Document:

Amended & Restated Continuing Guaranty Agreement

 

Exhibit 10.4

AMENDED AND RESTATED CONTINUING GUARANTY AGREEMENT

     THIS AMENDED AND RESTATED CONTINUING GUARANTY AGREEMENT (this “Guaranty”) is made this 23rd
day of December, 2005, by the Guarantors identified below (individually referred to as a
“Guarantor” and collectively as the “Guarantors”), in favor of each of the financial institutions
(collectively, the “Lenders”) now or hereafter parties to the Second Amended Credit Agreement (as
defined below) and BANK OF AMERICA, N.A., a national banking association, as administrative and
collateral agent (together with its successors in such capacity, the “Agent”) for each of the
Lenders (Agent and each Lender being referred to individually as a “Guaranteed Party” and
collectively as the “Guaranteed Parties”).

Recitals:

     Agent, Lenders, Applica Incorporated, a Florida corporation (hereinafter “Borrower”), Applica
Canada Corporation, a Nova Scotia Corporation and subsidiary of Borrower, Guarantors and certain
other entities are parties to a Second Amended and Restated Credit Agreement dated the date hereof
(as at any time amended, modified, renewed or extended, the “Second Amended Credit Agreement”),
which amends and restates a certain Amended and Restated Credit Agreement dated as of November 17,
2004 among certain of the parties (as amended, the “Prior Credit Agreement). Pursuant to the
Second Amended Credit Agreement, Lenders have agreed to make loans and other extensions of credit
to or for the benefit of Borrower on the terms and subject to all of the conditions set forth in
the Credit Agreement. Capitalized terms used in these Recitals and elsewhere in this Guaranty,
unless otherwise defined, shall have the meanings ascribed to them in the Second Amended Credit
Agreement.

     Pursuant to a Continuing Guaranty Agreement dated December 28, 2001 (the “Existing Guaranty
Agreement”), Guarantors have guaranteed the payment and performance of all of liabilities and
obligations of Borrowers to Agent and Lenders under the Prior Credit Agreement and related
documents.

     As a condition to their extension of any credit to Borrower under the Second Amended Credit
Agreement, Guaranteed Parties have required that Guarantors agree to amend and restate the Existing
Guaranty Agreement, so that, as amended and restated, the Existing Credit Agreement will read as
hereinafter set forth. To induce each of the Guaranteed Parties to extend credit to Borrower under
the Second Amended Credit Agreement in accordance with the terms thereof, Guarantor has agreed to
execute and deliver this Guaranty.

Agreement:

NOW, THEREFORE, for Ten Dollars ($10.00) in hand paid and to induce the Guaranteed Parties to make
loans or otherwise extend credit to Borrower from time to time as set forth in the Second Amended
Credit Agreement, and for other good and valuable consideration, Guarantors hereby, jointly and
severally, unconditionally and absolutely guarantee to the Guaranteed Parties the due and punctual
payment, performance and discharge (whether upon stated maturity, demand, acceleration or otherwise
in accordance with the terms thereof) of all of the Obligations, whether direct or indirect,
absolute or contingent, secured or unsecured, due or to become due, joint or several, primary or
secondary, liquidated or unliquidated, now existing or hereafter incurred, created or arising and
howsoever evidenced, regardless of whether recovery upon any of such Obligations becomes barred by
any statute of limitations, or is or becomes invalid or
unenforceable for any other reason, or is unrecoverable in any

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proceeding under the Bankruptcy Code
of an Obligated Party (whether pursuant to 11 U.S.C. § 506 or otherwise); provided,
however, that the obligations of each Guarantor hereunder shall be limited to an aggregate
amount equal to the greatest amount that would not render its obligations hereunder subject to
avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable
state law.

     EACH GUARANTOR DOES HEREBY WAIVE: notice of Agent’s or any Lender’s acceptance hereof; notice
of the extension of credit from time to time by any Guaranteed Party to Borrower and the creation,
existence or acquisition of any Obligations; notice of the amount of Obligations outstanding from
time to time, subject, however, to each Guarantor’s right to make inquiry of Agent to ascertain the
amount of Obligations at any reasonable time; notice of any adverse change in Borrower’s or any
other Obligated Party’s financial condition or of any other fact which might increase such
Guarantors’ risk; notice of presentment for payment, demand, protest and notice thereof as to any
instrument; notice of any Default, Event of Default or acceleration and all other notices and
demands to which such Guarantor might otherwise be entitled; any defense that Borrower may at any
time assert based upon the invalidity or unenforceability of any of the Loan Documents, the statute
of limitations, the statute of frauds, failure of consideration, fraud, bankruptcy, lack of legal
capacity, usury, or accord and satisfaction; any right to contest the commercial reasonableness of
the disposition of any or all Collateral; any right such Guarantor may have, by statute or
otherwise, to require any of the Guaranteed Parties to institute suit against Borrower or any other
Obligated Party after notice or demand from such Guarantor or to seek recourse first against
Borrower or any other Obligated Party, or to realize upon any Collateral, as a condition to
enforcing a Guarantor’s liability and obligations hereunder; any defense or claim that any Person
purporting to bind Borrower to the payment of any Obligations did not have actual or apparent
authority to do so; any right to appraisement, valuation, stay of execution, or notice of election
to declare due the amount of any Obligations of Borrower with regard to Agent’s enforcement of any
Lien or other interest Agent, for the benefit of the Guaranteed Parties, may hold in any real or
personal property of Borrower; and any defense or claim that any other act or failure to act by any
Guaranteed Party had the effect of increasing such Guarantor’s risk of payment. To the fullest
extent permitted by any applicable law, each Guarantor hereby also expressly waives any and all
rights or defenses arising by reason of (i) any “one action” or “anti-deficiency” law which would
otherwise prevent any Guaranteed Party from bringing any action, including any claim for a
deficiency, or exercising any other right or remedy (including any right of setoff) against
Guarantors before or after the Guaranteed Parties’ commencement or completion of any foreclosure
action, whether by judicial action, by exercise of power of sale or otherwise or (ii) any other law
which in any other manner would otherwise require any election of remedies by any Guaranteed Party.
Except as otherwise prohibited by any applicable law, each Guarantor hereby waives any right that
it may have to claim or recover in any litigation respecting this Guaranty any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to, actual damages.
Each Guarantor shall make all payments hereunder for the benefit of the Guaranteed Parties, free
and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, restrictions or conditions of any kind.

     If Borrower fails to pay any Obligations on the due date thereof (whether due on demand, at
stated maturity, upon acceleration or otherwise) or any other Event of Default under the Second
Amended Credit Agreement occurs or exists, then, all of the Obligations shall, at the election of
Agent, become immediately due and payable hereunder as to Guarantors and Agent shall be entitled to
enforce the obligations of Guarantors hereunder for the benefit of the Guaranteed Parties.
Guarantors agree to pay all reasonable expenses incurred by the Guaranteed Parties in connection
with enforcement of the Guaranteed Parties’ right under this Guaranty, including court costs,
collection charges and reasonable

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attorneys’ fees. Guarantors acknowledge and agree that Agent is authorized and empowered to enforce this
Guaranty for the benefit of all of the Guaranteed Parties and to collect from Guarantors the full
amount of the Obligations outstanding from time to time, in Agent’s own name and without the
necessity of joining any other Guaranteed Party in any action, suit or other proceeding to enforce
this Guaranty.

     Agent shall have, for the benefit of the Guaranteed Parties, a Lien upon and right of setoff
to any and all credits and any and all other property of each Guarantor, now or at any time
whatsoever with or in the possession of any of the Guaranteed Parties or anyone holding for any
Guaranteed Party as security for any and all Obligations and the indebtedness and obligations of
Guarantors hereunder.

     Each Guarantor consents and agrees that, without notice to or by Guarantors and without
reducing, impairing or otherwise affecting the liability or obligations of Guarantors hereunder,
Guaranteed Parties may (with or without consideration): compromise or settle, extend the period of
duration or the time for the payment, discharge or performance of any of the Obligations; increase
the amount of the Obligations; refuse to enforce any of the Obligations for release any Person
(including any Obligated Party) for liability for the payment of all or any party of the
Obligations; increase, decrease or otherwise alter the rate of interest payable with respect to the
Obligations or grant other indulgences to Borrower in respect thereof; amend or modify in any
manner, or terminate or release, any of the Loan Documents or any other agreements evidencing,
securing or otherwise relating to the Obligations (other than this Guaranty); release, surrender,
exchange, modify or impair, or consent to the sale, transfer or other disposition of, any and all
Collateral or other property at any time securing (directly or indirectly) any of the Obligations
or on which the Guaranteed Parties at any time may have a Lien; extend the time of payment of any
Collateral consisting of Accounts or other rights to the payment of money; fail or refuse to
perfect or maintain the perfection of any Lien; subordinate the payment of any of the Obligations
or any Lien securing the same; refuse to enforce its rights, or make any comprise or settlement or
agreement therefor, in respect of any such Collateral, deposits and property, or with any party to
the Obligations, or with any other Person whatsoever; or release or substitute any Obligated Party.

     None of the Guaranteed Parties shall be under any obligation to marshal any assets in favor of
Guarantors or against or in payment of any of the Obligations. If and to the extent any Guaranteed
Party receives any payment on account of any of the Obligations (whether from Borrower or any other
Obligated Party or from the sale or other disposition of any Collateral) and such payment or any
part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or
required to be repaid to a trustee, receiver or any other Person in any proceeding under the
Bankruptcy Code or under any applicable law, then the part of the Obligations intended to be
satisfied shall be revived and continued in full force and effect as if said payment had not been
made. The foregoing provisions of this paragraph shall survive any termination or revocation of
this Guaranty.

     Each Guarantor represents and warrants to the Guaranteed Parties that, as of the date of this
Guaranty, the fair saleable value of such Guarantor’s assets exceeds its liabilities; such
Guarantor is meeting current liabilities as they mature; the financial statements of such Guarantor
furnished to the Guaranteed Parties have been prepared in accordance with the GAAP, except, in the
case of interim statements, for the absence of footnotes and normal year-end adjustments, and
fairly present the financial condition and results of operation as of the dates and for the periods
covered; since the date of said financial statements there has been no material adverse change in
the financial condition of such Guarantor; there are not now pending any material court or
administrative proceedings or undischarged judgments against such Guarantor and no federal or state
tax liens have been filed or threatened against such Guarantor; and such Guarantor is not in
default or claimed default under any agreement for

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borrowed money.

     This Guaranty is a primary, immediate and original obligation of each Guarantor; is an
absolute, unconditional, continuing and irrevocable guaranty of payment of the Obligations and not
of its collectibility only; is not contingent upon the exercise or enforcement by the Guaranteed
Parties of whatever remedies the Guaranteed Parties may have against Borrower or otherwise or the
enforcement of any Lien or realization upon any Collateral; and shall remain in full force and
effect without regard to future changes in conditions, including change of law or any invalidity or
unenforceability of any of the Obligations or Loan Documents. This Guaranty shall be in addition to
any other present or future guaranty or other security for any of the Obligations, shall not be
prejudiced or unenforceable by the invalidity of any such other guaranty or security and is not
conditioned upon or subject to the execution by any other Person of this Guaranty or any other
guaranty or suretyship agreement.

     Agent, for and on behalf of the Guaranteed Parties, shall have the right to seek recourse
against Guarantors to the full extent provided for herein and in any other Loan Document and
against Borrower and each other Obligated Party to the full extent provided for in any of the Loan
Documents. No election to proceed in one form of action or proceeding, or against any party, or on
any obligation, shall constitute a waiver of the Agent’s right to proceed in any other form of
action or proceeding against other parties, unless Agent has expressly waived such right in
writing. Specifically, but without limiting the generality of the foregoing, no action or
proceeding by the Guaranteed Parties against Borrower or any other Obligated Party under any Loan
Document shall serve to diminish the liability of Guarantors except to the extent the Guaranteed
Parties realized payment by such action or proceeding.

     Each Guarantor is fully aware of the financial condition and business of Borrower and each
other Obligated Party. Each Guarantor delivers this Guaranty based solely upon its own independent
investigation and in no part upon any representation or statement of any of the Guaranteed Parties
with respect thereto. Each Guarantor is in a position to and hereby assumes full responsibility for
obtaining any additional information concerning Borrower’s or any other Obligated Party’s financial
condition as such Guarantor may deem material to its obligations hereunder and no Guarantor is
relying upon, nor expecting the Guaranteed Parties to furnish a Guarantor any information in any
Guaranteed Party’s possession concerning, Borrower’s financial condition, operations or business
prospects. Each Guarantor hereby knowingly accepts the full range of risks encompassed within a
contract of “Guaranty,” which risks include, without limitation, the possibility that Borrower will
contract additional Obligations for which such Guarantor may be liable hereunder after Borrower’s
financial condition or ability to pay its lawful debts when they fall due has deteriorated.

     Each Guarantor agrees that this Guaranty shall continue in full force and effect until all of
the Obligations have been fully paid and discharged and all Commitments of Lenders have been
terminated. If for any reason Borrower has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become unrecoverable from
Borrower by reason of any bankruptcy or other insolvency proceeding or by other operation of law or
for any other reason, this Guaranty shall nevertheless be binding upon Guarantors. If acceleration
of the time for payment of any of the Obligations is stayed as the result of any bankruptcy or
other insolvency proceeding or any other reason, all such amounts otherwise subject to acceleration
under the terms of the Loan Documents shall be immediately due and payable by Guarantors.

     To the fullest extent permitted by any applicable law, each Guarantor hereby waives the right
to revoke or terminate this Guaranty prior to payment in full of the Obligations and termination of
the Commitments. If, notwithstanding the foregoing waiver, a Guarantor shall nevertheless have a
right

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under applicable law to terminate or revoke this Guaranty, which right cannot be waived by
such Guarantor, such termination or revocation shall not be effective until a written notice of
such termination or revocation, specifically referring to this Guaranty and signed by such
Guarantor, is actually received by an officer of Agent who is familiar with Borrower’s account with
Guaranteed Parties and this Guaranty; but any termination or revocation shall not affect the
obligation of such Guarantor (or any other Guarantor) or any Guarantor’s successors or assigns with
respect to any of the Obligations owing to Guaranteed Parties and existing at the time of the
receipt by Agent of such revocation or to arise out of or in connection with any transactions
theretofore entered into by Guaranteed Parties with or for the account of Borrower, and Agent shall
be empowered to enforce this Guaranty with respect to all such Obligations. If Guaranteed Parties
make loans or other extensions of credit to or for the benefit of Borrower or take other action
after the termination or revocation by a Guarantor, but prior to Agent’s receipt of notice of
termination or revocation, then the rights of the Guaranteed Parties hereunder with respect thereto
shall be the same as if such termination or revocation had not occurred.

     All rights, benefits and privileges herein and hereby conferred upon Agent shall vest in and
be enforceable by them and their respective successors and assigns. This Guaranty shall be binding
upon Guarantors and upon their respective successors and assigns.

     To the extent any performance of this Guaranty would violate any usury statute or other any
applicable law, the obligation to be fulfilled shall be reduced to the limit legally permitted, so
that this Guaranty shall not require any performance in excess of the limit legally permitted, but
such obligations shall be fulfilled to the limit of the legal validity. The provisions of this
paragraph shall control every other provision of this Guaranty.

     This Guaranty expresses the entire understanding of the parties hereto with respect to the
subject matter hereof and may not be changed orally, and no obligations of Guarantors can be
released or waived by any of the Guaranteed Parties, except by a writing signed by a duly
authorized officer of Agent.

     Each Guarantor hereby subordinates its right to receive and be paid any present or future
liabilities, debts or obligations of Borrower to such Guarantor to the full and final payment of
the Obligations and termination of all of the Commitments. Until all of the Obligations have been
paid in full and the Commitments have been terminated, no Guarantor shall assert any claim, right
or remedy (whether or not arising in equity, by contract or any applicable law) against Borrower or
any other Person (including another Obligated Party) by reason of a Guarantor’s payment or other
performance hereunder. Without limiting the generality of the foregoing, each Guarantor hereby
subordinates to the full and final payment of the Obligations any and all legal or equitable rights
or claims that such Guarantor may have to reimbursement, subrogation, indemnity and exoneration and
agrees that such Guarantor shall have no recourse to any assets or property of Borrower (including
any Collateral) and no right of recourse against or contribution from any other Person in any way
directly or contingently liable for any of the Obligations, whether any of such rights arise under
contract, in equity or under any applicable law, until all of the Obligations have been paid in
full and the Commitments have been terminated.

     Each Guarantor that shall make a payment under this Guaranty (hereinafter, a “Paying
Guarantor”) shall have the right to obtain contribution, in an amount determined as set forth
below, from the other Guarantors that have not made payments under this Guaranty at least
proportionately equal (on the basis of their respective Allocable Percentages, as such term is
hereinafter defined) in amount to the payments made by the Guarantor seeking contribution. The
liability of the Guarantors hereunder to make
contribution to a Paying Guarantor as aforesaid shall be absolute and shall not be affected or
impaired by any defense, counterclaim or setoff that Borrower or any Guarantor may have or assert
against

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Guaranteed Parties under this Guaranty, or by any failure, neglect or omission on the part
of Guaranteed Parties to realize upon any Collateral or to enforce payment for the Obligations from
any Person, or by the release or discharge of any Collateral, by the release or discharge of
Borrower from its obligations or by the release or discharge of any Guarantor from its obligations
under this Guaranty (whether any such release is granted by Guaranteed Parties or by operation of
law). Any proceeds received by a Guaranteed Party from a foreclosure sale of any assets of a
Guarantor securing payment of the Obligations shall be deemed a payment by such Guarantor for
purposes hereof. Notwithstanding the foregoing, rights of contribution among Guarantors shall be
subordinated, as hereinabove provided, to the full and final payment of all of the Obligations and
termination of the Commitments.

     Each Paying Guarantor entitled to contribution hereunder shall be entitled to receive from
each of the other Guarantors an amount equal to (i) the product (if a positive number) arrived at
by multiplying the sum of all payments made by the Paying Guarantor to the Guaranteed Parties under
this Guaranty by the Allocable Percentage of the Guarantor from whom contribution is sought,
less (ii) the amount, if any, actually paid to Guaranteed Parties under this Guaranty by
the Guarantor from whom contribution is sought (said last mentioned amount, which is to be
subtracted from the aforesaid product, shall be increased by any amounts theretofore paid by such
Guarantor by way of contribution hereunder, and shall be decreased by any amounts theretofore
received by such Guarantor by way of contribution); provided however, that a Paying
Guarantor’s recovery of contribution from the other Guarantors hereunder shall be limited,
exclusive of interest, to that amount paid by the Paying Guarantor in excess of such Paying
Guarantor’s Allocable Percentage of all payments made by all Guarantors to Guaranteed Parties under
this Guaranty. Amounts due by way of contribution hereunder shall bear interest, until paid, at a
rate equal to the Base Rate per annum. As used herein, the term “Allocable Percentage” shall mean,
on any date of determination thereof, a fraction, the denominator of which shall be equal to the
number of Guarantors who are parties to this Guaranty on such date and the numerator of which shall
be 1; provided, further, however, that such percentages shall be modified in the event that
contribution from a Guarantor is not possible (whether by reason of insolvency, bankruptcy or
otherwise) by reducing such Guarantor’s Allocable Percentage to zero (or to a lesser equitable
percentage reflecting its ability to pay) and by increasing the Allocable Percentage of all
remaining Guarantors proportionately so that the Allocable Percentages of all Guarantors at all
times equals 100%. Guarantors further covenant and agree for themselves and their respective
successors and assigns, jointly and severally, absolutely and unconditionally, that each shall at
all times indemnify and keep indemnified each of the other Guarantors and hold and save each of
them harmless from and against any and all actions or causes of actions, claims, demands,
liabilities, losses, damages or expenses of whatever kind and nature, including, without limiting
the generality of the foregoing, attorneys’ fees, which any Guarantor shall or may at any time
sustain or incur in any suit or proceeding instituted to enforce the obligations of the Guarantors
under this Guaranty in excess of the amount equal to such Guarantor’s Allocable Percentage of
individual liability under the terms hereof. Each Guarantor liable to a Paying Guarantor for
contribution, whether pursuant to the provisions of this Guaranty or by any law, hereby assigns in
favor of the Guarantor entitled to receive contribution any claim the Guarantor liable to make
contribution has or hereafter may have against Borrower, and authorizes any payments that may be
due on any such claim to be made to the Guarantor entitled to receive contribution for application
toward satisfaction of amounts due by way of contribution.

     As used herein, all references to “Guarantor” or “Guarantors” shall mean each Guarantor and
its successors and assigns (including any receiver, trustee or custodian for a Guarantor or any of
its assets or a Guarantor in its capacity as debtor or debtor-in-possession under the United States
Bankruptcy Code); all references to “Agent” shall mean Agent and its successors and assigns; all references to
“Lenders” shall mean each of the Lenders and their respective successors and assigns; all
references to “Guaranteed

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Parties” shall mean each of the Guaranteed Parties and their respective
successors and assigns; all references to “Borrower” shall mean Borrower and its successors and
assigns (including any receiver, trustee or custodian for Borrower or any of its assets or Borrower
in its capacity as debtor or debtor-in. possession under the United States Bankruptcy Code); all
references to the plural shall also mean the singular, and all references to the singular shall
also mean the plural; and all references to “including” shall mean “including, without limitation.”

     Guarantors and Agent each hereby waives the right to a jury trial in any action, suit,
proceeding or counterclaim arising out of or related to this Guaranty. This Guaranty and the
rights and obligations of the parties hereto shall be governed, construed and interpreted according
to the internal laws of the State of New York. As part of the consideration for the Guaranteed
Parties’ granting credit to Borrower, Guarantor hereby agrees that all actions, suits or
proceedings arising directly or indirectly hereunder may, at the option of Agent, be litigated in
courts having situs within the State of New York, and Guarantor hereby expressly consents to the
jurisdiction of any state or federal court located within said state, and consents that any service
of process in which action or proceedings may be made by personal service upon Guarantor wherever
Guarantor may be then located, or by certified or registered mail directed to Guarantor at
Guarantor’s last known address.

(Signatures begin on following page)

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     IN WITNESS WHEREOF, Guarantors have caused this Guaranty to be signed, sealed and delivered by
its duly authorized officers, on the day and year first above written.

	 	 	 	 	 
	 	GUARANTORS:

APPLICA CONSUMER PRODUCTS, INC., a 

Florida corporation

 	 
	 	By:  	/s/ Terry Polistina
 	 
	 	Name:	  	Terry Polistina 	 
	 	Title:	  	Senior Vice President and Chief
Financial Officer 	 
	 
	 	WD DELAWARE, INC., a Delaware 

corporation

 	 
	 	By:  	/s/ Lisa R. Carstarphen
 	 
	 	Name:	  	Lisa R. Carstarphen 	 
	 	Title:	  	Corporate Secretary 	 
	 
	 	HP INTELLECTUAL CORP., a Delaware 

corporation

 	 
	 	By:  	/s/ Lisa R. Carstarphen
 	 
	 	Name:	  	Lisa R. Carstarphen 	 
	 	Title:	  	Corporate Secretary 	 
	 
	 	WINDMERE HOLDINGS CORPORATION, a 

Delaware corporation

 	 
	 	By:  	/s/ Lisa R. Carstarphen
 	 
	 	Name:	  	Lisa R. Carstarphen 	 
	 	Title:	  	Corporate Secretary 	 
	 
	 	HP DELAWARE, INC., a Delaware

Corporation

 	 
	 	By:  	/s/ Lisa R. Carstarphen
 	 
	 	Name:	  	Lisa R. Carstarphen 	 
	 	Title:	  	Corporate Secretary 	 
	 
	 	HPG LLC, a Delaware limited liability

company

 	 
	 	By:  	/s/ Lisa R. Carstarphen
 	 
	 	Name:	  	Lisa R. Carstarphen 	 
	 	Title:	  	Corporate Secretary 	 
	 

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	 	APPLICA AMERICAS, INC. (f/k/a HP 

AMERICAS, INC.), a Delaware corporation

 	 
	 	By:  	/s/ Lisa R. Carstarphen
 	 
	 	Name:	  	Lisa R. Carstarphen 	 
	 	Title:	  	Corporate Secretary 	 
	 
	 	APPLICA MEXICO HOLDINGS, INC., a 

Delaware corporation

 	 
	 	By:  	/s/ Lisa R. Carstarphen
 	 
	 	Name:	  	Lisa R. Carstarphen 	 
	 	Title:	  	Corporate Secretary 	 
	 
	 	Accepted: 

BANK OF AMERICA, N.A.,

as Agent

 	 
	 	By:  	/s/ Sherry D. Lail
 	 
	 	Name:	  	Sherry D. Lail 	 
	 	Title:	  	Senior Vice President 	 
	 

- 9 -<PAGE>
                                                                   Exhibit 10.19

(AHCCCS LOGO)

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

<TABLE>
<S>                <C>               <C>                              <C>
1. AMENDMENT NO.:  2. CONTRACT NO.:  3. EFFECTIVE DATE OF AMENDMENT:  4. PROGRAM:
        10           YH04-0001-03            OCTOBER 1, 2005              DHCM
</TABLE>

5. CONTRACTOR/PROVIDER NAME AND ADDRESS:
                              HEALTH CHOICE ARIZONA
                           1600 W. BROADWAY, SUITE 260
                            TEMPE, ARIZONA 85282-1136

6.   PURPOSE:
     To amend Sections B, C, D and E and Attachments A, B, F, G, H, I and L.

7.   The above referenced contract is hereby amended as follows:

     A. CHANGES IN REQUIREMENTS: In accordance with Section E, Paragraph 30,
     "Changes" various changes in contract requirements are indicated in this
     contract restatement.

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

NOTE: Please sign and date   Gary L. Callahan, Contract Management Supervisor
      both and return one    AHCCCS Contracts and Purchasing
      original to:           701 E. Jefferson, MD 5700
                             Phoenix, AZ 85034

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

     IN WITNESS WHEREOF THE PARTIES HERETO SIGN THEIR NAMES IN AGREEMENT.

<TABLE>
<S>                                  <C>
9.   NAME OF CONTRACTOR:             10.  ARIZONA HEALTH CARE COST CONTAINMENT
     HEALTH CHOICE ARIZONA                SYSTEM

SIGNATURE OF AUTHORIZED INDIVIDUAL   SIGNATURE:

/s/ Carolyn Rose                     /s/ Gary L. Callahan
----------------------------------   -------------------------------------------
TYPED NAME: CAROLYN ROSE             TYPED NAME: for MICHAEL VEIT
TITLE: CHIEF EXECUTIVE OFFICER       TITLE: CONTRACTS AND PURCHASING
                                            ADMINISTRATOR

DATE 9/30/2005                       DATE: AUG 17 2005
</TABLE>

<PAGE>

                                                      CONTRACT/RFP NO, YH04-0001

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                           <C>
SECTION A: CONTRACT AMENDMENT.............................................     1

SECTION B: CAPITATION RATES...............................................     6

SECTION C: DEFINITIONS....................................................     7

SECTION D: PROGRAM REQUIREMENTS...........................................    15
1.    TERM OF CONTRACT AND OPTION TO RENEW................................    15
2.    ELIGIBILITY CATEGORIES..............................................    16
3.    ENROLLMENT AND DISENROLLMENT........................................    17
4.    ANNUAL ENROLLMENT CHOICE............................................    19
5.    OPEN ENROLLMENT.....................................................    19
6.    AUTO-ASSIGNMENT ALGORITHM...........................................    20
7.    AHCCCS MEMBER IDENTIFICATION CARDS..................................    20
8.    MAINSTREAMING OF AHCCCS MEMBERS.....................................    20
9.    TRANSITION OF MEMBERS...............................................    21
10.   SCOPE OF SERVICES...................................................    21
11.   SPECIAL HEALTH CARE NEEDS...........................................    29
12.   BEHAVIORAL HEALTH SERVICES..........................................    30
13.   AHCCCS POLICY MANUALS...............................................    32
14.   MEDICAID SCHOOL BASED CLAIMING PROGRAM (MSBC).......................    32
15.   PEDIATRIC IMMUNIZATIONS AND THE VACCINE FOR CHILDREN PROGRAM........    33
16.   STAFF REQUIREMENTS AND SUPPORT SERVICES.............................    33
17.   WRITTEN POLICIES, PROCEDURES AND JOB DESCRIPTIONS...................    35
18.   MEMBER INFORMATION..................................................    35
19.   SURVEYS.............................................................    36
20.   CULTURAL COMPETENCY.................................................    36
21.   MEDICAL RECORDS.....................................................    37
22.   ADVANCE DIRECTIVES..................................................    37
23.   QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT (QM/UM)...............    38
24.   PERFORMANCE STANDARDS...............................................    40
25.   GRIEVANCE SYSTEM....................................................    44
26.   QUARTERLY GRIEVANCE SYSTEM REPORTS..................................    44
27.   NETWORK DEVELOPMENT.................................................    45
28.   PROVIDER AFFILIATION TRANSMISSION...................................    47
29.   NETWORK MANAGEMENT..................................................    47
30.   PRIMARY CARE PROVIDER STANDARDS.....................................    48
31.   MATERNITY CARE PROVIDER STANDARDS...................................    49
32.   REFERRAL MANAGEMENT PROCEDURES AND STANDARDS........................    49
33.   APPOINTMENT STANDARDS...............................................    50
34.   FEDERALLY QUALIFIED HEALTH CENTERS (FQHC) AND RHCS..................    51
35.   PROVIDER MANUAL.....................................................    51
36.   PROVIDER REGISTRATION...............................................    52
37.   SUBCONTRACTS........................................................    53
38.   CLAIMS PAYMENT/HEALTH INFORMATION SYSTEM............................    55
39.   SPECIALTY CONTRACTS.................................................    56
40.   HOSPITAL SUBCONTRACTING AND REIMBURSEMENT...........................    57
41.   NURSING FACILITY REIMBURSEMENT......................................    57
42.   PHYSICIAN INCENTIVES/PAY FOR PERFORMANCE............................    58
</TABLE>

                                       -2-

<PAGE>

                                                      CONTRACT/RFP NO. YH04-0001

<TABLE>
<S>                                                                           <C>
43.   MANAGEMENT SERVICES AGREEMENT AND COST ALLOCATION PLAN..............    58
44.   RESERVED............................................................    59
45.   MINIMUM CAPITALIZATION REQUIREMENTS.................................    59
46.   PERFORMANCE BOND OR BOND SUBSTITUTE.................................    60
47.   AMOUNT OF PERFORMANCE BOND..........................................    60
48.   ACCUMULATED FUND DEFICIT............................................    61
49.   ADVANCES, DISTRIBUTIONS, LOANS AND INVESTMENTS......................    61
50.   FINANCIAL VIABILITY STANDARDS/PERFORMANCE GUIDELINES................    61
51.   SEPARATE INCORPORATION..............................................    62
52.   MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP......................    62
53.   COMPENSATION........................................................    62
54.   PAYMENTS TO CONTRACTORS.............................................    64
55.   CAPITATION ADJUSTMENTS..............................................    65
56.   INCENTIVES..........................................................    65
57.   REINSURANCE.........................................................    66
58.   COORDINATION OF BENEFITS/THIRD PARTY LIABILITY......................    69
59.   COPAYMENTS..........................................................    71
60.   MEDICARE SERVICES AND COST SHARING..................................    72
61.   MARKETING...........................................................    72
62.   CORPORATE COMPLIANCE................................................    72
63.   RECORDS RETENTION...................................................    73
64.   DATA EXCHANGE REQUIREMENTS..........................................    73
65.   ENCOUNTER DATA REPORTING............................................    74
66.   ENROLLMENT AND CAPITATION TRANSACTION UPDATES.......................    75
67.   PERIODIC REPORT REQUIREMENTS........................................    75
68.   REQUESTS FOR INFORMATION............................................    76
69.   DISSEMINATION OF INFORMATION........................................    76
70.   OPERATIONAL AND FINANCIAL READINESS REVIEWS.........................    76
71.   OPERATIONAL AND FINANCIAL REVIEWS...................................    76
72.   SANCTIONS...........................................................    77
73.   BUSINESS CONTINUITY AND RECOVERY PLAN...............................    78
74.   TECHNOLOGICAL ADVANCEMENT...........................................    79
75.   PENDING LEGISLATIVE/OTHER ISSUES....................................    79
76.   BALANCED BUDGET ACT OF 1997 (BBA)...................................    80
77.   HEALTHCARE GROUP OF ARIZONA.........................................    80
78.   MEDICARE MODERNIZATION ACT (MMA)....................................    80

SECTION E: CONTRACT CLAUSES...............................................    81
1)    APPLICABLE LAW......................................................    81
2)    AUTHORITY...........................................................    81
3)    ORDER OF PRECEDENCE.................................................    81
4)    CONTRACT INTERPRETATION AND AMENDMENT...............................    81
5)    SEVERABILITY........................................................    81
6)    RELATIONSHIP OF PARTIES.............................................    81
7)    ASSIGNMENT AND DELEGATION...........................................    81
8)    GENERAL INDEMNIFICATION.............................................    81
9)    INDEMNIFICATION -- PATENT AND COPYRIGHT.............................    82
10)   COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS..............    82
11)   ADVERTISING AND PROMOTION OF CONTRACT...............................    82
12)   PROPERTY OF THE STATE...............................................    82
13)   THIRD PARTY ANTITRUST VIOLATIONS....................................    82
14)   RIGHT TO ASSURANCE..................................................    82
15)   TERMINATION FOR CONFLICT OF INTEREST................................    83
</TABLE>

                                       -3-

<PAGE>

                                                      CONTRACT/RFP NO. YH04-000I

<TABLE>
<S>                                                                           <C>
16)   GRATUITIES..........................................................    83
17)   SUSPENSION OR DEBARMENT.............................................    83
18)   TERMINATION FOR CONVENIENCE.........................................    83
19)   TEMPORARY MANAGEMENT/OPERATION OF A CONTRACTOR AND TERMINATION......    83
20)   TERMINATION - AVAILABILITY OF FUNDS.................................    84
21)   RIGHT OF OFFSET.....................................................    84
22)   NON-EXCLUSIVE REMEDIES..............................................    84
23)   NON-DISCRIMINATION..................................................    84
24)   EFFECTIVE DATE......................................................    85
25)   INSURANCE...........................................................    85
26)   DISPUTES............................................................    85
27)   RIGHT TO INSPECT PLANT OR PLACE OF BUSINESS.........................    85
28)   INCORPORATION BY REFERENCE..........................................    85
29)   COVENANT AGAINST CONTINGENT FEES....................................    86
30)   CHANGES.............................................................    86
31)   TYPE OF CONTRACT....................................................    86
32)   AMERICANS WITH DISABILITIES ACT.....................................    86
33)   WARRANTY OF SERVICES................................................    86
34)   NO GUARANTEED QUANTITIES............................................    86
35)   CONFLICT OF INTEREST................................................    86
36)   DISCLOSURE OF CONFIDENTIAL INFORMATION..............................    86
37)   COOPERATION WITH OTHER CONTRACTORS..................................    87
38)   ASSIGNMENT OF CONTRACT AND BANKRUPTCY...............................    87
39)   OWNERSHIP OF INFORMATION AND DATA...................................    87
40)   AHCCCSA RIGHT TO OPERATE CONTRACTOR.................................    87
41)   AUDITS AND INSPECTIONS..............................................    88
42)   LOBBYING............................................................    88
43)   CHOICE OF FORUM.....................................................    88
44)   DATA CERTIFICATION..................................................    88
45)   OFF SHORE PERFORMANCE OF WORK PROHIBITED............................    88

SECTION F: INDEX - PROGRAM REQUIREMENTS AND CONTRACT CLAUSES..............    89

ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS..............................    92
1)    ASSIGNMENT AND DELEGATION OF RIGHTS AND RESPONSIBILITIES............    92
2)    AWARDS OF OTHER SUBCONTRACTS........................................    92
3)    CERTIFICATION OF COMPLIANCE - ANTI-KICKBACK AND LABORATORY TESTING..    92
4)    CERTIFICATION OF TRUTHFULNESS OF REPRESENTATION.....................    92
5)    CLINICAL LABORATORY IMPROVEMENT AMENDMENTS OF 1988..................    92
6)    COMPLIANCE WITH AHCCCSA RULES RELATING TO AUDIT AND INSPECTION......    92
7)    COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS.........................    92
8)    CONFIDENTIALITY REQUIREMENT.........................................    93
9)    CONFLICT IN INTERPRETATION OF PROVISIONS............................    93
10)   CONTRACT CLAIMS AND DISPUTES........................................    93
11)   ENCOUNTER DATA REQUIREMENT..........................................    93
12)   EVALUATION OF QUALITY, APPROPRIATENESS, OR TIMELINESS OF SERVICES...    93
13)   FRAUD AND ABUSE.....................................................    93
14)   GENERAL INDEMNIFICATION.............................................    93
15)   INSURANCE...........................................................    93
16)   LIMITATIONS ON BILLING AND COLLECTION PRACTICES.....................    93
17)   MAINTENANCE OF REQUIREMENTS TO DO BUSINESS AND PROVIDE SERVICES.....    94
18)   NON-DISCRIMINATION REQUIREMENTS.....................................    94
19)   PRIOR AUTHORIZATION AND UTILIZATION REVIEW..........................    94
</TABLE>

                                       -4-

<PAGE>

                                                      CONTRACT/RFP NO. YH04-0001

<TABLE>
<S>                                                                          <C>
20)   RECORDS RETENTION...................................................    94
21)   SEVERABILITY........................................................    94
22)   SUBJECTION OF SUBCONTRACT...........................................    94
23)   TERMINATION OF SUBCONTRACT..........................................    94
24)   VOIDABILITY OF SUBCONTRACT..........................................    95
25)   WARRANTY OF SERVICES................................................    95
26)   OFF SHORE PERFORMANCE OF WORK PROHIBITED............................    95
ATTACHMENT B: MINIMUM NETWORK STANDARDS (BY GEOGRAPHIC SERVICE AREA)......    96

ATTACHMENT F: PERIODIC REPORT REQUIREMENTS................................   100

ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM...................................   104

ATTACHMENT H(1): ENROLLEE GRIEVANCE SYSTEM STANDARDS AND POLICY...........   107

ATTACHMENT H(2) PROVIDER CLAIM DISPUTE STANDARDS AND POLICY...............   112

ATTACHMENT I: ENCOUNTER SUBMISSION REQUIREMENTS...........................   114

ATTACHMENT L: COST SHARING COPAYMENTS.....................................   117
</TABLE>

                                       -5-

<PAGE>

CAPITATION RATES                                      CONTRACT/RFP NO. YH04-0001

SECTION B: CAPITATION RATES

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

SEE ATTACHED.

                                       -6-

<PAGE>

                   ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM
                      CAPITATION RATE SUMMARY - ACUTE RATES
                              HEALTH CHOICE ARIZONA
                             CYE'06(10/1/05-9/30/05)

<TABLE>
<CAPTION>
                                     TANF      TANF      TANF      TANF     TANF      SSI      SSI
TITLE XIX RATES:                   <1, M/F  1-13, M/F  14-44, F  14-44,M  45+, M/F   W/MED   W/O MED
----------------                   -------  ---------  --------  -------  --------  -------  -------
<S> <C>                            <C>      <C>        <C>       <C>      <C>       <C>      <C>
 4  Apache/Coconino/Mohave/Navajo  $437.59   $105.41    $204.32  $150.69   $368.46  $310.74  $636.53
 8  Gila/Pinal                     $433.76   $105.05    $181.64  $128.81   $362.34  $279.42  $564,65
10  Pima                           $428.12   $102.00    $181.78  $123.11   $369.09  $297.21  $615.92
12  Maricopa                       $430.16   $102.38    $182.41  $127.06   $369.46  $273.14  $553.40

<CAPTION>
                                            MATERNITY
                                            DELIVERY                     MED HOSPITAL
TITLE XIX RATES:                     SFP   SUPPLEMENT  NON-MED    MED     SUPPLEMENT
----------------                   ------  ----------  -------  -------  ------------
<S> <C>                            <C>     <C>         <C>      <C>      <C>
 4  Apache/Coconino/Mohave/Navajo  $15.92   $5,707,51  $463.07  $829.25   $11,298.83
 8  Gila/Pinal                     $17.67   $6,038.29  $426.60  $836.23   $10,021.35
10  Pima                           $14,16   $5,911.62  $381.27  $831.66   $10,415,89
12  Maricopa                       $18.63   $6,089.86  $429.89  $841.02   $ 9,902.59
</TABLE>

<TABLE>
<CAPTION>
                                      TANF       TANF      TANF      TANF     TANF      SSI      SSI
PPC Rates:                          <1, M/F   1-13, M/F  14-44, F  14-44,M  45+, M/F   W/MED   W/O MED  NON-MED     MED
----------                         ---------  ---------  --------  -------  --------  -------  -------  -------  ---------
<S> <C>                            <C>        <C>        <C>       <C>      <C>       <C>      <C>      <C>      <C>
 4  Apache/Coconino/Mohave/Navajo  $  762.80    $41.29    $150.39  $122.52   $283.36   $40.89   $90.61  $629.38  $1,575.24
 8  Gila/Pinal                     $  762.80    $41.29    $150.39  $122.52   $283.36   $40.89   $90.61  $590.91  $1,558.69
10  Pima                           $1,241.25    $41.29    $156.42  $127.43   $294.68   $31.96   $85.48  $640.46  $1,597.79
12  Maricopa                       $1,236.65    $41.29    $156.42  $127.43   $294.68   $32.08   $85.48  $573.80  $1,546.92
</TABLE>

<TABLE>
<CAPTION>
                                       HIFA       HIFA       HIFA      HIV/AIDS
OTHER RATES:                         14-44, F   14-44, M   45+, M/F   SUPPLEMENT
------------                         --------   --------   --------   ----------
<S>  <C>                             <C>        <C>        <C>        <C>
 4   Apache/Coconino/Mohave/Navajo    $229.49    $162.29    $394.63     $755.46
 8   Gila/Pinai                       $204.22    $138.74    $388.55     $755.46
10   Pima                             $203.74    $131.93    $418.75     $755.46
12   Maricopa                         $205.19    $136.91    $396.73     $755.46
</TABLE>

*    Rates have been adjusted for $35,000 Reinsurance Deductible

<PAGE>

DEFINITIONS                                           CONTRACT/RFP NO. YH04-0001

SECTION C: DEFINITIONS

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

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

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

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

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

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

AHCCCS BENEFITS            See "COVERED SERVICES".

AHCCCS MEMBER              See "MEMBER".

AHCCCSA                    Arizona Health Care Cost Containment System
                           Administration.

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

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

AMPM                       AHCCCS Medical Policy Manual.

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

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

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

A.R.S.                     Arizona Revised Statutes.

BBA                        The Balanced Budget Act of 1997.

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

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

                                       -7-

<PAGE>

DEFINITIONS                                           CONTRACT/RFP NO. YH04-0001

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

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

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

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

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

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

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

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

CONTRACT SERVICES          See "COVERED SERVICES".

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

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

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

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

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

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

                                       -8-

<PAGE>

DEFINITIONS                                           CONTRACT/RFP NO. YH04-0001

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

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

CY                         See "CONTRACT YEAR".

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

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

DIRECTOR                   The Director of AHCCCSA.

DISCLOSING ENTITY          An AHCCCS provider or a fiscal agent.

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

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

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

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

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

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

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

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

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

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

                                       -9-

<PAGE>

DEFINITIONS                                           CONTRACT/RFP NO. YH04-0001

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

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

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

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

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

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

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

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

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

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

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

HEALTH PLAN                See "CONTRACTOR".

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

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

                                      -10-

<PAGE>

DEFINITIONS                                           CONTRACT/RFP NO. YH04-0001

<TABLE>
<S>                        <C>
IBNR                       Incurred But Not Reported liability for services
                           rendered for which claims have not been received.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                      -11-

<PAGE>

DEFINITIONS                                           CONTRACT/RFP NO. YH04-0001

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

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

PMMIS                      AHCCCSA's Prepaid Medical Management Information
                           System.

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

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

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

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

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

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

RATE CODE                  Eligibility classification for capitation payment
                           purposes.

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

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

                                      -12-

<PAGE>

DEFINITIONS                                           CONTRACT/RFP NO. YH04-0001

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

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

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

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

SCOPE OF SERVICES          See "COVERED SERVICES".

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

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

STATE                      The State of Arizona.

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

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

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

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

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

                                      -13-

<PAGE>

DEFINITIONS                                           CONTRACT/RFP NO. YH04-0001

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

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

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

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

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

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

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

YEAR                       See "Contract Year".
</TABLE>

[END OF DEFINITIONS]

                                      -14-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

SECTION D: PROGRAM REQUIREMENTS

1. TERM OF CONTRACT AND OPTION TO RENEW

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

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

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

CONTRACTOR'S NOTICE OF INTENT NOT TO RENEW: If the Contractor chooses not to
renew this contract, the Contractor may be liable for certain costs associated
with the transition of its members to a different Contractor. If the Contractor
provides AHCCCSA written notice of its intent not to renew this contract at
least 180 days before its expiration, this liability for transition costs may be
waived by AHCCCSA.

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

a.   Notification of subcontractors and members.

b.   Payment of all outstanding obligations for medical care rendered to
     members.

c.   Until AHCCCSA is satisfied that the Contractor has paid all such
     obligations, the Contractor shall provide the following reports to AHCCCSA:

     (1)  A monthly claims aging report by provider/creditor including IBNR
          amounts;

     (2)  A monthly summary of cash disbursements;

     (3)  Copies of all bank statements received by the Contractor.

d.   Such reports shall be due on the fifth day of each succeeding month for the
     prior month.

e.   In the event of termination or suspension of the contract by AHCCCSA, such
     termination or suspension shall not affect the obligation of the Contractor
     to indemnify AHCCCSA for any claim by any third party against the State or
     AHCCCSA arising from the Contractor's performance of this contract and for
     which the Contractor would otherwise be liable under this contract.

f.   Any dispute by the Contractor, with respect to termination or suspension of
     this contract by AHCCCSA, shall be exclusively governed by the provisions
     of Section E, Paragraph 26, Disputes.

                                      -15-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

2. ELIGIBILITY CATEGORIES

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

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

TITLE XIX

     1931 (ALSO REFERRED TO AS TANF): Eligible individuals and families under
     the 1931 provision of the Social Security Act, with household income levels
     at or below 100% of the FPL.

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

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

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

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

     BREAST AND CERVICAL CANCER TREATMENT PROGRAM (BCCTP): Eligible individuals
     under the Title XIX expansion program for women with income up to 250% of
     the FPL, who are diagnosed with and need treatment for breast and/or
     cervical cancer or cervical lesions and are not eligible for other Title
     XIX programs providing full Title XIX services. Eligible members cannot
     have other creditable health insurance coverage, including Medicare.

TITLE XIX WAIVER GROUP

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

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

                                      -16-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

TITLE XXI

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

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

3. ENROLLMENT AND DISENROLLMENT

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

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

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

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

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

                                      -17-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

HEALTH PLAN CHOICE

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

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

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

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

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

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

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

NEWBORNS: Newborns, born to AHCCCS eligible mothers enrolled at the time of the
child's birth, will be enrolled with the mother's contractor, when newborn
notification is received by AHCCCSA. The Contractor is responsible for notifying
AHCCCSA of a child's birth to an enrolled member. Capitation for the newborn
will begin on the date notification is received by AHCCCSA (except for cases of
births during prior period coverage). The effective date of AHCCCS eligibility
will be the newborn's date of birth, and the Contractor is responsible for all
covered services to the newborn whether or not AHCCCSA has received notification
of the child's birth. AHCCCSA is currently available to receive notification 24
hours a day, 7 days a week via phone

                                      -18-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

or the AHCCCS website. Eligible mothers of newborns are sent a letter advising
them of their right to choose a different contractor for their child; the date
of the change will be the date of processing the request from the mother. If the
mother does not request a change, the child will remain with the mother's
contractor.

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

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

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

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

4.   ANNUAL ENROLLMENT CHOICE

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

5.   OPEN ENROLLMENT

In the event that AHCCCSA does not award a CYE '04 contract to an incumbent
contractor, AHCCCSA will hold an open enrollment for those members enrolled with
the exiting contractor. If those members do not elect to choose a contractor,
they will be auto assigned. In addition to open enrollment, AHCCCSA will make

                                      -19-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

changes to both annual enrollment choice materials and new enrollee materials
prior to October 1, 2003 to reflect the change in available contractors. The
auto assignment algorithm will be adjusted to exclude auto assignment of new
enrollees to exiting contractors(s). The exact dates for the open enrollment and
other changes described above have not yet been determined, but will be
communicated when they are finalized.

6.   AUTO-ASSIGNMENT ALGORITHM

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

7.   AHCCCS MEMBER IDENTIFICATION CARDS

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

8.   MAINSTREAMING OF AHCCCS MEMBERS

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

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

a.   Denying or not providing a member any covered service or access to an
     available facility.

b.   Providing to a member any covered service which is different, or is
     provided in a different manner or at a different time from that provided to
     other members, other public or private patients or the public at large,
     except where medically necessary.

c.   Subjecting a member to segregation or separate treatment in any manner
     related to the receipt of any covered service; restricting a member in any
     way in his or her enjoyment of any advantage or privilege enjoyed by others
     receiving any covered service.

d.   The assignment of times or places for the provision of services on the
     basis of the race, color, creed, religion, age, sex, national origin,
     ancestry, marital status, sexual preference, income status, AHCCCS
     membership, or physical or mental handicap of the participants to be
     served.

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

                                      -20-

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

9. TRANSITION OF MEMBERS

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

a.   Members with significant medical conditions such as a high-risk pregnancy
     or pregnancy within the last 30 days, the need for organ or tissue
     transplantation, chronic illness resulting in hospitalization or nursing
     facility placement, etc.;

b.   Members who are receiving ongoing services such as dialysis, home health,
     chemotherapy and/or radiation therapy or who are hospitalized at the time
     of transition;

c.   Members who have received prior authorization for services such as
     scheduled surgeries, out-of-area specialty services, nursing home
     admission;

d.   Prescriptions, DME and medically necessary transportation ordered for the
     transitioning member by the relinquishing contractor; and

e.   Medical records of the transitioning member (the cost, if any, of
     reproducing and forwarding medical records shall be the responsibility of
     the relinquishing AHCCCS contractor).

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

10. SCOPE OF SERVICES

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

                                      -21-

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

on a service on the basis of criteria such as medical necessity; or for
utilization control, provided the services furnished can reasonably be expected
to achieve their purpose. [42 CFR 438.210(a)(3)]

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

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

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

AMBULATORY SURGERY AND ANESTHESIOLOGY: The Contractor shall provide surgical
services for either emergency or scheduled surgeries when provided in an
ambulatory or outpatient setting such as a freestanding surgical center or a
hospital based outpatient surgical setting.

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

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

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

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

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

                                      -22-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

eligibility criteria, referral practices, and contractor-CRS coordination
issues, refer to the CRS Policy and Procedures Manual and the ACOM, including
Section 409 "Notices of Action."

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

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

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

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

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

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

                                      -23-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

EMERGENCY SERVICES: The Contractor shall have and/or provide the following as a
minimum:

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

     b.   All medical services necessary to rule out an emergency condition;

     c.   Emergency transportation; and

     d.   Member access by telephone to a physician, registered nurse, physician
          assistant or nurse practitioner for advice in emergent or urgent
          situations, 24 hours per day, 7 days per week.

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

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

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

     1.   A member had an emergency medical condition, including cases in which
          the absence of medical attention would not have resulted in the
          outcomes identified in the definition of emergency medical condition
          CFR 438.114.

     2.   A representative of the Contractor (an employee or subcontracting
          provider) instructs the member to seek emergency medical services.

Additionally, the Contractor may not:

     1.   Limit what constitutes an emergency medical condition as defined in
          CFR 438.114, on the basis of lists of diagnoses or symptoms.

     2.   Refuse to cover emergency services based on the failure of the
          provider, hospital, or fiscal agent to notify the Contractor of the
          member's screening and treatment within 10 calendar days of
          presentation for emergency services. This notification stipulation is
          only related to the provision of emergency services.

                                      -24-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

     3.   Require notification of Emergency Department treat and release visits
          as a condition of payment unless the plan has prior approval of the
          AHCCCS Administration.

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

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

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

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

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

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

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

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

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

                                      -25-

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

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

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

Upon written request, the Contractor may obtain laboratory test data on members
from a freestanding laboratory or hospital-based laboratory subject to the
requirements specified in A.R.S. Section 36-2903(R) and (S). The data shall be
used exclusively for quality improvement activities and health care outcome
studies required and/or approved by the Administration.

MATERNITY: The Contractor shall provide pre-conception counseling, pregnancy
identification, prenatal care, treatment of pregnancy related conditions, labor
and delivery services, and postpartum care for members. Services may be provided
by physicians, physician assistants, nurse practitioners, or certified nurse
midwives. Members may select or be assigned to a PCP specializing in obstetrics.
All members, anticipated to have a low-risk delivery, may elect to receive labor
and delivery services in their home, if this setting is included in the
allowable settings of the Contractor and the Contractor has providers in its
network that offer home labor and delivery services. All members, anticipated to
have a low-risk prenatal course and delivery, may elect to receive prenatal
care, labor and delivery and postpartum care provided by licensed midwives, if
these providers are in the Contractor's network. All licensed midwife labor and
delivery services must be provided in the member's home, as licensed midwives do
not have admitting privileges in hospitals or AHCCCS registered freestanding
birthing centers. Members receiving maternity services from a licensed midwife
must also be assigned to a PCP for other health care and medical services. The
Contractor shall allow women and their newborns to receive up to 48 hours of
inpatient hospital care after a routine vaginal delivery and up to 96 hours of
inpatient care after a cesarean delivery. The attending health care provider, in
consultation with the mother, may discharge the mother or newborn prior to the
48-hour minimum length of stay. A normal newborn may

                                      -26-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

be granted an extended stay in the hospital of birth when the mother's continued
stay in the hospital is beyond the 48 or 96 hour stay.

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

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

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

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

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

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

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

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

PODIATRY: The Contractor shall provide podiatry services to include
bunionectomies, casting for the purpose of constructing or accommodating
orthotics, medically necessary orthopedic shoes that are an integral part of a

                                      -27-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

brace, and medically necessary routine foot care for patients with a severe
systemic disease which prohibits care by a nonprofessional person.

POST-STABILIZATION CARE SERVICES COVERAGE AND PAYMENT: Pursuant to 42 CFR
438.114, 422.113(c) and 422.133, the following conditions apply with respect to
coverage and payment of emergency and of post-stabilization care services,
except where otherwise noted in the contract:

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

     1.   Post-stabilization care services that were pre-approved by the
          Contractor; or,

     2.   Post-stabilization care services were not pre-approved by the
          Contractor because the Contractor did not respond to the treating
          provider's request for pre-approval within one hour after being
          requested to approve such care or could not be contacted for
          pre-approval.

     3.   The Contractor representative and the treating physician cannot reach
          agreement concerning the member's care and a contractor physician is
          not available for consultation. In this situation, the Contractor must
          give the treating physician the opportunity to consult with a
          contractor physician and the treating physician may continue with care
          of the patient until a contractor physician is reached or one of the
          criteria in CFR 422.113(c)(3) is met.

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

     1.   A contractor physician with privileges at the treating hospital
          assumes responsibility for the member's care;

     2.   A contractor physician assumes responsibility for the member's care
          through transfer;

     3.   A contractor representative and the treating physician reach an
          agreement concerning the member's care; or

     4.   The member is discharged.

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

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

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

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

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

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

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

11. SPECIAL HEALTH CARE NEEDS

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

For members with special health care needs determined to need a specialized
course of treatment or regular care monitoring, the Contractor must have
procedures in place to allow members to directly access a specialist

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

(for example through a standing referral or an approved number of visits) as
appropriate for the member's condition and identified needs. [42 CFR
438.208(c)(4)]

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

The American Academy of Pediatrics (AAP) describes care from a medical home as:

     -    Accessible

     -    Continuous

     -    Coordinated

     -    Family-centered

     -    Comprehensive

     -    Compassionate

     -    Culturally effective

12. BEHAVIORAL HEALTH SERVICES

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

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

a.   Behavior Management (behavioral health personal assistance, family support,
     peer support)

b.   Case Management Services

c.   Emergency/Crisis Behavioral Health Services

d.   Emergency Transportation

e.   Evaluation and Screening

f.   Group Therapy and Counseling

g.   Individual Therapy and Counseling

h.   Family Therapy and Counseling

i.   Inpatient Hospital

j.   Inpatient Psychiatric Facilities (residential treatment centers and
     sub-acute facilities)

k.   Institutions for Mental Diseases (with limitations)

l.   Laboratory and Radiology Services for Psychotropic Medication Regulation
     and Diagnosis

m.   Non-Emergency Transportation

n.   Partial Care (Supervised day program, therapeutic day program, and medical
     day program)

o.   Psychosocial Rehabilitation (living skills training; health promotion;
     pre-job training, education and development; job coaching and employment
     support)

p.   Psychotropic Medication

q.   Psychotropic Medication Adjustment and Monitoring

r.   Respite Care (with limitations)

s.   Therapeutic foster care services

REFERRALS: As specified in Section D, Paragraph 10, Scope of Services, EPSDT,
the Contractor must provide developmental/behavioral health screenings for
members up to 21 years of age in compliance with the

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

AHCCCS periodicity schedule. The Contractor shall ensure the initiation and
coordination of behavioral health referrals of these members to the RBHA when
determined necessary through the screening process. The Contractor is
responsible for RBHA referral and follow-up collaboration, as necessary, for
other members identified as needing behavioral health evaluation and treatment.
Members may also access the RBHA system for evaluation by self-referral or be
referred by schools, State agencies or other service providers. The Contractor
is responsible for providing transportation to a member's first RBHA evaluation
appointment if a member is unable to provide his/her own transportation.

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

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

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

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

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

     1.   Guidelines for when a transition of the member to the RBHA for ongoing
          treatment is indicated.

     2.   Protocols for notifying the RBHA of the member's transfer, including
          reason for transfer, diagnostic information, and medication history.

     3.   Protocols and guidelines for the transfer of medical records,
          including but not limited to which parts of the medical record are to
          be copied, timeline for making the medical record available to the
          RBHA, observance of confidentiality of the member's medical record,
          and protocols for responding to RBHA requests for additional medical
          record information.

     4.   Protocols for transition of prescription services, including but not
          limited to notification to the RBHA of the member's current
          medications and timeframes for dispensing and refilling medications
          during the transition period. This coordination must ensure at a
          minimum, that the member does not run out of prescribed medications
          prior to the first appointment with a RBHA prescriber and that all
          relevant member pertinent medical information as outlined above and,
          including the reason for transfer is forwarded to the receiving RBHA
          prescriber prior to the member's first scheduled appointment with the
          RBHA prescriber.

     5.   Contractor activities to monitor to ensure that members are
          appropriately transitioned to the RBHA for care.

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

13. AHCCCS POLICY MANUALS

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

14. MEDICAID SCHOOL BASED CLAIMING PROGRAM (MSBC)

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

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

treatment goals between the Contractor and the member's school or school
district is required and should be used to enhance the services provided to
members.

15.  PEDIATRIC IMMUNIZATIONS AND THE VACCINE FOR CHILDREN PROGRAM

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

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

16.  STAFF REQUIREMENTS AND SUPPORT SERVICES

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

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

At a minimum, the following staff is required:

a.   A full-time ADMINISTRATOR/CEO/COO or designee must be available during
     working hours to fulfill the responsibilities of the position and to
     oversee the entire operation of the contractor. The Administrator shall
     devote sufficient time to the Contractor's operations to ensure adherence
     to program requirements and timely responses to AHCCCS Administration.

b.   A MEDICAL DIRECTOR who shall be an Arizona-licensed physician. The Medical
     Director shall be actively involved in all-major clinical programs and
     QM/UM components of the Contractor. The Medical Director shall devote
     sufficient time to the Contractor to ensure timely medical decisions,
     including after-hours consultation as needed.

c.   A CHIEF FINANCIAL OFFICER/CFO who is available at all times to fulfill the
     responsibilities of the position and to oversee the budget and accounting
     systems implemented by the Contractor.

d.   A QUALITY MANAGEMENT/ COORDINATOR who is an Arizona-licensed registered
     nurse, physician or physician's assistant.

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

e.   A UTILIZATION MANAGEMENT COORDINATOR who is an Arizona-licensed registered
     nurse, physician or physician's assistant.

f.   A MATERNAL HEALTH/EPSDT COORDINATOR who shall be an Arizona-licensed
     nurse, physician or physician's assistant; or have a Master's degree in
     health services, public health or health care administration or other
     related field.

g.   A BEHAVIORAL HEALTH COORDINATOR who shall be a behavioral health
     professional as described in Health Services Rule R9-20. The Behavioral
     Health Coordinator shall devote sufficient time to ensure that the
     Contractor's behavioral health referral and coordination activities are
     implemented per AHCCCSA requirements.

h.   PRIOR AUTHORIZATION STAFF to authorize health care 24 hours per day, 7 days
     per week. This staff shall include an Arizona-licensed nurse, physician or
     physician's assistant. The staff will work under the direction of an
     Arizona-licensed registered nurse, physician, or physician's assistant.

i.   CONCURRENT REVIEW STAFF to conduct inpatient concurrent review. This staff
     shall consist of an Arizona-licensed nurse, physician, physician's
     assistant. The staff will work under the direction of an Arizona-licensed
     registered nurse, physician or physician's assistant.

j.   MEMBER SERVICES MANAGER AND STAFF to coordinate communications with
     members and act as member advocates. There shall be sufficient Member
     Service staff to enable members to receive prompt resolution to their
     inquiries/problems, and to meet the Contractor's standards for resolution,
     telephone abandonment rates and telephone hold times.

k.   PROVIDER SERVICES MANAGER AND STAFF to coordinate communications between
     the Contractor and its subcontractors. There shall be sufficient Provider
     Services staff to enable providers to receive prompt resolution to their
     problems or inquiries and appropriate education about participation in the
     AHCCCS program.

l.   A CLAIMS ADMINISTRATOR AND CLAIMS PROCESSORS to ensure the timely and
     accurate processing of original claims, resubmissions and overall
     adjudication of claims.

m.   ENCOUNTER PROCESSORS to ensure the timely and accurate processing and
     submission to AHCCCSA of encounter data and reports.

n.   A GRIEVANCE MANAGER who is responsible for oversight of the Contractor's
     grievance system for members and providers.

o.   A COMPLIANCE OFFICER who will implement and oversee the Contractor's
     compliance program. The compliance officer shall be an on-site management
     official, available to all employees, with designated and recognized
     authority to access records and make independent referrals to the AHCCCSA,
     Office of Program Integrity. See Paragraph 62, Corporate Compliance, for
     more information.

p.   CONTRACTOR STAFF sufficient to implement and oversee compliance with both
     the Contractor's Cultural Competency Plan and the ACOM Cultural Competency
     Policy, and to oversee compliance with all AHCCCS requirements pertaining
     to limited English proficiency (LEP).

q.   CLERICAL AND SUPPORT STAFF to ensure appropriate functioning of the
     Contractor's operation.

r.   BUSINESS CONTINUITY PLANNING COORDINATOR as noted in the ACOM Business
     Continuity and Recovery Plan Policy

s.   A PHARMACY COORDINATOR/DIRECTOR to oversee and administer the prescription
     drug and pharmacy services benefit. If the Pharmacy Coordinator/Director is
     not an Arizona licensed pharmacist, the services of a pharmacist may be
     obtained through a contract with a prescription benefit management company
     or a consultant.

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

Administrator
Medical Director
Chief Financial Officer
Maternal Health/ EPSDT Coordinator
Member Services Manager
Provider Services Manager
Claims Administrator
Quality Management/Utilization Management

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

Grievance Manager    Coordinator
Compliance Officer   Behavioral Health Coordinator

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

17. WRITTEN POLICIES, PROCEDURES AND JOB DESCRIPTIONS

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

18. MEMBER INFORMATION

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

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

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

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

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

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

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

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

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

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

a. An updated member handbook at no cost to the member

b. The network description as described in the ACOM Member Information Policy

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

19. SURVEYS

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

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

20. CULTURAL COMPETENCY

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

21. MEDICAL RECORDS

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

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

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

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

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

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

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

Information related to fraud and abuse may be released so long as protected
HIV-related information is not disclosed (A.R.S. Section 36-664(1)).

22. ADVANCE DIRECTIVES

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

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

     (1)  Maintaining written policies that address the rights of adult members
          to make decisions about medical care, including the right to accept or
          refuse medical care, and the right to execute an advance directive. If
          the agency/organization has a conscientious objection to carrying out
          an advance directive, it must be explained in policies. (A health care
          provider is not prohibited from making such objection when made
          pursuant to A.R.S. Section 36-3205.C.I.)

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

     (2)  Provide written information to adult members regarding each
          individual's rights under State law to make decisions regarding
          medical care, and the health care provider's written policies
          concerning advance directives (including any conscientious
          objections). [42 CFR 438.6(i}(3)]

     (3)  Documenting in the member's medical record whether or not the adult
          member has been provided the information and whether an advance
          directive has been executed.

     (4)  Not discriminating against a member because of his or her decision to
          execute or not execute an advance directive, and not making it a
          condition for the provision of care.

     (5)  Providing education to staff on issues concerning advance directives
          including notification of direct care providers of services, such as
          home health care and personal care, of any advanced directives
          executed by members to whom they are assigned to provide services.

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

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

     (1)  A member's rights under State law, including a description of the
          applicable State law

     (2)  The organization's policies respecting the implementation of those
          rights, including a statement of any limitation regarding the
          implementation of advance directives as a matter of conscience.

     (3)  The member's right to file complaints directly with AHCCCSA.

     (4)  Changes to State law as soon as possible, but no later than 90 days
          after the effective date of the change. [42 CFR 438.6(i)(4)]

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

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

1.   Conducting Performance Improvement Projects (PIPs);

2.   QM monitoring and evaluation activities;

3.   Investigation, analysis, tracking and trending of quality of care issues,
     abuse and/or complaints that includes:

     a.   Acknowledgement letter to the originator of the concern

     b.   Documentation of all steps utilized during the investigation and
          resolution process

     c.   Follow-up with the member to assist in ensuring immediate health care
          needs are met

     d.   Closure/resolution letter that provides sufficient detail to ensure
          that the member has an understanding of the resolution of their issue,
          any responsibilities they have in ensuring all covered, medically
          necessary care needs are met, and a contact name/telephone number to
          call for assistance or to express any unresolved concerns

     e.   Documentation of implemented corrective action plan(s) or action(s)
          taken to resolve the concern

4.   AHCCCS mandated performance measures; and

5.   Credentialing, recredentialing and provisional credentialing processes for
     provider and organizations [42 CFR 438.206(b)(6)].

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

AHCCCS has established a uniform credentialing, recredentialing and provisional
credentialing policy. The Contractor shall demonstrate that its providers are
credentialed [42 CFR 438.214] and:

     a.   Shall follow a documented process for credentialing and
          recredentialing of providers who have signed contracts or
          participation agreements with the Contractor;

     b.   Shall not discriminate against particular providers that serve
          high-risk populations or specialize in conditions that require costly
          treatment; and

     c.   Shall not employ or contract with providers excluded from
          participation in Federal health care programs.

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

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

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

1.   Pharmacy Management; including the evaluation, reporting, analysis and
     interventions based on the data and reported through the UM Committee

2.   Prior authorization and Referral Management;

     For the processing of requests for initial and continuing authorizations of
     services the Contractor shall:

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

          b)   Consult with the requesting provider when appropriate [42 CFR
               438.210(b)(2)]

          c)   Monitor and ensure that all enrollees with special health care
               needs have direct access to care

3. Development and/or Adoption of Practice Guidelines [42 CFR 438.236(b)], that

          a)   Are based on valid and reliable clinical evidence or a consensus
               of health care professionals in the particular field;

          b)   Consider the needs of the Contractor's members;

          c)   Are adopted in consultation with contracting health care
               professionals;

          d)   Are reviewed and updated periodically as appropriate;

          e)   Are disseminated by Contractors to all affected providers and,
               upon request, to enrollees and potential enrollees [42
               CFR 438.236(c)]; and

          f)   Provide a basis for consistent decisions for utilization
               management, member education, coverage of services, and other
               areas to which the guidelines apply [42 CFR 438.236(d)]

4. Concurrent review;

          a)   Consistent application of review criteria; Provide a basis for
               consistent decisions for utilization management, coverage of
               services, and other areas to which the guidelines apply;

          b)   Discharge planning

5.   Continuity and coordination of care;

6.   Monitoring and evaluation of over and/or under utilization of services [42
     CFR 438-240(b)(3)];

7.   Evaluation of new medical technologies, and new uses of existing
     technologies;

8.   Disease Management Program that reports results and provides for analysis
     of the program through the UM Committee; and

9.   Quarterly Utilization Management Report (details in the AMPM)

                                      -39-

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

24. PERFORMANCE STANDARDS

ADMINISTRATIVE MEASURES:

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

The Contractor shall meet the following standards for its member services and
centralized provider telephone line statistics. All calls to the line shall be
included in the measure.

          a.   The Monthly Average Abandonment Rate shall be 5% or less;

          b.   First Contact Call Resolution shall be 70% or better; and

          c.   The Monthly Average Service Level shall be 75% or better.

The Monthly Average Abandonment Rate (AR) is:

                  Number of calls abandoned in a 24-hour period
                  --------------------------------------------------
                  Total number of calls received in a 24-hour period

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

First Contact Call Resolution Rate (FCCR) is:

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

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

The Monthly Average Service Level (MASL) is:

             Calls answered within 45 seconds for the month reported
   --------------------------------------------------------------------------
   Total of month's answered calls + month's abandoned calls + (if available)
                      month's calls receiving a busy signal

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

On a monthly basis the measures are to be reported for both the Member Services
and Provider telephone lines. For each of the Administrative Measures a. through
c., the Contractor shall also report the number of days in the reporting period
that the standard was not met. The Contractor shall include in the report the
instances of down time for the centralized telephone lines, the dates of
occurrence and the length of time they were out of service. The reports should
be sent to the Contractor's assigned Operations and Compliance Officer in the

                                      -40-

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

Health Plan Operations Unit of the Division of Health Care Management. The
deadline for submission of the reports is the 15th day of the month following
the reporting period (or the first business day following the 15th). Back up
documentation for the report, to the level of measured segments in the 24-hour
period, shall be retained for a rolling 12-month period. AHCCCSA will review the
performance measure calculation procedures and source data for this report.

PERFORMANCE MEASURES:

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

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

AHCCCS has established three levels of performance:

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

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

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

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

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

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

                                      -41-

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

In addition, AHCCCS has established standards for the following measures:

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

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

                   ACUTE-CARE CONTRACTOR PERFORMANCE STANDARDS

<TABLE>
<CAPTION>
                                          CYE 06
                                   Minimum Performance   CYE 06          Benchmark
      Performance Indicator              Standard         Goal    (Healthy People Goals)
--------------------------------   -------------------   ------   ----------------------
<S>                                <C>                   <C>      <C>
Immunization of Two-year-olds
   4:3:1 Series                            80%             83%              90%
   4:3:1:3:3 Series                        70%             75%              90%
   DTaP - 4 doses                          83%             86%              90%
   Polio - 3 doses                         89%             90%              90%
   MMR - 1 dose                            90%             90%              90%
   Hib - 3 doses                           76%             77%              90%
   HBV - 3 doses                           82%             88%              90%
   Varicella -1 dose                       77%             81%              90%
Adolescent Immunizations                   60%             63%              90%
Dental Visits                              49%             56%              56%
Well-child Visits 15 Months                70%             72%              90%
Well-child Visits 3 - 6 Years              55%             67%              80%
Adolescent Well-care Visits                32%             34%              50%
EPSDT Participation                        58%             80%              80%
Children's Access to PCPs                  79%             82%              97%
Cervical Cancer Screening                  61%             63%              90%
Breast Cancer Screening                    57%             61%              70%
Adult Preventive/Ambulatory Care           80%             82%              96%
Timeliness of Prenatal Care                62%             68%              90%
</TABLE>

QUALITY IMPROVEMENT:

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

A. QUALITY ASSESSMENT PROGRAM:

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

                                      -42-

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

1.   The program shall be designed to achieve, through ongoing measurements and
     intervention, significant improvement, sustained over time, in clinical
     care and non-clinical care areas that are expected to have a favorable
     effect on health outcomes and member satisfaction.

2.   The Contractor must [42 CFR 438.240(b)(2) and (c)]:

     a.   Measure and report to the State its performance, using standard
          measures required by the State, or as required by CMS,

     b.   Submit to the State, data specified by the State, that enables the
          State to measure the Contractor's performance; or

     c.   Perform a combination of the activities.

3.   The Contractor must have in effect mechanisms to detect both
     underutilization and overutilization of services.

4.   The Contractor must have in effect mechanisms to assess the quality and
     appropriateness of care furnished to members with special health care
     needs.

5.   The Contractor must have in place a process for internal monitoring of
     Performance Measure rates, using standard methodology established or
     adopted by AHCCCS, for each required Performance Measure. The Contractor's
     Quality Assessment/Performance Improvement Program will report its
     performance on an ongoing basis to its administration. It also will report
     this Performance Measure data to AHCCCSA in conjunction with its Quarterly
     EPSDT Progress Report, according to a format developed by AHCCCS.

B.   PERFORMANCE IMPROVEMENT PROGRAM:

The Contractor shall have an ongoing program of performance improvement projects
that focus on clinical and non-clinical areas, and that involve the following
[42 CFR 438.240(b)(l) and (d)(l)]:

     1.   Measurement of performance using objective quality indicators.

     2.   Implementation of system interventions to achieve improvement in
          quality

     3.   Evaluation of the effectiveness of the interventions.

     4.   Planning and initiation of activities for increasing or sustaining
          improvement.

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

C.   DATA COLLECTION PROCEDURES:

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

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

                                      -43-

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

25. GRIEVANCE SYSTEM

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

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

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

26. QUARTERLY GRIEVANCE SYSTEM REPORTS

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

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

     A.   Number of grievances received in the reporting period

          i.   Total

          ii.  By the categories used in the Contractor's executive summary
               reports

     B.   Number of days to resolution

          i.   Number resolved within 10 days

          ii.  Number resolved in 11 or more days, but less than 29 days

          iii. Number resolved in 30 or more days, but less than 59 days

          iv.  Number resolved in 60 to 90 days

          v.   Average days to resolution

                                      -44-

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

27.  NETWORK DEVELOPMENT

The Contractor shall develop and maintain a provider network that is designed to
support a medical home for members and sufficient to provide all covered
services to AHCCCS members [42 CFR 438.206(b)(1)]. It shall ensure covered
services are provided promptly and are reasonably accessible in terms of
location and hours of operation. [42 CFR 438.206(c)(l)(i) and (ii)]There shall
be sufficient personnel for the provision of covered services, including
emergency medical care on a 24-hour-a-day, 7-days-a-week basis [42 CFR
438.206(c)(l)(iii). The proposed network shall be sufficient to provide covered
services within designated time and distance limits. For Maricopa and Pima
Counties only, this includes a network such that 95% of its members residing
within the boundary area of metropolitan Phoenix and Tucson do not have to
travel more than 5 miles to see a PCP, dentist or pharmacy. PCPs and specialists
who provide inpatient services to the Contractor's members shall have admitting
and treatment privileges in a minimum of one general acute care hospital within
the Contractor's service area. Hospitalists may satisfy this requirement.
Contractors in Maricopa and/or Pima counties must have at least one hospital
contract in each of the service districts specified in Attachment B.

Contractors must provide a comprehensive provider network that ensures its
membership has access at least equal to, or better than, community norms.
Services shall be as accessible to AHCCCS members in terms of timeliness,
amount, duration and scope as those services are to non-AHCCCS persons within
the same service area [42 CFR 438.210(a)(2)]. The Contractor is expected to
consider the full spectrum of care when developing its network. The Contractor
must also consider communities whose residents typically receive care in
neighboring states. If the Contractor is unable to provide those services
locally, it must so demonstrate to AHCCCSA and shall provide reasonable
alternatives for members to access care. These alternatives must be approved by
AHCCCSA. If the Contractor's network is unable to provide medically necessary
services required under contract, the Contractor must adequately and timely
cover these services through an out of network provider until a network provider
is contracted. The Contractor and out of network provider must coordinate with
respect to authorization and payment issues in these circumstances. [42 CFR
438.206(b)(4) and (5)]

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

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

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

The Contractor shall not discriminate with respect to participation in the
AHCCCS program, reimbursement or indemnification against any provider based
solely on the provider's type of licensure or certification [42 CFR
438.12(a)(l)]. In addition, the Contractor must not discriminate against
particular providers that service high-risk populations or specialize in
conditions that require costly treatment [42 CFR 438.214(c)]. This provision,
however, does not prohibit the Contractor from limiting provider participation
to the extent necessary to meet the

                                      -45-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

needs of the Contractor's members. This provision also does not interfere with
measures established by the Contractor to control costs consistent with its
responsibilities under this contract [42 CFR 438.12(b)(1)]. If a Contractor
declines to include individual or groups of providers in its network, it must
give the affected providers written notice of the reason for its decision [42
CFR 438.12(a)(l)]. The Contractor may not include providers excluded from
participation in Federal health care programs, under either section 1128 or
section 1128A of the Social Security Act [42 CFR 438.214(d)].

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

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

     a.   Current network gaps and the methodology used to identify them;

     b.   Immediate short-term interventions when a gap occurs, including
          expedited or temporary credentialing;

     c.   Interventions to fill network gaps and barriers to those
          interventions;

     d.   Outcome measures/evaluation of interventions;

     e.   Ongoing activities for network development;

     f.   Coordination between internal departments;

     g.   Coordination with outside organizations;

     h.   A description of network design by GSA for the general population,
          including details regarding special populations including, but not
          limited to, the developmentally delayed (Arizona Early Intervention
         Program (AzEIP), the homeless and those in border communities.

          The description should cover:

               i.   how members access the system

               ii.  relationships between various levels of the system

               iii. the plan for incorporating the medical home for members and
                    the progress in its implementation

     i.   A description of the adequacy of the geographic access to tertiary
          hospital services for the Contractor's membership.

     j.   The assistance provided to PCPs when they refer members to
          specialists. The methods used to communicate the availability of this
          assistance to the providers.

     k.   The methodology (ies) the Contractor uses to collect and analyze
          provider feedback about the network designs and implementation. When
          specific provider issues are identified, the protocols for handling
          them.

The plan must include answers to the following questions:

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

     a.   How does the Contractor assess the medical and social needs of new
          members to determine how the contractor may assist the member in
          navigating the network more efficiently?

     b.   What assistance is provided to members with a high severity of illness
          or higher utilization to better navigate the provider network?

     c.   Does the Contractor utilize any of the following strategies to reduce
          unnecessary emergency department utilization by the membership? If so,
          how are members educated about these options?

               i.   Physician coverage/call availability after-hours and on
                    weekends

               ii.  Same-day PCP appointments

               iii. Nurse call-in centers/information lines

               iv.  Urgent Care facilities

     d.   Are members with special health care needs assigned to specialists for
          their primary care needs?

     e.   What are the most significant barriers to efficient network deployment
          within the Contractor's service area? How can AHCCCS best support the
          Contractor's efforts to improve its network and the quality of care
          delivered to its membership?

28. PROVIDER AFFILIATION TRANSMISSION

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

29. NETWORK MANAGEMENT

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

a.   Communicate with the network regarding contractual and/or program changes
     and requirements;

b.   Monitor network compliance with policies and rules of AHCCCSA and the
     Contractor, including compliance with all policies and procedures related
     to the grievance process and ensuring the member's care is not compromised
     during the grievance process;

c.   Evaluate the quality of services delivered by the network;

d.   Provide or arrange for medically necessary covered services should the
     network become temporarily insufficient within the contracted service area;

e.   Monitor the adequacy, accessibility and availability of its provider
     network to meet the needs of its members, including the provision of care
     to members with limited proficiency in English;

f.   Process expedited and temporary credentials;

g.   Recruit, select, credential, re-credential and contract with providers in a
     manner that incorporate quality management, utilization, office audits and
     provider profiling; and

h.   Provide training for its providers and maintain records of such training.

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

Provider notices do not require prior approval, however, the Contractor must
notify AHCCCSA of the material policy change 15 days prior to the provider
notice being sent out. During the 15 day time period, AHCCCS

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

shall have the right to comment or may intervene if the change to policy/process
will lead to an adverse affect to the overall system. This provision is not
intended to include contract negotiations between Contractors and providers.

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

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

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

30. PRIMARY CARE PROVIDER STANDARDS

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

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

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

a.   Supervision, coordination and provision of care to each assigned member;

b.   Initiation of referrals for medically necessary specialty care;

c.   Maintaining continuity of care for each assigned member; and

d.   Maintaining the member's medical record, including documentation of all
     services provided to the member by the PCP, as well as any specialty or
     referral services. Services potentially requiring medical follow up are the
     only dental services whose documentation must be included in the medical
     record.

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

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

31. MATERNITY CARE PROVIDER STANDARDS

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

a.   Arizona licensed allopathic and/or osteopathic physicians who are general
     practitioners or specialize in family practice or obstetrics

b.   Physician Assistants

c.   Nurse Practitioners

d.   Certified Nurse Midwives

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

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

32. REFERRAL MANAGEMENT PROCEDURES AND STANDARDS

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

a.   Use of referral forms clearly identifying the Contractor

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

b.   A system for resolving disputes regarding the referrals

c.   PCP referral shall be required for specialty physician services, except
     that women shall have direct access to in-network GYN providers, including
     physicians, physician assistants and nurse practitioners within the scope
     of their practice, without a referral for preventive and routine services
     [42 CFR 438.206(b)(2)]. In addition, for members with special health care
     needs determined to need a specialized course of treatment or regular care
     monitoring, the Contractor must have a mechanism in place to allow such
     members to directly access a specialist (for example through a standing
     referral or an approved number of visits) as appropriate for the member's
     condition and identified needs. Any waiver of this requirement by the
     Contractor must be approved in advance by AHCCCSA.

d.   Specialty physicians shall not begin a course of treatment for a medical
     condition other than that for which the member was referred, unless
     approved by the member's PCP.

e.   A process in place that ensures the member's PCP receives all specialist
     and consulting reports and a process to ensure PCP follow-up of all
     referrals including EPSDT referrals for behavioral health services

f.   A referral plan for any member who is about to lose eligibility and who
     requests information on low-cost or no-cost health care services

g.   Referral to Medicare HMO including payment of copayments

h.   Allow for a second opinion from a qualified health care professional within
     the network, or if one is not available in network, arrange for the member
     to obtain one outside the network, at no cost to the member [42 CFR
     438.206(b)(3)].

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

     a.   Clinical laboratory services

     b.   Physical therapy services

     c.   Occupational therapy services

     d.   Radiology services

     e.   Radiation therapy services and supplies

     f.   Durable medical equipment and supplies

     g.   Parenteral and enteral nutrients, equipment and supplies

     h.   Prosthetics, orthotics and prosthetic devices and supplies

     i.   Home health services

     j.   Outpatient prescription drugs

     k.   Inpatient and outpatient hospital services

33. APPOINTMENT STANDARDS

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

a.   Emergency PCP appointments - same day of request

b.   Urgent care PCP appointments - within 2 days of request

c.   Routine care PCP appointments - within 21 days of request

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

a.   Emergency appointments - within 24 hours of referral

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

b.   Urgent care appointments - within 3 days of referral

c.   Routine care appointments - within 45 days of referral

For DENTAL APPOINTMENTS, the Contractor shall be able to provide:

a.   Emergency appointments - within 24 hours of request

b.   Urgent care appointments - within 3 days of request

c.   Routine care appointments - within 45 days of request

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

a.   First trimester - within 14 days of request

b.   Second trimester - within 7 days of request

c.   Third trimester - within 3 days of request

d.   High risk pregnancies - within 3 days of identification of high risk by the
     Contractor or maternity care provider, or immediately if an emergency
     exists

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

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

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

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

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

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

35. PROVIDER MANUAL

The Contractor shall develop, distribute and maintain a provider manual. The
Contractor shall ensure that each contracted provider is issued a copy of the
provider manual and is encouraged to distribute a provider manual

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

a.   Introduction to the Contractor which explains the Contractor's organization
     and administrative structure

b.   Provider responsibility and the Contractor's expectation of the provider

c.   Overview of the Contractor's Provider Service department and function

d.   Listing and description of covered and non-covered services, requirements
     and limitations including behavioral health services

e.   Emergency room utilization (appropriate and non-appropriate use of the
     emergency room)

f.   EPSDT Services - screenings include a comprehensive history,
     developmental/behavioral health screening, comprehensive unclothed physical
     examination, appropriate vision testing, hearing testing, laboratory tests,
     dental screenings and immunizations

g.   Dental services

h.   Maternity/Family Planning services

i.   The Contractor's policy regarding PCP assignments

j.   Referrals to specialists and other providers, including access to
     behavioral health services provided by the ADHS/RBHA system

k.   Grievance system process and procedures for providers and enrollees

l.   Billing and encounter submission information

m.   Information about policies and procedures relevant to the providers
     including, but not limited to, utilization management and claims submission

n.   Reimbursement, including reimbursement for dual eligibles (i.e. Medicare
     and Medicaid) or members with other insurance

o.   Cost sharing responsibility

p.   Explanation of remittance advice

q.   Prior authorization and notification requirements

r.   Claims medical review

s.   Concurrent review

t.   Fraud and Abuse

u.   Formulary information, including updates when changes occur, must be
     provided in advance to providers, including pharmacies. The Contractor is
     not required to send a hard copy, unless requested, of the formulary each
     time it is updated. A memo may be used to notify providers of updates and
     changes, and refer providers to view the updated formulary on the
     Contractor's website.

v.   AHCCCS appointment standards

w.   Americans with Disabilities Act (ADA) requirements and Title VI, as
     applicable

x.   Eligibility verification

y.   Cultural competency information, including notification about Title VI of
     the Civil Rights Act of 1964. Providers should also be informed of how to
     access interpretation services to assist members who speak a language other
     the English or who use sign language.

z.   Peer review and appeal process.

aa.  Medication management services as described in Section D, Paragraph 12.

bb.  Information about a member's right to be treated with dignity and respect
     as specified in 42 CFR 438.100.

cc.  Notification that the contractor has no policies which prevent the provider
     from advocating on behalf of the member.

36. PROVIDER REGISTRATION

The Contractor shall ensure that all of its subcontractors register with AHCCCSA
as an approved service provider and receive an AHCCCS Provider ID Number. A
Provider Participation Agreement must be signed by each provider who does not
already have a current AHCCCS ID number. The original shall be forwarded to

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

AHCCCSA. This provider registration process must be completed in order for the
Contractor to report services a subcontractor renders to enrolled members and
for the Contractor to be paid reinsurance.

37. SUBCONTRACTS

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

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

a.   Automated data processing

b.   Third-party administrators

c.   Management Services (See also Section D, Paragraph 43)

d.   Capitated or other risk subcontracts requiring claims processing by the
     subcontractor

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

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

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

     -    Subcontractor's name

     -    Delegated duties and responsibilities

     -    Most recent review date of the duties, responsibilities and financial
          position of the subcontractor

     -    Next scheduled review date

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

     -    Identified areas of deficiency

     -    Contractor's corrective action plan

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

The Contractor shall not include covenant-not-to-compete requirements in its
provider agreements. Specifically, the Contractor shall not contract with a
provider and require that the provider not provide services for any other AHCCCS
Contractor. In addition, except for cost sharing requirements, the Contractor
shall not enter into subcontracts that contain compensation terms that
discourage providers from serving any specific eligibility category.

The Contractor must enter into a written agreement with any provider (including
out-of-state providers) the Contractor reasonably anticipates will be providing
services on its behalf more than 25 times during the contract year [42
CFR 438.206(b)(1)]. Exceptions to this requirement include the following:

a.   If a provider who provides services more than 25 times during the contract
     year refuses to enter into a written agreement with the Contractor, the
     Contractor shall submit documentation of such refusal to AHCCCS, Division
     of Health Care Management within seven days of its final attempt to gain
     such agreement.

b.   If a provider performs emergency services such as an emergency room
     physician or an ambulance company, a written agreement is not required.

c.   Individual providers as detailed in the AMPM.

d.   Hospitals, as discussed in Section D, Paragraph 40, Hospital Subcontracting
     and Reimbursement.

e.   If a provider primarily performs services in an inpatient setting.

f.   If upon the Medical Director's review, it is determined that the Contractor
     or members would not benefit by adding the provider to the contracted
     network.

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

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

a.   Full disclosure of the method and amount of compensation or other
     consideration to be received by the subcontractor.

b.   Identification of the name and address of the subcontractor.

c.   Identification of the population, to include patient capacity, to be
     covered by the subcontractor.

d.   The amount, duration and scope of medical services to be provided, and for
     which compensation will be paid.

e.   The term of the subcontract including beginning and ending dates, methods
     of extension, termination and re-negotiation.

f.   The specific duties of the subcontractor relating to coordination of
     benefits and determination of third-party liability.

g.   A provision that the subcontractor agrees to identify Medicare and other
     third-party liability coverage and to seek such Medicare or third party
     liability payment before submitting claims to the Contractor.

h.   A description of the subcontractor's patient, medical and cost record
     keeping system.

i.   Specification that the subcontractor shall cooperate with quality
     management/quality improvement programs, and comply with the utilization
     management and review procedures specified in 42 CFR Part 456, as specified
     in the AMPM.

j.   A provision stating that a merger, reorganization or change in ownership of
     a subcontractor that is related to or affiliated with the Contractor shall
     require a contract amendment and prior approval of AHCCCSA.

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

k.   Procedures for enrollment or re-enrollment of the covered population (may
     also refer to the Provider Manual).

l.   A provision that the subcontractor shall be fully responsible for all tax
     obligations, Worker's Compensation Insurance, and all other applicable
     insurance coverage obligations which arise under this subcontract, for
     itself and its employees, and that AHCCCSA shall have no responsibility or
     liability for any such taxes or insurance coverage.

m.   A provision that the subcontractor must obtain any necessary authorization
     from the Contractor or AHCCCSA for services provided to eligible and/or
     enrolled members.

n.   A provision that the subcontractor must comply with encounter reporting and
     claims submission requirements as described in the subcontract.

o.   Provision(s) that allow the Contractor to suspend, deny, refuse to renew or
     terminate any subcontractor in accordance with the terms of this contract
     and applicable law and regulation.

p.   A provision that the subcontractor may provide the member with factual
     information, but is prohibited from recommending or steering a member in
     the member's selection of a Contractor.

q.   A provision that compensation to individuals or entities that conduct
     utilization management activities is not structured so as to provide
     incentives for the individual or entity to deny, limit or discontinue
     medically necessary services to any enrollee (42 CFR 438.210(e)).

38. CLAIMS PAYMENT/HEALTH INFORMATION SYSTEM

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

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

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

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

                                      -55-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

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

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

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

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

39. SPECIALTY CONTRACTS

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

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

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

                                      -56-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

40. HOSPITAL SUBCONTRACTING AND REIMBURSEMENT

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

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

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

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

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

41. NURSING FACILITY REIMBURSEMENT

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

                                      -57-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

42. PHYSICIAN INCENTIVES/PAY FOR PERFORMANCE

Physician Incentives

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

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

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

1.   A complete copy of the contract

2.   A plan for the member satisfaction survey

3.   Details of the stop-loss protection provided

4.   A summary of the compensation arrangement that meets the substantial
     financial risk definition.

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

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

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

43. MANAGEMENT SERVICES AGREEMENT AND COST ALLOCATION PLAN

If a Contractor has subcontracted for management services, the management
service agreement and the corporate cost allocation plan must be approved in
advance by AHCCCSA, Division of Health Care Management. The cost allocation plan
must be submitted with the proposed management fee agreement. AHCCCSA reserves
the

                                      -58-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

right to perform a thorough review of actual management fees charged and/or
corporate allocations made. If the fees or allocations actually paid out are
determined to be unjustified or excessive, amounts may be subject to repayment
to the Contractor. In addition, sanctions may be imposed.

44. RESERVED

45. MINIMUM CAPITALIZATION REQUIREMENTS

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

Minimum capitalization requirements by GSA are as follows:

<TABLE>
<CAPTION>
                                 CAPITALIZATION      CAPITALIZATION
                                 REQUIREMENT--        REQUIREMENT--
GEOGRAPHIC SERVICE AREA (GSA)   NEW CONTRACTORS   EXISTING CONTRACTORS
-----------------------------   ---------------   --------------------
<S>                             <C>               <C>
Mohave/Coconino/Apache/Navajo      $4,400,000          $3,000,000
La Paz/Yuma                        $3,000,000          $2,000,000
Maricopa                           $5,000,000          $4,000,000
Pima/Santa Cruz                    $4,500,000          $3,000,000
Cochise/Graham/ Greenlee           $2,150,000          $2,000,000
Pinal/Gila                         $2,400,000          $2,000,000
Yavapai*                           $1,600,000          $1,600,000
</TABLE>

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

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

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

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

                                      -59-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

46. PERFORMANCE BOND OR BOND SUBSTITUTE

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

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

a.   Paying any damages sustained by providers, non-contracting providers and
     non-providers by reason of a breach of the Contractor's obligations under
     this contract,

b.   Reimbursing AHCCCSA for any payments made by AHCCCSA on behalf of the
     Contractor, and

c.   Reimbursing AHCCCSA for any extraordinary administrative expenses incurred
     by reason of a breach of the Contractor's obligations under this contract,
     including, but not limited to, expenses incurred after termination of this
     contract for reasons other than the convenience of the State by AHCCCSA.

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

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

47. AMOUNT OF PERFORMANCE BOND

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

                                      -60-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

48. ACCUMULATED FUND DEFICIT

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

49. ADVANCES, DISTRIBUTIONS, LOANS AND INVESTMENTS

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

50. FINANCIAL VIABILITY STANDARDS / PERFORMANCE GUIDELINES

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

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

FINANCIAL VIABILITY STANDARDS

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

                                 Standard: At least 1.00

                                 If current assets include a receivable from a
                                 parent company, the parent company must have
                                 liquid assets that support the amount of the
                                 intercompany loan.
</TABLE>

                                      -61-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

<TABLE>
<S>                              <C>
EQUITY PER MEMBER                Equity, less on-balance sheet performance bond,
                                 divided by the number of non-SOBRA Family
                                 Planning Extension Services members enrolled at
                                 the end of the period.

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

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

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

PERFORMANCE GUIDELINES

<TABLE>
<S>                              <C>
MEDICAL EXPENSE RATIO            Total medical expenses divided by the sum of
                                 total capitation + Delivery Supplement +
                                 Hospital Supplemental Payment + TPL +
                                 Reinsurance + HIV/AIDS Supplement less premium
                                 tax

                                 Standard: At least 84%

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

                                 Standard: No more than 10%

RECEIVED BUT UNPAID CLAIMS       Received but unpaid claims divided by the
   (DAYS OUTSTANDING)            average daily medical expenses for the period,
                                 net of sub-capitation expense. Standard: No
                                 more than 30 days
</TABLE>

51. SEPARATE INCORPORATION

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

52. MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP

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

53. COMPENSATION

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

                                      -62-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

     a.   Utilization and unit cost data derived from reported encounters

     b.   Both Audited and unaudited financial statements reported by
          Contractors

     c.   Local market basket inflation trends

     d.   AHCCCS fee for service schedule pricing adjustments

     e.   Programmatic or Medicaid covered service changes that affect
          reimbursement

     f.   Additional administrative requirements for Contractors

     g.   Other changes to medical practices that affect reimbursement

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

     a.   Reinsurance (as described in Paragraph 57)

     b.   HIV/AIDS supplemental payment

     c.   Age/Gender for the 1931(b), SOBRA, KidsCare and BCCTP eligibility
          groups

     d.   Medicare enrollment for SSI members

     e.   Delivery supplemental payment

     f.   Hospitalized supplemental payments for MED members

     g.   Geographic Service Area adjustments

     h.   Risk sharing for Title XIX Waiver Group reimbursement

     i.   Risk sharing for PPC reimbursement

     j.   Member choice statistic for Title XIX Waiver Group

     k.   Member share of cost amounts

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

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

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

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

                                      -63-

<PAGE>

PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

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

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

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

54. PAYMENTS TO CONTRACTORS

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

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

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

Except for funds received from the collection of permitted copayments and
third-party liabilities, the only source of payment to the Contractor for the
services provided hereunder is the Arizona Health Care Cost Containment System
Fund. An error discovered by the State, with or without an audit, in the amount
of fees paid to the Contractor will be subject to adjustment or repayment by
AHCCCSA making a corresponding decrease in a

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

current Contractor's payment or by making an additional payment to the
Contractor. When a contractor identifies an overpayment, AHCCCSA must be
notified and reimbursed within 30 days of identification.

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

55. CAPITATION ADJUSTMENTS

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

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

a.   death of a member

b.   member's incarceration (not eligible for AHCCCS benefits from the date of
     incarceration)

c.   duplicate capitation to the same Contractor

d.   adjustment based on change in member's contract type

e.   voluntary withdrawal

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

56. INCENTIVES

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

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

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

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

57. REINSURANCE

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

INPATIENT REINSURANCE

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

The following table represents deductible and coinsurance levels:

<TABLE>
<CAPTION>
                                                TITLE XIX WAIVER
                                            GROUP ANNUAL DEDUCTIBLE
                     ANNUAL DEDUCTIBLE*     -----------------------
                  -----------------------       COMBINED PPC AND
STATEWIDE PLAN    PROSPECTIVE REINSURANCE   PROSPECTIVE REINSURANCE   COINSURANCE
--------------    -----------------------   -----------------------   ----------
<S>               <C>                       <C>                       <C>
0-34, 999                 $20,000                   $15,000               75%
35,000-49,999             $35,000                   $15,000               75%
50,000 and over           $50,000                   $15,000               75%
</TABLE>

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

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

B) PRIOR PERIOD COVERAGE REINSURANCE: Effective October 1, 2003, AHCCCSA will no
longer cover PPC inpatient expenses under the reinsurance program for any
members except Title XIX Waiver Group members. See section c) below for
additional information.

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

CATASTROPHIC REINSURANCE

The reinsurance program includes a special Catastrophic Reinsurance program.
This program encompasses members diagnosed with hemophilia, von Willebrand's
Disease, and Gaucher's Disease. For additional detail and restrictions refer to
the AHCCCS Reinsurance Claims Processing Manual and the AMPM. There are no
deductibles for catastrophic reinsurance cases. All medically necessary covered
services provided during

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

the contract year shall be eligible for reimbursement at 85% of the AHCCCS
allowed amount or the Contractor's paid amount, depending on subcap code.
Reinsurance coverage for anti-hemophilic blood factors will be limited to 85% of
the AHCCCS contracted amount or the Contractor's paid amount, whichever is
lower. Capitation rates may be adjusted to reflect any cost savings resulting
from the implementation of the AHCCCS anti-hemophilic blood factor contract. All
catastrophic claims are subject to medical review by AHCCCSA.

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

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

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

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

TRANSPLANTS

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

OTHER

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

ENCOUNTER SUBMISSION AND PAYMENTS FOR REINSURANCE

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

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

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

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

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

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

REINSURANCE AUDITS

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

AUDIT: AHCCCSA will give the Contractor at least 45 days advance notice of any
audit. The Contractor shall have all requested medical records and financial
documentation available to the nurse auditors. Any

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

documents not requested in advance by AHCCCSA shall be made available upon
request of the Audit Team during the course of the audit. The Contractor
representative shall be available to the Audit Team at all times during AHCCCSA
audit activities. If an audit should be conducted on-site, the Contractor shall
provide the Audit Team with workspace, access to a telephone, electrical outlets
and privacy for conferences.

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

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

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

AUDIT DETERMINATIONS: The Contractor will be furnished a copy of the Reinsurance
Post-Audit Results letter approximately 45 days after the audit and given an
opportunity to comment and provide additional medical or financial documentation
on any audit findings. AHCCCSA may limit reinsurance reimbursement to a lower
or alternative level of care if the Director or designee determines that the
less costly alternative could and should have been used by the Contractor. A
recoupment of reinsurance reimbursements made to the Contractor may occur based
on the results of the medical audit.

A Contractor whose reinsurance case is reduced or denied shall be notified in
writing by AHCCCSA and will be informed of rationale for reduction or denial
determination and the applicable grievance and appeal process available.

58. COORDINATION OF BENEFITS / THIRD PARTY LIABILITY

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

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

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

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

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

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

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

The Contractor shall report any cases involving the above circumstances to
AHCCCSA's authorized representative should the Contractor identify such a
situation. The Contractor shall cooperate with AHCCCSA's authorized
representative in all collection efforts. In joint cases involving both AHCCCS
fee-

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

for-service or reinsurance and the Contractor, AHCCCSA's authorized
representative is responsible for performing all research, investigation and
payment of lien-related costs, subsequent to the referral of any and all
relevant case information to AHCCCSA's authorized representative by the
Contractor. AHCCCSA's authorized representative is also responsible for
negotiating and acting in the best interest of all parties to obtain a
reasonable settlement in joint cases and may compromise a settlement in order to
maximize overall reimbursement, net of legal and other costs. The Contractor
will be responsible for their prorated share of the contingency fee. The
Contractor's share of the contingency fee will be deducted from the settlement
proceeds prior to AHCCCSA remitting the settlement to the Contractor. For total
plan cases involving only payments made by the Contractor, the Contractor is
responsible for performing all research, investigation, the mandatory filing of
initial liens on cases that exceed $250, lien amendments, lien releases, and
payment of other related costs in accordance with A.R.S. 36-2915 and A.R.S.
36-2916. The Contractor shall use the AHCCCS approved casualty recovery
correspondence when filing liens and when corresponding to others in regard to
casualty recovery. The Contractor may retain up to 100% of its third-party
collections if all of the following conditions exist:

     a.   Total collections received do not exceed the total amount of the
          Contractor's financial liability for the member;

     b.   There are no payments made by AHCCCS related to fee-for-service,
          reinsurance or administrative costs (i.e. lien filing, etc.); and

     c.   Such recovery is not prohibited by state or Federal law.

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

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

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

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

59.  COPAYMENTS

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP No. YH04-0001

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

60.  MEDICARE SERVICES AND COST SHARING

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

61.  MARKETING

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

62.  CORPORATE COMPLIANCE

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

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

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

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

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

     1.   Written policies, procedures, and standards of conduct that articulate
          the organization's commitment to and processes for complying with all
          applicable federal and state standards.

     2.   The written designation of a compliance committee who are accountable
          to the Contractor's top management.

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

     3.   The Compliance Officer must be an onsite management official who
          reports directly to the Contractor's top management. Any exceptions
          must be approved by AHCCCSA.

     4.   Effective training and education.

     5.   Effective lines of communication between the compliance officer and
          the organization's employees.

     6.   Enforcement of standards through well-publicized disciplinary
          guidelines.

     7.   Provision for internal monitoring and auditing.

     8.   Provision for prompt response to problems detected.

     9.   A Compliance Committee which will be made up of, at a minimum, the
          Compliance Officer, a budgetary official and other executive officials
          with the authority to commit resources. The Compliance Committee will
          assist the Compliance Officer with monitoring, reviewing and assessing
          the effectiveness of the compliance program and timeliness of
          compliance reporting.

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

63. RECORDS RETENTION

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

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

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

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

64. DATA EXCHANGE REQUIREMENTS

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

The information so recorded and submitted to AHCCCSA shall be in accordance with
all procedures, policies, rules, or statutes in effect during the term of this
contract. If any of these procedures, policies, rules, regulations

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

or statutes are hereinafter changed both parties agree to conform to these
changes following appropriate notification to both parties by AHCCCSA.

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

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

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

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

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

HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA): The Contractor
shall comply with the Administrative Simplification requirements of Subpart F of
the HIPAA of 1996 (Public Law 107-191, 110 Statutes 1936) and all Federal
regulations implementing that Subpart that are applicable to the operations of
the Contractor by the dates required by the implementing Federal regulations.

65. ENCOUNTER DATA REPORTING

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

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

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

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

66. ENROLLMENT AND CAPITATION TRANSACTION UPDATES

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

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

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

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

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

67. PERIODIC REPORT REQUIREMENTS

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

     a.   Timeliness: Reports or other required data shall be received on or
          before scheduled due dates.

     b.   Accuracy: Reports or other required data shall be prepared in strict
          conformity with appropriate authoritative sources and/or AHCCCS
          defined standards.

     c.   Completeness: All required information shall be fully disclosed in a
          manner that is both responsive and pertinent to report intent with no
          material omissions.

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

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

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

68. REQUESTS FOR INFORMATION

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

69. DISSEMINATION OF INFORMATION

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

70. OPERATIONAL AND FINANCIAL READINESS REVIEWS

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

71. OPERATIONAL AND FINANCIAL REVIEWS

In accordance with CMS requirements, AHCCCSA, or an independent external agent,
will conduct annual Operational and Financial Reviews for the purpose of (but
not limited to) ensuring operational and financial program compliance [42 CFR
438.204]. The reviews will identify areas where improvements can be made and

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PROGRAM REQUIREIVIENTS                                CONTRACT/RFP NO. YH04-0001

make recommendations accordingly, monitor the Contractor's progress towards
implementing mandated programs and provide the Contractor with technical
assistance if necessary. The Contractor shall comply with all other medical
audit provisions as required by AHCCCS Rule R9-22-521 and R9-31-521.

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

The Contractor will be furnished a draft copy of the Operational and Financial
Review Report and given an opportunity to comment on any review findings prior
to AHCCCSA publishing the final report. Operational and Financial Review
findings may be used in the scoring of subsequent bid proposals by that
Contractor. Recommendations, made by the Review Team to bring the Contractor
into compliance with Federal, State, AHCCCS, and/or contract requirements, must
be implemented by the Contractor. AHCCCSA may conduct a follow-up Operational
and Financial Review to determine the Contractor's progress in implementing
recommendations and achieving program compliance. Follow-up reviews may be
conducted at any time after the initial Operational and Financial Review.

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

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

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

72. SANCTIONS

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

a.   Substantial failure to provide medically necessary services that the
     Contractor is required to provide under the terms of this contract to its
     enrolled members.

b.   Imposition of premiums or charges in excess of the amount allowed under the
     AHCCCS 1115 Waiver.

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

c.   Discrimination among members on the basis of their health status of need
     for health care services.

d.   Misrepresentation or falsification of information furnished to CMS or
     AHCCCSA.

e.   Misrepresentation or falsification of information furnished to an enrollee,
     potential enrollee, or provider.

f.   Failure to comply with the requirement for physician incentive plan as
     delineated in Paragraph 42.

g.   Distribution directly, or indirectly through any agent or independent
     contractor, of marketing materials that have not been approved by AHCCCSA
     or that contain false or materially misleading information.

h.   Failure to meet AHCCCS Financial Viability Standards.

i.   Material deficiencies in the Contractor's provider network.

j.   Failure to meet quality of care and quality management requirements.

k.   Failure to meet AHCCCS encounter standards.

l.   Violation of other applicable State or Federal laws or regulations.

m.   Failure to fund accumulated deficit in a timely manner.

n.   Failure to increase the Performance Bond in a timely manner.

o.   Failure to comply with any provisions contained in this contract.

p.   Failure to report third party liability cases as described in Paragraph 58.

AHCCCSA may impose the following types of intermediate sanctions:

a.   Civil monetary penalties

b.   Appointment of temporary management for a Contractor as provided in 42 CFR
     438.706 and A.R.S. Section 36-2903 (M).

c.   Granting members the right to terminate enrollment without cause and
     notifying the affected members of their right to disenroll [42 CFR
     438.702(a)(3)].

d.   Suspension of all new enrollment, including auto assignments after the
     effective date of the sanction.

e.   Suspension of payment for recipients enrolled after the effective date of
     the sanction until CMS or AHCCCSA is satisfied that the reason for
     imposition of the sanction no longer exists and is not likely to recur.

f.   Additional sanctions allowed under statue or regulation that address areas
     of noncompliance.

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

73. BUSINESS CONTINUITY AND RECOVERY PLAN

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

     -    Electronic/telephonic failure at the Contractor's main place of
          business

     -    Complete loss of use of the main site

     -    Loss of primary computer system/records

     -    Communication between the Contractor and AHCCCSA in the event of a
          business disruption

     -    Periodic Testing

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

74. TECHNOLOGICAL ADVANCEMENT

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

          1.   Formulary

          2.   Provider manual

          3.   Member handbook

          4.   Provider listing

          5.   Enrollment Verification

          6.   Claims inquiry

          7.   Accept HIPAA compliant electronic claims transactions (See
               paragraph 38)

          8.   Make Claims payments via electronic funds transfer (See paragraph
               38)

BY MARCH 1, 2006, Contractors must have:

     -    A link to the AHCCCS website for Member and Provider Survey Results

     -    A link to the AHCCCS website for Performance Measure Results

BY MAY 1, 2006, Contractors must provide searchable provider directories on
their web site. Web based directories must include the following search
functions and must be updated at least monthly, if necessary:

          1.   Name

          2.   Specialty/Service

          3.   Languages spoken by Practitioner

          4.   Office locations (e.g. county, city or zip code)

75. PENDING LEGISLATIVE / OTHER ISSUES

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

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

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

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

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PROGRAM REQUIREMENTS                                  CONTRACT/RFP NO. YH04-0001

76. BALANCED BUDGET ACT OF 1997 (BBA)

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

77. HEALTHCARE GROUP OF ARIZONA

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

78. MEDICARE MODERNIZATION ACT (MMA)

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

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

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

[END OF SECTION D]

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CONTRACT CLAUSES                                      CONTRACT/REF NO. YH04-0001

SECTION E: CONTRACT CLAUSES

1) APPLICABLE LAW

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

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

2) AUTHORITY

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

3) ORDER OF PRECEDENCE

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

4) CONTRACT INTERPRETATION AND AMENDMENT

NO PAROL EVIDENCE - This contract is intended by the parties as a final and
complete expression of their agreement. No course of prior dealings between the
parties and no usage of the trade shall supplement or explain any term used in
this contract.

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

WRITTEN CONTRACT AMENDMENTS - The contract shall be modified only through a
written contract amendment within the scope of the contract signed by the
procurement officer on behalf of the State.

5) SEVERABILITY

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

6) RELATIONSHIP OF PARTIES

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

7) ASSIGNMENT AND DELEGATION

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

8) GENERAL INDEMNIFICATION

The Contractor shall defend, indemnify and hold harmless the State from any
claim, demand, suit, liability, judgment and expense (including attorney's fees
and other costs of litigation) arising out of or relating to injury, disease, or
death of persons or damage to or loss of property resulting from or in
connection with the negligent performance of this contract by the Contractor,
its agents, employees, and subcontractors or anyone

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CONTRACT CLAUSES                                      CONTRACT/RFP NO. YH04-0001

for whom the Contractor may be responsible. The obligations, indemnities and
liabilities assumed by the Contractor under this paragraph shall not extend to
any liability caused by the negligence of the State or its employees. The
Contractor's liability shall not be limited by any provisions or limits of
insurance set forth in this contract. The State shall reasonably notify the
Contractor of any claim for which it may be liable under this paragraph. The
Administration shall bear no liability for subcontracts that a Contractor
executes with other parties for the provision of administrative or management
services, medical services or covered health care services, or for any other
purposes.

9) INDEMNIFICATION - PATENT AND COPYRIGHT

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

10) COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS

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

11) ADVERTISING AND PROMOTION OF CONTRACT

The Contractor shall not advertise or publish information for commercial benefit
concerning this contract without the prior written approval of the Contracting
Officer.

12) PROPERTY OF THE STATE

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

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

13) THIRD PARTY ANTITRUST VIOLATIONS

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

14) RIGHT TO ASSURANCE

If AHCCCSA, in good faith, has reason to believe that the Contractor does not
intend to perform or continue performing this contract, the procurement officer
may demand in writing that the Contractor give a written assurance of intent to
perform. The demand shall be sent to the Contractor by certified mail, return
receipt

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CONTRACT CLAUSES                                      CONTRACT/RFP NO. YH04-0001

required. Failure by the Contractor to provide written assurance within the
number of days specified in the demand may, at the State's option, be the basis
for terminating the contract.

15) TERMINATION FOR CONFLICT OF INTEREST

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

16) GRATUITIES

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

17) SUSPENSION OR DEBARMENT

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

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

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

18) TERMINATION FOR CONVENIENCE

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

19) TEMPORARY MANAGEMENT/OPERATION OF A CONTRACTOR AND TERMINATION

Temporary Management/Operation by AHCCCSA: Pursuant to the Balanced Budget Act
of 1997, 42 CFR 438.700 et seq. and State Law ARS Section 36-2903, AHCCCSA is
authorized to impose temporary management for a Contractor under certain
conditions. Under federal law, temporary management may be imposed if AHCCCS
determines that there is continued egregious behavior by the Contractor,
including but not limited to the following: substantial failure to provide
medically necessary services the Contractor is required to provide; imposition
on enrollees premiums or charges that exceed those permitted by AHCCCSA,
discrimination among enrollees on the basis of health status or need for health
care services; misrepresentation or falsification of information to AHCCCSA or
CMS; misrepresentation or falsification of information furnished to an

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CONTRACT CLAUSES                                      CONTRACT/RFP NO. YH04-0001

enrollee or provider; distribution of marketing materials that have not been
approved by AHCCCS or that are false or misleading; or behavior contrary to any
requirements of Sections 1903(m) or 1932 of the Social Security Act. Temporary
management may also be imposed if AHCCCSA determines that there is substantial
risk to enrollees' health or that temporary management is necessary to ensure
the health of enrollees while the Contractor is correcting the deficiencies
noted above or until there is an orderly transition or reorganization of die
Contractor. Under federal law, temporary management is mandatory if AHCCCSA
determines that the Contractor has repeatedly failed to meet substantive
requirements in Sections 1903(m) or 1932 of the Social Security Act. In these
situations, AHCCCSA shall not delay imposition of temporary management to
provide a hearing before imposing this sanction.

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

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

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

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

20) TERMINATION - AVAILABILITY OF FUNDS

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

21) RIGHT OF OFFSET

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

22) NON-EXCLUSIVE REMEDIES

The rights and the remedies of AHCCCSA under this contract are not exclusive.

23) NON-DISCRIMINATION

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

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CONTRACT CLAUSES                                      CONTRACT/RFP NO. YH04-0001

24) EFFECTIVE DATE

The effective date of this contract shall be the date referenced on page 1 of
this contract.

25) INSURANCE

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

a.   Commercial General Liability: Provides coverage of at least $1,000,000 for
     each occurrence for bodily injury and property damage to others as a result
     of accidents on the premises of or as the result of operations of the
     Contractor.

b.   Commercial Automobile Liability: Provides coverage of at least $1,000,000
     for each occurrence for bodily injury and property damage to others
     resulting from accidents caused by vehicles operated by the Contractor.

c.   Workers Compensation: Provides coverage to employees of the Contractor for
     injuries sustained in the course of their employment. Coverage must meet
     the obligations imposed by Federal and State statutes and must also include
     Employer's Liability minimum coverage of $100,000. Evidence of qualified
     self-insured status will also be considered.

d.   Professional Liability (if applicable): Provides coverage for alleged
     professional misconduct or lack of ordinary skills in the performance of a
     professional act of service.

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

a.   The State of Arizona Certificate of Insurance: This is a form with the
     special conditions required by the contract already pre-printed on the
     form. The Contractor's agent or broker must fill in the pertinent policy
     information and ensure the required special conditions are included in the
     Contractor's policy.

b.   The Accord form: This standard insurance industry certificate of insurance
     does not contain the preprinted special conditions required by this
     contract. These conditions must be entered on the certificate by the agent
     or broker and read as follows:

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

26) DISPUTES

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

27) RIGHT TO INSPECT PLANT OR PLACE OF BUSINESS

AHCCCSA may, at reasonable times, inspect the part of the plant or place of
business of the Contractor or subcontractor that is related to the performance
of this contract, in accordance with A.R.S. Section 41-2547.

28) INCORPORATION BY REFERENCE

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

                                      -85-

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CONTRACT CLAUSES                                      CONTRACT/RFP NO. YH04-0001

29) COVENANT AGAINST CONTINGENT FEES

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

30) CHANGES

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

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

31) TYPE OF CONTRACT

Firm Fixed-Price

32) AMERICANS WITH DISABILITIES ACT

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

33) WARRANTY OF SERVICES

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

34) NO GUARANTEED QUANTITIES

AHCCCSA does not guarantee the Contractor any minimum or maximum quantity of
services or goods to be provided under this contract.

35) CONFLICT OF INTEREST

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

36) DISCLOSURE OF CONFIDENTIAL INFORMATION

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

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CONTRACT CLAUSES                                      CONTRACT/RFP NO. YH04-0001

37) COOPERATION WITH OTHER CONTRACTORS

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

38) ASSIGNMENT OF CONTRACT AND BANKRUPTCY

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

39) OWNERSHIP OF INFORMATION AND DATA

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

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

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

40) AHCCCSA RIGHT TO OPERATE CONTRACTOR

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

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

All reasonable expenses of AHCCCS related to the direct operation of the
Contractor, including attorney fees, cost of preliminary or other audits of the
Contractor and expenses related to the management of any office or

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other assets of the Contractor, shall be paid by the Contractor or withheld from
payment due from AHCCCS to the Contractor.

41) AUDITS AND INSPECTIONS

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

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

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

42) LOBBYING

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

43) CHOICE OF FORUM

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

44) DATA CERTIFICATION

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

45) OFF SHORE PERFORMANCE OF WORK PROHIBITED

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

[END OF SECTION E]

                                      -88-

<PAGE>

INDEX - PROGRAM REQUIREMENTS AND CONTRACT CLAUSES      CONTRACT/RFP NO. YH8-0001

SECTION F: INDEX - PROGRAM REQUIREMENTS AND CONTRACT CLAUSES

A

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

B

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

C

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

D

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

E

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

F

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

G

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

H

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

                                      -89-

<PAGE>

INDEX - PROGRAM REQUIREMENTS AND CONTRACT CLAUSES      CONTRACT/RFP NO. YH8-0001

I

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

K

KidsCare, 17, 18, 63, 71

L

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

M

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

N

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

O

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

P

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

Q

QMB, 17
Quality Management, 33, 34, 38

R

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

                                      -90-

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INDEX - PROGRAM REQUIREMENTS AND CONTRACT CLAUSES      CONTRACT/RFP NO. YH8-0001

Risk Sharing, 25, 64
Roster, 18, 75

S

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

T

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

U

, 33, 34, 39

V

Vaccine for Children, 33
Vision, 25, 52

[END OF SECTION F]

                                      -91-

<PAGE>

ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS          CONTRACT/RFP NO. YH04-0001

ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS

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

1) ASSIGNMENT AND DELEGATION OF RIGHTS AND RESPONSIBILITIES

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

2) AWARDS OF OTHER SUBCONTRACTS

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

3) CERTIFICATION OF COMPLIANCE - ANTI-KICKBACK AND LABORATORY TESTING

By signing this subcontract, the Subcontractor certifies that it has not engaged
in any violation of the Medicare Anti-Kickback statute (42 USC Sections
1320a-7b) or the "Stark I" and "Stark II" laws governing related-entity
referrals (PL 101-239 and PL 101-432) and compensation there from. If the
Subcontractor provides laboratory testing, it certifies that it has complied
with 42 CFR Section411.361 and has sent to AHCCCSA simultaneous copies of the
information required by that rule to be sent to the Centers for Medicare and
Medicaid Services. (42 USC Sections 1320a-7b; PL 101-239 and PL 101-432; 42 CFR
Section411.361)

4) CERTIFICATION OF TRUTHFULNESS OF REPRESENTATION

By signing this subcontract, the Subcontractor certifies that all
representations set forth herein are true to the best of its knowledge.

5) CLINICAL LABORATORY IMPROVEMENT AMENDMENTS OF 1988

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

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

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

6) COMPLIANCE WITH AHCCCSA RULES RELATING TO AUDIT AND INSPECTION

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

7) COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS

The Subcontractor shall comply with all federal, State and local laws, rules,
regulations, standards and executive orders governing performance of duties
under this subcontract, without limitation to those designated within this
subcontract. (Requirement for FFP, 42 CFR 434.70) [42 CFR 438.6(1)]

                                      -92-

<PAGE>

ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS          CONTRACT/RFP NO. YH04-0001

8) CONFIDENTIALITY REQUIREMENT

Confidential information shall be safeguarded pursuant to 42 CFR Part 431,
Subpart F, ARS Section36-107, 36-2903, 41-1959 and 46-135, AHCCCS Rules and
Health Insurance Portability and Accountability Act (Public Law 107-191, 110
Statutes 1936).

9) CONFLICT IN INTERPRETATION OF PROVISIONS

In the event of any conflict in interpretation between provisions of this
subcontract and the AHCCCS Minimum Subcontract Provisions, the latter shall take
precedence.

10) CONTRACT CLAIMS AND DISPUTES

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

11) ENCOUNTER DATA REQUIREMENT

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

12) EVALUATION OF QUALITY, APPROPRIATENESS, OR TIMELINESS OF SERVICES

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

13) FRAUD AND ABUSE

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

14) GENERAL INDEMNIFICATION

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

15) INSURANCE

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

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

16) LIMITATIONS ON BILLING AND COLLECTION PRACTICES

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

                                      -93-

<PAGE>

ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS          CONTRACT/RFP NO. YH04-0001

17) MAINTENANCE OF REQUIREMENTS TO DO BUSINESS AND PROVIDE SERVICES

The Subcontractor shall be registered with AHCCCSA and shall obtain and maintain
all licenses, permits and authority necessary to do business and render service
under this subcontract and, where applicable, shall comply with all laws
regarding safety, unemployment insurance, disability insurance and worker's
compensation.

18) NON-DISCRIMINATION REQUIREMENTS

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

19) PRIOR AUTHORIZATION AND UTILIZATION REVIEW

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

20) RECORDS RETENTION

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

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

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

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

21) SEVERABILITY

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

22) SUBJECTION OF SUBCONTRACT

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

23) TERMINATION OF SUBCONTRACT

AHCCCSA may, by written notice to the Subcontractor, terminate this subcontract
if it is found, after notice and hearing by the State, that gratuities in the
form of entertainment, gifts, or otherwise were offered or given by the

                                      -94-

<PAGE>

ATTACHMENT A: MINIMUM SUBCONTRACT PROVISIONS          CONTRACT/RFP NO. YH04-0001

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

24) VOIDABILITY OF SUBCONTRACT

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

25) WARRANTY OF SERVICES

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

26) OFF SHORE PERFORMANCE OF WORK PROHIBITED

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

                                      -95-

<PAGE>

ATTACHMENT B: MINIMUM NETWORK STANDARDS               CONTRACT/RFP NO. YH04-0001

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

INSTRUCTIONS:

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

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

<TABLE>
<CAPTION>
               SPLIT BETWEEN      COUNTY ASSIGNED
ZIP CODE      THESE COUNTIES             TO         ASSIGNED GSA
--------   --------------------   ---------------   ------------
<S>        <C>                    <C>               <C>
  85220     Pinal and Maricopa        Maricopa           12
  85242     Pinal and Maricopa        Maricopa           12
  85292       Gila and Pinal            Gila              8
  85342    Yavapai and Maricopa       Maricopa           12
  85358    Yavapai and Maricopa       Maricopa           12
  85390    Yavapai and Maricopa       Maricopa           12
  85643     Graham and Cochise        Cochise            14
  85645    Pima and Santa Cruz       Santa Cruz          10
  85943     Apache and Navajo          Navajo             4
  86336    Coconino and Yavapai       Yavapai             6
  86351    Coconino and Yavapai       Coconino            4
  86434     Mohave and Yavapai        Yavapai             6
  86340    Coconino and Yavapai       Yavapai             6
</TABLE>

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

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

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

                                      -96-

<PAGE>

ATTACHMENT B: MINIMUM NETWORK STANDARDS               CONTRACT/RFP NO. YH04-0001

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

     H    Hospitals

     P    Primary Care Providers (physicians, certified nurse practitioners and
          physician assistants)

     D    Dentists

     Ph   Pharmacies

                                      -97-

<PAGE>

ATTACHMENT B: MINIMUM NETWORK STANDARDS               CONTRACT/RFP NO. YH04-0001

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

DISTRICT 1

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

DISTRICT 2

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

DISTRICT 3

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

DISTRICT 4

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

                                      -98-

<PAGE>

ATTACHMENT B: MINIMUM NETWORK STANDARDS               CONTRACT/RFP NO. YH04-0001

HOSPITALS IN TUCSON METROPOLITAN AREA (BY SERVICE DISTRICT, BY ZIP CODE)

DISTRICT 1

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

DISTRICT 2

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

                                      -99-

<PAGE>

ATTACHMENT F: PERIODIC REPORT REQUIREMENTS            CONTRACT/RFP NO. YH04-0001

ATTACHMENT F: PERIODIC REPORT REQUIREMENTS

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

<TABLE>
<CAPTION>
REPORT                         WHEN DUE              SOURCE/REFERENCE           SEND TO:
------                  ----------------------   -----------------------   -----------------
<S>                     <C>                      <C>                       <C>
DHCM Finance

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

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

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

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

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

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

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

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

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

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

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

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

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

DHCM Health Plan
Operations

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

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

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

                                      -100-

<PAGE>

ATTACHMENT F: PERIODIC REPORT REQUIREMENTS            CONTRACT/RFP No. YH04-0001

<TABLE>
<S>                     <C>                      <C>                       <C>
                        period

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

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

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

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

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

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

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

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

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

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

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

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

<TABLE>
<CAPTION>
REPORT                         WHEN DUE              SOURCE/REFERENCE           SEND TO:
------                  ----------------------   -----------------------   ------------------
<S>                     <C>                      <C>                       <C>
DHCM Data Analysis
and Research

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

New Day Encounter       Monthly, according       Encounter Manual          Encounter
                        to established                                     Administrator
                        schedule

Medical Records for     90 days after the        RFP Attachment I,         Encounter
Data Validation         request received from    Encounter Submission      Administrator
                        AHCCCSA                  Requirements
</TABLE>

<TABLE>
<CAPTION>
REPORT                         WHEN DUE              SOURCE/REFERENCE           SEND TO:
------                  ----------------------   -----------------------   ------------------
<S>                     <C>                      <C>                       <C>
DHCM Clinical
Quality Management

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

EPSDT Progress          15 days after the end    AMPM, Chapter 400         DHCM/CQM
Report                  of
</TABLE>

                                      -101-

<PAGE>

ATTACHMENT F: PERIODIC REPORT REQUIREMENTS            CONTRACT/RFP NO. YH04-0001

<TABLE>
<S>                       <C>                     <C>                       <C>
including Dental          each quarter
-Quarterly Update

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

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

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

Sterilization             Immediately following   AMPM, Chapter 400         DHCM/CQM
                          procedure

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

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

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

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

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

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

<TABLE>
<CAPTION>
REPORT                           WHEN DUE             SOURCE/REFERENCE      SEND TO:
------                    ---------------------   -----------------------   --------
<S>                       <C>                     <C>                       <C>
DHCM Utilization
Management

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

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

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

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

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

<TABLE>
<CAPTION>
REPORT                           WHEN DUE             SOURCE/REFERENCE      SEND TO:
------                    ---------------------   -----------------------   --------
<S>                       <C>                     <C>                       <C>
Office of Program
Integrity

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

                                      -102-

<PAGE>

ATTACHMENT F: PERIODIC REPORT REQUIREMENTS            CONTRACT/RFP NO. YH04-0001

<TABLE>
<S>                       <C>                     <C>                       <C>
Eligible Person           Immediately following   Section D, Paragraph 62   Office of Program
Fraud/Abuse Report        discovery                                         Integrity Manager
</TABLE>

<TABLE>
<CAPTION>
REPORT                           WHEN DUE             SOURCE/REFERENCE           SEND TO:
------                    ---------------------   -----------------------   -----------------
<S>                       <C>                     <C>                       <C>
Office of the Director

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

</TABLE>

<TABLE>
<CAPTION>
REPORT                           WHEN DUE             SOURCE/REFERENCE           SEND TO:
------                    ---------------------   -----------------------   -----------------
<S>                       <C>                     <C>                       <C>
As Required/Needed

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

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

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

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

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

Certificate of            Within 10 days of       Section E, #25            Contract Manager
Insurance                 contract award

Generic Extra Credit      As required per your    Per Contract Award        Per Your Contract
Requirement               contract                Requirement
</TABLE>

*    Applicable in the event that the prescription drug benefit remains the
     responsibility of the Contractor - see Paragraph 75, Pending Legislation /
     Other Issues, for more information.

                                      -103-

<PAGE>

ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM               CONTRACT/RFP NO. YH04-0001

ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM

Members who do not have the right to choose a Contractor or members who have the
right to choose but do not exercise this right, are assigned to a Contractor
through an auto-assignment algorithm. The algorithm is a mathematical formula
used to distribute members to the various Contractors in a manner that is
predictable and consistent with AHCCCSA goals.

The algorithm employs a data table and a formula to assign cases (a case may be
a member or a household of members) to Contractors using the target percentages
developed. The algorithm data table consists of all the geographic service areas
(GSA) in the state, all Contractors serving each GSA, and the target percentages
by risk group within each GSA.

The Contractor farthest away from its target percentage within a GSA and risk
group, the largest negative difference, is assigned the next case for that GSA.
The equation used is:

          (t/T) - P = d

t = The total members assigned to the GSA, per risk group category, for the
    Contractor

T = The total members assigned to the GSA, per risk group category, all
    Contractors combined

P = The target percentage of members per risk group for the Contractor

d = The difference

The algorithm is calculated after each assignment to give a new difference for
each Contractor. When more than one Contractor has the same difference, and
their differences are greater than all other Contractors, the Contractor with
the lowest Health Plan I.D. Number will be assigned the case.

Assignment by the algorithm applies to:

     1.   Members that are newly eligible to the AHCCCS program that did not
          choose a Contractor within the prescribed time limits.

     2.   Members whose assigned health plan is no longer available after the
          member moves to a new GSA and did not choose a new Contractor within
          the prescribed time limits.

     3.   Members whose assigned plan is no longer available at the beginning of
          a contract cycle that did not choose a Contractor within the
          prescribed time limits.

All Contractors, within a given geographic service area (GSA) and for each risk
group, will have a placement in the algorithm and will receive members
accordingly. A Contractor with a more favorable target percentage in the
algorithm will receive proportionally more members. Conversely, a Contractor
with a lower target percentage in the algorithm will receive proportionally
fewer members. The algorithm favors Contractors with both lower final bids and
awarded rates. The algorithm also favors those Contractors that score higher on
selected Performance Measures (See Section D, Paragraph 24, Performance
Measures).

For Contractors in the Maricopa and Pima/Santa Cruz GSAs with fewer than 25,000
members statewide, a temporary adjustment will be made to the algorithm formula
in order to ensure a minimum membership (see the discussion entitled "Adjustment
Methodology for Contractors with Fewer than 25,000 Members" for more
information).

Development of the Target Percentages

Beginning in CYE '06, the algorithm target percentages will be developed using
the methodology described below. However, for subsequent years, AHCCCS reserves
the right to change the algorithm methodology to assure assignments are made in
the best interest of the AHCCCS program and the State.

                                      -104-

<PAGE>

ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM               CONTRACT/RFP No. YH04-0001

A Contractor's placement in the algorithm is based upon the following three
factors, which are weighted as follows:

<TABLE>
<CAPTION>
#                                FACTOR                               WEIGHTING
-                                ------                               ---------
<S> <C>                                                               <C>
1   The final capitation rate bid submitted by the Contractor.           30%
    Final bids that are below the bottom of the rate range will be
    assigned to the bottom of the rate range for development of the
    target percentages.

2   The Contractor's final awarded rate from AHCCCSA.                    30%

3   The Contractor's ranking in Well-Child visits, 3, 4, 5, and 6        40%
    Years of Age (weighted 75%) and Timeliness of Prenatal Care
    (weighted 25%) Performance measures (measurement period CYE
    2004, reported in CYE 2005).
</TABLE>

Points will be assigned to each Contractor by risk group by GSA. Based on the
rankings of the final bid rates and the final awarded rates, each Contractor
will be assigned a number of points for each of these two components separately
as follows:

TABLE FOR FACTORS #1 AND #2

<TABLE>
<CAPTION>
                           2ND      3RD      4TH      5TH      6TH      7TH
  NUMBER OF     LOWEST   LOWEST   LOWEST   LOWEST   LOWEST   LOWEST   LOWEST
AWARDS IN GSA    RATE     RATE     RATE     RATE     RATE     RATE     RATE
-------------   ------   ------   ------   ------   ------   ------   ------
<S>             <C>      <C>      <C>      <C>      <C>      <C>      <C>
      2           60       40
      3           44       32       24
      4           35       28       22       15
      5           30       25       20       15       10
      6           26       23       19       15       11        6
      7           25       20       17       14       11        8        5
</TABLE>

Contractors that have equal bids in a GSA for the same risk group will be given
an equal percentage of the points for all of the positions combined.

The third component of the calculation, Performance Measure Rates (PMR), will be
assigned a number of points based on the Contractor's ranking among the rates
for the selected Performance Measures. The higher the rate, the more points
assigned. For this component, points will be assigned as follows:

TABLE FOR FACTOR #3

<TABLE>
<CAPTION>
NUMBER OF               2ND       3RD       4TH       5TH       6TH       7TH
AWARDS IN   HIGHEST   HIGHEST   HIGHEST   HIGHEST   HIGHEST   HIGHEST   HIGHEST
   GSA        PMR       PMR       PMR       PMR       PMR       PMR       PMR
---------   -------   -------   ------    -------   -------   -------   -------
<S>         <C>       <C>       <C>       <C>       <C>       <C>       <C>
    2          60        40
    3          44        32        24
    4          35        28        22        15
    5          30        25        20        15        10
    6          26        23        19        15        11        6
    7          25        20        17        14        11        8         5
</TABLE>

Contractors that have equal Performance Measure Rates will be given an equal
percentage of the points for all of the positions combined.

The points awarded for the three components will be combined as follows to give
the target percentage for each Contractor by GSA by risk group:

                                      -105-

<PAGE>

ATTACHMENT G: AUTO-ASSIGNMENT ALGORITHM               CONTRACT/RFP NO. YH04-0001

Final Bid Points (.30) + Awarded Bid Points (.30) + Performance Measure Points
(.40) = TARGET PERCENTAGE 100

ADJUSTMENT METHODOLOGY FOR CONTRACTORS WITH FEWER THAN 25,000 MEMBERS

At the beginning of the new contract cycle, the auto-assignment algorithm for
the Maricopa and Pima/Santa Cruz GSAs will be adjusted to favor Contractors with
fewer than 25,000 members statewide. The adjusted algorithm will be utilized
until a target membership of 25,000 members statewide, per Contractor, is
reached.

The adjustment will be made to the final percentages developed using the
methodology above. A pre-determined percentage, based on the table below, will
be added to the affected Contractor(s) and subtracted evenly from the other
Contractors.

<TABLE>
<CAPTION>
                                      PERCENTAGE
                                     ADDED TO NEW   PERCENTAGE TO BE EVENLY
NUMBER OF CONTRACTORS BELOW 25,000    CONTRACTOR        SUBTRACTED FROM
   STATEWIDE MINIMUM ENROLLMENT        TARGET         REMAINING BIDDERS
----------------------------------   ------------   -----------------------
<S>                                  <C>            <C>
                 1                        20%                 20%
                 2                        15%                 30%
                 3                        10%                 30%
</TABLE>

*    In the event that there are more than three affected Contractors, AHCCCS
     will disclose adjustment methodology by July 1, 2003.

In the event that a Contractor only receives an award in rural GSAs, AHCCCS
reserves the right to make a temporary adjustment to the auto-assignment target
to favor the new Contractor until a minimum enrollment is reached.

AHCCCSA reserves the right to adjust capitation rates for potential changes to
the populations risk due to the adjusted algorithm.

                                      -106-

<PAGE>

ATTACHMENT H:                                         CONTRACT/RFP NO. YH04-0001
GRIEVANCE SYSTEM AND STANDARDS

ATTACHMENT H (1): ENROLLEE GRIEVANCE SYSTEM STANDARDS AND POLICY

The Contractor shall have a written policy delineating its Grievance System
which shall be in accordance with applicable Federal and State laws, regulations
and policies, including, but not limited to 42 CFR Part 438 Subpart F. The
Contractor shall provide the ACOM Enrollee Grievance Policy to all providers and
subcontractors at the time of contract. The Contractor shall also furnish this
information to enrollees within a reasonable time after the Contractor receives
notice of the enrollment. Additionally, the Contractor shall provide written
notification of any significant change in this policy at least 30 days before
the intended effective date of the change.

The written information provided to enrollees describing the Grievance System
including the grievance process, the appeals process, enrollee rights, the
grievance system requirements and timeframes, shall be in each prevalent
non-English language occurring within the subcontractor's service area and in an
easily understood language and format. The Contractor shall inform enrollees
that oral interpretation services are available in any language, that additional
information is available in prevalent non-English languages upon request and how
enrollees may obtain this information.

Written documents, including but not limited to the Notice of Action, the Notice
of Appeal Resolution, Notice of Extension for Resolution, and Notice of
Extension of Notice of Action shall be translated in the enrollee's language if
information is received by the Contractor, orally or in writing, indicating that
the enrollee has a limited English proficiency. Otherwise, these documents shall
be translated in the prevalent non-English language(s) or shall contain
information in the prevalent non-English language(s) advising the enrollee that
the information is available in the prevalent non-English language(s) and in
alternative formats along with an explanation of how enrollees may obtain this
information. This information must be in large, bold print appearing in a
prominent location on the first page of the document.

At a minimum, the Contractor's Grievance System Standards and Policy shall
specify:

1.   That the Contractor shall maintain records of all grievances and appeals.

2.   Information explaining the grievance, appeal, and fair hearing procedures
     and timeframes describing the right to hearing, the method for obtaining a
     hearing, the rules which govern representation at the hearing, the right to
     file grievances and appeals and the requirements and timeframes for filing
     a grievance or appeal.

3.   The availability of assistance in the filing process and the Contractor's
     toll-free numbers that an enrollee can use to file a grievance or appeal by
     phone if requested by the enrollee.

4.   That the Contractor shall acknowledge receipt of each grievance and appeal.
     For Appeals, the Contractor shall acknowledge receipt of standard appeals
     in writing within five business days of receipt and within one business day
     of receipt of expedited appeals.

5.   That the Contractor shall permit both oral and written appeals and
     grievances and that oral inquiries appealing an action are treated as
     appeals.

6.   That the Contractor shall ensure that individuals who make decisions
     regarding grievances and appeals are individuals not involved in any
     previous level of review or decision making and that individuals who make
     decisions regarding: 1) appeals of denials based on lack of medical
     necessity, 2) a grievance regarding denial of expedited resolution of an
     appeal or 3) grievances or appeals involving clinical issues are health
     care professionals as defined in 42 CFR 438.2 with the appropriate clinical
     expertise in treating the enrollee's condition or disease.

                                      -107-

<PAGE>

ATTACHMENT H: GRIEVANCE SYSTEM AND STANDARDS          CONTRACT/RFP NO. YH04-0001

7.   The resolution timeframes for standard appeals and expedited appeals may be
     extended up to 14 days if the enrollee requests the extension or if the
     Contractor establishes a need for additional information and that the delay
     is in the enrollee's interest.

8.   That if the Contractor extends the timeframe for resolution of a grievance
     or appeal when not requested by the enrollee, the Contractor shall provide
     the enrollee with written notice of the reason for the delay.

9.   The definition of grievance as a member's expression of dissatisfaction
     with any aspect of their care, other than the appeal of actions.

10.  That an enrollee must file a grievance with the Contractor and that the
     enrollee is not permitted to file a grievance directly with the State.

11.  That the Contractor must dispose of each grievance in accordance with the
     ACOM Enrollee Grievance Policy, but in no case shall the timeframe exceed
     90 days unless an extension is in effect.

12.  The definition of action as the [42 CFR 438.400(b)]:

          a.   Denial or limited authorization of a requested service, including
               the type or level of service;

          b.   Reduction, suspension, or termination of a previously authorized
               service;

          c.   Denial, in whole or in part, of payment for a service;

          d.   Failure to provide services in a timely manner;

          e.   Failure to act within the timeframes required for standard and
               expedited resolution of appeals and standard disposition of
               grievances; or

          f.   Denial of a rural enrollee's request to obtain services outside
               the Contractor's network under 42 CFR 438.52(b)(2)(ii), when the
               contractor is the only Contractor in the rural area.

13.  The definition of a service authorization request as an enrollee's request
     for the provision of a service [42 CFR 431.201].

14.  The definition of appeal as the request for review of an action, as defined
     above.

15.  Information explaining that a provider acting on behalf of an enrollee and
     with the enrollee's written consent, may file an appeal.

16.  That an enrollee may file an appeal of: 1) the denial or limited
     authorization of a requested service including the type or level of
     service, 2) the reduction, suspension or termination of a previously
     authorized service, 3) the denial in whole or in part of payment for
     service, 4) the failure to provide services in a timely manner, 5) the
     failure of the Contractor to comply with the timeframes for dispositions of
     grievances and appeals and 6) the denial of a rural enrollee's request to
     obtain services outside the Contractor's network under 42 CFR
     438.52(b)(2)(ii) when the Contractor is the only Contractor in the rural
     area.

17.  The definition of a standard authorization request. For standard
     authorization decisions, the Contractor must provide a Notice of Action to
     the enrollee as expeditiously as the enrollee's health condition requires,
     but not later than 14 days following the receipt of the authorization with
     a possible extension of up to 14 days if the enrollee or provider requests
     an extension or if the Contractor establishes a need for additional
     information and delay is in the enrollee's best interest. [42 CFR
     438.210(d)(1)]

18.  The definition of an expedited authorization request. For expedited
     authorization decisions, the Contractor must provide a Notice of Action to
     the enrollee as expeditiously as the enrollee's health condition requires,
     but not later than 3 business days following the receipt of the
     authorization with a possible extension of up to 14 days if the enrollee or
     provider requests an extension or if the Contractor establishes a need for
     additional information and delay is in the enrollee's interest. [42 CFR
     438.210(d)(2)]

                                      -108-

<PAGE>

ATTACHMENT H: GRIEVANCE SYSTEM AND STANDARDS          CONTRACT/RFP NO. YH04-0001

19.  That the Notice of Action for a service authorization decision not made
     within the standard or expedited timeframes, whichever is applicable, will
     be made on the date that the timeframes expire. If the Contractor extends
     the timeframe to make a standard or expedited authorization decision, the
     contractor must give the enrollee written notice of the reason to extend
     the timeframe and inform the enrollee of the right to file a grievance if
     the enrollee disagrees with the decision. The Contractor must issue and
     carry out its decision as expeditiously as the enrollee's health condition
     requires and no later than the date the extension expires.

20.  That the Contractor shall notify the requesting provider of the decision to
     deny or reduce a service authorization request. The notice to the provider
     need not be written.

21.  The definition of a standard appeal and that the Contractor shall resolve
     standard appeals no later than 30 days from the date of receipt of the
     appeal unless an extension is in effect.

22.  The definition of an expedited appeal and that the Contractor shall resolve
     all expedited appeals not later than three business days from the date the
     Contractor receives the appeal (unless an extension is in effect) where the
     Contractor determines (for a request from the enrollee), or the provider
     (in making the request on the enrollee's behalf indicates) that the
     standard resolution timeframe could seriously jeopardize the enrollee's
     life or health or ability to attain, maintain or regain maximum function.
     The Contractor shall make reasonable efforts to provide oral notice to an
     enrollee regarding an expedited resolution appeal.

23.  That if the Contractor denies a request for expedited resolution, it must
     transfer the appeal to the 30-day timeframe for a standard appeal. The
     Contractor must make reasonable efforts to give the enrollee prompt oral
     notice and follow-up within two days with a written notice of the denial of
     expedited resolution.

24.  That an enrollee shall be given 60 days from the date of the Contractor's
     Notice of Action to file an appeal.

25.  That the Contractor shall mail a Notice of Action: 1) at least 10 days
     before the date of a termination, suspension or reduction of previously
     authorized AHCCCS services, except as provided in (a)-(f) below; 2) at
     least 5 days before the date of action in the case of suspected fraud; 3)
     at the time of any action affecting the claim when there has been a denial
     of payment for a service, in whole or in part; 4) within 14 days from
     receipt of a request for a standard service authorization which has been
     denied or reduced unless an extension is in effect; 5) within three
     business days from receipt of an expedited service authorization request
     unless an extension is in effect. As described below, the Contractor may
     elect to mail the Notice of Action no later than the date of action when:

          a.   The Contractor receives notification of the death of an enrollee;

          b.   The enrollee signs a written statement requesting service
               termination or gives information requiring termination or
               reduction of services (which indicates understanding that the
               termination or reduction will be the result of supplying that
               information);

          c.   The enrollee is admitted to an institution where he is ineligible
               for further services;

          d.   The enrollee's address is unknown and mail directed to the
               enrollee has no forwarding address;

          e.   The enrollee has been accepted for Medicaid in another local
               jurisdiction;

26.  That the Contractor include, as parties to the appeal, the enrollee, the
     enrollee's legal representative, or the legal representative of a deceased
     enrollee's estate.

27.  That the Notice of Action must explain: 1) the action the Contractor has
     taken or intends to take, 2) the reasons for the action, 3) the enrollee's
     right to file an appeal with the Contractor, 4) the procedures for
     exercising these rights, 5) circumstances when expedited resolution is
     available and how to request it and 6) the enrollee's right to receive
     continued benefits pending resolution of the appeal, how to request
     continued benefits and the circumstances under which the enrollee may be
     required to pay for the cost of these services.

                                      -109-

<PAGE>

ATTACHMENT H: GRIEVANCE SYSTEM AND STANDARDS          CONTRACT/RFP NO. YH04-0001

28.  That benefits shall continue until a hearing decision is rendered if: 1)
     the enrollee files an appeal before the later of a) 10 days from the
     mailing of the Notice of Action or b) the intended date of the Contractor's
     action, 2) a) the appeal involves the termination, suspension, or reduction
     of a previously authorized course of treatment or b) the appeal involves a
     denial and the physician asserts that the requested service/treatment is a
     necessary continuation of a previously authorized service, 3) the services
     were ordered by an authorized provider and 4) the enrollee requests a
     continuation of benefits.

     For purposes of this paragraph, benefits shall be continued based on the
     authorization which was in place prior to the denial, termination,
     reduction, or suspension which has been appealed.

29.  That for appeals, the Contractor provides the enrollee a reasonable
     opportunity to present evidence and allegations of fact or law in person
     and in writing and that the Contractor informs the enrollee of the limited
     time available in cases involving expedited resolution.

30.  That for appeals, the Contractor provides the enrollee and his
     representative the opportunity before and during the appeals process to
     examine the enrollee's case file including medical records and other
     documents considered during the appeals process.

31.  That the Contractor must ensure that punitive action is not taken against a
     provider who either requests an expedited resolution or supports an
     enrollee's appeal.

32.  That the Contractor shall provide written Notice of Appeal Resolution to
     the enrollee and the enrollee's representative or the representative of the
     deceased enrollee's estate which must contain: 1) the results of the
     resolution process, including the legal citations or authorities supporting
     the determination, and the date it was completed, and 2) for appeals not
     resolved wholly in favor of enrollees: a) the enrollee's right to request a
     State fair hearing (including the requirement that the enrollee must file
     the request for a hearing in writing) no later than 30 days after the date
     the enrollee receives the Contractor's notice of appeal resolution and how
     to do so, b) the right to receive continued benefits pending the hearing
     and how to request continuation of benefits and c) information explaining
     that the enrollee may be held liable for the cost of benefits if the
     hearing decision upholds the Contractor.

33.  That the Contractor continues extended benefits originally provided to the
     enrollee until any of the following occurs: 1) the enrollee withdraws
     appeal, 2) the enrollee has not specifically requested continued benefits
     pending a hearing decision within 10 days of the Contractor mailing of the
     appeal resolution notice, or 3) the AHCCCS Administration issues a state
     fair hearing decision adverse to the enrollee.

34.  That if the enrollee files a request for hearing the Contractor must ensure
     that the case file and all supporting documentation is received by the
     AHCCCSA, Office of Legal Assistance (OLA) as specified by OLA. The file
     provided by the Contractor must contain a cover letter that includes:

          a.   Enrollee's name

          b.   Enrollee's AHCCCS I.D. number

          c.   Enrollee's address

          d.   Enrollee's phone number (if applicable)

          e.   date of receipt of the appeal

          f.   summary of the Contractor's actions undertaken to resolve the
               appeal and summary of the appeal resolution

35.  The following material shall be included in the file sent by the
     Contractor:

          a.   the Enrollee's written request for hearing

                                      -110-

<PAGE>

ATTACHMENT H: GRIEVANCE SYSTEM AND STANDARDS          CONTRACT/RFP NO. YH04-0001

          b.   copies of the entire appeal file which includes all supporting
               documentation including pertinent findings and medical records;

          c.   the Contractor's Notice of Appeal Resolution

          d.   other information relevant to the resolution of the appeal

36.  That if the Contractor or the State fair hearing decision reverses a
     decision to deny, limit or delay services not furnished while the appeal
     was pending, the Contractor shall authorize or provide the services
     promptly and as expeditiously as the enrollee's health condition requires.

37.  That if the Contractor or State fair hearing decision reverses a decision
     to deny authorization of services and the disputed services were received
     pending appeal, the Contractor shall pay for those services, as specified
     in policy and/or regulation.

38.  That if the Contractor or State fair hearing decision upholds a decision to
     deny authorization of services and the disputed services were received
     pending appeal, the Contractor may recover the cost of those services from
     the enrollee.

                                      -1ll-

<PAGE>

ATTACHMENT H: GRIEVANCE SYSTEM AND STANDARDS          CONTRACT/RFP NO. YH04-0001

ATTACHMENT H(2) PROVIDER CLAIM DISPUTE STANDARDS AND POLICY

The Contractor shall have in place a written claim dispute policy for providers.
The policy shall be in accordance with applicable Federal and State laws,
regulations and policies. The claim dispute policy shall include the following
provisions:

1.   The Provider Claim Dispute Policy shall be provided to all subcontractors
     at the time of contract. For providers without a contract, the claim
     dispute policy may be mailed with a remittance advice, provided the
     remittance is sent within 45 days of receipt of a claim.

2.   The Provider Claim Dispute Policy must specify that all claim disputes
     challenging claim payments, denials or recoupments must be filed in writing
     with the Contractor no later than 12 months from the date of service, 12
     months after the date of eligibility posting or within 60 days after the
     payment, denial or recoupment of a timely claim submission, whichever is
     later.

3.   Specific individuals are appointed with authority to require corrective
     action and with requisite experience to administer the claim dispute
     process.

4.   A log is maintained for all claim disputes containing sufficient
     information to identify the Complainant, date of receipt, nature of the
     claim dispute and the date the claim dispute is resolved. Separate logs
     must be maintained for provider and behavioral health recipient claim
     disputes.

5.   Within five business days of receipt, the Complainant is informed by letter
     that the claim dispute has been received.

6.   Each claim dispute is thoroughly investigated using the applicable
     statutory, regulatory, contractual and policy provisions, ensuring that
     facts are obtained from all parties.

7.   All documentation received by the Contractor during the claim dispute
     process is dated upon receipt.

8.   All claim disputes are filed in a secure designated area and are retained
     for five years following the Contractor's decision, the Administration's
     decision, judicial appeal or close of the claim dispute, whichever is
     later.

9.   A copy of the Contractor's Notice of Decision (hereafter referred to as
     Decision) will be communicated in writing to all parties. The Decision must
     include and describe in detail, the following:

          a.   the nature of the claim dispute

          b.   the issues involved

          c.   the reasons supporting the Contractor's Decision, including
               references to applicable statute, rule, applicable contractual
               provisions, policy and procedure

          d.   the Provider's right to request a hearing by filing a written
               request for hearing to the Contractor no later than 30 days after
               the date the Provider receives the Contractor's decision.

          e.   If the claim dispute is overturned, the requirement that the
               Contractor shall reprocess and pay the claim(s) in a manner
               consistent with the decision within 15 business days of the date
               of the Decision.

10.  If the Provider files a written request for hearing, the Contractor must
     ensure that all supporting documentation is received by the AHCCCSA, Office
     of Legal Assistance, no later than five business days from the date the
     Contractor receives the provider's written hearing request. The file sent
     by the Contractor must contain a cover letter that includes:

                                      -112-

<PAGE>

ATTACHMENT H: GRIEVANCE SYSTEM AND STANDARDS          CONTRACT/RFP NO. YH04-0001

          a.   Provider's name

          b.   Provider's AHCCCS ID number

          c.   Provider's address

          d.   Provider's phone number (if applicable)

          e.   the date of receipt of claim dispute

          f.   a summary of the Contractor's actions undertaken to resolve the
               claim dispute and basis of the determination

11.  The following material shall be included in the file sent by the
     Contractor:

          a.   written request for hearing filed by the Provider

          b.   copies of the entire file which includes pertinent records; and
               the Contractor's Decision

          c.   other information relevant to the Notice of Decision of the claim
               dispute

12.  If the Contractor's Decision regarding a claim dispute is reversed through
     the appeal process, the Contractor shall reprocess and pay the claim (s) in
     a manner consistent with the decision within 15 business days of the date
     of the Decision.

                                      -113-

<PAGE>

ATTACHMENT I: ENCOUNTER SUBMISSION REQUIREMENTS       CONTRACT/RFP NO. YH04-0001

ATTACHMENT I: ENCOUNTER SUBMISSION REQUIREMENTS

The Contractor will be assessed sanctions for noncompliance with encounter
submission requirements. AHCCCSA may also perform special reviews of encounter
data, such as comparing encounter reports to the Contractor's claims files. Any
findings of incomplete or inaccurate encounter data may result in the imposition
of sanctions or requirement of a corrective action plan.

PENDED ENCOUNTER CORRECTIONS

The Contractor must resolve all pended encounters within 120 days of the
original processing date. Sanctions will be imposed according to the following
schedule for each encounter pended for more than 120 days unless the pend is due
to AHCCCSA error:

<TABLE>
<CAPTION>
 0-120 days   121-180 days    181-240 days   241 - 360 days     361 + days
 ----------   ------------   -------------   --------------   -------------
<S>           <C>            <C>             <C>              <C>
No sanction   $5 per month   $10 per month    $15 per month   $20 per month
</TABLE>

"AHCCCSA error" is defined as a pended encounter, which (1) AHCCCSA acknowledges
to be the result of its own error, and (2) requires a change to the system
programming, an update to the database reference table, or further research by
AHCCCSA. AHCCCSA reserves the right to adjust the sanction amount if
circumstances warrant.

When the Contractor notifies AHCCCSA, in writing, that the resolution of a
pended encounter depends on AHCCCSA rather than the Contractor, AHCCCSA will
respond in writing within 30 days of receipt of such notification. The AHCCCSA
response will report the status of each pending encounter problem or issue in
question.

Pended encounters will not qualify as AHCCCSA errors if AHCCCSA reviews the
Contractor's notification and asks the Contractor to research the issue and
provide additional substantiating documentation, or if AHCCCSA disagrees with
the Contractor's claim of AHCCCSA error. If a pended encounter being researched
by AHCCCSA is later determined not to be caused by AHCCCSA error, the Contractor
may be sanctioned retroactively.

Before imposing sanctions, AHCCCSA will notify the Contractor, in writing, of
the total number of sanctionable encounters pended more than 120 days. Pended
encounters shall not be deleted by the Contractor as a means of avoiding
sanctions for failure to correct encounters within 120 days. The Contractor
shall document deleted encounters and shall maintain a record of the deleted
CRNs with appropriate reasons indicated. The Contractor shall, upon request,
make this documentation available to AHCCCSA for review.

ENCOUNTER VALIDATION STUDIES

Per CMS requirement, AHCCCSA will conduct encounter validation studies of the
Contractor's encounter submissions, and sanction the Contractor for
noncompliance with encounter submission requirements. The purpose of encounter
validation studies is to compare recorded utilization information from a medical
record or other source with the Contractor's submitted encounter data. Any and
all covered services may be validated as part of these studies. Encounter
validation studies will be conducted at least yearly.

AHCCCSA may revise study methodology, timelines, and sanction amounts based on
agency review or as a result of consultations with CMS. The Contractor will be
notified in writing of any significant change in study methodology.

AHCCCSA will conduct two encounter validation studies. Study "A" examines
non-institutional services (form HCFA 1500 encounters), and Study "B" examines
institutional services (form UB-92 encounters).

                                      -114-

<PAGE>

ATTACHMENT I: ENCOUNTER SUBMISSION REQUIREMENTS       CONTRACT/RFP NO. YH04-0001

AHCCCSA will notify the Contractor in writing of the sanction amounts and of the
selected data needed for encounter validation studies. The Contractor will have
90 days to submit the requested data to AHCCCSA. In the case of medical records
requests, the Contractor's failure to provide AHCCCSA with the records requested
within 90 days may result in a sanction of $1,000 per missing medical record. If
AHCCCSA does not receive a sufficient number of medical records from the
Contractor to select a statistically valid sample for a study, the Contractor
may be sanctioned up to 5% of its annual capitation payment.

The criteria used in encounter validation studies may include timeliness,
correctness, and omission of encounters. These criteria are defined as follows:

Timeliness: The time elapsed between the date of service and the date that the
encounter is received at AHCCCS. Ninety-five percent (95%) of all encounters
must be received by AHCCCSA no later than 240 days after the end of the month in
which the service was rendered, or the effective date of enrollment with the
Contractor, whichever is later. For all encounters for which timeliness is
evaluated, a sanction per encounter error extrapolated to the population of
encounters may be assessed if the encounter record is received by AHCCCSA more
than 240 days after the date determined above. It is anticipated that the
sanction amount will be $1.00 per error extrapolated to the population of
encounters; however, sanction amounts may be adjusted if AHCCCSA determines that
encounter quality has changed, or if CMS changes sanction requirements. The
Contractor will be notified of the sanction amount in effect for the studies at
the time the studies begin.

Correctness: A correct encounter contains a complete and accurate description of
AHCCCS covered services provided to a member. A sanction per encounter error
extrapolated to the population of encounters may be assessed if the encounter is
incomplete or incorrectly coded. It is anticipated that the sanction amount will
be $1.00 per error extrapolated to the population of encounters; however,
sanction amounts may be adjusted if AHCCCSA determines that encounter quality
has changed, or if CMS changes sanction requirements. The Contractor will be
notified of the sanction amount in effect for the studies at the time the
studies begin.

Omission of data: An encounter not submitted to AHCCCSA or an encounter
inappropriately deleted from AHCCCSA's pending encounter file or historical
files in lieu of correction of such record. For Study "A" and for Study "B", a
sanction per encounter error extrapolated to the population of encounters may be
assessed for an omission. It is anticipated that the sanction amount will be
$5.00 per error extrapolated to the population of encounters for Study "A" and
$10.00 per error extrapolated to the population of encounters for Study "B";
however, sanction amounts may be adjusted if AHCCCSA determines that encounter
quality has changed, or if CMS changes sanction requirements. The Contractor
will be notified of the sanction amount in effect for the studies at the time
the studies begin.

For encounter validation studies, AHCCCSA will select all approved and pended
encounters to be studied no earlier than 240 days after the end of the month in
which the service was rendered. Once AHCCCSA has selected the Contractor's
encounters for encounter validation studies, subsequent encounter submissions
for the period being studied will not be considered.

AHCCCSA may review all of the Contractor's submitted encounters, or may select a
sample. The sample size, or number of encounters to be reviewed, will be
determined using statistical methods in order to accurately estimate the
Contractor's error rates. Error rates will be calculated by dividing the number
of errors found by the number of encounters reviewed. A 95% confidence interval
will be used to account for limitations caused by sampling. The confidence
interval shows the range within which the true error rate is estimated to be. If
error rates are based on a sample, the error rate used for sanction purposes
will be the lower limit of the confidence interval.

Encounter validation methodology and statistical formulas are provided in the
AHCCCS Encounter Data Validation Technical Document, which is available in the
Bidders Library. This document also provides examples, which illustrate how
AHCCCSA determines study sample sizes, error rates, confidence intervals, and
sanction amounts.

                                      -115-

<PAGE>

ATTACHMENT I: ENCOUNTER SUBMISSION REQUIREMENTS       CONTRACT/RFP No. YH04-0001

Written preliminary results of all encounter validation studies will be sent to
the Contractor for review and comment. The Contractor will have a maximum of 30
days to review results and provide AHCCCSA with additional documentation that
would affect the final calculation of error rates and sanctions. AHCCCSA will
examine the Contractor's documentation and may revise study results if
warranted. Written final results of the study will then be sent to the
Contractor and communicated to CMS, and any sanctions will be assessed.

The Contractor may file a written challenge to sanctions assessed by AHCCCSA not
more than 35 days after the Contractor receives final study results from
AHCCCSA. Challenges will be reviewed by AHCCCSA and a written decision will be
rendered no later than 60 days from the date of receipt of a timely challenge.
Sanctions shall not apply to encounter errors successfully challenged. A
challenge must be filed on a timely basis and a decision must be rendered by
AHCCCSA prior to filing a claim dispute and request for hearing pursuant to
A.A.C. 9-34-401 et seq. Sanction amounts will be deducted from the Contractor's
capitation payment.

ENCOUNTER CORRECTIONS

Contractors are required to submit replacement or voided encounters in the event
that claims are subsequently corrected following the initial encounter
submission. This includes corrections as a result of inaccuracies identified by
fraud and abuse audits or investigations conducted by AHCCCSA or the Contractor.
Contractors shall refer to the Encounter Reporting User Manual for instructions
regarding submission of corrected encounters.

                                      -116-

<PAGE>

ATTACHMENT L: COST SHARING COPAYMENTS                 CONTRACT/RFP No. YH04-0001

ATTACHMENT L: COST SHARING COPAYMENTS

     I.   EXEMPT POPULATIONS (REGARDLESS OF RATE CODE)

          The following populations are EXEMPT FROM COPAYMENTS FOR ALL SERVICES
          ($0 COPAY):

          -    All members under the age of 19, including all KidsCare members

          -    All Pregnant Women

          -    All ALTCS enrolled members

          -    All persons with Serious Mental Illness receiving RBHA services

          -    All members who are receiving CRS services

          -    SOBRA Family Planning Services Only members

          Additionally, no member may be asked to make a copayment for family
          planning services or supplies.

     II.  STANDARD COPAYMENTS APPLY TO THE TITLE XIX WAIVER GROUP

          SERVICES TO THIS POPULATION MAY NOT BE DENIED FOR FAILURE TO PAY
          COPAYMENT

          The standard copayments apply to the Title XIX Waiver Group, including
          RBHA General Mental Health and Substance Abuse service members. The
          standard copayments are as follows:

<TABLE>
<CAPTION>
SERVICE                                                        COPAYMENT
-------                                                        ---------
<S>                                                            <C>
Generic Prescriptions or Brand Name if generic not available   $0 per Rx
Brand Name Prescriptions when generic is available             $       0
Non Emergency Use of ER                                        $       1
Physician Office Visits                                        $       1
</TABLE>

     III. STANDARD COPAYMENTS APPLY TO THE FOLLOWING POPULATIONS

          SERVICES TO THIS POPULATION MAY NOT HE DENIED FOR FAILURE TO PAY
          COPAYMENT.

          -    AHCCCS for Families with Children

          -    Supplemental Security Income with and without Medicare

<TABLE>
<CAPTION>
SERVICE                                                        COPAYMENT
-------                                                        ---------
<S>                                                            <C>
Generic Prescriptions or Brand Name if generic not available       $0
Brand Name Prescriptions when generic is available                 $0
Non Emergency Use of ER                                            $1
Physician Office Visits                                            $1
</TABLE>

     IV.  OTHER CO-PAYS

          HIFA Parents (Parents of KidsCare and SOBRA Children)

          -    Copayment is not mandatory

          -    EXCEPTION: NATIVE AMERICAN CONTRACTOR ENROLLED PARENTS ARE EXEMPT
               FROM ANY COPAYMENT

<TABLE>
<CAPTION>
SERVICE                                                        COPAYMENT
-------                                                        ---------
<S>                                                            <C>
Generic Prescriptions or Brand Name if generic not available       $0
Brand Name Prescriptions when generic is available                 $0
Non Emergency Use of ER                                            $1
Physician Office Visits                                            $0
</TABLE>

                                      -117-

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