must comply with the Uniform Managed Care Manual’s
provisions regarding the review and approval of Member Materials).

     Section 3.08 Assignment.

     (a) Assignment by HMO.

     HMO shall not assign all or any portion of its rights under or interests in the Contract
or delegate any of its duties without prior written consent of HHSC. Any written request for
assignment or delegation must be accompanied by written acceptance of the assignment or
delegation by the assignee or delegation by the delegate. Except where otherwise agreed in
writing by HHSC, assignment or delegation will not release HMO from its obligations pursuant to
the Contract. An HHSC-approved Material Subcontract will not be considered to be an assignment
or delegation for purposes of this section.

     (b) Assignment by HHSC.

     HMO understands and agrees HHSC may in one or more transactions assign, pledge, transfer,
or hypothecate the Contract. This assignment will only be made to another State agency or a
non-State agency that is contracted to perform agency support.

     (c) Assumption.

     Each party to whom a transfer is made (an “Assignee”) must assume all or any part of HMO’S
or HHSC’s interests in the Contract, the product, and any documents executed with respect to
the Contract, including, without limitation, its obligation for all or any portion of the
purchase payments, in whole or in part.

     Section 3.09 Cooperation with other vendors and prospective vendors.

     HHSC may award supplemental contracts for work related to the Contract, or any portion
thereof. HMO will reasonably cooperate with such other vendors, and will not commit or
permit any act that may interfere with the performance of work by any other vendor.

     Section 3.10 Renegotiation and reprocurement rights.

     (a) Renegotiation of Contract terms.

     Notwithstanding anything in the Contract to the contrary, HHSC may at any time during the
term of the Contract exercise the option to notify HMO that HHSC has elected to renegotiate
certain terms of the Contract. Upon HMO’s receipt of any notice pursuant to this Section, HMO
and HHSC will undertake good faith negotiations of the subject terms of the Contract, and may
execute an amendment to the Contract in accordance with Article 8.

     (b) Reprocurement of the services or procurement of additional services.

     Notwithstanding anything in the Contract to the contrary, whether or not HHSC has accepted
or rejected HMO’s Services and/or Deliverables provided during any period of the Contract, HHSC
may at any time issue requests for proposals or offers to other potential contractors for
performance of any portion of the Scope of Work covered by the Contract or Scope of Work
similar or comparable to the Scope of Work performed by HMO under the Contract.

     (c) Termination rights upon reprocurement.

     If HHSC elects to procure the Services or Deliverables or any portion of the Services or
Deliverables from another vendor in accordance with this Section, HHSC will have the termination
rights set forth in Article 12 (“Remedies and Disputes”).

     Section 3.11 RFP errors and omissions.

     HMO will not take advantage of any errors and/or omissions in the RFP or the resulting
Contract. HMO must promptly notify HHSC of any such errors and/or omissions that are
discovered.

     Section 3.12 Attorneys’ fees.

     In the event of any litigation, appeal, or other legal action to enforce any provision of
the Contract, HMO agrees to pay all reasonable expenses of such action, including attorneys’
fees and costs, if HHSC is the prevailing Party.

     Section 3.13 Preferences under service contracts.

     HMO is required in performing the Contract to purchase products and materials produced in
the State of Texas when they are available at a price and time comparable to products and
materials produced outside the State.

     Section 3.14 Time of the essence.

     In consideration of the need to ensure uninterrupted and continuous HHSC HMO Program
performance, time is of the essence in the
performance of the Scope of Work under the Contract.

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     Section 3.15 Notice

     (a) Any notice or other legal communication required or permitted to be made or
given by either Party pursuant to the Contract will be in writing and in English, and
will be deemed to have been given:

     (1) Three (3) Business Days after the date of mailing if sent by registered or
certified U.S. mail, postage prepaid, with return receipt requested;

     (2) When transmitted if sent by facsimile, provided a confirmation of
transmission is produced by the sending machine; or

     (3) When delivered if delivered personally or sent by express courier service.

     (b) The notices described in this Section may not be sent by electronic mail.

     (c) All notices must be sent to the Project Manager identified in the HHSC Managed
Care Contract document. In addition, legal notices must be sent to the Legal Contact
identified in the HHSC Managed Care Contract document.

     (d) Routine communications that are administrative in nature will be provided in a
manner agreed to by the Parties.

Article 4. Contract Administration & Management

     Section 4.01 Qualifications, retention and replacement of HMO employees.

     HMO agrees to maintain the organizational and administrative capacity and
capabilities to carry out all duties and responsibilities under this Contract. The
personnel HMO assigns to perform the duties and responsibilities under this Contract
will be properly trained and qualified for the functions they are to perform.
Notwithstanding transfer or turnover of personnel, HMO remains obligated to perform all
duties and responsibilities under this Contract without degradation and in accordance
with the terms of this Contract.

     Section 4.02 HMO’s Key Personnel.

     (a) Designation of Key Personnel.

     HMO must designate key management and technical personnel who will be assigned to
the Contract. For the purposes of this requirement, Key Personnel are those with
management responsibility or principal technical responsibility for the following
functional areas for each HMO Program included within the scope of the Contract:

     (1) Member Services;

     (2) Management Information Systems;

     (3) Claims Processing,

     (4) Provider Network Development and Management;

     (5) Benefit Administration and Utilization and Care Management;

     (6) Quality Improvement;

     (7) Behavioral Health Services;

     (8) Financial Functions;

     (9) Reporting;

     (10) Executive Director(s) for applicable HHSC HMO Program(s) as defined in Section 4.03
(“Executive Director”);

     (11) Medical Director(s) for applicable HHSC
HMO Program(s) as defined in Section 4.04 (“Medical Director”); and

     (13) STAR+PLUS Service Coordinators for STAR+PLUS HMOs as defined in Section 4.04.1
(“STAR+PLUS Service Coordinator.”)

     (b) Support and Replacement of Key Personnel.

     The HMO must maintain, throughout the
Contract Term, the ability to supply its Key Personnel with the required resources necessary to
meet Contract requirements and comply with applicable law. The HMO must ensure project continuity
by timely replacement of Key Personnel, if necessary, with a sufficient number of persons having
the requisite skills, experience and other qualifications. Regardless of specific personnel
changes, the HMO must maintain the overall level of expertise, experience, and skill reflected in
the Key HMO Personnel job descriptions and qualifications included in the HMO’s proposal.

     (c) Notification of replacement of Key Personnel.

     HMO must notify HHSC within fifteen (15) Business Days of any change in Key Personnel. Hiring
or replacement of Key Personnel must conform to all Contract requirements. If HHSC determines that
a satisfactory working relationship cannot be established between certain Key Personnel and HHSC,
it will notify the HMO in writing. Upon receipt of HHSC’s notice, HHSC and HMO will attempt to
resolve HHSC’s concerns on a mutually agreeable basis.

     Section 4.03 Executive Director.

     (a) The HMO must employ a qualified individual to serve as the Executive Director for its
HHSC HMO Program(s). Such Executive Director must be employed full-time by the HMO, be primarily
dedicated to HHSC HMO Program(s), and must hold a Senior Executive or Management position in the
HMO’s organization, except that the HMO may propose an alternate structure for the Executive
Director position, subject to HHSC’s prior review and written approval.

     (b) The Executive Director must be authorized and empowered to represent the HMO regarding
all matters pertaining to the Contract prior to such representation. The Executive Director must
act as

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liaison between the HMO and the HHSC and must have responsibilities that include, but are not
limited to, the following:

     (1) ensuring the HMO’s compliance with the terms of the Contract, including securing and
coordinating resources necessary for such compliance;

     (2) receiving and responding to all inquiries and requests made by HHSC related to the
Contract, in the time frames and formats specified by HHSC. Where practicable, HHSC must
consult with the HMO to establish time frames and formats reasonably acceptable to the Parties;

     (3) attending and participating in regular HHSC HMO Executive Director meetings or
conference calls;

     (4) attending and participating in regular HHSC Regional Advisory Committees (RACs) for
managed care (the Executive Director may designate key personnel to attend a RAC if the
Executive Director is unable to attend);

     (5) making best efforts to promptly resolve any issues identified either by the HMO or
HHSC that may arise and are related to the Contract;

     (6) meeting with HHSC representative(s) on a periodic or as needed basis to review the
HMO’s performance and resolve issues, and

     (7) meeting with HHSC at the time and place requested by HHSC, if HHSC determines that
the HMO is not in compliance with the requirements of the Contract.

     Section 4.04 Medical Director.

     (a) The HMO must have a qualified individual to serve as the Medical Director for its
HHSC HMO Program(s). The Medical Director must be currently licensed in Texas under the Texas
Medical Board as an M.D. or D.O. with no restrictions or other licensure limitations. The Medical
Director must comply with the requirements of 28 T.A.C. §11.1606 and all applicable federal and
state statutes and regulations.

     (b) The Medical Director, or his or her physician designee meeting the same Contract
qualifications that apply to the Medical Director, must be available by telephone 24 hours a day,
seven days a week, for Utilization Review decisions. The Medical Director, and his/her designee,
must either possess expertise with Behavioral Health Services, or ready access to such expertise
to ensure timely and appropriate medical decisions for Members, including after regular business
hours.

     (c) The Medical Director, or his or her physician designee meeting the same Contract
qualifications that apply to the Medical Director, must be authorized and empowered to represent
the HMO regarding clinical issues, Utilization Review and quality of care
inquiries. The Medical Director, or his or her physician designee, must exercise independent
medical judgment in all decisions relating to medical necessity. The HMO must ensure that its
decisions relating to medical necessity are not adversely influenced by fiscal management
decisions. HHSC may conduct reviews of decisions relating to medical necessity upon reasonable
notice.

     Section 4.04.1 STAR+PLUS Service Coordinator

     (a) STAR+PLUS HMOs must employ as Service Coordinators persons experienced in meeting the
needs of people with disabilities, old and young, and vulnerable populations who have Chronic
or Complex Conditions. A Service Coordinator must have an undergraduate and/or graduate degree
in social work or a related field, or be a Registered Nurse, Licensed Vocational Nurse,
Advanced Nurse Practitioner, or a Physician Assistant.

     b) The STAR+PLUS HMO must monitor the Service Coordinator’s workload and performance to
ensure that he or she is able to perform all necessary Service Coordination functions for the
STAR+PLUS Members in a timely manner.

     (c) The Service Coordinator must be responsible for working with the Member or his or her
representative, the PCP and other Providers to develop a seamless package of care in which
primary, Acute Care, and long-term care service needs are met through a single, understandable,
rational plan. Each Member’s Service Plan must also be well coordinated with the Member’s
family and community support systems, including Independent Living Centers, Area Agencies on
Aging and Mental Retardation Authorities. The Service Plan should be agreed to and signed by
the Member or the Member’s representative to indicate agreement with the plan. The plan should
promote consumer direction and self-determination and may include information for services
outside the scope of Covered Services such as how to access affordable, integrated housing. For
dual eligible Members, the STAR+PLUS HMO is responsible for meeting the Member’s Community
Long- term Care Service needs.

     (d) The STAR+PLUS HMO must empower its Service Coordinators to authorize the provision
and delivery of Covered Services, including Community Long-term Care Covered Services.

     Section 4.05 Responsibility for HMO personnel and Subcontractors.

     (a) HMO’s employees and Subcontractors will not in any sense be considered employees of
HHSC or the State of Texas, but will be considered for all purposes as the HMO’s employees or
its Subcontractor’s employees, as applicable.

     (b) Except as expressly provided in this Contract, neither HMO nor any of HMO’s employees
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Subcontractors may act in any sense as agents or representatives of HHSC or the State of
Texas.

     (c) HMO agrees that anyone employed by HMO to fulfill the terms of the Contract is an
employee of HMO and remains under HMO’s sole direction and control. HMO assumes sole and full
responsibility for its acts and the acts of its employees and Subcontractors.

     (d) HMO agrees that any claim on behalf of any person arising out of employment or alleged
employment by the HMO (including, but not limited to, claims of discrimination against HMO, its
officers, or its agents) is the sole responsibility of HMO and not the responsibility of HHSC.
HMO will indemnify and hold harmless the State from any and all claims asserted against the
State arising out of such employment or alleged employment by the HMO. HMO understands that any
person who alleges a claim arising out of employment or alleged employment by HMO will not be
entitled to any compensation, rights, or benefits from HHSC (including, but not limited to,
tenure rights, medical and hospital care, sick and annual/vacation leave, severance pay, or
retirement benefits).

     (e) HMO agrees to be responsible for the following in respect to its employees:

     (1) Damages incurred by HMO’s employees within the scope of their duties under the
Contract; and

     (2) Determination of the hours to be worked and the duties to be performed by HMO’s
employees.

     (f) HMO agrees and will inform its employees and Subcontractor(s) that there is no right
of subrogation, contribution, or indemnification against HHSC for any duty owed to them by HMO
pursuant to this Contract or any judgment rendered against the HMO. HHSC’s liability to the
HMO’s employees, agents and Subcontractors, if any, will be governed by the Texas Tort Claims
Act, as amended or modified (TEx. Civ. PRACT. & REM. CODE §101.001et seq.).

     (g) HMO understands that HHSC does not assume liability for the actions of, or judgments
rendered against, the HMO, its employees, agents or Subcontractors. HMO agrees that it has no
right to indemnification or contribution from HHSC for any such judgments rendered against HMO
or its Subcontractors.

     Section 4.06 Cooperation with HHSC and state administrative agencies.

     (a) Cooperation with Other MCOs.

     HMO agrees to reasonably cooperate with and work with the other MCOs in the HHSC HMO
Programs, Subcontractors, and third-party representatives as requested by HHSC. To the extent
permitted by HHSC’s financial and personnel resources, HHSC agrees to reasonably cooperate with
HMO and to use its best efforts to ensure that other HHSC contractors reasonably cooperate with
the HMO.

     (b) Cooperation with state and federal administrative agencies.

     HMO must ensure that HMO personnel will cooperate with HHSC or other state or federal
administrative agency personnel at no charge to HHSC for purposes relating to the administration
of HHSC programs including, but not limited to the following purposes:

     (1) The investigation and prosecution of fraud, abuse, and waste in the HHSC programs;

     (2) Audit, inspection, or other investigative purposes; and

     (3) Testimony in judicial or quasi-judicial proceedings relating to the Services and/or
Deliverables under this Contract or other delivery of information to HHSC or other agencies’
investigators or legal staff.

     Section 4.07 Conduct of HMO personnel.

     (a) While performing the Scope of Work, HMO’s personnel and Subcontractors must:

     (1) Comply with applicable State rules and regulations and HHSC’s requests regarding
personal and professional conduct generally applicable to the service locations; and

     (2) Otherwise conduct themselves in a businesslike and professional manner.

     (b) If HHSC determines in good faith that a particular employee or Subcontractor is not
conducting himself or herself in accordance with this Contract, HHSC may provide HMO with notice
and documentation concerning such conduct. Upon receipt of such notice, HMO must promptly
investigate the matter and take appropriate action that may include:

     (1) Removing the employee from the project;

     (2) Providing HHSC with written notice of such removal; and

     (3) Replacing the employee with a similarly qualified individual acceptable to HHSC.

     (c) Nothing in the Contract will prevent HMO, at the request of HHSC, from replacing any
personnel who are not adequately performing their assigned responsibilities or who, in the
reasonable opinion of HHSC’s Project Manager, after consultation with HMO, are unable to work
effectively with the members of the HHSC’s staff. In such event, HMO will provide replacement
personnel with equal or greater skills and qualifications as soon as reasonably practicable.
Replacement of Key Personnel will be subject to HHSC review. The Parties will work

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together in the event of any such replacement so as not to disrupt the overall project
schedule.

     (d) HMO agrees that anyone employed by HMO to fulfill the terms of the Contract remains under
HMO’s sole direction and control.

     (e) HMO shall have policies regarding disciplinary action for all employees who have failed
to comply with federal and/or state laws and the HMO’s standards of conduct, policies and
procedures, and Contract requirements. HMO shall have policies regarding disciplinary action for
all employees who have engaged in illegal or unethical conduct.

     Section 4.08 Subcontractors.

     (a) HMO remains fully responsible for the obligations, services, and functions performed
by its Subcontractors to the same extent as if such obligations, services, and functions were
performed by HMO’s employees, and for purposes of this Contract such work will be deemed work
performed by HMO. HHSC reserves the right to require the replacement of any Subcontractor found by
HHSC to be unacceptable and unable to meet the requirements of the Contract, and to object to the
selection of a Subcontractor.

     (b) HMO must:

     (1) actively monitor the quality of care and services, as well as the quality of reporting
data, provided under a Subcontract;

     (2) notify HHSC in writing at least 60 days prior to reprocurement of services provided
by any Material Subcontractor;

     (3) notify HHSC in writing within three (3) Business Days after making a decision to
terminate a Subcontract with a Material Subcontractor or upon receiving notification from the
Material Subcontractor of its intent to terminate such Subcontract;

     (4) notify HHSC in writing within one (1) Business Day of making a decision to enter into
a Subcontract with a new Material
Subcontractor, or a new Subcontract for newly procured services of an existing Material
Subcontractor; and

     (5) provide HHSC with a copy of TDI filings of delegation agreements.

     (c) During the Contract Period, Readiness Reviews by HHSC or its designated agent may occur
if:

     (1) a new Material Subcontractor is employed by HMO;

     (2) an existing Material Subcontractor provides services in a new Service Area;

     (3) an existing Material Subcontractor provides services for a new HMO Program;

     (4) an existing Material Subcontractor changes locations or changes its MIS and or
operational functions;

     (5) an existing Material Subcontractor changes one or more of its MIS subsystems,
claims processing or operational functions; or

     (6) a Readiness Review is requested by HHSC.

The HMO must submit information required by HHSC for each proposed Material Subcontractor as
indicated in Attachment B-1, Section 7.

     (d) HMO must not disclose Confidential Information of HHSC or the State of Texas to a
Subcontractor unless and until such Subcontractor has agreed in writing to protect the
confidentiality of such Confidential Information in the manner required of HMO under this
Contract.

     (e)HMO must identify any Subcontractor that is a subsidiary or entity formed after the
Effective Date of the Contract, whether or not an Affiliate of HMO, substantiate the proposed
Subcontractor’s ability to perform the subcontracted Services, and certify to HHSC that no loss of
service will occur as a result of the performance of such Subcontractor. The HMO will assume
responsibility for all contractual responsibilities whether or not the HMO performs them. Further,
HHSC considers the HMO to be the sole point of contact with regard to contractual matters,
including payment of any and all charges resulting from the Contract.

     (f) Except as provided herein, all Subcontracts must be in writing and must provide HHSC the
right to examine the Subcontract and all Subcontractor records relating to the Contract and the
Subcontract. This requirement does not apply to agreements with utility or mail service providers.

     (g) A Subcontract whereby HMO receives rebates, recoupments, discounts, payments, or other
consideration from a Subcontractor (including without limitation Affiliates) pursuant to or
related to the execution of this Contract must be in writing and must provide HHSC the right to
examine the Subcontract and all records relating to such consideration.

     (h) All Subcontracts described in subsections (f) and (g) must show the dollar amount, the
percentage of money, or the value of any consideration that HMO pays to or receives from the
Subcontractor.

     (i) HMO must submit a copy of each Material Subcontract executed prior to the Effective Date
of the Contract to HHSC no later than thirty (30) days after the Effective Date of the Contract.
For Material Subcontracts executed after the Effective Date of the Contract, HMO must submit a
copy to HHSC no later than five (5) Business Days after execution.

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     (j) Network Provider Contracts must include the mandatory provisions included in the HHSC
Uniform Managed Care Manual.

     (k) HHSC reserves the right to reject any Subcontract or require changes to any provisions
that do not comply with the requirements or duties and responsibilities of this Contract or
create significant barriers for HHSC in monitoring compliance with this Contract.

     Section 4.09 HHSC’s ability to contract with Subcontractors.

     The HMO may not limit or restrict, through a covenant not to compete, employment contract
or other contractual arrangement, HHSC’s ability to contract with Subcontractors or former
employees of the HMO.

     Section 4.10 HMO Agreements with Third Parties

     (a) If the HMO intends to report compensation paid to a third party (including without
limitation an Affiliate) as an Allowable Expense under this Contract, and the compensation paid
to the third party exceeds $100,000, or is reasonably anticipated to exceed $100,000, in a State
Fiscal Year, then the HMO’s agreement with the third party must be in writing. The agreement
must provide HHSC the right to examine the agreement and all records relating to the agreement.

     (b) All agreements whereby HMO receives rebates, recoupments, discounts, payments, or
other consideration from a third party (including without limitation Affiliates) pursuant to
or related to the execution of this Contract, must be in writing and must provide HHSC the
right to examine the agreement and all records relating to such consideration. .

     (c) All agreements described in subsections (a) and (b) must show the dollar amount, the
percentage of money, or the value of any consideration that HMO pays to or receives from the
third party.

     (d) HMO must submit a copy of each third party agreement described in subsections (a) and
(b) to HHSC. If the third party agreement is entered into prior to the Effective Date of the
Contract, HMO must submit a copy no later than thirty (30) days after the Effective Date of
the Contract. If the third party agreement is executed after the Effective Date of the
Contract, HMO must submit a copy no later than five (5) Business Days after execution. (e) For
third party agreements valued under $100,000 per State Fiscal Year that are reported as
Allowable Expenses, the HMO must maintain financial records and data sufficient to verify the
accuracy of such expenses in accordance with the requirements of Article 9.

     (f) HHSC reserves the right to reject any third party agreement or require changes to any
provisions that do not comply with the requirements or duties
and responsibilities of this Contract or create significant barriers for HHSC in monitoring
compliance with this Contract.

     (g) This section shall not apply to Provider Contracts, or agreements with utility or mail
service providers.

Article 5. Member Eligibility & Enrollment Section 5.01 Eligibility Determination

     The State or its designee will make eligibility
determinations for each of the HHSC HMO Programs.

     Section 5.02 Member Enrollment & Disenrollment.

     (a) The HHSC Administrative Services Contractor will enroll and disenroll eligible
individuals in the HMO Program. To enroll in an HMO, the Member’s permanent residence must be
located within the HMO’s Service Area. The HMO is not allowed to induce or accept disenrollment
from a Member. The HMO must refer the Member to the HHSC Administrative Services Contractor.

     (b) HHSC makes no guarantees or representations to the HMO regarding the number of eligible
Members who will ultimately be enrolled into the HMO or the length of time any such enrolling
Members remain enrolled with the HMO beyond the minimum mandatory enrollment periods established
for each HHSC HMO Program.

     (c) The HHSC Administrative Services
Contractor will electronically transmit to the HMO new Member information and change information
applicable to active Members.

     (d) As described in the following Sections, depending on the HMO Program, special
conditions may also apply to enrollment and span of coverage for the HMO.

     (e) HMO has a limited right to request a Member be disenrolled from HMO without the Member’s
consent. HHSC must approve any HMO request for disenrollment of a Member for cause. HHSC may
permit disenrollment of a Member under the following circumstances:

(1) Member misuses or loans Member’s HMO membership card to another person to obtain
services.

(2) Member is disruptive, unruly, threatening or uncooperative to the extent that Member’s
membership seriously impairs HMO’s or Provider’s ability to provide services to Member or to
obtain new Members, and Member’s behavior is not caused by a physical or behavioral health
condition.

(3) Member steadfastly refuses to comply with managed care restrictions (e.g., repeatedly
using emergency room in

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combination with refusing to allow HMO to treat the underlying medical condition).

(4) HMO must take reasonable measures to correct Member behavior prior to requesting
disenrollment. Reasonable measures may include providing education and counseling regarding
the offensive acts or behaviors.

(5) For STAR+PLUS HMOs, under limited conditions, the HMO may request disenrollment of
members who are totally dependent on a ventilator or who have been diagnosed with End Stage
Renal Disease.

     (f) HHSC must notify the Member of HHSC’s decision to disenroll the Member if all reasonable
measures have failed to remedy the problem.

     (g) If the Member disagrees with the decision to disenroll the Member from HMO, HHSC must
notify the Member of the availability of the Complaint procedure and, for Medicaid Members, HHSC’s
Fair Hearing process.

     (h) HMO cannot request a disenrollment based on adverse change in the member’s health status
or utilization of services that are Medically Necessary for treatment of a member’s condition.

     (i) Upon implementation of the Comprehensive Healthcare Program for Foster Care, STAR and CHIP
Members taken into conservatorship by the Department of Family and Protective Services (DFPS) will
be disenrolled effective the date of conservatorship.

     Section 5.03 STAR enrollment for pregnant women and infants.

     (a) The HHSC Administrative Services Contractor will retroactively enroll some pregnant
Members in a Medicaid HMO based on their date of eligibility.

     (b) The HHSC Administrative Services Contractor will enroll newborns born to Medicaid
eligible mothers who are enrolled in a STAR HMO in the same HMO for 90 days following the date
of birth, unless the mother requests a plan change as a special exception. The Administrative
Service Contractor will consider such requests on a case-by-case basis. The HHSC Administrative
Services Contractor will retroactively, to date of birth, enroll newborns in the applicable STAR
HMO.

     Section 5.04 CHIP eligibility and enrollment.

     (a) Continuous coverage.

     A child who is CHIP-eligible will have six (6) months of continuous coverage. Children
enrolling in CHIP for the first time, or returning to CHIP after disenrollment, will be subject
to a waiting period before coverage actually begins, except as provided in 1 T.A.C. §370.46.
The waiting period for a child is determined by the date on which he/she is found eligible for
CHIP, and extends for a duration of three
months. If the child is found eligible for CHIP on or before the 15th day of a month, then the
waiting period begins on the first day of that same month. If the child is found eligible on or
after the 16th day of a month, then the waiting period begins on the first day of the next month.

     (b) Pregnant Members and Infants.

     The HHSC Administrative Contractor will refer pregnant CHIP Members, with the exception of
Legal Permanent Residents and other legally qualified aliens barred from Medicaid due to federal
eligibility restrictions, to Medicaid for eligibility determinations. Those CHIP Members who are
determined to be Medicaid Eligible will be disenrolled from HMO’s CHIP plan. Medicaid coverage
will be coordinated to begin after CHIP eligibility ends to avoid gaps in health care coverage.

In the event the HMO remains unaware of a
Member’s pregnancy until delivery, the delivery will be covered by CHIP. Babies are automatically
enrolled in the mother’s CHIP health plan at birth with CHIP eligibility and re-enrollment
following the timeframe as that of the mother. The HHSC Administrative Services Contractor will
then set the Member’s eligibility expiration date at the later of (1) the end of the second month
following the month of the baby’s birth or (2) the Member’s original eligibility expiration date.

     Section 5.04.1 CHIP Perinatal eligibility, enrollment, and disenrollment

     (1)The HHSC Administrative Contractor will electronically transmit to the HMO new CHIP
Perinate Member information based on the appropriate CHIP Perinate or CHIP Perinate Newborn Rate
Cell. There is no waiting period for CHIP Perinatal Program Members.

     (2) CHIP Perinate Newborns are eligible for 12 months continuous enrollment, beginning with
the month of enrollment as a CHIP Perinate (month of enrollment plus 11 months). A CHIP Perinate
Newborn will maintain coverage in his or her CHIP Perinatal health plan.

     (3) If only one CHIP Perinatal HMO operates in a Service Area, HHSC will automatically enroll
a prospective member in that CHIP Perinatal HMO. If multiple CHIP Perinatal HMOs offer coverage in
the Service Area, HHSC will send an enrollment packet to the prospective Member’s household. If
the
household of a prospective member does not make a selection within 15 calendar days, the HHSC
Administrative Services Contractor will notify the household that the prospective member has been
assigned to a CHIP Perinatal HMO (“Default Enrollment”). When this occurs the household has 30
calendar days to select another CHIP Perinatal HMO for the Member.

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     HHSC’s Administrative Services Contractor will assign prospective members to CHIP
Perinatal HMOs in a Service Area in a rotational basis. Should HHSC implement one or more
administrative rules governing the Default Enrollment processes, such administrative rules will
take precedence over the Default Enrollment process set forth herein.

     (4) When a member of a household enrolls in the CHIP Perinatal Program, all traditional CHIP
members in the household will be disenrolled from their current health plans and prospectively
enrolled in the CHIP Perinatal Program Member’s health plan. All members of the household must
remain in the same health plan through the end of the CHIP Perinatal Program Member’s enrollment
period.

Section 5.05 Span of Coverage

(a) Medicaid HMOs.

     (1) HHSC will conduct continuous open enrollment for Medicaid Eligibles and the HMO must
accept all persons who choose to enroll as Members in the HMO or who are assigned as Members in the
HMO by HHSC, without regard to the Member’s health status or any other factor. Persons in a
hospital on the enrollment date will not be enrolled until they are discharged from the hospital.

     (2) Members who are disenrolled because they are temporarily ineligible for Medicaid will be
automatically re-enrolled into the same health plan, if available. Temporary loss of eligibility
is defined as a period of six months or less.

     (3) A Member cannot change from one Medicaid MCO to another Medicaid MCO during an inpatient
hospital stay. The MCO responsible for the hospital charges at the start of an Inpatient Stay
remains responsible for hospital charges until the time of discharge, or until such time that
there is a loss of Medicaid eligibility. Medicaid MCOs are responsible for professional charges
during every month for which the MCO receives a full capitation for a Member.

(b) CHIP HMOs.

     If a CHIP Member’s Effective Date of Coverage occurs while the CHIP Member is confined in a
hospital, HMO is responsible for the CHIP Member’s costs of Covered Services beginning on the
Effective Date of Coverage. If a CHIP Member is disenrolled while the CHIP Member is confined in
a hospital, HMO’s responsibility for the CHIP Member’s costs of Covered Services terminates on
the Date of Disenrollment.

(c) CHIP Perinatal HMOs.

     If a CHIP Perinate’s Effective Date of Coverage occurs while the CHIP Perinate is confined
in a Hospital, HMO is responsible for the CHIP Perinate’s costs of Covered Services beginning on
the Effective Date of Coverage. If a CHIP Perinate is disenrolled while the CHIP Perinate is
confined in a Hospital, the
HMO’s responsibility for the CHIP Perinate’s costs of Covered Services terminates on the Date of
Disenrollment.

Section 5.06 Verification of Member Eligibility.

     Medicaid MCOs are prohibited from entering into an agreement to share information
regarding their Members with an external vendor that provides verification of Medicaid
recipients’ eligibility to Medicaid providers. All such external vendors must contract with the
State and obtain eligibility information from the State.

     Section 5.07 Special Temporary STAR Default Process

     (a) STAR HMOs that did not contract with HHSC prior to the Effective Date of the Contract
to provide Medicaid Health Care Services will be assigned a limited number of
Medicaid-eligibles, who have not actively made a STAR HMO choice, for a finite period. The
number will vary by Service Area as set forth below. To the extent possible, the special default
assignment will be based on each eligible’s prior history with a PCP and geographic proximity to
a PCP.

     (b) For the Bexar, Dallas, El Paso, Harris, Tarrant, and Travis Service Areas, the special
default process will begin with the Operational Start Date and conclude when the HMO has
achieved an enrollment of 15,000 mandatory STAR members, or at the end of six months, whichever
comes first.

     (c) For the Lubbock Service Area, the special default process will begin with the
Operational Start Date and conclude when the HMO has achieved an enrollment of 5,000 mandatory
STAR members, or at the end of six months, whichever comes first.

     (d) Special default periods may be extended for one or more Service Areas if consistent
with HHSC administrative rules.

     (e) This Section does not apply to the Nueces Service Area.

Article 6. Service Levels & Performance Measurement

     Section 6.01 Performance measurement.

     Satisfactory performance of this Contract will be measured by:

     (a) Adherence to this Contract, including all representations and warranties;

     (b) Delivery of the Services and Deliverables described in Attachment B;

     (c) Results of audits performed by HHSC or its representatives in accordance with
Article 9 (“Audit and Financial Compliance”);

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     (d) Timeliness, completeness, and accuracy of required reports; and

     (e) Achievement of performance measures developed by HMO and HHSC and as modified from time
to time by written agreement during the term of this Contract.

          Article 7. Governing Law & Regulations

     Section 7.01 Governing law and venue.

     This Contract is governed by the laws of the State of Texas and interpreted in
accordance with Texas law. Provided HMO first complies with the procedures set forth in
Section 12.13 (“Dispute
Resolution,”) proper venue for claims arising from this Contract will be in the State
District Court of Travis County, Texas.

     Section 7.02 HMO responsibility for compliance with laws and regulations.

     (a) HMO must comply, to the satisfaction of HHSC, with all provisions set forth in this
Contract, all applicable provisions of state and federal laws, rules, regulations, federal
waivers, policies and guidelines, and any court-ordered consent decrees, settlement agreements,
or other court orders that govern the performance of the Scope of Work including, but not limited
to:

     (1) Titles XIX and XXI of the Social Security Act;

     (2) Chapters 62 and 63, Texas Health and Safety Code;

     (3) Chapters 531 and 533, Texas Government Code;
(4) 42 C.F.R. Parts 417 and 457, as applicable;
(5) 45 C.F.R. Parts 74 and 92;

     (6) 48 C.F.R. Part 31, or OMB Circular A-122, based on whether the entity is for-profit or
nonprofit;

     (7) 1 T.A.C. Part 15, Chapters 361, 370, 391, and 392; and

     (8) all State and Federal tax laws, State and Federal employment laws, State and Federal
regulatory requirements, and licensing provisions.

     (b) The Parties acknowledge that the federal and/or state laws, rules, regulations,
policies, or guidelines, and court-ordered consent decrees, settlement agreements, or other court
orders that affect the performance of the Scope of Work may change from time to time or be added,
judicially interpreted, or amended by competent authority. HMO acknowledges that the HMO Programs
will be subject to continuous change during the term of the Contract and, except as provided in
Section 8.02, HMO has provided for or will provide for adequate resources, at no additional
charge to HHSC, to reasonably accommodate such changes. The Parties further acknowledge that HMO
was selected, in part,
because of its expertise, experience, and knowledge concerning applicable Federal and/or state
laws, regulations, policies, or guidelines that affect the performance of the Scope of Work. In
keeping with HHSC’s reliance on this knowledge and expertise, HMO is responsible for
identifying the impact of changes in applicable Federal or state legislative enactments and
regulations that affect the performance of the Scope of Work or the State’s use of the Services
and Deliverables. HMO must timely notify HHSC of such changes and must work with HHSC to
identify the impact of such changes on how the State uses the Services and Deliverables.

     (c) HHSC will notify HMO of any changes in applicable law, regulation, policy, or
guidelines that HHSC becomes aware of in the ordinary course of its business.

     (d) HMO is responsible for any fines, penalties, or disallowances imposed on the State or
HMO arising from any noncompliance with the laws and regulations relating to the delivery of
the Services or Deliverables by the HMO, its Subcontractors or agents.

     (e) HMO is responsible for ensuring each of its employees, agents or Subcontractors who
provide Services under the Contract are properly licensed, certified, and/or have proper
permits to perform any activity related to the Services.

     (f) HMO warrants that the Services and Deliverables will comply with all applicable
Federal, State, and County laws, regulations, codes, ordinances, guidelines, and policies. HMO
will indemnify HHSC from and against any losses, liability, claims, damages, penalties, costs,
fees, or expenses arising from or in connection with HMO’s failure to comply with or violation
of any such law, regulation, code, ordinance, or policy.

     Section 7.03 TDI licensure/ANHC certification and solvency.

     (a) Licensure

     HMO must be either licensed by the TDI as an HMO or a certified ANHC in all counties for
the Service Areas included within the scope of the Contract.

     (b) Solvency

     HMO must maintain compliance with the Texas Insurance Code and rules promulgated and
administered by the TDI requiring a fiscally sound operation. HMO must have a plan and take
appropriate measures to ensure adequate provision against the risk of insolvency as required
by TDI. Such provision must be adequate to provide for the following in the event of
insolvency:

     (1) continuation of benefits, until the time of discharge, to Members who are confined
on the

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date of insolvency in a Hospital or other inpatient facility;

     (2) payment to unaffiliated health care providers and affiliated health care providers
whose agreements do not contain member “hold harmless” clauses acceptable to TDI, and

     (3) continuation of benefits for the duration of the Contract period for which HHSC
has paid a Capitation Payment.

Provision against the risk of insolvency must be made by establishing adequate reserves,
insurance or other guarantees in full compliance with all financial requirements of TDI.

     Section 7.04 Immigration Reform and Control Act of 1986.

     HMO shall comply with the requirements of the Immigration Reform and Control Act of 1986
and the Immigration Act of 1990 (8 U.S.C. §1101, et seq.) regarding employment verification and
retention of verification forms for any individual(s) hired on or after November 6, 1986, who
will perform any labor or services under this Contract.

     Section 7.05 Compliance with state and federal anti-discrimination laws.

     HMO shall comply with Title VI of the Civil Rights Act of 1964, Executive Order 11246
(Public Law 88-352), Section 504 of the Rehabilitation Act of 1973 (Public Law 93-112), the
Americans with Disabilities Act of 1990 (Public Law 101-336), and all amendments to each, and
all requirements imposed by the regulations issued pursuant to these Acts. In addition, HMO
shall comply with Title 40, Chapter 73 of the Texas Administrative Code, “Civil Rights,” to the
extent applicable to this Contract. These provide in part that no persons in the United States
must, on the grounds of race, color, national origin, sex, age, disability, political beliefs,
or religion, be excluded from participation in, or denied, any aid, care, service or other
benefits provided by Federal or State funding, or otherwise be subjected to any discrimination.

     Section 7.06 Environmental protection laws.

     HMO shall comply with the applicable provisions of federal environmental protection laws
as described in this Section:

     (a) Pro-Children Act of 1994.

     HMO shall comply with the Pro-Children Act of 1994 (20 U.S.C. §6081 et seq.), as
applicable, regarding the provision of a smoke-free workplace and promoting the non-use of all
tobacco products.

     (b) National Environmental Policy Act of 1969.

     HMO shall comply with any applicable provisions relating to the institution of
environmental quality control measures contained in the National Environmental Policy Act of
1969 (42 U.S.C. §4321 et seq.) and Executive Order 11514 (“Protection and Enhancement of Environmental Quality”).

     (c) Clean Air Act and Water Pollution Control Act regulations.

     HMO shall comply with any applicable provisions relating to required notification of
facilities violating the requirements of Executive Order 11738 (“Providing for Administration of
the Clean Air Act and the Federal Water Pollution Control Act with Respect to Federal Contracts,
Grants, or Loans”).

     (d) State Clean Air Implementation Plan.

     HMO shall comply with any applicable provisions requiring conformity of federal actions to
State (Clean Air) Implementation Plans under §176(c) of the Clean Air Act of 1955, as amended (42
U.S.C. §740 et seq.).

     (e) Safe Drinking Water Act of 1974.

     HMO shall comply with applicable provisions relating to the protection of underground
sources of drinking water under the Safe Drinking Water Act of 1974, as amended (21 U.S.C. §
349; 42 U.S.C. §§ 300f to 300j-9).

     Section 7.07 HIPAA.

     HMO shall comply with applicable provisions of HIPAA. This includes, but is not limited to,
the requirement that the HMO’s MIS system comply with applicable certificate of coverage and data
specification and reporting requirements promulgated pursuant to HIPAA. HMO must comply with HIPAA
EDI requirements.

          Article 8. Amendments & Modifications Section 8.01 Mutual
agreement.

     This Contract may be amended at any time by mutual agreement of the Parties. The amendment
must be in writing and signed by individuals with authority to bind the Parties.

     Section 8.02 Changes in law or contract.

     If Federal or State laws, rules, regulations, policies or guidelines are adopted,
promulgated, judicially interpreted or changed, or if contracts are entered or changed, the
effect of which is to alter the ability of either Party to fulfill its obligations under this
Contract, the Parties will promptly negotiate in good faith appropriate modifications or
alterations to the Contract and any schedule(s) or attachment(s) made a part of this Contract.
Such modifications or alterations must be in writing and signed by
individuals with authority to bind the parties, equitably adjust the terms and conditions of this
Contract, and must be limited to those provisions of this Contract affected by the change.

     Section 8.03 Modifications as a remedy.

     This Contract may be modified under the terms of Article 12 ( “Remedies and Disputes”).

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     Section 8.04 Modifications upon renewal or extension of Contract.

     (a) If HHSC seeks modifications to the Contract as a condition of any Contract extension,
HHSC’s notice to HMO will specify those modifications to the Scope of Work, the Contract
pricing terms, or other Contract terms and conditions.

     (b) HMO must respond to HHSC’s proposed modification within the timeframe specified by
HHSC, generally within thirty (30) days of receipt. Upon receipt of HMO’s response to the
proposed modifications, HHSC may enter into negotiations with HMO to arrive at mutually
agreeable Contract amendments. In the event that HHSC determines that the Parties will be
unable to reach agreement on mutually satisfactory contract modifications, then HHSC will
provide written notice to HMO of its intent not to extend the Contract beyond the Contract Term
then in effect.

     Section 8.05 Modification of HHSC Uniform Managed Care Manual.

     (a) HHSC will provide HMO with at least thirty (30) days advance written notice before
implementing a substantive and material change in the HHSC Uniform Managed Care Manual (a change
that materially and substantively alters the HMO’s ability to fulfill its obligations under the
Contract). The Uniform Managed Care Manual, and all modifications thereto made during the
Contract Term, are incorporated by reference into this Contract. HHSC will provide HMO with a
reasonable amount of time to comment on such changes, generally at least ten (10) Business Days.
HHSC is not required to provide advance written notice of changes that are not material and
substantive in nature, such as corrections of clerical errors or policy clarifications.

     (b) The Parties agree to work in good faith to resolve disagreements concerning material
and substantive changes to the HHSC Uniform Managed Care Manual. If the Parties are unable to
resolve issues relating to material and substantive changes, then either Party may terminate
the agreement in accordance with Article 12 (“Remedies and Disputes”).

     (c) Changes will be effective on the date specified in HHSC’s written notice, which will
not be earlier than the HMO’s response deadline, and such changes will be incorporated into
the HHSC Uniform Managed Care Manual. If the HMO has raised an objection to a material and
substantive change to the HHSC Uniform Managed Care Manual and submitted a notice of
termination in accordance with Section 12.04(d), HHSC will not enforce the policy change
during the period of time between the receipt of the notice and the date of Contract
termination.

     Section 8.06 CMS approval of Medicaid amendments

     The implementation of amendments, modifications, and changes to STAR and STAR+PLUS HMO
contracts is subject to the approval of the Centers for Medicare and Medicaid Services (“CMS.”)

     Section 8.07 Required compliance with amendment and modification procedures.

     No different or additional services, work, or products will be authorized or performed
except as authorized by this Article. No waiver of any term, covenant, or condition of this
Contract will be valid unless executed in compliance with this Article. HMO will not be entitled
to payment for any services, work or products that are not authorized by a properly executed
Contract amendment or modification.

     Article 9. Audit & Financial Compliance Section 9.01 Financial record retention and
audit.

     HMO agrees to maintain, and require its Subcontractors to maintain, supporting financial
information and documents that are adequate to ensure that payment is made and the Experience
Rebate is calculated in accordance with applicable Federal and State requirements, and are
sufficient to ensure the accuracy and validity of HMO invoices. Such documents, including all
original claims forms, will be maintained and retained by HMO or its Subcontractors for a period
of five (5) years after the Contract Expiration Date or until the resolution of all litigation,
claim, financial management review or audit pertaining to this Contract, whichever is longer.

     Section 9.02 Access to records, books, and documents.

     (a) Upon reasonable notice, HMO must provide, and cause its Subcontractors to provide, the
officials and entities identified in this Section with prompt, reasonable, and adequate access
to any records, books, documents, and papers that are related to the performance of the Scope of
Work.

     (b) HMO and its Subcontractors must provide the access described in this Section upon
HHSC’s request. This request may be for, but is not limited to, the following purposes:

     (1) Examination;

     (2) Audit;

     (3) Investigation;

     (4) Contract administration; or

     (5) The making of copies, excerpts, or transcripts.

     (c) The access required must be provided to the following officials and/or entities:

     (1) The United States Department of Health and Human Services or its designee;

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     (2) The Comptroller General of the United States or its designee;

     (3) HMO Program personnel from HHSC or its designee;

     (4) The Office of Inspector General;

     (5) Any independent verification and validation contractor or quality assurance
contractor acting on behalf of HHSC;

     (6) The Office of the State Auditor of Texas or its designee;

     (7) A State or Federal law enforcement agency;

     (8) A special or general investigating committee of the Texas Legislature or its
designee; and

     (9) Any other state or federal entity identified by HHSC, or any other entity engaged
by HHSC.

     (d) HMO agrees to provide the access
described wherever HMO maintains such books, records, and supporting documentation. HMO
further agrees to provide such access in reasonable comfort and to provide any furnishings,
equipment, and other conveniences deemed reasonably necessary to fulfill the purposes
described in this Section. HMO will require its Subcontractors to provide comparable access
and accommodations.

     Section 9.03 Audits of Services, Deliverables and inspections.

     (a) Upon reasonable notice from HHSC, HMO will provide, and will cause its Subcontractors
to provide, such auditors and inspectors as HHSC may from time to time designate, with access
to:

     (1) HMO service locations, facilities, or installations; and

     (2) HMO Software and Equipment.

     (b) The access described in this Section will be for the purpose of examining, auditing,
or investigating:

     (1) HMO’s capacity to bear the risk of potential financial losses;

     (2) the Services and Deliverables provided;

     (3) a determination of the amounts payable under this Contract;

     (4) detection of fraud, waste and/or abuse; or

     (5) other purposes HHSC deems necessary to perform its regulatory function and/or
enforce the provisions of this Contract.

     (c) HMO must provide, as part of the Scope of Work, any assistance that such auditors
and inspectors reasonably may require to complete such audits or inspections.

     (d) If, as a result of an audit or review of payments made to the HMO, HHSC discovers a
payment error or overcharge, HHSC will notify the HMO of such error or overcharge. HHSC will be
entitled to recover such funds as an offset to future payments to the HMO, or to collect such
funds directly from the HMO. HMO must return funds owed to HHSC within thirty (30) days after
receiving notice of the error or overcharge, or interest will accrue on the amount due. HHSC
will calculate interest at the Department of Treasury’s Median Rate (resulting from the
Treasury’s auction of 13-week bills) for the week in which liability is assessed. In the event
that an audit reveals that errors in reporting by the HMO have resulted in errors in payments
to the HMO or errors in the calculation of the Experience Rebate, the HMO will indemnify HHSC
for any losses resulting from such errors, including the cost of audit.

     Section 9.04 SAO Audit

The HMO understands that acceptance of funds under this Contract acts as acceptance of the
authority of the State Auditor’s Office (“SAO”), or any successor agency, to conduct an
investigation in connection with those funds. The HMO further agrees to cooperate fully with
the SAO or its successor in the conduct of the audit or investigation, including providing all
records requested. The HMO will ensure that this clause concerning the authority to audit funds
received indirectly by Subcontractors through HMO and the requirement to cooperate is included
in any Subcontract it awards, and in any third party agreements described in Section 4.10
(a-b).

     Section 9.05 Response/compliance with audit or inspection findings.

     (a) HMO must take action to ensure its or a Subcontractor’s compliance with or correction
of any finding of noncompliance with any law, regulation, audit requirement, or generally
accepted accounting principle relating to the Services and Deliverables or any other deficiency
contained in any audit, review, or inspection conducted under this Article. This action will
include HMO’S delivery to HHSC, for HHSC’S approval, a Corrective Action Plan that addresses
deficiencies identified in any audit(s), review(s), or inspection(s) within thirty (30)
calendar days of the close of the audit(s), review(s), or inspection(s).

     (b) HMO must bear the expense of compliance with any finding of noncompliance under this
Section that is:

     (1) Required by Texas or Federal law, regulation, rule or other audit requirement
relating to HMO’s business;

     (2) Performed by HMO as part of the Services or Deliverables; or

     (3) Necessary due to HMO’s noncompliance with any law, regulation, rule or audit
requirement imposed on HMO.

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     (c) As part of the Scope of Work, HMO must provide to HHSC upon request a copy of those
portions of HMO’s and its Subcontractors’ internal audit reports relating to the Services and
Deliverables provided to HHSC under the Contract.

     Article 10. Terms & Conditions of Payment

     Section 10.01 Calculation of monthly Capitation Payment.

     (a) This is a Risk-based contract. For each applicable HMO Program, HHSC will pay the HMO
fixed monthly Capitation Payments based on the number of eligible and enrolled Members. HHSC
will calculate the monthly Capitation Payments by multiplying the number of Members by each
applicable Member Rate Cell. In consideration of the Monthly Capitation Payment(s), the HMO
agrees to provide the Services and Deliverables described in this Contract.

     (b) HMO will be required to provide timely financial and statistical information
necessary in the Capitation Rate determination process. Encounter Data provided by HMO must
conform to all HHSC requirements. Encounter Data containing non-compliant information,
including, but not limited to, inaccurate client or member identification numbers, inaccurate
provider identification numbers, or diagnosis or procedures codes insufficient to adequately
describe the diagnosis or medical procedure performed, will not be considered in the HMO’s
experience for rate-setting purposes.

     (c) Information or data, including complete and accurate Encounter Data, as requested by
HHSC for rate-setting purposes, must be provided to HHSC: (1) within thirty (30) days of receipt
of the letter from HHSC requesting the information or data; and (2) no later than March
31st of each year.

     (d) The fixed monthly Capitation Rate consists of the following components:

     (1) an amount for Health Care Services performed during the month;

     (2) an amount for administering the program,

     (3) an amount for the HMO’s Risk margin, and

     (4) with respect to the Medicaid program, pass through funds for high-volume providers.

Capitation Rates for each HMO Program may vary by Service Area and MCO. HHSC will employ or
retain qualified actuaries to perform data analysis and calculate the Capitation Rates for each
Rate Period.

     (e) HMO understands and expressly assumes the risks associated with the performance of
the duties and responsibilities under this Contract, including the failure, termination or
suspension of funding to HHSC, delays or denials of required
approvals, and cost overruns not reasonably attributable to HHSC.

     Section 10.02 Time and Manner of Payment.

     (a) During the Contract Term and beginning after the Operational Start Date, HHSC will pay
the monthly Capitation Payments by the 10th Business Day of each month.

     (b) The HMO must accept Capitation Payments by direct deposit into the HMO’s account.

     (c) HHSC may adjust the monthly Capitation Payment to the HMO in the case of an overpayment
to the HMO, for Experience Rebate amounts due and unpaid, and if money damages are assessed in
accordance with Article 12 (“Remedies and Disputes”).

     (d) HHSC’s payment of monthly Capitation Payments is subject to availability of federal and
state appropriations. If appropriations are not available to pay the full monthly Capitation
Payment, HHSC may:

     (1) equitably adjust Capitation Payments for all participating Contractors, and reduce
scope of service requirements as appropriate in accordance with Article 8, or

     (2) terminate the Contract in accordance with Article 12 (“Remedies and Disputes”).

     Section 10.03 Certification of Capitation Rates.

     HHSC will employ or retain a qualified actuary to certify the actuarial soundness of the
Capitation Rates contained in this Contract. HHSC will also employ or retain a qualified actuary
to certify all revisions or modifications to the Capitation Rates.

     Section 10.04 Modification of Capitation Rates.

     The Parties expressly understand and agree that the agreed Capitation Rates are subject to
modification in accordance with Article 8 (“Amendments and Modifications,”) if changes in state or
federal laws, rules, regulations or policies affect the rates or the actuarial soundness of the
rates. HHSC will provide the HMO notice of a modification to the Capitation Rates 60 days prior to
the effective date of the change, unless HHSC determines that circumstances warrant a shorter
notice period. If the HMO does not accept the rate change, either Party may terminate the Contract
in accordance with Article 12 (“Remedies and Disputes”).

     Section 10.05 STAR Capitation Structure.

     (a) STAR Rate Cells.

     STAR Capitation Rates are defined on a per Member per month basis by Rate Cells and Service
Areas. STAR Rate Cells are:

     (1) TANF adults;

     (2) TANF children over 12 months of age;

     (3) Expansion children over 12 months of age;

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     (4) Newborns less than or equal to 12 months of age;

     (5) TANF children less than or equal to 12 months of age;

     (6) Expansion children less than or equal to 12 months of age;

     (7) Federal mandate children; and

     (8) Pregnant women. (b) STAR

Capitation Rate development:

     (1) Capitation Rates for Rate Periods 1 and 2 for Service Areas with
historical STAR Program participation.

     For Service Areas where HHSC operated the STAR Program prior to the Effective Date of this
Contract, HHSC will develop base Capitation Rates by analyzing historical STAR Encounter Data
and financial data for the Service Area. This analysis will apply to all MCOs in the Service
Area, including MCOs that have no historical STAR Program participation in the Service Area. The
analysis will include a review of historical enrollment and claims experience information; any
changes to Covered Services and covered populations; rate changes specified by the Texas
Legislature; and any other relevant information. If the HMO participated in the STAR Program in
the Service Area prior to the Effective Date of this Contract, HHSC may modify the Service Area
base Capitation Rates using diagnosis-based risk adjusters to yield the final Capitation Rates.

     (2) Capitation Rates for Rate Periods 1 and 2 for Service Areas with no historical STAR
Program participation.

     For Service Areas where HHSC has not operated the STAR Program prior to the
Effective Date of this Contract, HHSC will establish base Capitation Rates for Rate Periods 1
and 2 by analyzing Fee-for-Service claims data for the Service Area. This analysis will include
a review of historical enrollment and claims experience information; any changes to Covered
Services and covered populations; rate changes specified by the Texas Legislature; and any
other relevant information.

     (3) Capitation Rates for subsequent Rate Periods for Service Areas with no historical
STAR Program participation.

     For Service Areas where HHSC has not operated the STAR Program prior to the Effective
Date of this Contract, HHSC will establish base Capitation Rates for the Rate Periods
following Rate Period 2 by analyzing historical STAR Encounter Data and financial data for
the Service Area. This analysis will include a review of historical enrollment and
claims experience information; any changes to Covered Services and covered populations; rate
changes specified by the Texas Legislature; and any other relevant information.

     (c) Acuity adjustment.

     HHSC may evaluate and implement an acuity adjustment methodology, or alternative reasonable
methodology, that appropriately reimburses the HMO for acuity and cost differences that deviate
from that of the community average, if HHSC in its sole discretion determines that such a
methodology is reasonable and appropriate. The community average is a uniform rate for all HMOs
in a Service Area, and is determined by combining all the experience for all HMOs in a Service
Area to get an average rate for the Service Area.

(d) Value-added Services will not be included in the rate-setting process.

     Section 10.05.1 STAR+PLUS Capitation Structure.

     (a) STAR+PLUS Rate Cells.

     STAR+PLUS Capitation Rates are defined on a per Member per month basis by Rate Cells.
STAR+PLUS Rate Cells are based on client category as follows:

(1) Medicaid Only Standard Rate

(2) Medicaid Only 1915 (c) Nursing Facility Waiver Rate

(3) Dual Eligible Standard Rate

(4) Dual Eligible 1915(c) Nursing Facility Waiver Rate

(5) Nursing Facility — Medicaid only

(6) Nursing Facility — Dual Eligible

     These Rate Cells are subject to change after Rate Period 2.

     (b) STAR+PLUS Capitation Rates

     For All Service Areas, HHSC will establish base Capitation Rates by Service Area based on
fee-for-service experience in the counties included in the Service Area. For the base Capitation
Rate in the Harris Service Area, the encounter data from existing STAR+PLUS plans in Harris
County will be blended with the fee-for-service experience from the balance of counties in the
Harris Service Area. HHSC may adjust the base Capitation Rate by the HMO’s Case Mix Index to
yield the final Capitation Rates.

     HHSC reserves the right to trend forward these rates until sufficient Encounter Data is
available to base Capitation Rates on Encounter Data.

     Section 10.06 CHIP Capitation Rates Structure.

     (a) CHIP Rate Cells.

     CHIP Capitation Rates are defined on a per
Member per month basis by the Rate Cells applicable

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to a Service Area. CHIP Rate Cells are based on the Member’s age group as follows:

	 	(1)	 	under age one (1);
	 
	 	(2)	 	ages one (1) through five (5);
	 
	 	(3)	 	ages six (6) through fourteen (14); and
	 
	 	(4)	 	ages fifteen (15) through eighteen (18).

     (b) CHIP Capitation Rate development:

     HHSC will establish base Capitation Rates by analyzing Encounter Data and financial data for
each Service Area. This analysis will include a review of historical enrollment and claims
experience information; any changes to Covered Services and covered populations; rate changes
specified by the Texas Legislature; and any other relevant information. HHSC may modify the Service
Area base Capitation Rate using diagnosis based risk adjusters to yield the final Capitation Rates.

     (c) Acuity adjustment.

     HHSC may evaluate and implement an acuity adjustment methodology, or alternative reasonable
methodology, that appropriately reimburses the HMO for acuity and cost differences that deviate
from that of the community average, if HHSC in its sole discretion determines that such a
methodology is reasonable and appropriate. The community average is a uniform rate for all HMOs in
a Service Area, and is determined by combining all the experience for all HMOs in a Service Area to
get an average rate for the Service Area.

     (d) Value-added Services will not be included in the rate-setting process.

     Section 10.06.1 CHIP Perinatal Program Capitation Structure.

     (a) CHIP Perinatal Program Rate Cells.

     CHIP Perinatal Capitation Rates are defined on a per Member per month basis by the Rate
Cells applicable to a Service Area. CHIP Perinatal Rate Cells are based on the Member’s birth
status and household income as follows:

(1) CHIP Perinate 100% — 185% of FPL;

(2) CHIP Perinate 186% — 200% of FPL;

(3) CHIP Perinate Newborn 100% — 185% of FPL; and

(4) CHIP Perinate Newborn 186% — 200% of FPL.

     (b) CHIP Perinatal Program Capitation Rate Development

     Until such time as adequate encounter data is available to set rates, CHIP Perinatal Program
capitation rates will be established based on experience from comparable populations in the
Medicaid Fee-for-Service and STAR programs. This analysis will include: a review of historical
enrollment and claims experience information; changes to Covered Services and covered
populations; rate
changes specified by the Texas Legislature; and any other relevant information. HHSC may modify
the Service Area based Capitation Rate using diagnosis-based risk adjusters to yield the final
Capitation Rates.

(c) Value-added Services will not be included in the rate-setting process.

     Section 10.07 HMO input during rate setting process.

     (1) In Service Areas with historical STAR or CHIP Program participation, HMO must provide
certified Encounter Data and financial data as prescribed in HHSC’s Uniform Managed Care Manual.
Such information may include, without limitation: claims lag information by Rate Cell,
capitation expenses, and stop loss reinsurance expenses. HHSC may request clarification or for
additional financial information from the HMO. HHSC will notify the HMO of the deadline for
submitting a response, which will include a reasonable amount of time for response.

     (2) HHSC will allow the HMO to review and comment on data used by HHSC to determine base
Capitation Rates. In Service Areas with no historical STAR Program participation, this will
include Fee-for-Service data for Rate Periods 1 and 2. HHSC will notify the HMO of deadline for
submitting comments, which will include a reasonable amount of time for response. HHSC will not
consider comments received after the deadline in its rate analysis.

     (3) During the rate setting process, HHSC will conduct at least two (2) meetings with the
HMO. HHSC may conduct the meetings in person, via teleconference, or by another method deemed
appropriate by HHSC. Prior to the first meeting, HHSC will provide the HMO with proposed
Capitation Rates. During the first meeting, HHSC will describe the process used to generate the
proposed Capitation Rates, discuss major changes in the rate setting process, and receive input
from the HMO. HHSC will notify the HMO of the deadline for submitting comments, which will
include a reasonable amount of time to review and comment on the proposed Capitation Rates and
rate setting process. After reviewing such comments, HHSC will conduct a second meeting to
discuss the final Capitation Rates and changes resulting from HMO comments, if any.

     Section 10.08 Adjustments to Capitation Payments.

     (a) Recoupment.

     HHSC may recoup a payment made to the HMO for a Member if:

     (1) the Member is enrolled into the HMO in error, and the HMO provided no Covered Services
to the

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Member during the month for which the payment was made;

     (2) the Member moves outside the United States, and the HMO has not provided Covered
Services to the Member during the month for which the payment was made;

     (3) the Member dies before the first day of the month for which the payment was made; or

     (4) a Medicaid Member’s eligibility status or program type is changed, corrected as a
result of error, or is retroactively adjusted.

     (b) Appeal of recoupment.

     The HMO may appeal the recoupment or adjustment of capitations in the above circumstances
using the HHSC dispute resolution process set forth in Section 12.13, (“Dispute Resolution”).

     Section 10.09 Delivery Supplemental Payment for CHIP, CHIP Perinatal and STAR
HMOs.

     (a) The Delivery Supplemental Payment (DSP) is a function of the average delivery cost in
each Service Area. Delivery costs include facility and professional charges.

     (b) CHIP and STAR HMOs will receive a Delivery Supplemental Payment (DSP) from HHSC for each
live or stillbirth by a Member. CHIP Perinatal HMOs will receive a DSP from HHSC for each live or
stillbirth by a mother of a CHIP Perinatal Program Member in the 186% to 200% FPL (measured at the
time of enrollment in the CHIP Perinatal Program). CHIP Perinatal HMOs will not receive a DSP from
HHSC for a live or stillbirth by the mother of a CHIP Perinatal Program Member in the 100%-185%
FPL. For STAR, CHIP and CHIP Perinatal Program HMOs, the one-time DSP payment is made in the amount
identified in the HHSC Managed Care Contract document regardless of whether there is a single birth
or there are multiple births at time of delivery. A delivery is the birth of a live born infant,
regardless of the duration of the pregnancy, or a stillborn (fetal death) infant of twenty (20)
weeks or more of gestation. A delivery does not include a spontaneous or induced abortion,
regardless of the duration of the pregnancy.

     (c) HMO must submit a monthly DSP Report as described in Attachment B to the HHSC Managed Care
Contract document, (“Scope of Work/Performance Measures’) in the format prescribed in HHSC’s
Uniform Managed Care Manual.

     (d) HHSC will pay the Delivery Supplemental Payment within twenty (20) Business Days after
receipt of a complete and accurate report from the HMO.

     (e) The HMO will not be entitled to Delivery Supplemental Payments for deliveries that are
not reported to HHSC within 210 days after the date of
delivery, or within thirty (30) days from the date of discharge from the hospital for the stay
related to the delivery, whichever is later.

     (f) HMO must maintain complete claims and adjudication disposition documentation, including
paid and denied amounts for each delivery. The HMO must submit the documentation to HHSC within
five (5) Business Days after receiving a request for such information from HHSC.

Section 10.10 Administrative Fee for SS/ Members

(a) Administrative Fee.

     STAR HMOs will receive a monthly fee for administering benefits to each SSI Beneficiary who
voluntarily enrolls in the HMO (a “Voluntary SSI Member”), in the amount identified in the HHSC
Managed Care Contract document. The HHSC will pay for Health Care Services for such Voluntary SSI
Members under the Medicaid Fee-for-Services program. SSI Beneficiaries in all Service Areas except
Nueces may voluntarily participate in the STAR Program; however, HHSC reserves the right to
discontinue such voluntary participation.

     (b) Administrative services and functions.

          (1) HMO must perform the same administrative services and functions for Voluntary SSI Members
as are performed for other Members under this contract. These administrative services and functions
include, but are not limited to:

(i) prior authorization of services;

(ii) all Member services functions, including linguistic services and Member materials in
alternative formats for the blind and disabled;

(iii) health education;

(iv) utilization management using HHSC Administrative Services Contractor encounter data to
provide service management and appropriate interventions;

(v) quality assessment and performance improvement activities;

(vi) coordination to link Voluntary SSI Members with applicable community resources and
Noncapitated services.

          (2) HMO must require Network Providers to submit claims for health and health-related services
to the HHSC Administrative Services Contractor for claims adjudication and payment.

          (3) HMO must provide services to Voluntary SSI Members within the HMO’s Network unless
necessary services are unavailable within Network. HMO must also allow referrals to
Out-of-Network providers if necessary services are not available within the HMO’s Network.
Records must be forwarded to Member’s PCP following a referral visit.

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     (c) Members who become eligible for SSI

     A Member’s SSI status is effective the date the State’s eligibility system identifies the
Member as Type Program 13 (TP13). On this effective date, the Member becomes a voluntary STAR
enrollee. The State is responsible for updating the State’s eligibility system within 45 days
of official notice of the
Member’s Federal SSI eligibility by the Social Security Administration (SSA).

     Section 10.11 STAR, CHIP, and CHIP Perinatal Experience Rebate

     (a) HMO’s duty to pay.

     At the end of each Rate Year beginning with Rate Year 1, the HMO must pay an Experience
Rebate for the STAR, CHIP, and CHIP Perinatal Programs to HHSC if the HMO’s Net Income before
Taxes is greater than 3% of the total Revenue for the period. The Experience Rebate is
calculated in accordance with the tiered rebate method set forth below based on the consolidated
Net Income before Taxes for all of the HMO’s STAR, CHIP, and CHIP Perinatal Service Areas
included within the scope of the Contract, as measured by any positive amount on the
Financial-Statistical Report (FSR) as reviewed and confirmed by HHSC.

     (b) Graduated Experience Rebate Sharing Method.

	 	 	 	 	 	 	 	 	 
	Experience	 	 	 	 	 	 
	as a % of Revenues	 	HMO Share	 	 	HHSC Share	 
	3%
	 	 	100	%	 	 	0	%
	> 3% and < 7%
	 	 	75	%	 	 	25	%
	> 7% and < 10%
	 	 	50	%	 	 	50	%
	> 10% and < 15%
	 	 	25	%	 	 	75	%
	> 15%
	 	 	0	%	 	 	100	%

HHSC and the HMO will share the Net Income before Taxes for the STAR, CHIP, and CHIP Perinatal
Programs as follows, unless HHSC provides the HMO an Experience Rebate Reward in accordance with
Section 6 of Attachment B-1 to the HHSC Managed Care Contract document and HHSC’s Uniform
Managed Care Manual:

     (1) The HMO will retain all Net Income before Taxes that is equal to or less than 3% of
the total Revenues received by the HMO.

     (2) HHSC and the HMO will share that portion of the Net Income before Taxes that is over 3%
but less than or equal to 7% of the total Revenues received with 75% to the HMO and 25% to HHSC.

     (3) HHSC and the HMO will share that portion of the Net Income before Taxes that is over 7%
but less than or equal to 10% of the total Revenues received with 50% to the HMO and 50% to
HHSC.

     (4) HHSC and the HMO will share that portion of the Net Income before Taxes that is over 10% but
less than or equal to 15% of the total Revenues received with 25% to the HMO and 75% to HHSC.

     (5) HHSC will be paid the entire portion of the Net Income before Taxes that exceeds 15% of
the total Revenues.

     (c) Net income before taxes.

     The HMO must compute the Net Income before Taxes in accordance with the HHSC Uniform Managed
Care Manual’s “Cost Principles for Administrative Expenses” and “FSR Instructions for Completion”
and applicable federal regulations. The Net Income before Taxes will be confirmed by HHSC or its
agent for the Rate Year relating to all revenues and expenses incurred pursuant to the Contract.
HHSC reserves the right to modify the “Cost Principles for Administrative Expenses” and “FSR
Instructions for Completion” found in HHSC’s Uniform Managed Care Manual in accordance with Section
8.05.

     (d) Carry forward of prior Rate Year losses.

     Losses incurred by a STAR, CHIP, or CHIP Perinatal HMO for one Rate Year may be carried
forward to the next Rate Year, and applied as an offset against a STAR, CHIP, or CHIP Perinatal
Experience Rebate. Prior losses may be carried forward for only one Rate Year for this purpose. If
the HMO offsets a loss against another STAR, CHIP, or CHIP Perinatal Service Area, only that
portion of the loss that was not used as an offset may be carried forward to the next Rate Year.
Losses incurred by a STAR, CHIP, CHIP Perinatal HMO cannot be offset against the STAR+PLUS Program.

     (e) Settlements for payment.

          (1) There will be two settlements for HMO payment(s) of the State share of the Experience
Rebate for the STAR, CHIP, and CHIP Perinatal Programs. The first settlement shall equal 100% of
the State share of the Experience Rebate as derived from the FSR, and shall be paid on the same day
the 90-day FSR Report is submitted to HHSC, accompanied by an actuarial opinion certifying the
reserve.

          (2) The second settlement shall be an adjustment to the first settlement and shall be paid by
the HMO to HHSC on the same day that the 334-day FSR is submitted to HHSC if the adjustment is a
payment from the HMO to HHSC.

          (3) HHSC or its agent may audit or review the FSRs. If HHSC determines that corrections to the
FSRs are required, based on an HHSC audit/review or other documentation acceptable to HHSC, to
determine an adjustment to the amount of the second settlement, then final adjustment shall be made
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three years from the date that the HMO submits the 334-day FSR.

     (4) HHSC may offset any Experience Rebates owed to the State from future Capitation Payments,
or collect such sums directly from the HMO. HHSC must receive the first and second settlements by
the specified due dates for the first and second FSRs respectively or HMO will incur interest on
the amounts due at the current prime interest rate as set forth below. HHSC may adjust the
Experience Rebate if HHSC determines the HMO has paid amounts for goods or services that are not
reasonable, necessary, and allowable in accordance with the HHSC Uniform Managed Care Manual’s
“Cost Principles for Administrative Expenses” and “FSR Instructions for Completion” and applicable
federal regulations. HHSC has final authority in auditing and determining the amount of the
Experience Rebate.

     (f) Interest on Experience Rebate.

     Interest on any Experience Rebate owed to HHSC shall be charged beginning thirty (30) days
after the date that the first and second settlements are due. In addition, if any adjusted amount
is owed to HHSC at the final settlement date, then interest will be charged on the adjusted amount
owed beginning thirty (30) days after the second settlement date to the date of the final
settlement payment. HHSC will calculate interest at the Department of Treasury’s Median Rate
(resulting from the Treasury’s auction of 13-week bills) for the week in which the liability is
assessed.

     Section 10.11.1 STAR+PLUS Experience Rebate

     (a) HMO’s duty to pay.

     At the end of each Rate Year beginning with Rate Year 1, the HMO must pay an Experience
Rebate to HHSC for the STAR+PLUS Program if the HMO produces a positive Net Income in
STAR+PLUS. The STAR+PLUS Experience Rebate is calculated in accordance with the tiered rebate
method set forth below based on the consolidated Net Income before Taxes for all of the HMO’s
STAR+PLUS Service Areas included within the scope of the Contract, as measured by any positive
amount on the Financial-Statistical Report (FSR) as reviewed and confirmed by HHSC.

     (b) Graduated STAR+PLUS Experience Rebate Sharing Method.

	 	 	 	 	 	 	 	 	 
	Experience Rebate	 	 	 	 	 	 
	as a % of Revenues	 	HMO Share	 	 	HHSC Share	 
	< 3%
	 	 	50	%	 	 	50	%
	> 3%
	 	 	75	%	 	 	25	%

     HHSC and the HMO will share the Net Income before Taxes for the STAR+PLUS Program as
follows, unless HHSC provides the HMO an Experience Rebate Reward in accordance with
Section 6 of Attachment B-1 to the HHSC Managed Care Contract document and HHSC’s Uniform Managed
Care Manual:

          (1) HHSC and the STAR+PLUS HMO will share that portion of the Net Income before Taxes that is
equal to or less than 3% of the total STAR+PLUS Revenues received with 50% to the HMO and 50% to
HHSC.

          (2) HHSC and the STAR+PLUS HMO will share that portion of the Net Income before Taxes that is
over 3% of the total STAR+PLUS Revenues received with 75% to the HMO and 25% to HHSC.

     (c) Net income before taxes.

     The HMO must compute the Net Income before Taxes in accordance with the HHSC Uniform Managed
Care Manual’s “Cost Principles for Administrative Expenses” and “FSR Instructions for Completion”
and applicable federal regulations. The Net Income before Taxes will be confirmed by HHSC or its
agent for the Rate Year relating to all revenues and expenses incurred pursuant to the Contract.
HHSC reserves the right to modify the “Cost Principles for Administrative Expenses” and “FSR
Instructions for Completion” found in HHSC’s Uniform Managed Care Manual in accordance with
Section 8.05.

     (d) Carry forward of prior Rate Year losses.

     Losses incurred by a STAR+PLUS HMO for one Rate Year may be carried forward to the next Rate
Year, and applied as an offset against a STAR+PLUS Experience Rebate. Prior losses may be carried
forward for only one Rate Year for this purpose. If the HMO offsets a loss against another
STAR+PLUS Service Area, only that portion of the loss that was not used as an offset may be
carried forward to the next Rate Year. Losses incurred by a STAR+PLUS HMO cannot be offset against
the STAR or CHIP Programs.

     (e) Settlements for payment.

          (1) There will be two settlements for HMO payment(s) of the State share of the Experience
Rebate for the STAR+PLUS. The first settlement shall equal 100% of the State share of the
Experience Rebate as derived from the FSR, and shall be paid on the same day the 90-day FSR Report
is submitted to HHSC, accompanied by an actuarial opinion certifying the reserve.

          (2) The second settlement shall be an adjustment to the first settlement and shall be paid by
the HMO to HHSC on the same day that the 334-day FSR is submitted to HHSC if the adjustment is a
payment from the HMO to HHSC.

          (3) HHSC or its agent may audit or review the FSRs. If HHSC determines that corrections to the
FSRs are required, based on an HHSC audit/review or other documentation acceptable to HHSC, to
determine an adjustment to the amount of the second

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settlement, then final adjustment shall be made within three years from the date that the HMO
submits the 334-day FSR.

     (4) HHSC may offset any Experience Rebates owed to the State from future STAR+PLUS Capitation
Payments, or collect such sums directly from the HMO. HHSC must receive the first and second
settlements by the specified due dates for the first and second FSRs respectively or HMO will incur
interest on the amounts due at the current prime interest rate as set forth below.

     (f) Interest on Experience Rebate.

     Interest on any Experience Rebate owed to HHSC shall be charged beginning thirty (30) days
after the date that the first and second settlements are due. In addition, if any adjusted amount
is owed to HHSC at the final settlement date, then interest will be charged on the adjusted amount
owed beginning thirty (30) days after the second settlement date to the date of the final
settlement payment. HHSC will calculate interest at the Department of Treasury’s Median Rate
(resulting from the Treasury’s auction of 13-week bills) for the week in which the liability is
assessed.

     Section 10.12 Payment by Members.

     (a) Medicaid HMOs

     Medicaid HMOs and their Network Providers are prohibited from billing or collecting any amount
from a Member for Health Care Services covered by this Contract. HMO must inform Members of costs
for non-covered services, and must require its Network Providers to:

     (1) inform Members of costs for non-covered services prior to rendering such services;
and

     (2) obtain a signed Private Pay form from such Members.

     (b) CHIP HMOs.

     Families that meet the enrollment period cost share limit requirement must report it to the
HHSC Administrative Services Contractor. The HHSC Administrative Service Contractor notifies the
HMO that a family’s cost share limit has been reached. Upon notification from the HHSC
Administrative Services Contractor that a family has reached its cost-sharing limit for the term of
coverage, the HMO will generate and mail to the CHIP Member a new Member ID card within five days,
showing that the CHIP Member’s cost-sharing obligation for that term of coverage has been met. No
cost-sharing may be collected from these CHIP Members for the balance of their term of coverage.

     Providers are responsible for collecting all CHIP Member co-payments at the time of service.
Co-payments that families must pay vary according to their income level. No co-payments apply, at
any income level, to well-child or well-baby visits or
immunizations. Except for costs associated with unauthorized non-emergency services provided to
a Member by Out-of-Network providers and for non-covered services, the co-payments outlined in
the CHIP Cost Sharing table in the HHSC Uniform Managed Care Manual are the only amounts that a
provider may collect from a CHIP-eligible family.

     Federal law prohibits charging cost-sharing or deductibles to CHIP Members of Native
Americans or Alaskan Natives. The HHSC Administrative Services Contractor will notify the HMO of
CHIP Members who are not subject to cost-sharing requirements. The HMO is responsible for
educating Providers regarding the cost-sharing waiver for this population.

     An HMO’s monthly Capitation Payment will not be reduced for a family’s failure to make its
CHIP premium payment. There is no relationship between the per Member/per month amount owed to
the HMO for coverage provided during a month and the family’s payment of its CHIP premium
obligation for that month.

     (c) CHIP Perinatal HMOs

     Cost-sharing does not apply to CHIP Perinatal Program Members. The exemption from
cost-sharing applies through the end of the original 12-month enrollment period.

     Section 10.13 Restriction on assignment of fees.

     During the term of the Contract, HMO may not, directly or indirectly, assign to any third
party any beneficial or legal interest of the HMO in or to any payments to be made by HHSC
pursuant to this Contract. This restriction does not apply to fees paid to Subcontractors.

     Section 10.14 Liability for taxes.

     HHSC is not responsible in any way for the payment of any Federal, state or local taxes
related to or incurred in connection with the HMO’s performance of this Contract. HMO must pay
and discharge any and all such taxes, including any penalties and interest. In addition, HHSC is
exempt from Federal excise taxes, and will not pay any personal property taxes or income taxes
levied on HMO or any taxes levied on employee wages.

     Section 10.15 Liability for employment-related charges and benefits.

     HMO will perform work under this Contract as an independent contractor and not as agent or
representative of HHSC. HMO is solely and exclusively liable for payment of all
employment-related charges incurred in connection with the performance of this Contract,
including but not limited to salaries, benefits, employment taxes, workers compensation
benefits, unemployment insurance and benefits, and other insurance or fringe benefits for Staff.

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     Section 10.16 No additional consideration.

     (a) HMO will not be entitled to nor receive from HHSC any additional consideration,
compensation, salary, wages, charges, fees, costs, or any other type of remuneration for Services
and Deliverables provided under the Contract, except by properly authorized and executed Contract
amendments.

     (b) No other charges for tasks, functions, or activities that are incidental or ancillary to
the delivery of the Services and Deliverables will be sought from HHSC or any other state agency,
nor will the failure of HHSC or any other party to pay for such incidental or ancillary services
entitle the HMO to withhold Services and Deliverables due under the Agreement.

     (c) HMO will not be entitled by virtue of the Contract to consideration in the form of
overtime, health insurance benefits, retirement benefits, disability retirement benefits, sick
leave, vacation time, paid holidays, or other paid leaves of absence of any type or kind
whatsoever.

     Section 10.17 Federal Disallowance

     If the federal government recoups money from the state for expenses and/or costs that are
deemed unallowable by the federal government, the state has the right to, in turn, recoup payments
made to the HMOs for these same expenses and/or costs, even if they had not been previously
disallowed by the state and were incurred by the HMO, and any such expenses and/or costs would then
be deemed unallowable by the state. If the state retroactively recoups money from the HMOs due to a
federal disallowance, the state will recoup the entire amount paid to the HMO for the federally
disallowed expenses and/or costs, not just the federal portion.

Article 11. Disclosure & Confidentiality of Information

     Section 11.01 Confidentiality.

     (a) HMO and all Subcontractors, consultants, or agents under the Contract must treat all
information that is obtained through performance of the Services under the Contract, including,
but not limited to, information relating to applicants or recipients of HHSC Programs as
Confidential Information to the extent that confidential treatment is provided under law and
regulations.

     (b) HMO is responsible for understanding the degree to which information obtained through
performance of this Contract is confidential under State and Federal law, regulations, or
administrative rules.

     (c) HMO and all Subcontractors, consultants, or agents under the Contract may not use any
information obtained through performance of this Contract in any manner except as is necessary for
the
proper discharge of obligations and securing of rights under the Contract.

     (d) HMO must have a system in effect to protect all records and all other documents deemed
confidential under this Contract maintained in connection with the activities funded under the
Contract. Any disclosure or transfer of Confidential Information by HMO, including information
required by HHSC, will be in accordance with applicable law. If the HMO receives a request for
information deemed confidential under this Contract, the HMO will immediately notify HHSC of
such request, and will make reasonable efforts to protect the information from public
disclosure.

     (e) In addition to the requirements expressly stated in this Section, HMO must comply
with any policy, rule, or reasonable requirement of HHSC that relates to the safeguarding or
disclosure of
information relating to Members, HMO’S operations, or HMO’s performance of the Contract.

     (f) In the event of the expiration of the Contract or termination of the Contract for any
reason, all Confidential Information disclosed to and all copies thereof made by the HMOI shall
be returned to HHSC or, at HHSC’s option, erased or destroyed. HMO shall provide HHSC
certificates evidencing such destruction.

     (g) The obligations in this Section shall not restrict any disclosure by the HMO pursuant
to any applicable law, or by order of any court or government agency, provided that the HMO
shall give prompt notice to HHSC of such order.

     (h) With the exception of confidential Member information, Confidential Information
shall not be afforded the protection of the Contract if such data was:

     (1) Already known to the receiving Party without restrictions at the time of its
disclosure by the furnishing Party;

     (2) Independently developed by the receiving Party without reference to the furnishing
Party’s Confidential Information;

     (3) Rightfully obtained by the other Party without restriction from a third party
after its disclosure by the furnishing Party;

     (4) Publicly available other than through the fault or negligence of the other
Party; or

     (5) Lawfully released without restriction to anyone.

     Section 11.02 Disclosure of HHSC’s Confidential Information.

     (a) HMO will immediately report to HHSC any and all unauthorized disclosures or uses of
HHSC’s Confidential Information of which it or its Subcontractor(s), consultant(s), or
agent(s) is aware or has knowledge. HMO acknowledges that any

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publication or disclosure of HHSC’s Confidential Information to others may cause
immediate and irreparable harm to HHSC and may constitute a violation of State or federal
laws. If HMO, its
Subcontractor(s), consultant(s), or agent(s) should publish or disclose such Confidential
Information to others without authorization, HHSC will immediately be entitled to injunctive relief
or any other remedies to which it is entitled under law or equity. HHSC will have the right to
recover from HMO all damages and liabilities caused by or arising from HMO’s, its Subcontractors’,
consultants’, or agents’ failure to protect HHSC’s Confidential Information. HMO will defend with
counsel approved by HHSC, indemnify and hold harmless HHSC from all damages, costs, liabilities,
and expenses (including without limitation reasonable attorneys’ fees and costs) caused by or
arising from HMO’s or its Subcontractors’,
consultants’ or agents’ failure to protect HHSC’s Confidential Information. HHSC will not
unreasonably withhold approval of counsel selected by the HMO.

     (b) HMO will require its Subcontractor(s), consultant(s), and agent(s) to comply with the
terms of this provision.

     Section 11.03 Member Records

     (a) HMO must comply with the requirements of state and federal laws, including the HIPAA
requirements set forth in Section 7.07, regarding the transfer of Member Records.

     (b) If at any time during the Contract Term this Contract is terminated, HHSC may require the
transfer of Member Records, upon written notice to HMO, to another entity, as consistent with
federal and state laws and applicable releases.

     (c) The term “Member Record” for this Section means only those administrative, enrollment,
case management and other such records maintained by HMO and is not intended to include patient
records maintained by participating Network Providers.

     Section 11.04 Requests for public information.

     (a) HHSC agrees that it will promptly notify HMO of a request for disclosure of information
filed in accordance with the Texas Public Information Act, Chapter 552 of the Texas Government
Code, that consists of the HMO’S confidential information, including without limitation,
information or data to which HMO has a proprietary or commercial interest. HHSC will deliver a
copy of the request for public information to HMO.

     (b) With respect to any information that is the subject of a request for disclosure, HMO is
required to demonstrate to the Texas Office of Attorney General the specific reasons why the
requested information is confidential or otherwise excepted from required public disclosure under
law. HMO will provide HHSC with copies of all such communications.

     (c) To the extent authorized under the Texas Public Information Act, HHSC agrees to safeguard
from disclosure information received from HMO that the HMO believes to be confidential
information. HMO must clearly mark such information as confidential information or provide
written notice to HHSC that it considers the information confidential.

     Section 11.05 Privileged Work Product.

     (a) HMO acknowledges that HHSC asserts that privileged work product may be prepared in
anticipation of litigation and that HMO is performing the Services with respect to privileged work
product as an agent of HHSC, and that all matters related thereto are protected from disclosure by
the Texas Rules of Civil Procedure, Texas Rules of Evidence, Federal Rules of Civil Procedure, or
Federal Rules of Evidence.

     (b) HHSC will notify HMO of any privileged work product to which HMO has or may have access.
After the HMO is notified or otherwise becomes aware that such documents, data, database, or
communications are privileged work product, only HMO personnel, for whom such access is necessary
for the purposes of providing the Services, may have access to privileged work product.

     (c) If HMO receives notice of any judicial or other proceeding seeking to obtain access to
HHSC’s privileged work product, HMO will:

	 	(1)	 	Immediately notify HHSC; and
	 
	 	(2)	 	Use all reasonable efforts to resist providing such access.

     (d) If HMO resists disclosure of HHSC’s privileged work product in accordance with this
Section, HHSC will, to the extent authorized under Civil Practices and Remedies Code or other
applicable State law, have the right and duty to:

	 	(1)	 	represent HMO in such resistance;
	 
	 	(2)	 	to retain counsel to represent HMO; or
	 
	 	(3)	 	to reimburse HMO for reasonable attorneys’ fees and expenses incurred in resisting
such access.

     (e) If a court of competent jurisdiction orders HMO to produce documents, disclose data, or
otherwise breach the confidentiality obligations imposed in the Contract, or otherwise with
respect to maintaining the confidentiality, proprietary nature, and secrecy of privileged work
product, HMO will not be liable for breach of such obligation.

     Section 11.06 Unauthorized acts.

     Each Party agrees to:

     (1) Notify the other Party promptly of any unauthorized possession, use, or knowledge, or
attempt thereof, by any person or entity that may become known to it, of any HHSC Confidential

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Information or any information identified by the HMO as confidential or proprietary;

     (2) Promptly furnish to the other Party full details of the unauthorized possession, use, or
knowledge, or attempt thereof, and use reasonable efforts to assist the other Party in
investigating or preventing the reoccurrence of any unauthorized possession, use, or knowledge, or
attempt thereof, of Confidential Information;

     (3) Cooperate with the other Party in any litigation and investigation against third
Parties deemed necessary by such Party to protect its proprietary rights; and

     (4) Promptly prevent a reoccurrence of any such unauthorized possession, use, or knowledge
such information.

     Section 11.07 Legal action.

Neither party may commence any legal action or proceeding in respect to any unauthorized

     possession, use, or knowledge, or attempt thereof by any person or entity of HHSC’s Confidential
Information or information identified by the HMO as confidential or proprietary, which action or
proceeding identifies the other Party such information without such Party’s consent.

          Article 12. Remedies & Disputes

     Section 12.01 Understanding and expectations.

     The remedies described in this Section are directed to HMO’s timely and responsive
performance of the Services and production of Deliverables, and the creation of a flexible and
responsive relationship between the Parties. The HMO is expected to meet or exceed all HHSC
objectives and standards, as set forth in the Contract. All areas of responsibility and all
Contract requirements will be subject to performance evaluation by HHSC. Performance reviews may
be conducted at the discretion of HHSC at any time and may relate to any responsibility and/or
requirement. Any and all responsibilities and/or requirements not fulfilled may be subject to
remedies set forth in the Contract.

     Section 12.02 Tailored remedies.

     (a) Understanding of the Parties.

     HMO agrees and understands that HHSC may pursue tailored contractual remedies for
noncompliance with the Contract. At any time and at its discretion, HHSC may impose or pursue one
or more remedies for each item of noncompliance and will determine remedies on a case-by-case
basis. HHSC’s pursuit or non-pursuit of a tailored remedy does not constitute a waiver of any
other remedy that HHSC may have at law or equity.

     (b) Notice and opportunity to cure for non-material breach.

     (1) HHSC will notify HMO in writing of specific areas of HMO performance that fail to meet
performance expectations, standards, or schedules set forth in the Contract, but that, in the
determination of HHSC, do not result in a material deficiency or delay in the implementation or
operation of the Services.

     (2) HMO will, within five (5) Business Days (or another date approved by HHSC) of receipt of
written notice of a non-material deficiency, provide the HHSC Project Manager a written response
that:

     (A) Explains the reasons for the deficiency, HMO’s plan to address or cure the deficiency,
and the date and time by which the deficiency will be cured; or

     (B) If HMO disagrees with HHSC’s findings, its reasons for disagreeing with HHSC’s
findings.

     (3) HMO’s proposed cure of a non-material deficiency is subject to the approval of HHSC.
HMO’s repeated commission of non-material deficiencies or repeated failure to resolve any such
deficiencies may be regarded by HHSC as a material deficiency and entitle HHSC to pursue any other
remedy provided in the Contract or any other appropriate remedy HHSC may have at law or equity.

     (c) Corrective action plan.

     (1) At its option, HHSC may require HMO to submit to HHSC a written plan (the “Corrective
Action Plan”) to correct or resolve a material breach of this Contract, as determined by HHSC.

     (2) The Corrective Action Plan must provide:

     (A) A detailed explanation of the reasons for the cited deficiency;

     (B) HMO’s assessment or diagnosis of the cause; and

     (C) A specific proposal to cure or resolve the deficiency.

     (3) The Corrective Action Plan must be submitted by the deadline set forth in HHSC’s request
for a Corrective Action Plan. The Corrective Action Plan is subject to approval by HHSC, which
will not unreasonably be withheld.

     (4) HHSC will notify HMO in writing of HHSC’s final disposition of HHSC’s concerns. If
HHSC accepts HMO’s proposed Corrective Action Plan, HHSC may:

     (A) Condition such approval on completion of tasks in the order or priority that
HHSC may reasonably prescribe;

     (B) Disapprove portions of HMO’s proposed Corrective Action Plan; or

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     (C) Require additional or different corrective action(s).

     Notwithstanding the submission and acceptance of a Corrective Action Plan, HMO remains
responsible for achieving all written performance criteria.

     (5) HHSC’s acceptance of a Corrective Action Plan under this Section will not:

     (A) Excuse HMO’s prior substandard performance;

     (B) Relieve HMO of its duty to comply with performance standards; or

     (C) Prohibit HHSC from assessing additional tailored remedies or pursuing other
appropriate remedies for continued substandard performance.

(d) Administrative remedies.

     (1) At its discretion, HHSC may impose one or more of the following remedies for each item of
material noncompliance and will determine the scope and severity of the remedy on a case-by-case
basis:

     (A) Assess liquidated damages in accordance with Attachment B-5 to the HHSC Managed
Care Contract, “Liquidated Damages Matrix;”

     (B) Conduct accelerated monitoring of the HMO. Accelerated monitoring includes more
frequent or more extensive monitoring by HHSC or its agent;

     (C) Require additional, more detailed, financial and/or programmatic reports to be
submitted by HMO;

     (D) Decline to renew or extend the Contract;

     (E) Appoint temporary management;

     (F) Initiate disenrollment of a Member or Members;

     (G) Suspend enrollment of Members;

     (H) Withhold or recoup payment to HMO;

     (I) Require forfeiture of all or part of the HMO’s bond; or

     (J) Terminate the Contract in accordance with Section 12.03, (“Termination
by HHSC”).

     (2) For purposes of the Contract, an item of material noncompliance means a specific
action of HMO that:

     (A) Violates a material provision of the Contract;

     (B) Fails to meet an agreed measure of performance; or

     (C) Represents a failure of HMO to be reasonably responsive to a reasonable request of
HHSC relating to the Services for information, assistance, or support within the timeframe
specified by HHSC.

     (3) HHSC will provide notice to HMO of the imposition of an administrative remedy in
accordance with this Section, with the exception of accelerated monitoring, which may be
unannounced. HHSC may require HMO to file a written response in accordance with this Section.

     (4) The Parties agree that a State or Federal statute, rule, regulation, or Federal
guideline will prevail over the provisions of this Section unless the statute, rule, regulation,
or guidelines can be read together with this Section to give effect to both.

(e) Damages.

     (1) HHSC will be entitled to actual and consequential damages resulting from the HMO’S failure
to comply with any of the terms of the Contract. In some cases, the actual damage to HHSC or State
of Texas as a result of HMO’S failure to meet any aspect of the responsibilities of the Contract
and/or to meet specific performance standards set forth in the Contract are difficult or impossible
to determine with precise accuracy. Therefore, liquidated damages will be assessed in writing
against and paid by the HMO in accordance with and for failure to meet any aspect of the
responsibilities of the Contract and/or to meet the specific performance standards identified by
the HHSC in Attachment B-5 to the HHSC Managed Care Contract, “Deliverables/Liquidated Damages
Matrix.” Liquidated damages will be assessed if HHSC determines such failure is the fault of the
HMO (including the HMO’S Subcontractors and/or consultants) and is not materially caused or
contributed to by HHSC or its agents. If at any time, HHSC determines the HMO has not met any
aspect of the responsibilities of the Contract and/or the specific performance standards due to
mitigating circumstances, HHSC reserves the right to waive all or part of the liquidated damages.
All such waivers must be in writing, contain the reasons for the waiver, and be signed by the
appropriate executive of HHSC.

     (2) The liquidated damages prescribed in this Section are not intended to be in the nature
of a penalty, but are intended to be reasonable estimates of HHSC’s projected financial loss and
damage resulting from the HMO’s nonperformance, including financial loss as a result of project
delays.

Accordingly, in the event HMO fails to perform in accordance with the Contract, HHSC may assess
liquidated damages as provided in this Section.

     (3) If HMO fails to perform any of the Services described in the Contract, HHSC may assess
liquidated damages for each occurrence of a liquidated damages event, to the extent consistent

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with HHSC’s tailored approach to remedies and Texas law.

     (4) HHSC may elect to collect liquidated damages:

     (A) Through direct assessment and demand for payment delivered to HMO; or

     (B) By deduction of amounts assessed as liquidated damages as set-off against
payments then due to HMO or that become due at any time after assessment of the liquidated
damages. HHSC will make deductions until the full amount payable by the HMO is received by
HHSC.

(f) Equitable Remedies

     (1) HMO acknowledges that, if HMO breaches (or attempts or threatens to breach) its material
obligation under this Contract, HHSC may be irreparably harmed. In such a circumstance, HHSC may
proceed directly to court to pursue equitable remedies.

     (2) If a court of competent jurisdiction finds that HMO breached (or attempted or threatened
to breach) any such obligations, HMO agrees that without any additional findings of irreparable
injury or other conditions to injunctive relief, it will not oppose the entry of an appropriate
order compelling performance by HMO and restraining it from any further breaches (or attempted or
threatened breaches).

(g) Suspension of Contract

     (1) HHSC may suspend performance of all or any part of the Contract if:

     (A) HHSC determines that HMO has committed a material breach of the Contract;

     (B) HHSC has reason to believe that HMO has committed, assisted in the commission of
Fraud, Abuse, Waste, malfeasance, misfeasance, or nonfeasance by any party concerning the
Contract;

     (C) HHSC determines that the HMO knew, or should have known of, Fraud, Abuse, Waste,
malfeasance, or nonfeasance by any party concerning the Contract, and the HMO failed to
take appropriate action; or

     (D) HHSC determines that suspension of the Contract in whole or in part is in the
best interests of the State of Texas or the HHSC Programs.

     (2) HHSC will notify HMO in writing of its intention to suspend the Contract in whole or in
part. Such notice will:

     (A) Be delivered in writing to HMO;

     (B) Include a concise description of the facts or matter leading to HHSC’s decision;
and

     (C) Unless HHSC is suspending the contract for convenience, request a Corrective Action
Plan from HMO or describe actions that HMO may take to avoid the contemplated suspension of
the Contract.

Section 12.03 Termination by HHSC.

     This Contract will terminate upon the Expiration Date. In addition, prior to completion
of the Contract Term, all or a part of this Contract may be terminated for any of the following
reasons:

(a) Termination in the best interest of HHSC.

     HHSC may terminate the Contract without cause at any time when, in its sole discretion, HHSC
determines that termination is in the best interests of the State of Texas. HHSC will provide
reasonable advance written notice of the termination, as it deems appropriate under the
circumstances. The
termination will be effective on the date specified in HHSC’s notice of termination.

(b) Termination for cause.

     HHSC reserves the right to terminate this Contract, in whole or in part, upon the
following conditions:

     (1) Assignment for the benefit of creditors, appointment of receiver, or inability to pay
debts.

     HHSC may terminate this Contract at any time if HMO:

     (A) Makes an assignment for the benefit of its creditors;

     (B) Admits in writing its inability to pay its debts generally as they become due;
or

     (C) Consents to the appointment of a receiver, trustee, or liquidator of HMO or of
all or any part of its property.

     (2) Failure to adhere to laws, rules, ordinances, or orders.

     HHSC may terminate this Contract if a court of competent jurisdiction finds HMO failed to
adhere to any laws, ordinances, rules,
regulations or orders of any public authority having jurisdiction and such violation prevents
or substantially impairs performance of HMO’s duties under this Contract. HHSC will provide at
least thirty (30) days advance written notice of such termination.

     (3) Breach of confidentiality.

     HHSC may terminate this Contract at any time if HMO breaches confidentiality laws with
respect to the Services and Deliverables provided under this Contract.

     (4) Failure to maintain adequate personnel or resources.

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     HHSC may terminate this Contract if, after providing notice and an opportunity to correct,
HHSC determines that HMO has failed to supply personnel or resources and such failure results in
HMO’s inability to fulfill its duties under this Contract. HHSC will provide at least thirty (30)
days advance written notice of such termination.

(5) Termination for gifts and gratuities.

     (A) HHSC may terminate this Contract at any time following the determination by a
competent judicial or quasi-judicial authority and HMO’s exhaustion of all legal remedies
that HMO, its employees, agents or
representatives have either offered or given any thing of value to an officer or employee of
HHSC or the State of Texas in violation of state law.

     (B) HMO must include a similar provision in each of its Subcontracts and shall enforce
this provision against a Subcontractor who has offered or given any thing of value to any of
the persons or entities described in this Section, whether or not the offer or gift was in
HMO’s behalf.

     (C) Termination of a Subcontract by HMO pursuant to this provision will not be a cause for
termination of the Contract unless:

     (1) HMO fails to replace such terminated Subcontractor within a reasonable time;
and

     (2) Such failure constitutes cause, as described in this Subsection 12.03(b).

     (D) For purposes of this Section, a “thing of value” means any item of tangible or
intangible property that has a monetary value of more than $50.00 and includes, but is not
limited to, cash, food, lodging, entertainment, and charitable contributions. The term does
not include contributions to holders of public office or candidates for public office that
are paid and reported in accordance with State and/or Federal law.

(6) Termination for non-appropriation of funds.

     Notwithstanding any other provision of this Contract, if funds for the continued
fulfillment of this Contract by HHSC are at any time not forthcoming or are insufficient,
through failure of any entity to appropriate funds or otherwise, then HHSC will have the right
to terminate this Contract at no additional cost and with no penalty whatsoever by giving prior
written notice documenting the lack of funding. HHSC will provide at least thirty (30) days
advance written notice of such termination. HHSC will
use reasonable efforts to ensure appropriated funds are available.

(7) Judgment and execution.

     (A) HHSC may terminate the Contract at any time if judgment for the payment of money in
excess of $500,000.00 that is not covered by insurance, is rendered by any court or
governmental body against HMO, and HMO does not:

     (1) Discharge the judgment or provide for its discharge in accordance with the terms
of the judgment;

     (2) Procure a stay of execution of the judgment within thirty (30) days from the
date of entry thereof; or

     (3) Perfect an appeal of such judgment and cause the execution of such judgment to be
stayed during the appeal, providing such financial reserves as may be required under
generally accepted accounting principles.

     (B) If a writ or warrant of attachment or any similar process is issued by any court
against all or any material portion of the property of HMO, and such writ or warrant of
attachment or any similar process is not released or bonded within thirty (30) days after its
entry, HHSC may terminate the Contract in accordance with this Section.

(8) Termination for insolvency.

     (A) HHSC may terminate the Contract at any time if HMO:

     (1) Files for bankruptcy;

     (2) Becomes or is declared insolvent, or is the subject of any proceedings related to
its liquidation, insolvency, or the appointment of a receiver or similar officer for it;

     (3) Makes an assignment for the benefit of all or substantially all of its creditors;
or

     (4) Enters into an Contract for the composition, extension, or readjustment of
substantially all of its obligations.

     (B) HMO agrees to pay for all reasonable expenses of HHSC including the cost of counsel,
incident to:

     (1) The enforcement of payment of all obligations of the HMO by any action or
participation in, or in connection with a case or proceeding under Chapters 7, 11, or 13 of
the United States Bankruptcy Code, or any successor statute;

     (2) A case or proceeding involving a receiver or other similar officer duly
appointed to handle the HMO’s business; or

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     (3) A case or proceeding in a State court initiated by HHSC when previous collection
attempts have been unsuccessful.

(9) Termination for HMO’S material breach of the Contract.

HHSC will have the right to terminate the Contract in whole or in part if HHSC determines, at
its sole discretion, that HMO has materially breached the Contract. HHSC will provide at least
thirty (30) days advance written notice of such termination.

     Section 12.04 Termination by HMO.

     (a) Failure to pay.

     HMO may terminate this Contract if HHSC fails to pay the HMO undisputed charges when due as
required under this Contract. Retaining premium, recoupment, sanctions, or penalties that are
allowed under this Contract or that result from the HMO’s failure to perform or the HMO’s default
under the terms of this Contract is not cause for termination. Termination for failure to pay does
not release HHSC from the obligation to pay undisputed charges for services provided prior to the
termination date.

     If HHSC fails to pay undisputed charges when due, then the HMO may submit a notice of intent
to terminate for failure to pay in accordance with the requirements of Subsection 12.04(d). If
HHSC pays all undisputed amounts then due within thirty (30)-days after receiving the notice of
intent to terminate, the HMO cannot proceed with termination of the Contract under this Article.

     (b) Change to HHSC Uniform Managed Care Manual.

     HMO may terminate this agreement if the Parties are unable to resolve a dispute concerning a
material and substantive change to the HHSC Uniform Managed Care Manual (a change that materially
and substantively alters the HMO’s ability to fulfill its obligations under the Contract). HMO
must submit a notice of intent to terminate due to a material and substantive change in the HHSC
Uniform Managed Care Manual no later than thirty (30) days after the effective date of the policy
change. HHSC will not enforce the policy change during the period of time between the receipt of
the notice of intent to terminate and the effective date of termination.

     (c) Change to Capitation Rate.

     If HHSC proposes a modification to the Capitation Rate that is unacceptable to the HMO, the
HMO may terminate the Contract. HMO must submit a written notice of intent to terminate due to a
change in the Capitation Rate no later than thirty (30) days after HHSC’s notice of the proposed
change. HHSC will not enforce the rate change during the period of time between the receipt of the
notice of intent to terminate and the effective date of termination.

     (d) Notice of intent to terminate.

     In order to terminate the Contract pursuant to this Section, HMO must give HHSC at least
ninety (90) days written notice of intent to terminate. The termination date will be calculated
as the last day of the month following ninety (90) days from the date the notice of intent to
terminate is received by HHSC.

     Section 12.05 Termination by mutual agreement.

     This Contract may be terminated by mutual written agreement of the Parties.

     Section 12.06 Effective date of termination.

     Except as otherwise provided in this Contract, termination will be effective as of the
date specified in the notice of termination.

     Section 12.07 Extension of termination effective date.

     The Parties may extend the effective date of termination one or more times by mutual
written agreement.

     Section 12.08 Payment and other provisions at Contract termination.

     (a) In the event of termination pursuant to this Article, HHSC will pay the Capitation
Payment for Services and Deliverables rendered through the effective date of termination. All
pertinent provisions of the Contract will form the basis of settlement.

     (b) HMO must provide HHSC all reasonable access to records, facilities, and documentation
as is required to efficiently and expeditiously close out the Services and Deliverables
provided under this Contract.

     (c) HMO must prepare a Turnover Plan, which is acceptable to and approved by HHSC. The
Turnover Plan will be implemented during the time period between receipt of notice and the
termination date.

     Section 12.09 Modification of Contract in the event of remedies.

     HHSC may propose a modification of this Contract in response to the imposition of a
remedy under this Article. Any modifications under this Section must be reasonable, limited to
the matters causing the exercise of a remedy, in writing, and executed in accordance with
Article 8. HMO must negotiate such proposed modifications in good faith.

     Section 12.10 Turnover assistance.

     Upon receipt of notice of termination of the Contract by HHSC, HMO will provide any
turnover assistance reasonably necessary to enable HHSC or its designee to effectively close
out the Contract and move the work to another vendor or to perform the work itself.

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     Section 12.11 Rights upon termination or expiration of Contract.

     In the event that the Contract is terminated for any reason, or upon its expiration,
HHSC will, at HHSC’s discretion, retain ownership of any and all associated work products,
Deliverables and/or documentation in whatever form that they exist.

     Section 12.12 HMO responsibility for associated costs.

     If HHSC terminates the Contract for Cause, the HMO will be responsible to HHSC for all
reasonable costs incurred by HHSC, the State of Texas, or any of its administrative agencies to
replace the HMO. These costs include, but are not limited to, the costs of procuring a
substitute vendor and the cost of any claim or litigation that is reasonably attributable to
HMO’s failure to perform any Service in accordance with the terms of the Contract

     Section 12.13 Dispute resolution.

     (a) General agreement of the Parties.

     The Parties mutually agree that the interests of fairness, efficiency, and good business
practices are best served when the Parties employ all reasonable and informal means to resolve
any dispute under this Contract. The Parties express their mutual commitment to using all
reasonable and informal means of resolving disputes prior to invoking a remedy provided
elsewhere in this Section.

     (b) Duty to negotiate in good faith.

     Any dispute that in the judgment of any Party to this Contract may materially or
substantially affect the performance of any Party will be reduced to writing and delivered to
the other Party. The Parties must then negotiate in good faith and use every reasonable effort
to resolve such dispute and the Parties shall not resort to any formal proceedings unless they
have reasonably determined that a negotiated resolution is not possible. The resolution of any
dispute disposed of by Contract between the Parties shall be reduced to writing and delivered to
all Parties within ten (10) Business Days.

     (c) Claims for breach of Contract.

     (1) General requirement. HMO’s claim for breach of this Contract will be resolved in
accordance with the dispute resolution process established by HHSC in accordance with Chapter
2260, Texas Government Code.

     (2) Negotiation of claims. The Parties expressly agree that the HMO’s claim for breach of
this Contract that the Parties cannot resolve in the ordinary course of business or through the
use of all reasonable and informal means will be submitted to the negotiation process provided
in Chapter 2260, Subchapter B, Texas Government Code.

     (A) To initiate the process, HMO must submit written notice to HHSC that specifically
states
that HMO invokes the provisions of Chapter 2260, Subchapter B, Texas Government Code. The
notice must comply with the requirements of Title 1, Chapter 392, Subchapter B of the Texas
Administrative Code.

     (B) The Parties expressly agree that the HMO’s compliance with Chapter 2260, Subchapter B,
Texas Government Code, will be a condition precedent to the filing of a contested case
proceeding under Chapter 2260, Subchapter C, of the Texas Government Code.

     (3) Contested case proceedings. The contested case process provided in Chapter 2260,
Subchapter C, Texas Government Code, will be HMO’s sole and exclusive process for seeking a remedy
for any and all alleged breaches of contract by HHSC if the Parties are unable to resolve their
disputes under Subsection (c)(2) of this Section.

     The Parties expressly agree that compliance with the contested case process provided in
Chapter 2260, Subchapter C, Texas Government Code, will be a condition precedent to seeking consent
to sue from the Texas Legislature under Chapter 107, Civil Practices & Remedies Code. Neither the
execution of this Contract by HHSC nor any other conduct of any representative of HHSC relating to
this Contract shall be considered a waiver of HHSC’s sovereign immunity to suit.

     (4) HHSC rules. The submission, processing and resolution of HMO’s claim is governed by the
rules adopted by HHSC pursuant to Chapter 2260, Texas Government Code, found at Title 1, Chapter
392, Subchapter B of the Texas Administrative Code.

     (5) HMO’s duty to perform. Neither the occurrence of an event constituting an alleged breach
of contract nor the pending status of any claim for breach of contract is grounds for the
suspension of performance, in whole or in part, by HMO of any duty or obligation with respect to
the performance of this Contract. Any changes to the Contract as a result of a dispute resolution
will be implemented in accordance with Article 8 (“Amendments and Modifications”).

     Section 12.14 Liability of HMO.

     (a) HMO bears all risk of loss or damage to HHSC or the State due to:

     (1) Defects in Services or Deliverables;

     (2) Unfitness or obsolescence of Services or Deliverables; or

     (3) The negligence or intentional misconduct of HMO or its employees, agents,
Subcontractors, or representatives.

     (b) HMO must, at the HMO’s own expense, defend with counsel approved by HHSC, indemnify,
and hold harmless HHSC and State employees, officers, directors, contractors and agents from and

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against any losses, liabilities, damages, penalties, costs, fees, including without limitation
reasonable attorneys’ fees, and expenses from any claim or action for property damage, bodily
injury or death, to the extent caused by or arising from the negligence or intentional misconduct
of the HMO and its employees, officers, agents, or Subcontractors. HHSC will not unreasonably
withhold approval of counsel selected by HMO.

     (c) HMO will not be liable to HHSC for any loss, damages or liabilities attributable to or
arising from the failure of HHSC or any state agency to perform a service or activity in
connection with this Contract.

          Article 13. Assurances & Certifications

     Section 13.01 Proposal certifications.

     HMO acknowledges its continuing obligation to comply with the requirements of the following
certifications contained in its Proposal, and will immediately notify HHSC of any changes in
circumstances affecting these certifications:

	 	(1)	 	Federal lobbying;
	 
	 	(2)	 	Debarment and suspension;
	 
	 	(3)	 	Child support; and
	 
	 	(4)	 	Nondisclosure statement.

     Section 13.02 Conflicts of interest.

     (a) Representation.

     HMO agrees to comply with applicable state and federal laws, rules, and regulations regarding
conflicts of interest in the performance of its duties under this Contract. HMO warrants that it
has no interest and will not acquire any direct or indirect interest that would conflict in any
manner or degree with its performance under this Contract.

     (b) General duty regarding conflicts of interest.

     HMO will establish safeguards to prohibit employees from using their positions for a purpose
that constitutes or presents the appearance of personal or organizational conflict of interest, or
personal gain. HMO will operate with complete independence and objectivity without actual,
potential or apparent conflict of interest with respect to the activities conducted under this
Contract with the State of Texas.

     Section 13.03 Organizational conflicts of interest. (a) Definition.

     An organizational conflict of interest is a set of facts or circumstances, a relationship, or
other situation under which a HMO, or a Subcontractor has past, present, or currently planned
personal or financial activities or interests that either directly or indirectly:

     (1) Impairs or diminishes the HMO’s, or Subcontractor’s ability to render impartial or
objective assistance or advice to HHSC; or

     (2) Provides the HMO or Subcontractor an unfair competitive advantage in future HHSC
procurements (excluding the award of this Contract).

     (b) Warranty.

     Except as otherwise disclosed and approved by HHSC prior to the Effective Date of the
Contract, HMO warrants that, as of the Effective Date and to the best of its knowledge and belief,
there are no relevant facts or circumstances that could give rise to an organizational conflict of
interest affecting this Contract. HMO affirms that it has neither given, nor intends to give, at
any time hereafter, any economic opportunity, future employment, gift, loan, gratuity, special
discount, trip, favor, or service to a public servant or any employee or representative of same, at
any time during the procurement process or in connection with the procurement process except as
allowed under relevant state and federal law.

     (c) Continuing duty to disclose.

     (1) HMO agrees that, if after the Effective Date, HMO discovers or is made aware of an
organizational conflict of interest, HMO will immediately and fully disclose such interest in
writing to the HHSC project manager. In addition, HMO must promptly disclose any relationship
that might be perceived or represented as a conflict after its discovery by HMO or by HHSC as a
potential conflict. HHSC reserves the right to make a final determination regarding the
existence of conflicts of interest, and HMO agrees to abide by HHSC’s decision.

     (2) The disclosure will include a description of the action(s) that HMO has taken or
proposes to take to avoid or mitigate such conflicts.

     (d) Remedy.

     If HHSC determines that an organizational conflict of interest exists, HHSC may, at its
discretion, terminate the Contract pursuant to Subsection 12.03(b)(9). If HHSC determines that HMO
was aware of an organizational conflict of interest before the award of this Contract and did not
disclose the conflict to the contracting officer, such nondisclosure will be considered a material
breach of the Contract. Furthermore, such breach may be submitted to the Office of the Attorney
General, Texas Ethics Commission, or appropriate State or Federal law enforcement officials for
further action.

     (e) Flow down obligation.

     HMO must include the provisions of this Section in all Subcontracts for work to be performed
similar to the service provided by HMO, and the terms

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“Contract,” “HMO,” and “project manager” modified appropriately to preserve the State’s
rights.

     Section 13.04 HHSC personnel recruitment prohibition.

     HMO has not retained or promised to retain any person or company, or utilized or promised
to utilize a consultant that participated in HHSC’s development of specific criteria of the RFP
or who participated in the selection of the HMO for this Contract.

     Unless authorized in writing by HHSC, HMO will not recruit or employ any HHSC professional
or technical personnel who have worked on projects relating to the subject matter of this
Contract, or who have had any influence on decisions affecting the subject matter of this
Contract, for two (2) years following the completion of this Contract.

     Section 13.05 Anti-kickback provision.

     HMO certifies that it will comply with the Anti-Kickback Act of 1986, 41 U.S.C. §51-58 and
Federal Acquisition Regulation 52.203-7, to the extent applicable.

     Section 13.06 Debt or back taxes owed to State of Texas.

     In accordance with Section 403.055 of the Texas Government Code, HMO agrees that any
payments due to HMO under the Contract will be first applied toward any debt and/or back taxes
HMO owes State of Texas. HMO further agrees that payments will be so applied until such debts
and back taxes are paid in full.

     Section 13.07 Certification regarding status of license, certificate, or permit.

     Article IX, Section 163 of the General Appropriations Act for the 1998/1999 state fiscal
biennium prohibits an agency that receives an appropriation under either Article II or V of the
General Appropriations Act from awarding a contract with the owner, operator, or administrator
of a facility that has had a license, certificate, or permit revoked by another Article II or V
agency. HMO certifies it is not ineligible for an award under this provision.

     Section 13.08 Outstanding debts and judgments.

     HMO certifies that it is not presently indebted to the State of Texas, and that HMO is not
subject to an outstanding judgment in a suit by State of Texas against HMO for collection of
the balance. For purposes of this Section, an indebtedness is any amount sum of money that is
due and owing to the State of Texas and is not currently under dispute. A false statement
regarding HMO’s status will be treated as a material breach of this Contract and may be grounds
for termination at the option of HHSC.

          Article 14. Representations & Warranties

     Section 14.01 Authorization.

     (a) The execution, delivery and performance of this Contract has been duly authorized by HMO
and no additional approval, authorization or consent of any governmental or regulatory agency is
required to be obtained in order for HMO to enter into this Contract and perform its obligations
under this Contract.

     (b) HMO has obtained all licenses, certifications, permits, and authorizations necessary to
perform the Services under this Contract and currently is in good standing with all regulatory
agencies that regulate any or all aspects of HMO’s performance of this Contract. HMO will maintain
all required certifications, licenses, permits, and authorizations during the term of this
Contract.

     Section 14.02 Ability to perform.

     HMO warrants that it has the financial resources to fund the capital expenditures required
under the Contract without advances by HHSC or assignment of any payments by HHSC to a financing
source.

     Section 14.03 Minimum Net Worth.

     The HMO has, and will maintain throughout the life of this Contract, minimum net worth to the
greater of (a) $1,500,000; (b) an amount equal to the sum of twenty-five dollars ($25) times the
number of all enrollees including Members; or (c) an amount that complies with standards adopted by
TDI. Minimum net worth means the excess total admitted assets over total liabilities, excluding
liability for subordinated debt issued in compliance with Chapter 843 of the Texas Insurance Code.

     Section 14.04 Insurer solvency.

     (a) The HMO must be and remain in full compliance with all applicable state and federal
solvency requirements for basic-service health maintenance organizations, including but not limited
to, all reserve requirements, net worth standards, debt-to-equity ratios, or other debt
limitations. In the event the HMO fails to maintain such compliance, HHSC, without limiting any
other rights it may have by law or under the Contract, may terminate the Contract.

     (b) If the HMO becomes aware of any impending changes to its financial or business structure
that could adversely impact its compliance with the requirements of the Contract or its ability to
pay its debts as they come due, the HMO must notify HHSC immediately in writing.

     (c) The HMO must have a plan and take appropriate measures to ensure adequate provision
against the risk of insolvency as required by TDI. Such provision must be adequate to provide
for the following in the event of insolvency:

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     (1) continuation of Covered Services, until the time of discharge, to Members who
are confined on the date of insolvency in a hospital or other inpatient facility;

     (2) payments to unaffiliated health care providers and affiliated healthcare providers
whose Contracts do not contain Member “hold harmless” clauses acceptable to the TDI;

     (3) continuation of Covered Services for the duration of the Contract Period for which a
capitation has been paid for a Member;

     (4) provision against the risk of insolvency must be made by establishing adequate
reserves, insurance or other guarantees in full compliance with all financial requirements of
TDI and the Contract.

     Should TDI determine that there is an
immediate risk of insolvency or the HMO is unable to provide Covered Services to its Members,
HHSC, without limiting any other rights it may have by law, or under the Contract, may terminate
the Contract.

     Section 14.05 Workmanship and performance.

     (a) All Services and Deliverables provided under this Contract will be provided in a manner
consistent with the standards of quality and integrity as outlined in the Contract.

     (b) All Services and Deliverables must meet or exceed the required levels of performance
specified in or pursuant to this Contract.

     (c) HMO will perform the Services and provide the Deliverables in a workmanlike manner, in
accordance with best practices and high professional standards used in well-managed operations
performing services similar to the services described in this Contract.

     Section 14.06 Warranty of deliverables.

     HMO warrants that Deliverables developed and delivered under this Contract will meet in all
material respects the specifications as described in the Contract during the period following its
acceptance by HHSC, through the term of the Contract, including any subsequently negotiated by HMO
and HHSC. HMO will promptly repair or replace any such Deliverables not in compliance with this
warranty at no charge to HHSC.

     Section 14.07 Compliance with Contract.

     HMO will not take any action substantially or materially inconsistent with any of the
terms and conditions set forth in this Contract without the express written approval of HHSC.

     Section 14.08 Technology Access

     (a) HMO expressly acknowledges that State funds may not be expended in connection with the
purchase of an automated information system unless that system meets certain statutory
requirements
relating to accessibility by persons with visual impairments. Accordingly, HMO represents and
warrants to HHSC that this technology is capable, either by virtue of features included within
the technology or because it is readily adaptable by use with other technology, of:

     (1) Providing equivalent access for effective use by both visual and non-visual
means;

     (2) Presenting information, including prompts used for interactive communications, in
formats intended for non-visual use; and

     (3) Being integrated into networks for obtaining, retrieving, and disseminating
information used by individuals who are not blind or visually impaired.

     (b) For purposes of this Section, the phrase “equivalent access” means a substantially
similar ability to communicate with or make use of the technology, either directly by features
incorporated within the technology or by other reasonable means such as assistive devices or
services that would constitute reasonable accommodations under the Americans with Disabilities
Act or similar State or Federal laws. Examples of methods by which equivalent access may be
provided include, but are not limited to, keyboard alternatives to mouse commands and other
means of navigating graphical displays, and customizable display appearance.

     (c) In addition, all technological solutions offered by the HMO must comply with the
requirements of Texas Government Code §531.0162. This includes, but is not limited to providing
technological solutions that meet federal accessibility standards for persons with disabilities, as
applicable.

          Article 15. Intellectual Property

     Section 15.01 Infringement and misappropriation.

     (a) HMO warrants that all Deliverables provided by HMO will not infringe or misappropriate
any right of, and will be free of any claim of, any third person or entity based on copyright,
patent, trade secret, or other intellectual property rights.

     (b) HMO will, at its expense, defend with counsel approved by HHSC, indemnify, and hold
harmless HHSC, its employees, officers, directors, contractors, and agents from and against any
losses, liabilities, damages, penalties, costs, fees, including without limitation reasonable
attorneys’ fees and expenses, from any claim or action against HHSC that is based on a claim of
breach of the warranty set forth in the preceding paragraph. HHSC will promptly notify HMO in
writing of the claim, provide HMO a copy of all information received by HHSC with respect to the
claim, and cooperate with HMO in defending or settling the claim. HHSC will not unreasonably

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withhold, delay or condition approval of counsel selected by the HMO.

     (c) In case the Deliverables, or any one or part thereof, is in such action held to
constitute an infringement or misappropriation, or the use thereof is enjoined or restricted or if
a proceeding appears to HMO to be likely to be brought, HMO will, at its own expense, either:

     (1) Procure for HHSC the right to continue using the Deliverables; or

     (2) Modify or replace the Deliverables to comply with the Specifications and to not
violate any intellectual property rights.

     If neither of the alternatives set forth in (1) or (2) above are available to the HMO on
commercially reasonable terms, HMO may require that HHSC return the allegedly infringing
Deliverable(s) in which case HMO will refund all amounts paid for all such Deliverables.

     Section 15.02 Exceptions.

     HMO is not responsible for any claimed breaches of the warranties set forth in Section
15.01 to the extent caused by:

     (a) Modifications made to the item in question by anyone other than HMO or its
Subcontractors, or modifications made by HHSC or its contractors working at HMO’s direction or in
accordance with the specifications; or

     (b) The combination, operation, or use of the item with other items if HMO did not supply
or approve for use with the item; or

     (c) HHSC’s failure to use any new or corrected versions of the item made available by HMO.

     Section 15.03 Ownership and Licenses

     (a) Definitions.

For purposes of this Section 15.03, the following terms have the meanings set forth below:

     (1) “Custom Software" means any software developed by the HMO: for HHSC; in
connection with the Contract; and with funds received from HHSC. The term does not include HMO
Proprietary Software or Third Party Software.

     (2) “HMO Proprietary Software" means software: (i) developed by the HMO prior to the
Effective Date of the Contract, or (ii) software developed by the HMO after the Effective Date of
the Contract that is not developed: for HHSC; in connection with the Contract; and with funds
received from HHSC.

     (3) “Third Party Software" means software that is: developed for general commercial
use; available to the public; or not developed for HHSC. Third Party Software includes without
limitation: commercial off-the-shelf software; operating system software; and application
software, tools, and utilities.

     (b) Deliverables.

     The Parties agree that any Deliverable, including without limitation the Custom Software, will
be the exclusive property of HHSC.

     (c) Ownership rights.

     (1) HHSC will own all right, title, and interest in and to its Confidential Information and
the Deliverables provided by the HMO, including without limitation the Custom Software and
associated documentation. For purposes of this Section 15.03, the Deliverables will not include
HMO Proprietary Software or Third Party Software. HMO will take all actions necessary and transfer
ownership of the Deliverables to HHSC, including, without limitation, the Custom Software and
associated documentation prior to Contract termination.

     (2) HMO will furnish such Deliverables, upon request of HHSC, in accordance with applicable
State law. All Deliverables, in whole and in part, will be deemed works made for hire of HHSC for
all purposes of copyright law, and copyright will belong solely to HHSC. To the extent that any
such Deliverable does not qualify as a work for hire under applicable law, and to the extent that
the Deliverable includes materials subject to copyright, patent, trade secret, or other proprietary
right protection, HMO agrees to assign, and hereby assigns, all right, title, and interest in and
to Deliverables, including without limitation all copyrights, inventions, patents, trade secrets,
and other proprietary rights therein (including renewals thereof) to HHSC.

     (3) HMO will, at the expense of HHSC, assist HHSC or its nominees to obtain copyrights,
trademarks, or patents for all such Deliverables in the United States and any other countries. HMO
agrees to execute all papers and to give all facts known to it necessary to secure United States
or foreign country copyrights and patents, and to transfer or cause to transfer to HHSC all the
right, title, and interest in and to such Deliverables. HMO also agrees not to assert any moral
rights under applicable copyright law with regard to such Deliverables.

     (d) License Rights

     HHSC will have a royalty-free and non-exclusive license to access the HMO Proprietary
Software and associated documentation during the term of the Contract. HHSC will also have
ownership and unlimited rights to use, disclose, duplicate, or publish all information and data
developed, derived, documented, or furnished by HMO under or resulting from the Contract. Such
data will include all results, technical information, and materials developed for and/or obtained
by HHSC from HMO in the performance of the Services hereunder, including but not limited to all
reports, surveys, plans, charts, recordings (video and/or sound), pictures, drawings, analyses,
graphic representations, computer

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printouts, notes and memoranda, and documents whether finished or unfinished, which result from
or are prepared in connection with the Services performed as a result of the Contract.

(e) Proprietary Notices

     HMO will reproduce and include HHSC’s
copyright and other proprietary notices and product
identifications provided by HMO on such copies, in
whole or in part, or on any form of the Deliverables.

(f) State and Federal Governments

     In accordance with 45 C.F.R. §95.617, all appropriate State and Federal agencies will have a
royalty-free, nonexclusive, and irrevocable license to reproduce, publish, translate, or otherwise
use, and to authorize others to use for Federal Government purposes all materials, the Custom
Software and modifications thereof, and associated documentation designed, developed, or installed
with federal financial participation under the Contract, including but not limited to those
materials covered by copyright, all software source and object code, instructions, files, and
documentation.

Article 16. Liability

Section 16.01 Property damage.

     (a) HMO will protect HHSC’s real and personal property from damage arising from HMO’s, its
agent’s, employees’ and Subcontractors’ performance of the Contract, and HMO will be responsible
for any loss, destruction, or damage to HHSC’s property that results from or is caused by HMO’s,
its agents’, employees’ or Subcontractors’ negligent or wrongful acts or omissions. Upon the loss
of, destruction of, or damage to any property of HHSC, HMO will notify the HHSC Project Manager
thereof and, subject to direction from the Project Manager or her or his designee, will take all
reasonable steps to protect that property from further damage.

     (b) HMO agrees to observe and encourage its employees and agents to observe safety measures
and proper operating procedures at HHSC sites at all times.

     (c) HMO will distribute a policy statement to all of its employees and agents that directs the
employee or agent to promptly report to HHSC or to HMO any special defect or unsafe condition
encountered while on HHSC premises. HMO will promptly report to HHSC any special defect or an
unsafe condition it encounters or otherwise learns about.

Section 16.02 Risk of Loss.

     During the period Deliverables are in transit and in possession of HMO, its carriers or HHSC
prior to being accepted by HHSC, HMO will bear the risk of loss or damage thereto, unless such
loss or damage is caused by the negligence or intentional misconduct of HHSC. After HHSC accepts a
Deliverable, the risk
of loss or damage to the Deliverable will be borne by HHSC, except loss or damage attributable to
the negligence or intentional misconduct of HMO’s agents, employees or Subcontractors.

Section 16.03 Limitation of HHSC’s Liability.

     HHSC WILL NOT BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES UNDER
CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHER LEGAL THEORY. THIS WILL APPLY
REGARDLESS OF THE CAUSE OF ACTION AND EVEN IF HHSC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.

     HHSC’S LIABILITY TO HMO UNDER THE CONTRACT WILL NOT EXCEED THE TOTAL CHARGES TO BE PAID BY
HHSC TO HMO UNDER THE CONTRACT, INCLUDING CHANGE ORDER PRICES AGREED TO BY THE PARTIES OR OTHERWISE
ADJUDICATED.

     HMO’s remedies are governed by the provisions in Article 12.

Article 17. Insurance & Bonding

Section 17.01 Insurance Coverage.

(a) Required Coverage

     (1) Statutory and General Coverage.

     HMO will maintain, at HMO’s own expense, during the Term of the Contract and until final
acceptance of all Services and Deliverables, the following insurance coverage. HMO will provide
HHSC with proof of the following insurance coverage on or before the Contract Effective Date:

     (A) Standard Worker’s Compensation Insurance coverage;

     (B) Automobile Liability;

     (C) Comprehensive Liability Insurance including Bodily Injury coverage of $100,000.00
per each occurrence and Property Damage Coverage of $25,000.00 per each occurrence; and

     (D) General Liability Insurance of at least $1,000,000.00 per occurrence and
$5,000,000.00 in the aggregate.

     If HMO’s current Comprehensive General Liability insurance coverage does not meet the above
stated requirements, HMO will obtain excess liability insurance to compensate for the difference
in the coverage amounts.

     (2) Professional Liability Coverage.

     (A) HMO must maintain at its own expense, or cause its Network Providers to maintain,
during the Term of the Contract and until final acceptance of all Services and

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Deliverables, Professional Liability Insurance for each Network Provider of $100,000.00
per occurrence and $300,000.00 in the aggregate, or the limits required by the hospital at
which the Network Provider has admitting privileges. HMO must provide proof of such coverage
upon request to HHSC.

     (B) HMO must maintain at its own expense, during the Term of the Contract and until final
acceptance of all Services and Deliverables, an Umbrella Professional Liability Insurance
Policy for the greater of $3,000,000.00 or an amount (rounded to the nearest $100,000.00) that
represents the number of Members enrolled in the HMO in the first month of the applicable
State Fiscal Year multiplied by $150.00, not to exceed $10,000,000.00. HMO will provide HHSC
with proof of this insurance coverage on or before the Contract Effective Date.

     (3) Any exceptions to the insurance requirements of this Contract must be approved in writing
by HHSC. HMO and Network Providers who qualify as either state or federal units of government are
exempt from the liability insurance requirements of this Contract and are not required to obtain
exemptions from these provisions. State and federal units of government are required to comply
with, and are subject to, the provision of the Texas and Federal Tort Claims Act.

     (4) HMO is responsible for any and all deductibles stated in the policies. Insurance will be
maintained at all times during the performance of the Contract. Insurance coverage will be issued
by insurance companies authorized by applicable law to conduct business in the State of Texas, and!
with the exception of Standard Workers’ Compensation Insurance, must name HHSC as an additional
insured, whether performed by HMO or by Subcontractors.

     (5) The policies will have an extended reporting period of two years. When policies are
renewed or replaced, the policy retroactive date must coincide with, or precede, the Contract
Effective Date.

(b) Proof of Insurance Coverage

     (1) HMO will furnish the HHSC Project Manager original Certificates of Insurance evidencing
the required coverage to be in force on the date of award, and renewal certificates of insurance,
or such similar evidence, if the coverages have an expiration or renewal date occurring during the
term of the Contract. HMO will submit original evidence of insurance prior to the Effective Date of
the Contract. The failure of HHSC to obtain such evidence from HMO before permitting HMO to
commence work will
not be deemed to be a waiver by HHSC and HMO will remain under continuing obligation to maintain
and provide proof of the insurance coverage.

     (2) The insurance specified above will be carried until all services required to be
performed under the terms of the Contract are satisfactorily completed. Failure to carry or keep
such insurance in force will constitute a violation of the Contract.

     (3) The insurance will provide for thirty (30) calendar days prior written notice to be
given to HHSC in the event coverage is substantially changed, canceled, or non-renewed. HMO
must submit a new coverage binder to HHSC to ensure no break in coverage.

     (4) HMO will require all Subcontractors operating in Texas to carry Worker’s Compensation
coverage in the amounts required by Texas law. HMO will also require Subcontractors to carry
Comprehensive Liability Insurance including Bodily Injury coverage or $100,000.00 per occurrence
and Property Damage Coverage of $25,000.00 per occurrence. HMO
may provide the coverage for any or all Subcontractors, and, if so, the evidence of
insurance submitted will so stipulate.

     (5) The Parties expressly understand and agree that any insurance coverages and limits
furnished by HMO will in no way expand or limit HMO’s liabilities and responsibilities
specified within the Contract documents or by applicable law.

     (6) HMO expressly understands and agrees that any insurance maintained by HHSC will apply
in excess of and not contribute to insurance provided by HMO under the Contract.

     (7) If HMO, or its Subcontractor(s), desire additional coverage, higher limits of liability,
or other modifications for its own protection, HMO and each of its Subcontractors will be
responsible for the acquisition and cost of such additional protection.

Section 17.02 Performance Bond.

     Beginning on the Operational Start Date of the Contract, and each year thereafter, the
HMO must obtain a performance bond with a one (1) year term. The performance bond must continue to
be in effect for one (1) year following the expiration of the one (1) year term. HMO must obtain
and maintain the annual performance bonds in the form prescribed by HHSC and approved by TDI,
naming HHSC as Obligee, securing HMO’s faithful performance of the terms and conditions of this
Contract. The annual performance bonds must comply with Chapter 843 of the Texas Insurance Code
and 28 T.A.C. §11.1805. The annual performance bond(s) must be issued in the amount of $100,000.00
for each applicable HMO Program within each Service Area that the HMO covers under this

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Contract. All performance bonds must be
issued by a surety licensed by TDI, and
specify cash payment as the sole remedy. HMO
must deliver the initial performance bond to
HHSC prior to the Operational Start Date of
the Contract, and each renewal performance
bond prior to the first day of the State
Fiscal Year.

Section 17.03 TDI Fidelity Bond

     The HMO will secure and maintain
throughout the life of the Contract a
fidelity bond in compliance with Chapter
843 of the Texas Insurance Code and
28 T.A.C. §11.1805. The HMO must promptly
provide HHSC with copies of the bond and any
amendments or renewals thereto.

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Part 1: Parties to the Contract

This Contract Amendment (the “Amendment”) is between the Texas Health and Human Services Commission
(HHSC), an administrative agency within the executive department of the State of Texas, having its
principal office
at 4900 North Lamar Boulevard, Austin, Texas 78751, and Amerigroup Texas. Inc., (HMO) a
corporation organized
under the laws of the State of Texas, having its principal place of business at: 1200 East Copeland
Road. Suite 200,
Arlington, Texas 76011. HHSC and HMO may be referred to in this Amendment individually as a “Party”
and
collectively as the “Parties.”

The Parties hereby agree to amend their original contract, HHSC contract number 529-06-0280-00002
(the
“Contract”) as set forth herein. The Parties agree that the terms of the Contract will remain in
effect and continue to
govern except to the extent modified in this Amendment.

This Amendment is executed by the Parties in accordance with the authority granted in Attachment A
to the HHSC
Managed Care Contract document, “HHSC Uniform Managed Care Contract Terms & Conditions,” Article 8,
“Amendments and Modifications.”

	 	 	 	 	 
	Part 2: Effective-Date of
Amendment

	 	Part 3: Contract
Expiration Date
	 	Part 4: Operational Start Date:
	 
	 	 	 	 
	September 1, 2006

	 	August 31, 2008
	 	STAR and CHIP HMOs: September 1,
2006
	 
	 	 	 	 
	 

	 	 	 	STAR+PLUS HMOs: January 1, 2007
	 
	 	 	 	 
	 

	 	 	 	CHIP Perinatal HMOs: January 1,
2007

Part 5: Project Managers

	 	 	 
	HHSC:

	 	HMO:
	Pamela Coleman

	 	Aileen McCormick
	Director of Medicaid/CHIP Health Plan Operations

	 	Amerigroup Texas, Inc.
	11209 Metric Boulevard, Building H

	 	6700 West Loop South, Suite 200
	Austin, Texas 78758

	 	Bellaire, Texas 77401
	Phone: 512-491-1302

	 	Phone: 713-218-5101
	Fax: 512-491-1966

	 	Fax: 713-218-8692
	 
	 	 
	 

	 	E-mail: amccorm@amerigroupcorp.com

Part 6: Deliver Legal Notices to:

	 	 	 
	HHSC:

	 	HMO:
	General Counsel

	 	Amerigroup Texas, Inc.
	4900 North Lamar Boulevard, 4th Floor

	 	6700 West Loop South, Suite 200
	Austin, Texas 78751

	 	Bellaire, Texas 77401
	Fax: 512-424-6586

	 	Fax: 713-218-8692

 

 

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: HHSC Managed Care Contract

Part 7: HMO Programs and Service Areas:

Mediciad STAR HMO Program

This Contract applies to the following HHSC HMO Programs and Service Areas (check all that
apply). All references in the Contract Attachments to HMO Programs or Service Areas that
are not checked are superfluous and do not apply to the HMO.

	 	 	 	 	 	 	 	 	 
	Service Areas:

	 	o
	 	Bexar
	 	o
	 	Lubbock
	 
	 	 	 	 	 	 	 	 
	 

	 	þ
	 	Dallas
	 	þ
	 	Nueces
	 

	 	o
	 	El Paso
	 	þ
	 	Tarrant
	 

	 	þ
	 	Harris
	 	o
	 	Travis

See Attachment B-6, “Map of Counties with HMO Program Service Areas,” for
listing of counties included within the STAR Service Areas.

Medicaid STAR+PLUS HMO Program

	 	 	 	 	 	 	 	 	 
	Service Areas:

	 	þ
	 	Bexar
	 	o
	 	Nueces
	 
	 	 	 	 	 	 	 	 
	 

	 	þ
	 	Harris
	 	þ
	 	Travis

See Attachment B-6.1, “Map of Counties with STAR+PLUS HMO Program Service Areas,” for listing
of counties included within the STAR+PLUS Service Areas.

CHIP HMO Program

	 	 	 	 	 	 	 	 	 
	Core Service Areas:

	 	o
	 	Bexar
	 	þ
	 	Nueces
	 
	 	 	 	 	 	 	 	 
	 

	 	þ
	 	Dallas
	 	þ
	 	Tarrant
	 
	 	 	 	 	 	 	 	 
	 

	 	o
	 	El Paso
	 	 o
	 	Travis
	 
	 	 	 	 	 	 	 	 
	 

	 	þ
	 	Harris
	 	o
	 	Webb
	 
	 	 	 	 	 	 	 	 
	 

	 	o
	 	Lubbock	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Optional Service Areas:

	 	o
	 	Bexar
	 	o
	 	Lubbock
	 
	 	 	 	 	 	 	 	 
	 

	 	o
	 	El Paso
	 	o
	 	Nueces
	 
	 	 	 	 	 	 	 	 
	 

	 	o
	 	Harris
	 	o
	 	Travis

See Attachment B-6, “Map of Counties with HMO Program Service Areas,” for listing of counties
included within the CHIP Core Service Areas and CHIP Optional Service Areas.

Page 2 of 10

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: HHSC Managed Care Contract

	 	HHSC Contract No. 529-06-0280-00002-D

X CHIP Perinatal Program

	 	 	 	 	 	 	 	 	 
	Service Areas:

	 	o
	 	Bexar
	 	o
	 	Nueces
	 
	 	 	 	 	 	 	 	 
	 

	 	o
	 	Dallas
	 	þ
	 	Tarrant
	 
	 	 	 	 	 	 	 	 
	 

	 	o
	 	El Paso
	 	o
	 	Travis
	 
	 	 	 	 	 	 	 	 
	 

	 	o
	 	Harris
	 	o
	 	Webb
	 

	 	o
	 	Lubbock	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	o
	 	Bexar
	 	o
	 	Lubbock
	 
	 	 	 	 	 	 	 	 
	 

	 	o
	 	El Paso
	 	o
	 	Nueces
	 
	 	 	 	 	 	 	 	 
	 

	 	o
	 	Harris
	 	o
	 	Travis

 

 

See Attachment B-6.2, “Map of Counties with CHIP Perinatal HMO Program Service Areas,” for a
list of counties included within the CHIP Perinatal Service Areas.

Part 8: Payment

*********REDACTED**********

Part 9: Contract Attachments

Modifications to Part 9 of the HHSC Managed Care Contract document, “Contract Attachments,”
are italicized below:

A: HHSC Uniform Managed Care Contract Terms & Conditions —  Version 1.3 is replaced with Version 1.4

B: Scope of Work/Performance Measures

     B-1: HHSC RFP 529-04-272, Sections 6-9 — Version 1.3 is replaced with Version 1.4

     B-2: Covered Services — Version 1.3 is replaced with Version 1.4

     B-2.1 STAR+PLUS Covered Services — Version 1.3 is replaced
with Version 1.4 B-2.2 CHIP Perinatal Program Covered Services
- Added by Version 1.3

     B-3: Value-added Services —  Version 1.3 is replaced with Version 1.4

     B-3.1 STAR+PLUS Value-added Services —  Version 1.3 is replaced with Version 1.4

     B-3.2 CHIP Perinatal Program Value-added Services —  Added by Version 1.3

     B-4: Performance Improvement Goals —  Version 1.3 is replaced with Version 1.4

     B-4.1 SFY 2008 Performance Improvement Goals- Version 1.3 is replaced with Version 1.4

     B-5: Deliverables/Liquidated Damages Matrix —  Version 1.3 is replaced with Version 1.4

     B-6: Map of Counties with HMO Program Service Areas

     B-6.1 STAR+PLUS Service Areas

     B-6.2 CHIP Perinatal Program Service Areas

C: HMO’s Proposal and Related Documents

     C-1: HMO’s Proposal

     C-2: HMO Supplemental Responses

     C-3: Agreed Modifications to HMO’s Proposal

 

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: HHSC Managed Care Contract

	 	HHSC Contract No. 529-06-0280-00002-D

Part 10: Signatures:

The Parties have executed this Contract Amendment in their capacities as stated below with
authority to bind their organizations on the dates set forth by their signatures. By signing this
Amendment, the Parties expressly understand and agree that this Amendment is hereby made part of
the Contract as though it were set out word for word in the Contract.

	 	 	 
	Amerigroup Texas, Inc.
	 	 
	Texas Health and Human Services Commission
	 	 
	 
	 	 
	Charles E. Bell, M.D.

	 	By: Aileen McCormick
	 
	 	 
	Deputy Executive Commissioner for Health Services

	 	Title: President and CEO
	Date: 9/18/06

	 	Date: 8/28/06

Page 10 of 10

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 6

	 	Version 1.4

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	 	 	DOCUMENT	 	EFFECTIVE	 	 
	STATUS’	 	REVISION2	 	DATE	 	DESCRIPTION3
	Baseline

	 	n/a	 	 	 	 	 	Initial version Attachment B-1, Section 6
	 
	 	 	 	 	 	 	 	 
	Revision

	 	1.1	 	 	 	June 30, 2006
	 	Revised version of the Attachment B-1,
Section 6, that includes provisions
applicable to MCOs participating in the
STAR+PLUS Program.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Section 6.3.2.1, Experience Rebate
Reward, is modified to delete references
to the selected performance indicators
and the Quality Challenge Pool.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Section 6.3.2.2, Performance-Based
Capitation Rate, is modified to include
STAR+PLUS and to add Additional
STAR+PLUS Performance Indicators.
Section 6.3.2.3, Quality Challenge Award,
is modified to include STAR+PLUS.
Section 6.3.2.5, STAR+PLUS Hospital
Inpatient Performance Based Capitation
Rate: Hospital Inpatient Stay Cost
Incentives and Disincentives, is added.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Section 6.3.2.5.1, STAR+PLUS Hospital
Inpatient Disincentive — Administrative
Fee at Risk, is added.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Section 6.3.2.5.2, STAR+PLUS Hospital
Inpatient Incentive — Shared Savings
Award, is added.
	 
	 	 	 	 	 	 	 	 
	Revision

	 	1.2	 	 	 	September 1, 2006
	 	Revised version of the Attachment B-1,
Section 6, that includes provisions
applicable to MCOs participating in the
STAR and CHIP Programs.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Section 6.3.2.2, Performance-Based
Capitation Rate, modifies the standard
performance indicator for the Behavioral
Health Hotline to change the maximum
abandonment rate from 5% to 7% (except
in the Dallas Core Service Area).
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Section 6.3.2.3, Quality Challenge Award,
is modified to reflect the new start date for
the Quality Challenge Award, which will
not be implemented until State Fiscal

6-1

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 6

	 	Version 1.4

	 	 	 	 	 	 	 	 	 
	 	 	DOCUMENT	 	EFFECTIVE	 	 
	STATUS’	 	REVISION2	 	DATE	 	DESCRIPTION3
	 

	 	 	 	 	 	 	 	Year 2008.
	 
	 	 	 	 	 	 	 	 
	Revision

	 	 	1.3	 	 	September 1, 2006
	 	Revised version of the Attachment B-1,
Section 6, that includes provisions
applicable to MCOs participating in the
CHIP Perinatal Program.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Section 6.3.2.1 modified to clarify that the
Experience Rebate Reward incentive
may apply to the CHIP Perinatal Program
at a later date.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Section 6.3.2.2 modified to clarify that the
Performance-based Capitation Rate will
not apply for the CHIP Perinatal Program
in SFY 2007.
	 
	 	 	 	 	 	 	 	 
	Revision

	 	 	1.4	 	 	September 1, 2006
	 	Contract amendment did not revise
Attachment B-1 Section 6 — Premium
Payment, Incentives, and Disincentives

 

			
	 	 	Status should be represented as “Baseline” for initial issuances, “Revision” for changes to the Baseline version, and
“Cancellation” for withdrawn versions
	 
	2 	 	Revisions should be numbered in accordance according to the version of the issuance and sequential numbering of
the revision-e.g., “1.2” refers to the first version of the document and the second revision.
	 
	 	 	Brief description of the changes to the document made in the revision.

 

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 6

	 	Version 1.4

6. Premium Payment, Incentives, and Disincentives

This section documents how the Capitation Rates are developed and describes performance
incentives and disincentives related to HHSC’s value-based purchasing approach. For further
information, HMOs should refer to the HHSC Uniform Managed Care Contract Terms and Conditions.

Under the HMO Contracts, health care coverage for Members will be provided on a fully insured
basis. The HMO must provide the Services and Deliverables, including Covered Services to enrolled
Members in order for monthly Capitation Payments to be paid by HHSC. Attachment B-1, Section 8
includes the HMO’s financial responsibilities regarding out-of-network Emergency Services and
Medically Necessary Covered Services not available through Network Providers.

6.1 Capitation Rate Development

Refer to Attachment A, HHSC Uniform Managed Care Contract Terms & Conditions, Article 10,
“Terms & Conditions of Payment,” for information concerning Capitation Rate development.

6.2 Financial Payment Structure and Provisions

HHSC will pay the HMO monthly Capitation Payments based on the number of eligible and
enrolled Members. HHSC will calculate the monthly Capitation Payments by multiplying the number
of Member Months times the applicable monthly Capitation Rate by Member Rate Cell. The HMO must
provide the Services and Deliverables, including Covered Services to Members, described in the
Contract for monthly Capitation Payments to be paid by HHSC.

The HMO must understand and expressly assume the risks associated with the performance of the
duties and responsibilities under the Contract, including the failure, termination, or suspension
of funding to HHSC, delays or denials of required approvals, cost of claims incorrectly paid by the
HMO, and cost overruns not reasonably attributable to HHSC. The HMO must further agree that no
other charges for tasks, functions, or activities that are incidental or ancillary to the delivery
of the Services and Deliverables will be sought from HHSC or any other state agency, nor will the
failure of HHSC or any other party to pay for such incidental or ancillary services entitle the HMO
to withhold Services or Deliverables due under the Contract.

6-3

 

6.2.1 Capitation Payments

The HMO must refer to the HHSC Uniform Managed Care Contract Terms & Conditions for
information and Contract requirements on the:

 

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 6

	 	Version 1.4

	 	1)	 	Time and Manner of Payment,
	 
	 	2)	 	Adjustments to Capitation Payments,
	 
	 	3)	 	Delivery Supplemental Payment, and
	 
	 	4)	 	Experience Rebate.

6.3 Performance Incentives and Disincentives

HHSC introduces several financial and non-financial performance incentives and disincentives
through this Contract. These incentives and disincentives are subject to change by HHSC over the
course of the Contract Period. The methodologies required to implement these strategies will be
refined by HHSC after collaboration with contracting HMOs through a new incentives workgroup to be
established by HHSC.

6.3.1 Non-financial Incentives

6.3.1.1 Performance Profiling

HHSC intends to distribute information on key performance indicators to HMOs on a regular basis,
identifying an HMO’s performance, and comparing that performance to other HMOs, and HHSC standards
and/or external Benchmarks. HHSC will recognize HMOs that attain superior performance and/or
improvement by publicizing their achievements. For example, HHSC may post information concerning
exceptional performance on its website, where it will be available to both stakeholders and
members of the public.

6.3.1.2 Auto-assignment Methodology for Medicaid HMOs

HHSC may also revise its auto-assignment methodology during the Contract Period for new Medicaid
Members who do not select an HMO (Default Members). The new assignment methodology would reward
those HMOs that demonstrate superior performance and/or improvement on one or more key dimensions
of performance. In establishing the assignment methodology, HHSC will employ a subset of the
performance indicators contained within the Performance Indicator Dashboard. At present, HHSC
intends to recognize those HMOs that exceed the minimum geographic access standards defined within
Attachment B-1, Section 8 and the Performance Indicator Dashboard. HHSC may also use its assessment
of HMO performance on annual quality improvement goals (described in Attachment B-1, Section 8) in
developing the assignment methodology. The methodology would disproportionately assign Default
Members to the HMO(s) in a given Service Area that performed comparably favorably on the selected
performance indicators.

HHSC anticipates that it will not implement a performance-based auto-assignment algorithm
before September 1, 2007. HHSC will invite HMO comments on potential approaches prior to
implementation of the new performance-based auto-assignment algorithm.

 

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 6

	 	Version 1.4

6.3.2 Financial Incentives and Disincentives

6.3.2.1 Experience Rebate Reward

HHSC historically has required HMOs to provide HHSC with an Experience Rebate (see the Uniform
Managed Care Contract Terms and Conditions, Article 10.11) when there has been an aggregate excess
of Revenues over Allowable Expenses. During the Contract Period, should the HMO experience an
aggregate excess of Revenues over Allowable Expenses across STAR and CHIP HMO Programs and Service
Areas, HHSC will allow the HMO to retain that portion of the aggregate excess of Revenues over
Allowable Expenses that is equal to or less than 3.5% of the total Revenue for the period should
the HMO demonstrate superior performance on selected performance indicators. The retention of 3.5%
of revenue exceeds the retention of 3.0% of revenue that would otherwise be afforded to a HMO
without demonstrated superior performance on these performance indicators relative to other HMOs.
HHSC will develop the methodology for determining the level of performance necessary for an HMO to
retain the additional 0.5% of revenue after consultation with HMOs. The finalized methodology will
be added to the Uniform Managed Care Manual.

HHSC will calculate the Experience Rebate Reward after it has calculated the HMO’s at-risk
Capitation Rate payment, as described below in Section 6.3.2.2. HHSC will calculate whether a
HMO is eligible for the Experience Rebate Reward prior to the 90-day Financial Statistical
Report (FSR) filing.

HHSC anticipates that it will not implement the incentive for Rate Period 1 of the Contract. HHSC
will invite HMO comments on potential approaches prior to implementation of the new
performance-based Experience Rebate Reward. HHSC may also implement this incentive option for the
STAR+PLUS and CHIP Perinatal programs in the future.

6.3.2.2 Performance-Based Capitation Rate

Beginning in State Fiscal Year 2007 of the Contract, HHSC will place each STAR and CHIP HMO at
risk for 1% of the Capitation Rate(s). Beginning in State Fiscal Year 2008 of the Contract, HHSC
will also place each STAR+PLUS HMO at risk for 1% of the Capitation Rate(s). HHSC retains the
right to vary the percentage of the Capitation Rate placed at risk in a given Rate Period. HHSC
will not place CHIP Perinatal HMOs at risk for 1% of the Capitation Rate(s) in State Fiscal Year
2007, but reserves this right in subsequent State Fiscal Years.

As noted in Section 6.2, HHSC will pay the HMO monthly Capitation Payments based on the number of
eligible and enrolled Members. HHSC will calculate the monthly Capitation Payments by multiplying
the number of Member months times the applicable monthly Capitation Rate by Member rate cell. At
the end of each Rate Period, HHSC will evaluate if the HMO has demonstrated that it has fully met
the performance expectations for which the HMO is at risk. Should the HMO fall short on some or
all of the performance expectations, HHSC will adjust a future monthly Capitation Payment by an
appropriate portion of the 1% at-risk amount. HMOs will be able to earn variable percentages up to
100% of the 1% at-risk Capitation Rate. HHSC’s objective is that all HMOs achieve performance
levels that enable them to receive the full at-risk amount.

6-5

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 6

	 	Version 1.4

HHSC will determine the extent to which the HMO has met the performance expectations by
assessing the HMO’s performance for each applicable HMO Program relative to performance targets
for the rate period. HHSC will conduct separate accounting for each HMO Program’s at-risk
Capitation Rate amount.

HHSC will identify no more than 10 performance indicators for each HMO Program. Some of the
performance indicators will be standard across the HMO Programs while others may apply to only one
of the HMO Programs.

HHSC’s performance indicators may include some or all of the following measures. The specific
performance indicators, periods of data collection, and associated points are detailed in the
HHSC Uniform Managed Care Manual. The minimum percentage targets identified in this section were
developed based, in part, on the HHSC HMO Program objective of ensuring access to care and
quality of care, past performance of the HHSC HMOs, and performance of Medicaid and CHIP HMOs
nationally on HEDIS and CARPS measures of plan performance. The Performance Indicator Dashboard
includes a more detailed explanation.

Standard Performance Indicators:

	 	1.	 	98% of Clean Claims are properly Adjudicated within 30 calendar days.
	 
	 	2.	 	The Member Services Hotline abandonment rate does not exceed 7%.
	 
	 	3.	 	The Behavioral Health Hotline abandonment rate does not exceed 7%.‘
	 
	 	4.	 	The Provider Services Hotline abandonment rate does not exceed 7%.

Additional STAR Performance Indicators

	 	1.	 	90% of child Members have access to at least one child-appropriate PCP with an
Open Panel within 30 miles travel distance.
	 
	 	2.	 	90% of adult Members have access to at least one adult-appropriate PCP with an
Open Panel within 30 miles travel distance.
	 
	 	3.	 	36% of age-qualified child Members receive six or more well-child visits (in the
first 15 months of life.
	 
	 	4.	 	56% of age-qualified child Members receive at least one well-child visit in the
3rd, 4th, 5th, or 6th year of life.
	 
	 	5.	 	72% of pregnant women Members receive a prenatal care visit in the first
trimester or within 42 days of enrollment.

Additional CHIP Performance Indicators

	 
	 	1.	 	90% of child Members have access to at least one child-appropriate PCP with an
Open Panel within 30 miles travel distance.
	 
	 	2.	 	90% of child Members have access to at least one otolaryngologist (ENT) within
75 miles travel distance.

 

			
	‘ Will not apply in the Dallas Core Service Area. Points will be allocated proportionately
over the remaining standard performance indicators.

6-6

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 6

	 	Version 1.4

	 	3.	 	56% of age-qualified child Members receive at least one well-child visit in the
3rd, 4th, 5th, or 6th year of life
	 
	 	4.	 	38% of adolescents receive an annual well visit.

Additional STAR+PLUS Performance Indicators

	 	1.	 	57% of adult Members report no problem with delays in getting approval from the HMO
	 
	 	2.	 	90% of adult Members have access to at least one adult-appropriate PCP with an
Open Panel within 30 miles travel distance
	 
	 	3.	 	62% of adult Members report no problem in getting a referral to a Specialty Physician
	 
	 	4.	 	47% of adult Members report no problem getting needed Special Therapy (physical
therapy, occupational therapy, and speech therapy) from the HMO
	 
	 	5.	 	57% of adult Members report no problem getting needed Behavioral Health
Services from the HMO

Failure to timely provide HHSC with necessary data related to the calculation of the performance
indicators will result in HHSC’s assignment of a zero percent performance rate for each related
performance indicator.

Should Member survey-based indicators yield response rates deemed by HHSC to be too low to yield
credible data, HHSC will reapportion points across the remaining measures.

Actual plan rates will be rounded to the nearest whole number. HHSC will calculate performance
assessment for the at-risk portion of the capitation payments by summing all earned points and
converting them to a percentage. For example, an HMO that earns 92 points will earn 92% of the
at-risk Capitation Rate. HHSC will apply the premium assessment of 8% of the at-risk Capitation
Rate as a reduction to the monthly Capitation Payment ninety days after the end of the contract
period.

HMOs will report actual Capitation Payments received on the Financial Statistical Report (FSR).
Actual Capitation Payments received include all of the at-risk Capitation Payment paid to the
HMO. Any performance assessment based on performance for a contract period will appear on the
second final (334-day) FSR for that contract period.

HHSC will evaluate the performance-based Capitation Rate methodology annually in consultation
with HMOs. HHSC may then modify the methodology it deems necessary and appropriate to motivate,
recognize, and reward HMOs for performance. The methodologies for Rate Periods 1 and 2 will be
included in the HHSC Uniform Managed Care Manual.

6.3.2.3 Quality Challenge Award

Data collection for the Quality Challenge Award will begin on September 1, 2006; however, the
Quality Challenge Award will not be implemented until State Fiscal Year 2008. Should one or more
HMOs be unable to earn the full amount of the performance-based at-risk portion of the Capitation
Rate, HHSC will reallocate the funds through the HMO Program’s Quality Challenge Award. HHSC will
use these funds to reward HMOs that demonstrate superior clinical quality. HHSC will determine
the number of HMOs that will receive Quality Challenge Award funds annually based on the amount
of the funds to be reallocated. Separate Quality Challenge Award

6-7

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 6

	 	Version 1.4

payments will be made for each of the HMO programs. As with the performance-based Capitation
Rate, each HMO will be evaluated separately for each HMO Program. HHSC intends to evaluate HMO
performance annually on some combination of the following performance indicators in order to
determine which HMOs demonstrate superior clinical quality. In no event will a distribution from
the Quality Challenge Award, plus any other incentive payments made in accordance with the HMO
Contract, when combined with the Capitation Rate payments, exceed 105% of the Capitation Rate
payments to an HMO.

Information about the data collection period to be used for each indicator is found in the HHSC
Uniform Managed Care Manual.

6.3.2.4 Remedies and Liquidated Damages

All areas of responsibility and all requirements in the Contract will be subject to
performance evaluation by HHSC. Any and all responsibilities or requirements not fulfilled may
have remedies and HHSC will assess either actual or liquidated damages. Refer to Attachment A,
HHSC Uniform Managed Care Contract Terms and Conditions and Attachment B-5 for performance
standards that carry liquidated damage values.

6.3.2.5 STAR+PLUS Hospital Inpatient Performance-Based Capitation Rate: Hospital Inpatient Stay
Cost Incentives & Disincentives

Effective as of the STAR+PLUS Operational Start Date, HHSC will place at-risk a portion of the
HMO’s Medicaid-Only Capitation Rate. Settlements for Inpatient Stay costs will be calculated by the
State after the end of each State Fiscal Year (SFY) using three (3) months of completed Hospital
paid data for the preliminary settlement and 11 months of completed data for the final settlement.
The SFY 2006 Fee-for-Service (FFS) Inpatient Hospital per-member-per-month (PMPM) rate will be
projected for Rate Period 1 (January 1, 2007-August 31, 2007) for the first settlement. Adjustments
for the projection will include trending and risk adjustment. The base and final inpatient hospital
PMPM rate will be calculated separately for each HMO, Service Area, and Rate Cell. Hams County is
excluded from the Harris Service Area calculations.

6.3.2.5.1 STAR+PLUS Hospital Inpatient Disincentive — Administrative Fee at Risk

HHSC has assumed that STAR+PLUS HMOs will achieve a 22% reduction in projected FFS Hospital
Inpatient Stay costs, for the Medicaid-Only population, through the implementation of the STAR+PLUS
model. HMOs achieving savings beyond 22% will be eligible for the STAR+PLUS Shared Savings Award
described in Section 6.3.25.2. The HMO will be at-risk for savings less than 22%.

The maximum risk to the HMO will be equal to 50% of the difference between 15% Hospital
inpatient savings and 22% Hospital inpatient savings. The disincentive for savings above 15%,
but still less than 22% will be equal to 50% of the difference between the level of achieved
savings and 22%. HHSC retains the right to vary the disincentive percentage in a given Rate
Period by Contract amendment.

6-8

 

Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 6

	 	Version 1.4

6.3.2.5.2 STAR+PLUS Hospital Inpatient Incentive — Shared Savings Award

HMOs that exceed the 22% reduction in Inpatient Stay costs incurred by STAR+PLUS Members specified
in Section 6.3.2.5.1 will be eligible to obtain a 20% share of the savings achieved beyond the 22%
target. HHSC will determine the extent to which the HMO has met and exceeded the performance
expectation in the manner described within Section 6.3.2.5. Should HHSC determine that the HMO
exceeded the 22% target, HHSC will adjust a future monthly Capitation Payment upward by 20% of the
calculated savings. This shared savings award is limited to 5% of the HMO‘s capitation
in accordance with Federal Balance Budget Act requirements and is calculated off of total of
STAR+PLUS Capitation Payment. An HMO will be subject to contractual remedies and determined
ineligible for the award, if a HHSC audit reveals that the HMO has inappropriately averted
Medically Necessary Inpatient Stay admissions and potentially endangered Member safety.

 

 

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DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	 	 	DOCUMENT	 	EFFECTIVE	 	 
	STATUS’	 	REVISION	 	DATE	 	DESCRIPTION3
	Baseline

	 	n/a	 	 	 	 	 	Initial version Attachment B-1, Section 7
	 
	 	 	 	 	 	 	 	 
	Revision

	 	1.1	 	 	 	June 30, 2006
	 	Revised version of the Attachment B-1,
Section 7, that includes provisions
applicable to MCOs participating in the
STAR+PLUS Program. 

Sections 7.1 to 7.3 modified to include
STAR+PLUS.
	 
	 	 	 	 	 	 	 	 
	Revision

	 	1.2	 	 	 	September 1, 2006
	 	Revised version of the Attachment B-1,
Section 7, that includes provisions
applicable to MCOs participating in the
STAR and CHIP Programs.

Section 7.3.1.7, Operations Readiness,
changes reference from “Operational
Date” to “Effective Date.”
	 
	 	 	 	 	 	 	 	 
	Revision

	 	1.3	 	 	 	September 1, 2006
	 	Revised version of the Attachment B-1,
Section 7, that includes provisions
applicable to MCOs participating in the
CHIP Perinatal Program.

Sections 7.2, 7.3, and 7.3.1.2 through
7.3.1.7 modified to include the CHIP
Perinatal Program.
	 
	 	 	 	 	 	 	 	 
	Revision

	 	1.4	 	 	 	September 1, 2006
	 	Contract amendment did not revise
Attachment B-1 Section 7 — Transition
Phase Requirements
	 
	 	 	 	 	 	 	 	 

 

			
	 	 	Status should be represented as “Baseline” for initial issuances, “Revision” for changes to
the Baseline version, and
	 
	 	 	“Cancellation” for withdrawn versions
	 
	2	 	Revisions should be numbered in accordance according to the version of the issuance and
sequential numbering of
the revision-e.g., “1.2” refers to the first version of the document and the second revision.
	 
	3	 	Brief description of the changes to the document made in the revision.

 

 

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7. Transition Phase Requirements

7.1 Introduction

This Section presents the scope of work for the Transition Phase of the Contract, which
includes those activities that must take place between the time of Contract award and the
Operational Start Date.

The Transition Phase will include a Readiness Review of each HMO, which must be completed
successfully prior to a HMO‘s Operational Start Date for each applicable HMO Program.
HHSC may, at its discretion, postpone the Operational Start Date of the Contract for any such HMO
that fails to satisfy all Transition Phase requirements.

If for any reason, a HMO does not fully meet the Readiness Review prior to the Operational Start
Date, and HHSC has not approved a delay in the Operational Start Date or approved a delay in the
HMO’s compliance with the applicable Readiness Review requirement, then HHSC shall impose remedies
and either actual or liquidated damages. If the HMO is a current HMO Contractor, HHSC may also
freeze enrollment into the HMO’s plan for any of its HMO Programs. Refer to the HHSC Uniform
Managed Care Contract Terms and Conditions (Attachment A) and the Liquidated Damages Matrix
(Attachment B-5) for additional information.

7.2 Transition Phase Scope for HMOs

STAR, STAR+PLUS and CHIP HMOs must meet the Readiness Review requirements established by HHSC
no later than 90 days prior to the Operational Start Date for each applicable HMO Program. CHIP
Perinatal HMOS must meet the Readiness Review requirements established by HHSC not later than 60
days prior to the Operational Start Date for the CHIP Perinatal Program. HMO agrees to provide all
materials required to complete the readiness review by the dates established by HHSC and its
Contracted Readiness Review Vendor.

7.3 Transition Phase Schedule and Tasks

The Transition Phase will begin after both Parties sign the Contract. The start date for the
STAR and CHIP Transition Phase is November 15, 2005. The start date for the STAR+PLUS Transition
Phase is June 30, 2006. The start date for the CHIP Perinate Transition Phase is September 1,
2006.

The Transition Phase must be completed no later than the agreed upon Operational Start Date(s)
for each HMO Program and Service Area. The HMO may be subject to liquidated damages for failure
to meet the agreed upon Operational Start Date (see Attachment B-5).

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7.3.1 Transition Phase Tasks

The HMO has overall responsibility for the timely and successful completion of each of the
Transition Phase tasks. The HMO is responsible for clearly specifying and requesting
information needed from HHSC, other HHSC contractors, and Providers in a manner that does not
delay the schedule or work to be performed.

7.3.1.1 Contract Start-Up and Planning

HHSC and the HMO will work together during the initial Contract start-up phase to:

	 	•	 	define project management and reporting standards;
	 
	 	•	 	establish communication protocols between HHSC and the HMO;
	 
	 	•	 	establish contacts with other HHSC contractors;
	 
	 	•	 	establish a schedule for key activities and milestones; and
	 
	 	•	 	clarify expectations for the content and format of Contract Deliverables.

The HMO will be responsible for developing a written work plan, referred to as the
Transition/Implementation Plan, which will be used to monitor progress throughout the Transition
Phase. An updated and detailed Transition /Implementation Plan will be due to HHSC.

     7.3.1.2 Administration and Key HMO Personnel

No later than the Effective Date of the Contract, the HMO must designate and identify Key HMO
Personnel that meet the requirements in HHSC Uniform Managed Care Contract Terms & Conditions,
Article 4. The HMO will supply HHSC with resumes of each Key HMO Personnel as well as
organizational information that has changed relative to the HMO’s Proposal, such as updated job
descriptions and updated organizational charts, (including updated Management Information System
(MIS) job descriptions and an updated MIS staff organizational chart), if applicable. If the HMO
is using a Material Subcontractor(s), the HMO must also provide the organizational chart for such
Material Subcontractor(s).

No later than the Contract execution date, STAR+PLUS HMOs must update the information above
and provide any additional information as it relates to the STAR+PLUS Program.

No later than the Contract execution date, CHIP Perinatal HMOs must update the information
above and provide any additional information as it relates to the CHIP Perinatal Program.

     7.3.1.3 Financial Readiness Review

In order to complete a Financial Readiness Review, HHSC will require that HMOs update information
submitted in their proposals. Note: STAR+PLUS and/or CHIP Perinatal HMOs who have already
submitted proposal updates for HHSC’s review for STAR and/or CHIP, must either verify that the
information has not changed and that it applies to STAR+PLUS and/or the CHIP

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Perinatal Program or provide updated information for STAR+PLUS by July 10, 2006 and for the
CHIP Perinatal Program by September 1, 2006. This information will include the following:

Contractor Identification and Information

	1.	 	The Contractor’s legal name, trade name, or any other name under which the Contractor does
business, if any.

	2.	 	The address and telephone number of the Contractor’s headquarters office.

	3.	 	A copy of its current Texas Department of Insurance Certificate of Authority to provide HMO
or ANHC services in the applicable Service Area(s). The Certificate of Authority must include
all counties in the Service Area(s) for which the Contractor is proposing to serve HMO
Members.

	4.	 	Indicate with a “Yes-HMO”, “Yes-ANHC” or
“No” in the applicable cell(s) of the Column B of the following chart
whether the Contractor is currently certified by TDI as an HMO or ANHC in all counties in
each of the CSAs in which the Contractor proposes to participate in one or more of the HHSC
HMO Programs. If the Contractor is not proposing to serve a CSA for a particular HMO Program,
the Contractor should leave the applicable cells in the table empty.

Table 2: TDI Certificate of Authority in Proposed HMO Program CSAs

	 	 	 	 	 	 	 	 	 
	Column A	 	Column B	 	 	Column C	 
	Core Service	 	 	 	 	 	Counties/Partial Counties withouta	 
	Area (CSA)	 	TDI Certificate of Authority	 	 	TDI Certificate of Authority	 
	Bexar
	 	 	 	 	 	 	 	 
	Dallas
	 	 	 	 	 	 	 	 
	El Paso
	 	 	 	 	 	 	 	 
	Hams
	 	 	 	 	 	 	 	 
	Lubbock
	 	 	 	 	 	 	 	 
	Nueces
	 	 	 	 	 	 	 	 
	Tarrant
	 	 	 	 	 	 	 	 
	Travis
	 	 	 	 	 	 	 	 
	Webb
	 	 	 	 	 	 	 	 

	 	 	If the Contractor is not currently certified by TDI as an HMO or ANHC in any one or more
counties in a proposed CSA, the Contractor must identify such entire counties in Column C for
each CSA. For each county listed in Column C, the Contractor must document that it applied to
TDI for such certification of authority prior to the submission of a Proposal for this RFP.
The Contractor shall indicate the date that it applied for such certification and the status
of its application to get TDI certification in the relevant counties in this section of its
submission to HHSC.
	 
	5.	 	For Contractors serving any CHIP and CHIP Perinatal OSAs, indicate with a
“Yes-HMO”, “Yes-ANHC” or “No” in the applicable cell(s) of the Column C
of the following chart whether the Contractor is currently certified by TDI as an HMO or ANHC
in the entire county in the OSA. If the Contractor is not proposing to serve an OSA, the
Contractor should leave the applicable cells in the table empty.

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Table 3: TDI Certificate of Authority in Proposed HMO Program OSAs

	 	 	 	 	 	 	 	 	 
	CHIP Program	 
	Column A	 	Column B	 	 	Column C	 
	Core Service Area	 	 	 	 	 	 
	(CSA)	 	Affiliated CHIP OSA	 	 	TDI Certificate of Authority	 
	Bexar
	 	 	 	 	 	 	 	 
	El Paso
	 	 	 	 	 	 	 	 
	Harris
	 	 	 	 	 	 	 	 
	Lubbock
	 	 	 	 	 	 	 	 
	Nueces
	 	 	 	 	 	 	 	 
	Travis
	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 
	CHIP Perinatal Program	 
	Column A	 	Column B	 	 	Column C	 
	Core Service Area	 	 	 	 	 	 
	(CSA)	 	Affiliated CHIP OSA	 	 	TDI Certificate of Authority	 
	Bexar
	 	 	 	 	 	 	 	 
	El Paso
	 	 	 	 	 	 	 	 
	Harris
	 	 	 	 	 	 	 	 
	Lubbock
	 	 	 	 	 	 	 	 
	Nueces
	 	 	 	 	 	 	 	 
	Travis
	 	 	 	 	 	 	 	 

	 	 	For each county listed in Column C, the Contractor must document that it applied to TDI for
such certification of authority prior to the submission of a Proposal for this RFP. The
Contractor shall indicate the date that it applied for such certification and the status of
its application to get TDI certification in the relevant counties in this section of its
submission to HHSC.
	 
	6.	 	If the Contractor proposes to participate in STAR or STAR+PLUS and seeks to be considered as
an organization meeting the requirements of Section §533.004(a) or (e) of the Texas
Government Code, describe how the Contractor meets the requirements of §§533.004(a)(1),
(a)(2), (a)(3), or (e) for each proposed Service Areas.
	 
	7.	 	The type of ownership (proprietary, partnership, corporation).
	 
	8.	 	The type of incorporation (for profit, not-for-profit, or non-profit) and whether the
Contractor is publicly or privately owned.
	 
	9.	 	If the Contractor is an Affiliate or Subsidiary, identify the parent organization.
	 
	10.	 	If any change of ownership of the Contractor’s company is anticipated during the 12 months
following the Proposal due date, the Contractor must describe the circumstances of such
change and indicate when the change is likely to occur.
	 
	11.	 	The name and address of any sponsoring corporation or others who provide financial support
to the Contractor and type of support, e.g., guarantees, letters of credit, etc. Indicate if
there are maximum limits of the additional financial support.
	 
	12.	 	The name and address of any health professional that has at least a five percent
financial interest in the Contractor and the type of financial interest.
	 
	13.	 	The names of officers and directors.

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	14.	 	The state in which the Contractor is incorporated and the state(s) in which the Contractor
is licensed to do business as an HMO. The Contractor must also indicate the state where it
is commercially domiciled, if applicable.
	 
	15.	 	The Contractor’s federal taxpayer identification number.
	 
	16.	 	The Contractor’s Texas Provider Identifier (TPI) number if the Contractor is
Medicaid-enrolled in Texas.
	 
	17.	 	Whether the Contractor had a contract terminated or not renewed for non-performance or poor
performance within the past five years. In such instance, the Contractor must describe the
issues and the parties involved, and provide the address and telephone number of the
principal terminating party. The Contractor must also describe any corrective action taken
to prevent any future occurrence of the problem leading to the termination.
	 
	18.	 	A current Certificate of Good Standing issued by the Texas Comptroller of Public Accounts,
or an explanation for why this form is not applicable to the Contractor.
	 
	19.	 	Whether the Contractor has ever sought, or is currently seeking, National Committee for
Quality Assurance (NCQA) or American Accreditation HealthCare Commission (URAC)
accreditation status, and if it has or is, indicate:

	 	•	 	its current NCQA or URAC accreditation status;
	 
	 	•	 	if NCQA or URAC accredited, its accreditation term effective dates; and
	 
	 	•	 	if not accredited, a statement describing whether and when NCQA or URAC
accreditation status was ever denied the Contractor.

Material Subcontractor Information

A Material Subcontractor means any entity retained by the HMO to provide all or part of the HMO
Administrative Services where the value of the subcontracted HMO Administrative Service(s)
exceeds $100,000 per fiscal year. HMO Administrative Services are those services or functions
other than the direct delivery of Covered Services necessary to manage the delivery of and
payment for Covered Services. HMO Administrative Services include but are not limited to Network,
utilization, clinical and/or quality management, service authorization, claims processing,
Management Information System (MIS) operation and reporting. The term Material Subcontractor does
not include Providers in the HMO’s Provider Network.

Contractors must submit the following for each proposed Material Subcontractor, if any:

	1.	 	A signed letter of commitment from each Material Subcontractor that states the Material
Subcontractor’s willingness to enter into a Subcontractor agreement with the Contractor and a
statement of work for activities to be subcontracted. Letters of Commitment must be provided
on the Material Subcontractor’s official company letterhead and signed by an official with the
authority to bind the company for the subcontracted work. The Letter of Commitment must state,
if applicable, the company’s certified HUB status.
	 
	2.	 	The Material Subcontractor’s legal name, trade name, or any other name under which the
Material Subcontractor does business, if any.
	 
	3.	 	The address and telephone number of the Material Subcontractor’s headquarters office.

4. The type of ownership (e.g., proprietary, partnership, corporation).
	 
	5.	 	The type of incorporation (i.e., for profit, not-for-profit, or non-profit) and
whether the Material Subcontractor is publicly or privately owned.
	 
	6.	 	If a Subsidiary or Affiliate, the identification of the parent organization.

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	7.	 	The name and address of any sponsoring corporation or others who provide financial support
to the Material Subcontractor and type of support, e.g., guarantees, letters of credit, etc.
Indicate if there are maximum limits of the additional financial support.
	 
	8.	 	The name and address of any health professional that has at least a five percent (5%)
financial interest in the Material Subcontractor and the type of financial interest.
	 
	9.	 	The state in which the Material Subcontractor is incorporated, commercially domiciled, and
the state(s) in which the organization is licensed to do business.
	 
	10.	 	The Material Subcontractor’s Texas Provider Identifier if Medicaid-enrolled in Texas.

11. The Material Subcontractor’s federal taxpayer identification number.
	 
	12.	 	Whether the Material Subcontractor had a contract terminated or not renewed for
non-performance or poor performance within the past five years. In such instance, the
Contractor must describe the issues and the parties involved, and provide the address and
telephone number of the principal terminating party. The Contractor must also describe any
corrective action taken to prevent any future occurrence of the problem leading to the
termination.
	 
	13.	 	Whether the Material Subcontractor has ever sought, or is currently seeking,
National Committee for Quality Assurance (NCQA) or American Accreditation HealthCare
Commission (URAC) accreditation or certification status, and if it has or is,
indicate:

	 	•	 	its current NCQA or URAC accreditation or certification status;
	 
	 	•	 	if NCQA or URAC accredited or certified, its accreditation or certification
term effective dates; and
	 
	 	•	 	if not accredited, a statement describing whether and when NCQA or URAC
accreditation status was ever denied the Material Subcontractor.

Organizational Overview

	 	1.	 	Submit an organizational chart (labeled Chart A), showing the corporate
structure and lines of responsibility and authority in the administration of the
Bidder’s business as a health plan.
	 
	 	2.	 	Submit an organizational chart (labeled Chart B) showing the Texas
organizational structure and how it relates to the proposed Service Area(s),
including staffing and functions performed at the local level. If Chart A represents
the entire organizational structure, label the submission as Charts A and B.
	 
	 	3.	 	Submit an organizational chart (labeled Chart C) showing the Management Information
System (MIS) staff organizational structure and how it relates to the proposed Service
Area(s) including staffing and functions performed at the local level.
	 
	 	4.	 	If the Bidder is proposing to use a Material Subcontractor(s), the Bidder shall
include an organizational chart demonstrating how the Material Subcontractor(s) will be
managed within the Bidder’s Texas organizational structure, including the primary
individuals at the Bidder’s organization and at each Material Subcontractor organization
responsible for overseeing such Material Subcontract. This information may be included in
Chart B, or in a separate organizational chart(s).
	 
	 	5.	 	Submit a brief narrative explaining the organizational charts submitted, and
highlighting the key functional responsibilities and reporting requirements of each
organizational unit relating to the Bidder’s proposed management of the HMO Program(s),
including its management of any proposed Material Subcontractors.

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Other Information

	 	1.	 	Briefly describe any regulatory action, sanctions, and/or fines imposed by any
federal or Texas regulatory entity or a regulatory entity in another state within the
last 3 years, including a description of any letters of deficiencies, corrective actions,
findings of non-compliance, and/or sanctions. Please indicate which of these actions or
fines, if any, were related to Medicaid or CHIP programs. HHSC may, at its option,
contact these clients or regulatory agencies and any other individual or organization
whether or not identified by the Contractor.
	 
	 	2.	 	No later than ten (10) days after the Contract Effective Date, submit
documentation that demonstrates that the HMO has secured the required insurance and
bonds in accordance with TDI requirements and Attachment B-1, Section 8.
	 
	 	3.	 	Submit annual audited financial statement for fiscal years 2004 and 2005 (2005
to be submitted no later than six months after the close of the fiscal year).
	 
	 	4.	 	Submit an Affiliate Report containing a list of all Affiliates and for HHSC’s prior
review and approval, a schedule of all transactions with Affiliates that, under the
provisions of the Contract, will be allowable as expenses in the FSR Report for services
provided to the HMO by the Affiliate. Those should include financial terms, a detailed
description of the services to be provided, and an estimated amount that will be incurred
by the HMO for such services during the Contract Period.

7.3.1.4 System Testing and Transfer of Data

The HMO must have hardware, software, network and communications systems with the capability
and capacity to handle and operate all MIS systems and subsystems identified in Attachment
B-1, Section 8.1.18. For example, the HMO‘s MIS system must comply with the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) as indicated in Section 8.1.18.4.

During this Readiness Review task, the HMO will accept into its system any and all necessary data
files and information available from HHSC or its contractors. The HMO will install and test all
hardware, software, and telecommunications required to support the Contract. The HMO will define
and test modifications to the HMO’s system(s) required to support the business functions of the
Contract.

The HMO will produce data extracts and receive all electronic data transfers and transmissions.
STAR and CHIP HMOs must be able to demonstrate the ability to produce an EQRO (currently,
Institute for Child Health Policy (ICHP)) encounter file by April 1, 2006, and the 837-encounter
file by August 1, 2006. STAR+PLUS HMOs must be able to demonstrate the ability to produce the
STAR+PLUS encounter file by the STAR+PLUS Operational Start Date and the 837-encounter file by
September 1, 2007. CHIP Perinatal HMOs who have already demonstrated the ability to produce an
EQRO encounter file and 837-encounter file for the CHIP Program are not required to produce
separate files for the CHIP Perinatal Program.

If any errors or deficiencies are evident, the HMO will develop resolution procedures to address
problems identified. The HMO will provide HHSC, or a designated vendor, with test data files for
systems and interface testing for all external interfaces. This includes testing of the required

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telephone lines for Providers and Members and any necessary connections to the HHSC
Administrative Services Contractor and the External Quality Review Organization. The HHSC
Administrative Services Contractor will provide enrollment test files to new HMOs that do not
have previous HHSC enrollment files. The HMO will demonstrate its system capabilities and
adherence to Contract specifications during readiness review.

7.3.1.5 System Readiness Review

The HMO must assure that systems services are not disrupted or interrupted during the Operations
Phase of the Contract. The HMO must coordinate with HHSC and other contractors to ensure the
business and systems continuity for the processing of all health care claims and data as required
under this contract.

The HMO must submit to HHSC, descriptions of interface and data and process flow for each key
business processes described in Section 8.1.18.3, System-wide Functions.

The HMO must clearly define and document the policies and procedures that will be followed to
support day-to-day systems activities. The HMO must develop, and submit for State review and
approval, the following information by December 14, 2005 for STAR and CHIP, by July 31, 2006 for
STAR+PLUS:

	 	1.	 	Joint Interface Plan.
	 
	 	2.	 	Disaster Recovery Plan
	 
	 	3.	 	Business Continuity Plan
	 
	 	4.	 	Risk Management Plan, and
	 
	 	5.	 	Systems Quality Assurance Plan.

Separate plans are not required for CHIP Perinatal HMOs.

7.3.1.6 Demonstration and Assessment of System Readiness

The HMO must provide documentation on systems and facility security and provide evidence or
demonstrate that it is compliant with HIPAA. The HMO shall also provide HHSC with a summary of
all recent external audit reports, including findings and corrective actions, relating to the
HMO’s proposed systems, including any SAS70 audits that have been conducted in the past three
years. The HMO shall promptly make additional information on the detail of such system audits
available to HHSC upon request.

In addition, HHSC will provide to the HMO a test plan that will outline the activities that
need to be performed by the HMO prior to the Operational Start Date of the Contract. The HMO
must be prepared to assure and demonstrate system readiness. The HMO must execute system
readiness test cycles to include all external data interfaces, including those with Material
Subcontractors.

HHSC, or its agents, may independently test whether the HMO’s MIS has the capacity to
administer the STAR, STAR+PLUS, CHIP, and/or CHIP Perinatal HMO business, as applicable to the
HMO. This Readiness Review of a HMO’s MIS may include a desk review and/or an

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onsite review. HHSC may request from the HMO additional documentation to support the
provision of STAR, STAR+PLUS, CHIP, and/or CHIP Perinatal HMO Services, as applicable to the HMO.
Based in part on the HMO’s assurances of systems readiness, information contained in the Proposal,
additional documentation submitted by the HMO, and any review conducted by HHSC or its agents,
HHSC will assess the HMO’s understanding of its responsibilities and the HMO’s capability to
assume the MIS functions required under the Contract.

The HMO is required to provide a Corrective Action Plan in response to any Readiness Review
deficiency no later than ten (10) calendar days after notification of any such deficiency by HHSC.
If the HMO documents to HHSC’s satisfaction that the deficiency has been corrected within ten (10)
calendar days of such deficiency notification by HHSC, no Corrective Action Plan is required.

7.3.1.7 Operations Readiness

The HMO must clearly define and document the policies and procedures that will be followed to
support day-to-day business activities related to the provision of STAR, STAR+PLUS, CHIP, and/or
CHIP Perinatal HMO Services, including coordination with contractors. The HMO will be responsible
for developing and documenting its approach to quality assurance.

Readiness Review. Includes all plans to be implemented in one or more Service Areas
on the anticipated Operational Start Date. At a minimum, the HMO shall, for each HMO Program:

	 	1.	 	Develop new, or revise existing, operations procedures and associated documentation
to support the HMO‘s proposed approach to conducting operations activities in
compliance with the contracted scope of work.
	 
	 	2.	 	Submit to HHSC, a listing of all contracted and credentialed Providers, in a
HHSC approved format including a description of additional contracting and
credentialing activities scheduled to be completed before the Operational Start
Date.
	 
	 	3.	 	Prepare and implement a Member Services staff training curriculum and a
Provider training curriculum.
	 
	 	4.	 	Prepare a Coordination Plan documenting how the HMO will coordinate its business
activities with those activities performed by HHSC contractors and the HMO’s Material
Subcontractors, if any. The Coordination Plan will include identification of coordinated
activities and protocols for the Transition Phase.
	 
	 	5.	 	Develop and submit to HHSC the draft Member Handbook, draft Provider Manual, draft
Provider Directory, and draft Member Identification Card for HHSC’s review and approval.
The materials must at a minimum meet the requirements specified in Section 8.1.5 and
include the Critical Elements to be defined in the HHSC Uniform Managed Care Manual.
	 
	 	6.	 	Develop and submit to HHSC the HMO’s proposed Member complaint and appeals
processes for Medicaid, CHIP, and CHIP Perinatal as applicable to the HMO’s Program
participation.
	 
	 	7.	 	Provide sufficient copies of the final Provider Directory to the HHSC
Administrative Services Contractor in sufficient time to meet the enrollment
schedule.

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	 	Version 1.4

	 	8.	 	Demonstrate toll-free telephone systems and reporting capabilities for the
Member Services Hotline, the Behavioral Health Hotline, and the Provider Services
Hotline.
	 
	 	9.	 	Submit a written Fraud and Abuse Compliance Plan to HHSC for approval no later
than 30 days after the Contract Effective Date. See Section 8.1.19, Fraud and Abuse,
for the requirements of the plan, including new requirements for special investigation
units. As part of the Fraud and Abuse Compliance Plan, the HMO shall:

	 	•	 	designate executive and essential personnel to attend mandatory training in
fraud and abuse detection, prevention and reporting. Executive and essential fraud
and abuse personnel means HMO staff persons who supervise staff in the following
areas: data collection, provider enrollment or disenrollment, encounter data,
claims processing, utilization review, appeals or grievances, quality assurance
and marketing, and who are directly involved in the decision-making and
administration of the fraud and abuse detection program within the HMO. The
training will be conducted by the Office of Inspector General, Health and Human
Services Commission, and will be provided free of charge. The HMO must schedule
and complete training no later than 90 days after the Effective Date.
	 
	 	•	 	designate an officer or director within the organization responsible for
carrying out the provisions of the Fraud and Abuse Compliance Plan.
	 
	 	•	 	The HMO is held to the same requirements and must ensure that, if this
function is subcontracted to another entity, the subcontractor also meets all the
requirements in this section and the Fraud and Abuse section as stated in
Attachment B-1, Section 8.
	 
	 	•	 	Note: STAR+PLUS HMOs who have already submitted and received HHSC’s approval
for their Fraud and Abuse Compliance Plans must submit acknowledgement that the
HMO’s approved Fraud and Abuse Compliance Plan also applies to the STAR+PLUS
program, or submit a revised Fraud and Abuse Compliance Plan for HHSC’s
approval, with an explanation of changes to be made to incorporate the STAR+PLUS
program into the plan, by July 10, 2006.
	 
	 	•	 	CHIP Perinatal HMOs who have already submitted and received HHSC’s approval
for their Fraud and Abuse Compliance Plans must submit acknowledgement that the
HMO’s approved Fraud and Abuse Compliance Plan also applies to the CHIP Perinatal
Program, or submit a revised Fraud and Abuse Compliance Plan for HHSC’s approval,
with an explanation of changes to be made to incorporate the CHIP Perinatal
program into the plan, by September 15, 2006.
	 
	 	•	 	Complete hiring and training of STAR+PLUS Service Coordination staff, no
later than 45 days prior to the STAR+PLUS Operational Start Date.

During the Readiness Review, HHSC may request from the HMO certain operating procedures and
updates to documentation to support the provision of STAR, STAR+PLUS, CHIP, and/or CHIP
Perinatal HMO Services. HHSC will assess the HMO’s understanding of its responsibilities and
the HMO’s capability to assume the functions required under the Contract, based in part on the
HMO’s assurances of operational readiness, information contained in the Proposal, and in
Transition Phase documentation submitted by the HMO.

7-11

 

			
	Contractual Document (CD)

	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 7
	 	Version 1.4

The HMO is required to promptly provide a Corrective Action Plan and/or Risk Mitigation Plan
as requested by HHSC in response to Operational Readiness Review deficiencies identified by the
HMO or by HHSC or its agent. The HMO must promptly alert HHSC of deficiencies, and must correct a
deficiency or provide a Corrective Action Plan and/or Risk Mitigation Plan no later than ten (10)
calendar days after HHSC’s notification of deficiencies. If the Contractor documents to HHSC’s
satisfaction that the deficiency has been corrected within ten (10) calendar days of such
deficiency notification by HHSC, no Corrective Action Plan is required.

7.3.1.8 Assurance of System and Operational Readiness

In addition to successfully providing the Deliverables described in Section 7.3.1, the HMO must
assure HHSC that all processes, MIS systems, and staffed functions are ready and able to
successfully assume responsibilities for operations prior to the Operational Start Date. In
particular, the HMO must assure that Key HMO Personnel, Member Services staff, Provider Services
staff, and MIS staff are hired and trained, MIS systems and interfaces are in place and
functioning properly, communications procedures are in place, Provider Manuals have been
distributed, and that Provider training sessions have occurred according to the schedule approved
by HHSC.

7.3.1.9 Post-Transition

The HMO will work with HHSC, Providers, and Members to promptly identify and resolve problems
identified after the Operational Start Date and to communicate to HHSC, Providers, and Members, as
applicable, the steps the HMO is taking to resolve the problems.

If a HMO makes assurances to HHSC of its readiness to meet Contract requirements, including MIS
and operational requirements, but fails to satisfy requirements set forth in this Section, or as
otherwise required pursuant to the Contract, HHSC may, at its discretion do any of the following
in accordance with the severity of the non-compliance and the potential impact on Members and
Providers:

	 	1.	 	freeze enrollment into the HMO’s plan for the affected HMO Program(s) and
Service Area(s);
	 
	 	2.	 	freeze enrollment into the HMO’s plan for all HMO Programs or for all
Service Areas of an affected HMO Program;
	 
	 	3.	 	impose contractual remedies, including liquidated damages; or
	 
	 	4.	 	pursue other equitable, injunctive, or regulatory relief.

 

 

			
	Contractual Document (CD)

	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	Subject: Attachment B-1 -HHSC Joint Medicaid/CHIP HMO RFP, Section 8
	 	Version 1.4

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 
	 	 	DOCUMENT	 	EFFECTIVE	 	 
	STATUS’	 	REVISION	 	DATE	 	DESCRIPTION3
	Baseline

	 	n/a
	 	 	 	Initial version Attachment B-1, Section 8
	 
	 	 	 	 	 	 
	Revision

	 	1.1
	 	June 30, 2006
	 	Revised version of the Attachment B-1, Section
8, that includes provisions applicable to MCOs
participating in the STAR+PLUS Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.1.1, Performance Evaluation, is
modified to include STAR+PLUS Performance
Improvement Goals.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.2, Covered Services, is modified to
include Functionally Necessary Community Long-
term Care Services for STAR+PLUS.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.2.1 Value-Added Services, is
modified to add language allowing for the HMO to
distinguish between the Dual Eligible and non-
Dual Eligible populations.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.2.2 Case-by-Case Added Services, is
modified to clarify for STAR+Plus members it is
based on functionality.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.3, Access to Care, is modified to
include STAR+PLUS Functional Necessity and
1915(c) Nursing Facility Waiver clarifications.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.4, Provider Network, is modified to
include STAR+PLUS.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.4.2, Primary Care Providers, is
modified to include STAR+PLUS
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.4.8, Provider Reimbursement, is
modified to include Functionally Necessary Long-
term care services for STAR+PLUS.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.7.7, Provider Profiling, is modified to
include STAR+PLUS.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Sections 8.1.12 and 8.1.12.2, Services for People
with Special Health Care Needs, are modified to
include STAR+PLUS.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.13, Service Management for Certain
Populations, is modified to include STAR+PLUS.

8-1

 

			
	Contractual Document (CD)

	Responsible Office: HHSC Office of General Counsel (OGC	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 8
	 	Version 1.4

	 	 	 	 	 	 	 
	 	 	DOCUMENT	 	EFFECTIVE	 	 
	STATUS’	 	REVISION	 	DATE	 	DESCRIPTION3
	 

	 	 	 	 	 	Section 8.1.14, Disease Management, is
modified to include STAR+PLUS.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.2, Additional Medicaid HMO Scope of
Work, is modified to include STAR+PLUS.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.3, Additional STAR+PLUS Scope of
Work, is added.
	 
	 	 	 	 	 	 
	Revision

	 	1.2
	 	September 1, 2006
	 	Revised version of Attachment B-1, Section 8,
that includes provisions applicable to MCOs
participating in the STAR and CHIP Programs.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.1.1, Performance Evaluation, is
modified to clarify that the HMOs goals are
Service Area and Program specific; when the
percentages for Goals 1 and 2 are to be
negotiated; and when Goal 3 is to be negotiated.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.2.1, Value-Added Services, is
modified to add language allowing for the
addition of two Value-added Services during the
Transition Phase of the Contract and to clarify the
effective dates for Value Added Services for the
Transition Phase and the Operation Phase of the
Contract.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.3.2, Access to Network Providers, is
modified to delete references to Open Panels.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.4, Provider Network, is modified to
clarify that “Out-of-Network reimbursement
arrangements” with certain providers must be in
writing.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.5.1, Member Materials, is modified to
clarify the date that the member ID card and the
member handbook are to be sent to members.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.5.6, Member Hotline, is modified to
clarify the hotline performance requirements.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.17.2, Financial Reporting
Requirements, is modified to clarify that the
Bonus Incentive Plan refers to the Employee
Bonus Incentive Plan. It has also been modified
to clarify the reports and deliverable due dates
and to change the name of the Claims Summary

8-2

 

			
	Contractual Document (CD)

	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 8
	 	Version 1.4

	 	 	 	 	 	 	 
	 	 	DOCUMENT	 	EFFECTIVE	 	 
	STATUS’	 	REVISION	 	DATE	 	DESCRIPTION3
	 

	 	 	 	 	 	Lag Report and clarify that the report format has
been moved to the Uniform Managed Care
Manual.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.18.5, Claims Processing
Requirements, is modified to revise the claims
processing requirements and move many of the
specifics to the Uniform Managed Care Manual.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.20, Reporting Requirements, is
modified to clarify the reports and deliverable due
dates.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.20.2, Reports, is modified to delete
the Claims Data Specifications Report, amend
the All Claims Summary Report, and add two
new provider-related reports to the contract.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.2.2.10, Cooperation with Immunization
Registry, is added to comply with legislation, SB
1188 sec. 6(e)(1), 79th Legislature, Regular
Session, 2005.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.2.2.11, Case Management for Children
and Pregnant Women, is added.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.2.5.1, Provider Complaints, is modified
to include the 30-day resolution requirement.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.2.10.2, Non-Reimbursed Arrangements
with Local Public Health Entities, is modified to
update the requirements and delete the
requirement for an MOU.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.2.11, Coordination with Other State
Health and Human Services (HHS) Programs, is
modified to update the requirements and delete
the requirement for an MOU.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.4.2, CHIP Provider Complaint and
Appeals, is modified to include the 30-day
resolution requirement.
	 
	 	 	 	 	 	 
	Revision

	 	1.3
	 	September 1, 2006
	 	Revised version of Attachment B-1, Section 8,
that includes provisions applicable to MCOs
participating in the CHIP Perinatal Program.
Section 8.1.1.1, Performance Evaluation, is
modified to clarify that HHSC will negotiate and
implement Performance Improvement Goals for

8-3

 

			
	Contractual Document (CD)

	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	Subject:
Attachment B-1 - HHSC Joint
Medicaid/CHIP HMO RFP, Section 8 
	 	Version 1.4

	 	 	 	 	 	 	 
	 	 	DOCUMENT	 	EFFECTIVE	 	 
	STATUS'	 	REVISION2	 	DATE	 	DESCRIPTION3
	 

	 	 	 	 	 	the first full State Fiscal Year following the CHIP Perinatal Operational Start Date
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.2, Covered
Services is amended to: (a) clarify that Fee For Service will pay the
Hospital costs for CHIP Perinate Newborns; (b)
add a reference to new Attachment B-2.2
concerning covered services; (c) add CHIP
Perinate references where appropriate.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.2.2 Case-by-Case Added Services, is
modified to clarify that this does not apply to the
CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.3, Access to Care, is amended to
include emergency services limitations.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.3.2, Access to Network Providers, is
amended to include the Provider access
standards for the CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.4.2 Primary Care Providers, is
modified to clarify the development of the PCP
networks between the CHIP Perinates and the
CHIP Perinate Newborns.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.4.6 Provider Manual, Materials and
Training, modified to include the CHIP Perinatal
Program
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.4.9 Termination of Provider Contracts
modified to include the CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.5.2 Member Identification (ID) Card,
modified to include the CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.5.3 Member Handbook, modified to
include the CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.5.4 Provider Directory, modified to
include the CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.5.6 Member Hotline, modified to
include the CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.5.7 Member Education, modified to
include the CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.5.9 Member Complaint and Appeal
Process, modified to include the CHIP Perinatal
Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.7.7, Provider Profiling, is modified to
include the CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.12, Services for People with Special
Health Care Needs, modified to clarify between

8-4

 

			
	Contractual Document (CD)

	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 8 
	 	Version 1.4

	 	 	 	 	 	 	 
	 	 	DOCUMENT	 	EFFECTIVE	 	 
	STATUS’	 	REVISION	 	DATE	 	DESCRIPTION3
	 

	 	 	 	 	 	CHIP Perinatal Program and CHIP Perinatal
Newborn.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.13, Service Management for Certain
Populations, modified to clarify the CHIP
Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.15, Behavioral Health (BH) Network
and Services, modified to clarify between CHIP
Perinatal and Perinate members.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.17.2, Financial Reporting
Requirements, modified to include the CHIP
Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.18.3, System-wide Functions,
modified to include the CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.18.5, Claims Processing
Requirements, modified to include the CHIP
Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.19, Fraud and Abuse, modified to
include the CHIP Perinatal Program
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.1.20.2, Provider Termination Report
and Provider Network Capacity Report, is
modified to include the CHIP Perinatal Program.
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Section 8.5, Additional Scope of Work for CHIP
Perinatal Program HMOs, is added to Attachment
B-1.
	 
	 	 	 	 	 	 
	Revision

	 	1.4
	 	September
	 	Contract amendment did not revise Attachment
01, 2006 B-1 Section 8-Operations Phase Requirements

 

			
	 	 	Status should be represented as “Baseline” for initial issuances, “Revision” for changes to the Baseline version, and “Cancellation”
for withdrawn versions
	 
	2	 	Revisions should be numbered in accordance according to the version of the issuance and sequential numbering of the revision-
e.g., “1.2” refers to the first version of the document and the second revision.
Brief description of the changes to the document made in the revision.

8-5

 

			
	Contractual Document (CD)

	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 8 
	 	Version 1.4

8. OPERATIONS PHASE REQUIREMENTS

This Section is designed to provide HMOs with sufficient information to understand the
HMOs’ responsibilities. This Section describes scope of work requirements for the Operations
Phase of the Contract.

Section 8.1 includes the general scope of work that applies to the STAR, STAR+PLUS, CHIP, and
CHIP Perinatal HMO Programs.

Section 8.2 includes the additional Medicaid scope of work that applies only to the STAR and
STAR+PLUS HMOs.

Section 8.3 includes the additional scope of work that applies only to STAR+PLUS HMOs.

Section 8.4 includes the additional scope of work that applies only to CHIP HMOs.

Section 8.5 includes the additional scope of work that applies only to CHIP Perinatal HMOs.

The Section does not include detailed information on the STAR, STAR+PLUS, CHIP, and CHIP
Perinatal HMO Program requirements, such as the time frame and format for all reporting
requirements. HHSC has included this information in the Uniform Managed Care Contract Terms and
Conditions (Attachment A) and the Uniform Managed Care Manual. HHSC reserves the right to modify
these documents as it deems necessary using the procedures set forth in the Uniform Managed Care
Contract Terms and Conditions.

8.1 General Scope of Work

In each HMO Program Service Area, HHSC will select HMOs for each HMO Program to provide
health care services to Members. The HMO must be licensed by the Texas Department of Insurance
(TDI) as an HMO or an ANHC in all zip codes in the respective Service Area(s).

Coverage for benefits will be available to enrolled Members effective on the Operational Start
Date. The Operational Start Date is September 1, 2006 for STAR and CHIP HMOs, and January 1,
2007 for STAR+PLUS and CHIP Perinatal HMOs.

8.1.1 Administration and Contract Management

The HMO must comply, to the satisfaction of HHSC, with (1) all provisions set forth in this
Contract, and (2) all applicable provisions of state and federal laws, rules, regulations,
and waivers.

8-6

 

			
	Contractual Document (CD)

	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 8 
	 	Version 1.4

8.1.1.1 Performance Evaluation

The HMO must identify and propose to HHSC, in writing, no later than May 1st of each
State Fiscal Year (SFY) after the Operational Start Date, annual HMO Performance Improvement
Goals for the next fiscal year, as well as measures and time frames for demonstrating that such
goals are being met. Performance Improvement Goals must be based on HHSC priorities and
identified opportunities for improvement (see Attachment B-4, Performance Improvement Goals).
The Parties will negotiate such Performance Improvement Goals, the measures that will be used to
assess goal achievement, and the time frames for completion, which will be incorporated into the
Contract. If HHSC and the HMO cannot agree on the Performance Improvement Goals, measures, or
time frames, HHSC will set the goals, measures, or time frames.

For State Fiscal Year 2007, HHSC has established three overarching goals for each Program.
These overarching goals are as follows:

     Goal 1 (STAR and CHIP) Improve Access to Primary Care Services for Members Goal 2

     (STAR
and CHIP) Improve Access to Behavioral Health Services for Members,

Goal 3 (STAR Only) Improve Access to Clinically Appropriate Alternatives to
Emergency Room Services Outside of Regular Office Hours
(CHIP Only) Improve Current Member Understanding About the CHIP Benefit
Renewal Processes

Note: The HMO is required to propose customized sub-goals specific to the HMO’s Service
Areas and Programs for all overarching goals. The sub-goals must be approved by HHSC as part of
the negotiation process.

The specific percentages of expected achievement for each sub-goal will be negotiated by HHSC
and the HMO before the Operational Start Date.

For STAR+PLUS HMOs, HHSC will negotiate and implement Performance Improvement Goals for the
first full fiscal year following the STAR+PLUS Operational Start Date. One standard STAR+PLUS
goal will relate to Consumer-Directed Services. STAR+PLUS improvement goals for SFY2008 will be
included in Attachment B-4.1.

For CHIP Perinatal HMOs, HHSC will negotiate and implement Performance Improvement Goals for
the first full State Fiscal Year following the CHIP Perinatal Operational Start Date.

The HMO must participate in semi-annual Contract Status Meetings (CSMs) with HHSC for the
primary purpose of reviewing progress toward the achievement of annual Performance Improvement
Goals and Contract requirements. HHSC may request additional CSMs, as it deems necessary to
address areas of noncompliance. HHSC will provide the HMO with reasonable advance notice of
additional CSMs, generally at least five (5) business days.

8-7

 

			
	Contractual Document (CD)

	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 8
	 	Version 1.4

The HMO must provide to HHSC, no later than 14 business days prior to each semi-annual CSM,
one electronic copy of a written update, detailing and documenting the HMO’s progress toward
meeting the annual Performance Improvement Goals or other areas of noncompliance.

HHSC will track HMO performance on Performance Improvement Goals. It will also track other key
facets of HMO performance through the use of a Performance Indicator Dashboard (see HHSC’s Uniform
Managed Care Manual). HHSC will compile the Performance Indicator Dashboard based on HMO
submissions, data from the External Quality Review Organization (EQRO), and other data available
to HHSC. HHSC will share the Performance Indicator Dashboard with the HMO on a quarterly basis.

8.1.2 Covered Services

The HMO is responsible for authorizing, arranging, coordinating, and providing Covered Services
in accordance with the requirements of the Contract. The HMO must provide Medically Necessary
Covered Services to all Members beginning on the Member’s date of enrollment regardless of
pre-existing conditions, prior diagnosis and/or receipt of any prior health care services.
STAR+PLUS HMOs must also provide Functionally Necessary Community Long-term Care Services to all
Members beginning on the Member’s date of enrollment regardless of pre-existing conditions, prior
diagnosis and/or receipt of any prior health care services. The HMO must not impose any
pre-existing condition limitations or exclusions or require Evidence of Insurability to provide
coverage to any Member.

The HMO must provide full coverage for Medically Necessary Covered Services to all Members and,
for STAR+PLUS Members, Functionally Necessary Community Long-term Care Services, without regard
to the Member’s:

	 	1.	 	previous coverage, if any, or the reason for termination of such coverage;
	 
	 	2.	 	health status;
	 
	 	3.	 	confinement in a health care facility; or
	 
	 	4.	 	for any other reason.

Please Note:

(STAR HMOs): A Member cannot change from one STAR HMO to another STAR HMO during an inpatient
hospital stay. The STAR HMO responsible for the hospital charges for STAR Members at the start of
an Inpatient Stay remains responsible for hospital charges until the time of discharge or until
such time that there is a loss of Medicaid eligibility. STAR HMOs are responsible for
professional charges during every month for which the HMO receives a full capitation for a
Member.

(STAR+PLUS HMOs): A Member cannot change from one STAR+PLUS HMO to another STAR+PLUS HMO during
an inpatient hospital stay. The STAR+PLUS HMO is responsible for authorization and management of
the inpatient hospital stay until the time of discharge, or until such time that there is a loss
of Medicaid eligibility. STAR+PLUS HMOs are responsible for professional charges during every
month for which the HMO receives a full capitation for a Member.

8-8

 

			
	Contractual Document (CD)

	Responsible Office: HHSC Office of General Counsel (OGC)	 	 
	Subject: Attachment B-1 - HHSC
Joint Medicaid/CHIP HMO RFP, Section 8 
	 	Version 1.4

A Member cannot change from one STAR+PLUS HMO to another STAR+PLUS HMO during a nursing
facility stay.

(CHIP HMOs): If a CHIP Member’s Effective Date of Coverage occurs while the CHIP Member is
confined in a hospital, HMO is responsible for the CHIP Member’s costs of Covered Services
beginning on the Effective Date of Coverage. If a CHIP Member is disenrolled while the CHIP
Member is confined in a hospital, HMO’s responsibility for the CHIP Member’s costs of Covered
Services terminates on the Date of Disenrollment.

(CHIP Perinatal HMOs): If a CHIP Perinate’s Effective Date of Coverage occurs while the CHIP
Perinate is confined in a Hospital, HMO is responsible for the CHIP Perinate’s costs of Covered
Services beginning on the Effective Date of Coverage. If a CHIP Perinate is disenrolled while the
CHIP Perinate is confined in a Hospital, HMO‘s responsibility for the CHIP Perinate’s
costs of Covered Services terminates on the Date of Disenrollment.

The HMO must not practice discriminatory selection, or encourage segregation among the total
group of eligible Members by excluding, seeking to exclude, or otherwise discriminating against
any group or class of individuals.

Covered Services for all Medicaid HMO Members are listed in Attachments B-2 and B-2.1 of the
Contract. As noted in Attachments B-2 and B-2.1, all Medicaid HMOs must provide Covered Services
described in the most recent Texas Medicaid Provider Procedures Manual (Provider Procedures
Manual), the THSteps Manual (a supplement to the Provider Procedures Manual), and in all Texas
Medicaid Bulletins, which update the Provider Procedures Manual except for those services
identified in Section 8.2.2.8 as non-capitated services. A description of CHIP Covered Services
and exclusions is provided in Attachment B-2 of the Contract. A description of CHIP Perinatal
Program Covered Services and exclusions is provided in Attachment B-2.2 of the Contract. Covered
Services are subject to change due to changes in federal and state law, changes in Medicaid, CHIP
or CHIP Perinatal Program policy, and changes in medical practice, clinical protocols, or
technology.

8.1.2.1 Value-added Services

HMOs may propose additional services for coverage. These are referred to as “Value-added
Services.” Value-added Services must be actual health care services or benefits rather than
gifts, incentives, educational classes or health assessments. Temporary phones, cell phones,
additional transportation benefits, and extra home health services may be Value-added Services,
if approved by HHSC. Best practice approaches to delivering Covered Services are not considered
Value-added Services.

If offered, Value-added Services must be offered to all mandatory STAR, and CHIP and CHIP
Perinatal HMO Members within the applicable HMO Program and Service Area. For STAR+PLUS Acute
Care services, the HMO may distinguish between the Dual Eligible and non-Dual Eligible
populations. Value-added Services do not need to be consistent across more than one HMO Program
or across more than one Service Area. Value-added Services that are approved by HHSC during the
contracting process will be included in the Contract’s scope of services.

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The HMO must provide Value-added Services at no additional cost to HHSC. The HMO must not pass
on the cost of the Value-added Services to Providers. The HMO must specify the conditions and
parameters regarding the delivery of the Value-added Services in the HMO’s Marketing Materials and
Member Handbook, and must clearly describe any limitations or conditions specific to the
Value-added Services.

Transition Phase. During the Transition Phase, HHSC will offer a one-time opportunity for the HMO
to propose two additional Value-added Services to its list of current, approved Value-added
Services. (See Attachment B-3, Value-Added Services). HHSC will establish the requirements and the
timeframes for submitting the two additional proposed Value-added Services.

During this HHSC-designated opportunity, the HMO may propose either to add new Value-added
Services or to enhance its current, approved Value-added Services. The HMO may propose two
additional Value-added Services per HMO Program, and the services do not have to be the same for
each HMO Program. HHSC will review the proposed additional services and, if appropriate, will
approve the additional Value-added Services, which will be effective on the Operational Start
Date. The HMO’s Contract will be amended to reflect the additional, approved Value-added Services.

The HMO does not have to add Value-added Services during the HHSC-designated opportunity, but
this will be the only time during the Transition Phase for the HMO to add Value-added Services.
At no time during the Transition Phase will the HMO be allowed to delete, limit or restrict any
of its current, approved Value-added Services.

Operations Phase. During the Operations Phase, Value-added Services can be added or removed only
by written amendment of the Contract one time per fiscal year to be effective September 1 of the
fiscal year, except when services are amended by HHSC during the fiscal year. This will allow
HHSC to coordinate with annual revisions to HHSC’s HMO Comparison Charts for Members. A HMO’s
request to add or delete a Value-added Service must be submitted to HHSC by May 1 of each year to
be effective September 1 for the following contract period. (For STAR and CHIP, see Attachment
B-3, Value-Added Services. For STAR+PLUS, see Attachment B-3.1, STAR+PLUS Value-Added Services.
For CHIP Perinatal, see Attachment B-3.2, CHIP Perinatal Value-Added Services.)

A HMO’s request to add a Value-added Service must:

	 	a.	 	Define and describe the proposed Value-added Service;
	 
	 	b.	 	Specify the Service Areas and HMO Programs for the proposed
Value-added Service;
	 
	 	c.	 	Identify the category or group of mandatory Members eligible to
receive the Value-added Service if it is a type of service that is not
appropriate for all mandatory Members;
	 
	 	d.	 	Note any limits or restrictions that apply to the Value-added Service;
e. Identify the Providers responsible for providing the Value-added Service;
f. Describe how the HMO will identify the Value-added Service in
administrative (Encounter) data;
	 
	 	g.	 	Propose how and when the HMO will notify Providers and mandatory
Members about the availability of such Value-added Service;

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	 	h.	 	Describe how a Member may obtain or access the Value-added Service; and
	 
	 	i.	 	Include a statement that the HMO will provide such Value-added
Service for at least 12 months from the September 1 effective date.

A HMO cannot include a Value-added Service in any material distributed to mandatory Members or
prospective mandatory Members until the Parties have amended the Contract to include that
Value-added Service. If a Value-added Service is deleted by amendment, the HMO must notify each
mandatory Member that the service is no longer available through the HMO. The HMO must also revise
all materials distributed to prospective mandatory Members to reflect the change in Value-added
Services.

8.1.2.2 Case-by-Case Added Services

Except as provided below, the HMO may offer additional benefits that are outside the scope of
services to individual Members on a case-by-case basis, based on Medical Necessity,
cost-effectiveness, the wishes of the Member/Member’s family, the potential for improved health
status of the Member, and for STAR+PLUS Members based on functional necessity.

Section 8.1.2.2, Case-by-Case Added Services, does not apply to the CHIP Perinatal Program.

8.1.3 Access to Care

All Covered Services must be available to Members on a timely basis in accordance with medically
appropriate guidelines, and consistent with generally accepted practice parameters, requirements
in this Contract. The HMO must comply with the access requirements as established by the Texas
Department of Insurance (TDI) for all HMOs doing business in Texas, except as otherwise required
by this Contract. Medicaid HMOs must be responsive to the possibility of increased Members due to
the phase-out of the PCCM model in Service Areas where adequate HMO coverage exists.

The HMO must provide coverage for Emergency Services to Members 24 hours a day and 7 days a week,
without regard to prior authorization or the Emergency Service provider’s contractual relationship
with the HMO. The HMO’s policy and procedures, Covered Services, claims adjudication methodology,
and reimbursement performance for Emergency Services must comply with all applicable state and
federal laws and regulations, whether the provider is in-network or Out-of-Network. A HMO is not
responsible for payment for unauthorized non-emergency services provided to a Member by
Out-of-Network providers.

The HMO must also have an emergency and crisis Behavioral Health Services Hotline available 24
hours a day, 7 days a week, toll-free throughout the Service Area. The Behavioral Health
Services Hotline must meet the requirements described in Section 8.1.15. For Medicaid Members, a
HMO must provide coverage for Emergency Services in compliance with 42 C.F.R. §438.114, and as
described in more detail in Section 8.2.2.1. The HMO may arrange Emergency Services and crisis
Behavioral Health Services through mobile crisis teams.

For CHIP Members, Emergency Services, including emergency Behavioral Health Services, must be
provided in accordance with the Texas Insurance Code and TDI regulations.

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	 	Version 1.4

For the CHIP Perinatal Program, refer to Attachment B-2.2 for description of emergency
services for CHIP Perinates and CHIP Perinate Newborns.

For the STAR, STAR+PLUS, and CHIP Programs, and for CHIP Perinate Newborns, HMO must require, and
make best efforts to ensure, that PCPs are accessible to Members 24 hours a day, 7 days a week and
that its Network Primary Care Providers (PCPs) have after-hours telephone availability that is
consistent with, Section 8.1.4. CHIP Perinatal HMOs are not required to establish PCP Networks for
CHIP Perinates.

The HMO must provide that if Medically Necessary Covered Services are not available through
Network physicians or other Providers, the HMO must, upon the request of a Network physician or
other Provider, within the time appropriate to the circumstances relating to the delivery of the
services and the condition of the patient, but in no event to exceed five business days after
receipt of reasonably requested documentation, allow a referral to a non-network physician or
provider. The HMO must fully reimburse the non-network provider in accordance with the
Out-of-Network methodology for Medicaid as defined by HHSC, and for CHIP, at the usual and
customary rate defined by TDI in 28 T.A.C. Section 11.506.

The Member will not be responsible for any payment for Medically Necessary Covered Services,
including Functionally Necessary Covered Services, other than:

(1) HHSC-specified co-payments for CHIP Members, where applicable; and

(2) STAR+PLUS Members who qualify for 1915(c) Nursing Facility Waiver services and
enter a 24-hour setting will be required to pay the provider of care room and board costs
and any income in excess of the personal needs allowance, as established by HHSC. If the
HMO provides Members who do not qualify for the 1915(c) Nursing Facility Waiver services in
a 24-hour setting as an alternative to nursing facility or hospitalization, the Member will
be required to pay the provider of care room and board costs and any income in excess of
the personal needs allowance, as established by HHSC.

8.1.3.1 Waiting Times for Appointments

Through its Provider Network composition and management, the HMO must ensure that
appointments for the following types of Covered Services are provided within the time frames
specified below. In all cases below, “day” is defined as a calendar day.

	 	1.	 	Emergency Services must be provided upon Member presentation at the service
delivery site, including at non-network and out-of-area facilities;
	 
	 	2.	 	Urgent care, including urgent specialty care, must be provided within 24 hours of request.
	 
	 	3.	 	Routine primary care must be provided within 14 days of request;
	 
	 	4.	 	Initial outpatient behavioral health visits must be provided within 14 days of request;
	 
	 	5.	 	Routine specialty care referrals must be provided within 30 days of request;
	 
	 	6.	 	Pre-natal care must be provided within 14 days of request, except for high-risk
pregnancies or new Members in the third trimester, for whom an appointment must be
offered within five days, or immediately, if an emergency exists;
	 
	 	7.	 	Preventive health services for adults must be offered to a Member within 90
days of request; and

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	 	8.	 	Preventive health services for children, including well-child check-ups should be
offered to Members in accordance with the American Academy of Pediatrics (AAP)
periodicity schedule. Please note that for Medicaid Members, HMOs should use the THSteps
Program modifications to the AAP periodicity schedule. For newly enrolled Members under
age 21, overdue or upcoming well-child checkups, including THSteps medical checkups,
should be offered as soon as practicable, but in no case later than 14 days of
enrollment for newborns, and no later than 60 days of enrollment for all other eligible
child Members.

8.1.3.2 Access to Network Providers

The HMO’s Network shall have within its Network, PCPs in sufficient numbers, and with sufficient
capacity, to provide timely access to regular and preventive pediatric care and THSteps services
to all child Members in accordance with the waiting times for appointments in
Section 8.13.1.

PCP Access: At a minimum, the HMO must ensure that all Members have access to an
age-appropriate PCP in the Provider Network with an Open Panel within 30 miles of the Member’s
residence. For the purposes of assessing compliance with this requirement, an internist who
provides primary care to adults only is not considered an age-appropriate PCP choice for a
Member under age 21, and a pediatrician is not considered an age-appropriate choice for a
Member age 21 and over. Note: This provision does not apply to CHIP Perinates, but it does
apply to CHIP Perinate Newborns.

OB/GYN Access and CHIP Perinatal Program Provider Access: STAR, STAR+PLUS and CHIP Program
Network: at a minimum, STAR, STAR+PLUS and CHIP HMOs must ensure that all female Members have
access to an OB/GYN in the Provider Network within 75 miles of the Member’s residence. (If the
OB/GYN is acting as the Member’s PCP, the HMO must follow the access requirements for the PCP.)
The HMO must allow female Members to select an OB/GYN within its Provider Network. A female
Member who selects an OB/GYN must be allowed direct access to the OB/GYN’s health care services
without a referral from the Member’s PCP or a prior authorization. A pregnant Member with 12
weeks or less remaining before the expected delivery date must be allowed to remain under the
Member’s current OB/GYN care though the Member’s post-partum checkup, even if the OB/GYN provider
is, or becomes, Out-of-Network.

CHIP Perinatal Program Network: at a minimum, CHIP Perinatal HMOs must ensure that CHIP Perinates
have access to a Provider of perinate services within 75 miles of the Member’s residence if the
Member resides in an urban area and within 125 miles of the Member’s residence if the Member
resides in a rural area.

Outpatient Behavioral Health Service Provider Access: At a minimum, the HMO must ensure that all
Members except CHIP Perinates have access to an outpatient Behavioral Health Service Provider in
the Network within 75 miles of the Member’s residence. Outpatient Behavioral Health Service
Providers must include Masters and Doctorate-level trained practitioners practicing independently
or at community mental health centers, other clinics or at outpatient hospital departments. A
Qualified Mental Health Provider (QMHP), as defined and credentialed by the Texas Department of
State Health Services standards (T.A.C. Title 25, Part I, Chapter 412), is an acceptable
outpatient behavioral health provider as long as the QMHP is working

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under the authority of an MHMR entity and is supervised by a licensed mental health professional or
physician.

Other Specialist Physician Access: At a minimum, the HMO must ensure that all Members except
CHIP Perinates have access to a Network specialist physician within 75 miles of the Member’s
residence for common medical specialties. For adult Members, common medical specialties shall
include general surgery, cardiology, orthopedics, urology, and ophthalmology. For child Members,
common medical specialties shall include orthopedics and otolaryngology.

Hospital Access: The HMO must ensure that all Members have access to an Acute Care hospital in the
Provider Network within 30 miles of the Member’s residence.

All other Covered Services, except for services provided in the Member’s residence: At a minimum,
the HMO must ensure that all Members have access to at least one Network Provider for each of the
remaining Covered Services described in Attachment B-2, within 75 miles of the Member’s residence.
This access requirement includes, but is not limited to, specialists, specialty hospitals,
psychiatric hospitals, diagnostic and therapeutic services, and single or limited service health
care physicians or Providers, as applicable to the HMO Program.

The HMO is not precluded from making arrangements with physicians or providers outside the HMO’s
Service Area for Members to receive a higher level of skill or specialty than the level available
within the Service Area, including but not limited to, treatment of cancer, bums, and cardiac
diseases. HHSC may consider exceptions to the above access-related requirements when an HMO has
established, through utilization data provided to HHSC, that a normal pattern for securing health
care services within an area does not meet these standards, or when an HMO is providing care of a
higher skill level or specialty than the level which is available within the Service Area such
as, but not limited to, treatment of cancer, burns, and cardiac diseases.

8.1.3.3 Monitoring Access

The HMO is required to systematically and regularly verify that Covered Services furnished by
Network Providers are available and accessible to Members in compliance with the standards
described in Sections 8.1.3.1 and 8.1.3.2, and for Covered Services furnished by PCPs, the
standards described in Section 8.1.4.2.

The HMO must enforce access and other Network standards required by the Contract and take
appropriate action with Providers whose performance is determined by the HMO to be out of
compliance.

8.1.4 Provider Network

The HMO must enter into written contracts with properly credentialed Providers as described in
this Section. The Provider contracts must comply with the Uniform Managed Care Manual’s
requirements.

The HMO must maintain a Provider Network sufficient to provide all Members with access to the full
range of Covered Services required under the Contract. The HMO must ensure its Providers

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	 	Version 1.4

and subcontractors meet all current and future state and federal eligibility criteria,
reporting requirements, and any other applicable rules and/or regulations related to the
Contract.

The Provider Network must be responsive to the linguistic, cultural, and other unique needs of any
minority, elderly, or disabled individuals, or other special population in the Service Areas and
HMO Programs served by the HMO, including the capacity to communicate with Members in languages
other than English, when necessary, as well as with those who are deaf or hearing impaired.

The HMO must seek to obtain the participation in its Provider Network of qualified providers
currently serving the Medicaid and CHIP Members in the HMO‘s proposed Service
Area(s).

NOTE: The following Provider descriptions do not require STAR+PLUS HMOs to contract with Hospital
providers for Inpatient Stay services. STAR+PLUS HMOs are required, however, to contract with
Hospitals for Outpatient Hospital Services.

All Providers: All Providers must be licensed in the State of Texas to provide the Covered
Services for which the HMO is contracting with the Provider, and not be under sanction or
exclusion from the Medicaid program. All Acute Care Providers serving Medicaid Members must be
enrolled as Medicaid providers and have a Texas Provider Identification Number (TPIN). Long-term
Care Providers are not required to have a TPIN but must have a LTC Provider number. Providers must
also have a National Provider Identifier (NPI) in accordance with the timelines established in 45
C.F.R. Part 162, Subpart D (for most Providers, the NPI must be in place by May 23, 2007.)

Inpatient hospital and medical services: The HMO must ensure that Acute Care hospitals and
specialty hospitals are available and accessible 24 hours per day, seven days per week, within
the HMO’s Network to provide Covered Services to Members throughout the Service Area.

Children’s Hospitals/hospitals with specialized pediatric services: The HMO must ensure Members
access to hospitals designated as Children’s Hospitals by Medicare and hospitals with specialized
pediatric services, such as teaching hospitals and hospitals with designated children’s wings, so
that these services are available and accessible 24 hours per day, seven days per week, to
provide Covered Services to Members throughout the Service Area. The HMO must make Out-of-Network
reimbursement arrangements with a designated Children’s Hospital and/or hospital with specialized
pediatric services in proximity to the Member’s residence, and such arrangements must be in
writing, if the HMO does not include such hospitals in its Provider Network. Provider
Directories, Member materials, and Marketing materials must clearly distinguish between hospitals
designated as Children’s Hospitals and hospitals that have designated children’s units.

Trauma: The HMO must ensure Members access to Texas Department of State Health Services (TDSHS)
designated Level I and Level II trauma centers within the State or hospitals meeting the
equivalent level of trauma care in the HMO’s Service Area, or in close proximity to such Service
Area. The HMO must make Out-of-Network reimbursement arrangements with the DSHS-designated Level I
and Level II trauma centers or hospitals meeting equivalent levels of trauma care, and such
arrangements must be in writing, if the HMO does not include such a trauma center in its Provider
Network.

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Joint Medicaid/CHIP HMO RFP, Section 8 
	 	Version 1.4

Transplant centers: The HMO must ensure Member access to HHSC-designated transplant centers
or centers meeting equivalent levels of care. A list of HHSC-designated transplant centers can be
found in the Procurement Library in Attachment H. The HMO must make Out-of-Network reimbursement
arrangements with a designated transplant center or center meeting equivalent levels of care in
proximity to the Member’s residence, and such arrangements must be in writing, if the HMO does not
include such a center in its Provider Network.

Hemophilia centers: The HMO must ensure Member access to hemophilia centers supported by the
Centers for Disease Control (CDC). A list of these hemophilia centers can be found at
http://www.cdc.gov/ncbddd/hbd/htc_list.htm. The HMO must make Out-of-Network reimbursement
arrangements with a CDC-supported hemophilia center, and such arrangements must be in writing,
if the HMO does not include such a center in its Provider Network.

Physician services: The HMO must ensure that Primary Care Providers are available and accessible
24 hours per day, seven days per week, within the Provider Network. The HMO must contract with a
sufficient number of participating physicians and specialists within each Service Area to comply
with the access requirements throughout Section 8.1.3 and meet the needs of Members for all
Covered Services.

The HMO must ensure that an adequate number of participating physicians have admitting
privileges at one or more participating Acute Care hospitals in the Provider Network to ensure
that necessary admissions are made. In no case may there be less than one in-network PCP with
admitting privileges available and accessible 24 hours per day, seven days per week for each
Acute Care hospital in the Provider Network.

The HMO must ensure that an adequate number of participating specialty physicians have
admitting privileges at one or more participating hospitals in the HMO’s Provider Network to
ensure necessary admissions are made. The HMO shall require that all physicians who admit to
hospitals maintain hospital access for their patients through appropriate call coverage.

Laboratory services: The HMO must ensure that in-network reference laboratory services must be
of sufficient size and scope to meet the non-emergency and emergency needs of the enrolled
population and the access requirements in Section 8.1.3. Reference laboratory specimen
procurement services must facilitate the provision of clinical diagnostic services for
physicians, Providers and Members through the use of convenient reference satellite labs in each
Service Area, strategically located specimen collection areas in each Service Area, and the use
of a courier system under the management of the reference lab. For Medicaid Members, THSteps
requires that laboratory specimens obtained as part of a THSteps medical checkup visit must be
sent to the TDSHS Laboratory.

Diagnostic imaging: The HMO must ensure that diagnostic imaging services are available and
accessible to all Members in each Service Area in accordance with the access standards in
Section 8.1.3. The HMO must ensure that diagnostic imaging procedures that require the
injection or ingestion of radiopaque chemicals are performed only under the direction of
physicians qualified to perform those procedures.

Home health services: The HMO must have a contract(s) with a home health Provider so that all
Members living within the HMO’s Service Area will have access to at least one such Provider for

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home health Covered Services. (These services are provided as part of the Acute Care
Covered Services, not the Community Long-term Care Services.)

Community Long-term Care services: STAR+PLUS HMOs must have contracts with Community Long-term
Care service Providers, so that all Members living within the Contractor’s Service Area will have
access to Medically Necessary and Functionally Necessary Covered Services.

8.1.4.1 Provider Contract Requirements

The HMO is prohibited from requiring a provider or provider group to enter into an exclusive
contracting arrangement with the HMO as a condition for participation in its Provider Network.

The HMO’s contract with health care Providers must be in writing, must be in compliance with
applicable federal and state laws and regulations, and must include minimum requirements specified
in the Uniform Managed Care Contract Terms and Conditions (Attachment A) and HHSC’s Uniform
Managed Care Manual.

The HMO must submit model Provider contracts to HHSC for review during Readiness Review. HHSC
retains the right to reject or require changes to any model Provider contract that does not
comply with HMO Program requirements or the HHSC-HMO Contract.

8.1.4.2 Primary Care Providers

The HMO’s PCP Network may include Providers from any of the following practice areas: General
Practice; Family Practice; Internal Medicine; Pediatrics; Obstetrics/Gynecology (OB/GYN);
Certified Nurse Midwives (CNM) and Physician Assistants (PAs) practicing under the supervision of
a physician; Federally Qualified Health Centers (FQHCs), Rural Health Clinics (RHCs), and similar
community clinics; and specialist physicians who are willing to provide a Medical Home to selected
Members with special needs and conditions. Section 533.005(a)(13), Government Code, requires the
HMO to use Pediatric and Family Advanced Practice Nurses practicing under the supervision of a
physician as PCPs in its Provider Network for STAR and STAR+PLUS.

CHIP Perinatal HMOs are not required to develop PCP Networks for CHIP Perinates. CHIP
Perinatal HMOs may use the same PCP Network for CHIP Members and CHIP Perinatal Newborns.

An internist or other Provider who provides primary care to adults only is not considered an
age-appropriate PCP choice for a Member under age 21. An internist or other Provider who
provides primary care to adults and children may be a PCP for children if:

	 	1.	 	the Provider assumes all HMO PCP responsibilities for such
Members in a specific age group under age 21,
	 
	 	2.	 	the Provider has a history of practicing as a PCP for the
specified age group as evidenced by the Provider’s primary care practice
including an established patient population under age 20 and within the
specified age range, and

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	 	3.	 	the Provider has admitting privileges to a local hospital that
includes admissions to pediatric units.

A pediatrician is not considered an age-appropriate choice for a Member age 21 and over.

The PCP for a Member with disabilities, Special Health Care Needs, or Chronic or Complex
Conditions may be a specialist physician who agrees to provide PCP services to the Member. The
specialty physician must agree to perform all PCP duties required in the Contract and PCP duties
must be within the scope of the specialist’s license. Any interested person may initiate the
request through the HMO for a specialist to serve as a PCP for a Member with disabilities,
Special Health Care Needs, or Chronic or Complex Conditions. The HMO shall handle such requests
in accordance with 28 T.A.C. Part 1, Chapter 11, Subchapter J.

PCPs who provide Covered Services for STAR, CHIP, and CHIP Perinatal Newborns must either have
admitting privileges at a Hospital that is part of the HMO’s Provider Network or make referral
arrangements with a Provider who has admitting privileges to a Network Hospital. STAR+PLUS PCPs
must either have admitting privileges at a Medicaid Hospital or make referral arrangements with a
Provider who has admitting privileges to a Medicaid Hospital.

The HMO must require, through contract provisions, that PCPs are accessible to Members 24
hours a day, 7 days a week. The HMO is encouraged to include in its Network sites that offer
primary care services during evening and weekend hours. The following are acceptable and
unacceptable telephone arrangements for contacting PCPs after their normal business hours.

Acceptable after-hours coverage:

	 	1.	 	The office telephone is answered after-hours by an answering service, which meets
language requirements of the Major Population Groups and which can contact the PCP or
another designated medical practitioner. All calls answered by an answering service must
be returned within 30 minutes;
	 
	 	2.	 	The office telephone is answered after normal business hours by a recording in the
language of each of the Major Population Groups served, directing the patient to call
another number to reach the PCP or another provider designated by the PCP. Someone must
be available to answer the designated provider’s telephone. Another recording is not
acceptable; and
	 
	 	3.	 	The office telephone is transferred after office hours to another location where
someone will answer the telephone and be able to contact the PCP or another designated
medical practitioner, who can return the call within 30 minutes.

Unacceptable after-hours coverage:

	 	1.	 	
 The office telephone is only answered during office hours;
	 
	 	2.	 	The office telephone is answered after-hours by a recording that tells patients to
leave a message;
	 
	 	3.	 	The office telephone is answered after-hours by a recording that directs patients
to go to an Emergency Room for any services needed; and
	 
	 	4.	 	Returning after-hours calls outside of 30 minutes.

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The HMO must require PCPs, through contract provisions or Provider Manual, to provide
children under the age of 21 with preventive services in accordance with the AAP recommendations
for CHIP Members and CHIP Perinate Newborns, and the THSteps periodicity schedule published in the
THSteps Manual for Medicaid Members. The HMO must require PCPs, through contract provisions or
Provider Manual, to provide adults with preventive services in accordance with the U.S. Preventive
Services Task Force requirements. The HMO must make best efforts to ensure that PCPs follow these
periodicity requirements for children and adult Members. Best efforts must include, but not be
limited to, Provider education, Provider profiling, monitoring, and feedback activities.

The HMO must require PCPs, through contract provisions or Provider Manual, to assess the medical
needs of Members for referral to specialty care providers and provide referrals as needed. PCPs
must coordinate Members’ care with specialty care providers after referral. The HMO must make best
efforts to ensure that PCPs assess Member needs for referrals and make such referrals. Best
efforts must include, but not be limited to, Provider education activities and review of Provider
referral patterns.

8.1.4.3 PCP Notification

The HMO must furnish each PCP with a current list of enrolled Members enrolled or assigned to that
Provider no later than five (5) working days after the HMO receives the Enrollment File from the
HHSC Administrative Services Contractor each month. The HMO may offer and provide such enrollment
information in alternative formats, such as through access to a secure Internet site, when such
format is acceptable to the PCP.

8.1.4.4 Provider Credentialing and Re-credentialing

The HMO must review, approve and periodically recertify the credentials of all participating
physician Providers and all other licensed Providers who participate in the HMO’s Provider
Network. The HMO may subcontract with another entity to which it delegates such credentialing
activities if such delegated credentialing is maintained in accordance with the National
Committee for Quality Assurance (NCQA) delegated credentialing requirements and any comparable
requirements defined by HHSC.

At a minimum, the scope and structure of a HMO’s credentialing and re-credentialing processes
must be consistent with recognized HMO industry standards such as those provided by NCQA and
relevant state and federal regulations including 28 T.A.C. §11.1902, relating to credentialing of
providers in HMOs, and as an additional requirement for Medicaid HMOs, 42 C.F.R. §438.214(b). The
initial credentialing process, including application, verification of information, and a site
visit (if applicable), must be completed before the effective date of the initial contract with
the physician or Provider. The re-credentialing process must occur at least every three years.

The re-credentialing process must take into consideration Provider performance data including,
but not be limited to, Member Complaints and Appeals, quality of care, and utilization
management.

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8.1.4.5 Board Certification Status

The HMO must maintain a policy with respect to Board Certification for PCPs and specialty
physicians that encourage participation of board certified PCPs and specialty physicians in the
Provider Network. The HMO must make information on the percentage of Board-certified PCPs in the
Provider Network and the percentage of Board-certified specialty physicians, by specialty,
available to HHSC upon request.

8.1.4.6 Provider Manual, Materials and Training

The HMO must prepare and issue a Provider Manual(s), including any necessary specialty
manuals (e.g., behavioral health) to all existing Network Providers. For newly contracted
Providers, the HMO must issue copies of the Provider Manual(s) within five (5) working days
from inclusion of the Provider into the Network. The Provider Manual must contain sections
relating to special requirements of the HMO Program(s) and the enrolled populations in
compliance with the requirements of this Contract.

HHSC or its designee must approve the Provider Manual, and any substantive revisions to the
Provider Manual, prior to publication and distribution to Providers. The Provider Manual must
contain the critical elements defined in the Uniform Managed Care Manual. HHSC’s initial review of
the Provider Manual is part of the Operational Readiness Review described in Attachment B-1,
Section 7.

The HMO must provide training to all Providers and their staff regarding the requirements of the
Contract and special needs of Members. The HMO’s Medicaid, CHIP and/or CHIP Perinatal Program
training must be completed within 30 days of placing a newly contracted Provider on active
status. The HMO must provide on-going training to new and existing Providers as required by the
HMO or HHSC to comply with the Contract. The HMO must maintain and make available upon request
enrollment or attendance rosters dated and signed by each attendee or other written evidence of
training of each Provider and their staff.

The HMO must establish ongoing Provider training that includes, but is not limited to,
the following issues:

	 	1.	 	Covered Services and the Provider’s responsibilities for providing and/or
coordinating such services. Special emphasis must be placed on areas that vary from
commercial coverage rules (e.g., Early Intervention services, therapies and
DME/Medical Supplies); and for Medicaid, making referrals and coordination with
Non-capitated Services;
	 
	 	2.	 	Relevant requirements of the Contract;
	 
	 	3.	 	The HMO’s quality assurance and performance improvement program and the Provider’s
role in such a program; and
	 
	 	4.	 	The HMO‘s policies and procedures, especially regarding
in-network and Out-of-Network referrals.

Provider Materials produced by the HMO, relating to Medicaid Managed Care, the CHIP Program,
and/or the CHIP Perinatal Program must be in compliance with State and Federal laws and
requirements of the HHSC Uniform Managed Care Contract Terms and Conditions. HMO must make
available any provider materials to HHSC upon request.

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8.1.4.7 Provider Hotline

The HMO must operate a toll-free telephone line for Provider inquiries from 8 a.m. to 5 p.m.
local time for the Service Area, Monday through Friday, except for State-approved holidays. The
Provider Hotline must be staffed with personnel who are knowledgeable about Covered Services and
each applicable HMO Program, and for Medicaid, about Non-capitated Services.

The HMO must ensure that after regular business hours the line is answered by an automated system
with the capability to provide callers with operating hours information and instructions on how
to verify enrollment for a Member with an Urgent Condition or an Emergency Medical Condition. The
HMO must have a process in place to handle after-hours inquiries from Providers seeking to verify
enrollment for a Member with an Urgent Condition or an Emergency Medical Condition, provided,
however, that the HMO and its Providers must not require such verification prior to providing
Emergency Services.

The HMO must ensure that the Provider Hotline meets the following minimum performance
requirements for all HMO Programs and Service Areas:

	 	1.	 	99% of calls are answered by the fourth ring or an automated call pick-up system is used;
	 
	 	2.	 	no more than one percent of incoming calls receive a busy signal;
	 
	 	3.	 	the average hold time is 2 minutes or less; and
	 
	 	4.	 	the call abandonment rate is 7% or less.

The HMO must conduct ongoing call quality assurance to ensure these standards are met. The
Provider Hotline may serve multiple HMO Programs if Hotline staff is knowledgeable about all of
the HMO’s Programs. The Provider Hotline may serve multiple Service Areas if the Hotline staff
is knowledgeable about all such Service Areas, including the Provider Network in such Service
Areas.

The HMO must monitor its performance regarding Provider Hotline standards and submit performance
reports summarizing call center performance for the Hotline as indicated in Section 8.1.20. If
the HMO subcontracts with a Behavioral Health Organization (BHO) that is responsible for Provider
Hotline functions related to Behavioral Health Services, the BHO’s Provider Hotline must meet the
requirements in Section 8.1.4.7.

8.1.4.8 Provider Reimbursement

The HMO must make payment for all Medically Necessary Covered Services provided to all Members
for whom the HMO is paid a capitation. A STAR+PLUS HMO must also make payment for all
Functionally Necessary Covered Services provided to all Members for whom the HMO is paid a
capitation. The HMO must ensure that claims payment is timely and accurate as described in
Section 8.1.18.5. The HMO must require tax identification numbers from all participating
Providers. The HMO is required to do back-up withholding from all payments to Providers who fail
to give tax identification numbers or who give incorrect numbers.

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8.1.4.9 Termination of Provider Contracts

Unless prohibited or limited by applicable law, at least 15 days prior to the effective date of
the HMO’s termination of contract of any participating Provider the HMO must notify the HHSC
Administrative Services Contractor and notify affected current Members in writing. Affected
Members include all Members in a PCP’s panel and all Members who have been receiving ongoing
care from the terminated Provider, where ongoing care is defined as two or more visits for
home-based or office-based care in the past 12 months.

For the CHIP and CHIP Perinatal Programs, the HMO‘s process for terminating
Provider contracts must comply with the Texas Insurance Code and TDI regulations.

8.1.5 Member Services

The HMO must maintain a Member Services Department to assist Members and Members’ family
members or guardians in obtaining Covered Services for Members. The HMO must maintain
employment standards and requirements (e.g., education, training, and experience) for Member
Services Department staff and provide a sufficient number of staff for the Member Services
Department to meet the requirements of this Section, including Member Hotline response times,
and Linguistic Access capabilities, see 8.1.5.6 Member Hotline Requirements.

8.1.5.1 Member Materials

The HMO must design, print and distribute Member identification (ID) cards and a Member
Handbook to Members. Within five business days following the receipt of an Enrollment File from
the HHSC Administrative Services Contractor, the HMO must mail a Member’s ID card and Member
Handbook to the Case Head or Account Name for each new Member. When the Case Head or Account
Name is on behalf of two or more new Members, the HMO is only required to send one Member
Handbook. The HMO is responsible for mailing materials only to those Members for whom valid
address data are contained in the Enrollment File.

The HMO must design, print and distribute a Provider Directory to the HHSC Administrative
Services Contractor as described in Section 8.1.5.4.

Member materials must be at or below a 6th grade reading level as measured by the appropriate
score on the Flesch reading ease test. Member materials must be available in English, Spanish,
and the languages of other Major Population Groups making up 10% or more of the managed care
eligible population in the HMO’s Service Area, as specified by HHSC. HHSC will provide the HMO
with reasonable notice when the enrolled population reaches 10% within the HMO’s Service Area.
All Member materials must be available in a format accessible to the visually impaired, which
may include large print, Braille, and audiotapes.

The HMO must submit member materials to HHSC for approval prior to use or mailing. HHSC will
identify any required changes to the Member materials within 15 business days. If HHSC has not
responded to the Contractor by the fifteenth day, the Contractor may proceed to use the submitted
materials. HHSC reserves the right to require discontinuation of any Member materials that
violate the terms of the Uniform Managed Care Terms and Conditions, including but not

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limited to “Marketing Policies and Procedures” as described in the Uniform Managed Care
Manual.

8.1.5.2 Member Identification (ID) Card

All Member ID cards must, at a minimum, include the following information:

	 	1.	 	the Member’s name;
	 
	 	2.	 	the Member’s Medicaid, CHIP or CHIP Perinatal Program number;
	 
	 	3.	 	the effective date of the PCP assignment (excluding CHIP Perinates);
	 
	 	4.	 	the PCP’s name, address (optional for all products), and telephone number
(excluding CHIP Perinates);
	 
	 	5.	 	the name of the HMO;
	 
	 	6.	 	the 24-hour, seven (7) day a week toll-free Member services
telephone number and BH Hotline number operated by the HMO; and
	 
	 	7.	 	any other critical elements identified in the Uniform Managed Care Manual.

The HMO must reissue the Member ID card if a Member reports a lost card, there is a Member name
change, if the Member requests a new PCP, or for any other reason that results in a change to the
information disclosed on the ID card. CHIP Perinatal HMOs must issue Member ID cards to both CHIP
Perinates and CHIP Perinate Newborns.

8.1.5.3 Member Handbook

HHSC must approve the Member Handbook, and any substantive revisions, prior to publication and
distribution. As described in Attachment B-1, Section 7, the HMO must develop and submit to HHSC
the draft Member Handbook for approval during the Readiness Review and must submit a final Member
Handbook incorporating changes required by HHSC prior to the Operational Start Date.

The Member Handbook for each applicable HMO Program must, at a minimum, meet the Member
materials requirements specified by Section 8.1.5.1 above and must include critical elements
in the Uniform Managed Care Manual. CHIP Perinatal HMOs must issue Member Handbooks to both
CHIP Perinates and CHIP Perinate Newborns. The Member Handbook for CHIP Perinate Newborns may
be the same as that used for CHIP.

The HMO must produce a revised Member Handbook, or an insert informing Members of changes to
Covered Services upon HHSC notification and at least 30 days prior to the effective date of such
change in Covered Services. In addition to modifying the Member materials for new Members, the
HMO must notify all existing Members of the Covered Services change during the time frame
specified in this subsection.

8.1.5.4 Provider Directory

The Provider Directory for each applicable HMO Program, and any substantive revisions, must be
approved by HHSC prior to publication and distribution. The HMO is responsible for

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submitting draft Provider directory updates to HHSC for prior review and approval if
changes other than PCP information or clerical corrections are incorporated into the Provider
Directory.

As described in Attachment B-1, Section 7, during the Readiness Review, the HMO must develop and
submit to HHSC the draft Provider Directory template for approval and must submit a final
Provider Directory incorporating changes required by HHSC prior to the Operational Start Date.
Such draft and final Provider Directories must be submitted according to the deadlines
established in Attachment B-1, Section 7.

The Provider Directory for each applicable HMO Program must, at a minimum, meet the Member
Materials requirements specified by Section 8.1.5.1 above and must include critical elements in
the Uniform Managed Care Manual. The Provider Directory must include only Network Providers
credentialed by the HMO in accordance with Section 8.1.4.4. If the HMO contracts with limited
Provider Networks, the Provider Directory must comply with the requirements of 28 T.A.C. §
11.1600(b)(11), relating to the disclosure and notice of limited Provider Networks.

CHIP Perinatal HMOs must develop Provider Directories for both CHIP Perinates and CHIP
Perinate Newborns. The Provider Directory for CHIP Perinate Newborns may be the same as that
used for the CHIP Program.

The HMO must update the Provider Directory on a quarterly basis. The HMO must make such update
available to existing Members on request, and must provide such update to the HHSC Administrative
Services Contractor at the beginning of each state fiscal quarter. HHSC will consult with the
HMOs and the HHSC Administrative Services Contractors to discuss methods for reducing the HMO’s
administrative costs of producing new Provider Directories, including considering submission of
new Provider Directories on a semi-annual rather than a quarterly basis if a HMO has not made
major changes in its Provider Network, as determined by HHSC. HHSC will establish weight limits
for the Provider Directories. Weight limits may vary by Service Area. HHSC will require HMOs that
exceed the weight limits to compensate HHSC for postage fees in excess of the weight limits.

The HMO must send the most recent Provider Directory, including any updates, to Members upon
request. The HMO must, at least annually, include written and verbal offers of such Provider
Directory in its Member outreach and education materials.

8.1.5.5 Internet Website

The HMO must develop and maintain, consistent with HHSC standards and Section 843.2015 of the
Texas Insurance Code and other applicable state laws, a website to provide general information
about the HMO’s Program(s), its Provider Network, its customer services, and its Complaints and
Appeals process. The HMO may develop a page within its existing website to meet the requirements
of this section. The HMO must maintain a Provider Directory for its HMO Program(s) on the HMO’s
website with designation of open versus closed panels. The HMO’s website must comply with the
Marketing Policies and Procedures for each applicable HHSC HMO Program.

The website‘s HMO Program content must be:

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	 	1.	 	Written in Major Population Group languages (which under this contract include
only English and Spanish);
	 
	 	2.	 	Culturally appropriate;
	 
	 	3.	 	Written for understanding at the 6th grade reading level; and
	 
	 	4.	 	Be geared to the health needs of the enrolled HMO Program population.

To minimize download and “wait times,” the website must avoid tools or techniques that require
significant memory or disk resources or require special intervention on the customer side to
install plug-ins or additional software. Use of proprietary items that would require a specific
browser are not allowed. HHSC strongly encourages the use of tools that take advantage of
efficient data access methods and reduce the load on the server or bandwidth.

8.1.5.6 Member Hotline

The HMO must operate a toll-free hotline that Members can call 24 hours a day, seven (7) days a
week. The Member Hotline must be staffed with personnel who are knowledgeable about its HMO
Program(s) and Covered Services, between the hours of 8:00 a.m. to 5:00 p.m. local time for the
Service Area, Monday through Friday, excluding state-approved holidays.

The HMO must ensure that after hours, on weekends, and on holidays the Member Services Hotline is
answered by an automated system with the capability to provide callers with operating hours and
instructions on what to do in cases of emergency. All recordings must be in English and in
Spanish. A voice mailbox must be available after hours for callers to leave messages. The HMO’s
Member Services representatives must return member calls received by the automated system on the
next working day.

If the Member Hotline does not have a voice-activated menu system, the HMO must have a menu system
that will accommodate Members who cannot access the system through other physical means, such as
pushing a button.

The HMO must ensure that its Member Service representatives treat all callers with dignity and
respect the callers’ need for privacy. At a minimum, the HMO’s Member Service representatives
must be:

	 	1.	 	Knowledgeable about Covered Services;
	 
	 	2.	 	Able to answer non-technical questions pertaining to the role of the PCP, as applicable;
	 
	 	3.	 	Able to answer non-clinical questions pertaining to referrals or the process for
receiving authorization for procedures or services;
	 
	 	4.	 	Able to give information about Providers in a particular area;
	 
	 	5.	 	Knowledgeable about Fraud, Abuse, and Waste and the requirements to report
any conduct that, if substantiated, may constitute Fraud, Abuse, or Waste in the
HMO Program;
	 
	 	6.	 	Trained regarding Cultural Competency;
	 
	 	7.	 	Trained regarding the process used to confirm the status of persons with Special
Health Care Needs;
	 
	 	8.	 	For Medicaid members, able to answer non-clinical questions pertaining to
accessing Non-capitated Services; and

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	 	9.	 	For CHIP Members, able to give correct cost-sharing information relating to premiums,
co-pays or deductibles, as applicable. (Cost-sharing does not apply to CHIP Perinates or
CHIP Perinate Newborns.)

Hotline services must meet Cultural Competency requirements and must appropriately handle calls
from non-English speaking (and particularly, Spanish-speaking) callers, as well as calls from
individuals who are deaf or hard-of-hearing. To meet these requirements, the HMO must employ
bilingual Spanish-speaking Member Services representatives and must secure the services of other
contractors as necessary to meet these requirements.

The HMO must process all incoming Member correspondence and telephone inquiries in a timely and
responsive manner. The HMO cannot impose maximum call duration limits but must allow calls to be
of sufficient length to ensure adequate information is provided to the Member. The HMO must ensure
that the toll-free Member Hotline meets the following minimum performance requirements for all HMO
Programs and Service Areas:

	 	1.	 	99% of calls are answered by the fourth ring or an automated call pick-up system;
	 
	 	2.	 	no more than one percent (1%) of incoming calls receive a busy signal;
	 
	 	3.	 	at least 80% of calls must be answered by toll-free line staff within 30 seconds
measured from the time the call is placed in queue after selecting an option; and
	 
	 	4.	 	the call abandonment rate is 7% or less.

The HMO must conduct ongoing quality assurance to ensure these standards are met.

The Member Services Hotline may serve multiple HMO Programs if Hotline staff is knowledgeable
about all of the HMO’s Medicaid and/or CHIP Programs. The Member Services Hotline may serve
multiple Service Areas if the Hotline staff is knowledgeable about all such Service Areas,
including the Provider Network in each Service Area.

The HMO must monitor its performance regarding HHSC Member Hotline standards and submit
performance reports summarizing call center performance for the Member Hotline as indicated in
Section 8.1.20 and the Uniform Managed Care Manual.

8.1.5.7 Member Education

The HMO must, at a minimum, develop and implement health education initiatives that educate
Members about:

	 	1.	 	How the HMO system operates, including the role of the PCP;
	 
	 	2.	 	Covered Services, limitations and any Value-added Services offered by the HMO;
	 
	 	3.	 	The value of screening and preventive care, and
	 
	 	4.	 	How to obtain Covered Services, including:

	 	a.	 	Emergency Services;
	 
	 	b.	 	Accessing OB/GYN and specialty care;
	 
	 	c.	 	Behavioral Health Services;
	 
	 	d.	 	Disease Management programs;

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	 	e.	 	Service Coordination, treatment for pregnant women, Members with Special
Health Care Needs, including Children with Special Health Care Needs; and other
special populations;
	 
	 	f.	 	Early Childhood Intervention (ECI) Services;
	 
	 	g.	 	Screening and preventive services, including well-child care (THSteps
medical checkups for Medicaid Members);
	 
	 	h.	 	For CHIP Members, Member co-payments
	 
	 	i.	 	Suicide prevention; and
	 
	 	J.	 	Identification and health education related to Obesity.

The HMO must provide a range of health promotion and wellness information and activities for
Members in formats that meet the needs of all Members. The HMO must propose, implement, and
assess innovative Member education strategies for wellness care and immunization, as well as
general health promotion and prevention. The HMO must conduct wellness promotion programs to
improve the health status of its Members. The HMO may cooperatively conduct health education
classes for all enrolled Members with one or more HMOs also contracting with HHSC in the Service
Area. The HMO must work with its Providers to integrate health education, wellness and prevention
training into the care of each Member.

The HMO also must provide condition and disease-specific information and educational materials to
Members, including information on its Service Management and Disease Management programs described
in Section 8.1.13 and Section 8.1. Condition- and disease-specific information must be oriented to
various groups within the managed care eligible population, such as children, the elderly, persons
with disabilities and non-English speaking Members, as appropriate to the HMO’s Medicaid, CHIP
and/or CHIP Perinatal Program(s).

8.1.5.8 Cultural Competency Plan

The HMO must have a comprehensive written Cultural Competency Plan describing how the HMO will
ensure culturally competent services, and provide Linguistic Access and Disability-related
Access. The Cultural Competency Plan must describe how the individuals and systems within the
HMO will effectively provide services to people of all cultures, races, ethnic backgrounds, and
religions as well as those with disabilities in a manner that recognizes, values, affirms, and
respects the worth of the individuals and protects and preserves the dignity of each. The HMO
must submit the Cultural Competency Plan to HHSC for Readiness Review. Modifications and
amendments to the plan must be submitted to HHSC no later than 30 days prior to implementation.
The Plan must also be made available to the HMO’s Network of Providers.

8.1.5.9 Member Complaint and Appeal Process

The HMO must develop, implement and maintain a system for tracking, resolving, and reporting
Member Complaints regarding its services, processes, procedures, and staff The HMO must ensure
that Member Complaints are resolved within 30 calendar days after receipt. The HMO is subject to
remedies, including liquidated damages, if at least 98 percent of Member Complaints are not
resolved within 30 days of receipt of the Complaint by the HMO. Please see the Uniform Managed
Care Contract Terms & Conditions and Attachment B-5, Deliverables/Liquidated Damages Matrix.

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The HMO must develop, implement and maintain a system for tracking, resolving, and reporting
Member Appeals regarding the denial or limited authorization of a requested service, including
the type or level of service and the denial, in whole or in part, of payment for service. Within
this process, the HMO must respond fully and completely to each Appeal and establish a tracking
mechanism to document the status and final disposition of each Appeal.

The HMO must ensure that Member Appeals are resolved within 30 calendar days, unless the HMO can
document that the Member requested an extension or the HMO shows there is a need for additional
information and the delay is in the Member’s interest. The HMO is subject to liquidated damages
if at least 98 percent of Member Appeals are not resolved within 30 days of receipt of the
Appeal by the HMO. Please see the Uniform Managed Care Contract Terms & Conditions and
Attachment B-5, Deliverables/Liquidated Damages Matrix.

Medicaid HMOs must follow the Member Complaint and Appeal Process described in Section 8.2.6.
CHIP and CHIP Perinatal HMOs must comply with the CHIP Complaint and Appeal Process described
in Sections 8.4.2 and 8.5.2, respectively.

8.1.6 Marketing and Prohibited Practices

The HMO and its Subcontractors must adhere to the Marketing Policies and Procedures as set
forth by HHSC in the Contract, and the HHSC Uniform Managed Care Manual.

8.1.7 Quality Assessment and Performance Improvement

The HMO must provide for the delivery of quality care with the primary goal of improving the
health status of Members and, where the Member’s condition is not amenable to improvement,
maintain the Member’s current health status by implementing measures to prevent any further
decline in condition or deterioration of health status. The HMO must work in collaboration with
Providers to actively improve the quality of care provided to Members, consistent with the
Quality Improvement Goals and all other requirements of the Contract. The HMO must provide
mechanisms for Members and Providers to offer input into the HMO’s quality improvement
activities.

8.1.7.1 QAPI Program Overview

The HMO must develop, maintain, and operate a quality assessment and performance improvement
(QAPI) Program consistent with the Contract, and TDI requirements, including 28 T.A.C.
§11.1901(a)(5) and §11.1902. Medicaid HMOs must also meet the requirements of 42 C.F.R.
§438.240.

The HMO must have on file with HHSC an approved plan describing its QAPI Program, including
how the HMO will accomplish the activities required by this section. The HMO must submit a
QAPI Program Annual Summary in a format and timeframe specified by HHSC or its designee. The
HMO must keep participating physicians and other Network Providers informed about the QAPI
Program and related activities. The HMO must include in Provider contracts a requirement
securing cooperation with the QAPI.

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The HMO must approach all clinical and non-clinical aspects of quality assessment and
performance improvement based on principles of Continuous Quality Improvement (CQI)/Total
Quality Management (TQM) and must:

	 	1.	 	Evaluate performance using objective quality indicators;
	 
	 	2.	 	Foster data-driven decision-making;
	 
	 	3.	 	Recognize that opportunities for improvement are unlimited;
	 
	 	4.	 	Solicit Member and Provider input on performance and QAPI activities;
	 
	 	5.	 	Support continuous ongoing measurement of clinical and non-clinical effectiveness
and Member satisfaction;
	 
	 	6.	 	Support programmatic improvements of clinical and non-clinical processes based
on findings from on-going measurements; and
	 
	 	7.	 	Support re-measurement of effectiveness and Member satisfaction, and
continued development and implementation of improvement interventions as
appropriate.

8.1.7.2 QAPI Program Structure

The HMO must maintain a well-defined QAPI structure that includes a planned systematic approach
to improving clinical and non-clinical processes and outcomes. The HMO must designate a senior
executive responsible for the QAPI Program and the Medical Director must have substantial
involvement in QAPI Program activities. At a minimum, the HMO must ensure that the QAPI Program
structure:

	 	1.	 	Is organization-wide, with clear lines of accountability within the organization;
	 
	 	2.	 	Includes a set of functions, roles, and responsibilities for the oversight of QAPI
activities that are clearly defined and assigned to appropriate individuals, including physicians,
other clinicians, and non-clinicians;
	 
	 	3.	 	Includes annual objectives and/or goals for planned projects or activities
including clinical and non-clinical programs or initiatives and measurement
activities; and
	 
	 	4.	 	Evaluates the effectiveness of clinical and non-clinical initiatives.

8.1.7.3 Clinical Indicators

The HMO must engage in the collection of clinical indicator data. The HMO must use such
clinical indicator data in the development, assessment, and modification of its QAPI Program.

8.1.7.4 QAPI Program Subcontracting

If the HMO subcontracts any of the essential functions or reporting requirements contained
within the QAPI Program to another entity, the HMO must maintain a file of the subcontractors.
The file must be available for review by HHSC or its designee upon request.

8.1.7.5 Behavioral Health Integration into QAPI Program

If the HMO provides Behavioral Health Services within the Covered Services as defined in
Attachments B-2, B-2.1, and B-2.2, it must integrate behavioral health into its QAPI Program
and include a systematic and on-going process for monitoring, evaluating, and improving the

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quality and appropriateness of Behavioral Health Services provided to Members. The HMO must
collect data, and monitor and evaluate for improvements to physical health outcomes resulting
from behavioral health integration into the Member’s overall care.

8.1.7.6 Clinical Practice Guidelines

The HMO must adopt not less than two evidence-based clinical practice guidelines for each
applicable HMO Program. Such practice guidelines must be based on valid and reliable clinical
evidence, consider the needs of the HMO’s Members, be adopted in consultation with contracting
health care professionals, and be reviewed and updated periodically, as appropriate. The HMO must
develop practice guidelines based on the health needs and opportunities for improvement identified
as part of the QAPI Program.

The HMO may coordinate the development of clinical practice guidelines with other HHSC HMOs
to avoid providers in a Service Area receiving conflicting practice guidelines from
different HMOs.

The HMO must disseminate the practice guidelines to all affected Providers and, upon request, to
Members and potential Members.

The HMO must take steps to encourage adoption of the guidelines, and to measure compliance with
the guidelines, until such point that 90% or more of the Providers are consistently in
compliance, based on HMO measurement findings. The HMO must employ substantive Provider
motivational incentive strategies, such as financial and non-financial incentives, to improve
Provider compliance with clinical practice guidelines. The HMO’s decisions regarding utilization
management, Member education, coverage of services, and other areas included in the practice
guidelines must be consistent with the HMO’s clinical practice guidelines.

8.1.7.7 Provider Profiling

The HMO must conduct PCP and other Provider profiling activities at least annually. As part of
its QAPI Program, the HMO must describe the methodology it uses to identify which and how many
Providers to profile and to identify measures to use for profiling such Providers.

Provider profiling activities must include, but not be limited to:

	 	1.	 	Developing PCP and Provider-specific reports that include a multi-dimensional
assessment of a PCP or Provider’s performance using clinical, administrative, and
Member satisfaction indicators of care that are accurate, measurable, and relevant to
the enrolled population;
	 
	 	2.	 	Establishing PCP, Provider, group, Service Area or regional Benchmarks for
areas profiled, where applicable, including STAR, STAR+PLUS, CHIP and CHIP Perinatal
Program-specific Benchmarks, where appropriate; and
	 
	 	3.	 	Providing feedback to individual PCPs and Providers regarding the results
of their performance and the overall performance of the Provider Network.

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8.1.7.8 Network Management The

HMO must:

	 	1.	 	Use the results of its Provider profiling activities to identify areas of
improvement for individual PCPs and Providers, and/or groups of Providers;
	 
	 	2.	 	Establish Provider-specific quality improvement goals for priority areas in
which a Provider or Providers do not meet established HMO standards or improvement
goals;
	 
	 	3.	 	Develop and implement incentives, which may include financial and non-financial
incentives, to motivate Providers to improve performance on profiled measures; and
	 
	 	4.	 	At least annually, measure and report to HHSC on the Provider Network and
individual Providers’ progress, or lack of progress, towards such improvement goals.

8.1.7.9 Collaboration with the EQRO

The HMO will collaborate with HHSC’s external quality review organization (EQRO) to develop
studies, surveys, or other analytical approaches that will be carried out by the EQRO. The purpose
of the studies, surveys, or other analytical approaches is to assess the quality of care and
service provided to Members and to identify opportunities for HMO improvement. To facilitate this
process, the HMO will supply claims data to the EQRO in a format identified by HHSC in
consultation with HMOs, and will supply medical records for focused clinical reviews conducted by
the EQRO. The HMO must also work collaboratively with HHSC and the EQRO to annually measure
selected HEDIS measures that require chart reviews. During the first year of operations, HHSC
anticipates that the selected measures will include, at a minimum, well-child visits and
immunizations, appropriate use of asthma medications, measures related to Members with diabetes,
and control of high blood pressure.

8.1.8 Utilization Management

The HMO must have a written utilization management (UM) program description, which
includes, at a minimum:

	 	1.	 	Procedures to evaluate the need for Medically Necessary Covered Services;
	 
	 	2.	 	The clinical review criteria used, the information sources, the
process used to review and approve the provision of Covered Services;
	 
	 	3.	 	The method for periodically reviewing and amending the UM
clinical review criteria; and
	 
	 	4.	 	The staff position functionally responsible for the day-to-day
management of the UM function.

The HMO must make best efforts to obtain all necessary information, including pertinent clinical
information, and consult with the treating physician as appropriate in making UM determinations.

The HMO must issue coverage determinations, including adverse determinations, according to
the following timelines:

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	 	•	 	Within three (3) business days after receipt of the request for
authorization of services;
	 
	 	•	 	Within one (1) business day for concurrent hospitalization decisions; and
	 
	 	•	 	Within one (1) hour for post-stabilization or life-threatening conditions, except that
for Emergency Medical Conditions and Emergency Behavioral Health Conditions,
the HMO must not require prior authorization.

The HMO‘s UM Program must include written policies and procedures to ensure:

	 	1.	 	Consistent application of review criteria that are compatible with Members’ needs
and situations;
	 
	 	2.	 	Determinations to deny or limit services are made by physicians under the
direction of the Medical Director;
	 
	 	3.	 	Appropriate personnel are available to respond to utilization review inquiries 8:00
a.m. to 5:00 p.m., Monday through Friday, with a telephone system capable of accepting
utilization review inquiries after normal business hours. The HMO must respond to calls
within one business day;
	 
	 	4.	 	Confidentiality of clinical information; and
	 
	 	5.	 	Quality is not adversely impacted by financial and reimbursement-related processes
and decisions.

For HMOs with preauthorization or concurrent review programs, qualified medical professionals
must supervise preauthorization and concurrent review decisions.
The HMO UM Program must include polices and procedures to:

	 	1.	 	Routinely assess the effectiveness and the efficiency of the UM Program;
	 
	 	2.	 	Evaluate the appropriate use of medical technologies, including medical
procedures, drugs and devices;
	 
	 	3.	 	target areas of suspected inappropriate service utilization;
	 
	 	4.	 	Detect over- and under-utilization;
	 
	 	5.	 	Routinely generate Provider profiles regarding utilization patterns and compliance
with utilization review criteria and policies;
	 
	 	6.	 	Compare Member and Provider utilization with norms for comparable individuals;
	 
	 	7.	 	Routinely monitor inpatient admissions, emergency room use, ancillary, and
out-of-area services;
	 
	 	8.	 	Ensure that when Members are receiving Behavioral Health Services from the local
mental health authority that the HMO is using the same UM guidelines as those prescribed
for use by Local Mental Health Authorities by MHMR which are published at:
http://www.mhmr.state.tx.us/centraloffice/behavioralhealthservices/RDMC1in
Guide. html and
	 
	 	9.	 	Refer suspected cases of provider or Member Fraud, Abuse, or Waste to the Office
of Inspector General (OIG) as required by Section 8.1.19.

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8.1.9 Early Childhood Intervention (ECI)

The HMO must ensure that Network Providers are educated regarding their responsibility under
federal laws (e.g., 20 U.S.C. §1435 (a)(5); 34 C.F.R. §303.321(d)) to identify and refer any
Member age three (3) or under suspected of having a developmental disability or delay, or who is
at risk of delay, to the designated ECI program for screening and assessment within two (2)
working days from the day the Provider identifies the Member. The HMO must use written
educational materials developed or approved by the Department of Assistive and Rehabilitative
Services — Division for Early Childhood Intervention Services for these “child find” activities.
Eligibility for ECI services will be determined by the local ECI program using the criteria
contained in 40 T.A.C. §108.25.

The HMO must contract with qualified ECI Providers to provide ECI services to Members under age
three who have been determined eligible for ECI services. The HMO must permit Members to self
refer to local ECI Service Providers without requiring a referral from the Member’s PCP. The
HMO’s policies and procedures, including its Provider Manual, must include written policies and
procedures for allowing such self-referral to ECI providers.

The HMO must coordinate and cooperate with local ECI programs in the development and
implementation of the Individual Family Service Plan (IFSP), including on-going case management
and other non-capitated services required by the Member‘s IFSP. The IFSP is an
agreement developed by the interdisciplinary team that consists of the ECI Case Manager/Service
Coordinator, the Member/family, and other professionals who participated in the Member’s
evaluation or are providing direct services to the Member, and may include the Member’s Primary
Care Physician (PCP) with parental consent. The IFSP identifies the Member‘s present
level of development based on assessment, describes the services to be provided to the child to
meet the needs of the child and the family, and identifies the person or persons responsible for
each service required by the plan. The IFSP shall be transmitted by the ECI Provider to the HMO
and the PCP with parental consent to enhance coordination of the plan of care. The IFSP may be
included in the Member’s medical record.

Cooperation with the ECI program includes covering medical diagnostic procedures and providing
medical records required to perform developmental assessments and developing the IFSP within the
45-day timeline established in federal rule (34 C.F.R. §303.342(a)). The HMO must require
compliance with these requirements through Provider contract provisions. The HMO must not
withhold authorization for the provision of such medical diagnostic procedures. The HMO must
promptly provide to the ECI program, relevant medical records available to the HMO.

The interdisciplinary team will determine Medical Necessity for health and Behavioral Health
Services as approved by the Member’s PCP. The HMO must require, through contract provisions, that
all Medically Necessary health and Behavioral Health Services contained in the Member’s IFSP are
provided to the Member in the amount, duration, scope and service setting established by the
IFSP. The HMO must allow services to be provided by a non-network provider if a Network Provider
is not available to provide the services in the amount, duration, scope and service setting as
required by the IFSP. The HMO cannot modify the plan of care or alter the amount, duration,
scope, or service setting required by the Member‘s IFSP. The HMO cannot create
unnecessary barriers for the Member to obtain IFSP services, including requiring prior

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authorization for the ECI assessment or establishing insufficient authorization periods
for prior authorized services.

8.1.10 Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) — Specific Requirements

The HMO must, by contract, require its Providers to coordinate with the Special Supplemental
Nutrition Program for Women, Infants, and Children (WIC) to provide medical information necessary
for WIC eligibility determinations, such as height, weight, hematocrit or hemoglobin. The HMO
must make referrals to WIC for Members potentially eligible for WIC. The HMO may use the
nutrition education provided by WIC to satisfy certain health education requirements of the
Contract.

8.1.11 Coordination with Texas Department of Family and Protective Services

The HMO must cooperate and coordinate with the Texas Department of Family and Protective
Services (TDFPS) (formerly the Department of Protective and Regulatory Services) for the care
of a child who is receiving services from or has been placed in the conservatorship of TDFPS.

The HMO must comply with all provisions related to Covered Services, including Behavioral
Health Services, in the following documents:

	 	•	 	A court order (Order) entered by a Court of Continuing Jurisdiction placing a child
under the protective custody of TDFPS.
	 
	 	•	 	A TDFPS Service Plan entered by a Court of Continuing Jurisdiction placing a
child under the protective custody of TDFPS.
	 
	 	•	 	A TDFPS Service Plan voluntarily entered into by the parents or person having
legal custody of a Member and TDFPS.

The HMO cannot deny, reduce, or controvert the Medical Necessity of any health or Behavioral
Health Services included in an Order. The HMO may participate in the preparation of the medical
and behavioral care plan prior to TDFPS submitting the health care plan to the Court. Any
modification or termination of court-ordered services must be presented and approved by the court
having jurisdiction over the matter.

A Member or the parent or guardian whose rights are subject to an Order or Service Plan cannot
use the HMO’s Complaint or Appeal processes, or the HHSC Fair Hearing process to Appeal the
necessity of the Covered Services.

The HMO must include information in its Provider Manuals and training materials regarding:

	 	1.	 	Providing medical records to TDFPS;
	 
	 	2.	 	Scheduling medical and Behavioral Health Services appointments within 14 days
unless requested earlier by TDFPS; and
	 
	 	3.	 	Recognition of abuse and neglect, and appropriate referral to TDFPS.

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The HMO must continue to provide all Covered Services to a Member receiving services from, or
in the protective custody of, TDFPS until the Member has been disenrolled from the HMO due to loss
of Medicaid managed care eligibility or placed into foster care.

8.1.12 Services for People with Special Health Care Needs

This section applies to STAR, STAR+PLUS, CHIP HMOs. It applies to CHIP Perinatal HMOs with
respect to their Perinate Newborn Members only.

8.1.12.1 Identification

The HMO must develop and maintain a system and procedures for identifying Members with Special
Health Care Needs (MSHCN), including people with disabilities or chronic or complex medical and
behavioral health conditions and Children with Special Health Care Needs (CSHCN)‘.

The HMO must contact Members pre-screened by the HHSC Administrative Services Contractor as MSHCN
to determine whether they meet the HMO’s MSHCN assessment criteria, and to determine whether the
Member requires special services described in this section. The HMO must provide information to
the HHSC Administrative Services Contractor that identifies Members who the HMO has assessed to be
MSHCN, including any Members pre-screened by the HHSC Administrative Services Contractor and
confirmed by the HMO as a MSHCN. The information must be provided, in a format and on a timeline
to be specified by HHSC in the Uniform Managed Care Manual, and updated with newly identified
MSHCN by the 10th day of each month. In the event that a MSHCN changes HMOs, the HMO must provide
the receiving contractor information concerning the results of the HMO’s identification and
assessment of that Member’s needs, to prevent duplication of those activities.

8.1.12.2 Access to Care and Service Management

Once identified, the HMO must have effective systems to ensure the provision of Covered
Services to meet the special preventive, primary Acute Care, and specialty health care needs
appropriate for treatment of the individual Member‘s condition(s). All STAR+PLUS
Members are considered to be MSHCN.

The HMO must provide access to identified PCPs and specialty care Providers with experience
serving MSHCN. Such Providers must be board-qualified or board-eligible in their specialty. The
HMO may request exceptions from HHSC for approval of traditional providers who are not
board-qualified or board-eligible but who otherwise meet the HMO’s credentialing requirements.

 

	
	CSHCN is a term often used to refer to a services program for children with special health care
needs administered by DSHS, and described in 25 TAC, Part 1, Section 38.1. Although children
served through this program may also be served by Medicaid or CHIP, the reference to “CSHCN” in
this Contract does not refer to children served through this program.

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For services to CSHCN, the HMO must have Network PCPs and specialty care Providers that
have demonstrated experience with CSHCN in pediatric specialty centers such as children’s
hospitals, teaching hospitals, and tertiary care centers.

The HMO is responsible for working with MSHCN, their families and legal guardians if
applicable, and their health care providers to develop a seamless package of care in which
primary, Acute Care, and specialty service needs are met through a Service Plan that is
understandable to the Member, or, when applicable, the Member’s legal guardian.

The HMO is responsible for providing Service Management to develop a Service Plan and ensure
MSHCN, including CSHCN, have access to treatment by a multidisciplinary team when the
Member‘s PCP determines the treatment is Medically Necessary, or to avoid separate and
fragmented evaluations and service plans. The team must include both physician and non-physician
providers determined to be necessary by the Member’s PCP for the comprehensive treatment of the
Member. The team must:

	 	1.	 	Participate in hospital discharge planning;
	 
	 	2.	 	Participate in pre-admission hospital planning for non-emergency hospitalizations;
	 
	 	3.	 	Develop specialty care and support service recommendations to be incorporated into
the Service Plan; and
	 
	 	4.	 	Provide information to the Member, or when applicable, the Member’s legal
guardian concerning the specialty care recommendations.

MSHCN, their families, or their health providers may request Service Management from the HMO. The
HMO must make an assessment of whether Service Management is needed and furnish Service
Management when appropriate. The HMO may also recommend to a MSHCN, or to a CSHCN’s family, that
Service Management be furnished if the HMO determines that Service Management would benefit the
Member.

The HMO must provide information and education in its Member Handbook and Provider Manual
about the care and treatment available in the HMO’s plan for Members with Special Health
Care Needs, including the availability of Service Management.

The HMO must have a mechanism in place to allow Members with Special Health Care Needs to have
direct access to a specialist as appropriate for the Member’s condition and identified needs,
such as a standing referral to a specialty physician. The HMO must also provide MSHCN with access
to non-primary care physician specialists as PCPs, as required by 28 T.A.C. § 11.900 and Section
8.1.

The HMO must implement a systematic process to coordinate Non-capitated Services, and enlist the
involvement of community organizations that may not be providing Covered Services but are
otherwise important to the health and wellbeing of Members. The HMO also must make a best effort
to establish relationships with State and local programs and community organizations, such as
those listed below, in order to make referrals for MSHCN and other Members who need community
services:

	 	•	 	Community Resource Coordination Groups (CRCGs);

	 	•	 	Early Childhood Intervention (ECI) Program;

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	 	•	 	Local school districts (Special Education);
	 
	 	•	 	Texas Department of Transportation’s Medical Transportation Program (MTP);
	 
	 	•	 	Texas Department of Assistive and Rehabilitative Services (DARS) Blind Children’s
Vocational Discovery and Development Program;
	 
	 	•	 	Texas Department of State Health (DSHS) services, including community mental
health programs, the Title V Maternal and Child Health and Children with Special
Health Care Needs (CSHCN) Programs, and the Program for Amplification of Children
of Texas (PACT);
	 
	 	•	 	Other state and local agencies and programs such as food stamps, and the
Women, Infants, and Children’s (WIC) Program;
	 
	 	•	 	Civic and religious organizations and consumer and advocacy groups, such as United
Cerebral Palsy, which also work on behalf of the MSHCN population.

8.1.13 Service Management for Certain Populations

The HMO must have service management programs and procedures for the following populations, as
applicable to the HMO‘s Medicaid and/or CHIP Program(s) (See CHIP Perinatal Program
Covered Services, Attachment B-2.2, for the applicability of these services to the CHIP Perinatal
Program):

	1.	 	High-cost catastrophic cases;
	 
	2.	 	Women with high-risk pregnancies (STAR and STAR+PLUS Programs only); and
	 
	3.	 	Individuals with mental illness and co-occurring substance abuse.

8.1.14 Disease Management (DM)

The HMO must provide, or arrange to have provided to Members, comprehensive disease management
services consistent with state statutes and regulations. Such DM services must be part of
person-based approach to DM and holistically address the needs of persons with multiple chronic
conditions. The HMO must develop and implement DM services that relate to chronic conditions
that are prevalent in HMO Program Members. In the first year of operations, STAR, STAR+PLUS and
CHIP HMOs must have DM Programs that address Members with chronic conditions to be identified by
HHSC and included within the Uniform Managed Care Manual. HHSC will not identify the Members
with chronic conditions. The HMO must implement policies and procedures to ensure that Members
that require DM services are identified and enrolled in a program to provide such DM services.
The HMO must develop and maintain screening and evaluation procedures for the early detection,
prevention, treatment, or referral of participants at risk for or diagnosed with chronic
conditions identified by HHSC and included within the Uniform Managed Care Manual. The HMO must
ensure that all Members identified for DM are enrolled into a DM Program with the opportunity to
opt out of these services within 30 days while still maintaining access to all other Covered
Services.

The DM Program(s) must include:

	1.	 	Patient self-management education;
	 
	2.	 	Provider education;

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	3.	 	Evidence-based models and minimum standards of care;
	 
	4.	 	Standardized protocols and participation criteria;
	 
	5.	 	Physician-directed or physician-supervised care;
	 
	6.	 	Implementation of interventions that address the continuum of care;
	 
	7.	 	Mechanisms to modify or change interventions that are not proven effective; and
	 
	8.	 	Mechanisms to monitor the impact of the DM Program over time, including both the clinical
and the financial impact.

The HMO must maintain a system to track and monitor all DM participants for clinical,
utilization, and cost measures.

The HMO must provide designated staff to implement and maintain DM Programs and to assist
participating Members in accessing DM services. The HMO must educate Members and Providers
about the HMO’s DM Programs and activities. Additional requirements related to the
HMO‘s Disease Management Programs and activities are found in the HHSC Uniform
Managed Care Manual.

8.1.14.1 DM Services and Participating Providers

At a minimum, the HMO must:

	1.	 	Implement a system for Providers to request specific DM interventions;
	 
	2.	 	Give Providers information, including differences between recommended prevention and
treatment and actual care received by Members enrolled in a DM Program, and information
concerning such Members’ adherence to a service plan; and
	 
	3.	 	For Members enrolled in a DM Program, provide reports on changes in a Member’s health status
to their PCP.

8.1.14.2 HMO DM Evaluation

HHSC or its EQRO will evaluate the HMO’s DM Program.

8.1.15 Behavioral Health (BH) Network and Services

The requirements in this sub-section pertain to all HMOs except: (1) the STAR HMOs in the
Dallas CSA, whose Members receive Behavioral Health Services through the NorthSTAR Program,
and (2) the CHIP Perinatal Program HMOs with respect to their Perinate Members.

The HMO must provide, or arrange to have provided, to Members all Medically Necessary Behavioral
Health (BH) Services as described in Attachments B-2, B-2.1, and B-2.2. All BH Services must be
provided in conformance with the access standards included in Section 8.1.3. For Medicaid HMOs,
BH Services are described in more detail in the Texas Medicaid Provider Procedures Manual and the
Texas Medicaid Bulletins. When assessing Members for BH Services, the HMO and its Network
Behavioral Health Service Providers must use the DSM-IV multi-axial classification. HHSC may
require use of other assessment instrument/outcome measures in addition to the DSM-IV. Providers
must document DSM-IV and assessment/outcome information in the Member’s medical record.

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8.1.15.1 BH Provider Network

The HMO must maintain a Behavioral Health Services Provider Network that includes psychiatrists,
psychologists, and other Behavioral Health Service Providers. The Provider Network must include
Behavioral Health Service Providers with experience serving special populations among the HMO
Program(s)’ enrolled population, including, as applicable, children and adolescents, persons
with disabilities, the elderly, and cultural or linguistic minorities, to ensure accessibility
and availability of qualified Providers to all Members in the Service Area.

8.1.15.2 Member Education and Self-referral for Behavioral Health Services

The HMO must maintain a Member education process to help Members know where and how to obtain
Behavioral Health Services.

The HMO must permit Members to self refer to any in-network Behavioral Health Services
Provider without a referral from the Member’s PCP. The HMOs’ policies and procedures,
including its Provider Manual, must include written policies and procedures for allowing such
self- referral to BH services.

The HMO must permit Members to participate in the selection of the appropriate behavioral
health individual practitioner(s) who will serve them and must provide the Member with
information on accessible in-network Providers with relevant experience.

8.1.15.3 Behavioral Health Services Hotline

This Section includes Hotline functions pertaining to Members. Requirements for Provider
Hotlines are found in Section 8.1.4.7. The HMO must have an emergency and crisis Behavioral
Health Services Hotline staffed by trained personnel 24 hours a day, 7 days a week, toll-free
throughout the Service Area. Crisis hotline staff must include or have access to qualified
Behavioral Health Services professionals to assess behavioral health emergencies. Emergency and
crisis Behavioral Health Services may be arranged through mobile crisis teams. It is not
acceptable for an emergency intake line to be answered by an answering machine.

The HMO must operate a toll-free hotline as described in Section 8.1.5.6 to handle Behavioral
Health-related calls. The HMO may operate one hotline to handle emergency and crisis calls and
routine Member calls. The HMO cannot impose maximum call duration limits and must allow calls to
be of sufficient length to ensure adequate information is provided to the Member. Hotline
services must meet Cultural Competency requirements and provide linguistic access to all Members,
including the interpretive services required for effective communication.

The Behavioral Health Services Hotline may serve multiple HMO Programs Hotline staff is
knowledgeable about all of the HMO Programs. The Behavioral Health Services Hotline may serve
multiple Service Areas if the Hotline staff is knowledgeable about all such Service Areas,
including the Behavioral Health Provider Network in each Service Area. The HMO must ensure that
the toll-free Behavioral Health Services Hotline meets the following minimum performance
requirements for all HMO Programs and Service Areas:

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	 	1.	 	99% of calls are answered by the fourth ring or an automated call pick-up system;
	 
	 	2.	 	No incoming calls receive a busy signal;
	 
	 	3.	 	At least 80% of calls must be answered by toll-free line staff within 30 seconds
measured from the time the call is placed in queue after selecting an option; and
	 
	 	4.	 	The call abandonment rate is 7% or less.

The HMO must conduct on-going quality assurance to ensure these standards are met.

The HMO must monitor the HMO’s performance against the Behavioral Health Services Hotline
standards and submit performance reports summarizing call center performance as indicated in
Section 8.1.20 and the Uniform Managed Care Manual.
8.1.15.4 Coordination between the BH Provider and the PCP

The HMO must require, through contract provisions, that PCPs have screening and evaluation
procedures for the detection and treatment of, or referral for, any known or suspected
behavioral health problems and disorders. PCPs may provide any clinically appropriate Behavioral
Health Services within the scope of their practice.

The HMO must provide training to network PCPs on how to screen for and identify behavioral health
disorders, the HMO’s referral process for Behavioral Health Services and clinical coordination
requirements for such services. The HMO must include training on coordination and quality of care
such as behavioral health screening techniques for PCPs and new models of behavioral health
interventions.

The HMO shall develop and disseminate policies regarding clinical coordination between
Behavioral Health Service Providers and PCPs. The HMO must require that Behavioral Health
Service Providers refer Members with known or suspected and untreated physical health problems
or disorders to their PCP for examination and treatment, with the Member’s or the
Member‘s legal guardian‘s consent. Behavioral Health Providers may only
provide physical health care services if they are licensed to do so. This requirement must be
specified in all Provider Manuals.

The HMO must require that behavioral health Providers send initial and quarterly (or more
frequently if clinically indicated) summary reports of a Members’ behavioral health status to
the PCP, with the Member’s or the Member’s legal guardian’s consent. This requirement must be
specified in all Provider Manuals.

8.1.15.5 Follow-up after Hospitalization for Behavioral Health Services

The HMO must require, through Provider contract provisions, that all Members receiving
inpatient psychiatric services are scheduled for outpatient follow-up and/or continuing
treatment prior to discharge. The outpatient treatment must occur within seven (7) days from
the date of discharge. The HMO must ensure that Behavioral Health Service Providers contact
Members who have missed appointments within 24 hours to reschedule appointments.

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8.1.15.6 Chemical Dependency

The HMO must comply with 28 T.A.C. §3.8001 et seq., regarding utilization review for
Chemical Dependency Treatment. Chemical Dependency Treatment must conform to the standards set
forth in 28 T.A.C. Part 1, Chapter 3, Subchapter HH.

8.1.15.7 Court-Ordered Services

“Court-Ordered Commitment” means a commitment of a Member to a psychiatric facility for
treatment that is ordered by a court of law pursuant to the Texas Health and Safety Code,
Title VII, Subtitle C.

The HMO must provide inpatient psychiatric services to Members under the age of 21, up to the
annual limit, who have been ordered to receive the services by a court of competent jurisdiction
under the provisions of Chapters 573 and 574 of the Texas Health and Safety Code, relating to
Court-Ordered Commitments to psychiatric facilities. The HMO is not obligated to cover
placements as a condition of probation, authorized by the Texas Family Code.

The HMO cannot deny, reduce or controvert the Medical Necessity of inpatient psychiatric
services provided pursuant to a Court-ordered Commitment for Members under age 21. Any
modification or termination of services must be presented to the court with jurisdiction over
the matter for determination.

A Member who has been ordered to receive treatment under the provisions of Chapter 573 or 574 of
the Texas Health and Safety Code can only Appeal the commitment through the court system.

8.1.15.8 Local Mental Health Authority (LMHA)

The HMO must coordinate with the Local Mental Health Authority (LMHA) and state psychiatric
facility regarding admission and discharge planning, treatment objectives and projected length of
stay for Members committed by a court of law to the state psychiatric facility.

Medicaid HMOs are required to comply with additional Behavioral Health Services requirements
relating to coordination with the LMHA and care for special populations. These Medicaid HMO
requirements are described in Section 8.2.8.

8.1.16 Financial Requirements for Covered Services

The HMO must pay for or reimburse Providers for all Medically Necessary Covered Services provided
to all Members. The HMO is not liable for cost incurred in connection with health care rendered
prior to the date of the Member’s Effective Date of Coverage in that HMO. A Member may receive
collateral health benefits under a different type of insurance such as workers compensation or
personal injury protection under an automobile policy. If a Member is entitled to coverage for
specific services payable under another insurance plan and the HMO paid for such Covered
Services, the HMO may obtain reimbursement from the responsible insurance entity not to exceed
100% of the value of Covered Services paid.

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8.1.17 Accounting and Financial Reporting Requirements

The HMO’s accounting records and supporting information related to all aspects of the Contract
must be accumulated in accordance with Generally Accepted Accounting Principles (GAAP) and the
cost principles contained in the Cost Principles Document in the Uniform Managed Care Manual. The
State will not recognize or pay services that cannot be properly substantiated by the HMO and
verified by HHSC.

The HMO must:

	 	1.	 	Maintain accounting records for each applicable HMO Program separate and apart
from other corporate accounting records;
	 
	 	2.	 	Maintain records for all claims payments, refunds and adjustment payments to
providers, capitation payments, interest income and payments for administrative services
or functions and must maintain separate records for medical and administrative fees,
charges, and payments;
	 
	 	3.	 	Maintain an accounting system that provides an audit trail containing sufficient
financial documentation to allow for the reconciliation of billings, reports, and
financial statements with all general ledger accounts; and
	 
	 	4.	 	Within 60 days after Contract execution, submit an accounting policy manual that
includes all proposed policies and procedures the HMO will follow during the duration of
the Contract. Substantive modifications to the accounting policy manual must be approved
by HHSC.

The HMO agrees to pay for all reasonable costs incurred by HHSC to perform an examination,
review or audit of the HMO’s books pertaining to the Contract.

	8.1.17.1	 	General Access to Accounting Records

The HMO must provide authorized representatives of the Texas and federal government full
access to all financial and accounting records related to the performance of the Contract.
The HMO must:

	 	1.	 	Cooperate with the State and federal governments in their evaluation,
inspection, audit, and/or review of accounting records and any necessary supporting
information;
	 
	 	2.	 	Permit authorized representatives of the State and federal governments full access,
during normal business hours, to the accounting records that the State and the Federal
government determine are relevant to the Contract. Such access is guaranteed at all
times during the performance and retention period of the Contract, and will include both
announced and unannounced inspections, on-site audits, and the review, analysis, and
reproduction of reports produced by the HMO;
	 
	 	3.	 	Make copies of any accounting records or supporting documentation relevant to the
Contract available to HHSC or its agents within ten (10) business days of receiving a
written request from HHSC for specified records or information. If such documentation is
not made available as requested, the HMO agrees to reimburse HHSC for all costs,
including, but not limited to, transportation, lodging, and subsistence for all State
and

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	 	 	 	federal representatives, or their agents, to carry out their inspection, audit,
review, analysis, and reproduction functions at the location(s) of such accounting
records; and
	 
	 	4.	 	Pay any and all additional costs incurred by the State and federal government
that are the result of the HMO’s failure to provide the requested accounting records or
financial information within ten (10) business days of receiving a written request from
the State or federal government.

8.1.17.2 Financial Reporting Requirements

HHSC will require the HMO to provide financial reports by HMO Program and by Service Area to
support Contract monitoring as well as State and Federal reporting requirements. HHSC will
consult with HMOs regarding the format and frequency of such reporting. All financial information
and reports that are not Member-specific are property of HHSC and will be public record. Any
deliverable or report in Section 8.1.17.2 without a specified due date is due quarterly on the
last day of the month. Where the due date states 30 days, the HMO is to provide the deliverable
by the last day of the month following the end of the reporting period. Where the due date states
45 days, the HMO is to provide the deliverable by the 15th day of the second month following the
end of the reporting period.

CHIP Perinatal Program data must be reported, and the data will be integrated into existing CHIP
Program financial reports. Except for the Financial Statistical Report, no separate CHIP
Perinatal Program reports are required. For all other CHIP financial reports, where appropriate,
HHSC will designate specific attributes within the CHIP Program financial reports that the CHIP
Perinatal HMOs must complete to allow HHSC to extract financial data particular to the CHIP Perinatal
Program.

HHSC’s Uniform Managed Care Manual will govern the timing, format and content for the
following reports.

Audited Financial Statement -The HMO must provide the annual audited financial statement, for
each year covered under the Contract, no later than June 30. The HMO must provide the most recent
annual financial statements, as required by the Texas Department of Insurance for each year
covered under the Contract, no later than March 1.

Affiliate Report — The HMO must submit an Affiliate Report to HHSC if this information has
changed since the last report submission. The report must contain the following:

	 	1.	 	A list of all Affiliates, and
	 
	 	2.	 	For HHSC’s prior review and approval, a schedule of all transactions with
Affiliates that, under the provisions of the Contract, will be allowable as expenses in
the FSR Report for services provided to the HMO by the Affiliate. Those should include
financial terms, a detailed description of the services to be provided, and an
estimated amount that will be incurred by the HMO for such services during the Contract
Period.

Employee Bonus and/or Incentive Payment Plan — If a HMO intends to include Employee Bonus or
Incentive Payments as allowable administrative expenses, the HMO must furnish a written
Employee Bonus and/or Incentive Payments Plan to HHSC so it may determine whether such payments
are allowable administrative expenses in accordance with Cost Principles

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Document in the Uniform Managed Care Manual. The written plan must include a description of
the HMO’s criteria for establishing bonus and/or incentive payments, the methodology to calculate
bonus and/or incentive payments, and the timing of bonus and/or incentive payments. The Bonus
and/or Incentive Payment Plan and description must be submitted to HHSC for approval no later
than 30 days after the Effective Date of the Contract and any Contract renewal. If the HMO
substantively revises the Employee Bonus and/or Incentive Payment Plan, the HMO must submit the
revised plan to HHSC for prior review and approval.

Claims Lag Report — The HMO must submit Claims Lag Report as a Contract year-to-date report.
The report must be submitted quarterly by the last day of the month following the reporting period.
The report must be submitted to HHSC in a format specified by HHSC. The report format is contained
in the Uniform Managed Care Manual Chapter 5, Section 5.6.2. The report must disclose the amount of
incurred claims each month and the amount paid each month by categories of service, such as
inpatient facility, out-patient facility, professional and other services, if applicable. The
report must include total claims incurred and paid by month.

DSP Report — The HMO must submit a monthly Delivery Supplemental Payment (DSP) Report that
includes the data elements specified by HHSC in the format specified by HHSC. HHSC will consult
with contracted HMOs prior to revising the DSP Report data elements and requirements. The DSP
Report must include only unduplicated deliveries and only deliveries for which the
HMO has made a payment, to either a hospital or other provider.

Form CMS-1513 — The HMO must file an original Form CMS-1513 prior to beginning operations
regarding the HMO’s control, ownership, or affiliations. An updated Form CMS-1513 must also be
filed no later than 30 days after any change in control, ownership, or affiliations.

FSR Reports — The HMO must file quarterly and annual Financial-Statistical Reports (FSR) in the
format and timeframe specified by HHSC. HHSC will include FSR format and directions in the
Uniform Managed Care Manual. The HMO must incorporate financial and statistical data of
delegated networks (e.g., IPAs, ANHCs, Limited Provider Networks), if any, in its FSR
Reports. Administrative expenses reported in the FSRs must be reported in accordance with the
Cost Principles Document in the Uniform Managed Care Manual. Quarterly FSR reports are due no
later than 30 days after the end of the quarter and must provide information for the current
quarter and year-to-date information through the current quarter. The first annual FSR report
must reflect expenses incurred through the 90th day after the end of the fiscal year. The first
annual report must be filed on or before the 120th day after the end of each fiscal year and
accompanied by an actuarial opinion by a qualified actuary who is in good standing with the
American Academy of Actuaries. Subsequent annual reports must reflect data completed through the
334th day after the end of each fiscal year and must be filed on or before the 365th day
following the end of each fiscal year.

CHIP Perinatal HMOs are required to submit separate FSRs for the CHIP Perinatal Program
following the instructions outlined above and in the Uniform Managed Care Manual.

Out-of-Network Utilization Reports — The HMO must file quarterly Out-of Network Utilization
Reports in the format and timeframe specified by HHSC. HHSC will include the report format and
directions in the Uniform Managed Care Manual. Quarterly reports are due 30 days after the end of
each quarter.

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HUB Reports — Upon contract award, the HMO must attend a post award meeting in Austin,
Texas, at a time specified by HHSC, to discuss the development and submission of a Client
Services HUB Subcontracting Plan for inclusion and the HMO’s good faith efforts to notify HUBs of
subcontracting opportunities. The HMO must maintain its HUB Subcontracting Plan and submit
monthly reports documenting the HMO’s Historically Underutilized Business (HUB) program efforts
and accomplishments to the HHSC HUB Office. The report must include a narrative description of
the HMO‘s program efforts and a financial report reflecting payments made to HUBs.
HMOs must use the formats included in HHSC’s Uniform Managed Care Manual for the HUB monthly
reports. The HMO must comply with HHSC’s standard Client Services HUB Subcontracting Plan
requirements for all subcontractors.

IBNR Plan — The HMO must furnish a written IBNR Plan to manage incurred-but-not-reported (IBNR)
expenses, and a description of the method of insuring against insolvency, including information
on all existing or proposed insurance policies. The Plan must include the methodology for
estimating IBNR. The plan and description must be submitted to HHSC no later than 60 days after
the Effective Date of the Contract. Substantive changes to a HMO’s IBNR plan and description must
be submitted to HHSC no later than 30 days before the HMO implements changes to the IBNR plan.

Medicaid Disproportionate Share Hospital (DSH) Reports — Medicaid HMOs must file preliminary and
final Medicaid DSH reports, required by HHSC to identify and reimburse hospitals that qualify for
Medicaid DSH funds. The preliminary and final DSH reports must include the data elements and be
submitted in the form and format specified by HHSC in the Uniform Managed Care Manual. The
preliminary DSH reports are due on or before June 1 of the year following the state fiscal
reporting year. The final DSH reports are due no later than July 15 of the year following the
state fiscal reporting year. This reporting requirement does not apply to CHIP or CHIP Perinatal
Program HMOs. For STAR+PLUS, HMOs will include only outpatient services in the DSH report.

TDI Examination Report — The HMO must furnish a copy of any TDI Examination Report, including
the financial, market conduct, target exam, quality of care components, and corrective action
plans and responses, no later than 10 days after receipt of the final report from TDI.

TDI Filings — The HMO must submit annual figures for controlled risk-based capital, as well as
its quarterly financial statements, both as required by TDI.

Registration Statement (also known as the “Form B”) — If the HMO is a part of an insurance
holding company system, the HMO must submit to HHSC a complete registration statement, also known
as Form B, and all amendments to this form, and any other information filed by such insurer with
the insurance regulatory authority of its domiciliary jurisdiction.

Section 1318 Financial Disclosure Report — The HMO must file an original CMS Public Health
Service (PHS) Section 1318 Financial Disclosure Report prior to the start of Operations and an
updated CMS PHS Section 1318 Financial Disclosure Report no later than 30 days after the end of
each Contract Year and no later than 30 days after entering into, renewing, or terminating a
relationship with an affiliated party.

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Third Party Recovery (TPR) Reports — The HMO must file TPR Reports in accordance with the format
developed by HHSC in the Uniform Managed Care Manual. HHSC will require the HMO to submit TPR
reports no more often than quarterly. TRP reports must include total dollars recovered from third
party payers for each HMO Program for services to the HMO’s Members, and the total dollars
recovered through coordination of benefits, subrogation, and worker’s compensation. For CHIP HMOs,
the TPR Reports only apply if the HMO chooses to engage in TPR activities.

8.1.18 Management Information System Requirements

The HMO must maintain a Management Information System (MIS) that supports all functions of the
HMO’s processes and procedures for the flow and use of HMO data. The HMO must have hardware,
software, and a network and communications system with the capability and capacity to handle and
operate all MIS subsystems for the following operational and administrative areas:

Enrollment/Eligibility Subsystem;

Provider Subsystem;

Encounter/Claims Processing Subsystem;

Financial Subsystem;

Utilization/Quality Improvement Subsystem;

Reporting Subsystem;

Interface Subsystem; and

TPR Subsystem, as applicable to each HMO Program.

The MIS must enable the HMO to meet the Contract requirements, including all applicable state and
federal laws, rules, and regulations. The MIS must have the capacity and capability to capture and
utilize various data elements required for HMO administration.

HHSC will provide the HMO with pharmacy data on the HMO’s Members on a weekly basis through
the HHSC Vendor Drug Program, or should these services be outsourced, through the Pharmacy
Benefit Manager. HHSC will provide a sample format of pharmacy data to contract awardees.

The HMO must have a system that can be adapted to changes in Business Practices/Policies within
the timeframes negotiated by the Parties. The HMO is expected to cover the cost of such systems
modifications over the life of the Contract.
The HMO is required to participate in the HHSC Systems Work Group.

The HMO must provide HHSC prior written notice of major systems changes, generally within 90
days, and implementations, including any changes relating to Material Subcontractors, in
accordance with the requirements of this Contract and the Uniform Managed Care Terms and
Conditions.

The HMO must provide HHSC any updates to the HMO’s organizational chart relating to MIS and
the description of MIS responsibilities at least 30 days prior to the effective date of the

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change. The HMO must provide HHSC official points of contact for MIS issues on an on-going
basis.

HHSC, or its agent, may conduct a Systems Readiness Review to validate the HMO’s ability to meet
the MIS requirements as described in Attachment B-1, Section 7. The System Readiness Review may
include a desk review and/or an onsite review and must be conducted for the following events:

	 	1.	 	A new plan is brought into the HMO Program;
	 
	 	2.	 	An existing plan begins business in a new Service Area;
	 
	 	3.	 	An existing plan changes location;
	 
	 	4.	 	An existing plan changes its processing system, including changes in Material
Subcontractors performing MIS or claims processing functions; and
	 
	 	5.	 	An existing plan in one or two HHSC HMO Programs is initiating a Contract to
participate in any additional HMO Programs.

If for any reason, a HMO does not fully meet the MIS requirements, then the HMO must, upon request
by HHSC, either correct such deficiency or submit to HHSC a Corrective Action Plan and Risk
Mitigation Plan to address such deficiency as requested by HHSC. Immediately upon identifying a
deficiency, HHSC may impose remedies and either actual or liquidated damages according to the
severity of the deficiency. HHSC may also freeze enrollment into the HMO’s plan for any of its HMO
Programs until such deficiency is corrected. Refer to the Uniform Managed Care Terms and Conditions
and Attachment B-5 for additional information.

8.1.18.1 Encounter Data

The HMO must provide complete Encounter Data for all Covered Services, including Value-added
Services. Encounter Data must follow the format, and data elements as described in the
HIPAA-compliant 837 format. HHSC will specify the method of transmission, and the submission
schedule, in the Uniform Managed Care Manual. The HMO must submit monthly Encounter Data
transmissions, and include all Encounter Data and Encounter Data adjustments processed by the HMO.
Encounter Data quality validation must incorporate assessment standards developed jointly by the
HMO and HHSC. The HMO must make original records available for inspection by HHSC for validation
purposes. Encounter Data that do not meet quality standards must be corrected and returned within
a time period specified by HHSC.

In addition to providing Encounter Data in the 837 format described above, HMOs must submit an
Encounter Data file to HHSC’s EQRO, in the format provided in the Uniform Managed Care Manual.
This additional submission requirement is time-limited and may not be required for the entire term
of the Contract.

For reporting Encounters and fee-for-service claims to HHSC, the HMO must use the procedure
codes, diagnosis codes, and other codes as directed by HHSC. Any exceptions will be considered on
a code-by-code basis after HHSC receives written notice from the HMO requesting an exception. The
HMO must also use the provider numbers as directed by HHSC for both Encounter and fee-for-service
claims submissions, as applicable.

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8.1.18.2 HMO Deliverables related to MIS Requirements

At the beginning of each state fiscal year, the HMO must submit for HHSC’s review and
approval any modifications to the following documents:

	1.	 	Joint Interface Plan;
	 
	2.	 	Disaster Recovery Plan;
	 
	3.	 	Business Continuity Plan;
	 
	4.	 	Risk Management Plan; and
	 
	5.	 	Systems Quality Assurance Plan.

The HMO must submit such modifications to HHSC according to the format and schedule
identified the HHSC Uniform Managed Care Manual.

8.1.18.3 System-wide Functions

The HMO’s MIS system must include key business processing functions and/or features, which must
apply across all subsystems as follows:

	 	1.	 	Process electronic data transmission or media to add, delete or modify
membership records with accurate begin and end dates;
	 
	 	2.	 	Track Covered Services received by Members through the system, and accurately and
fully maintain those Covered Services as HIPAA-compliant Encounter transactions;
	 
	 	3.	 	Transmit or transfer Encounter Data transactions on electronic media in the HIPAA
format to the contractor designated by HHSC to receive the Encounter Data;
	 
	 	4.	 	Maintain a history of changes and adjustments and audit trails for current and retroactive
data;
	 
	 	5.	 	Maintain procedures and processes for accumulating, archiving, and restoring data
in the event of a system or subsystem failure;
	 
	 	6.	 	Employ industry standard medical billing taxonomies (procedure codes, diagnosis
codes) to describe services delivered and Encounter transactions produced;
	 
	 	7.	 	Accommodate the coordination of benefits;
	 
	 	8.	 	Produce standard Explanation of Benefits (EOBs);
	 
	 	9.	 	Pay financial transactions to Providers in compliance with federal and state
laws, rules and regulations;
	 
	 	10.	 	Ensure that all financial transactions are auditable according to GAAP guidelines.
	 
	 	11.	 	Relate and extract data elements to produce report formats (provided within the
Uniform Managed Care Manual) or otherwise required by HHSC;
	 
	 	12.	 	Ensure that written process and procedures manuals document and describe all
manual and automated system procedures and processes for the MIS;
	 
	 	13.	 	Maintain and cross-reference all Member-related information with the most
current Medicaid, CHIP or CHIP Perinatal Program Provider number; and
	 
	 	14.	 	Ensure that the MIS is able to integrate pharmacy data from HHSC’s Drug Vendor
file (available through the Virtual Private Network (VPN)) into the HMO’s Member
data.

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8.1.18.4 Health Insurance Portability and Accountability Act (HIPAA) Compliance

The HMO’s MIS system must comply with applicable certificate of coverage and data specification
and reporting requirements promulgated pursuant to the Health Insurance Portability and
Accountability Act (HIPAA) of 1996, P.L. 104-191 (August 21, 1996), as amended or modified. The
HMO must comply with HIPAA EDI requirements. HMO’s enrollment files must be in the 834
HIPAA-compliant format. Eligibility inquiries must be in the 270/271 format and all claims and
remittance transactions in the 837/835 format.

The HMO must provide its Members with a privacy notice as required by HIPAA. The HMO must
provide HHSC with a copy of its privacy notice for filing.

8.1.18.5 Claims Processing Requirements

The HMO must process and adjudicate all provider claims for Medically Necessary Covered Services
that are filed within the time frames specified in the Uniform Managed Care Manual. The HMO is
subject to remedies, including liquidated damages and interest, if the HMO does not process and
adjudicate claims within the timeframes listed in the Uniform Managed Care Manual.

The HMO must administer an effective, accurate, and efficient claims payment process in
compliance with federal laws and regulations, applicable state laws and rules, the Contract, and
the Uniform Managed Care Manual. In addition, a Medicaid HMO must be able to accept and process
provider claims in compliance with the Medicaid Provider Procedures Manual and The Texas Medicaid
Bulletin.

The HMO must maintain an automated claims processing system that registers the date a claim is
received by the MCO, the detail of each claim transaction (or action) at the time the transaction
occurs, and has the capability to report each claim transaction by date and type to include
interest payments. The claims system must maintain information at the claim and line detail
level. The claims system must maintain adequate audit trails and report accurate claims
performance measures to HHSC.

The HMO’s claims system must maintain online and archived files. The HMO must keep online
automated claims payment history for the most current 18 months. The HMO must retain other
financial information and records, including all original claims forms, for the time period
established in Attachment A, Section 9.01. All claims data must be easily sorted and produced in
formats as requested by HHSC.

The HMO must offer its Providers/Subcontractors the option of submitting and receiving claims
information through electronic data interchange (EDI) that allows for automated processing and
adjudication of claims. EDI processing must be offered as an alternative to the filing of paper
claims. Electronic claims must use HIPAA-compliant electronic formats.

The HMO may deny a claim submitted by a provider for failure to file in a timely manner as
provided for in the Uniform Managed Care Manual. The HMO must not pay any claim submitted by a
provider excluded or suspended from the Medicare, Medicaid, CHIP or CHIP Perinatal programs for
Fraud, Abuse, or Waste. The HMO must not pay any claim submitted by

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a Provider that is on payment hold under the authority of HHSC or its authorized agent(s), or
who has pending accounts receivable with HHSC.

The HMO is subject to the requirements related to coordination of benefits for secondary payors
in the Texas Insurance Code Section 843.349 (e) and (f).

The HMO must notify HHSC of major claim system changes in writing no later than 90 days prior
to implementation. The HMO must provide an implementation plan and schedule of proposed
changes. HHSC reserves the right to require a desk or on-site readiness review of the changes.

The HMO must inform all Network Providers about the information required to submit a claim at
least 30 days prior to the Operational Start Date and as a provision within the HMO/Provider
contract. The HMO must make available to Providers claims coding and processing guidelines for the
applicable provider type. Providers must receive 90 days notice prior to the HMO’s implementation
of changes to claims guidelines.

8.1.19 Fraud and Abuse

A HMO is subject to all state and federal laws and regulations relating to Fraud, Abuse, and Waste
in health care and the Medicaid and CHIP programs. The HMO must cooperate and assist HHSC and any
state or federal agency charged with the duty of identifying, investigating, sanctioning or
prosecuting suspected Fraud, Abuse or Waste. The HMO must provide originals and/or copies of all
records and information requested and allow access to premises and provide records to the Inspector
General for the Texas Health and Human Services System, HHSC or its authorized agent(s), the
Centers for Medicare and Medicaid Services (CMS), the U.S. Department of Health and Human Services
(DHHS), Federal Bureau of Investigation, TDI, or other units of state government. The HMO must
provide all copies of records free of charge.

The HMO must submit a written Fraud and Abuse compliance plan to the Office of Inspector
General at HHSC for approval (See Attachment B-1, Section 7 for requirements regarding
timeframes for submitting the original plan.) The plan must ensure that all officers,
directors, managers and employees know and understand the provisions of the HMO’s Fraud and
Abuse compliance plan. The plan must include the name, address, telephone number, electronic
mail address, and fax number of the individual(s) responsible for carrying out the plan.

The written Fraud and Abuse compliance plan must:

	 	1.	 	Contain procedures designed to prevent and detect potential or suspected Abuse, Fraud
and Waste in the administration and delivery of services under the Contract;
	 
	 	2.	 	Contain a description of the HMO’s procedures for educating and training personnel to
prevent Fraud, Abuse, or Waste;
	 
	 	3.	 	Include provisions for the confidential reporting of plan violations to the
designated person within the HMO’s organization and ensure that the identity of an
individual reporting violations is protected from retaliation;

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	 	4.	 	Include provisions for maintaining the confidentiality of any patient information
relevant to an investigation of Fraud, Abuse, or Waste;
	 
	 	5.	 	Provide for the investigation and follow-up of any allegations of Fraud, Abuse, or
Waste and contain specific and detailed internal procedures for officers, directors,
managers and employees for detecting, reporting, and investigating Fraud and Abuse
compliance plan violations;
	 
	 	6.	 	Require that confirmed violations be reported to the Office of Inspector General
(OIG); and
	 
	 	7.	 	Require any confirmed violations or confirmed or suspected Fraud, Abuse, or
Waste under state or federal law be reported to 01G.

If the HMO contracts for the investigation of allegations of Fraud, Abuse, or Waste and other
types of program abuse by Members or Providers, the plan must include a copy of the subcontract;
the names, addresses, telephone numbers, electronic mail addresses, and fax numbers of the
principals of the subcontracted entity; and a description of the qualifications of the
subcontracted entity. Such subcontractors must be held to the requirements stated in this Section.

The HMO must designate executive and essential personnel to attend mandatory training in Fraud and
Abuse detection, prevention and reporting. Designated executive and essential personnel means the
HMO staff persons who supervise staff in the following areas: data collection, provider enrollment
or disenrollment, encounter data, claims processing, utilization review, appeals or grievances,
quality assurance and marketing, and who are directly involved in the decision-making and
administration of the Fraud and Abuse detection program within the HMO. The training will be
conducted by the OIG free of charge. The HMO must schedule and complete training no later than 90
days after the Effective Date of the Contract. If the HMO updates or modifies its written Fraud
and Abuse compliance plan, the HMO must train its executive and essential personnel on these
updates or modifications no later than 90 days after the effective date of the updates or
modifications.

The HMO must designate an officer or director in its organization with responsibility and
authority to carry out the provisions of the Fraud and Abuse compliance plan. A HMO’s failure to
report potential or suspected Fraud or Abuse may result in sanctions, cancellation of the
Contract, and/or exclusion from participation in the Medicaid, CHIP or CHIP Perinatal HMO
Programs. The HMO must allow the OIG, HHSC, its agents, or other governmental units to conduct
private interviews of the HMO’s personnel, subcontractors and their personnel, witnesses, and
Members with regard to a confirmed violation. The HMO’s personnel and it subcontractors must
reasonably cooperate, to the satisfaction of HHSC, by being available in person for interviews,
consultation, grand jury proceedings, pre-trial conferences, hearings, trials and in any other
process, including investigations, at the HMO’s and subcontractors’ own expense.

8.1.20 Reporting Requirements

The HMO must provide and must require its subcontractors to provide:

	 	1.	 	All information required under the Contract, including but not limited to, the
reporting requirements or other information related to the performance of its
responsibilities hereunder as reasonably requested by the HHSC; and

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	 	2.	 	Any information in its possession sufficient to permit HHSC to comply with the Federal
Balanced Budget Act of 1997 or other Federal or state laws, rules, and regulations. All
information must be provided in accordance with the timelines, definitions, formats and
instructions as specified by HHSC. Where practicable, HHSC may consult with HMOs to
establish time frames and formats reasonably acceptable to both parties.

Any deliverable or report in Section 8.1.20 without a specified due date is due quarterly on the
last day of the month following the end of the reporting period. Where the due date states 30
days, the HMO is to provide the deliverable by the last day of the month following the end of the
reporting period. Where the due date states 45 days, the HMO is to provide the deliverable by the
15th day of the second month following the end of the reporting period.

The HMO’s Chief Executive and Chief Financial Officers, or persons in equivalent positions,
must certify that financial data, Encounter Data and other measurement data has been reviewed
by the HMO and is true and accurate to the best of their knowledge after reasonable inquiry.

8.1.20.1 HEDIS and Other Statistical Performance Measures

The HMO must provide to HHSC or its designee all information necessary to analyze the HMO’s
provision of quality care to Members using measures to be determined by HHSC in consultation with
the HMO. Such measures must be consistent with HEDIS or other externally based measures or
measurement sets, and involve collection of information beyond that present in Encounter Data. The
Performance Indicator Dashboard, found in the Uniform Managed Care Manual provides additional
information on the role of the HMO and the EQRO in the collection and calculation of HEDIS, CARPS,
and other performance measures.

8.1.20.2 Reports

The HMO must provide the following reports, in addition to the Financial Reports described in
Section 8.1.17 and those reporting requirements listed elsewhere in the Contract. The HHSC
Uniform Managed Care Manual will include a list of all required reports, and a description of
the format, content, file layout and submission deadlines for each report.

For the following reports, CHIP Perinatal Program data will be integrated into existing CHIP
Program reports. Generally, no separate CHIP Perinatal Program reports are required. Where
appropriate, HHSC will designate specific attributes within the CHIP Program reports that the
CHIP Perinatal HMOs must complete to allow HHSC to extract data particular to the CHIP
Perinatal Program.

Claims Summary Report — The HMO must submit quarterly Claims Summary Reports to HHSC by HMO
Program, Service Area and claims processing subcontractor by the 30th day following
the end of the reporting period unless otherwise specified. The format for the Claims Summary
Report is contained in Chapter 5, Section 5.6.1 of the Uniform Managed Care Manual.

QAPI Program Annual Summary Report — The HMO must submit a QAPI Program Annual Summary in a
format and timeframe as specified in the Uniform Managed Care Manual.

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Fraudulent Practices Report — Utilizing the HHSC-Office of Inspector General (OIG) fraud
referral form, the HMO’s assigned officer or director must report and refer all possible acts of
waste, abuse or fraud to the HHSC-OIG within 30 working days of receiving the reports of possible
acts of waste, abuse or fraud from the HMO’s Special Investigative Unit (SIU). The report and
referral must include: an investigative report identifying the allegation, statutes/regulations
violated or considered, and the results of the investigation; copies of program rules and
regulations violated for the time period in question; the estimated overpayment identified; a
summary of the interviews conducted; the encounter data submitted by the provider for the time
period in question; and all supporting documentation obtained as the result of the investigation.
This requirement applies to all reports of possible acts of waste, abuse and fraud.

Additional reports required by the Office of the Inspector General relating to waste, abuse
or fraud are listed in the HHSC Uniform Managed Care Manual.

Provider Termination Report: (CHIP (including integrated CHIP Perinatal Program
data) & STAR)

MCO must submit a quarterly report that identifies any providers who cease to participate in MCO’s
provider network, either voluntarily or involuntarily. The report must be submitted to HHSC in the
format specified by HHSC, no later than 30 days after the end of the reporting period.

PCP Network & Capacity Report: (CHIP only (including integrated CHIP Perinatal
Program data))

For the CHIP Program, MCO must submit a quarterly report listing all unduplicated PCPs in the
MCO‘s Provider Network. For the CHIP Perinatal Program, the Perinatal Newborns are
assigned PCPs that are part of the CHIP PCP Network. The report must be submitted to HHSC in the
format specified by HHSC, no later than 30 days after the end of the reporting quarter.

Summary Report of Member Complaints and Appeals — The HMO must submit quarterly Member
Complaints and Appeals reports. The HMO must include in its reports Complaints and Appeals
submitted to its subcontracted risk groups (e.g., IPAs) and any other subcontractor that
provides Member services. The HMO must submit the Complaint and Appeals reports electronically
on or before 45 days following the end of the state fiscal quarter, using the format specified
by HHSC in the HHSC Uniform Managed Care Manual, Chapter 5.5.

HHSC may direct the CHIP Perinatal HMOs to provide segregated Member Complaints and Appeals
reports on an as-needed basis.

Summary Report of Provider Complaints — The HMO must submit Provider complaints reports on a
quarterly basis. The HMO must include in its reports complaints submitted by providers to its
subcontracted risk groups (e.g., IPAs) and any other subcontractor that provides Provider
services. The complaint reports must be submitted electronically on or before 45 days
following the end of the state fiscal quarter, using the format specified by HHSC in the HHSC
Uniform Managed Care Manual, Chapter 5.5.

HHSC may direct the CHIP Perinatal HMOs to provide segregated Provider Complaints and
Appeals reports on an as-needed basis.

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Hotline Reports — The HMO must submit, on a quarterly basis, a status report for the Member
Hotline, the Behavioral Health Services Hotline, and the Provider Hotline in comparison with the
performance standards set out in Sections 8.1.5.6, 8.1.14.3, and 8.1.4.7. The HMO shall submit
such reports using a format to be prescribed by HHSC in consultation with the HMOs.

If the HMO is not meeting a hotline performance standard, HHSC may require the HMO to submit
monthly hotline performance reports and implement corrective actions until the hotline
performance standards are met. If a HMO has a single hotline serving multiple Service Areas,
multiple HMO Programs, or multiple hotline functions, (i.e. Member, Provider, Behavioral Health
Services hotlines), HHSC may request on an annual basis that the HMO submit certain hotline
response information by HMO Program, by Service Area, and by hotline function, as applicable to
the HMO. HHSC may also request this type of hotline information if a HMO is not meeting a hotline
performance standard.

The HMO must follow all applicable Joint Interface Plans (JIPs) and all required file submissions
for HHSC‘s Administrative Services Contractor, External Quality Review Organization
(EQRO) and HHSC Medicaid Claims Administrator. The JIPs can be accessed through the Uniform
Managed Care Manual.

8.2 Additional Medicaid HMO Scope of Work

The following provisions apply to any HMO participating in the STAR or STAR+PLUS HMO
Program.

8.2.1 Continuity of Care and Out-of-Network Providers

The HMO must ensure that the care of newly enrolled Members is not disrupted or interrupted. The
HMO must take special care to provide continuity in the care of newly enrolled Members whose
health or behavioral health condition has been treated by specialty care providers or whose
health could be placed in jeopardy if Medically Necessary Covered Services are disrupted or
interrupted.

The HMO must allow pregnant Members with 12 weeks or less remaining before the expected delivery
date to remain under the care of the Member’s current OB/GYN through the Member’s postpartum
checkup, even if the provider is Out-of-Network. If a Member wants to change her OB/GYN to one
who is in the Network, she must be allowed to do so if the Provider to whom she wishes to
transfer agrees to accept her in the last trimester of pregnancy.

The HMO must pay a Member‘s existing Out-of-Network providers for Medically Necessary
Covered Services until the Member’s records, clinical information and care can be transferred to
a Network Provider, or until such time as the Member is no longer enrolled in that HMO,
whichever is shorter. Payment to Out-of-Network providers must be made within the time period
required for Network Providers. The HMO must comply with out-of-network provider reimbursement
rules as adopted by HHSC.

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This Article does not extend the obligation of the HMO to reimburse the Member’s existing
Out-of-Network providers for on-going care for:

	 	1.	 	More than 90 days after a Member enrolls in the HMO’s Program, or
	 
	 	2.	 	For more than nine (9) months in the case of a Member who, at the time of
enrollment in the HMO, has been diagnosed with and receiving treatment for a
terminal illness and remains enrolled in the HMO.

The HMO’s obligation to reimburse the Member’s existing Out-of-Network provider for services
provided to a pregnant Member with 12 weeks or less remaining before the expected delivery date
extends through delivery of the child, immediate postpartum care, and the follow-up checkup within
the first six weeks of delivery.

The HMO must provide or pay Out-of-Network providers who provide Medically Necessary Covered
Services to Members who move out of the Service Area through the end of the period for which
capitation has been paid for the Member.

The HMO must provide Members with timely and adequate access to Out-of-Network services for as
long as those services are necessary and covered benefits not available within the network, in
accordance with 42 C.F.R. §438.206(b)(4). The HMO will not be obligated to provide a Member with
access to Out-of-Network services if such services become available from a Network Provider.

The HMO must ensure that each Member has access to a second opinion regarding the use of any
Medically Necessary Covered Service. A Member must be allowed access to a second opinion from a
Network Provider or Out-of-Network provider if a Network Provider is not available, at no cost to
the Member, in accordance with 42 C.F.R. §438.206(b)(3).

8.2.2 Provisions Related to Covered Services for Medicaid Members

8.2.2.1 Emergency Services

HMO policy and procedures, Covered Services, claims adjudication methodology, and reimbursement
performance for Emergency Services must comply with all applicable state and federal laws,
rules, and regulations including 42 C.F.R. §438.114, whether the provider is in-network or
Out-of-Network. HMO policies and procedures must be consistent with the prudent layperson
definition of an Emergency Medical Condition and the claims adjudication processes required
under the Contract and 42 C.F.R. §438.114.

The HMO must pay for the professional, facility, and ancillary services that are Medically
Necessary to perform the medical screening examination and stabilization of a Member presenting
with an Emergency Medical Condition or an Emergency Behavioral Health Condition to the hospital
emergency department, 24 hours a day, 7 days a week, rendered by either the HMO’s Network or
Out-of-Network providers.

The HMO cannot require prior authorization as a condition for payment for an Emergency Medical
Condition, an Emergency Behavioral Health Condition, or labor and delivery. The HMO

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cannot limit what constitutes an Emergency Medical Condition on the basis of lists of
diagnoses or symptoms. The HMO cannot refuse to cover Emergency Services based on the emergency
room provider, hospital, or fiscal agent not notifying the Member’s PCP or the HMO of the
Member’s screening and treatment within 10 calendar days of presentation for Emergency Services.
The HMO may not hold the Member who has an Emergency Medical Condition liable for payment of
subsequent screening and treatment needed to diagnose the specific condition or stabilize the
patient. The HMO must accept the emergency physician or provider’s determination of when the
Member is sufficiently stabilized for transfer or discharge.

A medical screening examination needed to diagnose an Emergency Medical Condition must be provided
in a hospital based emergency department that meets the requirements of the Emergency Medical
Treatment and Active Labor Act (EMTALA) (42 C.F.R. §§489.20, 489.24 and 438.114(b)&(c)). The HMO
must pay for the emergency medical screening examination, as required by 42 U.S.C. §1395dd. The
HMO must reimburse for both the physician’s services and the hospital’s Emergency Services,
including the emergency room and its ancillary services.

When the medical screening examination determines that an Emergency Medical Condition exists,
the HMO must pay for Emergency Services performed to stabilize the Member. The emergency
physician must document these services in the Member’s medical record. The HMO must reimburse
for both the physician’s and hospital’s emergency stabilization services including the emergency
room and its ancillary services.

The HMO must cover and pay for Post-Stabilization Care Services in the amount, duration, and
scope necessary to comply with 42 C.F.R. §438.114(b)&(e) and 42 C.F.R. §422.113(c)(iii). The HMO
is financially responsible for post-stabilization care services obtained within or outside the
Network that are not pre-approved by a Provider or other HMO representative, but administered to
maintain, improve, or resolve the Member’s stabilized condition if:

	 	1.	 	The HMO does not respond to a request for pre-approval within 1 hour;
	 
	 	2.	 	The HMO cannot be contacted; or
	 
	 	3.	 	The HMO representative and the treating physician cannot reach an agreement
concerning the Member’s care and a Network physician is not available for consultation.
In this situation, the HMO must give the treating physician the opportunity to consult
with a Network physician and the treating physician may continue with care of the patient
until an HMO physician is reached. The HMO’s financial responsibility ends as follows:
the HMO physician with privileges at the treating hospital assumes responsibility for the
Member’s care; the HMO physician assumes responsibility for the Member’s care through
transfer; the HMO representative and the treating physician reach an agreement concerning
the Member’s care; or the Member is discharged.

8.2.2.2 Family Planning — Specific Requirements

The HMO must require, through Provider contract provisions, that Members requesting
contraceptive services or family planning services are also provided counseling and education
about the family planning and family planning services available to Members. The HMO must
develop outreach programs to increase community support for family planning and encourage
Members to use available family planning services.

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The HMO must ensure that Members have the right to choose any Medicaid participating family
planning provider, whether the provider chosen by the Member is in or outside the Provider
Network. The HMO must provide Members access to information about available providers of family
planning services and the Member’s right to choose any Medicaid family planning provider. The HMO
must provide access to confidential family planning services.

The HMO must provide, at minimum, the full scope of services available under the Texas Medicaid
program for family planning services. The HMO will reimburse family planning agencies the
Medicaid fee-for service amounts for family planning services, including Medically Necessary
medications, contraceptives, and supplies not covered by the Vendor Drug Program and will
reimburse Out-of-Network family planning providers in accordance with HHSC’s administrative
rules.

The HMO must provide medically approved methods of contraception to Members, provided that the
methods of contraception are Covered Services. Contraceptive methods must be accompanied by
verbal and written instructions on their correct use. The HMO must establish mechanisms to ensure
all medically approved methods of contraception are made available to the Member, either directly
or by referral to a subcontractor.

The HMO must develop, implement, monitor, and maintain standards, policies and procedures for
providing information regarding family planning to Providers and Members, specifically regarding
State and federal laws governing Member confidentiality (including minors). Providers and family
planning agencies cannot require parental consent for minors to receive family planning services.
The HMO must require, through contractual provisions, that subcontractors have mechanisms in
place to ensure Member’s (including minor’s) confidentiality for family planning services.

8.2.2.3 Texas Health Steps (EPSDT)

The HMO must develop effective methods to ensure that children under the age of 21 receive
THSteps services when due and according to the recommendations established by the AAP and the
THSteps periodicity schedule for children. The HMO must arrange for THSteps services for all
eligible Members except when a Member knowingly and voluntarily declines or refuses services
after receiving sufficient information to make an informed decision.

HMO must have mechanisms in place to ensure that all newly enrolled newborns receive an
appointment for a THSteps checkup within 14 days of enrollment and all other eligible child
Members receive a THSteps checkup within 60 days of enrollment, if one is due according to the
AAP periodicity schedule.

The HMO must ensure that Members are provided information and educational materials about the
services available through the THSteps Program, and how and when they may obtain the services.
The information should tell the Member how they can obtain dental benefits, transportation
services through the Texas Department of Transportation’s Medical Transportation Program, and
advocacy assistance from the HMO.

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The HMO must provide appropriate training to all Network Providers and Provider staff in
the Providers’ area of practice regarding the scope of benefits available and the THSteps
Program. Training must include:

	 	1.	 	THSteps benefits,
	 
	 	2.	 	The periodicity schedule for THSteps medical checkups and immunizations,
	 
	 	3.	 	The required elements of THSteps medical checkups,
	 
	 	4.	 	Providing or arranging for all required lab screening tests
(including lead screening), and Comprehensive Care Program (CCP) services
available under the THSteps program to Members under age 21 years.

HMO must also educate and train Providers regarding the requirements imposed on HHSC and
contracting HMOs under the Consent Decree entered in Frew v. Hawkins, et. al., Civil
Action No. 3:93CV65, in the United States District Court for the Eastern District of Texas,
Paris Division. Providers should be educated and trained to treat each THSteps visit as an
opportunity for a comprehensive assessment of the Member.

The HMO must provide outreach to Members to ensure they receive prompt services and are
effectively informed about available THSteps services. Each month, the HMO must retrieve from the
HHSC Administrative Services Contractor Bulletin Board System a list of Members who are due and
overdue THSteps services. Using these lists and its own internally generated list, the HMO will
contact such Members to obtain the service as soon as possible. The HMO outreach staff must
coordinate with DSHS THSteps outreach staff to ensure that Members have access to the Medical
Transportation Program, and that any coordination with other agencies is maintained.

The HMO must cooperate and coordinate with the State, outreach programs and THSteps regional
program staff and agents to ensure prompt delivery of services to children of migrant farm
workers and other migrant populations who may transition into and out of the HMO’s Program
more rapidly and/or unpredictably than the general population.

The HMO must have mechanisms in place to ensure that all newborn Members have an initial newborn
checkup before discharge from the hospital and again within two weeks from the time of birth. The
HMO must require Providers to send all THSteps newborn screens to the DSHS Bureau of Laboratories
or a DSHS certified laboratory. Providers must include detailed identifying information for all
screened newborn Members and the Member’s mother to allow DSHS to link the screens performed at
the hospital with screens performed at the two-week follow-up.

All laboratory specimens collected as a required component of a THSteps checkup (see Medicaid
Provider Procedures Manual for age-specific requirements) must be submitted to the DSHS
Laboratory for analysis. The HMO must educate Providers about THSteps Program requirements for
submitting laboratory tests to the DSHS Bureau of Laboratories.

The HMO must make an effort to coordinate and cooperate with existing community and school-based
health and education programs that offer services to school-aged children in a location that is
both familiar and convenient to the Members. The HMO must make a good faith effort to comply
with Head Start’s requirement that Members participating in Head Start receive their THSteps
checkup no later than 45 days after enrolling into either program.

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The HMO must educate Providers on the Immunization Standard Requirements set forth in
Chapter 161, Health and Safety Code; the standards in the ACIP Immunization Schedule; the AAP
Periodicity Schedule for CHIP Members; and the DSHS Periodicity Schedule for Medicaid Members.
The HMO shall educate Providers that Medicaid Members under age 21 must be immunized during the
THSteps checkup according to the DSHS routine immunization schedule. The HMO shall also educate
Providers that the screening provider is responsible for administration of the immunization and
should not refer children to Local Health Departments to receive immunizations.

The HMO must educate Providers about, and require Providers to comply with, the requirements of
Chapter 161, Health and Safety Code, relating to the Texas Immunization Registry (ImmTrac), to
include parental consent on the Vaccine Information Statement.

The HMO must require all THSteps Providers to submit claims for services paid (either on a
capitated or fee-for service basis) on the HCFA 1500 claim form and use the HIPAA compliant
code set required by HHSC.

Encounter Data will be validated by chart review of a random sample of THSteps eligible
enrollees against monthly Encounter Data reported by the HMO. HHSC or its designee will
conduct chart reviews to validate that all screens are performed when due and as reported,
and that reported data is accurate and timely. Substantial deviation between reported and
charted Encounter Data could result in the HMO and/or Network Providers being investigated
for potential Fraud, Abuse, or Waste without notice to the HMO or the Provider.

8.2.2.4 Perinatal Services

The HMO’s perinatal health care services must ensure appropriate care is provided to women and
infant Members of the HMO from the preconception period through the infant’s first year of life.
The HMO’s perinatal health care system must comply with the requirements of the Texas Health and
Safety Code, Chapter 32 (the Maternal and Infant Health Improvement Act) and administrative rules
codified at 25 T.A.C. Chapter 37, Subchapter M.

The HMO must have a perinatal health care system in place that, at a minimum, provides the
following services:

	 	1.	 	Pregnancy planning and perinatal health promotion and education for reproductive-
age women;
	 
	 	2.	 	Perinatal risk assessment of non-pregnant women, pregnant and postpartum women,
and infants up to one year of age;
	 
	 	3.	 	Access to appropriate levels of care based on risk assessment, including emergency care;
	 
	 	4.	 	Transfer and care of pregnant women, newborns, and infants to tertiary care
facilities when necessary;
	 
	 	5.	 	Availability and accessibility of OB/GYNs, anesthesiologists, and neonatologists
capable of dealing with complicated perinatal problems; and
	 
	 	6.	 	Availability and accessibility of appropriate outpatient and inpatient facilities
capable of dealing with complicated perinatal problems.

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The HMO must have a process to expedite scheduling a prenatal appointment for an obstetrical
exam for a TP40 Member no later than two weeks after receiving the daily Enrollment File verifying
the Member’s enrollment into the HMO.

The HMO must have procedures in place to contact and assist a pregnant/delivering Member in
selecting a PCP for her baby either before the birth or as soon as the baby is born.

The HMO must provide inpatient care and professional services relating to labor and delivery for
its pregnant/delivering Members, and neonatal care for its newborn Members at the time of
delivery and for up to 48 hours following an uncomplicated vaginal delivery and 96 hours
following an uncomplicated Caesarian delivery.

The HMO must Adjudicate provider claims for services provided to a newborn Member in accordance
with HHSC‘s claims processing requirements using the proxy ID number or State-issued
Medicaid ID number. The HMO cannot deny claims based on a provider’s non-use of State-issued
Medicaid ID number for a newborn Member. The HMO must accept provider claims for newborn services
based on mother’s name and/or Medicaid ID number with accommodations for multiple births, as
specified by the HMO.

The HMO must notify providers involved in the care of pregnant/delivering women and newborns
(including Out-of-Network providers and hospitals) of the HMO’s prior authorization
requirements. The HMO cannot require a prior authorization for services provided to a
pregnant/delivering Member or newborn Member for a medical condition that requires Emergency
Services, regardless of when the emergency condition arises.

8.2.2.5 Sexually Transmitted Diseases (STDs) and Human Immunodeficiency Virus (HIV)

The HMO must provide STD services that include STD/HIV prevention, screening, counseling,
diagnosis, and treatment. The HMO is responsible for implementing procedures to ensure that
Members have prompt access to appropriate services for STDs, including HIV. The HMO must allow
Members access to STD services and HIV diagnosis services without prior authorization or referral
by a PCP.

The HMO must comply with Texas Family Code Section 32.003, relating to consent to treatment by a
child. The HMO must provide all Covered Services required to form the basis for a diagnosis by the
Provider as well as the STD/HIV treatment plan.

The HMO must make education available to Providers and Members on the prevention, detection and
effective treatment of STDs, including HIV.

The HMO must require Providers to report all confirmed cases of STDs, including HIV, to the
local or regional health authority according to 25 T.A.C. §§97.131 — 97.134, using the required
forms and procedures for reporting STDs. The HMO must coordinate with the HHSC regional health
authority to ensure that Members with confirmed cases of syphilis, chancroid, gonorrhea,
chlamydia and HIV receive risk reduction and partner elicitation/notification counseling.

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The HMO must have established procedures to make Member records available to public health
agencies with authority to conduct disease investigation, receive confidential Member
information, and provide follow up activities.

The HMO must require that Providers have procedures in place to protect the confidentiality of
Members provided STD/HIV services. These procedures must include, but are not limited to, the
manner in which medical records are to be safeguarded, how employees are to protect medical
information, and under what conditions information can be shared. The HMO must inform and require
its Providers who provide STD/HIV services to comply with all state laws relating to communicable
disease reporting requirements. The HMO must implement policies and procedures to monitor
Provider compliance with confidentiality requirements.

The HMO must have policies and procedures in place regarding obtaining informed consent and
counseling Members provided STD/HIV services.

8.2.2.6 Tuberculosis (TB)

The HMO must provide Members and Providers with education on the prevention, detection and
effective treatment of tuberculosis (TB). The HMO must establish mechanisms to ensure all
procedures required to screen at-risk Members and to form the basis for a diagnosis and proper
prophylaxis and management of TB are available to all Members, except services referenced in
Section 8.2.2.8 as Non-Capitated Services. The HMO must develop policies and procedures to ensure
that Members who may be or are at risk for exposure to TB are screened for TB. An at-risk Member
means a person who is susceptible to TB because of the association with certain risk factors,
behaviors, drug resistance, or environmental conditions. The HMO must consult with the local TB
control program to ensure that all services and treatments are in compliance with the guidelines
recommended by the American Thoracic Society (ATS), the Centers for Disease Control and
Prevention (CDC), and DSHS policies and standards.

The HMO must implement policies and procedures requiring Providers to report all confirmed or
suspected cases of TB to the local TB control program within one working day of identification,
using the most recent DSHS forms and procedures for reporting TB. The HMO must provide access to
Member medical records to DSHS and the local TB control program for all confirmed and suspected
TB cases upon request.

The HMO must coordinate with the local TB control program to ensure that all Members with
confirmed or suspected TB have a contact investigation and receive Directly Observed Therapy
(DOT). The HMO must require, through contract provisions, that Providers report to DSHS or the
local TB control program any Member who is non-compliant, drug resistant, or who is or may be
posing a public health threat. The HMO must cooperate with the local TB control program in
enforcing the control measures and quarantine procedures contained in Chapter 81 of the Texas
Health and Safety Code.

The HMO must have a mechanism for coordinating a post-discharge plan for follow-up DOT with the
local TB program. The HMO must coordinate with the DSHS South Texas Hospital and Texas Center for
Infectious Disease for voluntary and court-ordered admission, discharge plans, treatment
objectives and projected length of stay for Members with multi-drug resistant TB.

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8.2.2.7 Objection to Provide Certain Services

In accordance with 42 C.F.R. §438.102, the HMO may file an objection to providing, reimbursing for,
or providing coverage of, a counseling or referral service for a Covered Service based on moral or
religious grounds. The HMO must work with HHSC to develop a work plan to complete the necessary
tasks and determine an appropriate date for implementation of the requested changes to the
requirements related to Covered Services. The work plan will include timeframes for completing the
necessary Contract and waiver amendments, adjustments to Capitation Rates, identification of the
HMO and enrollment materials needing revision, and notifications to Members.

In order to meet the requirements of this section, the HMO must notify HHSC of grounds for and
provide detail concerning its moral or religious objections and the specific services covered
under the objection, no less than 120 days prior to the proposed effective date of the policy
change.

8.2.2.8 Medicaid Non-capitated Services

The following Texas Medicaid programs and services have been excluded from HMO Covered
Services. Medicaid Members are eligible to receive these Non-capitated Services on a
Fee-for-Service basis from Texas Medicaid providers. HMOs should refer to relevant chapters in
the Provider Procedures Manual and the Texas Medicaid Bulletins for more information.

	 	1.	 	THSteps dental (including orthodontia);
	 
	 	2.	 	Early Childhood Intervention (ECI) case management/service coordination;
	 
	 	3.	 	DSHS targeted case management;
	 
	 	4.	 	DSHS mental health rehabilitation;
	 
	 	5.	 	DSHS case management for Children and Pregnant Women;
	 
	 	6.	 	Texas School Health and Related Services (SHARS);
	 
	 	7.	 	Department of Assistive and Rehabilitative Services Blind Children’s
Vocational Discovery and Development Program;
	 
	 	8.	 	Tuberculosis services provided by DSHS-approved providers (directly observed
therapy and contact investigation);
	 
	 	9.	 	Vendor Drug Program (out-of-office drugs);
	 
	 	10.	 	Texas Department of Transportation Medical Transportation;
	 
	 	11.	 	DADS hospice services (all Members are disenrolled from their health plan
upon enrollment into hospice except STAR+PLUS members receiving 1915(c) Nursing
Facility Waiver services that are not covered by the Hospice Program);
	 
	 	12.	 	Audiology services and hearing aids for children (under age 21) (hearing
screening services are provided through the THSteps Program and are capitated)
through PACT (Program for Amplification for Children of Texas).
	 
	 	13.	 	For STAR+PLUS, Inpatient Stays are Non-capitated Services.

8.2.2.9 Referrals for Non-capitated Services

Although Medicaid HMOs are not responsible for paying or reimbursing for Non-capitated
Services, HMOs are responsible for educating Members about the availability of Non-capitated
Services, and for providing appropriate referrals for Members to obtain or access these
services.

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The HMO is responsible for informing Providers that bills for all Non-capitated Services must
be submitted to HHSC’s Claims Administrator for reimbursement.

8.2.2.10 Cooperation with Immunization Registry

The HMO must work with HHSC and health care providers to improve the immunization rate of
Medicaid clients and the reporting of immunization information for inclusion in the Texas
Immunization Registry, called “ImmTrac.”

8.2.2.11 Case Management for Children and Pregnant Women

The HMO must educate Members and Providers on the services available through Case Management for
Children and Pregnant Women (CPW) as described on the program’s website at
http://www.dshs.state.tx.us/caseman/default.shtm. An HMO may provide information about
CPW’s website and basic information about CPW services in order to meet this requirement. CPW
information and materials must be included in the HMO’s Provider Manual, Member Handbook and
Provider orientations. The information and materials must also inform Providers that the
disclosure of medical records or information between Providers, HMO’s and CPW case managers does
not require a medical release form from the Member.

The HMO must coordinate services with CPW regarding a Member’s health care needs that are
identified by CPW and referred to the HMO. Upon receipt of a referral or assessment from a CPW
case manager, the HMO’s designated staff are required to review the assessment and determine,
based on the HMO’s policies, the appropriate level of health care and services. The HMO’s staff
must also coordinate with the Member’s family, Member’s Primary Care Provider (PCP), in and
Out-of-Network Providers, agencies, and the HMO’s utilization management staff to ensure that
the health care and services identified are properly referred, authorized, scheduled and
provided within a timely manner.

The HMO must ensure that access to medically necessary health care needed by the Member is
available within the standards established by HHSC for respective care. HMOs are not required to
arrange or provide for any covered or non-covered services identified in the CPW assessment. The
decision whether to authorize these services is made by the HMO. Within five (5) business days
of identifying any non-covered health care services or other services that the Member may need,
the HMO’s staff must report to the CPW case manager which items/services will not be performed
by the HMO. Additionally, within ten (10) business days after all of the authorized services
have been provided, the HMO’s staff must follow-up with CPW case manager to report the provision
of services. The HMO’s staff must ensure that all services provided to a Member by an HMO
Provider are reported to the Member’s PCP.

The CPW program requires its contracted case managers to coordinate with the HMO and the
HMO’s PCPs. The HMO should report problems regarding CPW referrals, assessments or
coordination activities to HHSC for follow-up with CPW program staff.

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8.2.3 Medicaid Significant Traditional Providers

In the first three (3) years of a Medicaid HMO Program operating in a Service Area, the HMO must
seek participation in its Network from all Medicaid Significant Traditional Providers (STPs)
defined by HHSC in the applicable Service Area for the applicable HMO Program. For STAR HMOs, the
Medicaid STP requirements only apply in the Nueces Service Area. For STAR+PLUS HMOs, the Medicaid
STP requirements apply to all Service Areas, except Harris County within the Harris Service Area.

Medicaid STPs are defined as PCPs and, for STAR+PLUS, Community-based Long Term Care providers
in a county, that, when listed by provider type by county in descending order by unduplicated
number of clients, served the top 80% of unduplicated clients. Hospitals receiving
Disproportionate Share Hospital (DSH) funds are also considered STPs in the Service Area in
which they are located. Note that STAR+PLUS HMOs are not required to contract with Hospitals for
Inpatient Stays, but are required to contract with Hospitals for Outpatient Hospital Services.
The HHSC website includes a list of Medicaid STPs by Service Area.

Because the STP lists were produced in FY2005, HHSC has developed an updated list for Long Term
Care Providers. The list will be provided to HMOs and posted on HHSC’s website.

The STP requirement will be in place for three years after the program has been implemented.
During that time, providers who believe they meet the STP requirements may contact HHSC
request HHSC‘s consideration for STP status. STAR+PLUS HMOs will be notified when
Providers are added to the list of STPs for a Service Area.

The HMO must give STPs the opportunity to participate in its Network for at least three (3) years
commencing on the implementation date of Medicaid managed care in the Service Area. However, the
STP provider must:

	 	1.	 	Agree to accept the HMO‘s Provider reimbursement rate for the provider type; and
	 
	 	2.	 	Meet the standard credentialing requirements of the HMO, provided that lack of board
certification or accreditation by the Joint Commission on Accreditation of Health Care
Organizations (JCAHO) is not the sole grounds for exclusion from the Provider Network.

8.2.4 Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs)

The HMO must make reasonable efforts to include FQHCs and RHCs (freestanding and hospital-based)
in its Provider Network. The HMO must reimburse FQHCs and RHCs for health care services provided
outside of regular business hours, as defined by HHSC in rules, including weekend days or
holidays, at a rate that is equal to the allowable rate for those services as determined under
Section 32.028, Human Resources Code, if the Member does not have a referral from their PCP. FQHCs
or RHCs will receive a cost settlement from HHSC and must agree to accept initial payments from
the HMO in an amount that is equal to or greater than the HMO‘s payment terms for other
Providers providing the same or similar services.

The HMO must submit monthly FQHC and RHC encounter and payment reports to all contracted FQHCs and
RHCs, and FQHCs and RHCs with which there have been encounters, not later than

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21 days from the end of the month for which the report is submitted. The format will be
developed by HHSC and provided in the Uniform Managed Care Manual. The FQHC and RHC must validate
the encounter and payment information contained in the report(s). The HMO and the FQHC/RHC must
both sign the report(s) after each party agrees that it accurately reflects encounters and
payments for the month reported. The HMO must submit the signed FQHC and RHC encounter and
payment reports to HHSC not later than 45 days from the end of the reported month.

8.2.5 Provider Complaints and Appeals

8.2.5.1 Provider Complaints

Medicaid HMOs must develop, implement, and maintain a system for tracking and resolving all
Medicaid Provider complaints. Within this process, the HMO must respond fully and completely to
each complaint and establish a tracking mechanism to document the status and final disposition of
each Provider complaint. The HMO must resolve Provider Complaints within 30 days from the date the
Complaint is received.

8.2.5.2 Appeal of Provider Claims

Medicaid HMOs must develop, implement, and maintain a system for tracking and resolving all
Medicaid Provider appeals related to claims payment. Within this process, the Provider must
respond fully and completely to each Medicaid Provider’s claims payment appeal and establish a
tracking mechanism to document the status and final disposition of each Medicaid Provider’s
claims payment appeal.

Medicaid HMOs must contract with physicians who are not Network Providers to resolve claims
disputes related to denial on the basis of medical necessity that remain unresolved subsequent to
a Provider appeal. The determination of the physician resolving the dispute must be binding on the
HMO and the Provider. The physician resolving the dispute must hold the same specialty or a
related specialty as the appealing Provider. HHSC reserves the right to amend this process to
include an independent review process established by HHSC for final determination on these
disputes.

8.2.6 Member Rights and Responsibilities

In accordance with 42 C.F.R. §438.100, all Medicaid HMOs must maintain written policies and
procedures for informing Members of their rights and responsibilities, and must notify their
Members of their right to request a copy of these rights and responsibilities. The Member
Handbook must include notification of Member rights and responsibilities.

8.2.7 Medicaid Member Complaint and Appeal System

The HMO must develop, implement, and maintain a Member Complaint and Appeal system that complies
with the requirements in applicable federal and state laws and regulations, including 42

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C.F.R. §431.200, 42 C.F.R. Part 438, Subpart F, “Grievance System,” and the provisions
of 1 T.A.C. Chapter 357 relating to Medicaid managed care organizations.

The Complaint and Appeal system must include a Complaint process, an Appeal process, and access
to HHSC’s Fair Hearing System. The procedures must be the same for all Members and must be
reviewed and approved in writing by HHSC or its designee. Modifications and amendments to the
Member Complaint and Appeal system must be submitted for HHSC’s approval at least 30 days prior
to the implementation.

8.2.7.1 Member Complaint Process

The HMO must have written policies and procedures for receiving, tracking, responding to,
reviewing, reporting and resolving Complaints by Members or their authorized representatives.
For purposes of this Section 8.2.7, an "authorized representative" is any
person or entity acting on behalf of the Member and with the Member’s written consent. A
Provider may be an authorized representative.

The HMO must resolve Complaints within 30 days from the date the Complaint is received. The HMO
is subject to remedies, including liquidated damages, if at least 98 percent of Member
Complaints are not resolved within 30 days of receipt of the Complaint by the HMO. Please see
the Uniform Managed Care Contract Terms & Conditions and Attachment B-5, Deliverables/Liquidated
Damages Matrix. The Complaint procedure must be the same for all Members under the Contract. The
Member or Member’s authorized representative may file a Complaint either orally or in writing.
The HMO must also inform Members how to file a Complaint directly with HHSC, once the Member has
exhausted the HMO’s complaint process.

The HMO must designate an officer of the HMO who has primary responsibility for ensuring that
Complaints are resolved in compliance with written policy and within the required timeframe. For
purposes of Section 8.2.7.2, an “officer” of the HMO means a president, vice president, secretary,
treasurer, or chairperson of the board for a corporation, the sole proprietor, the managing
general partner of a partnership, or a person having similar executive authority in the organization.

The HMO must have a routine process to detect patterns of Complaints. Management, supervisory,
and quality improvement staff must be involved in developing policy and procedure improvements to
address the Complaints.

The HMO’s Complaint procedures must be provided to Members in writing and through oral
interpretive services. A written description of the HMO’s Complaint procedures must be
available in prevalent non-English languages for Major Population Groups identified by HHSC, at
no more than a 6th grade reading level.

The HMO must include a written description of the Complaint process in the Member Handbook. The
HMO must maintain and publish in the Member Handbook, at least one local and one toll-free
telephone number with TeleTypewriter/Telecommunications Device for the Deaf (TTY/TDD) and
interpreter capabilities for making Complaints.

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The HMO‘s process must require that every Complaint received in person, by
telephone, or in writing must be acknowledged and recorded in a written record and logged with
the following details:

1. Date;

2. Identification of the individual filing the Complaint;

3. Identification of the individual recording the Complaint;

4. Nature of the Complaint;

5. Disposition of the Complaint (i.e., how the HMO resolved the Complaint);

6. Corrective action required; and

7. Date resolved.

The HMO is prohibited from discriminating or taking punitive action against a Member or his or
her representative for making a Complaint.

If the Member makes a request for disenrollment, the HMO must give the Member information on the
disenrollment process and direct the Member to the HHSC Administrative Services Contractor. If
the request for disenrollment includes a Complaint by the Member, the Complaint will be
processed separately from the disenrollment request, through the Complaint process.

The HMO will cooperate with the HHSC’s Administrative Services Contractor and HHSC or its
designee to resolve all Member Complaints. Such cooperation may include, but is not limited to,
providing information or assistance to internal Complaint committees.

The HMO must provide designated Member Advocates to assist Members in understanding and using
the HMO’s Complaint system as described in Section 8.2.7.9. The HMO’s Member Advocates must
assist Members in writing or filing a Complaint and monitoring the Complaint through the HMO’s
Complaint process until the issue is resolved.

8.2.7.2 Medicaid Standard Member Appeal Process

The HMO must develop, implement and maintain an Appeal procedure that complies with state and
federal laws and regulations, including 42 C.F.R.§ 431.200 and 42 C.F.R. Part 438, Subpart F,
“Grievance System." An Appeal is a disagreement with an HMO Action as defined in HHSC’s
Uniform Contract Terms and Conditions. The Appeal procedure must be the same for all Members. When
a Member or his or her authorized representative expresses orally or in writing any
dissatisfaction or disagreement with an Action, the HMO must regard the expression of
dissatisfaction as a request to Appeal an Action.

A Member must file a request for an Appeal with the HMO within 30 days from receipt of the notice
of the Action. The HMO is subject to remedies, including liquidated damages, if at least 98
percent of Member Appeals are not resolved within 30 days of receipt of the Appeal by the HMO.
Please see the Uniform Managed Care Contract Terms & Conditions and Attachment B-5,
Deliverables/Liquidated Damages Matrix. To ensure continuation of currently authorized services,
however, the Member must file the Appeal on or before the later of 10 days following the HMO’s
mailing of the notice of the Action, or the intended effective date of the proposed Action. The
HMO must designate an officer who has primary responsibility for ensuring that Appeals are
resolved in compliance with written policy and within the 30-day time limit.

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The provisions of Article 21.58A, Texas Insurance Code, (to be recodified as Texas Insurance
Code, Title 14, Chapter 4201), relating to a Member‘s right to Appeal an Adverse
Determination made by the HMO or a utilization review agent to an independent review
organization, do not apply to a Medicaid recipient. Article 21.58A is pre-empted by federal Fair
Hearings requirements.

The HMO must have policies and procedures in place outlining the Medical Director’s role in an
Appeal of an Action. The Medical Director must have a significant role in monitoring,
investigating and hearing Appeals. In accordance with 42 C.F.R.§ 438.406, the HMO‘s
policies and procedures must require that individuals who make decisions on Appeals are not
involved in any previous level of review or decision-making, and are health care professionals
who have the appropriate clinical expertise in treating the Member’s condition or disease.

The HMO must provide designated Member Advocates, as described in Section 8.2.7.9, to assist
Members in understanding and using the Appeal process. The HMO’s Member Advocates must assist
Members in writing or filing an Appeal and monitoring the Appeal through the HMO‘s
Appeal process until the issue is resolved.

The HMO must have a routine process to detect patterns of Appeals. Management, supervisory, and
quality improvement staff must be involved in developing policy and procedure improvements to
address the Appeals.

The HMO’s Appeal procedures must be provided to Members in writing and through oral interpretive
services. A written description of the Appeal procedures must be available in prevalent
non-English languages identified by HHSC, at no more than a 6th grade reading level. The HMO must
include a written description of the Appeals process in the Member Handbook. The HMO must
maintain and publish in the Member Handbook at least one local and one toll-free telephone number
with TTY/TDD and interpreter capabilities for requesting an Appeal of an Action.

The HMO’s process must require that every oral Appeal received must be confirmed by a written,
signed Appeal by the Member or his or her representative, unless the Member or his or her
representative requests an expedited resolution. All Appeals must be recorded in a written record
and logged with the following details:

1) Date notice is sent;

2) Effective date of the Action;

3) Date the Member or his or her representative requested the Appeal;

4) Date the Appeal was followed up in writing;

5) Identification of the individual filing;

6) Nature of the Appeal; and

7) Disposition of the Appeal, and notice of disposition to Member.

The HMO must send a letter to the Member within five (5) business days acknowledging receipt of
the Appeal request. Except for the resolution of an Expedited Appeal as provided in Section
8.2.7.3, the HMO must complete the entire standard Appeal process within 30 calendar days after
receipt of the initial written or oral request for Appeal. The timeframe for a standard Appeal
may be extended up to 14 calendar days if the Member or his or her representative requests an

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extension; or the HMO shows that there is a need for additional information and how the
delay is in the Member’s interest. If the timeframe is extended, the HMO must give the Member
written notice of the reason for delay if the Member had not requested the delay. The HMO must
designate an officer who has primary responsibility for ensuring that Appeals are resolved within
these timeframes and in accordance with the HMO’s written policies.

During the Appeal process, the HMO must provide the Member a reasonable opportunity to present
evidence and any allegations of fact or law in person as well as in writing. The HMO must inform
the Member of the time available for providing this information and that, in the case of an
expedited resolution, limited time will be available.

The HMO must provide the Member and his or her representative opportunity, before and during the
Appeal process, to examine the Member’s case file, including medical records and any other
documents considered during the Appeal process. The HMO must include, as parties to the Appeal,
the Member and his or her representative or the legal representative of a deceased Member’s
estate.

In accordance with 42 C.F.R.§ 438.420, the HMO must continue the Member’s benefits currently
being received by the Member, including the benefit that is the subject of the Appeal, if all of
the following criteria are met:

	 	1.	 	The Member or his or her representative files the Appeal timely as defined
in this Contract:
	 
	 	2.	 	The Appeal involves the termination, suspension, or reduction of a previously
authorized course of treatment;
	 
	 	3.	 	The services were ordered by an authorized provider;
	 
	 	4.	 	The original period covered by the original authorization has not expired; and
	 
	 	5.	 	The Member requests an extension of the benefits.

If, at the Member’s request, the HMO continues or reinstates the Member’s benefits while the
Appeal is pending, the benefits must be continued until one of the following occurs:

	 	1.	 	The Member withdraws the Appeal;
	 
	 	2.	 	Ten (10) days pass after the HMO mails the notice resolving the Appeal against the
Member, unless the Member, within the 10-day timeframe, has requested a Fair Hearing
with continuation of benefits until a Fair Hearing decision can be reached; or
	 
	 	3.	 	A state Fair Hearing officer issues a hearing decision adverse to the Member or
the time period or service limits of a previously authorized service has been met.

In accordance with 42 C.F.R.§ 438.420(d), if the final resolution of the Appeal is adverse to
the Member and upholds the HMO’s Action, then to the extent that the services were furnished to
comply with the Contract, the HMO may recover such costs from the Member.

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If the HMO or State Fair Hearing Officer reverses a decision to deny, limit, or delay services
that were not furnished while the Appeal was pending, the HMO must authorize or provide the
disputed services promptly and as expeditiously as the Member’s health condition requires.

If the HMO or State Fair Hearing Officer reverses a decision to deny authorization of services
and the Member received the disputed services while the Appeal was pending, the HMO is
responsible for the payment of services.

The HMO is prohibited from discriminating or taking punitive action against a Member or his or
her representative for making an Appeal.

8.2.7.3 Expedited Medicaid HMO Appeals

In accordance with 42 C.F.R. §438.410, the HMO must establish and maintain an expedited review
process for Appeals, when the HMO determines (for a request from a Member) or the provider
indicates (in making the request on the Member’s behalf or supporting the Member’s request)
that taking the time for a standard resolution could seriously jeopardize the Member’s life or
health. The HMO must follow all Appeal requirements for standard Member Appeals as set forth in
Section 8.2.7.2), except where differences are specifically noted. The HMO must accept oral or
written requests for Expedited Appeals.

Members must exhaust the HMO’s Expedited Appeal process before making a request for an expedited
Fair Hearing. After the HMO receives the request for an Expedited Appeal, it must hear an approved
request for a Member to have an Expedited Appeal and notify the Member of the outcome of the
Expedited Appeal within 3 business days, except that the HMO must complete investigation and
resolution of an Appeal relating to an ongoing emergency or denial of continued hospitalization:
(1) in accordance with the medical or dental immediacy of the case; and (2) not later than one (1)
business day after receiving the Member‘s request for Expedited Appeal is received.

Except for an Appeal relating to an ongoing emergency or denial of continued hospitalization, the
timeframe for notifying the Member of the outcome of the Expedited Appeal may be extended up to 14
calendar days if the Member requests an extension or the HMO shows (to the satisfaction of HHSC,
upon HHSC’s request) that there is a need for additional information and how the delay is in the
Member’s interest. If the timeframe is extended, the HMO must give the Member written
notice of the reason for delay if the Member had not requested the delay.

If the decision is adverse to the Member, the HMO must follow the procedures relating to the
notice in Section 8.2.7.5. The HMO is responsible for notifying the Member of his or her right to
access an expedited Fair Hearing from HHSC. The HMO will be responsible for providing
documentation to the State and the Member, indicating how the decision was made, prior to HHSC’s
expedited Fair Hearing.

The HMO is prohibited from discriminating or taking punitive action against a Member or his or
her representative for requesting an Expedited Appeal. The HMO must ensure that punitive action
is neither taken against a provider who requests an expedited resolution or supports a Member’s
request.

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If the HMO denies a request for expedited resolution of an Appeal, it must:

	 	(1)	 	Transfer the Appeal to the timeframe for standard resolution, and
	 
	 	(2)	 	Make a reasonable effort to give the Member prompt oral notice of
the denial, and follow up within two (2) calendar days with a written notice.

8.2.7.4 Access to Fair Hearing for Medicaid Members

The HMO must inform Members that they have the right to access the Fair Hearing process at any
time during the Appeal system provided by the HMO. In the case of an expedited Fair Hearing
process, the HMO must inform the Member that he or she must first exhaust the HMO’s internal
Expedited Appeal process prior to filing an Expedited Fair Hearing. The HMO must notify Members
that they may be represented by an authorized representative in the Fair Hearing process.
8.2.7.5 Notices of Action and Disposition of Appeals for Medicaid Members

The HMO must notify the Member, in accordance with 1 T.A.C. Chapter 357, whenever the HMO takes
an Action. The notice must, at a minimum, include any information required by 1 T.A.C. Chapter
357 that relates to a managed care organization’s notice of Action and any information required
by 42 C.F.R. §438.404 as directed by HHSC, including but not limited to:

	 	1.	 	The Action the HMO has taken or intends to take;
	 
	 	2.	 	The reasons for the Action;
	 
	 	3.	 	The Member’s right to access the HMO’s Appeal process.
	 
	 	4.	 	The procedures by which the Member may Appeal the HMO’s Action;
	 
	 	5.	 	The circumstances under which expedited resolution is available and how to request it;
	 
	 	6.	 	The circumstances under which a Member may continue to receive benefits pending
resolution of the Appeal, how to request that benefits be continued, and the circumstances
under which the Member may be required to pay the costs of these services;
	 
	 	7.	 	The date the Action will be taken;
	 
	 	8.	 	A reference to the HMO policies and procedures supporting the HMO’s Action;
	 
	 	9.	 	An address where written requests may be sent and a toll-free number that the Member
can call to request the assistance of a Member representative, file an Appeal, or request a
Fair Hearing;
	 
	 	10.	 	An explanation that Members may represent themselves, or be represented by a
provider, a friend, a relative, legal counsel or another spokesperson;

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	 	11.	 	A statement that if the Member wants a Fair Hearing on the Action, the
Member must make the request for a Fair Hearing within 90 days of the date on the notice
or the right to request a hearing is waived;
	 
	 	12.	 	A statement explaining that the HMO must make its decision within 30 days from the
date the Appeal is received by the HMO, or 3 business days in the case of an Expedited
Appeal; and
	 
	 	13.	 	A statement explaining that the hearing officer must make a final decision within 90 days
from the date a Fair Hearing is requested.

8.2.7.6 Timeframe for Notice of Action

In accordance with 42 C.F.R.§ 438.404(c), the HMO must mail a notice of Action within the
following timeframes:

	 	1.	 	For termination, suspension, or reduction of previously authorized
Medicaid-covered services, within the timeframes specified in 42 C.F.R.§§ 431.211,
431.213, and 431.214;
	 
	 	2.	 	For denial of payment, at the time of any Action affecting the claim;
	 
	 	3.	 	For standard service authorization decisions that deny or limit services,
within the timeframe specified in 42 C.F.R.§ 438.210(d)(1);
	 
	 	4.	 	If the HMO extends the timeframe in accordance with 42 C.F.R. §438.210(d)(1), it must:

	 
	 	5.	 	give the Member written notice of the reason for the decision
to extend the timeframe and inform the Member of the right to file an Appeal if he or she disagrees with that decision;
and
	 
	 	6.	 	issue and carry out its determination as expeditiously as the Member’s health
condition requires and no later than the date the extension expires;
	 
	 	7.	 	For service authorization decisions not reached within the timeframes specified in
42 C.F.R.§ 438.210(d) (which constitutes a denial and is thus an adverse Action), on the
date that the timeframes expire; and
	 
	 	8.	 	For expedited service authorization decisions, within the timeframes specified
in 42 C.F.R. 438.210(d).

8.2.7.7 Notice of Disposition of Appeal

In accordance with 42 C.F.R.§ 438.408(e), the HMO must provide written notice of disposition of
all Appeals including Expedited Appeals. The written resolution notice must include the results
and date of the Appeal resolution. For decisions not wholly in the Member’s favor, the notice must
contain:

	 	1.	 	The right to request a Fair Hearing;
	 
	 	2.	 	How to request a Fair Hearing;
	 
	 	3.	 	The circumstances under which the Member may continue to receive benefits pending
a Fair Hearing;
	 
	 	4.	 	How to request the continuation of benefits;
	 
	 	5.	 	If the HMO’s Action is upheld in a Fair Hearing, the Member may be liable for the
cost of any services furnished to the Member while the Appeal is pending; and

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	 	6.	 	Any other information required by 1 T.A.C. Chapter 357 that relates to a
managed care organization‘s notice of disposition of an Appeal.

8.2.7.8 Timeframe for Notice of Resolution of Appeals

In accordance with 42 C.F.R.§ 438.408, the HMO must provide written notice of resolution of
Appeals, including Expedited Appeals, as expeditiously as the Member’s health condition requires,
but the notice must not exceed the timelines as provided in this Section for Standard or
Expedited Appeals. For expedited resolution of Appeals, the HMO must make reasonable efforts to
give the Member prompt oral notice of resolution of the Appeal, and follow up with a written
notice within the timeframes set forth in this Section for Expedited Appeals. If the HMO denies a
request for expedited resolution of an Appeal, the HMO must transfer the Appeal to the timeframe
for standard resolution as provided in this Section, and make reasonable efforts to give the
Member prompt oral notice of the denial, and follow up within two calendar days with a written
notice.

8.2.7.9 Medicaid Member Advocates

The HMO must provide Member Advocates to assist Members. Member Advocates must be physically
located within the Service Area unless an exception is approved by HHSC. Member Advocates must
inform Members of the following:

	 	1.	 	Their rights and responsibilities,
	 
	 	2.	 	The Complaint process,
	 
	 	3.	 	The Appeal process,
	 
	 	4.	 	Covered Services available to them, including preventive services, and
	 
	 	5.	 	Non-capitated Services available to them.

Member Advocates must assist Members in writing Complaints and are responsible for
monitoring the Complaint through the HMO’s Complaint process.

Member Advocates are responsible for making recommendations to management on any changes needed
to improve either the care provided or the way care is delivered. Member Advocates are also
responsible for helping or referring Members to community resources available to meet Member
needs that are not available from the HMO as Medicaid Covered Services.

8.2.8 Additional Medicaid Behavioral Health Provisions

8.2.8.1 Local Mental Health Authority (LMHA)

Assessment to determine eligibility for rehabilitative and targeted DSHS case management
services is a function of the LMHA. Covered Services must be provided to Members with severe and
persistent mental illness (SPMI) and severe emotional disturbance (SED), when Medically
Necessary, whether or not they are also receiving targeted case management or rehabilitation
services through the LMHA.

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The HMO must enter into written agreements with all LMHAs in the Service Area that describe
the process(es) that the HMO and LMHAs will use to coordinate services for Medicaid Members with
SPMI or SED. The agreements will:

	 	1.	 	Describe the Behavioral Health Services indicated in detail in the Provider
Procedures Manual and in the Texas Medicaid Bulletin, include the amount, duration, and
scope of basic and Value-added Services, and the HMO’s responsibility to provide these
services;
	 
	 	2.	 	Describe criteria, protocols, procedures and instrumentation for referral of
Medicaid Members from and to the HMO and the LMHA;
	 
	 	3.	 	Describe processes and procedures for referring Members with SPMI or SED to the
LMHA for assessment and determination of eligibility for rehabilitation or targeted case
management services;
	 
	 	4.	 	Describe how the LMHA and the HMO will coordinate providing Behavioral Health
Services to Members with SPMI or SED;
	 
	 	5.	 	Establish clinical consultation procedures between the HMO and LMHA including
consultation to effect referrals and on-going consultation regarding the Member’s
progress;
	 
	 	6.	 	Establish procedures to authorize release and exchange of clinical treatment records;
	 
	 	7.	 	Establish procedures for coordination of assessment,
intake/triage, utilization review/utilization management and care for persons with SPMI or SED;
	 
	 	8.	 	Establish procedures for coordination of inpatient psychiatric services (including Court-
ordered Commitment of Members under 21) in state psychiatric facilities within the
LMHA’s catchment area;
	 
	 	9.	 	Establish procedures for coordination of emergency and urgent services to Members;
	 
	 	10.	 	Establish procedures for coordination of care and transition of care for new
Members who are receiving treatment through the LMHA; and
	 
	 	11.	 	Establish that when Members are receiving Behavioral Health Services from the Local
Mental Health Authority that the HMO is using the same UM guidelines as those prescribed
for use by local mental health authorities by DSHS which are published at:
http://www.mhmr.state.tx.us/centraloffice/behavioralhealthservices/RDMClinGuide.html.

The HMO must offer licensed practitioners of the healing arts (defined in 25 T.A.C., Part 2,
Chapter 419, Subchapter L), who are part of the Member’s treatment team for rehabilitation
services, the opportunity to participate in the HMO‘s Network. The practitioner must
agree to accept the HMO’s Provider reimbursement rate, meet the credentialing requirements, and
comply with all the terms and conditions of the HMO’s standard Provider contract.

HMOs must allow Members receiving rehabilitation services to choose the licensed practitioners of
the healing arts who are currently a part of the Member’s treatment team for rehabilitation
services to provide Covered Services. If the Member chooses to receive these services from
licensed practitioners of the healing arts who are part of the Member’s rehabilitation services
treatment team but are not part of the HMO’s Network, the HMO must reimburse the Local Mental
Health Authority through Out-of-Network reimbursement arrangements.

Nothing in this section diminishes the potential for the Local Mental Health Authority to
seek best value for rehabilitative services by providing these services under arrangement,
where possible, as specified is 25 T.A.C. §419.455.

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8.2.9 Third Party Liability and Recovery

Medicaid HMOs are responsible for establishing a plan and process for recovering costs for
services that should have been paid through a third party in accordance with State and Federal law
and regulations. To recognize this requirement, capitation payments to the HMOs are reduced by the
projected amount of TPR that the HMO is expected to recover.

The HMOs must provide required reports as stated in Section 8.1.17.2, Financial Reporting
Requirements.

After 120-days from the date of service on any claim, encounter, or other Medicaid related payment
by the HMO subject to Third Party Recovery, HHSC may attempt recovery independent of any HMO
action. HHSC will retain, in full, all funds received as a result of the state initiated recovery
or subrogation action.

HMOs shall provide a Member quarterly file, which contains the following information if available
to the HMO: the Member name, address, claim submission address, group number, employer’s mailing
address, social security number, and date of birth for each subscriber or policyholder and each
dependent of the subscriber or policyholder covered by the insurer. The file shall be used for the
purpose of matching the Texas Medicaid eligibility file against the HMO Member file to identify
Medicaid clients enrolled in the HMO, which may not be known the Medicaid Program.
8.2.10 Coordination With Public Health Entities

8.2.10.1 Reimbursed Arrangements with Public Health Entities

The HMO must make a good faith effort to enter into a subcontract for Covered Services with
Public Health Entities. Possible Covered Services that could be provided by Public Health
Entities include, but are not limited to, the following services:

	 	1.	 	Sexually Transmitted Diseases (STDs) services;
	 
	 	2.	 	Confidential HIV testing;
	 
	 	3.	 	Immunizations;
	 
	 	4.	 	Tuberculosis (TB) care;
	 
	 	5.	 	Family Planning services;
	 
	 	6.	 	THSteps medical checkups, and
	 
	 	7.	 	Prenatal services.

These subcontracts must be available for review by HHSC or its designated agent(s) on the same
basis as all other subcontracts. If the HMO is unable to enter into a contract with Public
Health Entities, the HMO must document efforts to contract with Public Health Entities, and make
such documentation available to HHSC upon request.

HMO Contracts with Public Health Entities must specify the scope of responsibilities of both
parties, the methodology and agreements regarding billing and reimbursements, reporting
responsibilities, Member and Provider educational responsibilities, and the methodology and

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agreements regarding sharing of confidential medical record information between the
Public Health Entity and the HMO or PCP.
The HMO must:

	 	1.	 	Identify care managers who will be available to assist public health providers and
PCPs in efficiently referring Members to the public health providers, specialists, and
health-related service providers either within or outside the HMO’s Network; and
	 
	 	2.	 	Inform Members that confidential healthcare information will be provided to the
PCP, and educate Members on how to better utilize their PCPs, public health
providers, emergency departments, specialists, and health-related service providers.

8.2.10.2 Non-Reimbursed Arrangements with Local Public Health Entities

The HMO must coordinate with Public Health Entities in each Service Area regarding the provision
of essential public health care services. In addition to the requirements listed above in
Section 8.2.2, or otherwise required under state law or this contract, the HMO must meet the
following requirements:

	 	1.	 	Report to public health entities regarding communicable diseases and/or diseases
that are preventable by immunization as defined by state law;
	 
	 	2.	 	Notify the local Public Health Entity, as defined by state law, of communicable
disease outbreaks involving Members;
	 
	 	3.	 	Educate Members and Providers regarding WIC services available to Members; and
	 
	 	4.	 	Coordinate with local public health entities that have a child lead program, or with DSHS
regional staff when the local public health entity does not have a child lead program, for
follow-up of suspected or confirmed cases of childhood lead exposure.

8.2.11 Coordination with Other State Health and Human Services (HHS) Programs

The HMO must coordinate with other state HHS Programs in each Service Area regarding the
provision of essential public health care services. In addition to the requirements listed above
in Section 8.2.2. or otherwise required under state law or this contract, the HMO must meet the
following requirements:

	 	1.	 	Require Providers to use the DSHS Bureau of Laboratories for specimens obtained
as part of a THSteps medical checkup, including THSteps newborn screens, lead
testing, and hemoglobin/hematocrit tests;
	 
	 	2.	 	Notify Providers of the availability of vaccines through the Texas Vaccines for
Children Program;
	 
	 	3.	 	Work with HHSC and Providers to improve the reporting of immunizations to
the statewide ImmTrac Registry;
	 
	 	4.	 	Educate Providers and Members about the Department of State Health Services (DSHS)
Case Management for Children and Pregnant Women (CPW) services available;
	 
	 	5.	 	Coordinate services with CPW specifically in regard to an HMO Member’s health care
needs that are identified by CPW and referred to the HMO;

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	 	6.	 	Participate, to the extent practicable, in the community-based coalitions
with the Medicaid-funded case management programs in the Department of Assistive
and Rehabilitative Services (DARS), the Department of Aging and Disability
Services (DADS), and DSHS;
	 
	 	7.	 	Cooperate with activities required of state and local public health authorities
necessary to conduct the annual population and community based needs assessment; and
	 
	 	8.	 	Report all blood lead results, coordinate and follow-up of suspected or confirmed
cases of childhood lead exposure with the Childhood Lead Poisoning Prevention Program in
DSHS.

8.2.12 Advance Directives

Federal and state law require HMOs and providers to maintain written policies and procedures for
informing all adult Members 18 years of age and older about their rights to refuse, withhold or
withdraw medical treatment and mental health treatment through advance directives (see Social
Security Act §1902(a)(57) and §1903(m)(1)(A)). The HMO‘s policies and procedures must
include written notification to Members and comply with provisions contained in 42 C.F.R. §434.28
and 42 C.F.R. § 489, Subpart I, relating to advance directives for all hospitals, critical access
hospitals, skilled nursing facilities, home health agencies, providers of home health care,
providers of personal care services and hospices, as well as the following state laws and rules:

	 	1.	 	A Member’s right to self-determination in making health care decisions;
	 
	 	2.	 	The Advance Directives Act, Chapter 166, Texas Health and Safety Code,
which includes:

	 	a.	 	A Member’s right to execute an advance written directive to
physicians and family or surrogates, or to make a non-written directive to
administer, withhold or withdraw life-sustaining treatment in the event of a
terminal or irreversible condition;
	 
	 	b.	 	A Member’s right to make written and non-written
out-of-hospital do-not-resuscitate (DNR) orders;
	 
	 	c.	 	A Member‘s right to execute a Medical Power of Attorney to
appoint an agent to make health care decisions on the Member’s behalf if the
Member becomes incompetent; and

	 	3.	 	The Declaration for Mental Health Treatment, Chapter 137, Texas Civil Practice
and Remedies Code, which includes: a Member’s right to execute a Declaration for
Mental Health Treatment in a document making a declaration of preferences or
instructions regarding mental health treatment.

The HMO must maintain written policies for implementing a Member’s advance directive. Those
policies must include a clear and precise statement of limitation if the HMO or a Provider cannot
or will not implement a Member’s advance directive.

The HMO cannot require a Member to execute or issue an advance directive as a condition of
receiving health care services. The HMO cannot discriminate against a Member based on whether or
not the Member has executed or issued an advance directive.

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The HMO’s policies and procedures must require the HMO and subcontractors to comply with
the requirements of state and federal law relating to advance directives. The HMO must provide
education and training to employees and Members on issues concerning advance directives.

All materials provided to Members regarding advance directives must be written at a 7 th
-grade reading comprehension level, except where a provision is required by state or
federal law and the provision cannot be reduced or modified to a 7 th -
8 th grade reading level because it is a reference to the law or
is required to be included “as written” in the state or federal law.

The HMO must notify Members of any changes in state or federal laws relating to advance
directives within 90 days from the effective date of the change, unless the law or
regulation contains a specific time requirement for notification.

8.3 Additional STAR+PLUS Scope of Work

8.3.1 Covered Community-Based Long-Term Care Services

The HMO must ensure that STAR+PLUS Members needing Community Long-term Care Services are
identified and that services are referred and authorized in a timely manner. The HMO must ensure
that Providers of Community Long-term Care Services are licensed to deliver the service they
provide. The inclusion of Community Long-term Care Services in a managed care model presents
challenges, opportunities and responsibilities.

Community Long-term Care Services may be necessary as a preventative service to avoid more
expensive hospitalizations, emergency room visits, or institutionalization. Community Long-term
Care Services should also be made available to Members to assure maintenance of the highest level
of functioning possible in the least restrictive setting. A Member’s need for Community Long-term
Care Services to assist with the activities of daily living must be considered as important as
needs related to a medical condition. HMOs must provide Functionally Necessary Covered Services to
Community Long-term Care Service Members.

8.3.1.1 Community Based Long-Term Care Services Available to All Members

The HMO shall enter into written contracts with Providers of Personal Assistance Services and Day
Activity and Health Services (DAHS) to make them available to all STAR+PLUS Members. These
Providers must at a minimum, meet all of the following state licensure and certification
requirements for providing the services in Attachment B-2.1, Covered Services.

Community Long-Term Care Services Available to All Members

Service                Licensee and Certification Require

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	Community Long-Term Care Services Available to All Members

	 
	 	 
	Service

	 	Licensure and Certification Requirements
	 
	 	 
	Personal Attendant 

Services

	 	The Provider must be licensed by the Texas Department of Human
Services as a Home and Community Support Services Agency. The
level of licensure required depends on the type of service delivered.
NOTE: For primary home care and client managed attendant care, the
agency may have only the Personal Assistance Services level of
licensure.
	 
	 	 
	Day Activity and
Health Services
(DAHS)

	 	The Provider must be licensed by the Texas Department of Human
Services, Long Term Care Regulatory Division, as an adult day care
provider. To provide DAHS, the Provider must provide the range of
services required for DAHS.

			
	8.3.1.2	 	1915(c) Nursing Facility Waiver Services Available to Members Who Qualify for 1915 (c)
Nursing Facility Waiver Services

The 1915(c) Nursing Facility Waiver provides Community Long-term Care Services to Medicaid
Eligibles who are elderly and to adults with disabilities as a cost-effective alternative to living
in a nursing facility. These Members must be age 21 or older, be a Medicaid recipient or be
otherwise financially eligible for waiver services. To be eligible for 1915(c) Nursing Facility
Waiver Services, a Member must meet income and resource requirements for Medicaid nursing facility
care, and receive a determination from HHSC on the medical necessity of the nursing facility care.
The HMO must make available to STAR+PLUS Members who meet the eligibility requirements the array of
services allowable through HHSC ‘s CMS-approved 1915(c) Nursing Facility Waiver (see Appendix
B-2.1, STAR+PLUS Covered Services).

	 	 	 
	Community Long-Term Care Services Under the 1915(c) Nursing Facility Waiver

	 
	 	 
	Service

	 	Licensure and Certification Requirements
	 
	 	 
	Personal Attendant 

Services

	 	The Provider must be licensed by the Texas Department of Human
Services as a Home and Community Support Services Agency. The
level of licensure required depends on the type of service delivered.
For Primary Home Care and Client Managed Attendant Care, the
agency may have only the Personal Assistance Services level of
licensure.
	 
	 	 
	Assisted Living

	 	The Provider must be licensed by the Texas Department of Aging
and Disability Services, Long Term Care Regulatory Division. The
type of licensure determines what services may be provided.
	 
	 	 
	Emergency 

Response Service 

Provider

	 	Texas Department of Aging and Disability Services (DADS)
Standards for Emergency Response Services at 40 T.A.C.
§52.201(a), and be licensed by the Texas Board of Private
Investigators and Private Security Agencies, unless exempt from
licensure.
	 
	 	 
	Adult Foster Home

	 	TDSHS Provider standards for Adult Foster Care and TDSHS Rules
at 40 T.A.C. §48.6032. Four bed homes also licensed under TDSHS

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	Community Long-Term Care Services Under the 1915(c) Nursing Facility Waiver

	 
	 	 
	Service

	 	Licensure and Certification Requirements
	 
	 	 
	 

	 	Rules at 40 T.A.C. §481.8906.
	 
	 	 
	 

	 	DFPS licensure in accordance with 24-hour Care Licensing
requirements found in T.A.C., Title 40, Part 19, Chapter 720.
	 
	 	 
	Home Delivered 

Meals

	 	T.A.C., Title 40, Part 1, Chapter 55.
	 
	 	 
	Physical 

Therapy

	 	Licensed Physical Therapist through the Texas Board of Physical
Therapy Examiners, Chapter 453.
	 
	 	 
	Occupational 

Therapy

	 	Licensed Occupational Therapist through the Texas Board of
Occupational Therapy Examiners, Chapter 454.
	 
	 	 
	Speech Therapy

	 	Licensed Speech Therapist Through the Department of State Health
Services.
	 
	 	 
	Consumer Directed 

Services

	 	Home and Community Support Services Agency (HCSSA)
	 
	 	 
	Transition 

Assistance Services

	 	No licensure or certification requirements.
	 
	 	 
	Minor Home 

Modification

	 	No licensure or certification requirements.
	 
	 	 
	Adaptive Aids and
Medicaid
Equipment

	 	No licensure or certification requirements.
	 
	 	 
	Medical supplies

	 	No licensure or certification requirements.

8.3.2 Service Coordination

The HMO must furnish a Service Coordinator to all STAR+PLUS Members who request one. The HMO
should also furnish a Service Coordinator to a STAR+PLUS Member when the HMO determines one is
required through an assessment of the Member’s health and support needs. The HMO must ensure that
each STAR+PLUS Member has a qualified PCP who is responsible for overall clinical direction and,
in conjunction with the Service Coordinator, serves as a central point of integration and
coordination of Covered Services, including primary, Acute Care, long-term care and Behavioral
Health Services.

The Service Coordinator must work as a team with the PCP, and coordinate all STAR+PLUS Covered
Services and any applicable Non-capitated Services with the PCP. This requirement applies whether
or not the PCP is in the HMO’s Network, as some STAR+PLUS Members dually eligible for Medicare may
have a PCP that is not in the HMO’s Provider Network. In order to integrate the Member’s Acute
Care and primary care, and stay abreast of the Member’s needs and condition, the Service
Coordinator must also actively involve and coordinate with the Member’s primary and specialty care
providers, including Behavioral Health Service providers, and providers of Non-capitated Services.

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STAR+PLUS Members dually eligible for Medicare will receive most prescription drug services
through Medicare rather than Medicaid. The Texas Vendor Drug Program will pay for a limited
number of medications not covered by Medicare.

The HMO must identify and train Members or their families to coordinate their own care, to the
extent of the Member’s or the family’s capability and willingness to coordinate care.
8.3.2.1 Service Coordinators

The HMO must employ as Service Coordinators persons experienced in meeting the needs of vulnerable
populations who have Chronic or Complex Conditions. Such Service Coordinators are Key HMO
Personnel as described in Attachment A, HHSC’s Uniform Managed Care Contract Terms and Conditions,
Section 4.02, and must meet the requirements set forth in Section 4.04.1 of HHSC’s Uniform Managed
Care Contract Terms and Conditions.
8.3.2.2 Referral to Community Organizations

The HMO must provide information about and referral to community organizations that may not be
providing STAR+PLUS Covered Services, but are otherwise important to the health and well being
of Members. These organizations include, but are not limited to:

	 	1.	 	State/federal agencies (e.g., those agencies with jurisdiction over aging,
public health, substance abuse, mental health/retardation, rehabilitation,
developmental disabilities, income support, nutritional assistance, family support
agencies, etc.);
	 
	 	2.	 	social service agencies (e.g., Area Agencies on Aging, residential support
agencies, independent living centers, supported employment agencies, etc.);
	 
	 	3.	 	city and county agencies (e.g., welfare departments, housing programs, etc.);
	 
	 	4.	 	civic and religious organizations; and
	 
	 	5.	 	consumer groups, advocates, and councils (e.g., legal aid offices,
consumer/family support groups, permanency planning, etc.).

8.3.2.3 Discharge Planning

The HMO must have a protocol for quickly assessing the needs of Members discharged from a
Hospital or other care or treatment facility.

The HMO’s Service Coordinator must work with the Member’s PCP, the hospital discharge
planner(s), the attending physician, the Member, and the Member’s family to assess and plan for
the Member’s discharge. When long-term care is needed, the HMO must ensure that the Member’s
discharge plan includes arrangements for receiving community-based care whenever possible. The
HMO must ensure that the Member, the Member’s family, and the Member’s PCP are all well informed
of all service options available to meet the Member’s needs in the community.

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8.3.2.4 Transition Plan for New STAR+PLUS Members

The HMO must provide a transition plan for Members enrolled in the STAR+PLUS Program prior to the
Operational Start Date. HHSC, and/or the previous STAR+PLUS HMO contractor, will provide the HMO
with detailed Care Plans, names of current providers, etc., for newly enrolled Members already
receiving long-term care services at the time of enrollment. The HMO must ensure that current
providers are paid for Medically Necessary Covered Services that are delivered in accordance with
the Member’s existing treatment/long-term care services plan after the Member has become enrolled
in the HMO and until the transition plan is developed.
The transition planning process must include, but is not limited to, the following:

	 	1.	 	review of existing DADS long-term care services plans;
	 
	 	2.	 	preparation of a transition plan that ensures continuous care under the Member’s
existing Care Plan during the transfer into the HMO’s Network while the HMO conducts an
appropriate assessment and development of a new plan, if needed;
	 
	 	3.	 	if durable medical equipment or supplies had been ordered prior to enrollment but
have not been received by the time of enrollment, coordination and follow-through to
ensure that the Member receives the necessary supportive equipment and supplies without
undue delay; and
	 
	 	4.	 	payment to the existing provider of service under the existing authorization
until the HMO has completed the assessment and service plans and issued new
authorizations.

The HMO must review any existing care plan and develop a transition plan within 30 days of
receiving the Member’s enrollment. The transition plan will remain in place until the HMO contacts
the Member and coordinates modifications to the Member’s current treatment/long-term care services
plan. The HMO must ensure that the existing services continue and that there are no breaks in
services. For initial implementation of the STAR+PLUS program in a Service Area, the HMO will have
90-days from the start of the STAR+PLUS program in that Service Area to complete this process for
its Members.

The HMO must ensure that the Member is involved in the assessment process and fully informed about
options, is included in the development of the care plan, and is in agreement with the plan when
completed.

8.3.2.5 Centralized Medical Record and Confidentiality

The Service Coordinator shall be responsible for maintaining a centralized record related to
Member contacts, assessments and service authorizations. The HMO shall ensure that the
organization of and documentation included in the centralized Member record meets all
applicable professional standards ensuring confidentiality of Member records, referrals, and
documentation of information.

The HMO must have a systematic process for generating or receiving referrals and sharing
confidential medical, treatment, and planning information across providers.

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8.3.2.6 Nursing Facilities

Nursing facility care, although a part of the care continuum, presents a challenge for managed
care. Because of the process for becoming eligible for Medicaid assistance in a nursing facility,
there is frequently a significant time gap between entry into the nursing home and determination
of Medicaid eligibility. During this gap from entry to Medicaid eligibility, the resident has
“nested” in the facility and many of the community supports are no longer available. To require
participation of all nursing facility residents would result in the HMO maintaining a Member in
the nursing facility without many options for managing their health. For this reason, persons who
qualify for Medicaid as a result of nursing facility residency are not enrolled in STAR+PLUS.

The STAR+PLUS HMO must participate in the Promoting Independence initiative for such
individuals. Promoting Independence (PI) is a philosophy that aged and disabled individuals
remain in the most integrated setting to receive long-term care services. PI is
Texas‘ response to the U.S. Supreme Court ruling in Olmstead v. L.C. that requires
states to provide community-based services for persons with disabilities who would otherwise be
entitled to institutional services, when:

	 	•	 	the state’s treatment professionals determine that such placement is appropriate;
	 
	 	•	 	the affected persons do not oppose such treatment; and
	 
	 	•	 	the placement can be reasonably accommodated, taking into account the resources
available to the state and the needs of others who are receiving state supported
disability services.

In accordance with legislative direction, the HMO must designate a point of contact to receive
referrals for nursing facility residents who may potentially be able to return to the
community through the use of 1915(c) Nursing Facility Waiver services. To be eligible for this
option, an individual must reside in a nursing facility until a written plan of care for
safely moving the
resident back into a community setting has been developed and approved.

A STAR+PLUS Member who enters a nursing facility will remain a STAR+PLUS Member for a total of
four months. The nursing facility will bill the state directly for covered nursing facility
services delivered while the Member is in the nursing facility. See Section 8.3.2.7 for further
information.

The HMO is responsible for the Member at the time of nursing facility entry and must utilize the
Service Coordinator staff to complete an assessment of the Member within 30 days of entry in the
nursing facility, and develop a plan of care to transition the Member back into the community if
possible. If at this initial review, return to the community is possible, the Service Coordinator
will work with the resident and family to return the Member to the community using 1915(c) Waiver
Services.

If the initial review does not support a return to the community, the Service Coordinator will
conduct a second assessment 90 days after the initial assessment to determine any changes in the
individual’s condition or circumstances that would allow a return to the community. The Service
Coordinator will develop and implement the transition plan.

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The HMO will provide these services as part of the Promoting Independence initiative. The HMO must
maintain the documentation of the assessments completed and make them available for state review
at any time.

It is possible that the STAR+PLUS HMO will be unaware of the Member’s entry into a nursing
facility. It is the responsibility of the nursing facility to review the Member’s Medicaid card
upon entry into the facility and notify the HMO. The nursing facility is also required to notify
HHSC of the entry of a new resident.

8.3.2.7 HMO Four-Month Liability for Nursing Facility Care

A STAR+PLUS Member who enters a nursing facility will remain a STAR+PLUS Member for a total of
four months. The four months do not have to be consecutive. Upon completion of four months of
nursing facility care, the individual will be disenrolled from the STAR+PLUS Program and the
Medicaid Fee-for-Service program will provide Medicaid benefits. A STAR+PLUS Member may not change
HMOs while in a nursing facility.

Tracking the four months of liability is done through a counter system. The four-month counter
starts with the Medicaid admission or on the 21st day of a Medicare stay. A partial month counts
as a full month. In other words, the month in which the Medicaid admission occurs or the month on
which the 21st day of the Medicare stay occurs, is counted as one of the four months.

An amount will be included in the capitation rates to cover the cost of four months of nursing
facility services (based upon experience from STAR+PLUS in Harris County) for the historical
average number of admissions to nursing facilities. Nursing facility costs for STAR+PLUS in
Harris County have accounted for less than one percent of premiums in recent years. HHSC
believes that these costs will not deviate substantially from this experience.

The HMO will be liable for the cost of care in a nursing facility care and, for Medicaid-only
Members, the cost of all other Covered Services. The HMO will not maintain nursing facilities in
its Network and will not reimburse the nursing facilities directly. Nursing facilities will use
the traditional Fee-for-Service system of billing HHSC rather than billing the HMO. The HMO’s
liability will be established based on the amount paid through the Fee-for-Service billing system
on behalf of the Member. HHSC will recoup those costs from the HMO by an offset to the monthly
Capitation Payment. The offset will be recognized as a nursing facility expense.. The HMO will
record the nursing facility liability recoupment as nursing facility expense on its
Financial-Statistical Reports (FSR). The HMO will be responsible for direct payment of all
non-nursing facility Medicaid expenses on behalf of the Member.
8.3.3 STAR+PLUS Assessment Instruments

The HMO must have and use functional assessment instruments to identify Members with significant
health problems, Members requiring immediate attention, and Members who need or are at risk of
needing long-term care services. The HMO, a subcontractor, or a Provider may complete assessment
instruments, but the HMO remains responsible for the data recorded.

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HMOs must use the DHS Form 2060, as amended or modified, to assess a Member’s need for
Functionally Necessary Personal Attendant Services. The HMO may adapt the form to reflect the
HMO’s name or distribution instructions, but the elements must be the same and instructions for
completion must be followed without amendment.

For Members and applicants seeking or needing the 1915(c) Nursing Facility Waiver services, the
HMOs must use the DADS CARE Form 3652, as amended or modified, to assess Members and to supply
current medical information for Medical Necessity determinations.

HHSC has adopted a Minimum Data Set for Home Care (MDS-HC), which can be found in the HHSC Uniform
Managed Care Manual. HHSC may adopt new versions of this instrument as appropriate or as directed
by CMS. The MDS-HC instrument must be completed and electronically submitted to HHSC in the
specified format within 30 days of enrollment for every Member receiving Community-based Long-term
Care Services, and then each year by the anniversary of the Member’s date of enrollment. Initially,
HMOs will have 90 days to complete the MDS-HC instrument for Members enrolled on the Operational
Start Date. In addition to submitting the MDS-HC instrument to HHSC, the HMO may also submit other
supplemental assessment instruments it elects to use. As specialized MDS instruments are developed
or adopted by HHSC for other living arrangements (e.g., assisted living), HHSC will notify HMO of
the availability of the instrument and the date the HMO is required to begin using such instrument
in the HHSC Uniform Managed Care Manual. Any additional assessment instruments used by the HMO must
be approved by HHSC.

8.3.4 1915(c) Nursing Facility Waiver Service Eligibility

8.3.4.1 For Members

The HMO must notify HHSC when it initiates 1915(c) Nursing Facility Waiver eligibility testing on
a STAR+PLUS Member. The HMO must apply risk criteria, complete the Form 3652 for Medical Necessity
determination, complete the assessment documentation, and prepare a 1915(c) Nursing Facility
Waiver Individual Service Plan (ISP) for each Member requesting 1915(c) Nursing Facility Waiver
services and for Members the HMO has identified as needing 1915(c) Nursing Facility Waiver
services. The HMO must provide HHSC the results of the assessment activities within 45 days of
initiating the assessment process.

HHSC will notify the Member and the HMO of the eligibility determination, which will be based on
the information provided by the HMO. If the STAR+PLUS Member is eligible for 1915(c) Nursing
Facility Waiver services, HHSC will notify the Member of the effective date of eligibility. If the
Member is not eligible for 1915(c) Nursing Facility Waiver services, HHSC will provide the Member
information on right to Appeal the Adverse Determination. Regardless of the 1915(c) Nursing
Facility Waiver eligibility determination, HHSC will send a copy of the Member notice to the HMO.

8.3.4.2 For Medical Assistance Only (MAO) Non-Member Applicants

Non-Member persons who are not eligible for Medicaid in the community may apply for
participation in the 1915(c) Nursing Facility Waiver program under the financial and functional

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eligibility requirements for MAO. HHSC will inform the applicant that services are provided
through an HMO and allow the applicant to select the HMO. HHSC will authorize the selected HMO to
initiate pre-enrollment assessment services required under the 1915(c) Nursing Facility Waiver
for the non-member. The HMO must complete Form 3652 for Medical Necessity determination, complete
the assessment documentation, and prepare a 1915(c) Nursing Facility Waiver service plan for each
applicant referred by HHSC. The initial home visit with the applicant must occur within 14 days
of the receipt of the referral. The HMO must provide HHSC the results of the assessment
activities within 45 days of the receipt of the referral.

HHSC will notify the applicant and the HMO of the results of its eligibility determination. If the
applicant is eligible, HHSC will notify the applicant and the HMO will be notified of the
effective date of eligibility, which will be the first day of the month following the
determination of eligibility. The HMO must initiate the Individual Service Plan (ISP) on the date
of enrollment.

If the applicant is not eligible, the HHSC notice will provide information on the applicant’s
right to Appeal the Adverse Determination. HHSC will also send notice to the HMO if the applicant
is not eligible for 1915(c) Nursing Facility Waiver services.

8.3.4.3 Annual Reassessment

Prior to the end date of the annual ISP, the HMO must initiate an annual reassessment to
determine and validate continued eligibility for 1915(c) Nursing Facility Waiver services for each
Member receiving such services. The HMO will be expected to complete the same activities for the
annual reassessment as required for the initial eligibility determination, with the following
exception: the HMO does not need to obtain a physician’s signature on the Form 3652 for the annual
reassessment. . Existing 1915(c) Nursing Facility Waiver clients may not be denied 1915(c) Nursing
Facility Waiver services solely on the basis that the proposed cost of the ISP will exceed the
cost of care if the Member were in a nursing home if the following conditions are met:

	 	1.	 	those services are required for that individual to live in the most
integrated setting appropriate to his or her needs;
	 
	 	2.	 	the cost for the needed services for each six-month period of the client’s ISP year,
averaged and excluding the cost of minor home modifications and adaptive aids, does not
exceed 133.3% of the Nursing Facility Cost Ceiling; and
	 
	 	3.	 	HHSC continues to comply with the cost-effectiveness requirements from the CMS.

If an ongoing client has a change in needs that would cause the cost for needed services, under
the client’s ISP, to exceed 100% of the cost ceiling, the HMO with HHSC approval may consider the
client’s request if there is a change in:

	 	1.	 	the client’s medical condition, functional needs, or environment;
	 
	 	2.	 	the caregiver support or third-party resources that have been providing service
to the client; or
	 
	 	3.	 	the need for a service or support to adequately support the client living in
the most integrated setting appropriate to his or her needs.

If the client’s needs cannot be met within the cost limit of 133% described above, then the
client is no longer eligible for services, unless the client meets the criteria in the next
paragraph. All

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available non-waiver support systems and resources must be accessed in the development of
the ISP.

HMO will continue services to those individuals receiving services in a waiver program, when
continuation of the services is necessary for the individual to live in the most integrated
setting appropriate to his or her needs and HHSC continues to comply with CMS
cost-effectiveness requirements.

The Texas Department of Aging and Disability Services commissioner has the authority to grant an
exemption to this rule in individual cases. A written request for an exemption to the board or
commissioner will be considered in situations in which the client’s needs cannot be met within the
estimated cost ceiling and cannot be provided through any other setting or programs.

Individuals receiving waiver services through the Medically Dependent Children Program are
covered by the provisions in this Section when they apply for transition to the 1915(c)
waiver program at age 21.

8.3.5 Consumer-Directed Services — Personal Attendant Services

The HMO must make available and promote the use of the Consumer-Directed Services (CDS) option
to all STAR+PLUS Members desiring that option for the delivery of Personal Attendant Services
(PAS). The HMO will provide information on CDS:

	 	1.	 	at initial assessment for attendant care services;
	 
	 	2.	 	at annual reassessment for attendant care services;
	 
	 	3.	 	at any time when a STAR+PLUS Member so requests that information; and
	 
	 	4.	 	in the Member Handbook.

The HMO must contract with Providers who are able to offer Consumer-Directed Services. To
participate as Consumer-Directed Services provider, the Provider must have entered into a
contract with DADS for the delivery of those services.

The HMO must comply with 40 T.A.C. Chapter 41, regarding “Vendor Fiscal Intermediary
Payments,” and the provider manual and training related to STAR+PLUS.

8.3.6 Community Based Long-term Care Service Providers

8.3.6.1 Training

The HMO must comply with Section 8.1.4.6 regarding Provider Manual and Provider training
specific to the STAR+PLUS Program. The HMO must train all Community Long-term Care Service
Providers regarding the requirements of the Contract and special needs of STAR+PLUS

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Members. The HMO must establish ongoing STAR+PLUS Provider training addressing the
following issues at a minimum:

	 	1.	 	Covered Services and the Provider’s responsibilities for providing such services
to STAR+PLUS Members and billing the HMO for such services. The HMO must place
special emphasis on Community Long-term Care Services and STAR+PLUS requirements,
policies, and procedures that vary from Medicaid Fee-for-Service and commercial
coverage rules, including payment policies and procedures.
	 
	 	2.	 	Inpatient Stay hospital services and the authorization and billing of such
services for STAR+PLUS Members.
	 
	 	3.	 	Relevant requirements of the STAR+PLUS Contract, including the role of the
Service Coordinator;
	 
	 	4.	 	Processes for making referrals and coordinating Non-capitated Services;
	 
	 	5.	 	The HMO’s quality assurance and performance improvement program and the Provider’s
role in such programs; and
	 
	 	6.	 	The HMO’s STAR+PLUS policies and procedures, including those relating to Network
and Out-of-Network referrals.

8.3.7.2 LTC Provider Billing

Long-term care providers are not required to utilize the billing systems that most medical
facilities use on a regular basis. For this reason, the HMO must make accommodations to the
claims processing system for such providers to allow for a smooth transition from traditional
Medicaid to Managed Care Medicaid.

HHSC will meet with HMOs to develop a standardized method long-term care billing. All
STAR+PLUS HMOs will be required to utilize the standardized method, which will be
incorporated into the HHSC Uniform Managed Care Manual.

8.3.7.3 Rate Enhancement Payments for Agencies Providing Attendant Care

The Legislature made available additional funds for increased attendant compensation. Home and
Community Support Services (HCSS). Providers may contract with the State to receive additional
funds for attendant salaries. Under such contracts, HCSS Providers may participate at any of
twenty (20) payment levels or may choose not to participate at all. The State is required to
assure that participating Providers in the HMO Network have access to enhanced payments. A work
group that includes representative from the HMOs will develop how the process will be implemented
and posted to the HHSC Uniform Managed Care Manual. In all expansion areas, the cost of attendant
care enhancement was included in the development of the Capitation Rate.

8.3.7.4 Payment for 1915(c) Nursing Facility Waiver Services for Non-Members

Disenrolled Members: Occasionally, the Social Security Administration will place SSI recipients
on hold for a short period of time, usually due failure to provide timely updates required for
the continuation of SSI benefits. During this period, the recipients will not appear to be
eligible for Medicaid or 1915(c) Nursing Facility Waiver services. Often the Social Security

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Administration reinstates these Medicaid Eligibles retroactively without a break in Medicaid
coverage. To deal with this situation, for at least thirty (30) days after disenrollment, the HMO
will continue to authorize and pay for 1915(c) Nursing Facility Waiver services for disenrolled
STAR+PLUS Members who appear to lose eligibility due to an administrative problem related to SSI.
If at the end of the thirty (30) days, the Medicaid Eligible’s 1915(c) Nursing Facility Waiver
eligibility is reinstated, the Medicaid Eligible will be manually enrolled into the STAR+PLUS HMO
back to the date of disenrollment and the retroactive adjustment system will properly reimburse
the HMO. If after thirty (30) days, the former STAR+PLUS Member continues to be ineligible for
Medicaid, the individual will not be retroactively enrolled, and the HMO will bill HHSC for
1915(c) Nursing Facility Waiver services rendered during this time.

8.4 Additional CHIP Scope of Work

The following provisions only apply to HMOs participating in
CHIP.

8.4.1 CHIP Provider Network

In each Service Area, the HMO must seek to obtain the participation in its Provider Network of
CHIP Significant Traditional Providers (STPs), defined by HHSC as PCP Providers currently
serving the CHIP population and DSH hospitals. The Procurement Library includes CHIP STPs by
Service Area.
The HMO must give STPs the opportunity to participate in its Network if the STPs:

	 	1.	 	Agree to accept the HMO‘s Provider reimbursement rate for the provider type; and
	 
	 	2.	 	Meet the standard credentialing requirements of the HMO, provided that lack of board
certification or accreditation by the Joint Commission on Accreditation of Health Care
Organizations (JCAHO) is not the sole grounds for exclusion from the Provider Network.

8.4.2 CHIP Provider Complaint and Appeals

CHIP Provider Complaints and Appeals are subject to disposition consistent with the Texas
Insurance Code and any applicable TDI regulations. The HMO must resolve Provider Complaints
within 30 days from the date the Complaint is received.

8.4.3 CHIP Member Complaint and Appeal Process

CHIP Member Complaints and Appeals are subject to disposition consistent with the Texas Insurance
Code and any applicable TDI regulations. HHSC will require the HMO to resolve Complaints and
Appeals (that are not elevated to TDI) within 30 days from the date the Complaint or Appeal is
received. The HMO is subject to remedies, including liquidated damages, if at least 98 percent of
Member Complaints or Member Appeals are not resolved within 30 days of receipt of the Complaint or
Appeal by the HMO. Please see the Uniform Managed Care Contract Terms & Conditions and Attachment
B-5, Deliverables/Liquidated Damages

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Matrix. Any person, including those dissatisfied with a HMO’s resolution of a Complaint
or Appeal, may report an alleged violation to TDI.

8.4.4 Dental Coverage for CHIP Members

The HMO is not responsible for reimbursing dental providers for preventive and therapeutic dental
services obtained by CHIP Members. However, medical and/or hospital charges, such as anesthesia,
that are necessary in order for CHIP Members to access standard therapeutic dental services, are
Covered Services for CHIP Members. The HMO must provide access to facilities and physician
services that are necessary to support the dentist who is providing dental services to a CHIP
Member under general anesthesia or intravenous (IV) sedation.

The HMO must inform Network facilities, anesthesiologists, and PCPs what authorization procedures
are required, and how Providers are to be reimbursed for the preoperative evaluations by the PCP
and/or anesthesiologist and for the facility services. For dental-related medical Emergency
Services, the HMO must reimburse in-network and Out-of-Network providers in accordance with
federal and state laws, rules, and regulations.

8.5 Additional CHIP Perinatal Scope of Work

The following provisions only apply to HMOs participating in CHIP Perinatal
Program.

8.5.1 CHIP Perinatal Provider Network

In each Service Area, the CHIP Perinatal HMO must seek to obtain the participation of Providers
for CHIP Perinate Members. CHIP Perinatal HMOs are encouraged to obtain the participation of
Obstetricians/Gynecologists (OB/GYNs), Family Practice Physicians with experience in prenatal
care, or other qualified health care Providers as CHIP Perinate Providers.

See Sections 8.1.3.2, Access to Network Providers, and 8.1.4.2, Primary Care Providers, regarding
distinctions in the provider networks for CHIP Perinates and CHIP Perinate Newborns.

8.5.2 CHIP Perinatal Program Provider Complaint and Appeals

CHIP Perinatal Program Provider Complaints and Appeals are subject to disposition consistent
with the Texas Insurance Code and any applicable TDI regulations. The HMO must resolve Provider
Complaints within 30 days from the date the Complaint is received.

8.5.3 CHIP Perinatal Program Member Complaint and Appeal Process

CHIP Perinatal Program Member Complaints and Appeals are subject to disposition consistent with
the Texas Insurance Code and any applicable TDI regulations. HHSC will require the HMO to resolve
Complaints and Appeals (that are not elevated to TDI) within 30 days from the date the
Complaint or Appeal is received. Any person, including those dissatisfied with a
HMO’s resolution of a Complaint or Appeal, may report an alleged violation to
TDI.

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DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	 	 	DOCUMENT2	 	EFFECTIVE	 	 
	STATUS'	 	REVISION	 	DATE	 	DESCRIPTION3
	Baseline

	 	 	n/a	 	 	 	 	Initial version Attachment B-1, Section 7
	 
	 	 	 	 	 	 	 	 
	Revision

	 	 	1.1	 	 	June 30, 2006
	 	Contract amendment to include
STAR+PLUS program. No change to this
Section.
	 
	 	 	 	 	 	 	 	 
	Revision

	 	 	1.2	 	 	September 1, 2006
	 	Contract amendment did not revise
Attachment B-1 Section 9 — Turnover
Requirements
	 
	 	 	 	 	 	 	 	 
	Revision

	 	 	1.3	 	 	September 1, 2006
	 	Contract amendment did not revise
Attachment B-1 Section 9 — Turnover
Requirements
	 
	 	 	 	 	 	 	 	 
	Revision

	 	 	1.4	 	 	September 1, 2006
	 	Contract amendment did not revise
Attachment B-1 Section 9 — Turnover
Requirements

 

			
	 	 	Status should be represented as “Baseline” for initial issuances, “Revision” for changes to the Baseline version, and
“Cancellation” for withdrawn versions
	 
	 	2 	Revisions should be numbered in accordance according to the version of the issuance and sequential numbering of the
revision-e.g., “1.2” refers to the first version of the document and the second revision.
Brief description of the changes to the document made in the revision.

 

 

	 	 	 
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9. Turnover Requirements

9.1 Introduction

This section presents the Turnover Requirements to which the HMO must agree. Turnover is
defined as those activities that are required for the HMO to perform upon termination of the
Contract in situations in which the HMO must transition Contract operations to HHSC or a
subsequent Contractor.

9.2 Transfer of Data

The HMO must transfer all data regarding the provision of Covered Services to Members to
HHSC or a new HMO, at the sole discretion of HHSC and as directed by HHSC. All transferred data
must be compliant with HIPAA.

All relevant data must be received and verified by HHSC or the subsequent Contractor. If HHSC
determines that not all of the data regarding the provision of Covered Services to Members was
transferred to HHSC or the subsequent Contractor, as required, or the data is not HIPAA compliant,
HHSC reserves the right to hire an independent contractor to assist HHSC in obtaining and
transferring all the required data and to ensure that all the data are HIPAA compliant. The
reasonable cost of providing these services will be the responsibility of the HMO.

9.3 Turnover Services

Six months prior to the end of the Contract Period, including any extensions to such Period,
the HMO must propose a Turnover Plan covering the possible turnover of the records and information
maintained to either the State or a successor HMO. The Turnover Plan must be a comprehensive
document detailing the proposed schedule, activities, and resource requirements associated with
the turnover tasks. The Turnover Plan must be approved by HHSC.

As part of the Turnover Plan, the HMO must provide HHSC with copies of all relevant Member and
service data, documentation, or other pertinent information necessary, as determined by the
HHSC, for HHSC or a subsequent Contractor to assume the operational activities successfully.
This includes correspondence, documentation of ongoing outstanding issues, and other operations
support documentation. The plan will describe the HMO’s approach and schedule for transfer of
all data and operational support information, as applicable. The information must be supplied
in media and format specified by the State and according to the schedule approved by the State.

HHSC is not limited or restricted in the ability to require additional information from the HMO or
modify the turnover schedule as necessary.

9.4 Post-Turnover Services

Thirty (30) days following turnover of operations, the HMO must provide HHSC with a Turnover
Results report documenting the completion and results of each step of the Turnover Plan. Turnover
will not be considered complete until this document is approved by HHSC.

If the HMO does not provide the required relevant data and reference tables, documentation, or
other pertinent information necessary for HHSC or the subsequent Contractor to assume the
operational activities successfully, the HMO agrees to reimburse the State for all reasonable
costs, including, but not

9-2

 

	 	 	 
	Contractual Document (CD)

	 
	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)
	 	 
	Subject: Attachment B-1 — HHSC Joint Medicaid/CHIP HMO RFP, Section 9

	 	Version 1.4

limited to, transportation, lodging, and subsistence for all state and federal
representatives, or their agents, to carry out their inspection, audit, review, analysis,
reproduction and transfer functions at the location(s) of such records.

The HMO also agrees to pay any and all additional costs incurred by the State that are the
result of the HMO’s failure to provide the requested records, data or documentation within the
time frames agreed to in the Turnover Plan.

The HMO must maintain all files and records related to Members and Providers for five years
after the date of final payment under the Contract or until the resolution of all litigation,
claims, financial management review or audit pertaining to the Contract, whichever is longer.
The HMO agrees to repay any valid, undisputed audit exceptions taken by HHSC in any audit of
the Contract.

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