Document:

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                                                                    EXHIBIT 10.8

                        HEALTHCHOICES SOUTHEAST AGREEMENT
                            EFFECTIVE OCTOBER 1, 2001

                                TABLE OF CONTENTS

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SECTION I:  INCORPORATION OF DOCUMENTS..............................................................................1

         A.       Operative Documents...............................................................................1

SECTION II:  DEFINITIONS............................................................................................1

AGREEMENT AND RFP ACRONYMS:........................................................................................21

SECTION III:  RELATIONSHIP OF PARTIES..............................................................................24

         A.       Basic Relationship...............................................................................24
         B.       Nature of Contract...............................................................................24

SECTION IV:  APPLICABLE LAWS AND REGULATIONS.......................................................................24

         A.       Certification and Licensing......................................................................24
         B.       Specific to MA Program...........................................................................25
         C.       General Laws and Regulations.....................................................................25
         D.       Limitation on the Department's Obligations.......................................................26

SECTION V:  PROGRAM REQUIREMENTS...................................................................................26

         A.       In-Plan Services.................................................................................26
                  1.    Amount, Duration and Scope.................................................................26
                  2.    Program Exceptions.........................................................................27
                  3.    Expanded Benefits..........................................................................27
                  4.    Referrals..................................................................................28
                  5.    Self Referral/Direct Access................................................................28
                  6.    Behavioral Health Services.................................................................29
                  7.    Pharmacy Services..........................................................................29
                  8.    EPSDT Services.............................................................................33
                  9.    Emergency Room (ER) Services...............................................................33
                  10.    Post-Stabilization Services...............................................................34
                  11.    Examinations to Determine Abuse or Neglect................................................34
                  12.    Hospice Services..........................................................................35
                  13.    Organ Transplants.........................................................................35
                  14.    Transportation............................................................................35
                  15.    Waiver Services/State Plan Amendments.....................................................36
                  16.    Nursing Facility Services.................................................................37
         B.       Prior Authorization of Services..................................................................38
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                  1.    General Prior Authorization Requirements...................................................38
                  2.    Prior Authorization for Outpatient Prescription Drugs......................................39
         C.       Continuity of Care...............................................................................41
         D.       Coordination of Care.............................................................................41
                  1.    Nursing Facility Care......................................................................41
                  2.    Special Services...........................................................................42
                  3.    Out-of-Plan Services.......................................................................42
                  4.    Coordination of Care/Letters of Agreement..................................................43
                  5.    PH-MCO and BH-MCO Coordination.............................................................44
         E.       Contractor Responsibility for Reportable Conditions..............................................45
         F.       Member Enrollment and Disenrollment..............................................................45
                  1.    General....................................................................................45
                  2.    Contractor Outreach Materials..............................................................46
                  3.    Contractor Outreach Activities.............................................................47
                  4.    Alternative Language Requirement...........................................................50
                  5.    Contractor Enrollment Procedures...........................................................50
                  6.    Enrollment of Newborns.....................................................................51
                  7.    Transitioning Members Between PH-MCOs......................................................51
                  8.    Change in Status...........................................................................51
                  9.    Monthly Membership.........................................................................52
                  10.    Enrollment and Disenrollment Updates......................................................52
                  11.    Services for New Members..................................................................53
                  12.    New Member Orientation....................................................................54
                  13.    Eligibility Verification System (EVS).....................................................54
                  14.    Contractor Identification Cards...........................................................55
                  15.    Member Handbook...........................................................................55
                  16.    Provider Directories......................................................................56
                  17.    Member Disenrollment......................................................................57
         G.       Member Services..................................................................................57
                  1.    General....................................................................................57
                  2.    Contractor Internal Member Dedicated Hotline...............................................57
                  3.    Education and Outreach Health Education Advisory Committee.................................58
                  4.    Informational Materials....................................................................59
                  5.    Member Encounter Listings..................................................................60
         H.       Additional Addressee.............................................................................61
         I.       Member Complaint, Grievance and DPW Fair Hearing Process.........................................61
                  1.    Member Complaint, Grievance and DPW Fair Hearing Process...................................61
                  2.    DPW Fair Hearing Process for Members.......................................................62
         J.       Clinical Sentinel................................................................................63
         K.       Provider Dispute Resolution System...............................................................63
         L.       Certification of Authority.......................................................................64
         M.       Executive Management.............................................................................64
         N.       Other Administrative Components..................................................................66
         O.       Administration...................................................................................67
                  1.    Responsibility to Employ MA Consumers......................................................68
                  2.    Recipient Restriction Program..............................................................68
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                  3.    Contracts and Subcontracts.................................................................68
                  4.    Lobbying Disclosure........................................................................69
                  5.    Records Retention..........................................................................69
                  6.    Fraud and Abuse............................................................................70
                  7.    Information Systems and Encounter Data.....................................................72
                  8.    Department Access and Availability.........................................................74
         P.       Special Needs Unit (SNU).........................................................................74
                  1.    Establishment of Special Needs Unit........................................................74
                  2.    Special Needs Coordinator..................................................................76
                  3.    Responsibilities of Special Needs Unit Staff...............................................76
         Q.       Assignment of PCPs...............................................................................76
         R.       Provider Services................................................................................78
                  1.    Provider Manual............................................................................79
                  2.    Provider Education.........................................................................79
         S.       Provider Network/Services Access.................................................................80
                  1.    Network Composition........................................................................80
                  2.    Provider Agreements........................................................................85
                  3.    Cultural Competence........................................................................88
                  4.    Primary Care Practitioner (PCP) Responsibilities...........................................88
                  5.    Specialists as PCPs........................................................................89
                  6.    Any Willing Pharmacy.......................................................................90
                  7.    Hospital Related Party.....................................................................90
                  8.    Mainstreaming..............................................................................90
                  9.    Network Changes............................................................................91
                  10.    Other Provider Enrollment Standards.......................................................92
                  11.    Twenty-Four Hour Coverage.................................................................93
                  12.    Appointment Standards.....................................................................93
                  13.    Policies and Procedures for Appointment Standards.........................................96
                  14.    Compliance With Access Standards..........................................................96
         T.       QM and UM Program Requirements...................................................................97
                  1.    Overview...................................................................................97
                  2.    General....................................................................................97
                  3.    Additional Utilization Management Program Requirements.....................................98
                  4.    Healthplan Employer Data Information Set (HEDIS)...........................................99
                  5.    External Quality Review (EQR)..............................................................99
                  6.    QM/UM Program Reporting Requirements......................................................100
                  7.    Collaboration Between Contractor QM and UM Departments and Special Needs Units............101
                  8.    Delegated Quality Management and Utilization Management Functions.........................101
                  9.    Consumer Involvement in the Quality Management and Utilization Management Programs........101
                  10.    Confidentiality..........................................................................101
                  11.    Department Oversight.....................................................................102

SECTION VI:  PROGRAM OUTCOMES AND DELIVERABLES....................................................................102
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SECTION VII:  FINANCIAL REQUIREMENTS..............................................................................103

         A.       Financial Standards.............................................................................103
                  1.    Risk Protection Reinsurance for High Cost Cases...........................................103
                  2.    Equity Requirements and Insolvency Protection.............................................104
                  3.    Secondary Liability.......................................................................105
                  4.    Limitation of Liability...................................................................106
                  5.    Medical Cost Accruals.....................................................................106
                  6.    Claims Processing and MIS.................................................................106
                  7.    DSH/GME Payment for Disproportionate Share Hospitals (DSH)/ Graduate Medical
                        Education (GME)...........................................................................107
                  8.    Member Liability..........................................................................107
         B.       Commonwealth Capitation Payments................................................................107
                  1.    Payments For In-Plan Services.............................................................107
                  2.    Maternity Care Payment....................................................................110
                  3.    Program Changes...........................................................................111
         C.       HIV/AIDS Risk Pool..............................................................................111
         D.       Claims Processing Standards, Monthly Report and Penalties.......................................111
                  1.    Timeliness Standards......................................................................111
                  2.    Sanctions.................................................................................113
                  3.    Physician Incentive Arrangements..........................................................115
                  4.    Retroactive Eligibility Period............................................................117
                  5.    In-Network Services.......................................................................117
                  6.    Payments for Out-of-Network Providers.....................................................117
                  7.    Payments to FQHCs and Rural Health Centers (RHCs).........................................118
                  8.    Liability During an Active Grievance or Appeal............................................118
                  9.    Financial Responsibility for Dual Eligibles...............................................118
                  10.    Third Party Liability (TPL)..............................................................119
                  11.    Health Insurance Premium Payment (HIPP) Program..........................................122
                  12.    Requests for Additional Data.............................................................122
                  13.    Accessibility to TPL Data................................................................123
                  14.    Damage Liability.........................................................................123
                  15.    Estate Recovery..........................................................................123
                  16.    Audits...................................................................................123
                  17.    Restitution..............................................................................123

SECTION VIII:  REPORTING REQUIREMENTS.............................................................................124

         A.       General.........................................................................................124
         B.       Systems Reports.................................................................................124
                  1.    Encounter Data and Subcapitation Data Reports.............................................124
                  2.    Federalizing GA Data Reporting............................................................127
                  3.    Third Party Resource Identification.......................................................127
         C.       Operations Reports..............................................................................128
                  1.    Continuous Quality Improvement............................................................128
                  2.    Federal Waiver Reporting Requirements.....................................................128
                  3.    Complaint, Grievance and DPW Fair Hearing Data............................................128
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                  4.    EPSDT Reports.............................................................................129
                  5.    Healthy Beginnings Plus Reporting.........................................................129
                  6.    Member Hotline Activities Report..........................................................130
                  7.    Fraud and Abuse...........................................................................130
                  8.    Provider Network..........................................................................130
                  9.    Provider Dispute Resolution System........................................................130
                  10.    Reports Submission Schedule..............................................................130
                  11.    HEDIS including CAHPS....................................................................131
                  12.    SERB.....................................................................................131
         D.       Financial Reports...............................................................................131
         E.       Equity..........................................................................................131
         F.       Claims Processing Reports.......................................................................132
         G.       Presentation of Findings........................................................................132
         H.       Reference Information...........................................................................132
         I.       Sanctions.......................................................................................133
         J.       Non-Duplication of Financial Penalties..........................................................134

SECTION IX:  REPRESENTATIONS AND WARRANTIES OF THE CONTRACTOR.....................................................134

         A.       Accuracy of Proposal............................................................................135
         B.       Disclosure of Interests.........................................................................135
         C.       Disclosure of Change in Circumstances...........................................................135
         D.       SERB Commitment.................................................................................136

SECTION X:  DURATION OF AGREEMENT AND RENEWAL.....................................................................136

         A.       Initial Term....................................................................................136
         B.       Renewal.........................................................................................137

SECTION XI:  TERMINATION AND DEFAULT..............................................................................137

         A.       Termination by the Department...................................................................137
                  1.    Termination for Convenience Upon Notice...................................................137
                  2.    Termination for Cause.....................................................................137
                  3.    Termination Due to Unavailability of Funds/Approvals......................................138
         B.       Termination by the Contractor...................................................................138
         C.       Responsibilities of the Contractor Upon Termination.............................................139
                  1.    Continuing Obligations....................................................................139
                  2.    Notice to Members.........................................................................139
                  3.    Submission of Invoices....................................................................139
                  4.    Failure to Perform........................................................................139
         D.       Transition at Expiration and/or Termination of Agreement........................................140

SECTION XII:  RECORDS.............................................................................................141

         A.       Financial Records Retention.....................................................................141
         B.       Operational Data Reports........................................................................142
         C.       Medical Records Retention.......................................................................142
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         D.       REVIEW OF RECORDS...............................................................................142

SECTION XIII:  SUBCONTRACTUAL RELATIONSHIPS.......................................................................143

         A.       Compliance with Program Standards...............................................................143
         B.       Consistency with Policy Statements..............................................................144

SECTION XIV:  CONFIDENTIALITY.....................................................................................144

SECTION XV:  INDEMNIFICATION AND INSURANCE........................................................................145

         A.       Indemnification.................................................................................146
         B.       Insurance.......................................................................................146

SECTION XVI:  DISPUTES............................................................................................146

SECTION XVII:  FORCE MAJEURE......................................................................................147

SECTION XVIII:  GENERAL...........................................................................................148

         A.       Suspension From Other Programs..................................................................148
         B.       Rights of the Department and the Contractor.....................................................148
         C.       Waiver..........................................................................................148
         D.       Invalid Provisions..............................................................................148
         E.       Governing Law...................................................................................148
         F.       Expansion of the Zone...........................................................................149
         G.       Notice..........................................................................................149
         H.       Counterparts....................................................................................149
         I.       Headings........................................................................................150
         J.       Assignment......................................................................................150
         K.       No Third Party Beneficiaries....................................................................150
         L.       News Releases...................................................................................150
         M.       Entire Agreement: Modification..................................................................150
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                                   APPENDICES

1--------HealthChoices RFP
2--------Proposal
3--------Capitated Rates
4--------Contractor Information
5--------Contractor SERB Committment

                               AGREEMENT EXHIBITS

A--------General Guidelines for Managed Care Regulatory Review
B--------HCFA Waiver Approval Letter
C--------HealthChoices Proposers' Library
D--------Standard Contract Terms and Conditions for Services
E--------DPW Addendum to Standard Contract Terms and Conditions
F--------Family Planning Services Procedures
G--------Drug Formulary Guidelines
H--------Prior Authorization Guidelines for Participating Managed Care
         Organizations
I--------Drug Utilization Review Guidelines
J--------EPSDT Guidelines
K--------Emergency Room Services
L--------Medical Assistance Transportation Program
M--------Reserved -- See M(1)
M(1)-----Quality Management and Utilization Management Program Requirements
M(2)-----External Quality Review
M(3)-----Quality Management/Utilization Management Deliverables
M(4)-----Health Plan Employer Data Information Set (HEDIS)
N--------Denial Notices
O--------Description of Special Services
P--------Out-of-Plan Services
Q--------Sample Model Agreement
R--------Coordination with BH-MCOs
S--------Written Agreements Between PH-MCO and Service Providers
T--------PH/BH Provider Agreements
U--------Behavioral Health Services
V--------Requirements Covering Medications Prescribed by PH-MCOs
W--------PH-MCO Guidelines for Outreach Materials
X--------HealthChoices PH-MCO Guidelines for Advertising, Sponsorships, and
         Outreach
Y--------Managed Care Enrollment/Disenrollment Dating Rules
Z--------Automatic Assignment
AA-------Category/Program Status Coverage Chart
BB-------HealthChoices PH-MCO Recipient Coverage Document
CC-------Data Support for PH-MCOs
DD-------HealthChoices PH-MCO Member Handbook
EE-------Automated Provider Directory File Layout

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FF-------PCP, Dentists, Specialists, and Providers of Ancillary Services
         Directories
GG-------Complaints, Grievances, and Fair Hearing Process
HH-------Contractor's Responsibility to Employ MA Consumers
II-------Required Contract Terms for Providers and Administrative Subcontractors
JJ-------Lobbying Certification and Disclosure of Lobbying Activities
KK-------Standardized Referral Process To The Department
LL-------Guidelines for Sanctions Regarding Fraud and Abuse
MM-------Management Information System and System Performance Review Standards
NN-------Special Needs Unit
OO-------Coordination of Care Entities
PP-------Provider Manuals
QQ-------Federally Qualified Health Centers and Rural Health Clinics
RR------- Reserved
SS-------Reserved
TT-------Reserved -- See M(2)
UU-------Reserved -- See M(3)
VV-------HIV/AIDS Risk Pool
WW-------HealthChoices Audit Clause
XX-------Encounter and Subcapitation Data Penalty Occurrences
YY-------MCO Obstetrical Reporting Form
ZZ-------Reserved -- See M(4)
AAA------Managed Care Contract Monitoring Manual - Internal Operations

Copies of Appendices and Agreement Exhibits are available by request from
the Commonwealth of Pennsylvania Department of Public Welfare

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SECTION I: INCORPORATION OF DOCUMENTS

        A.      OPERATIVE DOCUMENTS

                The RFP, a copy of which is attached hereto as Appendix 1, and
                the Proposal, a copy of which is attached hereto as Appendix 2,
                are incorporated herein and are made a part of this Agreement.
                With regard to the governance of such documents, it is agreed
                that:

                1.      In the event that any of the terms of this Agreement
                        conflict with, are inconsistent with, or are in addition
                        to the terms of the RFP, the terms of this Agreement
                        shall govern;

                2.      In the event that any of the terms of this Agreement
                        conflict with, are inconsistent with, or are in addition
                        to the terms of the Proposal, the terms of this
                        Agreement shall govern;

                3.      In the event that any of the terms of the RFP conflict
                        with, are inconsistent with, or are in addition to the
                        terms of the Proposal, the terms of the RFP shall
                        govern.

SECTION II: DEFINITIONS

        ABUSE -- Any Provider practices that are inconsistent with sound fiscal,
        business, or medical practices, and result in an unnecessary cost to the
        MA Program, or in reimbursement for services that are not medically
        necessary or that fail to meet professionally recognized standards or
        contractual obligations (including the terms of the RFP, Agreement, and
        the requirements of state or federal regulations) for health care in a
        managed care setting. The abuse can be committed by the Contractor,
        subcontractor, Provider, State employee, or a Member, among others.
        Abuse also includes enrollee practices that result in unnecessary cost
        to the MA Program, the Contractor, a subcontractor, or Provider.

        ACCESS CARD -- Medical Assistance Identification (MAID) card. The
        individual card issued to enrolled consumers in the MA Program.

        ACCESS PROGRAM -- A system used by school districts, intermediate units,
        state-owned schools or approved private schools to bill Medicaid for
        services for special education students who are enrolled in the MA
        Program.

        ADJUDICATED CLAIM -- A Claim that has been processed to payment or
        denial.

        AFFILIATE -- Any individual, corporation, partnership, joint venture,
        trust, unincorporated organization or association, or other similar
        organization (hereinafter "Person"), controlling, controlled by or under
        common control with

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        the Contractor or its parent(s), whether such common control be direct
        or indirect. Without limitation, all officers, or persons, holding five
        percent (5%) or more of the outstanding ownership interests of
        Contractor or its parent(s), directors or subsidiaries of Contractor or
        parent(s) shall be presumed to be affiliates for purposes of the RFP and
        Agreement. For purposes of this definition, "control" means the
        possession, directly or indirectly, of the power (whether or not
        exercised) to direct or cause the direction of the management or
        policies of a person, whether through the ownership of voting
        securities, other ownership interests, or by contract or otherwise
        including but not limited to the power to elect a majority of the
        directors of a corporation or trustees of a trust, as the case may be.

        ALTERNATE PAYMENT NAME -- The person to whom benefits are issued on
        behalf of an MA Consumer.

        AMENDED CLAIM -- A Provider request to adjust the payment of a
        previously adjudicated Claim. A Provider appeal is not an amended Claim.

        AREA AGENCY ON AGING (AAA) -- The single local agency designated by the
        Pennsylvania Department of Aging within each planning and service area
        to administer the delivery of a comprehensive and coordinated plan of
        social and other services and activities.

        BEHAVIORAL HEALTH MANAGED CARE ORGANIZATION (BH-MCO) -- An entity,
        operated by county government or licensed by the Commonwealth as a
        risk-bearing Health Maintenance Organization (HMO) or Preferred Provider
        Organization (PPO), which manages the purchase and provision of
        behavioral health services under a contract with the Department.

        BEHAVIORAL HEALTH REHABILITATION SERVICES FOR CHILDREN AND ADOLESCENTS
        (FORMERLY EPSDT "WRAPAROUND") -- Individualized, therapeutic mental
        health, substance abuse or behavioral interventions/services developed
        and recommended by an interagency team and prescribed by a physician or
        licensed psychologist.

        BEHAVIORAL HEALTH (BH) SERVICES -- Mental health and/or drug and alcohol
        services which are provided by the BH-MCO.

        BUSINESS DAYS -- A business day includes Monday through Friday except
        for those days recognized as federal holidays and/or Pennsylvania State
        holidays.

        CAPITATION -- A fee the Department pays periodically to a Contractor for
        each MA Consumer enrolled under a contract for the provision of medical
        services, whether or not the MA Consumer receives the services during
        the period covered by the fee.

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        CASE MANAGEMENT SERVICES -- Services which will assist individuals in
        gaining access to necessary medical, social, educational and other
        services.

        CASE PAYMENT NAME -- The person in whose name benefits are issued.

        CERTIFICATE OF AUTHORITY -- A document issued jointly by the Departments
        of Health and Insurance authorizing a corporation to establish, maintain
        and operate an HMO in Pennsylvania.

        CERTIFIED NURSE MIDWIFE -- An individual licensed under the laws within
        the scope of Chapter 6 of Professions & Occupations, 63 P.S. 171-176.

        CERTIFIED REGISTERED NURSE PRACTITIONER (CRNP) -- A registered nurse
        licensed in the Commonwealth of Pennsylvania who is certified by the
        boards in a particular clinical specialty area and who, while
        functioning in the expanded role as a professional nurse, performs acts
        of medical diagnosis or prescription of medical therapeutic or
        corrective measures in collaboration with and under the direction of a
        physician licensed to practice medicine in Pennsylvania.

        CHILDREN IN SUBSTITUTE CARE -- Children who have been adjudicated
        dependent or delinquent and who are in the legal custody of a public
        agency and/or under the jurisdiction of the juvenile court and are
        living outside their homes, in any of the following settings: shelter
        homes, foster homes, group homes, supervised independent living, and
        Residential Treatment Facilities for Children (RTFs).

        CLAIM -- A bill from a provider of a medical service or product that is
        assigned a unique identifier (i.e. Claim reference number). A Claim does
        not include an encounter form for which no payment is made or only a
        nominal payment is made.

        CLEAN CLAIM -- A Claim that can be processed without obtaining
        additional information from the provider of the service or from a third
        party. A Clean Claim includes a Claim with errors originating in the
        Contractor's Claims system. Claims under investigation for fraud or
        abuse or under review to determine if they are Medically Necessary are
        not Clean Claims.

        CLIENT INFORMATION SYSTEM (CIS) -- The Department's database of MA
        Consumers. The data base contains demographic and eligibility
        information for all MA Consumers.

        COMPLAINT -- A dispute or objection regarding a participating health
        care provider or the coverage, operations, or management policies of a
        managed care plan, which has not been resolved by the managed care plan
        and has been filed with the plan or with the Department of Health or the
        Insurance Department of the Commonwealth. The term does not include a
        Grievance.

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        CONCURRENT REVIEW -- A review conducted by the Contractor during a
        course of treatment to determine whether the prescribed services should
        continue in amount, duration and scope or whether a modification is
        necessary.

        CONTRACTOR -- A successful proposer or its successor approved by the
        Department.

        COUNTY ASSISTANCE OFFICE (CAO) -- The county offices of the Department
        that administer all benefit programs, including MA, on the local level.
        Department staff in these offices perform necessary functions such as
        determining and maintaining MA Consumer eligibility.

        CULTURAL COMPETENCY -- The ability of individuals, as reflected in
        personal and organizational responsiveness, to understand the social,
        linguistic, moral, intellectual and behavioral characteristics of a
        community or population, and translate this understanding systematically
        to enhance the effectiveness of healthcare delivery to diverse
        populations.

        DAILY MEMBERSHIP FILE - An electronic file generated by the Department
        using CIS on a daily basis, exclusive of weekends and Pennsylvania state
        holidays, that is transmitted to the Contractor. The Daily Membership
        File contains information on changes made to MA Consumer records on CIS,
        and may include retroactive, current or prospective MA eligibility, and
        PH-MCO coverage information.

        DELIVERABLES -- Those documents, records and reports required to be
        furnished to the Department for review and/or approval pursuant to the
        terms of the RFP and this Agreement.

        DENIAL OF SERVICES -- Any determination made by the Contractor in
        response to a Provider's request for approval to provide MA covered
        services of a specific duration and scope which: disapproves the request
        completely; approves provision of the requested service(s), but for a
        lesser scope or duration than requested by the provider; or disapproves
        provision of the requested service(s), but approves provision of an
        alternative service(s). An approval of a requested service which
        includes a requirement for a concurrent review by the Contractor during
        the authorized period does not constitute a denial of service.

        DENIED CLAIM -- An Adjudicated Claim that does not result in a payment
        to a Provider.

        DEPARTMENT -- The Department of Public Welfare (DPW) of the Commonwealth
        of Pennsylvania.

        DEPRIVATION QUALIFYING CODE -- The code specifying the condition which
        determines an MA Consumer to be eligible in nonfinancial criteria.

                                                                               4

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        DEVELOPMENTAL DISABILITY -- A severe, chronic disability of an
        individual that is:

                -       Attributable to a mental or physical impairment or
                        combination of mental or physical impairments.

                -       Manifested before the individual attains age twenty-two
                        (22).

                -       Likely to continue indefinitely.

                -       Manifested in substantial functional limitations in
                        three or more of the following areas of life activity:
                -       Self care;
                -       Receptive and expressive language;
                -       Learning;
                -       Mobility;
                -       Capacity for independent living; and
                -       Economic self-sufficiency.

                -       Reflective of the individual's need for special,
                        interdisciplinary or generic services, supports, or
                        other assistance that is of lifelong or extended
                        duration, except in the cases of infants, toddlers, or
                        preschool children who have substantial developmental
                        delay or specific congenital or acquired conditions with
                        a high probability of resulting in developmental
                        disabilities if services are not provided.

        DISEASE MANAGEMENT -- An integrated treatment approach that includes the
        collaboration and coordination of patient care delivery systems and that
        focuses on measurably improving clinical outcomes for a particular
        medical condition through the use of appropriate clinical resources such
        as preventive care, treatment guidelines, patient counseling, education
        and outpatient care; and that includes evaluation of the appropriateness
        of the scope, setting and level of care in relation to clinical outcomes
        and cost of a particular condition.

        DPW FAIR HEARING -- A hearing conducted by the Department of Public
        Welfare, Bureau of Hearings and Appeals or its subcontractor, based on a
        PH-MCO Member's filing of an appeal from a termination, suspension or a
        reduction in MA eligibility or MA covered services.

        DRUG EFFICACY STUDY IMPLEMENTATION (DESI) -- Drug products that have
        been classified as less-than-effective by the Food and Drug
        Administration (FDA).

        DUAL ELIGIBLES -- An individual who is eligible to receive services
        through both Medicare and the MA Program (Medicaid).

                                                                               5

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        EARLY INTERVENTION PROGRAM --The provision of specialized services
        through family-centered intervention for a child, birth to age three
        (3), who has been determined to have a developmental delay of
        twenty-five percent (25%) of the child's chronological age or has
        documented test performance of 1.5 standard deviation below the mean in
        standardized tests in one or more areas: cognitive development; physical
        development, including vision and hearing; language and speech
        development; psycho-social development; or self-help skills or has a
        diagnosed condition which may result in developmental delay.

        ELIGIBILITY PERIOD -- A period of time during which a consumer is
        eligible to receive MA benefits. An eligibility period is indicated by
        the eligibility start and end dates on CIS. A blank eligibility end date
        signifies an open-ended eligibility period.

        ELIGIBILITY VERIFICATION SYSTEM (EVS) -- An automated system available
        to Providers and other specified organizations for on-line verification
        of MA eligibility, prepaid capitation, PH-MCO or BH-MCO enrollment,
        third party resources, and the applicable benefit package under the MA
        Fee-for-Service (FFS) Program.

        EMERGENCY MEDICAL CONDITION -- A medical condition manifesting itself by
        acute symptoms of sufficient severity (including severe pain) such that
        a prudent layperson, who possesses an average knowledge of health and
        medicine, could reasonably expect the absence of immediate medical
        attention to result in: (a) placing the health of the individual (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.

        EMERGENCY MEMBER ISSUE -- A problem of a PH-MCO Member (including
        problems related to whether an individual is a Member), the resolution
        of which should occur immediately or before the beginning of the next
        business day in order to prevent a denial or significant delay in care
        to the Member that could precipitate a Medical Emergency Condition or
        need for urgent care.

        EMERGENCY SERVICES -- Covered inpatient and outpatient services that:
        (a) are furnished by a Provider that is qualified to furnish such
        service under Title XIX of the Social Security Act and (b) are needed to
        evaluate or stabilize an Emergency Medical Condition.

        ENCOUNTER DATA -- Any health care service provided to a PH-MCO Member.
        Encounters whether reimbursed through capitation, fee-for-service, or
        another method of compensation must result in the creation and
        submission of an encounter record to the Department. The information
        provided on these records represents the encounter data provided by the
        MCO.

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        ENROLLEE -- A person eligible to receive services under the MA Program
        in the Commonwealth of Pennsylvania and who is mandated to be enrolled
        in the HealthChoices Program.

        ENROLLMENT -- The process by which a Member's coverage by a PH-MCO is
        initiated.

        ENROLLMENT SPECIALIST -- The individual responsible to assist MA
        Consumers with selecting a PH-MCO and PCP as well as providing
        information regarding physical and behavioral health services and
        service providers under the HealthChoices Program.

        EPSDT -- Early and Periodic Screening, Diagnosis and Treatment. Items
        and services which must be made available to persons under the age of
        twenty-one (21) upon a determination of medical necessity and required
        by federal law at 42 U.S.C. Section 1396d(r).

        EXPANDED SERVICES -- Any Medically Necessary service,covered under Title
        XIX of the Social Security Act, 42 U.S.C.A. 1396 et seq., but not
        included in the State's Medicaid Plan, which is provided to an enrollee.

        EXPEDITED GRIEVANCE -- A process for reviewing and resolving Grievances
        within forty-eight (48) hours.

        EXPERIMENTAL TREATMENT -- A course of treatment, procedure, device or
        other medical intervention that is not yet recognized by the
        professional medical community as an effective, safe and proven
        treatment for the condition for which it is being used.

        EXTERNAL QUALITY REVIEW (EQR) -- A requirement under Section
        1902(a)(30)(C) of Title XIX of the Social Security Act, 42 U.S.C.A.
        1396a(a)(30)(C) for states to obtain an independent, external review
        body to perform an annual review of the quality of services furnished
        under state contracts with managed care organizations, including the
        evaluation of quality outcomes, timeliness and access to services.

        FAMILY PLANNING SERVICES -- Services which enable individuals
        voluntarily to determine family size, to space children and to prevent
        or reduce the incidence of unplanned pregnancies. They are made
        available without regard to marital status, age, sex or parenthood.

        FEDERALLY QUALIFIED HEALTH CENTER (FQHC) -- An entity which is receiving
        a grant as defined under the Social Security Act, 42 U.S.C.A. 1396d(l)
        or is receiving funding from such a grant under a contract with the
        recipient of such a grant, and meets the requirements to receive a grant
        under the above-mentioned sections of the Act.

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        FEE-FOR-SERVICE (FFS) -- Payment by the Department to providers on a
        per-service basis for health care services provided to MA Consumers.

        FORMULARY -- An exclusive list of drug products for which the Contractor
        will provide coverage to its Members, as approved by the Department.

        FRAUD -- Any type of intentional deception or misrepresentation made by
        an entity or person with the knowledge that the deception could result
        in some unauthorized benefit to the entity, him/herself, or some other
        person in a managed care setting. The fraud can be committed by many
        entities, including the Contractor, a subcontractor, a Provider, a State
        employee, or a Member, among others.

        GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) -- A technical term in
        financial accounting. It encompasses the conventions, rules, and
        procedures necessary to define accepted accounting practice at a
        particular time.

        GOVERNMENT LIAISON -- The Department's primary point of contact within
        the PH-MCO. This individual acts as the day to day manager of
        contractual and operational issues and works within PH-MCO and with DPW
        to facilitate compliance, solve problems, and implement corrective
        action. The Government Liaison negotiates internal plan, policy and
        operational issues.

        GRIEVANCE -- A request by an enrollee or a health care provider, with
        written consent of the enrollee, to have the managed care plan or
        utilization review entity reconsider a decision solely concerning
        medical necessity and appropriateness of health care services. If the
        managed care plan is unable to resolve the matter, a Grievance may be
        filed regarding a decision that: (1) disapproves full or partial payment
        for requested health care services; (2) approves a provision of a
        requested health care service for a lesser scope or duration than
        requested; or (3) disapproves payment for provisions of a requested
        health care service but approves payment for provision of an alternative
        health care service. The term does not include a Complaint.

        HEALTH CARE FINANCING ADMINISTRATION (HCFA) -- The federal agency within
        the Department of Health and Human Services responsible for oversight of
        MA programs.

        HEALTH CARE PROFESSIONAL -- A physician or other health care
        provider/practitioner whose professional services are covered and
        provided for under the professional scope of practice, and are included
        under the contract for the services of the professional. This term
        includes, but is not limited to: podiatrist, optometrist, chiropractor,
        psychologist, dentist, pharmacist, physician assistant, physical or
        occupational therapist and therapy assistant, speech-language
        pathologist, audiologist, registered or licensed practical nurse

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        (including nurse practitioner, clinical nurse specialist, certified
        registered nurse anesthetist and certified nurse-midwife), licensed
        certified social worker, registered respiratory therapist and certified
        respiratory therapy technician.

        HEALTH MAINTENANCE ORGANIZATION (HMO) -- A Commonwealth licensed
        risk-bearing entity which combines delivery and financing of health care
        and which provides basic health services to enrolled Members for a
        fixed, prepaid fee.

        HEALTHCHOICES DISENROLLMENT -- Action taken by the Department to remove
        a Member's name from the monthly Enrollment Report following the
        Department's receipt of a determination that the Member is no longer
        eligible for enrollment in HealthChoices.

        HEALTHCHOICES SOUTHEAST (HC-SE) PROGRAM -- The mandatory Medical
        Assistance managed care program in Bucks, Chester, Delaware, Montgomery
        and Philadelphia counties.

        HEALTHCHOICES PROPOSERS' LIBRARY -- A collection of reference documents
        and materials, relevant to the HealthChoices Program, available for use
        by proposers.

        HEALTHCHOICES PROGRAM -- The name of Pennsylvania's 1915(b) waiver
        program to provide mandatory managed health care to MA Consumers.

        HIV/AIDS WAIVER PROGRAM -- A home and community based waiver that
        provides for expanded services to MA Consumers who are diagnosed with
        Acquired Immunodeficiency Syndrome (AIDS) or symptomatic Human
        Immunodeficiency Virus (HIV) as a cost-effective alternative to
        inpatient care.

        HOME AND COMMUNITY WAIVER PROGRAM -- Necessary and cost effective
        services, not otherwise furnished under the State's Medicaid Plan, or
        services already furnished under the State's Medicaid Plan but in
        expanded amount, duration, or scope which are furnished to an individual
        in his/her home or community in order to prevent institutionalization.
        Such services must be authorized under the provisions of Section 1915(c)
        of P.L. 74-271, as amended, and codified at 42 U.S.C. 1396n.

        IMMEDIATE NEED -- A situation in which, in the professional judgment of
        the dispensing registered pharmacist and/or prescriber, the dispensing
        of the drug at the time when the prescription is presented is necessary
        to reduce or prevent the occurrence or persistence of a serious adverse
        health condition.

        INDEPENDENT ENROLLMENT ASSISTANCE PROGRAM (IEAP) -- The program that
        provides enrollment specialists to assist MA Consumers in selecting the
        PH-MCO and Primary Care Practitioner (PCP) and obtaining information
        regarding HealthChoices physical and behavioral health services and
        service providers.

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        IN-PLAN SERVICES -- Services which are the payment responsibility of the
        Contractor under the HealthChoices Program.

        INQUIRY -- Any Member's request for administrative service, information
        or to express an opinion.

        INTERAGENCY TEAM FOR ADULTS -- A multi-system planning team consisting
        of the individual, family member(s), legal guardian, advocate(s), county
        mental health/mental retardation and/or drug and alcohol case
        manager(s), PCP, treating specialist(s), residential and/or day service
        provider(s) and any other participant(s) necessary and appropriate to
        assess the needs and strengths of the individual, formulate treatment
        and service goals, approaches and methods, recommend and monitor
        services and develop discharge plans. Representation on the team is
        based on expertise necessary to determine and meet each individual's
        needs and, therefore, is developed on a case-by-case basis.

        INTERAGENCY TEAM FOR INDIVIDUALS UNDER THE AGE OF TWENTY-ONE (21) -- A
        multi-system planning team comprised of the child, when appropriate, at
        least one (1) accountable family member, a representative of the County
        Mental Health and/or Drug and Alcohol Program, the case manager, the
        prescribing physician or psychologist, and as applicable, the County
        Children and Youth, Juvenile Probation, Mental Retardation, and Drug and
        Alcohol agencies, a representative of the school district, BH-MCO,
        PH-MCO and/or PCP, other agencies that are providing services to the
        child, and other community resource persons identified by the family.
        The purpose of the interagency team is to collaboratively assess the
        needs and strengths of the child and family, formulate the measurable
        goals for treatment, recommend the services, treatment approaches and
        methods, intensity and frequency of interventions and develop the
        discharge goals and plans.

        INTERMEDIATE CARE FACILITY FOR THE MENTALLY RETARDED AND OTHER RELATED
        CONDITIONS (ICF/MR/ORC) -- An institution (or distinct part of an
        institution) that 1) is primarily for the diagnosis, treatment or
        rehabilitation for persons with mental retardation or persons with other
        related conditions; and 2) provides, in a residential setting, ongoing
        evaluation, planning, twenty-four (24) hour supervision, coordination
        and integration of health or rehabilitative services to help each
        individual function at his/her maximum capacity.

        ISSUING OFFICE -- The Department's Division of Procurement.

        JUVENILE DETENTION CENTER -- A publicly or privately administered,
        secure residential facility for:

                -       Children alleged to have committed delinquent acts who
                        are awaiting a court hearing;

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                -       Children who have been adjudicated delinquent and are
                        awaiting disposition or awaiting placement; and

                -       Children who have been returned from some other form of
                        disposition and are awaiting a new disposition (i.e.,
                        court order regarding custody of child, placement of
                        child, or services to be provided to the child upon
                        discharge from the Juvenile Detention Center).

        LOCK-IN -- If a MA Consumer is involved in fraudulent activities or is
        identified as abusing services provided under the MA Program, they are
        restricted (locked-in) to a specific Provider(s) to obtain all of
        his/her services to ensure they receive comprehensiveness of care.

        MA CONSUMER -- A person enrolled to receive services under the MA
        Program in the Commonwealth of Pennsylvania.

        MANAGED CARE ORGANIZATION (MCO) -- An entity which manages the purchase
        and provision of physical or behavioral health services under the
        HealthChoices Program.

        MARKET SHARE -- The percentage of Members enrolled with a particular
        PH-MCO when compared to the total of Members enrolled in all the PH-MCOs
        within a zone.

        MEDICAL ASSISTANCE (MA) -- The Medical Assistance Program authorized by
        Title XIX of the federal Social Security Act, 42 U.S.C.A 1396 et seq.,
        and regulations promulgated thereunder, and 62 P.S. 101 et seq.

        MEDICAL ASSISTANCE TRANSPORTATION PROGRAM (MATP) -- A non-emergency
        medical transportation service provided to eligible persons who need to
        make trips to/from a MA reimbursable service for the purpose of
        receiving treatment, medical evaluation, or purchasing prescription
        drugs or medical equipment.

        MEDICALLY NECESSARY -- A service or benefit is medically necessary if it
        is compensable under the MA Program and if it meets any one of the
        following standards:

                -       The service or benefit will, or is reasonably expected
                        to, prevent the onset of an illness, condition or
                        disability.

                -       The service or benefit will, or is reasonably expected
                        to, reduce or ameliorate the physical, mental or
                        developmental effects of an illness, condition, injury
                        or disability.

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<PAGE>

                -       The service or benefit will assist the Member to achieve
                        or maintain maximum functional capacity in performing
                        daily activities, taking into account both the
                        functional capacity of the Member and those functional
                        capacities that are appropriate for Members of the same
                        age.

        Determination of medical necessity for covered care and services,
        whether made on a prior authorization, concurrent review,
        post-utilization, or exception basis, must be in writing.

        The determination is based on medical information provided by the
        Member, the Member's family/caretaker and the primary care practitioner,
        as well as any other providers, programs, agencies that have evaluated
        the Member.

        All such determinations must be made by qualified and trained providers.

        MEMBER -- An individual who is enrolled with a PH-MCO under the
        HealthChoices Program and for whom the PH-MCO is responsible to provide
        physical health services under the provisions of the HealthChoices
        Program.

        MEMBER RECORD -- A record contained on the Daily Membership File or the
        Monthly Membership File that contains information on MA eligibility,
        managed care coverage, and the category of assistance, which help
        establish the covered services for which a MA Consumer is eligible.

        MENTAL RETARDATION -- An impairment in intellectual functioning which is
        lifelong and originates during the developmental period (birth to
        twenty-two (22) years). It results in substantial limitations in three
        or more of the following areas: learning, self-direction; self care;
        expressive and/or receptive language; mobility; capacity for independent
        living; and economic self-sufficiency.

        MICHAEL DALLAS WAIVER (MDW) -- A program operating under a federal
        waiver that provides essential home care services to
        technology-dependent individuals.

        MIDWIFERY PRACTICE -- Management of the care of essentially healthy
        women and their healthy neonates (initial twenty-eight [28] day period).
        This includes intrapartum, postpartum and gynecological care.

        MINORITY BUSINESS ENTERPRISE -- A business concern that is:

                -       A sole proprietorship, owned and controlled by a
                        minority;

                -       A partnership or joint venture controlled by minorities
                        in which fifty-one percent (51%) of the beneficial
                        ownership interest is held by minorities; or

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<PAGE>

                -       A corporation or other entity controlled by minorities
                        in which fifty-one percent (51%) of the voting interest
                        and fifty-one percent (51%) of the beneficial ownership
                        interest are held by minorities.

        MONTHLY MEMBERSHIP FILE -- An electronic file generated by the
        Department using CIS that is transmitted to the Contractor. The Monthly
        Membership File lists retroactive, current and prospective Members,
        specifying for each Member the corresponding eligibility period, PH-MCO
        coverage and BH-MCO coverage.

        NETWORK -- All contracted or employed providers in the PH-MCO who are
        providing covered services to Members.

        NETWORK PROVIDER -- A health care professional who has a written
        Provider Agreement with a HealthChoices PH-MCO and is credentialed by
        and who participates in the PH-MCO's Provider Network to serve
        HealthChoices Members.

        NET WORTH (EQUITY) -- The residual interest in the assets of an entity
        that remains after deducting its liabilities.

        NURSING FACILITY -- A facility licensed by the DOH as a MA provider type
        35 or type 36 or a facility licensed by DOH as such and certified for
        Medicare participation.

        ONGOING MEDICATION -- A medication that has been previously dispensed to
        the Member for the treatment of an illness that is chronic in nature or
        for an illness for which the medication is required for a length of time
        to complete a course of treatment, until the medication is no longer
        considered necessary by the physician/prescriber, and that has been used
        by the Member without a gap in treatment. If the current prescription is
        for a higher dosage than previously prescribed, the prescription is for
        an ongoing medication at least to the extent of the previous dosage.
        When payment is authorized due to the obligation to cover pre-existing
        services while a grievance of fair hearing is pending, a request to
        refill that prescription, made after the grievance or fair hearing has
        been finally concluded in favor of the MCO, is not an ongoing
        medication.

        OPEN-ENDED -- A period of time that has a start date but no definitive
        end date.

        OPTIONS -- The long-term care pre-admission assessment program operated
        by the Department of Aging under contract with the Department of Public
        Welfare.

        OTHER RELATED CONDITIONS (ORC) -- A physical disability such as cerebral
        palsy, epilepsy, spina bifida or similar conditions which occur before
        the age of twenty-two (22), is likely to continue indefinitely and
        results in three (3) or more substantial functional limitations.

                                                                              13

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        OTHER RESOURCES -- All other resources include, but are not limited to,
        recoveries from personal injury Claims, liability insurance, first-party
        automobile medical insurance, accident-indemnity insurance, and the
        assigned Claims plan.

        OUT-OF-AREA COVERED SERVICES -- Medical services provided to MA
        Consumers that meet one (1) or more of the following criteria:

                -       An emergency medical condition that occurs while outside
                        the zone;

                -       The health of the MA consumer would be endangered if the
                        MA consumer returned to the zone for needed services;

                -       The provider is located outside the zone, but is
                        nonetheless a subcontractor regularly providing medical
                        services to MA consumers at the request of the PH-MCO;
                        or

                -       The needed medical services are not available in the
                        zone.

        OUT-OF-NETWORK PROVIDER -- A health care professional who has not been
        credentialed by and does not have a signed Provider Agreement with a
        HealthChoices PH-MCO.

        OUT-OF-PLAN SERVICES -- Services which are non-plan, non-capitated and
        are not the responsibility of the Contractor under the HealthChoices
        Program comprehensive benefit package.

        PHYSICAL HEALTH MANAGED CARE ORGANIZATION (PH-MCO) -- A risk bearing
        entity, also referred to as the "plan", which has contracted with the
        Department to manage the purchase and provision of physical health
        services under the HealthChoices Program.

        PH-MCO COVERAGE PERIOD -- A period of time during which an individual is
        eligible for MA coverage and a PH-MCO coverage period exists on CIS.

        PH-MCO DISENROLLMENT -- The process by which a Member's ability to
        receive services from a PH-MCO is terminated.

        PHYSICAL HEALTH (PH) SERVICES -- Medical and other related services
        which the Contractor is responsible to provide to its Members.

        PHYSICIAN INCENTIVE PLAN -- Any compensation arrangement between an MCO
        and a physician or physician group that may directly or indirectly have
        the effect of reducing or limiting services furnished to Medicaid
        recipients enrolled in the MCO.

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<PAGE>

        POSNET -- The Pennsylvania Open Systems Network (POSNet) which is a
        peer-to-peer network based on open systems products and protocols.

        POST-STABILIZATION SERVICES -- Medically necessary non-emergency
        services furnished to a Member after the Member is stabilized following
        an Emergency Medical Condition.

        PREFERRED PROVIDER ORGANIZATION (PPO) -- A Commonwealth licensed person,
        partnership, association or corporation which establishes, operates,
        maintains or underwrites in whole or in part a preferred provider
        arrangement as defined in 31 Pa. Code 152.2.

        PRIMARY CARE CASE MANAGEMENT (PCCM) -- A program under which the
        Department contracts directly with primary care providers who agree to
        be responsible for the provision and/or coordination of medical services
        to MA Consumers under their care.

        PRIMARY CARE PRACTITIONER (PCP) -- A specific physician, physician group
        or a CRNP operating under the scope of his/her licensure who has
        received an exception from the Department of Health, and who is
        responsible for supervising, prescribing, and providing primary care
        services; locating, coordinating and monitoring other medical care and
        rehabilitative services and maintaining continuity of care on behalf of
        an MA Consumer.

        PRIOR AUTHORIZATION -- A determination made by a Contractor to approve
        or deny payment for a Provider's request to provide a service or course
        of treatment of a specific duration and scope to a Member prior to the
        Provider's initiating provision of the requested service.

        PRIOR AUTHORIZATION REVIEW PANEL (PARP) -- A panel of representatives
        from within the Department who have been assigned organizational
        responsibility for the review, approval and denial of all PH-MCO prior
        authorization policies and procedures.

        PRIOR AUTHORIZED SERVICES -- In-plan services, the utilization of which
        the PH-MCO manages in accordance with Department-approved prior
        authorization policies and procedures.

        PROVIDER -- A person, firm or corporation, enrolled in the Pennsylvania
        MA Program, which provides services or supplies to MA Consumers.

        PROVIDER AGREEMENT -- Any Department-approved written agreement between
        the Contractor and a Provider to provide medical or professional
        services to MA Consumers to fulfill the requirements of this Agreement.

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<PAGE>

        PROVIDER APPEAL -- A request from a Provider for reversal of a denial by
        the Contractor, with regard to the three (3) major types of issues that
        are to be addressed in a provider appeal system as outlined in this
        Agreement at Section V.K, Provider Dispute Resolution System. The three
        (3) types of Provider appeals issues are:

        -       Provider credentialing denial by the PH-MCO;

        -       Claims denied by the PH-MCO for Providers participating in the
                PH-MCO's Network. This includes payment denied for services
                already rendered by the Provider to the Member; and

        -       Provider termination by the PH-MCO.

        PROVIDER DISPUTE -- A written communication to a PH-MCO, made by a
        Provider, expressing dissatisfaction with a PH-MCO decision that
        directly impacts the Provider. This does not include decisions
        concerning medical necessity.

        QUALITY MANAGEMENT -- An ongoing, objective and systematic process of
        monitoring, evaluating and improving the quality, appropriateness and
        effectiveness of care.

        RECIPIENT - A person eligible to receive physical and/or behavioral
        health services under the MA Program of the Commonwealth of
        Pennsylvania.

        RECIPIENT MONTH -- One MA Consumer covered by the HealthChoices Program
        for one (1) calendar month.

        REJECTED CLAIM -- A non-HealthChoices Claim or a Claim that has
        erroneously been assigned a unique identifier and is removed from the
        Claims processing system prior to adjudication.

        RELATED PARTIES -- Any entity that is related to the Contractor or
        subcontracting PH-MCO by common ownership or control, (see definition of
        "Affiliate"), and (1) performs some of the Contractor or subcontracting
        PH-MCO's management functions under contract or delegation; (2)
        furnishes services to Members under a written agreement; or (3) leases
        real property or sells materials to the Contractor or subcontracting
        PH-MCO at a cost of more than $2,500.00 during any year of a
        HealthChoices physical health contract with the Department.

        RESIDENTIAL TREATMENT FACILITY (RTF) -- A facility licensed by the
        Department of Public Welfare that provides twenty-four (24) hour
        out-of-home care, supervision and medically necessary mental health
        services for individuals under twenty-one (21) years of age with a
        diagnosed mental illness or severe emotional disorder.

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        RETROSPECTIVE REVIEW -- A review conducted by the Contractor to
        determine whether services were delivered as prescribed and consistent
        with the Contractor's payment policies and procedures.

        RURAL -- Consists of territory, persons and housing units in areas
        throughout the Commonwealth which are designated as having less than
        2,500 persons.

        SCHOOL-BASED HEALTH CENTER -- A health care site located on school
        building premises which provides, at a minimum, on-site, age-appropriate
        primary and preventive health services with parental consent, to
        children in need of primary health care and which participate in the MA
        Program and adhere to EPSDT standards and periodicity schedule.

        SCHOOL-BASED HEALTH SERVICES -- An array of Medically Necessary health
        services performed by licensed professionals that may include, but are
        not limited to, immunization, well child care and screening examinations
        in a school-based setting.

        SOCIALLY/ECONOMICALLY RESTRICTED BUSINESS (SERB) -- A business whose
        economic growth and development has been restricted based on social and
        economic bias.

        SPECIAL NEEDS -- The circumstances for which a Member will be classified
        as having a special need will be based on a non-categorical or generic
        perspective that identifies key attributes of physical, developmental,
        emotional or behavioral conditions, as determined by DPW and as
        described in this Agreement at Section V.P, Special Needs Unit (SNU) and
        Exhibit NN, Special Needs Unit.

        SPEND-DOWN -- A process of establishing eligibility for MA whereby
        consumers spend their excess net income on certain incurred or paid
        medical expenses. Eligibility may need to be redetermined monthly.

        START DATE -- The first date on which MA Consumers are eligible for
        medical services under this Agreement, and on which the Contractors are
        operationally responsible and financially liable for providing Medically
        Necessary services to MA Consumers.

        STOP-LOSS PROTECTION -- Coverage designed to limit the amount of
        financial loss experienced by a health care provider.

        SUBCAPITATION -- A fixed per capita amount that is paid by the PH-MCO to
        a Network provider for each Member identified as being in their
        capitation group, whether or not the Member received medical services.

        SUBCONTRACT -- Any contract between the PH-MCO and an individual,
        business, university, governmental entity, or nonprofit organization to
        perform part or all of

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<PAGE>

        the PH-MCO's responsibilities under this Agreement. Exempt from this
        definition are salaried employees, utility agreements and Provider
        Agreements, which are not considered Subcontracts for the purpose of
        this Agreement and, unless otherwise specified herein, are not subject
        to the provisions governing Subcontracts.

        SUSTAINED IMPROVEMENT -- Improvement in performance documented through
        continued measurement of quality indicators after the performance
        project/study/quality initiative is completed.

        SUBSTANTIAL FINANCIAL RISK -- Financial risk set at greater than
        twenty-five percent (25%) of potential payments for covered services,
        regardless of the frequency of assessment (i.e., collection) or
        distribution of payments. The term "potential payments" means simply the
        maximum anticipated total payments that the physician or physician group
        could receive if the use or cost of referral services were significantly
        low. The cost of referrals, then, must not exceed that twenty-five
        percent (25%) level, or else the financial arrangement is considered to
        put the physician or group at substantial financial risk.

        TARGETED CASE MANAGEMENT (TCM) PROGRAM -- A case management program for
        MA Consumers who are diagnosed with AIDS or symptomatic HIV.

        THIRD PARTY LIABILITY (TPL) -- The financial responsibility for all or
        part of a Member's healthcare expenses of an individual entity or
        program (e.g., Medicare) other than the Contractor.

        THIRD PARTY RESOURCE (TPR) -- Any individual, entity or program that is
        liable to pay all or part of the medical cost of injury, disease or
        disability of a MA Consumer. Examples of third party resources include:
        government insurance programs such as Medicare or CHAMPUS (Civilian
        Health and Medical Program of the Uniformed Services); private health
        insurance companies, or carriers; liability or casualty insurance; and
        court-ordered medical support.

        TITLE XVIII (MEDICARE) -- A federally-financed health insurance program
        administered by the Health Care Financing Administration (HCFA) pursuant
        to 42 U.S.C.A. 1395 et seq., covering almost all Americans sixty-five
        (65) years of age and older and certain individuals under sixty-five
        (65) who are disabled or have chronic kidney disease.

        TRANSITIONAL CARE HOME -- A tertiary care center which provides medical
        and personal care services to children upon discharge from the hospital
        who require intensive medical care for an extended period of time. This
        transition allows for the caregiver to be trained in the care of the
        child, so that the child can eventually be placed in the caregiver's
        home.

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        URBAN -- Consists of territory, persons and housing units in places
        which are designated as 2,500 persons or more. These places must be in
        close proximity to one another.

        URGENT MEDICAL CONDITION -- Any illness, injury or severe condition
        which under reasonable standards of medical practice, would be diagnosed
        and treated within a twenty-four (24) hour period and if left untreated,
        could rapidly become a crisis or Emergency Medical Condition. The terms
        also include situations where a person's discharge from a hospital will
        be delayed until services are approved or a person's ability to avoid
        hospitalization depends upon prompt approval of services.

        UTILIZATION MANAGEMENT -- An objective and systematic process for
        planning, organizing, directing and coordinating health care resources
        to provide Medically Necessary, timely and quality health care services
        in the most cost-effective manner.

        UTILIZATION REVIEW CRITERIA -- Detailed standards, guidelines, decision
        algorithms, models, or informational tools that describe the clinical
        factors to be considered relevant to making determinations of medical
        necessity including, but not limited to, level of care, place of
        service, scope of service, and duration of service.

        VENTILATOR DEPENDENT -- A person who requires respiratory support
        through the use of a mechanical ventilator in order to replace or
        support normal musculo-skeletal respiratory function to support the
        adequate exchange of oxygen and carbon dioxide. A Member is considered
        ventilator dependent if s/he:

        -       Demonstrates an inability to maintain adequate respiratory
                function without the assistance of a mechanical ventilator and
                therefore the mechanical ventilator is needed for its cyclic
                mechanical support or replacement of the inspiratory phase of
                respiration,

        -       Requires more than twelve hours per day of continuous support
                from the mechanical ventilator to sustain life in order to
                prevent significant abnormalities in the physiologic parameters
                associated with respiration, and

        -       Is maintained on a mechanical ventilatory support via a
                tracheostomy.

        VOIDED MEMBER RECORD -- A Member Record used by the Department to advise
        the Contractor that a certain related Member Record previously submitted
        by the Department to the Contractor should be voided. A Voided Member
        Record can be recognized by its illogical sequence of PH-MCO membership
        start and end dates with the end date preceding the Start Date.

                                                                              19

<PAGE>

        WOMEN'S BUSINESS ENTERPRISE -- A business concern that is:

        -       A sole proprietorship, owned and controlled by a woman;

        -       A partnership or joint venture controlled by women in which
                fifty-one percent (51%) of the beneficial ownership interest is
                held by women; or

        -       A corporation or other entity controlled by women in which
                fifty-one percent (51%) of the voting interest and fifty-one
                percent (51%) of the beneficial ownership interest are held by
                women.

                                                                              20

<PAGE>

AGREEMENT AND RFP ACRONYMS:

        For the purpose of this Agreement and RFP, the acronyms set forth shall
apply.

        AAA -- Area Agency on Aging.
        AIDS -- Acquired Immunodeficiency Syndrome.
        ADA -- Americans with Disabilities Act.
        BBS -- Bulletin Board System.
        BCABD -- Bureau of Contract Administration and Business Development.
        BH -- Behavioral Health.
        BHA -- Bureau of Hearings and Appeals.
        BH-MCO -- Behavioral Health Managed Care Organization.
        CAHPS -- Consumer Assessment of Health Plans Study.
        CAO -- County Assistance Office.
        CASSP -- Children and Adolescent Support Services Program.
        CDC -- Centers for Disease Control (and Prevention).
        CFO -- Chief Financial Officer.
        CFR -- Code of Federal Regulations.
        CIS -- Client Information System.
        CLIA -- Clinical Laboratory Improvement Amendment.
        CLPPP  -- Childhood Lead Poisoning Prevention Project.
        COB -- Coordination of Benefits.
        CSP -- Community Support Program.
        CRNP -- Certified Registered Nurse Practitioner.
        CRR -- Community Residential Rehabilitation.
        DEA -- Drug Enforcement Agency.
        DESI -- Drug Efficacy Study Implementation.
        DSH -- Disproportionate Share.
        DME -- Durable Medical Equipment.
        DOH -- Department of Health (of the Commonwealth of Pennsylvania).
        DOI -- Department of Insurance (Pennsylvania Insurance Department).
        DPW -- Department of Public Welfare.
        DUR -- Drug Utilization Review.
        EMS -- Emergency Medical Services.
        EQR  -- External Quality Review.
        EVS -- Eligibility Verification System.
        EPSDT -- Early and Periodic Screening, Diagnosis and Treatment.
        ER -- Emergency Room.
        ERISA -- Employees Retirement Income Security Act of 1974.
        FDA -- Food and Drug Administration.
        FFS -- Fee-for-Service.
        FQHC -- Federally Qualified Health Center.
        FTE -- Full Time Equivalent.
        FTP -- File Transfer Protocol.
        GA -- General Assistance.
        GAAP -- Generally Accepted Accounting Principles.

                                                                              21

<PAGE>

        GME -- Graduate Medical Education.
        HBP -- Healthy Beginnings Plus.
        HCFA -- Health Care Financing Administration.
        HEDIS -- Healthplan Employer Data and Information Set.
        HC-SE -- HealthChoices Southeast  (Program).
        HIPAA -- Health Insurance Portability and Accountability Act.
        HIPP -- Health Insurance Premium Payment.
        HIV -- Human Immunodeficiency Virus.
        HMO -- Health Maintenance Organization.
        IBNP -- Incurred But Not Paid.
        ICF/MR -- Intermediate Care Facility for the Mentally Retarded.
        ICF/ORC -- Intermediate Care Facility/Other Related Conditions.
        IGC -- Initial Grievance Committee.
        IEAP -- Independent Enrollment Assistance Program.
        JCAHO -- Joint Commission for the Accreditation of Healthcare
                 Organizations.
        JDC -- Juvenile Detention Center.
        LAAM -- Levo-Alpha-acetyl-Methadol, now known as Levomethadyl Acetate
                Hydrochloride.
        LTCCAP -- Long Term Care Capitation.
        MA -- Medical Assistance.
        MAAC -- Medical Assistance Advisory Committee.
        MAID -- Medical Assistance Identification Number.
        MATP -- Medical Assistance Transportation Program.
        MBE -- Minority Business Enterprise.
        MCO -- Managed Care Organization.
        MDW -- Michael Dallas Waiver.
        MIS -- Management Information System.
        NCQA -- National Committee for Quality Assurance.
        NPDB -- National Practitioner Data Bank.
        OBRA -- Omnibus Budget Reconciliation Act.
        OCYF -- Office of Children, Youth and Families.
        OIP -- Other Insurance Paid.
        OMAP -- Office of Medical Assistance Programs.
        OMHSAS -- Office of Mental Health and Substance Abuse Services.
        OMR -- Office of Mental Retardation.
        ORC  -- Other Related Conditions.
        OSP -- Office of Social Programs.
        PARP -- Prior Authorization Review Panel.
        PBM -- Pharmacy Benefit Manager.
        PCP -- Primary Care Practitioner.
        PDA -- Pennsylvania Department of Aging.
        PERT -- Program Evaluation and Review Technique.
        PH -- Physical Health.
        PH-MCO -- Physical Health Managed Care Organization.
        PMPM -- Per Member, Per Month.
        QARI -- Quality Assurance Reform Initiative.

                                                                              22

<PAGE>

        QM -- Quality Management.
        QMC --  Quality Management Committee.
        QM/UMP -- Quality Management and Utilization Management Program.
        RBUC -- Reported But Unpaid Claim.
        RFP -- Request for Proposal.
        RHC - Rural Health Clinic
        RPAA -- Risk Pool Allocation Amount.
        RTF -- Residential Treatment Facility.
        SAP -- Statutory Accounting Principles.
        SERB -- Socially/Economically Restricted Business.
        SNU -- Special Needs Unit.
        SPR -- Systems Performance Review.
        SSA -- Social Security Act.
        SSI -- Supplemental Security Income.
        STD -- Sexually Transmitted Disease.
        TANF -- Temporary Assistance for Needy Families.
        TCM -- Targeted Case Management.
        TPL -- Third Party Liability.
        TTY -- Text Telephone Typewriter.
        UM -- Utilization Management.
        URCAP -- Utilization Review Criteria Assessment Process.
        U.S. DHHS -- United States Department of Health and Human Services.
        WBE -- Women's Business Enterprise.
        WIC -- Women's, Infants' and Children (Program).

                                                                              23

<PAGE>

SECTION III: RELATIONSHIP OF PARTIES

        A.      BASIC RELATIONSHIP

                The relationship between the Department and the Contractor is
                that of independent contracting parties. The Contractor, its
                employees, servants, agents, and representatives shall not be
                considered and shall not hold themselves out as the employees,
                servants, agents or representatives of the Department or the
                Commonwealth of Pennsylvania. The Contractor, its employees,
                servants, agents and representatives do not have the authority
                to bind the Department or the Commonwealth of Pennsylvania and
                they shall not make any claim or demand for any right or
                privilege applicable to an officer or employee of the Department
                or the Commonwealth of Pennsylvania. In furtherance of the
                foregoing, the Contractor acknowledges that no workers'
                compensation or unemployment insurance coverage shall be
                provided by the Department to the Contractor's employees,
                servants, agents and representatives. The Contractor shall be
                responsible for maintaining for its employees, and for requiring
                of its agents and representatives, malpractice, workers'
                compensation and unemployment compensation insurance in such
                amounts as required by law.

                The Contractor acknowledges and agrees that it shall have full
                responsibility for all taxes and withholdings of all of its
                employees. In the event that any employee or representative of
                the Contractor is deemed an employee of the Department by any
                taxing authority or other governmental agency, the Contractor
                agrees to indemnify the Department for any taxes, penalties or
                interest imposed upon the Department by such taxing authority or
                other governmental agency.

        B.      NATURE OF CONTRACT

                Pursuant to this Agreement, the Contractor shall arrange for the
                provision of medical and related services to MA Consumers
                through qualified health care Providers in accordance with the
                terms and conditions of this Agreement. In administering the
                HealthChoices Program, the Contractor shall comply fully with
                the terms and conditions set forth in this Agreement, including
                but not limited to, the operational and financial standards.

SECTION IV: APPLICABLE LAWS AND REGULATIONS

        A.      CERTIFICATION AND LICENSING

                During the term of this Agreement, the Contractor shall require
                that each of the health care professionals with which it
                contracts comply with all

                                                                              24

<PAGE>

                certification and licensing laws and regulations applicable to
                the profession. The Contractor agrees not to employ or enter
                into a contractual relationship with a Provider or practitioner
                who is precluded from participation in the MA program.

        B.      SPECIFIC TO MA PROGRAM

                The Contractor agrees to participate in the MA Program and to
                arrange for the provision of those medical and related services
                essential to the medical care of those individuals being served,
                and to comply with all federal and Pennsylvania laws generally
                and specifically governing participation in the MA Program. The
                Contractor agrees that all services provided hereunder shall be
                provided in the manner prescribed by 42 U.S.C.A. 300e(b), and
                warrants that the organization and operation of the Contractor
                is in compliance with 42 U.S.C.A. 300e(c). The Contractor agrees
                to comply with all applicable rules, regulations, and Bulletins
                promulgated under such laws including, but not limited to, 42
                U.S.C.A. 300e, 1396 et seq.; 62 P.S. 101 et. seq.; 42 C.F.R.
                Parts 431 through 481 and 45 C.F.R. Parts 74, 80, and 84, and
                the Department of Public Welfare regulations as specified in
                Exhibit A of this Agreement, General Guidelines for Managed Care
                Regulatory Review, and, the HealthChoices Proposers' Library,
                Exhibit C of this Agreement for a list of applicable
                regulations.

        C.      GENERAL LAWS AND REGULATIONS

                The Contractor must comply with Titles VI and VII of the Civil
                Rights Act of 1964, 42 U.S.C.A. Section 2000d et seq. and 2000e
                et seq.; Section 504 of the Rehabilitation Act of 1973, 29
                U.S.C.A. Section 701 et seq.; the Age Discrimination Act of
                1975, 42 U.S.C.A. 6101 et seq.; the Americans with Disabilities
                Act, 42 U.S.C.A. 12101 et seq.; and the Pennsylvania Human
                Relations Act of 1955, 71 P.S. 941 et seq.; and Article XXI of
                the Insurance Company Law of 1921, as amended, 40 P.S. 991.2102
                et seq.

                The Contractor must comply with the Commonwealth's Contract
                Compliance Regulations that are set forth at 16 Pa. Code 49.101
                and on file with the Contractor.

                The Contractor must comply with the Standard Contract Terms and
                Conditions found in Exhibit D of this Agreement, Standard
                Contract Terms and Conditions for Services.

                The Contractor must comply with all applicable laws,
                regulations, and policies of the Pennsylvania Department of
                Health and the Pennsylvania Insurance Department.

                                                                              25

<PAGE>

                In addition, the Contractor and its subcontractors must respect
                the conscience rights of individual providers and provider
                organizations, and comply with the current Pennsylvania laws
                prohibiting discrimination on the basis of the refusal or
                willingness to participate in certain abortion and
                sterilization-related activities as outlined in 43 P.S. 955.2
                and 18 Pa. C.S.A. 3213(d).

                Nothing in this Agreement shall be construed to permit or
                require the Department to pay for any services or items which
                are not or have ceased to be compensable under the laws, rules
                and regulations governing the MA Program at the time such
                services are provided.

                The Contractor shall maintain the highest standards of integrity
                in the performance of this Agreement and shall take no action in
                violation of state or federal laws, regulations, or other
                requirements that govern contracting with the Commonwealth. The
                requirements regarding Contractor Integrity Provisions, are
                contained in Exhibit D of this Agreement, Standard Contract
                Terms and Conditions for Services.

        D.      LIMITATION ON THE DEPARTMENT'S OBLIGATIONS

                The obligations of the Department under this Agreement are
                limited and subject to the availability of funds appropriated by
                the General Assembly of the Commonwealth of Pennsylvania, and
                certified by the Comptroller for Public Health and Human
                Services.

SECTION V: PROGRAM REQUIREMENTS

        A.      IN-PLAN SERVICES

                The Contractor must ensure that all services provided are
                Medically Necessary.

                1.      AMOUNT, DURATION AND SCOPE

                        At a minimum, In-Plan Services shall be provided in the
                        amount, duration and scope set forth in the MA FFS
                        Program and be based on the MA Consumer's benefit
                        package, unless otherwise specified by the Department.
                        If new services or eligible consumers are added to the
                        Pennsylvania MA Program, or if covered services or
                        eligible consumers are expanded or eliminated,
                        implementation by the Contractor shall be on the same
                        day as the Department's, unless the Contractor is
                        notified by the Department of an alternative
                        implementation date. When new services are added, the
                        Department shall conduct an actuarial analysis including
                        appropriate input by the Contractor, to determine if
                        there is a need

                                                                              26

<PAGE>

                        for a rate change and if necessary, adjust the rates to
                        appropriately reflect the addition of the new services.

                        The Department has established benefit packages based on
                        category of assistance, program status code, age, and,
                        for some packages, the existence of Medicare coverage or
                        a deprivation qualifying code. In cases where the Member
                        benefits are determined by the benefit package, the most
                        comprehensive package is to be honored.

                2.      PROGRAM EXCEPTIONS

                        The Contractor is also required to establish a process,
                        reviewed and approved by the Department, whereby a
                        Provider may request coverage for items or services,
                        which while included under the MA Consumer's benefit
                        package, are not currently listed on the MA Program Fee
                        Schedule. These requests are recognized by the
                        Department as a Program Exception and described in 55
                        Pa. Code 1150.63.

                3.      EXPANDED BENEFITS

                        The Contractor may provide expanded benefits subject to
                        advance written approval by the Department. These must
                        be benefits that are generally considered to have a
                        direct relationship to the maintenance or enhancement of
                        a Member's health status. Examples of potentially
                        approvable benefits include various seminars and
                        educational programs promoting healthy living or illness
                        prevention, memberships in health clubs and/or
                        facilities promoting physical fitness and expanded
                        eyeglass or eye care benefits. These benefits must be
                        generally available to all Members and must be made
                        available at all appropriate Contractor Network
                        Providers. Such benefits cannot be tied to specific
                        Member performance. However, the Department may grant
                        exceptions in areas where it believes that such tie-ins
                        shall produce significant health improvements for
                        Members.

                        In order for information about expanded benefits to be
                        included in any Member information provided by the
                        Contractor, the expanded benefits must apply for a
                        minimum of one full year or until the Member information
                        is revised, whichever is later. Upon sixty (60) days
                        advance notice to the Department, the Contractor may
                        modify or eliminate any expanded benefits, which exceed
                        the benefits provided for under the MA FFS Program. Such
                        benefit(s) as modified or eliminated shall supersede
                        those specified in the Proposal. The Contractor must
                        send written notice to Members

                                                                              27

<PAGE>

                        and affected Providers at least thirty (30) days prior
                        to the effective date of the change in covered benefits
                        and shall simultaneously amend all written materials
                        describing its covered benefit or Provider Network. A
                        change in covered benefits includes any reduction in
                        benefits or a substantial change to the Provider
                        Network.

                        For information to be included in materials to be used
                        by the Independent Enrollment Assistance Program (IEAP),
                        the expanded benefits must be in effect for the full
                        calendar year for which the IEAP information applies.
                        IEAP information will be updated annually on a calendar
                        year basis.

                4.      REFERRALS

                        The Contractor is required to establish and maintain a
                        referral process to effectively utilize and manage the
                        care of its Members. The Contractor may require a
                        referral for any medical services, which cannot be
                        provided by the PCP except where specifically provided
                        for in this Agreement.

                5.      SELF REFERRAL/DIRECT ACCESS

                        There are some services, which can be accessed without a
                        referral from the PCP. Vision, dental care, obstetrical
                        and gynecological (OB/GYN) services may be
                        self-referred, providing the Member obtains the services
                        from the PH-MCO's Provider Network. Chiropractic
                        services may be accessed in accordance with the process
                        set forth in Medical Assistance Bulletin 99-00-03.

                        Neither the referral process nor the prior authorization
                        process can be employed to manage the utilization of
                        family planning services. The right of the Member to
                        choose a provider for family planning services shall not
                        be restricted. Members may access at a minimum, health
                        education and counseling necessary to make an informed
                        choice about contraceptive methods, pregnancy testing
                        and counseling, breast cancer screening services, basic
                        contraceptive supplies such as oral birth control pills,
                        diaphragms, foams, creams, jellies, condoms (male and
                        female), Norplant, injectibles, intrauterine devices,
                        and other family planning procedures as described in
                        Exhibit F of this Agreement, Family Planning Services
                        Procedures, and the Contractor must pay for the
                        Out-of-Plan Services.

                        Under Section 2111(7) of the Insurance Company Law of
                        1921, as amended, 40 P.S. 991.72111(7), Members are to
                        be provided

                                                                              28

<PAGE>

                        direct access to OB/GYN services. The Contractor must
                        have a system in place that does not erect barriers to
                        care for pregnant women and does not involve a
                        time-consuming authorization process or unnecessary
                        travel.

                        Members must be permitted to select a healthcare
                        Provider, including nurse midwives participating in the
                        PH-MCO's Network, to obtain maternity and gynecological
                        care without prior approval from a PCP. This includes
                        selecting a healthcare Provider to provide Medically
                        Necessary follow-up care, an annual well-woman
                        gynecological visit, primary and preventive gynecology
                        care, including a PAP smear and referrals for diagnostic
                        testing related to maternity and gynecological care.

                        In situations where a new (and pregnant) enrollee is
                        already receiving care from an out-of-network OB-GYN
                        specialist at the time of enrollment, the Member may
                        continue to receive services from that specialist
                        throughout the pregnancy and postpartum care related to
                        the delivery.

                6.      BEHAVIORAL HEALTH SERVICES

                        The Contractor is not responsible to provide any
                        services as set forth in the contracts between the
                        Department and the Behavioral Health Managed Care
                        Organizations (BH-MCOs) in effect at the same time as
                        this Agreement.

                7.      PHARMACY SERVICES

                        a.      GENERAL

                                The Contractor must cover, at a minimum, those
                                therapeutic categories currently covered by the
                                Department's FFS Pharmaceutical Services
                                Program.

                                Under no circumstances will the Contractor
                                permit the therapeutic substitution of a
                                prescription drug by a pharmacist without
                                explicit authorization from the licensed
                                prescriber.

                                The Contractor must also comply with the
                                requirements for Prior Authorization for
                                Outpatient Prescription Drugs, Section V. B.2 of
                                this Agreement.

                        b.      FORMULARIES

                                                                              29

<PAGE>

                                Formulary guidelines and approval criteria are
                                listed in Exhibit G of this Agreement, Drug
                                Formulary Guidelines.

                                The Contractor may use a formulary as long as it
                                meets the clinical needs of the MA population
                                and allows access to all other MA FFS drug
                                products not on the formulary through some
                                exception process such as prior authorization in
                                accordance with Exhibit H of this Agreement,
                                Prior Authorization Guidelines. The Contractor
                                must submit the request for advance written
                                approval by the Department of the exception or
                                prior authorization process related to pharmacy
                                services together with the request for formulary
                                approval. Pharmacy prior authorization policies
                                and procedures must be submitted to the Prior
                                Authorization Review Panel (PARP) for review and
                                approval prior to implementation. Clinical
                                guidelines to prior authorize non-formulary
                                drugs require advance written approval under the
                                Department's Utilization Review Criteria
                                Assessment Process (URCAP) process which can be
                                found in the HealthChoices Proposers' Library.
                                All formularies must conform to the formulary
                                guidelines and approval criteria established by
                                the Department and may not be implemented prior
                                to receiving advance written approval from the
                                Department. For additional clarification on
                                formulary guidelines, see Exhibit G of this
                                Agreement, Drug Formulary Guidelines.

                        c.      COVERAGE EXCLUSIONS

                                In accordance with Section 1927 of the Social
                                Security Act, 42 U.S.C.A. 1396r-8, the
                                Contractor must exclude coverage for any drug
                                marketed by a drug company (or labeler) who does
                                not participate in the MA FFS Medicaid Drug
                                Rebate Program. Therefore, the Contractor is not
                                permitted to provide coverage for any drug
                                product, brand name or generic, legend or
                                non-legend, sold or distributed by a company
                                that did not sign an agreement with the federal
                                government to provide rebates to the Medicaid
                                agency.

                                In addition, the Contractor must allow access to
                                all drug products covered by the MA FFS Program.
                                This includes brand name and generic products,
                                as well as all outpatient legend drugs, sold or
                                distributed by companies that participate in the
                                rebate program for all medically accepted
                                indications, as described in Section 1927(k)(6)
                                of the Social Security Act, 42 U.S.C.A.
                                1396r-8(k)(6). The Contractor

                                                                              30

<PAGE>

                                must include coverage for non-legend drugs as
                                required under formulary guidelines and covered
                                by the MA FFS Program. This includes any use
                                which is approved under the Federal Food, Drug,
                                and Cosmetic Act, 21 U.S.C.A. 301 et seq. or,
                                whose use is supported by the American Hospital
                                Formulary Service - Drug Information, American
                                Medical Association Drug Evaluations, United
                                States Pharmacopoeia - Drug Information, and
                                DRUGDEX.

                        d.      DESI DRUGS

                                The Contractor shall not provide coverage for
                                Drug Efficacy Study Implementation (DESI) drugs
                                under any circumstances.

                        e.      PHARMACY REBATE PROGRAM

                                Under the provisions of Section 1927 of the
                                Social Security Act 42 U.S.C.A. 1396r-8, drug
                                companies that wish to have their products
                                covered through the MA Program (both
                                fee-for-service and managed care) must sign an
                                agreement with the federal government to provide
                                rebates to the State. Any drug company that does
                                not sign a rebate agreement may not have their
                                products covered through the MA Program.

                                The Contractor must negotiate with drug
                                companies to collect rebates for pharmaceutical
                                products.

                        f.      DRUG UTILIZATION REVIEW (DUR) PROGRAM

                                The Contractor must have written polices and
                                procedures to adhere to a DUR Program prior
                                approved by the Department. This system must be
                                based on federal law and regulation at Section
                                1927 of the Social Security Act, 42
                                U.S.C.A.1396r-8 and 42 C.F.R. 456 and state
                                guidelines adopted from the existing MA FFS DUR
                                Program. DUR state guidelines can be found in
                                Exhibit I of this Agreement, Drug Utilization
                                Review Guidelines.

                                The Contractor must have a procedure to compare
                                pharmacy encounter data use against
                                predetermined therapeutic drug criteria
                                standards consistent with the official compendia
                                and the peer-reviewed medical literature. The
                                official compendia shall consist of the American
                                Hospital Formulary Service Drug Information, the
                                United States Pharmacopoeia - Drug Information,
                                the DRUGDEX

                                                                              31

<PAGE>

                                Information System, and the American Medical
                                Association Drug Evaluations. These standards
                                must be consistent with medical practices that
                                have been developed by unbiased, independent
                                experts through an open professional consensus
                                process. This procedure must also include an
                                ongoing review for current drug criteria
                                standards. All drug criteria standards must be
                                submitted to the Department for advance written
                                approval before its usage by the Contractor,
                                under the Utilization Review Criteria Assessment
                                Process (URCAP). The URCAP manual may be found
                                in the HealthChoices Proposers' Library.

                                The Contractor must have a process for the
                                communication of counseling for Members based on
                                standards established by state pharmacy law
                                related to patient counseling and to the
                                maintenance of patient profiles.

                                The Contractor must have procedures for
                                retrospective DUR through mechanized drug Claims
                                processing and an information retrieval system
                                in accordance with Exhibit I of this Agreement,
                                Drug Utilization Review Guidelines.

                                In no case shall the Contractor's DUR Program
                                provide any financial or other incentive to a
                                pharmacist for encouraging the physician to
                                change his/her prescription order. A change to a
                                prescription order is only acceptable when
                                warranted by clinical reasons of Member safety
                                and approved efficacy.

                        g.      PHARMACY BENEFIT MANAGER (PBM)

                                The Contractor may use a PBM to process
                                prescription Claims only if the PBM Subcontract
                                has received advance written approval by the
                                Department. The Contractor must indicate the
                                intent to use a PBM, identify the proposed PBM
                                Subcontract and the ownership of the proposed
                                PBM subcontractor. If the PBM is owned wholly or
                                in part by a retail pharmacy Provider, chain
                                drug store or pharmaceutical manufacturer, the
                                Contractor will submit a written description of
                                the assurances and procedures that shall be put
                                in place under the proposed PBM Subcontract,
                                such as an independent audit, to assure
                                confidentiality of proprietary information.
                                These assurances and procedures must be
                                submitted and receive advance written approval
                                by the Department prior to initiating the PBM
                                Subcontract. The Department will allow the
                                continued operation of pre-existing

                                                                              32

<PAGE>

                                PBM subcontracts while the Department is
                                reviewing such pre-existing contracts.

                8.      EPSDT SERVICES

                        The Contractor must comply with the requirements
                        regarding EPSDT services as set forth in Exhibit J of
                        this Agreement, EPSDT Guidelines.

                        The Contractor must also adhere to specific Department
                        regulations at 55 Pa. Code Chapters 3700 and 3800 as
                        they relate to EPSDT examination for individuals under
                        the age of 21 and entering substitute care or a child
                        residential facility placement.

                9.      EMERGENCY ROOM (ER) SERVICES

                        The Contractor agrees to comply with the program
                        standards regarding Emergency Room (ER) Services that
                        are set forth in Exhibit K of this Agreement, Emergency
                        Room Services.

                        The Contractor must comply with the provisions of the
                        Balanced Budget Act of 1997 (BBA) and Sections 2102 and
                        2116 of the Insurance Company Law of 1921 as amended, 40
                        P.S. 991.2102 and 991.2116, pertaining to coverage and
                        payment of Medically Necessary Emergency Services. In
                        addition:

                        -       Emergency Providers may initiate the necessary
                                intervention to stabilize an Emergency Medical
                                Condition of the patient without seeking or
                                receiving prospective authorization by the
                                Contractor.

                        -       The Contractor shall be responsible for all ER
                                services including those categorized as mental
                                health or drug and alcohol. Exception: ER
                                evaluations for voluntary and involuntary
                                commitments pursuant to the Mental Health
                                Procedures Act of 1976, 50 P.S. 7101 et seq.
                                shall be the responsibility of the BH-MCO.

                        Nothing in the above section shall be construed to imply
                        that the Contractor shall not:

                        -       track, trend and profile ER utilization;

                        -       retrospectively review and where appropriate,
                                deny payment for inappropriate ER use;

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<PAGE>

                        -       use all appropriate methods to encourage Members
                                to use PCPs rather than ERs for minor acute
                                conditions; or

                        -       use a recipient restriction methodology for
                                Members with a history of significant
                                inappropriate ER usage.

                10.     POST-STABILIZATION SERVICES

                        The Contractor must cover Post-Stabilization Services,
                        pursuant to 42 C.F.R. 422.100(b)(iv).

                        The Contractor must cover Post-Stabilization Services
                        without requiring authorization, and regardless of
                        whether the Member obtains the services within or
                        outside the Contractor's Provider Network if any of the
                        following situations exist:

                        a.      The Post-Stabilization Services were
                                pre-approved by the Contractor.

                        b.      The Post-Stabilization Services were not
                                pre-approved by the Contractor because the
                                Contractor did not respond to the Provider's
                                request for these Post-Stabilization Services
                                within one (1) hour of the request.

                        c.      The Post-Stabilization Services were not
                                pre-approved by the Contractor because the
                                Contractor could not be reached by the Provider
                                to request pre-approval for these
                                Post-Stabilization Services.

                11.     EXAMINATIONS TO DETERMINE ABUSE OR NEGLECT

                        a.      The Contractor must ensure that Members who are
                                MA Consumers under evaluation for suspected
                                child abuse or neglect by the County Children
                                and Youth Agency system, and who present for
                                physical examinations for determination of abuse
                                or neglect, shall receive such services. These
                                services must be performed by trained examiners
                                in a timely manner according to the Child
                                Protective Services Law, 23 Pa. C.S.A. 6301 et
                                seq. and Department regulations.

                        b.      The Contractor is responsible to ensure that ER
                                staff and physicians know the procedures for
                                reporting suspected abuse and neglect in
                                addition to performing exams for the county.
                                This requirement must be included in all
                                applicable Provider Agreements.

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                        c.      Should the PCP determine that a mental health
                                assessment is needed, s/he must inform the MA
                                consumer or the County Children and Youth Agency
                                representative how to access these mental health
                                services and coordinate access to these
                                services, when necessary.

                12.     HOSPICE SERVICES

                        The Contractor must provide hospice care and use
                        certified hospice providers in accordance with the
                        provisions outlined at 42 C.F.R. 418.1 et seq.

                        MA Consumers who are enrolled in the Department's
                        Hospice Program and were not previously enrolled in the
                        HealthChoices Program will not be enrolled in
                        HealthChoices. However, if a PH-MCO Member is determined
                        eligible for the Department's Hospice Program after
                        being enrolled in the PH-MCO, the Member will remain the
                        responsibility of the PH-MCO and will not be disenrolled
                        from HealthChoices.

                13.     ORGAN TRANSPLANTS

                        The Contractor is responsible to pay for transplants to
                        the extent that the MA FFS Program pays for such
                        transplants. When Medically Necessary, the following
                        transplants shall be the responsibility of the
                        Contractor: Kidney (cadaver and living donor),
                        kidney/pancreas, cornea, heart, heart/lung, single lung,
                        double lung, liver (cadaver and living donor),
                        liver/pancreas, small bowel, pancreas/small bowel, bone
                        marrow, stem cell, pancreas, liver/small bowel
                        transplants, and multivisceral transplants.

                14.     TRANSPORTATION

                        The Contractor is financially responsible for the cost
                        of all Medically Necessary emergency transportation and
                        all Medically Necessary non-emergency ambulance
                        transportation.

                        Regulations set forth at 55 Pa. Code 1245.52(l) outline
                        the conditions required for ambulance transportation to
                        be considered Medically Necessary.

                        Any non-emergency transportation (excluding Medically
                        Necessary non-emergency ambulance) for Members to and
                        from MA compensable services must be arranged through
                        the Medical Assistance Transportation Program (MATP). A
                        complete

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                        description of MATP responsibilities can be found in
                        Exhibit L of this Agreement, Transportation.

                15.     WAIVER SERVICES/STATE PLAN AMENDMENTS

                        a.      HIV/AIDS WAIVER PROGRAM

                                The Contractor must arrange for and provide
                                services to persons with AIDS or symptomatic HIV
                                the same as those provided under the
                                Department's AIDS Waiver Program. Individuals
                                enrolled in the Department's AIDS Waiver Program
                                who would not otherwise be eligible for MA, are
                                included in HealthChoices. The Contractor shall
                                be responsible for tracking these Members in
                                accordance with federal reporting requirements.
                                A full description of the AIDS Waiver Program
                                can be found in the HealthChoices Proposers'
                                Library.

                        b.      HIV/AIDS TARGETED CASE MANAGEMENT (TCM) PROGRAM

                                The Contractor must ensure the provision of TCM
                                services for persons with AIDS or symptomatic
                                HIV, including access to needed medical and
                                social services using the existing TCM program
                                standards of practice followed by the Department
                                or comparable standards approved by the
                                Department. In addition, individuals within the
                                PH-MCO who provide the TCM services must meet
                                the same qualifications as those under the
                                Department's TCM Program. A full description of
                                the TCM Program including practice standards for
                                case managers, can be found in the HealthChoices
                                Proposers' Library.

                        c.      MICHAEL DALLAS WAIVER (MDW) PROGRAM

                                MA Consumers who are currently receiving home
                                and community based services through the MDW,
                                will be enrolled in the HealthChoices Program
                                but all waiver services will be covered under
                                the MA FFS delivery system. All other non-waiver
                                services will be covered under the HealthChoices
                                PH-MCO.

                                MA Consumers currently receiving home and
                                community based services through the MDW Program
                                and deemed MA eligible solely through the MDW
                                will be exempt from the HealthChoices Program.

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<PAGE>

                        d.      HEALTHY BEGINNINGS PLUS (HBP) PROGRAM

                                The Contractor must provide services that meet
                                or exceed HBP standards in effect as defined in
                                current MA Bulletins. The Contractor must also
                                assure that the coordinated prenatal activities
                                of the HBP Program continue by utilizing
                                enrolled HBP Providers or developing comparable
                                resources. Such comparable programs will be
                                subject to review and approval by the Department
                                based on the likelihood that such programs will
                                be of greater effectiveness in meeting the goals
                                of the HBP Program. The Contractor must provide
                                a full description of its plan to provide
                                prenatal care for pregnant women and infants in
                                fulfillment of the HBP Program objectives for
                                review and advance written approval by the
                                Department. This plan must include comprehensive
                                postpartum care.

                        e.      PENNSYLVANIA DEPARTMENT OF AGING (PDA) WAIVERS

                                The Department reserves the right to expand the
                                scope of services to include MA Consumers in the
                                PDA Waiver in HealthChoices. Please refer to
                                Section VII.B.3 of this Agreement for further
                                information on program changes.

                16.     NURSING FACILITY SERVICES

                        The PH-MCO is responsible for payment for up to thirty
                        (30) days of nursing home care (including hospital
                        reserve or bed hold days) if a Member is admitted to a
                        Nursing Facility. Members are disenrolled from
                        HealthChoices thirty (30) days following the admission
                        date to the Nursing Facility as long as the Member has
                        not been discharged (from the Nursing Facility).

                        A PH-MCO may not deny or otherwise limit Medically
                        Necessary services, such as home health services, on the
                        grounds that the Member needs, but is not receiving, a
                        higher level of care. A PH-MCO may not offer financial
                        or other incentives to obtain or expedite a Member's
                        admission to a Nursing Facility except as short-term
                        nursing care, not to exceed thirty (30) days.

                        The PH-CMO must abide by the decision of the OPTIONS
                        assessment process determination letter related to the
                        need for Nursing Facility services.

                        MA Consumers who are placed into a Nursing Facility from
                        a hospital and who were not previously enrolled in the
                        HealthChoices

                                                                              37

<PAGE>

                        Program or individuals who enter a Nursing Facility from
                        a hospital and are then determined eligible for MA will
                        not be enrolled in HealthChoices. However, should an
                        individual leave the Nursing Facility to reside in the
                        HealthChoices zone and then be determined eligible for
                        enrollment into HealthChoices, they will then be
                        required to enroll into the HealthChoices Program.

                        Individuals who are residing in Nursing Facilities and
                        are subsequently found eligible for MA will not be
                        enrolled in the HealthChoices Program. Individuals
                        eligible for MA, but not mandated into the HealthChoices
                        Program when they enter Nursing Facilities, or MA
                        Consumers who are placed in Nursing Facilities inside
                        the HealthChoices zone, who previously resided outside
                        the HealthChoices zone, will not be enrolled in the
                        HealthChoices Program.

        B.      PRIOR AUTHORIZATION OF SERVICES

                1.      GENERAL PRIOR AUTHORIZATION REQUIREMENTS

                        The Contractor must provide Emergency Services without
                        regard to prior authorization or the emergency care
                        provider's contractual relationship with the Contractor.

                        If the Contractor wishes to require prior authorization
                        of any services which are not required to be prior
                        authorized under the MA FFS Program, the Contractor must
                        establish and maintain written policies and procedures
                        which must have advance written approval by the
                        Department. In addition, the Contractor must include a
                        list and scope of services for referral and prior
                        authorization, which must be included in the
                        Contractor's Provider manual and Member handbook.
                        Contractors must receive advance written approval of the
                        list and scope of services to be referred or prior
                        authorized by the Department as outlined in Exhibit H of
                        this Agreement, Prior Authorization Guidelines and
                        Exhibit M(1) of this Agreement, Quality Management and
                        Utilization Management Program Requirements. Prior
                        authorization policies and procedures approved under
                        previous HealthChoices contracts will be considered
                        approved under this Agreement.

                        The Contractor shall not implement prior authorization
                        policies without having sought and obtained advance
                        written approval by the Department. Denials issued under
                        unapproved prior authorization policies may be subject
                        to retrospective review and reversal at the Department's
                        sole discretion. The Department may, at its discretion,
                        impose sanctions and/or corrective action plans in

                                                                              38

<PAGE>

                        the event that the Contractor improperly implements any
                        prior authorization policy or procedure.

                        The Department will make its best efforts to review and
                        provide feedback to the Contractor (e.g., written
                        approval, request for corrective action plan, denial,
                        etc.) within sixty (60) days from the date the
                        Department receives the request for review by the
                        Contractor. For minor updates to existing approved prior
                        authorization plans, the Department will make its best
                        efforts to review updates within forty-five (45) days
                        from the date the Department receives the request for
                        review by the Contractor.

                        The Contractor is required to process each request for
                        prior authorization of a covered service and ensure that
                        the Member is notified, at least verbally, of the
                        decision within two (2) business days of receiving the
                        request. If additional information is needed to review
                        the request, the Contractor must request such
                        information from the appropriate Provider within
                        forty-eight (48) hours of receiving the request for
                        prior authorization of a covered service. If the
                        Contractor requests additional information, the request
                        may be pended for a reasonable time period. However,

                        a.      a prior authorization (prospective utilization
                                review) decision must be communicated to the
                                Member within two (2) business days of the
                                receipt of all supporting information reasonably
                                necessary to complete the review.

                        b.      the Member must receive written notification of
                                a decision on a request for a covered service or
                                item within twenty-one (21) days of the date the
                                Contractor received the request. If not, the
                                service or item is automatically approved. To
                                satisfy the twenty-one (21) day time period, the
                                Contractor must mail to the Member, the Member's
                                PCP, and the prescribing Provider a notice of
                                partial approval or denial of the request on or
                                before the eighteenth (18th) day from the date
                                the request is received. If the notice is not
                                mailed by the eighteenth (18th) day after the
                                request is received, the request is
                                automatically authorized (i.e., deemed
                                approved).

                        The Contractor may waive the prior authorization
                        requirements for services which are required by the
                        Department to be prior authorized.

                2.      PRIOR AUTHORIZATION FOR OUTPATIENT PRESCRIPTION DRUGS

                                                                              39

<PAGE>

                        The Contractor may require prior authorization as a
                        condition of coverage or payment for an outpatient
                        prescription drug provided that 1) a decision whether to
                        approve or deny the prescription is made within
                        twenty-four (24) hours, and 2) if a Member's
                        prescription for a medication is not filled when a
                        prescription is presented to the pharmacist, the PH-MCO
                        must allow the pharmacist to dispense either a fifteen
                        (15) day supply if the prescription qualifies as an
                        Ongoing Medication, or a seventy-two (72) hour supply in
                        other instances where this is an Immediate Need for the
                        medication.

                        The Contractor must issue a written denial notice, in
                        the form attached as Exhibit N of this Agreement, Denial
                        Notices, within twenty-four (24) hours from the time
                        that the prescription is presented at the pharmacy. In
                        the event that the Contractor cannot issue a written
                        denial notice within twenty-four (24) hours, the
                        Contractor must have procedures in place so as to permit
                        the Member to receive a supply of the new medication
                        such that the supply will not be exhausted prior to
                        receipt of the notice. For drugs not able to be divided
                        and dispensed into individual doses, the Contractor will
                        make provisions to allow the pharmacist to dispense the
                        smallest amount that will provide at least a seventy-two
                        (72) hour or fifteen (15) day supply, whichever is
                        applicable. The Department will waive the seventy-two
                        (72) hour supply requirement for medications and
                        treatments under concurrent clinical review and
                        treatments that are outside the parameter of use
                        approved by the FDA or accepted standards of care.

                        The Contractor must have procedures in place to assure
                        that if a prescription for an Ongoing Medication is not
                        authorized when presented at the pharmacy, the
                        pharmacist shall dispense a fifteen (15) day supply of
                        the prescription, unless the Contractor or its
                        designated subcontractor issued a proper written notice
                        of benefit reduction or termination at least ten (10)
                        days prior to the end of the period for which the
                        medication was previously authorized and a Grievance or
                        DPW Fair Hearing request has not been filed. If the
                        Member files a Grievance or DPW Fair Hearing request
                        from a denial of an Ongoing Medication, the Contractor
                        must authorize the medication until the Grievance or DPW
                        Fair Hearing request is resolved. When medication is
                        authorized due to the Contractor's obligation to
                        continue services while a Member's Grievance or Fair
                        Hearing is pending, and the final binding decision is in
                        favor of the Contractor, a request for subsequent refill
                        of the prescribed medication does not constitute an
                        ongoing medication.

                                                                              40

<PAGE>

                        The requirement that the Member be given at least a
                        seventy-two (72) hour supply for a new medication or a
                        fifteen (15) day supply for an Ongoing Medication does
                        not apply when a pharmacist determines that the taking
                        of the prescribed medication, either alone or along with
                        other medication that the Member may be taking, would
                        jeopardize the health or safety of the Member. In such
                        event, the Contractor and/or its subcontractor must
                        require that its participating pharmacist make good
                        faith efforts to contact the prescriber. In such
                        instances, however, the requirement that the Contractor
                        issue a written denial notice within twenty-four (24)
                        hours still applies.

        C.      CONTINUITY OF CARE

                The Contractor must comply with the procedures outlined in MA
                Bulletin #99-96-01, Continuity of Prior Authorized Services
                Between FFS and Managed Care Plans and Between Managed Care
                Plans for Individuals Under Twenty-One (21), to ensure
                continuity of prior authorized services whenever an individual
                under the age of twenty-one (21) transfers from one PH-MCO to
                another, from a PH-MCO to the MA FFS Program, or from the MA FFS
                Program to a PH-MCO.

                The PH-MCO must comply with Section 2117 of Article XXI of the
                Insurance Company Law of 1921, as amended, 40 P.S. 991.2117
                regarding continuity of care requirements. A bulletin detailing
                the continuity of care requirements applicable to prior
                authorized services to adult Members, as well as continuity of
                treatment for non-prior authorized services for all Members will
                be issued by the Department in the near future. A draft of this
                bulletin can be found in the HealthChoices Proposers' Library.

        D.      COORDINATION OF CARE

                The PH-MCO is responsible for coordination of care for
                individuals enrolled in HealthChoices. The PH-MCO must ensure
                seamless and continuous coordination of care across a continuum
                of services for the individual Member with a focus on improving
                health care outcomes. The continuum of services may include the
                in-plan comprehensive benefits package, out-of-plan benefits,
                and non-MA covered services provided by other community
                resources such as:

                1.      NURSING FACILITY CARE

                        The PH-MCO must ensure the decisions related to
                        placement in Nursing Facilities are coordinated with the
                        Member and, where appropriate, the Member's family.

                                                                              41

<PAGE>

                2.      SPECIAL SERVICES

                        Through a variety of mechanisms including Quality
                        Management and Utilization Management (QM/UM) and
                        Special Needs Unit (SNU) functions, the PH-MCO is
                        responsible to coordinate special In-Plan Services.

                        Special In-Plan Services include but are not limited to:

                        -       ICF/MR/ORC Intermediate Care Facility for the
                                Mentally Retarded/Other Related Conditions

                        -       Residential Treatment Facility (RTF)

                        -       Acute and Extended Acute Psychiatric Facilities

                        -       Non-Hospital Residential Detoxification,
                                Rehabilitation, and Half-Way House Facilities
                                for Drug/Alcohol Dependence/ Addiction

                        -       Area Agencies on Aging (AAA)/OPTIONS Assessment
                                and Pre-admission Screening Requirements

                        -       Pennsylvania Department of Aging (PDA) Waiver

                        -       Members Admitted to Juvenile Detention Centers
                                (JDCs)

                        -       Children in Substitute Care Transition

                        -       Adoption Assistance Children/Adolescents

                        -       Dual Eligibles (Medicare/Medicaid)

                        The HealthChoices Program requirements covering special
                        services are outlined in Exhibit O of this Agreement,
                        Description of Special Services.

                3.      OUT-OF-PLAN SERVICES

                        The PH-MCO is responsible to interact/coordinate with
                        the entity responsible for the Out-of-Plan Services to
                        promote a seamless continuum of care coordination.

                        Out-of-Plan Services include, but are not limited to:

                                                                              42

<PAGE>

                        -       Transitional Care Homes

                        -       Medical Foster Care Services

                        -       Early Intervention Services

                        -       The Home and Community Based Waiver Program for
                                Nursing Facility Residents with other related
                                conditions (OSP/OBRA Waiver)

                        -       The Home and Community Based Waiver Program for
                                Nursing Facility Applicants with other related
                                conditions (OSP/Independence Waiver)

                        -       Home and Community Based Waiver for Attendant
                                Care Services (OSP/AC Waiver)

                        -       Home and Community Based Waiver for Persons with
                                Mental Retardation

                        Out-of-Plan Services are described in Exhibit P of this
                        Agreement, Out-of-Plan Services.

                4.      COORDINATION OF CARE/LETTERS OF AGREEMENT

                        The Contractor is responsible to coordinate the
                        comprehensive in-plan package of services with entities
                        providing Out-of-Plan Services. To clearly define the
                        roles of the entities involved in the coordination of
                        services, the Contractor must enter into coordination of
                        care letters of agreement with all school districts,
                        County Children and Youth Agencies (CCYAs) and Juvenile
                        Probation Offices (refer to Sample Model Agreement,
                        Exhibit Q of this Agreement), and the BH-MCOs (refer to
                        Exhibit R of this Agreement, Coordination with BH-MCOs).
                        The Department encourages the Contractor to make a good
                        faith effort to enter into coordination of care letters
                        of agreement with other public, governmental, county,
                        and community-based service providers.

                        Should the Contractor be unable to enter into
                        coordination of care letters of agreement as required
                        under this Agreement, the Contractor must submit written
                        justification to the Department. Justification must
                        include all the steps taken by the Contractor to attempt
                        to secure coordination of care letters of agreement, or
                        must demonstrate an existing, ongoing, and cooperative
                        relationship with the entity. The Department will then
                        determine whether or not this requirement will be deemed
                        met.

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<PAGE>

                        All written coordination documents developed and
                        maintained by the Contractor must have advance written
                        approval by the Department and must be reviewed/revised
                        at least annually by the Contractor. Coordination
                        documents must be available for review by the Department
                        at the time of Readiness Review and upon request
                        thereafter. All written coordination documents entered
                        into between a service Provider and the Contractor must
                        also be approved by the Department. These written
                        coordination documents, including the operational
                        procedures, must be submitted for final review and
                        approval at least thirty (30) days prior to the
                        operational date of the Initial Term of the Contract.

                        Any written coordination documents entered into between
                        the Contractor and service Providers must contain, but
                        are not limited to, the provisions outlined in Exhibit S
                        of this Agreement, Written Agreements Between PH-MCO and
                        Service Providers. Under no circumstances may these
                        coordination documents contain any definition of
                        Medically Necessary other than the definition found in
                        this Agreement.

                5.      PH-MCO AND BH-MCO COORDINATION

                        The HealthChoices PH-MCOs and the BH-MCOs are required
                        to develop and implement written agreements regarding
                        the interaction and coordination of services provided to
                        MA Consumers enrolled in the HealthChoices Program.
                        These agreements must be submitted and approved by the
                        Department. The PH Contractors and BH Contractors in the
                        zone are encouraged to develop uniform coordination
                        agreements to promote consistency in the delivery and
                        administration of services.

                        Program requirements covering PH/BH Provider Agreements
                        are outlined in Exhibit T of this Agreement, PH/BH
                        Provider Agreements. The HealthChoices Program
                        requirements covering behavioral health services
                        requirements are outlined in Exhibit U of this
                        Agreement, Behavioral Health Services.

                        The Contractor agrees to comply with the requirements
                        regarding Coordination with Out-of-Plan Services, which
                        are set forth in Section V.D.3 of this Agreement,
                        including those pertaining to behavioral health.

                        a.      The Contractor agrees, and the Department will
                                use its best efforts to require HealthChoices
                                BH-MCOs to agree, to submit to a binding
                                independent arbitration process in the

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<PAGE>

                                event of a dispute between the Contractor and
                                any such BH-MCOs concerning their respective
                                obligations pursuant to this Agreement and a
                                Behavioral HealthChoices contract. The mutual
                                agreement of the Contractor and a BH-MCO to such
                                an arbitration process must be evidenced by and
                                included in the written agreement between the
                                Contractor and the BH-MCO.

                        b.      All pharmacy services, except those otherwise
                                assigned, are the payment responsibility of the
                                Member's PH-MCO. The only exception is that the
                                BH-MCO is responsible for the payment of
                                methadone and Levomethadyl Acetate Hydrochloride
                                (LAAM). All prescribed medications are to be
                                dispensed through the Contractor's Network
                                pharmacies. This includes drugs prescribed by
                                both the PH-MCO and the BH-MCO Providers. The
                                Contractor must follow the PH/BH Pharmacy
                                Services guidelines in Exhibit V of this
                                Agreement, PH-MCO Pharmacy Guidelines. The
                                Department will issue a list of BH-MCO Providers
                                to the Contractor prior to the effective date of
                                this Agreement. Should the Contractor receive a
                                request to dispense medication from a BH
                                Provider not listed on the BH-MCO's Provider
                                file, the Contractor must work through the
                                appropriate BH-MCO to identify the Provider. The
                                Contractor is prohibited from denying prescribed
                                medications solely in cases where the BH-MCO
                                Provider is not clearly identified on the BH-MCO
                                Provider file.

        E.      CONTRACTOR RESPONSIBILITY FOR REPORTABLE CONDITIONS

                The Contractor will work with State Department of Health (DOH)
                State and District Office Epidemiologists in partnership with
                the designated county/municipal health department staffs to
                ensure that reportable conditions are appropriately reported in
                accordance with Department regulations, in accordance with 28
                Pa. Code 27.1 et seq. The Contractor will designate a single
                contact person to facilitate the implementation of this
                requirement.

                The Contractor is not responsible for the payment of
                Environmental Lead Investigations.

        F.      MEMBER ENROLLMENT AND DISENROLLMENT

                1.      GENERAL

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<PAGE>

                        The Contractor is prohibited from restricting its
                        Members from changing PH-MCOs for any reason. The MA
                        Consumer has the right to initiate a change in PH-MCOs
                        at any time.

                        The Contractor is prohibited from offering or exchanging
                        financial payments, incentives, commissions, etc., to
                        any other PH-MCO (not receiving a contract to operate
                        under the HealthChoices Program or not choosing to
                        continue a contractual relationship with the Department)
                        for the exchange of information on the terminating
                        PH-MCO's membership. This includes offering incentives
                        to a terminating PH-MCO to recommend that its membership
                        join the PH-MCO offering the incentives.

                        The Department will disenroll Members from a PH-MCO when
                        there is a change in residence which places the Member
                        outside the HC zone covered by this Agreement, as
                        indicated on the individual county file maintained by
                        the Department's Office of Income Maintenance.

                        The Department is developing procedures to support
                        enrolling HC Members transferring from one HC zone to
                        another with the same Plan, provided that the Plan
                        operates in both zones.

                2.      CONTRACTOR OUTREACH MATERIALS

                        The Contractor must develop outreach materials such as
                        pamphlets and brochures which can be used by the IEAP
                        contractor to assist MA Consumers in choosing a PH-MCO
                        and PCP. These materials must be developed in the form
                        and context required by the Department. The Department
                        must approve of such materials in writing prior to their
                        use. The Department's review will be conducted within
                        thirty (30) days and approval will not be unreasonably
                        withheld. The Contractor is required to print and
                        provide to the IEAP contractor an adequate supply of
                        previously approved materials within five (5) business
                        days from the request of the IEAP contractor. The
                        Contractor brochure must follow the guidelines outlined
                        in Exhibit W of this Agreement, PH-MCO Guidelines for
                        Outreach Materials.

                        The Contractor is prohibited from distributing directly
                        or through any agent or independent contractor, outreach
                        materials without advance written approval of the
                        Department. In addition, the Contractor must comply with
                        the following guidelines and/or restrictions.

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<PAGE>

                        a.      The Contractor may not seek to influence an
                                individual's enrollment with the PH-MCO in
                                conjunction with the sale of any other
                                insurance.

                        b.      The Contractor must comply with the enrollment
                                procedures established by the Department in
                                order to ensure that, before the individual is
                                enrolled with the PH-MCO, the individual is
                                provided accurate oral and written information
                                sufficient to make an informed decision on
                                whether to enroll.

                        c.      In accordance with the federal Balanced Budget
                                Act of 1997, Section 1932(d)(2)(E), the
                                Contractor shall not directly or indirectly
                                conduct door-to-door, telephone or other
                                cold-call marketing activities.

                        d.      The Contractor must ensure that all outreach
                                plans, procedures and materials are accurate and
                                do not mislead, confuse or defraud either the MA
                                Consumer or the Department.

                3.      CONTRACTOR OUTREACH ACTIVITIES

                        The Contractor must comply with the following principles
                        for all Contractor outreach activities:

                        a.      Due to the Department's use of HealthChoices
                                Enrollment Specialists, the Contractor will be
                                prohibited from engaging in any marketing
                                activities associated with enrollment into a
                                PH-MCO in any HealthChoices zone. The Contractor
                                will be prohibited from engaging in any
                                marketing activities associated with enrollment
                                into their PH-MCO program upon notification by
                                the Department prior to commencement of this
                                Agreement, but in no case after the IEAP
                                contractor commences enrollment activities.

                                The Contractor is also prohibited from
                                subcontracting with an outside entity to engage
                                in marketing activities associated with any form
                                of enrollment to eligible or potential MA
                                Consumers. The Contractor must not engage in
                                marketing activities associated with
                                enrollments, which include but are not limited
                                to, the following locations and activities:

                                -       County Assistance Offices (CAOs)

                                -       Providers' offices

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<PAGE>

                                -       Malls/Commercial or retail
                                        establishments

                                -       Hospitals

                                -       Check cashing establishments

                                -       Door-to-door visitations

                                -       Telemarketing

                                -       Community Centers

                                -       Churches

                                -       Direct Mail

                        b.      The Contractor may use but not be limited to
                                commonly accepted media methods to advertise.
                                These include television, radio, billboard, the
                                Internet and printed media. All such advertising
                                is subject to advance written approval by the
                                Department.

                        c.      The Contractor may participate in or sponsor
                                health fairs or community events. The Department
                                reserves the right to set limits on
                                contributions and/or payments made to non-profit
                                groups in connection with health fairs or
                                community events. Advance written approval is
                                required for contributions of $2,000.00 or more.
                                The Department will make every reasonable effort
                                to respond to the Contractor's request for
                                advance written approval within ten (10)
                                business days. All contributions are subject to
                                financial audit by the Department.

                        d.      Items of little or no intrinsic value (i.e.,
                                trinkets with promotional Contractor logos), may
                                be offered at health fairs or other approved
                                community events. Such items must be made
                                available to the general public, not to exceed
                                $3.00 in retail value and must not be connected
                                in any way to Contractor enrollment activity.
                                All such items are subject to advance written
                                approval by the Department.

                        e.      The Contractor will be permitted to offer
                                Members health-related benefits in excess of
                                those required by the Department, and are
                                permitted to feature such expanded benefits in
                                approved outreach materials. All such expanded
                                benefits are subject to advance written approval
                                by the

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<PAGE>

                                Department and must meet the requirements of
                                Section V.A.3 of this Agreement, Expanded
                                Benefits.

                        f.      Contractors may not offer Member coupons for
                                products of value.

                        g.      Unless approved by the Department, Contractors
                                are not permitted to directly provide products
                                of value unless they are health related and are
                                prescribed by a licensed Provider.

                        h.      The PH-MCO will be responsible for bearing the
                                cost of reprinting HealthChoices outreach
                                materials, if a major change involving content
                                is made prior to the IEAP's annual revision of
                                materials. These changes include, but are not
                                limited to, change in product names, program
                                benefits and services.

                        i.      The Department reserves the right to review any
                                and all outreach activities and advertising
                                materials and procedures used by the Contractor
                                for the HealthChoices program. In addition to
                                any other sanctions, the Department may impose
                                monetary or restricted enrollment penalties
                                should the Contractor be found to be using
                                marketing materials or engaging in marketing
                                practices. The Department reserves the right to
                                suspend all outreach activities and the
                                completion of applications for new Members. Such
                                suspensions may be imposed for a period of sixty
                                (60) days from notification by the Department to
                                the Contractor citing the violation.

                        j.      The Contractor is prohibited from distributing,
                                directly or through any agent or independent
                                Contractor, outreach materials that contain
                                false or misleading information.

                        k.      The Contractor must not, under any conditions
                                use the Department's Client Information System
                                (CIS) to identify and market to MA Consumers
                                participating in the MA FFS Program or enrolled
                                in another PH-MCO. The Contractor shall not
                                share or sell MA Consumer lists with other
                                organizations for any purpose.

                        l.      The Contractor must submit a plan for
                                advertising, sponsorship, and outreach
                                procedures to the Department for advance written
                                approval in accordance with the guidelines
                                outlined in Exhibit X of this Agreement,
                                HealthChoices PH-

                                                                              49
<PAGE>

                                MCO Guidelines for Advertising, Sponsorship, and
                                Outreach.

                4.      ALTERNATIVE LANGUAGE REQUIREMENT

                        During the enrollment process, the Department and/or its
                        HealthChoices Enrollment Specialists shall seek to
                        identify program Members who speak a language other than
                        English as their first language. The Department and/or
                        its HealthChoices Enrollment Specialists shall notify
                        the Contractor when it knows of Members who do not speak
                        English as a first language and who have either selected
                        or been assigned to the Contractor.

                        If five percent (5%) or more of MA Consumers in a County
                        Assistance/District Office speak a language other than
                        English as a first language, the Contractor must make
                        available in that language all information that is
                        disseminated to English speaking Members. This
                        information includes, but is not limited to, Member
                        handbooks, hardcopy provider directories, education and
                        outreach materials, written notifications, etc.
                        Materials must include appropriate instructions on how
                        to access or receive assistance with accessing desired
                        materials in an alternate language or format.

                5.      CONTRACTOR ENROLLMENT PROCEDURES

                        The Contractor must have in effect written
                        administrative policies and procedures for newly
                        enrolled Members. The Contractor must also provide
                        written policies and procedures for coordinating
                        enrollment information with the Department's IEAP
                        contractor. The Contractor must receive advance written
                        approval from the Department regarding these policies
                        and procedures. The Contractor's submission of new or
                        revised policies and procedures for review and approval
                        by the Department shall not act to void any pre-existing
                        policies and procedures which have been prior approved
                        by the Department for operation in a HC zone. Unless
                        otherwise required by law, the Contractor may continue
                        to operate under such pre-existing policies and
                        procedures until such time as the Department approves
                        the new or revised version thereof.

                        The Contractor must take necessary administrative steps
                        consistent with the Enrollment/Disenrollment Dating
                        Rules that are determined by and provided by the
                        Department in Exhibit Y of this Agreement, Managed Care
                        Enrollment/Disenrollment Dating Rules.

                        The Contractor must enroll any eligible MA Consumer who
                        selects the Contractor or is assigned in accordance with
                        Exhibit Z of this

                                                                              50
<PAGE>

                        Agreement, Automatic Assignment, to the Contractor
                        regardless of the MA Consumer's race, color, creed,
                        religion, age, sex, national origin, ancestry, marital
                        status, sexual orientation, income status, program
                        membership, Grievance status, MA category status, health
                        status, pre-existing condition, physical or mental
                        handicap or anticipated need for health care. See
                        Exhibit AA of this Agreement, Category/Program Status
                        Coverage Chart.

                6.      ENROLLMENT OF NEWBORNS

                        The Contractor must have written administrative policies
                        and procedures to enroll and provide all necessary
                        services to newborn infants of Members, effective from
                        the time of birth, without delay, in accordance with
                        Section V.F.11 of this Agreement, Services for New
                        Members, and Exhibit BB of this Agreement, PH-MCO
                        Recipient Coverage Document. The Contractor must receive
                        advance written approval from the Department regarding
                        these policies and procedures.

                        The Contractor is not responsible for the payment of
                        newborn metabolic screenings.

                7.      TRANSITIONING MEMBERS BETWEEN PH-MCOS

                        It may be necessary to transition a Member between
                        PH-MCOs. Members with Special Needs should be assisted
                        by the SNU(s) to facilitate a seamless transition. The
                        Contractor must follow the Department's established
                        procedures as outlined in Exhibit BB of this Agreement,
                        PH-MCO Recipient Coverage Document.

                8.      CHANGE IN STATUS

                        The Contractor must report to the Department on a weekly
                        enrollment/disenrollment file the following:

                        -       Pregnancies not on CIS;

                        -       Death Reports;

                        -       Newborns not on CIS; and

                        -       Return mail.

                        The Contractor must report to the appropriate CAO any
                        changes in the status of families or individual Members
                        within ten (10) business

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<PAGE>

                        days of their becoming known, including changes in
                        family size and residence, and new phone numbers.

                9.      MONTHLY MEMBERSHIP

                        The Department will provide an electronic file, on a
                        monthly basis, that lists program eligibles who are
                        prior, current or future Contractor Members. The
                        Contractor agrees to reconcile this membership list
                        against its internal membership information and notify
                        the Department of any discrepancies found within the
                        data on the file within thirty (30) business days, in
                        order to resolve problems.

                        MA Consumers not included on this file with an
                        indication of prospective coverage will not be the
                        responsibility of the PH-MCO unless a subsequent Daily
                        Membership File indicates otherwise. Those with an
                        indication of future month coverage will not be the
                        responsibility of the PH-MCO if a Daily Membership File
                        received by the PH-MCO prior to the beginning of the
                        future month indicates otherwise.

                10.     ENROLLMENT AND DISENROLLMENT UPDATES

                        a.      DAILY FILE

                                The Department will provide to the Contractor by
                                electronic file transmission, a daily file that
                                lists demographic changes, eligibility changes,
                                enrollment changes and Members enrolled through
                                the automatic assignment process.

                                The Contractor must reconcile this file against
                                its internal membership information and notify
                                the Department within thirty (30) business days
                                in order to resolve problems.

                        b.      WEEKLY ENROLLMENT/DISENROLLMENT RECONCILIATION
                                FILE

                                The Department will provide, every week by
                                electronic file transmission, information on
                                Members voluntarily enrolled or disenrolled.
                                This file also provides dispositions on alerts
                                submitted by the Contractor.

                        c.      DISENROLLMENT EFFECTIVE DATES

                                Member disenrollments will become effective on
                                the date specified by the Department. The
                                Contractor must have

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<PAGE>

                                written policies and procedures for complying
                                with Department disenrollment orders.

                        d.      DISCHARGE/TRANSITION PLANNING

                                When any Member is disenrolled from the PH-MCO
                                because of:

                                admission to or length of stay in a facility,
                                a waiver program eligibility, or
                                a child's placement in substitute care outside
                                the HealthChoices zone,

                                the Contractor from which the Member disenrolled
                                must remain responsible for participating in
                                discharge/transition planning for up to six (6)
                                months from the initial date of disenrollment.
                                The Contractor will remain the MA Consumer's
                                PH-MCO upon discharge (upon returning to the
                                HealthChoices zone), unless the MA Consumer
                                chooses a different PH-MCO or is determined to
                                no longer be eligible for participation in
                                HealthChoices.

                                If the MA Consumer chooses a different PH-MCO,
                                that PH-MCO must participate in the
                                discharge/transition planning upon notification
                                that the MA Consumer is enrolled.

                11.     SERVICES FOR NEW MEMBERS

                        The Contractor must make available the full scope of
                        benefits to which a Member is entitled from the
                        effective enrollment date provided by the Department.
                        Detailed descriptions of those services can be found in
                        the HealthChoices Proposers' Library in the materials
                        describing the MA FFS Program for those services.

                        The Contractor must ensure that pertinent demographic
                        information about the MA Consumer, i.e., Special Needs
                        data collected through the IEAP or directly indicated to
                        the Contractor by the MA Consumer after enrollment, will
                        be used by the Contractor upon the new Member's
                        effective enrollment date in the PH-MCO. If a Special
                        Need is indicated, the Contractor is required to place a
                        Special Needs indicator on the Member's record and must
                        outreach to that Member to identify their Special Need
                        or circumstance. For any Member with a Special Needs
                        indicator, the Contractor must arrange for a health
                        needs assessment within forty-five (45) days; provide
                        results of the same to the assigned PCP; and track and
                        follow-up outcomes to assure the Member's needs are
                        adequately addressed.

                                                                              53
<PAGE>

                        The Contractor must comply with access standards as
                        required in Section V.S of this Agreement, Provider
                        Network/Services Access and follow the appointment
                        standards described in Section V.S.12 of this Agreement,
                        Appointment Standards, when an appointment is requested
                        by a Member.

                12.     NEW MEMBER ORIENTATION

                        The Contractor must have written policies and procedures
                        for:

                        -       Orienting new Members to their benefits (e.g.,
                                prenatal care, dental care, and specialty care),

                        -       Educational and preventative care programs,

                        -       The proper use of the PH-MCO identification card
                                and the Department's ACCESS card,

                        -       The role of the PCP,

                        -       What to do in an emergency or urgent medical
                                situation,

                        -       How to utilize services in other circumstances,
                                and

                        -       How to register a Complaint, file a Grievance or
                                request a DPW Fair Hearing.

                        These policies and procedures must receive advance
                        written approval by the Department.

                        The Contractor is prohibited from contacting a potential
                        enrollee who is identified on the daily file with an
                        automatic assignment indicator (either an "A" auto
                        assigned or "M" member assigned) until ten (10) business
                        days before the effective date of the Member enrollment
                        unless it is the Contractor's responsibility under this
                        Agreement.

                13.     ELIGIBILITY VERIFICATION SYSTEM (EVS)

                        The Contractor must provide a file via the Department's
                        Pennsylvania Open Systems Network (POSNet), to the
                        Department's EVS contractor, of PCP assignments for all
                        its Members. The Contractor must provide this file at
                        least weekly or more frequently if requested by the
                        Department. The Contractor must ensure that the PCP
                        assignment information is consistent with

                                                                              54
<PAGE>

                        all requirements specified by the Department. The file
                        layout and data dictionary for this file are located in
                        the Exhibit CC of this Agreement, Data Support for
                        PH-MCOs.

                14.     CONTRACTOR IDENTIFICATION CARDS

                        The Contractor may issue its own identification card to
                        enrolled Members. However, the Department issues an
                        identification card, called an ACCESS card, to each MA
                        Consumer, which the Member is required to use when
                        accessing services. Providers must use this card to
                        access the Department's EVS and to verify the Member's
                        eligibility. The ACCESS card shall allow the Provider
                        the capacity to access the most current eligibility
                        information without contacting the Contractor directly.

                15.     MEMBER HANDBOOK

                        The Contractor agrees to mail a Member handbook, or
                        other written materials, with information on how to
                        access services, in the appropriate language or
                        alternate format to Members within five (5) business
                        days of being notified of a Member's enrollment. The
                        Contractor must maintain documentation verifying that
                        the Member handbook is reviewed for accuracy at least
                        once a year, and that all necessary modifications have
                        been made and all Members notified.

                        a.      MEMBER HANDBOOK REQUIREMENTS

                                The Contractor must ensure that the Member
                                handbook is written at no higher than a fourth
                                grade level and include, at a minimum, the
                                information outlined in Exhibit DD of this
                                Agreement, HealthChoices PH-MCO Member Handbook.

                        b.      DEPARTMENT APPROVAL

                                The Contractor must submit Member handbook
                                language to the Department for advance written
                                approval prior to distribution to Members. The
                                Contractor must make modifications in the
                                language contained in the Member handbook if
                                ordered by the Department so as to comply with
                                the requirements described in a., Member
                                Handbook Requirements, above.

                        c.      LANGUAGES OTHER THAN ENGLISH

                                                                              55
<PAGE>

                                The Contractor must follow the Member access
                                standards for Member handbooks outlined in
                                Section V.F.4 of this Agreement, Alternative
                                Language Requirement.

                16.     PROVIDER DIRECTORIES

                        Directories must be available for all types of Providers
                        in the Contractor's Network, including, but not limited
                        to: PCPs, hospitals, specialists, providers of ancillary
                        services, Nursing Facilities, etc. The Contractor must
                        provide the IEAP contractor with an adequate supply of
                        hardcopy provider directories (including updates) on a
                        continual basis. Hardcopy provider directories must be
                        updated annually.

                        The Contractor must provide the IEAP contractor with an
                        updated electronic version of their provider directory
                        on a weekly basis. This will provide information
                        regarding terminations, additions, PCPs and specialists
                        not accepting new assignments, and other information
                        determined by the Department to be necessary. The
                        Contractor must provide the file layout and format
                        specified by the Department. The format shall include,
                        but not be limited to the following:

                        -       Correct Provider Medical Assistance
                                Identification (MAID) number

                        -       All providers in the Contractor's Network

                        -       Wheel chair accessibility of provider sites

                        -       Language indicators

                        A Contractor will not be certified as "ready" without
                        the completion of the electronic provider directory
                        component. See Exhibit EE of this Agreement, Online
                        Provider Directory File Layout.

                        The Contractor must provide its Members with directories
                        for PCPs, dentists, specialists and providers of
                        ancillary services, upon request, which include, at a
                        minimum, the information listed in Exhibit FF of this
                        Agreement, PCP, Dentists, Specialists and Providers of
                        Ancillary Services Directories. The Contractor must
                        submit PCP, specialists, and provider of ancillary
                        services directories to the Department for advance
                        written approval before distribution to its Members. The
                        Contractor must submit provider directories to the
                        Department for review and approval thirty (30) days
                        prior to the program commencement or as determined by
                        the

                                                                              56
<PAGE>

                        Department. The Contractor also agrees to make
                        modifications to its provider directories if ordered by
                        the Department to do so.

                17.     MEMBER DISENROLLMENT

                        The PH-MCO may not reassign or remove Members
                        involuntarily from Network Providers who are willing and
                        able to serve the Member.

        G.      MEMBER SERVICES

                1.      GENERAL

                        The Contractor's Member services functions shall be
                        operational at least during regular business hours (9:00
                        a.m. to 5:00 p.m., Monday through Friday) and one (1)
                        evening per week (5:00 p.m. to 8:00 p.m.) or one (1)
                        weekend per month to address non-emergency problems
                        encountered by Members. Arrangements must be made to
                        receive, identify, and timely resolve Emergency Member
                        Issues on a twenty-four (24) hour, seven (7) day-a-week
                        basis. The Contractor's Member services functions shall
                        include, but are not limited to, the following Member
                        services standards:

                        -       Explaining the operation of the Contractor and
                                assisting Members in the selection of a PCP.

                        -       Assisting Members with making appointments and
                                obtaining services.

                        -       Assisting with arranging transportation for
                                Members through the MATP. See Section V.A.14 of
                                this Agreement, Transportation and Exhibit L of
                                this Agreement, Transportation.

                        -       Receiving, identifying and resolving Emergency
                                Member Issues.

                        -       Under no circumstances will unlicensed members
                                services staff provide health-related advice to
                                Members requesting clinical information. The
                                Contractor must ensure that all such inquires
                                are addressed by clinical personnel acting
                                within the scope of their licensure to practice
                                a health related profession.

                2.      CONTRACTOR INTERNAL MEMBER DEDICATED HOTLINE

                        The Contractor must maintain and staff a twenty-four
                        (24) hour, seven (7) day-a-week toll-free dedicated
                        hotline to respond to Members' inquiries, Complaints and
                        problems raised regarding

                                                                              57
<PAGE>

                        services. The Contractor's internal Member hotline staff
                        are required to ask the caller whether or not they are
                        satisfied with the response given to their call. All
                        calls must be documented and if the caller is not
                        satisfied, the Contractor must ensure that the call is
                        referred to the appropriate individual within the PH-MCO
                        for follow-up and/or resolution. This referral must take
                        place within forty-eight (48) hours of the call. The
                        Contractor must provide the Department with the
                        capability to monitor the Contractor's Member services
                        and internal Member dedicated hotline from both the
                        Department's headquarters and at each of the
                        Contractor's offices. The Department shall only monitor
                        calls from MA Program recipients and shall cease all
                        monitoring activity as soon as it becomes apparent that
                        the caller is not a MA Program recipient. The Contractor
                        is not permitted to utilize electronic call answering
                        methods, as a substitute for staff persons, to perform
                        this service. The Contractor must ensure that its
                        dedicated hotline meets the following Member services
                        performance standards:

                        -       Provide for a dedicated phone line for its
                                Members.

                        -       Provide for necessary translation assistance
                                including provisions for Members who have
                                hearing impairments.

                        -       Be staffed by individuals trained in:

                                -  cultural competence;
                                -  addressing the needs of special populations;
                                -  the availability of the functions of the SNU;
                                -  the services which the Contractor is required
                                   to make available to children; and
                                -  the availability of social services within
                                   the community.

                        -       Be staffed with representatives familiar with
                                accessing medical transportation.

                        -       Be staffed with adequate service representatives
                                to accommodate a delay in answering no greater
                                than five (5) rings and three (3) minutes hold
                                time.

                        -       Provide for TTY and/or Pennsylvania
                                Telecommunication Relay Service availability.

                3.      EDUCATION AND OUTREACH HEALTH EDUCATION ADVISORY
                        COMMITTEE

                        The Contractor must develop and implement effective
                        Member education and outreach programs which may include
                        health

                                                                              58
<PAGE>

                        education programs focusing on the leading causes of
                        hospitalization and emergency room use and health
                        initiatives which target Members with Special Needs
                        including but not limited to: HIV/AIDS, mental
                        retardation/developmental disabilities, eligibility
                        (Medicare/ Medicaid), etc.

                        The Contractor must establish and maintain a Health
                        Education Advisory Committee that includes MA Consumers
                        and Providers of the community to advise on the health
                        education needs of managed care Members. Representation
                        on this Committee shall include, but not be limited to,
                        women, minorities, persons with Special Needs and at
                        least one (1) person with expertise on the medical needs
                        of children with Special Needs.

                        The Contractor must provide for and document
                        coordination of health education materials, activities
                        and programs with public health entities, particularly
                        as they relate to public health priorities and
                        population-based interventions. The Contractor must also
                        work with the Department to ensure that its Health
                        Education Advisory Committees are provided with an
                        effective means to consult with each other and, when
                        appropriate, coordinate efforts and resources for the
                        benefit of the entire HealthChoices population in the
                        zone or populations with Special Needs. Provider
                        representation includes physical health, behavioral
                        health, and dental health providers on the Contractor's
                        Health Education Advisory Committees.

                        The Contractor must provide the Department with a
                        written description of all planned health education
                        activities and targeted implementation dates on an
                        annual basis.

                4.      INFORMATIONAL MATERIALS

                        All information given to Members and potential Members
                        must be easily understood and must comply with all
                        requirements outlined in the RFP and Agreement and the
                        provisions of Section 2136 of the Insurance Company Law
                        of 1921, as amended, 40 P.S. 991.2136. Informational
                        material distributed to HealthChoices Members, including
                        but not limited to provider directories and Member
                        handbooks, shall be available, upon request, in Braille,
                        large print, and audio tape and must be provided in the
                        format requested by the person with a visual impairment.
                        The information contained in the provider directories
                        may cover only those zip codes or other geographic
                        locations that the person with a visual impairment
                        requests. The Contractor must pay particular attention
                        for the provision of the following items:

                                                                              59
<PAGE>

                        -       Identity, location, qualifications and
                                availability of health care providers within the
                                organization.

                        -       Members' rights and responsibilities.

                        -       Complaint, Grievances, and DPW Fair Hearing
                                procedures.

                        -       Instructions for Members to access or receive
                                assistance in accessing materials in an
                                alternate language or format. Instructions
                                should include both phone and TTY numbers.

                        -       Information on services covered directly or
                                through referral and prior authorization.

                        -       Information regarding how an individual who is
                                deaf can access interpreter services for medical
                                appointments.

                        The Contractor must obtain advance written approval from
                        the Department of all Member newsletters. In addition,
                        the Contractor must send Member newsletters to each
                        Member household.

                        The Contractor must obtain advance written approval from
                        the Department to use Member related HealthChoices
                        information, on their electronic web sites and bulletin
                        boards.

                5.      MEMBER ENCOUNTER LISTINGS

                        The Contractor must include, in its PCP Provider
                        Agreements, language which requires PCPs to contact new
                        Members identified in the quarterly encounter lists who
                        have not had an encounter during the first six (6)
                        months of enrollment, or who have not complied with the
                        scheduling requirements outlined in the RFP and this
                        Agreement. The Contractor must require the PCP to
                        contact Members identified in the quarterly encounter
                        lists as not complying with EPSDT periodicity and
                        immunization schedules for children. The PCP must be
                        required to identify to the Contractor any such Members
                        who have not come into compliance with the EPSDT
                        periodicity and immunization schedules within one (1)
                        month of such notification to the site by the
                        Contractor. The PCP must also be required to document
                        the reasons for non-compliance, where possible, and to
                        document its efforts to bring the Member's care into
                        compliance with the standards.

                        The Contractor must distribute quarterly lists to each
                        PCP in its Provider Networks which identify new Members
                        and Members who

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<PAGE>

                        have not had an encounter during the previous six (6)
                        months or within the time frames set forth in Section
                        V.F.11 of this Agreement, Services for New Members, or
                        Members who have not complied with EPSDT periodicity and
                        immunization schedules for children. PCPs shall be
                        required to contact these Members to arrange
                        appointments. The Contractor is responsible for
                        contacting such Members, documenting the reasons for
                        noncompliance and documenting its efforts for bringing
                        the Member's care into compliance.

        H.      ADDITIONAL ADDRESSEE

                The Contractor must have administrative mechanisms for sending
                copies of information, notices and other written materials to a
                third party upon the request and signed consent of the Member.
                The Contractor must develop plans to process such individual
                requests and for obtaining the necessary releases signed by the
                Member to ensure that the Member's rights regarding
                confidentiality are maintained.

        I.      MEMBER COMPLAINT, GRIEVANCE AND DPW FAIR HEARING PROCESS

                1.      MEMBER COMPLAINT, GRIEVANCE AND DPW FAIR HEARING PROCESS

                        The Contractor must develop, implement, and maintain a
                        Complaint and Grievance process that provides for
                        settlement of Members' Complaints and Grievances and the
                        processing of requests for DPW Fair Hearings as outlined
                        in Exhibit GG of this Agreement, Complaints, Grievances,
                        and DPW Fair Hearing Process. The Contractor must have
                        written policies and procedures approved by the
                        Department, for resolving Member Complaints and for
                        processing Grievances and DPW Fair Hearing requests,
                        that meet the requirements established by the Department
                        and the provisions of Article XXI of the Insurance
                        Company Law of 1921, as amended by the Act of June 17,
                        1998, (P.L. 464, No. 68), 40 P.S. 991.2101 (991.2361)
                        known as Act 68 and corresponding Act 68 regulations and
                        42 C.F.R. 431.200 et seq. of the Federal Regulations.
                        The Contractor must also comply with 55 Pa. Code 275 et
                        seq. regarding DPW Fair Hearing Requests.

                        The Contractor's submission of new or revised policies
                        and procedures for review and approval by the Department
                        shall not act to void any pre-existing policies and
                        procedures which have been prior approved by the
                        Department for operation in a HC zone. Unless otherwise
                        required by law, the Contractor may continue to operate
                        under such pre-existing policies and procedures until
                        such

                                                                              61
<PAGE>

                        time as the Department approves the new or revised
                        version thereof.

                        The Contractor must require each of its subcontractors
                        to comply with the Member Complaint, Grievance, and DPW
                        Fair Hearing Process. This includes reporting
                        requirements established by the Contractor, which have
                        received advance written approval by the Department. The
                        Contractor must provide to the Department for approval,
                        its written procedures governing the resolution of
                        Complaints and Grievances and the processing of DPW Fair
                        Hearing requests.

                        The standard notice required and outlined in Exhibit N
                        of this Agreement, Denial Notices, must be used in the
                        Contractor's Complaint, Grievance and DPW Fair Hearing
                        process and must be in accessible formats for
                        individuals with vision impairments. In addition, the
                        notice must be available for persons who do not speak
                        English.

                        For children in substitute care, notices must be sent to
                        the County Children and Youth Agency with legal custody
                        of a child or to the court authorized juvenile probation
                        office with primary supervision of a juvenile provided
                        the PH-MCO knows that the child is in substitute care
                        and the address of the custodian of the child.

                        The Contractor must abide by the final decision of the
                        Departments of Health or Insurance (as applicable) when
                        a Member has filed an external appeal of a second level
                        complaint decision. When a Member files an external
                        appeal of a second level Grievance decision, the
                        Contractor must abide by the decision of the Department
                        of Health certified utilization review entity (URE),
                        which was assigned to conduct the independent external
                        review, unless appealed to the court of competent
                        jurisdiction. The Contractor must abide by the final
                        decision of the Department of Public Welfare's Bureau of
                        Hearings and Appeals for those cases when an MA Consumer
                        has requested a DPW Fair Hearing, unless requesting
                        reconsideration by the Secretary of the Department of
                        Public Welfare or appealing to the court of competent
                        jurisdiction.

                2.      DPW FAIR HEARING PROCESS FOR MEMBERS

                        During all phases of the PH-MCO Grievance process, and
                        in some instances involving Complaints, the Member has
                        the right to request a Fair Hearing with the Department.
                        The Contractor must comply with the DPW Fair Hearing
                        Process requirements defined in Exhibit

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                        GG of this Agreement, Complaints, Grievances and DPW
                        Fair Hearing Process.

                        A request for a DPW Fair Hearing does not prevent a
                        Member from also utilizing the plan's Grievance process.

        J.      CLINICAL SENTINEL

                The Contractor agrees to cooperate with the functions of the
                Department's Clinical Sentinel Hotline which is designed to
                address clinically related systems issues encountered by MA
                Consumers and their advocates or Providers. The Clinical
                Sentinel Hotline facilitates resolution according to Contractor
                policies and procedures and does not impose additional
                obligations on the Contractor.

        K.      PROVIDER DISPUTE RESOLUTION SYSTEM

                The Contractor shall develop, implement, and maintain a Provider
                Dispute Resolution Process, which provides for informal
                settlement of Providers' disputes at the lowest level and a
                formal process for appeal. The resolution of all issues
                regarding the interpretation of Department approved Provider
                PH-MCO contracts shall be handled between the two entities and
                shall not involve the Department. The Department's Bureau of
                Hearings and Appeals or its designee is not an appropriate forum
                for Provider disputes with the PH-MCO.

                Prior to implementation, the PH-MCO shall submit to the
                Department, their policies and procedures relating to the
                resolution of Provider disputes/appeals for approval. Any
                changes made to the Provider disputes/appeals policies and
                procedures shall be submitted to the Department for approval
                prior to implementation of the changes.

                The PH-MCO's policies and procedures shall include at a minimum:

                -       Informal and formal processes for settlement of Provider
                        disputes;

                -       Acceptance and usage of the Department's
                        definition/delineation of disputes;

                -       Submission and resolution of timeframes for
                        disputes/appeals;

                -       Processes to ensure equitability for all Providers;

                -       Mechanisms and time-frames for reporting Provider appeal
                        decisions to PH-MCO administration, QM Provider
                        Relations and the Department; and

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                -       Establishment of a PH-MCO Committee to process provider
                        formal disputes/appeals which shall include:
                        -  At least one-fourth (1/4th) of the membership of
                           the Committee shall be composed of
                           providers/peers;
                        -  Committee members who have the authority,
                           training, and expertise to address and resolve
                           provider dispute/appeal issues;
                        -  Access to data necessary to assist committee
                           members in making decisions; and
                        -  Documentation of meetings and decisions of the
                           Committee.

                The Contractor's submission of new or revised policies and
                procedures for review and approval by the Department shall not
                act to void any pre-existing policies and procedures which have
                been prior approved by the Department for operation in a HC
                zone. Unless otherwise required by law, the Contractor may
                continue to operate under such pre-existing policies and
                procedures until such time as the Department approves the new or
                revised version thereof.

                In addition to the Provider Dispute Resolution System covering
                contractual issues between the Provider and the managed care
                plan, Article XXI of the Insurance Company Law of 1921, as
                amended,40 P.S. 991.2101 et seq. and the regulations promulgated
                by the Pennsylvania Insurance Department, 31 Pa. Code Chapters
                154 and 301, afford Providers the opportunity to file Clean
                Claim disputes with the Insurance Department.

        L.      CERTIFICATION OF AUTHORITY

                The Contractor will be required to maintain operating authority
                in all HealthChoices counties in the zone throughout the term of
                this Agreement. The Contractor must provide to the Department a
                copy of Certificates of Authority verifying the counties in
                which it is licensed to operate, upon request.

        M.      EXECUTIVE MANAGEMENT

                The Contractor must provide the following management personnel:

                -       Designated administrator/program manager empowered to
                        make day-to-day decisions about the administration of
                        the program.

                -       Member services supervisor/manager and adequate
                        qualified member service staff to interact by phone or
                        in person with MA Consumers.

                -       Qualified medical personnel to oversee QA, UM, Special
                        Needs, Maternal Health/EPSDT functions.

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                -       Personnel with access to the MIS system and the ability
                        to produce ad hoc reports to assist in the
                        administration of the program.

                The Contractor must document minority participation in executive
                level decision making positions within its corporate structure.
                In addition, the Contractor's staffing should represent the
                cultural and ethnic diversity of the Program and comply with all
                requirements of Exhibit D of this Agreement, Standard Contract
                Terms and Conditions for Services. Cultural competency may be
                reflected by the Contractor's pursuit to:

                -       Identify and value differences;

                -       Acknowledge the interactive dynamics of cultural
                        differences;

                -       Continually expand cultural knowledge and resources with
                        regard to the populations served;

                -       Recruit minority staff in proportion to the populations
                        served;

                -       Collaborate with the community regarding service
                        provisions and delivery; and

                -       Commit to cross-cultural training of staff and the
                        development of policies to provide relevant, effective
                        programs for the diversity of people served.

                The Contractor must have in place sufficient administrative
                staff and organizational components to comply with the
                requirements of this Agreement. The Contractor must include in
                its organizational structure, the components outlined below. The
                functions must be staffed by qualified persons in numbers
                appropriate to the PH-MCO's size of enrollment. The Department
                has the right to make the final determination regarding whether
                or not the Contractor is in compliance.

                The Contractor may combine functions or split the responsibility
                for a function across multiple departments, unless otherwise
                indicated, as long as it can demonstrate that the duties of the
                function are being carried out. Similarly, the Contractor may
                contract with a third party to perform one (1) or more of these
                functions, subject to the subcontractor conditions described in
                Section XIII of this Agreement, Subcontractual Relationships.
                The Contractor is required to keep the Department informed at
                all times of the management individual(s) whose duties include
                each of the responsibilities outlined in this section.

                The Contractor must include in its Executive Management
                structure:

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                -       A full-time Administrator with authority over the entire
                        operation of the PH-MCO.

                -       A full-time HealthChoices Program Manager to oversee the
                        operation of the Agreement, if different than the
                        Administrator of the PH-MCO.

                -       A full-time Medical Director who is a current
                        Pennsylvania-licensed physician. The Medical Director
                        must be actively involved in all major clinical program
                        components of the PH-MCO and directly accountable within
                        the organization for management of the QM Department, UM
                        Department, and Special Needs Unit. The Medical Director
                        and his/her staff/consultant physicians shall devote
                        sufficient time to the PH-MCO to ensure timely medical
                        decisions, including after-hours consultation, as
                        needed.

                -       A full-time Chief Financial Officer (CFO) to oversee the
                        budget and accounting systems implemented by the PH-MCO.
                        The CFO must ensure the timeliness and accurateness of
                        all financial reports.

                -       A full-time Information Systems (IS) Coordinator, who
                        would be the single point of contact for all information
                        systems issues with the Department. The IS Coordinator
                        must have a good working knowledge of the PH-MCO's
                        entire program and operation, as well as the technical
                        expertise to answer questions related to the operation
                        of the information system.

                -       Clerical and support staff to ensure appropriate
                        functioning of the PH-MCO's operation.

        N.      OTHER ADMINISTRATIVE COMPONENTS

                The Contractor must address each of the administrative functions
                listed below. These functions may be combined or split as long
                as the Contractor can demonstrate that the duties of these
                functions will conform to the work statement described herein.

                -       A QM Coordinator who is a Pennsylvania-licensed
                        physician, registered nurse or physician's assistant
                        with past experience or education in quality management
                        systems. The Department may consider other advanced
                        degrees relevant to quality management in lieu of
                        professional licensure.

                -       A UM Coordinator who is a Pennsylvania-licensed
                        physician, registered nurse or physician's assistant
                        with past experience or education in utilization
                        management systems. The Department may

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                        consider other advanced degrees relevant to utilization
                        management in lieu of professional licensure.

                -       A full-time SNU Coordinator who is a
                        Pennsylvania-licensed or certified medical professional,
                        social worker, teacher or psychologist with a minimum of
                        three (3) years past experience in dealing with Specials
                        Needs populations similar to those served by Medicaid
                        and in implementing the principles of case management.

                -       A full-time Government Liaison who will serve as the
                        Department's primary point of contact with the PH-MCO
                        for the day-to-day management of contractual and
                        operational issues.

                -       A Maternal Health/EPSDT Coordinator who is a
                        Pennsylvania-licensed physician, registered nurse or
                        physician's assistant; or has a Master's degree in
                        Health Services, Public Health, or Health Care
                        Administration to coordinate maternity and prenatal care
                        services.

                -       A Member Services Manager who will oversee staff to
                        coordinate communications with Members and act as Member
                        advocates. There must be sufficient Member Services
                        staff to enable Members to receive prompt resolution to
                        their complaints, problems or inquiries.

                -       A Provider Services Manager who will oversee staff to
                        coordinate communications between the Contractor and its
                        Providers. There shall be sufficient Provider Services
                        staff to enable Providers to receive prompt resolution
                        to their complaints, problems or inquiries.

                -       A Grievance Coordinator whose qualifications demonstrate
                        the ability to manage and facilitate Member Grievances.

                -       A Member Advocate or Ombudsman whose qualifications
                        demonstrate the ability to exercise independent judgment
                        to assist Members in navigating the Grievance and DPW
                        Fair Hearing process.

                -       A Claims Administrator who will oversee staff to ensure
                        the timely and accurate processing of Claims, encounter
                        forms and other information necessary for meeting
                        contract requirements and the efficient management of
                        the PH-MCO.

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

        O.      ADMINISTRATION

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                The Contractor agrees to comply with the program standards
                regarding PH-MCO Administration, which are set forth in this
                Agreement and in Exhibit D of this Agreement, Standard Contract
                Terms and Conditions for Services and in Exhibit E of this
                Agreement, DPW Addendum to Standard Contract Terms and
                Conditions.

                The Contractor must have an administrative office within the
                zone from which the HealthChoices Program is operated. However,
                exceptions to this requirement will be considered on an
                individual basis if the Contractor has administrative offices
                elsewhere in Pennsylvania and the Contractor is in compliance
                with all standards set forth by the Departments of Health and
                Insurance.

                The Contractor must submit for approval by the Department its
                organizational structure listing the function of each executive
                as well as administrative staff members. Staff positions
                outlined in this Agreement must be maintained in accordance with
                the Department's requirements.

                1.      RESPONSIBILITY TO EMPLOY MA CONSUMERS

                        The Contractor must provide a plan approved by the CAO
                        Employment Unit Coordinator for the recruitment and
                        hiring of MA Consumers as described in Exhibit HH of
                        this Agreement, Contractor Responsibility to Employ MA
                        Consumers.

                2.      RECIPIENT RESTRICTION PROGRAM

                        The Contractor agrees to maintain a recipient
                        restriction program to interface with the Department's
                        recipient restriction program and provide for
                        appropriate professional resources to identify and
                        monitor Member fraud and Member abuse and perform the
                        necessary administrative activities to maintain accurate
                        records and comply with state and federal requirements.

                        A centralized recipient restriction process is in place
                        for the MA FFS Program and the managed care programs and
                        is managed by the Department. The Department maintains a
                        lock-in database that is accessible to all PH-MCOs. The
                        Contractor will cooperate with the Department in all
                        procedures necessary to restrict Members who are
                        misutilizing medical services or pharmacy benefits and
                        to provide the appropriate resources to enforce and
                        monitor the restrictions.

                3.      CONTRACTS AND SUBCONTRACTS

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                        In fulfilling its obligations hereunder, the Contractor
                        has the right to utilize the services of persons or
                        entities by means of subcontractual relationships. The
                        Contractor acknowledges and agrees that the execution of
                        Subcontracts does not diminish or alter the Contractor's
                        responsibilities under this Agreement.

                        The Contractor must make all Subcontracts available to
                        the Department within five (5) days of a request by the
                        Department. Contracts and Subcontracts entered into by
                        the Contractor do not terminate the Contractor's
                        obligations under this Agreement. All contracts and
                        Subcontracts must be in writing and must include, at a
                        minimum, the provisions contained in Exhibit II of this
                        Agreement, Required Contract Terms for Subcontractors.

                        Subcontracts which must be submitted to the Department
                        for advance written approval are:

                        Any subcontract between the Contractor and any
                        individual, firm, corporation or any other entity to
                        perform part or all of the selected Contractor's
                        responsibilities under this Agreement. This provision
                        includes, but is not limited to, contracts for vision
                        services, dental services, Claims processing, member
                        services, pharmacy services and lobbying activities.
                        This provision does not include, for example, purchase
                        orders.

                        Any transaction with a related party, regardless of its
                        stated purpose, including, but not limited to, loans,
                        advances and/or lease arrangements. The Contractor must
                        inform the Department that the subcontractor is a
                        related party at the time approval is requested.

                4.      LOBBYING DISCLOSURE

                        The Contractor agrees to the terms and conditions for
                        lobbying disclosure defined in Exhibit D of this
                        Agreement, Standard Contract Terms and Conditions for
                        Services.

                        The Contractor will be required to complete and return a
                        "Lobbying Certification Form" and a "Disclosure of
                        Lobbying Activities Form" found in Exhibit JJ of this
                        Agreement, Lobbying Certification and Disclosure of
                        Lobbying Activities Forms.

                5.      RECORDS RETENTION

                        The Contractor agrees to comply with the program
                        standards regarding records retention, which are set
                        forth in Exhibit D, Standard Terms and Conditions of
                        Services of this Agreement.

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                        Upon thirty (30) days notice from the Department, the
                        Contractor must provide copies of all records to the
                        Department at the Contractor's site, if requested, so
                        long as the Department requests access to those records
                        during the retention period prescribed by this
                        Agreement. This thirty (30) days notice does not apply
                        to records requested by the state or federal government
                        for purposes of fiscal audits or fraud and/or abuse. The
                        retention requirements in this section do not apply to
                        DPW-generated Remittance Advices.

                6.      FRAUD AND ABUSE

                        The Contractor shall be required to establish written
                        policies and procedures for the detection and prevention
                        of fraud and abuse in its program. Such written policies
                        and procedures must be reviewed and approved by the
                        Department.

                        Within the Contractor's written policies and procedures,
                        the Contractor shall identify the corporate officer
                        responsible for the proactive detection, prevention and
                        elimination of fraud or abuse in its program. The
                        designated corporate officer must have direct access to
                        the CEO and be granted independent authority to refer
                        instances of suspected fraud and abuse directly to the
                        Department.

                        The Contractor and its employees shall cooperate fully
                        with centralized oversight agencies responsible for
                        fraud and abuse detection and prosecution activities.
                        Such agencies include, but are not limited to, the
                        Department's Bureau of Program Integrity, the Governor's
                        Office of the Budget, the Office of the Attorney
                        General's Medicaid Fraud Control Section, the
                        Pennsylvania State Inspector General, the HCFA Office of
                        Inspector General, and the United States Justice
                        Department Such cooperation may include participation in
                        periodic fraud and abuse training sessions and joint
                        reviews of subcontracted Providers or Members.

                        The Contractor must also ensure that the Department's
                        toll-free fraud and abuse hotline and accompanying
                        explanatory statement (which will be established in the
                        near future) is distributed to its Members and Providers
                        through its Member and Provider handbooks.
                        Notwithstanding this requirement, the Contractor will
                        not be required to re-print handbooks for the sole
                        purpose of revising them to include fraud and abuse
                        hotline information. The Contractor must, however,
                        include such information in any new version of these
                        documents to be distributed to Members and Providers.

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                        The Contractor, including the designated corporate
                        officer, shall have an affirmative responsibility to
                        refer suspected fraud or abuse to relevant oversight
                        agencies. Contractors who do not report such information
                        are subject to sanctions, penalties, or other actions. A
                        standardized referral process is outlined in Exhibit KK
                        of this Agreement, Standardized Referrals, to expedite
                        information for appropriate disposition. The
                        requirements of the standardized referral process are
                        incorporated by reference into this Agreement.

                        The Department shall provide the Contractor with
                        immediate notice via electronic transmission or access
                        to Medicheck listings or upon request if a provider with
                        whom the Contractor has entered into an agreement is
                        subsequently suspended or terminated from participation
                        in the Medicaid or Medicare Programs. Such notification
                        will not include the basis for the departmental action,
                        due to confidentiality issues. Upon notification from
                        the Department that a provider with whom the Contractor
                        has entered into an agreement is suspended or terminated
                        from participation in the Medicaid or Medicare Programs,
                        the Contractor shall immediately act to terminate the
                        provider from participation. Terminations for loss of
                        licensure and criminal convictions must coincide with
                        the MA effective date of the action.

                        The Contractor must immediately notify the Department,
                        in writing, if a provider or subcontractor with whom the
                        Contractor has entered into an agreement is subsequently
                        suspended, terminated or voluntarily withdraws from
                        participation in the program as a result of suspected or
                        confirmed fraud or abuse. The Contractor must also
                        immediately notify the Department, in writing, if it
                        terminates or suspends an employee as a result of
                        suspected or confirmed fraud or abuse. The Contractor
                        shall inform the Department, in writing, of the specific
                        underlying conduct that lead to the suspension,
                        termination, or voluntary withdrawal. Provider
                        agreements shall carry notification of the prohibition
                        and sanctions for submission of false Claims and
                        statements. Contractors who fail to report such
                        information are subject to sanctions, penalties, or
                        other actions. The Department's enforcement guidelines
                        are outlined in Exhibit LL of this Agreeement,
                        Guidelines for Sanctions Regarding Fraud and Abuse in
                        the HealthChoices Program.

                        The Department reserves the right to impose sanctions,
                        penalties, or take other actions when it identifies
                        fraud and abuse within a Contractor's program.

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                        The Contractor agrees to ensure that all of the health
                        care providers and others with whom it subcontracts
                        agree to comply with the program standards regarding
                        Fraud and Abuse.

                7.      INFORMATION SYSTEMS AND ENCOUNTER DATA

                        The Contractor must have a comprehensive, automated and
                        integrated health management information system (MIS)
                        that is capable of meeting the requirements listed below
                        and throughout this Agreement.

                        a.      The Contractor must ensure that its data system
                                is linked throughout all of its internal
                                departments. In addition, the Contractor must
                                have an authorization system that links with
                                Claims processing.

                        b.      The membership management system must have the
                                capability to receive, update and maintain the
                                Contractor's membership files consistent with
                                information provided by the Department. The
                                Contractor must have the capability to provide
                                daily updates of membership information to
                                subcontractors or Providers with responsibility
                                for processing Claims or authorizing services
                                based on membership information.

                        c.      The Contractor's Claims processing system must
                                have the capability to process Claims consistent
                                with timeliness and accuracy requirements
                                identified in this Agreement. Claims history
                                must be maintained with sufficient detail to
                                meet all Department reporting and encounter
                                requirements.

                        d.      The Contractor's provider management system must
                                have the capability to receive, store, analyze,
                                and report on provider specific data sufficient
                                to meet the Provider credentialing, auditing,
                                quality improvement, and profiling requirements
                                of this Agreement.

                        e.      The Contractor's Provider file must be
                                maintained with detailed information on each
                                Provider sufficient to meet the Department's
                                reporting and encounter data requirements.

                        f.      The Contractor must have sufficient
                                telecommunication capabilities, including
                                electronic mail, to meet the requirements of
                                this Agreement.

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                        g.      The Contractor must have the capability to
                                electronically transfer data files with the
                                Department and the IEAP contractor.

                        h.      The encounter data system must be
                                bi-directionally linked to the other operational
                                systems listed in this Agreement, in order to
                                ensure that data captured in encounter records
                                accurately matches data in Member, provider and
                                Claims files, and in order to enable encounter
                                data to be utilized for Member profiling,
                                provider profiling, Claims validation, and fraud
                                and abuse monitoring activities.

                        i.      The Contractor's MIS must be compatible with the
                                Department's POSNet system. The Contractor must
                                comply with the policies and procedures
                                governing the operation of the Department's
                                POSNet system, as defined in the POSNet
                                Interface Specifications and Data Exchange
                                Guidelines, which can be found in the
                                HealthChoices Proposers' Library. In addition,
                                the Contractor must comply with changes made to
                                the POSNet Interface Specifications and the Data
                                Exchange Guidelines of the Department. The
                                Contractor must make changes to their MIS
                                system, in order to remain compatible with the
                                Department's data system. Whenever possible, the
                                Department will provide advance notice of at
                                least sixty (60) days prior to the
                                implementation of changes. For more complex
                                changes, every effort will be made to provide
                                additional notice.

                        j.      The Contractor must have a Claims processing
                                system and MIS sufficient to support the
                                Provider payment and data reporting requirements
                                specified in this Agreement. See Exhibit MM of
                                this Agreement, Management Information System
                                and System Performance Review Standards, for MIS
                                and Systems Performance Review (SPR) standards.
                                The Contractor must be prepared to document its
                                ability to expand Claims processing or MIS
                                capacity should either or both be exceeded
                                through the enrollment of program Members.

                        k.      The Contractor will designate appropriate staff
                                to participate in DPW directed development and
                                implementation activities. The Contractor will
                                make all necessary systems changes to migrate to
                                the new EPSDT reporting system consistent with
                                timeframes to be established by the Department
                                to the extent possible, to be consistent with
                                federal reporting/claims formats and to avoid
                                duplication of data collection.

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                        l.      Subcontractors must meet the same MIS
                                requirements as the Contractor and the
                                Contractor will be held responsible for MIS
                                errors or noncompliance resulting from the
                                action of a subcontractor.

                        m.      The Contractor's MIS shall be subject to review
                                and approval during the Department's
                                HealthChoices Readiness Review process as
                                referenced in Section VI of this Agreement,
                                Program Outcomes and Deliverables.

                8.      DEPARTMENT ACCESS AND AVAILABILITY

                        The Contractor is responsible for providing Department
                        staff with access to appropriate on-site private office
                        space and equipment including, but not limited to, the
                        following:

                        -       Two (2) desks and two (2) chairs;
                        -       Two (2) telephones, one (1) of which has speaker
                                phone capabilities;
                        -       One (1) personal computer and printer with
                                on-line access to the Contractor's MIS;
                        -       FAX machine; and
                        -       Bookcase.

                        The Contractor must ensure Department access to
                        administrative policies and procedures, including, but
                        not limited to;

                        -       Personnel policies and procedures

                        -       Procurement policies and procedures

                        -       Public relations policies and procedures

                        -       Operations policies and procedures

                        -       Policies and procedures developed to ensure
                                compliance with requirements under this
                                Agreement.

        P.      SPECIAL NEEDS UNIT (SNU)

                1.      ESTABLISHMENT OF SPECIAL NEEDS UNIT

                        a.      The Contractor must develop, train, and maintain
                                a "special" dedicated unit within its
                                organizational structure to deal with issues
                                relating to Members with Special Needs ("Special

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                                Needs Unit" [SNU]). The purpose of the SNU is to
                                ensure that each Member with Special Needs
                                receives access to PCPs, dentists, and
                                specialists trained and skilled in the Special
                                Needs of the Member; information about and
                                access to a specialist, as appropriate;
                                information about and access to all covered
                                services appropriate to the Member's condition
                                or circumstance, including pharmaceuticals and
                                Durable Medical Equipment (DME); access to sign
                                language interpreter services and access to
                                needed community services. The Contractor must
                                show evidence they can execute agreements with
                                individuals who have expertise in the treatment
                                of Special Needs to provide consultation to the
                                SNU staff, as needed.

                        b.      The Contractor agrees to comply with the
                                Department's requirements and determination of
                                whether a Member shall be classified as having a
                                Special Need, which determination will be based
                                on criteria set forth in Exhibit NN of this
                                Agreement, Special Needs Unit.

                        c.      It is the responsibility of the SNU to arrange
                                for and ensure coordination between the PH-MCO
                                and other health, education, and human service
                                systems for Members with Special Needs. See
                                Exhibit OO of this Agreement, Coordination of
                                Care Entities, for an example but not an
                                all-inclusive list. The Contractor is
                                responsible to coordinate the comprehensive
                                in-plan package of services with entities
                                providing Out-of-Plan Services.

                        d.      The Contractor must assure that outpatient case
                                management for services for Members under age
                                twenty-one (21) are not provided through any
                                individual employed by the Contractor or through
                                a subcontractor of the Contractor if the
                                individual's responsibilities include outpatient
                                utilization review or otherwise include reviews
                                of requests for authorization of outpatient
                                benefits. In addition, if the Contractor
                                provides case management services to Members
                                under the age of twenty-one (21) through the
                                SNU, the Contractor must assure that the SNU
                                assists individuals in gaining access to
                                necessary medical, social, education, and other
                                services in accordance with Medical Assistance
                                Bulletin #1239-94-01 Medical Assistance Case
                                Management Services for Recipients Under the Age
                                of 21.

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                        e.      The Contractor must comply with SNU reporting
                                requirements as specified by the Department and
                                described in Exhibit NN of this Agreement,
                                Special Needs Unit.

                2.      SPECIAL NEEDS COORDINATOR

                        The Contractor must employ a full-time SNU Coordinator
                        whose qualifications include, among other things;
                        experience with Special Needs populations similar to
                        those served by Medicaid. The SNU Coordinator must
                        report directly and be accountable to the Contractor's
                        Medical Director and be responsible for the management
                        and supervision of the SNU and SNU staff. The Contractor
                        agrees to notify the Department within thirty (30) days
                        of a change in the SNU Coordinator. See also Section V.M
                        of this Agreement, Executive Management.

                3.      RESPONSIBILITIES OF SPECIAL NEEDS UNIT STAFF

                        a.      The Contractor agrees that the staff members
                                which it employs within the SNU must assist MA
                                Consumers in accessing services and benefits and
                                act as liaisons with various government offices,
                                providers, public entities, and county entities
                                which shall include, but shall not be limited to
                                the list of Providers in Exhibit OO of this
                                Agreement, Coordination of Care Entities.

                        b.      The staff members of this unit must work in
                                close collaboration with the SNU operated by the
                                Department and the IEAP contractor's SNU.

                        c.      The Contractor must demonstrate to the
                                Department that its SNU staff is qualified to
                                perform the functions outlined in Exhibit NN of
                                this Agreement, Special Needs Unit.

        Q.      ASSIGNMENT OF PCPS

                The Contractor must have written policies and procedures for
                Members, parents, guardians, or others acting as loco parens for
                Special Needs populations, who require assistance in the
                selection of a PCP. The Contractor must receive advance written
                approval by the Department regarding these policies and
                procedures. The Contractor's submission of new or revised
                policies and procedures for review and approval by the
                Department shall not act to void any pre-existing policies and
                procedures which have been prior approved by the Department for
                operation in a HC zone. Unless otherwise required by law, the
                Contractor may continue to

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                operate under such pre-existing policies and procedures until
                such time as the Department approves the new or revised version
                thereof.

                The Contractor must ensure that the process includes at a
                minimum the following features:

                -       The Contractor must ensure that a Member's selection of
                        a PCP through the IEAP contractor is honored upon
                        commencement of PH-MCO coverage. If the Contractor is
                        not able to honor the selection, the Contractor is
                        required to follow the guidelines described further
                        under this provision.

                -       Should the Contractor permit selection of a PCP group
                        and the Member has selected a PCP group in the PH-MCO's
                        Network through the Enrollment Specialist, the PH-MCO
                        must ensure that upon commencement of the PH-MCO
                        coverage, the Member's selection is honored. In
                        addition, the PH-MCO will have three (3) months to
                        outreach to this Member to make an individual PCP
                        selection within the PCP group. If the Member does not
                        make a selection within the three (3) month period, the
                        PH-MCO must ensure that the Member is assigned to a PCP
                        within that PCP group the Member initially selected. The
                        PH-MCO must then notify the Member by telephone or in
                        writing of his/her PCP's name, location and office
                        telephone number. In addition, at no time is the
                        Contractor permitted to assign a PCP group to a Member
                        if the Member has not selected a PCP or a PCP group at
                        the time of enrollment.

                -       If the Member has not selected a PCP through the
                        Enrollment Specialist, the PH-MCO must make contact with
                        the Member within seven (7) business days of his or her
                        enrollment and provide information on options for
                        selecting a PCP, unless the PH-MCO has information that
                        the Member should be immediately contacted due to a
                        medical condition requiring immediate care. To the
                        extent practical, the PH-MCO must offer freedom of
                        choice to Members in making a PCP selection.

                -       If a Member does not select a PCP within fourteen (14)
                        business days of enrollment, the PH-MCO must make an
                        automatic assignment. The Contractor must consider such
                        factors (to the extent they are known), as current
                        Provider relationships, need of children to be followed
                        by a pediatrician, special medical needs, physical
                        disabilities of the Member, language needs, area of
                        residence and access to transportation. The PH-MCO must
                        then notify the Member by telephone or in writing of
                        his/her PCP's name, location and office telephone
                        number. The PH-MCO must make every effort to determine
                        PCP choice and confirm this with the Member prior to the

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                        commencement of the PH-MCO coverage in accordance with
                        Section V.F of this Agreement, Member Enrollment and
                        Disenrollment, so that new Members do not go without a
                        PCP for a period of time after enrollment begins.

                -       The Contractor must take into consideration, language
                        and cultural compatibility between the Member and the
                        PCP.

                -       If a Member requests a change in his or her PCP
                        selection following the initial visit, the Contractor
                        must promptly grant the request and process the change
                        timely.

                -       The Contractor must have written policies and procedures
                        for allowing Members to select or be assigned to a new
                        PCP whenever requested by the Member, when a PCP is
                        terminated from the Contractor's Network or when a PCP
                        change is ordered as part of the resolution to a
                        Grievance or Complaint proceeding. The policies and
                        procedures must receive advance written approval by the
                        Department.

                -       In cases where a PCP has been terminated, the Contractor
                        must immediately inform Members assigned to that PCP in
                        order to allow them to select another PCP prior to the
                        PCP's termination effective date. In cases where an MA
                        Consumer fails to select a new PCP, re-assignment must
                        take place prior to the PCP's termination effective
                        date.

                -       The Contractor must consider that a Member with Special
                        Needs can request a specialist as a PCP. Denial of such
                        requests are appealable.

                Should the Contractor choose to implement a process for the
                assignment of a primary dentist, the Contractor must submit the
                process for advance written approval from the Department prior
                to its implementation.

        R.      PROVIDER SERVICES

                Provider services functions shall be required to be operated at
                least during regular business hours (9:00 a.m. to 5:00 p.m.,
                Monday through Friday). Provider services functions include, but
                are not limited to, the following:

                -       Assisting Providers with questions concerning Member
                        eligibility status.

                -       Assisting Providers with Contractor prior authorization
                        and referral procedures.

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                -       Assisting Providers with Claims payment procedures and
                        handling Provider complaints.

                -       Facilitating transfer of Member medical records among
                        medical Providers, as necessary.

                -       Providing to PCPs a monthly list of Members who are
                        under their care, including identification of new and
                        deleted Members. An explanation guide detailing use of
                        the list must also be provided to PCPs.

                -       Developing a process to respond to Provider inquiries
                        regarding current enrollment.

                -       Coordinating the administration of Out-of-Plan Services.

                1.      PROVIDER MANUAL

                        The Contractor must keep its Network Providers
                        up-to-date with the latest policy and procedures changes
                        as they affect the MA Program. The key to maintaining
                        this level of communication is the publication of a
                        Provider manual. Copies of the Provider manual shall be
                        distributed in a manner that makes them easily
                        accessible to all participating practitioners. The
                        Contractor may specifically delegate this responsibility
                        to large providers in its Provider Agreement. The
                        Provider manual must be updated annually. The Department
                        may grant an exception to this annual requirement upon
                        written request from the PH-MCO provided there are no
                        major changes to the manual. For a complete description
                        of the Provider manual contents and information
                        requirements, refer to Exhibit PP of this Agreement,
                        Provider Manuals.

                2.      PROVIDER EDUCATION

                        The Contractor must demonstrate that its Provider
                        Network is knowledgeable and experienced in treating
                        Members with Special Needs. The Contractor must submit a
                        plan to the Department that outlines its plans to
                        educate and train Providers. This training plan can be
                        done in conjunction with the SNU training requirements
                        as outlined in Section V.P of this Agreement, Special
                        Needs Unit, and must also include Special Needs MA
                        Consumers, advocates and family members in developing
                        the design and implementation of the training plan.

                        The Contractor must submit its plan for measuring
                        training outcomes including the tracking of training
                        schedules and Provider attendance to the Department for
                        approval at least annually.

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                        At a minimum, the Provider training must be conducted
                        for PCPs and dentists as appropriate, and include the
                        following areas:

                        a.      EPSDT training for any Providers who serve
                                Members under age twenty-one (21).

                        b.      Identification and appropriate referral for
                                mental health, drug and alcohol and substance
                                abuse services.

                        c.      Sensitivity training on diverse and Special
                                Needs populations such as persons who are deaf
                                and hard of hearing.

                        d.      Cultural competence.

                        e.      Treating Special Needs populations, including
                                the right to treatment for individuals with
                                disabilities.

                        f.      Administrative processes that include, but are
                                not limited to: coordination of benefits, dual
                                eligibles, and encounter reporting.

                        The Contractor may submit an alternate Provider training
                        and education plan should the Contractor wish to combine
                        its activities with other Contractors operating in the
                        HealthChoices zone or wish to develop and implement new
                        and innovative methods for Provider training and
                        education. However, this alternative plan must have
                        advance written approval by the Department. Should the
                        Department approve an alternative plan, the Contractor
                        must have the ability to track and report on the
                        components included in the Contractor's alternative
                        Provider training and education plan.

        S.      PROVIDER NETWORK/SERVICES ACCESS

                The Contractor must establish and maintain adequate Provider
                Networks to serve all of the eligible HealthChoices populations
                in the zone. Provider Networks must include, but not be limited
                to: hospitals, children's tertiary care hospitals, specialty
                clinics, trauma centers, facilities for high-risk deliveries and
                neonates, specialists, dentists, orthodontists, physicians,
                pharmacies, emergency transportation services, long-term care
                facilities, rehab facilities, home health agencies and DME
                suppliers in sufficient numbers to make available all services
                in a timely manner.

                1.      NETWORK COMPOSITION

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                        The Contractor must ensure that its Provider Network is
                        adequate to provide its Members in the HealthChoices
                        zone with access to quality Member care through
                        participating professionals, in a timely manner, and
                        without the need to travel excessive distances. Upon
                        request from the Department, the Contractor must supply
                        geographic access maps detailing the number, location
                        and specialties of their Provider Network to the
                        Department in order to verify accessibility of Providers
                        within their Network. The Department may require
                        additional numbers of specialists and ancillary
                        providers should it be determined that geographic access
                        is not adequate.

                        The Contractor must make all reasonable efforts to honor
                        a Member's choice of Providers who are credentialed in
                        the Network. Additional requirements for establishing
                        and maintaining an acceptable Provider Network are as
                        follows:

                        a.      The Contractor must ensure the provision of
                                services to persons who have special health
                                needs or who face access barriers to health
                                care. If the Contractor does not have at least
                                two (2) specialists or sub-specialists qualified
                                to meet the particular needs of the individuals,
                                then the Contractor must allow Members to pick
                                an Out-of-Network Provider if not satisfied with
                                the Network Provider. The Contractor must
                                develop a system to determine prior
                                authorization for Out-of-Plan Services,
                                including provisions for informing the MA
                                Consumer of how to request this authorization
                                for Out-of-Plan Services. For children with
                                special health needs, the Contractor must offer
                                at least two (2) pediatric specialists or
                                pediatric sub-specialists.

                        b.      The Contractor must ensure and must demonstrate
                                its ability to:

                                i.      Make available to every Member a choice
                                        of at least two (2) appropriate PCPs
                                        whose offices are located within a
                                        travel time no greater than thirty (30)
                                        minutes (urban) and sixty (60) minutes
                                        (rural). This travel time is measured
                                        via public transportation, where
                                        available. Members may, at their
                                        discretion, select PCPs located further
                                        from their homes.

                                ii.     Ensure an adequate number of
                                        pediatricians to permit all Members who
                                        want a pediatrician as a PCP to have a
                                        choice of two (2) for their child(ren)
                                        within the travel time limits (30
                                        minutes urban, 60 minutes rural).

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                                iii.    Demonstrate its attempts to contract in
                                        good faith with a sufficient number of
                                        Certified Registered Nurse Practitioners
                                        (CRNP) to ensure access to CRNP
                                        services. While the Contractor may
                                        contract with a primary care practice in
                                        which the majority of primary care
                                        services are performed by CRNP's, the
                                        number of CRNPs in such practices may
                                        not exceed 10 percent of the total
                                        number of PCPs in the Contractor's
                                        Network.

                                iv.     Limit its PCP Network to appropriately
                                        qualified Providers. The PH-MCO's PCP
                                        Network must meet the following:

                                        -  Seventy-five to one hundred percent
                                           (75-100%) of the Network consists of
                                           PCPs who have completed an approved
                                           primary care residency in family
                                           medicine, osteopathic general
                                           medicine, internal medicine or
                                           pediatrics; and

                                        -  No more than twenty-five percent
                                           (25%) of the Network consists of PCPs
                                           without appropriate residencies but
                                           who have, within the past seven (7)
                                           years, five (5) years of
                                           post-training clinical practice
                                           experience in family medicine,
                                           osteopathic general medicine,
                                           internal medicine or pediatrics.
                                           Post-training experience is defined
                                           as having practiced at least as a 0.5
                                           full-time equivalent in the practice
                                           areas described; and

                                        -  No more than ten percent (10%) of the
                                           Network consists of PCPs who were
                                           previously trained as specialist
                                           physicians and changed their areas of
                                           practice to primary care, and who
                                           have completed Department-approved
                                           primary care retraining programs.

                        c.      The Contractor must ensure a choice of at least
                                two (2) pharmacies (excluding mail-order
                                entities) within the travel time limits (30
                                minutes urban, 60 minutes rural).

                        d.      The Contractor must ensure a choice of at least
                                two (2) hospitals within the Provider Network,
                                at least one (1) of which must be within the
                                travel limits (30 minutes urban, 60 minutes
                                rural).

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                        e.      The Contractor must ensure a choice of at least
                                two (2) home health agencies within the
                                HealthChoices zone.

                        f.      The Contractor must ensure a choice of at least
                                two (2) DME suppliers within the HealthChoices
                                zone.

                        g.      The Contractor must ensure a choice of at least
                                two (2) rehabilitation facilities within the
                                Provider Network, at least one (1) of which must
                                be located within the HealthChoices zone.

                        h.      The Contractor must ensure a choice of at least
                                two (2) nursing facilities within the Provider
                                Network.

                        i.      The Contractor must ensure a choice of at least
                                two (2) general practice dentists within the
                                Provider Network. For Members needing anesthesia
                                for dental care, the Contractor must ensure a
                                choice of at least two (2) dentists within the
                                Provider Network with privileges or certificates
                                to perform specialized dental procedures under
                                general anesthesia.

                        j.      The Contractor must ensure access to Certified
                                Nurse Midwives (CNMs) and CRNPs.

                        k.      The Contractor must demonstrate its ability to
                                offer its Members freedom of choice in selecting
                                a PCP. At a minimum, the Contractor must have or
                                provide one (1) full-time equivalent (FTE) PCP
                                who serves no more than one thousand (1,000) MA
                                Consumers (cumulative across all HealthChoices
                                PH-MCO plans in the zone) and PCP sites which
                                serve no more than five thousand (5,000) MA
                                Consumers (cumulative across all HealthChoices
                                PH-MCO plans in the zone). The Department will
                                develop a system to notify the Contractor of a
                                Provider reaching maximum panel limits. The
                                number of Members assigned to a PCP may be
                                decreased by the Contractor if necessary to
                                maintain the appointment availability standards.

                        l.      The Contractor and the Department will work
                                together to avoid the PCP having a caseload or
                                medical practice composed predominantly of HC
                                Members. In addition, the Contractor must
                                organize its PCP sites so as to ensure
                                continuity of care to Members and must identify
                                a specific PCP within the site for each Member.
                                The Contractor may apply to the Department for a
                                waiver of these requirements

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                                on a site-specific basis. The Department may
                                waive these requirements for good cause
                                demonstrated by the Contractor.

                        m.      The Contractor must demonstrate its ability to
                                provide adequate access to physician specialists
                                for PCP referrals, and must employ or contract
                                with adult and pediatric specialists in
                                sufficient numbers to ensure that specialty
                                services are made available in a timely,
                                geographically, and physically accessible
                                manner, particularly for those Members in
                                Special Needs populations. The Contractor must
                                ensure Members a choice of at least two (2)
                                appropriate specialists.

                        n.      The Contractor must contract with a sufficient
                                number of Federally Qualified Health Centers
                                (FQHCs) and Rural Health Clinics (RHCs) to
                                ensure access to FQHC and RHC services, provided
                                FQHC and RHC services are available, within a
                                travel time of thirty (30) minutes (urban) and
                                sixty (60) minutes (rural). If the Contractor's
                                primary care Network includes FQHCs and RHCs,
                                these sites may be designated as PCP sites. A
                                listing of FQHCs and RHCs for HealthChoices is
                                included in Exhibit QQ of this Agreement,
                                HealthChoices Federally Qualified Health Centers
                                and Rural Health Clinics. If a Contractor cannot
                                contract with a sufficient number of FQHCs and
                                RHCs, the Contractor must demonstrate in writing
                                it has attempted to reasonably contract in good
                                faith.

                        o.      The Contractor must comply with the provisions
                                of Act 112 of 1996 (H.B. 1415, P.N. 3853, signed
                                July 11, 1996),the Balanced Budget
                                Reconciliation Act of 1997 and Act 68 of 1998,
                                the Quality Health Care Accountability and
                                Protection Provisions, 40 P.S. 991.2101 et seq.
                                pertaining to coverage and payment of Medically
                                Necessary Emergency Services. The definition of
                                such services is set forth herein at Section II.

                        p.      The Contractor must inspect the office of any
                                PCP or dentist who seeks to participate in the
                                Contractor's Provider Network (excluding offices
                                located in hospitals) to determine whether the
                                office is architecturally accessible to persons
                                with mobility impairments. Architectural
                                accessibility means compliance with ADA
                                accessibility guidelines with reference to
                                parking (if any), path of travel to an entrance,
                                and the entrance to both the building and the
                                office of the provider, if different from the
                                building entrance. If the office or facility is

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                                not accessible under the terms of this
                                paragraph, the PCP or dentist may participate in
                                the Contractor's Provider Network provided that
                                the PCP or dentist: 1) requests and is
                                determined by the Contractor to qualify for an
                                exemption from this paragraph, consistent with
                                the requirements of the ADA, or 2) agrees in
                                writing to remove the barrier to make the office
                                or facility accessible to persons with mobility
                                impairments within six (6) months after the
                                Contractor identified the barrier.

                        q.      The PH-MCO must ensure that all laboratory
                                testing sites providing services have either a
                                Clinical Laboratory Improvement Amendment (CLIA)
                                certificate of waiver or a certificate of
                                registration along with a CLIA identification
                                number in accordance with CLIA 1988. Those
                                laboratories with certificates of waiver will
                                provide only the eight (8) types of tests
                                permitted under the terms of their waiver.
                                Laboratories with certificates of registration
                                may perform a full range of laboratory tests.
                                The PCP must provide all required demographics
                                to the laboratory when submitting a specimen for
                                analysis.

                2.      PROVIDER AGREEMENTS

                        The Contractor is required to have written Provider
                        Agreements with a sufficient number of Providers to
                        ensure Member access to all Medically Necessary services
                        covered by the HealthChoices Program.

                        The Contractor's Provider Agreements must include the
                        following provisions:

                        a.      A requirement that the Contractor will not
                                exclude or terminate a Provider from
                                participation in the Contractor's Provider
                                Network due to the fact that the Provider has a
                                practice that includes a substantial number of
                                patients with expensive medical conditions.

                        b.      A requirement that the Contractor will not
                                exclude a Provider from the Contractor's
                                Provider Network because the Provider advocated
                                on behalf of a Member for Medically Necessary
                                and appropriate health care consistent with the
                                degree of learning and skill ordinarily
                                possessed by a reputable health care Provider
                                practicing according to the applicable legal
                                standard of care.

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                        c.      A provision that prohibits the Provider from
                                denying services to an MA Consumer during the MA
                                FFS eligibility window prior to the effective
                                date of the PH-MCO enrollment.

                        d.      Notification of the prohibition and sanctions
                                for submission of false Claims and statements.

                        e.      The definition of Medically Necessary as defined
                                in Section II of this Agreement, Definitions.

                        f.      A requirement that the Contractor cannot
                                prohibit or restrict a health care professional
                                from discussing Medically Necessary and
                                appropriate care with or on behalf of an
                                enrollee, including information regarding the
                                nature of treatment; risks of treatment;
                                alternative treatments; or the availability of
                                alternative therapies, consultation or tests.

                        g.      A requirement that the Contractor cannot
                                terminate a contract or employment with a health
                                care Provider for filing a Grievance on a
                                Member's behalf.

                        h.      A clause which specifies that the agreement will
                                not be construed as requiring the Contractor to
                                provide, reimburse for, or provide coverage of,
                                a counseling or referral service if the Provider
                                objects to the provision of such services on
                                moral or religious grounds.

                        i.      A requirement securing cooperation with the
                                QM/UM Program standards outlined in Exhibit M(1)
                                of this Agreement, Quality Management and
                                Utilization Management Program Requirements.

                        j.      A requirement for cooperation for the submission
                                of encounter data for all services provided
                                within the timeframes required in Section VIII
                                of this Agreement, Reporting Requirements, no
                                matter whether reimbursement for these services
                                is made by the Contractor either directly or
                                indirectly through capitation.

                        k.      A continuation of benefits provision which
                                states that the Provider agrees that in the
                                event of the Contractor's insolvency or other
                                cessation of operations, the Provider must
                                continue to provide benefits to the Contractor's
                                Members through the period for which the premium
                                has been paid, including Members in an inpatient
                                setting.

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                        l.      A requirement that the PCPs who serve Members
                                under the age of twenty-one (21) are responsible
                                for conducting all EPSDT screens for individuals
                                on their panel under the age of twenty-one (21).
                                Should the PCP be unable to conduct the
                                necessary EPSDT screens, the PCP is responsible
                                for arranging to have the necessary EPSDT
                                screens conducted by another Network Provider
                                and ensure that all relevant medical
                                information, including the results of the EPSDT
                                screens, are incorporated into the Member's PCP
                                medical record. For details on access
                                requirements, see Section V.S.1 of this
                                Agreement, Network Composition.

                        m.      A requirement that PCPs who serve Members under
                                the age of twenty-one (21) report encounter data
                                associated with EPSDT screens, using a format
                                approved by the Department, to the Contractor
                                within ninety (90) days from the date of
                                service.

                        n.      A requirement that the Contractor include in all
                                capitated Provider Agreements a clause which
                                requires that should the Provider terminate its
                                agreement with the Contractor, for any reason,
                                that the Provider provide services to the
                                Members assigned to the Provider under the
                                contract up to the end of the month in which the
                                effective date of termination falls.

                        o.      A requirement that the Contractor must not
                                discriminate with respect to participation,
                                reimbursement, or indemnification as to any
                                provider who is acting within the scope of the
                                Provider's license or certification under
                                applicable State law, solely on the basis of
                                such license or certification. This paragraph
                                must not be construed to prohibit an
                                organization from including Providers only to
                                the extent necessary to meet the needs of the
                                organization's enrollees or from establishing
                                any measure designed to maintain quality and
                                control costs consistent with the
                                responsibilities of the organization.

                        p.      A requirement that ensures each physician
                                providing services to enrollees eligible for
                                medical assistance under the State Plan to have
                                a unique identifier in accordance with the
                                system established under section 1173(b) of the
                                Balanced Budget Act.

                        The Contractor must make all necessary revisions to its
                        Provider Agreements to be in compliance with the
                        requirements set forth in this section. Revisions may be
                        completed as Provider Agreements

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                        become due for renewal provided that all Provider
                        Agreements are amended within one (1) year of the
                        effective date of this Agreement with the exception of
                        the encounter data requirements which must be amended
                        immediately, if necessary, to ensure that all Providers
                        are submitting encounter data to the Contractor within
                        the timeframes specified in Section VIII.B.1 of this
                        Agreement, Encounter Data and Subcapitation Data
                        Reports.

                3.      CULTURAL COMPETENCE

                        Both the Contractor and Providers must demonstrate
                        cultural competency and must understand that cultural
                        differences between Provider and Member cannot be
                        permitted to present barriers to accessing and receiving
                        quality health care; must demonstrate the willingness
                        and ability to make the necessary distinctions between
                        traditional treatment methods and/or non-traditional
                        treatment methods that are consistent with the Member's
                        cultural background and which may be equally or more
                        effective and appropriate for the particular Member; and
                        demonstrate consistency in providing quality care across
                        a variety of cultures. For example, language, religious
                        beliefs, cultural norms, social-economic conditions,
                        diet, etc., may make one treatment method more palatable
                        to a Member of a particular culture than to another of a
                        differing culture.

                4.      PRIMARY CARE PRACTITIONER (PCP) RESPONSIBILITIES

                        The Contractor must have written policies and procedures
                        for assigning every Member to a PCP. The PCP must serve
                        as the Member's initial and most important point of
                        contact regarding health care needs. As such, PCP
                        responsibilities include at a minimum:

                        a.      Providing primary and preventive care and acting
                                as the Member's advocate, providing,
                                recommending and arranging for care.

                        b.      Documenting all care rendered in a complete and
                                accurate encounter record that meets or exceeds
                                the DPW data specifications.

                        c.      Maintaining continuity of each Member's health
                                care.

                        d.      Making referrals for specialty care and other
                                Medically Necessary services, both in and
                                out-of-plan.

                        e.      Maintaining a current medical record for the
                                Member, including documentation of all services
                                provided to the

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                                Member by the PCP, as well as any specialty or
                                referral services.

                        f.      Arranging for behavioral health services in
                                accordance with Exhibit U of this Agreement,
                                Behavioral Health Services.

                        The Contractor agrees to retain responsibility for
                        monitoring PCP actions to ensure they comply with the
                        provisions of this Agreement.

                5.      SPECIALISTS AS PCPS

                        A Member may qualify to select a specialist to act as
                        PCP if s/he has a disease or condition that is life
                        threatening, degenerative, or disabling.

                        The PH-MCO must adopt and maintain procedures by which
                        an enrollee with a life-threatening, degenerative or
                        disabling disease or condition shall, upon request,
                        receive an evaluation and, if the Contractor's
                        established standards are met, be permitted to receive:

                        -       A standing referral to a specialist with
                                clinical expertise in treating the disease or
                                condition; or

                        -       The designation of a specialist to provide and
                                coordinate the enrollee's primary and specialty
                                care.

                        The referral to or designation of a specialist must be
                        pursuant to a treatment plan approved by the Contractor,
                        in consultation with the PCP, the enrollee and, as
                        appropriate, the specialist. When possible, the
                        specialist must be a health care Provider participating
                        in the Contractor's Network.

                        Information for MA Consumers must include a description
                        of the procedures that a Member with a life-threatening,
                        degenerative or disabling disease or condition shall
                        follow and satisfy to be eligible for:

                        -       A standing referral to a specialist with
                                clinical expertise in treating the disease or
                                condition; or

                        -       The designation of a specialist to provide and
                                coordinate the enrollee's primary and specialty
                                care.

                        It is the responsibility of the Contractor to ensure
                        adequate Network capacity of qualified specialists as
                        PCPs. These physicians may be

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                        predetermined and listed in the directory but may also
                        be determined on an as needed basis. All determinations
                        must comply with specifications set out by Act 68
                        regulations. The Contractor must establish and maintain
                        its own credentialing and recredentialing policies and
                        procedures to ensure compliance with these
                        specifications.

                        The Contractor must ensure that Providers credentialed
                        as specialists and as PCPs agree to meet all of the
                        Contractor's standards for credentialing PCPs and
                        specialists, including compliance with record keeping
                        standards, the Department's access and availability
                        standards and other QM/UM Program standards. The
                        specialist as a PCP must agree to provide or arrange for
                        all primary care, consistent with Contractor preventive
                        care guidelines, including routine preventive care, and
                        to provide those specialty medical services consistent
                        with the Member's "special need" in accordance with the
                        Contractor's standards and within the scope of the
                        specialty training and clinical expertise. In order to
                        accommodate the full spectrum of care, the specialist as
                        a PCP also must have admitting privileges at a hospital
                        in the Contractor's Network.

                6.      ANY WILLING PHARMACY

                        The Contractor must contract on an equal basis with any
                        pharmacy qualified to participate in the MA FFS Program
                        that is willing to comply with the Contractor's payment
                        rates and terms and to adhere to quality standards
                        established by the Contractor as required by 62 P.S.
                        449.

                7.      HOSPITAL RELATED PARTY

                        The Department requires that a hospital that is a
                        Related Party to a Contractor shall be willing to
                        negotiate in good faith with other contractors regarding
                        the provision of services to MA Consumers. The
                        Department reserves the right to terminate this
                        Agreement with the Contractor if it determines that a
                        hospital related to the Contractor has refused to
                        negotiate in good faith with other contractors.

                8.      MAINSTREAMING

                        The Contractor must ensure that Network Providers do not
                        intentionally segregate their Members in any way from
                        other persons receiving services.

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                        The Contractor must investigate complaints and take
                        affirmative action so that Members are provided covered
                        services without regard to race, color, creed, sex,
                        religion, age, national origin, ancestry, marital
                        status, sexual orientation, language, MA status, health
                        status, disease or pre-existing condition, anticipated
                        need for health care or physical or mental handicap,
                        except where medically indicated. Example of prohibited
                        practices include, but are not limited to, the
                        following:

                        -       Denying or not providing a Member any MA covered
                                service or availability of a facility within the
                                Contractor's Network. The Contractor must have
                                explicit policies to provide access to complex
                                interventions such as cardiopulmonary
                                resuscitations, intensive care, transplantation
                                and rehabilitation when medically indicated and
                                must educate its Providers on these policies.
                                Health care and treatment necessary to preserve
                                life shall be provided to all persons who are
                                not terminally ill or permanently unconscious,
                                except where a competent Member objects to such
                                care on his/her own behalf.

                        -       Subjecting a Member to segregated, separate, or
                                different treatment, including a different place
                                or time from that provided to other Members,
                                public or private patients, in any manner
                                related to the receipt of any MA covered
                                service, except where Medically Necessary.

                        -       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
                                orientation, income status, program membership,
                                language, MA status, health status, disease or
                                pre-existing condition, anticipated need for
                                health care or physical or mental disability of
                                the participants to be served.

                        If the Contractor knowingly executes an agreement with a
                        Provider with the intent of allowing or permitting the
                        Provider to implement barriers to care (i.e. the terms
                        of the Provider Agreement are more restrictive than this
                        Agreement), the Contractor shall be in breach of this
                        Agreement.

                9.      NETWORK CHANGES

                        The Contractor must notify the Department promptly of
                        any changes to the composition of its Provider Network
                        that materially affects the Contractor's ability to make
                        available all services covered by this Agreement in a
                        timely manner. The Contractor also

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                        must have procedures to address changes in its Network
                        that negatively affect the ability of Members to access
                        services. Material changes in Network composition that
                        negatively affect Member access to services may be
                        grounds for termination of this Agreement.

                        a.      For PCP terminations, the Contractor must
                                provide thirty (30) days advance written notice
                                to Members assigned to the PCP and must provide
                                for or assist with those assignments of the
                                Member to another PCP. The Contractor must
                                ensure the timely and complete transfer of
                                medical records to the new PCP.

                        b.      For hospital terminations, the Contractor must
                                provide thirty (30) days advance notice to
                                Members assigned to any PCPs or PCP groups that
                                will be terminated as a result of the hospital
                                termination. In addition, the Department may
                                require notification to all Members of a
                                hospital change.

                        c.      The Department will work with the Contractor to
                                identify those situations in which advance
                                notification to Members of an ancillary Provider
                                termination is necessary, with special
                                consideration given to Members with Special
                                Needs.

                        d.      The advance notice requirement will not apply to
                                terminations by the Contractor due to quality of
                                care or other for cause reasons.

                10.     OTHER PROVIDER ENROLLMENT STANDARDS

                        The Contractor agrees to comply with the program
                        standards regarding Provider enrollment that are set
                        forth in this Agreement.

                        All Providers operating within the Contractor's Network
                        who provide services to MA Consumers must be enrolled in
                        the Commonwealth's MA Program and possess an active
                        Medical Assistance Identification (MAID) number.

                        The Contractor must enroll a sufficient number of
                        Providers qualified to conduct the specialty evaluations
                        necessary for conducting alleged physical and/or sexual
                        abuse investigations.

                        The Department encourages the use of Providers currently
                        contracting with the County Children and Youth Agencies
                        who have experience with the foster care population and
                        who have been

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                        providing services to children and youth MA Consumers
                        for many years.

                11.     TWENTY-FOUR HOUR COVERAGE

                        It is the responsibility of the Contractor to have
                        coverage available directly or through its PCPs either
                        directly or through on-call arrangements with other
                        qualified Providers for urgent or emergency care on a
                        twenty-four (24) hour, seven (7) day-a-week basis. The
                        Contractor shall not use answering services in lieu of
                        the above PCP emergency coverage requirements without
                        the knowledge of the Member. For Emergency or Urgent
                        Medical Conditions, the Contractor must have written
                        policies and procedures on how Members and Providers can
                        make contact to receive instruction or prior
                        authorization for treatment. If the PCP determines that
                        emergency care is not required, 1) the PCP must see the
                        Member in accordance with the timeframe specified in
                        Section V.S.12.a.ii, or 2) the member must be referred
                        to an urgent care clinic which can see the Member in
                        accordance with the timeframe specified in Section
                        V.S.12.a.ii.

                12.     APPOINTMENT STANDARDS

                        The Contractor agrees to require the PCP, dentist, or
                        specialist to conduct affirmative outreach whenever a
                        Member misses an appointment and to document this in the
                        medical record. Such an effort shall be deemed to be
                        reasonable if it includes three (3) attempts to contact
                        the Member. Such attempts may include, but are not be
                        limited to: written attempts, telephone calls and home
                        visits. At least one (1) such attempt must be written.

                        a.      GENERAL

                                PCP scheduling procedures must ensure that:

                                i.      Emergency cases must be seen or referred
                                        to an emergency facility. If it is
                                        determined that Emergency Medical
                                        Condition care is not required, the
                                        Member must be seen by the PCP or
                                        referred to an open urgent care clinic.

                                ii.     Urgent Medical Condition cases must be
                                        scheduled within twenty-four (24) hours.

                                iii.    Routine appointments must be scheduled
                                        within ten (10) business days.

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                                iv.     Health assessment/general physical
                                        examinations and first examinations must
                                        be scheduled within three (3) weeks of
                                        enrollment.

                                v.      The Contractor must provide the
                                        Department with its protocol for
                                        ensuring that a Member's average office
                                        waiting time is no more than twenty (20)
                                        minutes or at any time no more than up
                                        to one (1) hour when the physician
                                        encounters an unanticipated Urgent
                                        Medical Condition visit or is treating a
                                        Member with a difficult medical need.
                                        The Member will be informed of
                                        scheduling time frames through
                                        educational outreach efforts.

                                vi.     The Contractor must monitor the adequacy
                                        of its appointment processes and reduce
                                        the unnecessary use of emergency room
                                        visits.

                        b.      PERSONS WITH HIV/AIDS

                                The Contractor must have adequate PCP scheduling
                                procedures in place to ensure that an
                                appointment with a PCP or specialist must be
                                scheduled within seven (7) days from the
                                effective date of enrollment for any person
                                known to the Contractor to be HIV positive or
                                diagnosed with AIDS (e.g. self-identification),
                                unless the enrollee is already in active care
                                with a PCP or specialist.

                        c.      SSI

                                The Contractor must make a reasonable effort to
                                schedule an appointment with a PCP or specialist
                                within forty-five (45) days of enrollment for
                                any Member who is an SSI or SSI-related consumer
                                unless the Member is already in active care with
                                a PCP or specialist.

                        d.      SPECIALTY REFERRALS

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

                                i.      Emergency Medical Condition appointments
                                        immedi-ately upon referral.

                                ii.     Urgent Medical Condition care
                                        appointments within twenty-four (24)
                                        hours of referral.

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                                iii.    Routine appointments within ten (10)
                                        business days of referral.

                        e.      PREGNANT WOMEN

                                Should the IEAP contractor or Member notify the
                                Contractor that a new Member is pregnant or
                                there is a pregnancy indication on the files
                                transmitted to the Contractor by the Department,
                                the Contractor must contact the Member within
                                five (5) days of the effective date of
                                enrollment to assist the woman in obtaining an
                                appointment with an OB/GYN or Nurse Midwife. For
                                maternity care, the Contractor must be able to
                                provide initial prenatal care appointments for
                                enrolled pregnant Members as follows:

                                i.      First trimester -- within ten (10)
                                        business days of the Member being
                                        identified as being pregnant.

                                ii.     Second trimester -- within five (5)
                                        business days of the Member being
                                        identified as being pregnant.

                                iii.    Third trimester -- within four (4)
                                        business days of the Member being
                                        identified as being pregnant.

                                iv.     High-risk pregnancies -- within
                                        twenty-four (24) hours of identification
                                        of high risk to the Contractor or
                                        maternity care provider, or immediately
                                        if an emergency exists.

                        f.      EPSDT

                                EPSDT screens for any new enrollee under the age
                                of twenty-one (21) must be scheduled within
                                forty-five (45) days from the effective date of
                                enrollment unless the child is already under the
                                care of a PCP and the child is current with
                                screens and immunizations.

                        The Contractor must ensure that PCPs follow-up with
                        those Members described in the above Section V.S.12 for
                        any missed appointments. The PCP or specialist must send
                        two (2) notices of missed appointments and make a
                        follow-up telephone call to the Member for any missed
                        appointments and the PCP or specialist must document
                        these in the medical record.

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<PAGE>

               13.    POLICIES AND PROCEDURES FOR APPOINTMENT STANDARDS

                      The Contractor agrees to comply with the program standards
                      regarding service accessibility standards that are set
                      forth in Section V.S. of this Agreement, Provider
                      Network/Services Access.

                      The Contractor must have written policies and procedures
                      for disseminating its appointment standards to all Members
                      through its Member handbook and through other means. In
                      addition, the Contractor must have written policies and
                      procedures to educate its Provider Network about
                      appointment standard requirements. The Contractor must
                      monitor compliance with appointment standards and shall
                      have a corrective action plan when appointment standards
                      are not met.

               14.    COMPLIANCE WITH ACCESS STANDARDS

                      a.     MANDATORY COMPLIANCE

                             The Contractor must comply with the access
                             standards in accordance with Section V.S of this
                             Agreement, Provider Network/Services Access. If the
                             Contractor fails to meet any of the access
                             standards by the dates specified by the Department,
                             the Department may terminate this Agreement.

                      a.     REASONABLE EFFORTS AND ASSURANCES

                             The Contractor must make reasonable efforts to
                             honor a Member's choice of Providers among Network
                             Providers as long as:

                             i.     The PH-MCO's agreement with the Network
                                    Provider covers the services required by the
                                    Member; and

                             ii.    The Contractor has not determined that the
                                    Member's choice is clinically inappropriate.

                             The Contractor must provide the Department adequate
                             assurances that the Contractor, with respect to the
                             HealthChoices zone, has the capacity to serve the
                             expected enrollment in the HealthChoices zone by
                             providing assurances that the Contractor offers the
                             full scope of covered services as set forth in this
                             Agreement and access to preventive and primary care
                             services and maintains a sufficient number, mix and
                             geographic distribution of Providers and services
                             in accordance with the standards set

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<PAGE>

                             forth in Section V.S of this Agreement, Provider
                             Network/Services Access.

                      c.     CONTRACTOR'S CORRECTIVE ACTION

                             The Contractor must take all necessary steps to
                             resolve, in a timely manner, its failure to comply
                             with the access standards. Prior to a termination
                             action or other sanction by the Department, the
                             Contractor will be given the opportunity to
                             institute a corrective action plan. The Contractor
                             must submit a corrective action plan to the
                             Department for approval within thirty (30) days of
                             notification of such failure to comply, unless
                             circumstances warrant and the Department demands a
                             shorter response time. The Department's approval of
                             the Contractor's corrective action plan will not be
                             unreasonably withheld. The Department will make its
                             best effort to respond to the Contractor within
                             thirty (30) days from the submission date of the
                             corrective action plan. If the Department rejects
                             the corrective action plan, the Contractor shall be
                             notified of the deficiencies of the corrective
                             action plan. In such event, the Contractor shall
                             submit a revised corrective action plan within
                             fifteen (15) days of notification. If the
                             Department does not receive an acceptable
                             corrective action plan, the Department may impose
                             sanctions against the Contractor, in accordance
                             with Section VIII.I of this Agreement, Sanctions.
                             Failure to implement the corrective action plan may
                             result in the imposition of a sanction as provided
                             in this Agreement.

        T.     QM AND UM PROGRAM REQUIREMENTS

               1.     OVERVIEW

                      The Contractor must comply with the Department's QM and UM
                      program standards and requirements described in Exhibit
                      M(1) of this Agreement, Quality Management and Utilization
                      Management Program Requirements. The Department retains
                      the right of advance written approval and to review on an
                      ongoing basis all aspects of the Contractor QM and UM
                      programs, including subsequent changes. The Contractor
                      must comply with all QM and UM program reporting
                      requirements and must submit data in formats to be
                      determined by the Department.

               2.     GENERAL

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                      The QM and UM programs must include a written program
                      description and annual work plan with a timetable of all
                      activities and performance improvement initiatives for the
                      coming year. The Department, in collaboration with the
                      Contractor, retains the right to determine and prioritize
                      QM and UM activities and initiatives based on areas
                      identified as being of importance to the Department and
                      areas identified through its analysis of external quality
                      review (EQR) findings, Health Plan Employer Data and
                      Information Set (HEDIS) measures, and encounter data
                      submitted by the Contractor. The Contractor must implement
                      and abide by the program description and work plan or
                      amended plan as approved by the Department. The QM and UM
                      programs must:

                      a.     Include methodologies that allow for statistically
                             valid performance based monitoring of the QM and UM
                             programs and include documentation that all QM and
                             UM activities and initiatives undertaken by the
                             plan are selected through clinical and financial
                             analysis of encounter, Member demographic and other
                             data.

                      b.     Provide evidence of evaluation and re-measurement
                             of the Contractor QM and UM activities and
                             initiatives in order to determine sustained
                             improvement or the need for further action.

                      c.     Address development, implementation, and
                             performance measurement of disease management
                             programs that are intended for selected conditions
                             among targeted populations in order to improve
                             outcomes through the quality of care provided while
                             effectively managing utilization.

               3.     ADDITIONAL UTILIZATION MANAGEMENT PROGRAM REQUIREMENTS

                      The Contractor agrees to provide twenty-four (24) hour
                      staff availability to authorize weekend services,
                      including but not limited to: home health care, pharmacy,
                      DME, and medical supplies. The Contractor must have
                      written policies and procedures that address how Members
                      and Providers can make contact with the plan to receive
                      instruction or prior authorization, as necessary.

                      The Contractor must ensure that all utilization review
                      decisions are made using the HealthChoices definition of
                      Medically Necessary. In addition, the Contractor must take
                      steps to ensure that determinations made by individual
                      clinical reviewers on whether or not requested care and
                      services are Medically Necessary are consistent with
                      determinations for care and services that would be

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<PAGE>

                      found to be Medically Necessary consistent with the
                      HealthChoices definition of Medically Necessary.

                      The Contractor must develop polices and procedures that
                      allow for prospective, concurrent, and retrospective
                      determination of Medically Necessary, which are based on
                      the HealthChoices Program's definition of Medically
                      Necessary and meet HealthChoices Program's timeframes for
                      the processing of requests, for elective, urgent and
                      Emergency Services as outlined in Exhibit H of this
                      Agreement, Prior Authorization Guidelines.

                      In addition, the Contractor must submit utilization review
                      criteria and policies/procedures that contain utilization
                      review criteria used to determine medical necessity to the
                      Department for evaluation under the Utilization Review
                      Criteria Assessment Process (URCAP).

               4.     HEALTHPLAN EMPLOYER DATA INFORMATION SET (HEDIS)

                      The Contractor must submit data to the Department by June
                      15th of the current year. The calendar year is the
                      standard measurement year for HEDIS data. HEDIS measures
                      are specified for one of three data collection
                      methodologies: administrative, hybrid or survey. The
                      administrative methodology requires that contractors
                      identify the denominator and numerator using transaction
                      data or other administrative databases. The denominator
                      includes all eligible Members.

                      The Contractor will report a rate based on all Members who
                      meet the criteria who are found through administrative
                      data to have received the service identified in the
                      numerator data.

                      The hybrid methodology requires that the Contractor
                      identify the denominator and the numerator through both
                      administrative and medical record data. The denominator
                      consists of a systematic sample of Members drawn from the
                      measure's eligible population.

                      The Contractor will report a rate based on those Members
                      in the sample who are found through either administrative
                      or medical record data to have received the service
                      identified in the numerator. The Contractor may not report
                      a measure using the hybrid method when the numerator is
                      derived solely from administrative data.

               5.     EXTERNAL QUALITY REVIEW (EQR)

                      The Contractor agrees to cooperate fully with any external
                      evaluations and assessments of its performance authorized
                      by the

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                      Department under this Agreement. Independent
                      assessments will include, but not be limited to, any
                      independent evaluation required or allowed by federal or
                      state statute or regulation. See Exhibit M(2) of this
                      Agreement, External Quality Review.

                      The Contractor agrees to cooperate fully with external
                      clinical record reviews that assess the Contractor's
                      quality of care, access to care, and timeliness of care
                      i.e., any studies as determined by the Department.

                      The Contractor agrees to assist in the identification and
                      collection of any data or clinical records to be reviewed
                      by the independent evaluation team members. In addition,
                      the Contractor must provide to the External Quality Review
                      Organization (EQRO) complete medical records in the
                      timeframe allowed by the EQRO.

                      The Contractor must ensure that data, clinical records and
                      workspace located at the Contractor's work site are
                      available to the independent review team and to the
                      Department, upon request.

                      The Contractor must demonstrate how the results of the EQR
                      are incorporated into the overall Quality and Utilization
                      Management Programs.

               6.     QM/UM PROGRAM REPORTING REQUIREMENTS

                      The Contractor agrees to:

                      a.      Provide the Department with uniform QM, UM, and
                              Member satisfaction/complaint data, in a format
                              to be determined by the Department, on a regular
                              basis;

                      b.      Collaborate with the Department in carrying out
                              data validation steps;

                      c.      Maintain and make available to the Department,
                              upon request, studies, reports, protocols,
                              standards, worksheets, minutes or other such
                              documentation as may be appropriate; and

                      d.      Submit reports based on the most current version
                              of HEDIS measures.

                      The Contractor agrees to comply with all QM and UM program
                      reporting requirements and time frames outlined in Exhibit
                      M(1) or this Agreement, Quality Management and Utilization
                      Management

                                                                             100
<PAGE>

                      Program Requirements. The Department will, on a periodic
                      basis, review the required reports and make changes to
                      the information/data and/or formats requested based on
                      the changing needs of the HealthChoices Program. The
                      Contractor must comply with all requested changes to the
                      report information and formats as deemed necessary by
                      the Department. Copies of current QM and UM reporting
                      requirements can be found in the HealthChoices
                      Proposers' Library.

               7.     COLLABORATION BETWEEN CONTRACTOR QM AND UM DEPARTMENTS AND
                      SPECIAL NEEDS UNITS

                      The Contractor must provide evidence of ongoing
                      collaboration and coordination between its QM and UM
                      Departments and its SNU regarding quality initiatives,
                      case management and/or disease management activities
                      directed toward or involving care of Special Needs
                      populations. Collaboration must include, but not be
                      limited to, quality improvement studies; UM referrals;
                      discharge planning/case management, identification of and
                      outreach to MA Consumers with Special Needs and Special
                      Needs populations.

               8.     DELEGATED QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT
                      FUNCTIONS

                      The Contractor must demonstrate that it retains
                      accountability for all QM and UM programs functions,
                      including those that are delegated to other entities. The
                      Contractor must make available to the Department, any
                      records, documents, and data detailing its oversight of
                      delegated QM and UM program functions. In addition, the
                      Contractor must ensure that delegated entities make
                      available to the Department, any records, documents, and
                      data detailing the delegated QM and UM program functions
                      undertaken by the entity of behalf of the Contractor.

               9.     CONSUMER INVOLVEMENT IN THE QUALITY MANAGEMENT AND
                      UTILIZATION MANAGEMENT PROGRAMS

                      The Contractor agrees to participate and cooperate in the
                      work and review of the Department's formal advisory body
                      through participation in the Medical Assistance Advisory
                      Committee (MAAC) and its subcommittees.

               10.    CONFIDENTIALITY

                      The Contractor must have written policies and procedures
                      for maintaining the confidentiality of data that addresses
                      medical

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                      records, Member information and Provider information and
                      is in compliance with the provisions set forth in Section
                      2131 of the Insurance Company Law of 1921, as amended, 40
                      P.S. 991.2131 and 55 Pa. Code 105.

                      The Contractor must ensure that Provider offices/sites
                      have implemented mechanisms that guard against
                      unauthorized or inadvertent disclosure of confidential
                      information to persons outside the Contractor.

                      All clinical data related to HealthChoices Members is the
                      property of the Department. Release of data by the
                      Contractor to third parties, except for the purpose of
                      individual care and coordination among Providers as
                      consented to by Members, requires the Department's advance
                      written approval.

               11.    DEPARTMENT OVERSIGHT

                      The Contractor and its subcontractor(s) agree to make
                      available to the Department upon request, data, clinical
                      and other records and reports for review of quality of
                      care, access and utilization issues including but not
                      limited to EQRO, HEDIS, Encounter Data Validation, and
                      other related activities.

                      The Contractor must submit a plan, as determined by the
                      Department, and within time frames established by the
                      Department, to resolve any performance or quality of care
                      deficiencies identified by the Department's ongoing
                      monitoring activities and any independent assessments or
                      evaluations requested by the Department.

                      The Contractor must obtain advance written approval from
                      the Department before releasing or sharing data,
                      correspondence and/or improvements from the Department
                      regarding the Contractor's internal QM and UM programs
                      with any of the other HealthChoices PH-MCOs or any
                      external entity.

                      The Contractor must obtain advance written approval from
                      the Department before participating in or providing
                      letters of support for QM or UM data studies and/or any
                      data related external research projects related to
                      HealthChoices with any entity.

SECTION VI:  PROGRAM OUTCOMES AND DELIVERABLES

        All deliverables must receive advance written approval by the Department
        prior to the operational date of the Initial Term of the Contract unless
        otherwise specified

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        by the Department. Deliverables include, but are not limited to:
        operational policies and procedures, required materials, letters of
        agreement, provider agreements, reimbursement methodology and rates,
        coordination agreements, reports, tracking systems, required files,
        QM/UM documents (See Exhibit M(3) of this Agreement, Quality
        Management/Utilitzation Management Deliverables), and referral systems.

        The Department may conduct on-site Readiness Reviews as needed to
        document the Contractor's compliance with this Agreement. Upon request
        by the Department, as part of the Readiness Review, the Contractor must
        provide detailed written descriptions of how the Contractor is complying
        with Agreement requirements and standards. The Department retains the
        right to continue development of Readiness Review elements, program
        standards and forms prior to scheduling the actual on-site Readiness
        Review visits.

SECTION VII:  FINANCIAL REQUIREMENTS

        A.     FINANCIAL STANDARDS

               1.     RISK PROTECTION REINSURANCE FOR HIGH COST CASES

                      The Contractor must have a risk protection arrangement
                      during the term of this Agreement. This risk protection
                      arrangement must include reinsurance that covers, at a
                      minimum, eighty (80) percent of Inpatient costs incurred
                      by one (1) Member in one (1) year in excess of $150,000.
                      The Department may alter or waive the reinsurance
                      requirement if the Contractor proposes an alternative risk
                      protection arrangement that the Department determines is
                      acceptable.

                      The Contractor may not change or discontinue the risk
                      protection arrangement without advance written approval
                      from the Department, which approval shall not be
                      unreasonably withheld. The Contractor must notify the
                      Department thirty (30) days prior to any change in the
                      risk protection arrangement. The Department reserves the
                      right to review such risk protection arrangements and
                      require changes based on the Department's assessment of
                      the Contractor's overall financial condition.

                      The reinsurance threshold requirement shall be $75,000,
                      instead of $150,000, if any of the following criteria is
                      met:

                      a.     The Contractor has been operational (providing
                             medical benefits to any type of consumer) for less
                             than three (3) years; or,

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                      b.     The Contractor's Statutory Accounting Principles
                             (SAP) basis equity is less than 4.2 percent of MA
                             premiums earned during the most recent calendar
                             year for which the due date has passed for
                             submission of the unaudited annual reports filed by
                             the Contractor with the Insurance Department (DOI);
                             or,

                      c.     The Contractor did not earn cumulative net surplus
                             over the previous three (3) years.

               2.     EQUITY REQUIREMENTS AND INSOLVENCY PROTECTION

                      The Contractor must meet, during the term of this
                      Agreement, the equity requirements set forth below. The
                      Contractor shall comply with all financial requirements
                      included in this Agreement in addition to those of the
                      Pennsylvania Departments of Health and Insurance. The
                      Department reserves the right to review such equity and
                      financial requirements and require changes based on the
                      Department's assessment of the Contractor's overall
                      financial condition.

                      The Contractor must maintain SAP-basis equity equal to the
                      highest of the amounts determined by the following "Three
                      (3) Part Test":

                       -   $1.5 million.

                       -   4.2% of MA premiums earned during the most recent
                           four (4) calendar quarters.

                       -   4.2% of MA premiums earned during the current quarter
                           multiplied by three (3).

                      The amount of the requirement for equity for any PH-MCO
                      that did not provide medical benefits to MA Consumers in
                      the zone through a HC contract in 2001 shall be phased in
                      as follows:

                      <TABLE>
                      <CAPTION>
                      -------------------------------------------------------------------------
                      <S>                                    <C>
                      Equity as of the last day of the       50% of the amount determined by
                      first contract calendar quarter.       the Three (3) Part Test, but not
                                                             less than $1.5 million.
                      -------------------------------------------------------------------------
                      Equity as of the last day of the       66% of the amount determined by
                      second contract calendar quarter.      the Three (3) Part Test, but not
                                                             less than $1.5 million.
                      -------------------------------------------------------------------------
                      Equity as of the last day of the       80% of the amount determined by
                      third contract calendar quarter.       the Three (3) Part Test, but not
                                                             less than $1.5 million.
                      </TABLE>

                                                                             104
<PAGE>

                      <TABLE>
                      -------------------------------------------------------------------------
                      <S>                                    <C>
                      Equity as of the last day of the       100% of the amount determined by
                      fourth contract calendar quarter.      the Three (3) Part Test.
                      -------------------------------------------------------------------------
                      </TABLE>

                      MA premiums are defined as all revenue received from the
                      Commonwealth for any and all Managed Care Medical
                      Assistance contracts.

                      For the purpose of this requirement, equity amounts, as of
                      the last day of each calendar quarter shall be determined
                      in accordance with statutory accounting principles as
                      specified or accepted by DOI. The Department shall accept
                      DOI determinations of equity amounts, and in the absence
                      of such determination, shall rely on required financial
                      statements filed by the Contractor with DOI to determine
                      equity amounts.

                      The Contractor shall provide the Department with reports
                      as specified in Section VIII.D of this Agreement,
                      Financial Reports.

                      In addition to the Department's general sanction authority
                      specified in Section VIII.I of this Agreement, Sanctions,
                      if the Contractor fails to comply with the requirements of
                      this Section, the Department may take any or all of the
                      following actions:

                      -  Discuss fiscal plans with the Contractor's management.

                      -  Require the Contractor to submit and implement a
                         corrective action plan.

                      -  Suspend some or all enrollment of MA Consumers into the
                         Contractor's plan.

                      -  Terminate this Agreement effective the last day of the
                         calendar month after the Department notifies the
                         Contractor of termination.

               3.     SECONDARY LIABILITY

                      The Contractor must have in place an acceptable plan to
                      provide for payment to Providers by a secondary liable
                      party after default in payment to Providers resulting from
                      bankruptcy or insolvency. The secondary liability must
                      ensure payment for all services performed by providers
                      through the last day for which the Department paid a
                      capitation premium to the Contractor. The requirements may
                      be met by submission of one or more of the following
                      arrangements:

                      a.     Insolvency insurance.

                                                                             105
<PAGE>

                      b.     An irrevocable, unconditional, and automatically
                             renewable letter of credit for the benefit of
                             the Department which is in place for the entire
                             term of this Agreement.

                      c.     A guarantee from an entity acceptable to the
                             Department, with sufficient financial strength and
                             creditworthiness to assume the payment obligations
                             of the Contractor in the event of a default in
                             payment resulting from bankruptcy or insolvency.

                      d.     Other arrangements satisfactory to the Department,
                             that are sufficient to insure payment to Providers
                             in the event of default in payment resulting from
                             bankruptcy or insolvency.

                      The Department must approve all arrangements for secondary
                      liability. Such approval shall include approval of the
                      financial strength of the secondary liable parties and
                      approval of all legal forms for secondary liability.

               4.     LIMITATION OF LIABILITY

                      In accordance with 42 C.F.R. 434.20, the Contractor must
                      assure that MA Consumers shall not be liable for the
                      Contractor's debts if the Contractor becomes insolvent.

               5.     MEDICAL COST ACCRUALS

                      As part of its accounting and budgeting function, the
                      Contractor must establish and maintain an actuarially
                      sound process for estimating and tracking Incurred But Not
                      Paid (IBNP) amounts. The Contractor must reserve funds by
                      major categories of service to cover IBNP amounts. As part
                      of its reserving methodology, the Contractor must conduct
                      annual reviews to assess its reserving methodology and
                      make adjustments, as necessary.

               6.     CLAIMS PROCESSING AND MIS

                      The Contractor must have a Claims processing system and
                      MIS sufficient to support the Provider payment and data
                      reporting requirements specified in Section VIII of this
                      Agreement, Reporting Requirements. See also Exhibit MM of
                      this Agreement, Management Information System and System
                      Performance Review Standards, for MIS and Systems
                      Performance Review (SPR) standards. The Contractor shall
                      be prepared to document its ability

                                                                             106
<PAGE>

                      to expand Claims processing or MIS capacity should
                      either or both be exceeded through the enrollment of
                      program Members.

               7.     DSH/GME PAYMENT FOR DISPROPORTIONATE SHARE HOSPITALS (DSH)
                      / GRADUATE MEDICAL EDUCATION (GME)

                      The Department shall make direct payments of DSH/GME to
                      hospitals. DSH and GME amounts shall not be included in
                      fee-for-service cost equivalent projections or in
                      capitation payments paid by the Department to the
                      Contractor.

               8.     MEMBER LIABILITY

                      The Contractor is prohibited from holding the Member
                      liable for the following:

                      a.     Debts of the Contractor in the event of the
                             Contractor's insolvency.

                      b.     Services provided to the Member in the event of the
                             Contractor failing to receive payment from the
                             Department for such services.

                      c.     Services provided to the Member in the event of a
                             health care Provider with a contractual, referral
                             or other arrangement with the Contractor failing to
                             receive payment from the Department or the
                             Contractor for such services.

                      d.     Payments to a Provider that furnishes covered
                             services under a contractual, referral or other
                             arrangement with the Contractor in excess of the
                             amount that would be owed by the Member if the
                             Contractor had directly provided the services.

        B.     COMMONWEALTH CAPITATION PAYMENTS

               1.     PAYMENTS FOR IN-PLAN SERVICES

                      The obligation of the Department to make payments shall be
                      limited to capitation payments, maternity care payments,
                      and any other payments provided by this Agreement.

                      a.     CAPITATION PAYMENTS

                             i.     The Contractor shall receive capitated
                                    payments for In-Plan Services as defined in
                                    Section VII.B.1 of this

                                                                             107
<PAGE>

                                    Agreement, Payment for In-Plan Services.
                                    Capitation rates maternity care rates, and
                                    Risk Pool Allocation Amounts (RPAAs),
                                    applicable to the agreement year beginning
                                    January 1, 2002, are set forth in Appendix 3
                                    of this Agreement, Capitated Rates. This
                                    agreement year, for capitation purposes,
                                    begins January 1, 2002, and extends 12
                                    months to December 31, 2002. The contract
                                    period of October 1, 2001 - December 31,
                                    2001 is for Readiness Review and for
                                    pre-operational preparedness. No payment
                                    will be made for this period of time under
                                    this contract.

                                    For the agreement year beginning January 1,
                                    2003, and for each subsequent agreement
                                    year, the Department will provide an initial
                                    schedule of capitation rates, maternity care
                                    rates, and RPAAs, not later than July 1 of
                                    the previous year. The Department will
                                    provide the Contractor with information on
                                    methodology and data used to develop the
                                    initial schedule of rates. The Department
                                    will provide the Contractor with the
                                    opportunity of a meeting, in which the
                                    Department will consider questions from the
                                    Contractor on development of the initial
                                    schedule of rates. The Department will
                                    provide the Contractor with a final schedule
                                    of capitation rates; maternity care rates,
                                    and RPAAs, by September 30 of the year prior
                                    to the effective date of the rates. If the
                                    Contractor does not notify the Department of
                                    its acceptance of the final schedule of
                                    rates by October 15 of the same year, and if
                                    the Contractor has not already provided
                                    notice of its intent to terminate the
                                    Agreement, the Department will, at its sole
                                    discretion, decide on a schedule of rates
                                    for the subsequent agreement year that will
                                    consist of one of the following:

                                    (1)     The final schedule of capitation
                                            rates, maternity care rates and
                                            RPAAs, applicable to the subsequent
                                            agreement year, previously provided
                                            by the Department; or

                                    (2)     The schedule of capitation rates,
                                            maternity care rates and RPAAs
                                            applicable to the prior agreement
                                            year.

                                                                             108
<PAGE>

                             ii.    The Department shall make a pre-paid
                                    capitation payment, referenced in Section
                                    VII.B.1.a above, for each Member whose
                                    enrollment on the first day of the month is
                                    indicated on the Department's CIS on the
                                    first day of the month. If the Contractor is
                                    responsible to provide benefits to a MA
                                    Consumer who does not appear on CIS on the
                                    first day of the month, the Department shall
                                    initiate a capitation payment on the first
                                    day of the first subsequent month on which
                                    said enrollment appears on CIS. The
                                    Department will compute capitation payments
                                    using per diem rates. The Department will
                                    make a monthly payment to the PH-MCO for
                                    each MA Consumer enrolled in the PH-MCO, for
                                    the first day in the month the MA Consumer
                                    is enrolled in the PH-MCO and for each
                                    subsequent day through, and including the
                                    last day of the month.

                             iii.   The Department shall make each monthly
                                    capitation payment by the fifteenth (15th)
                                    of the month. The Department shall seek to
                                    make arrangements for payment by wire
                                    transfer or electronic funds transfer. If
                                    such arrangements are not in place, payment
                                    shall be made by U.S. Mail.

                             iv.    The Department shall not make a capitation
                                    payment for a Recipient Month if it notifies
                                    the Contractor before the first of the month
                                    that the individual's MA eligibility or
                                    PH-MCO enrollment ends prior to the first of
                                    the month.

                             v.     This Agreement provides for rates for SSI
                                    consumers who have Medicare Part A benefits

                                    that are distinct from rates for SSI
                                    consumers who do not have Medicare Part A
                                    benefits. If the Department's Third Party
                                    Liability (TPL) file is updated to indicate
                                    Medicare Part A coverage within four (4)
                                    months prior to the current month for a MA
                                    Consumer at an SSI Without Medicare rate,
                                    the Department shall adjust the payment to
                                    reflect the rating group appropriate to the
                                    MA Consumer, provided the TPL file indicates
                                    Medicare Part A coverage as of the first day
                                    of coverage by the Contractor for this
                                    MA Consumer during the month for which
                                    payment was made. If the Department's TPL
                                    file is updated to adjust or delete
                                    indication of Medicare Part A coverage
                                    within four (4) months of a payment to the
                                    Contractor for a MA

                                                                             109
<PAGE>

                                    Consumer at an SSI with Medicare or Healthy
                                    Horizons rate, the Department shall adjust
                                    the payment to reflect the rating group
                                    appropriate to the MA Consumer, provided the
                                    TPL file does not indicate Medicare Part A
                                    coverage as of the first day of coverage by
                                    the Contractor for this MA Consumer during
                                    the month for which payment was made. The
                                    Department shall provide information to the
                                    Contractor on this type of payment
                                    adjustment on an electronic file. The
                                    Contractor shall utilize this information to
                                    adjust its payments to Providers and
                                    instruct its Providers to bill Medicare.

                             vi.    The Department will recover capitation
                                    payments made for Members who were later
                                    determined to be ineligible for managed care
                                    for up to twelve (12) months after the
                                    service month for which payment was made.
                                    The Department will recover capitation
                                    payments made for deceased recipients for up
                                    to eighteen (18) months after the service
                                    month for which payment was made. See
                                    Exhibit BB of this Agreement, PH-MCO
                                    Recipient Coverage Document.

                             vii.   If a HCFA determination that a PH-MCO has
                                    committed a violation described
                                    in paragraph (a) of 42 C.F.R. Chapter IV
                                    Subsection 434.67 (Sanctions against HMOs
                                    with risk comprehensive contracts) is
                                    affirmed on review of paragraph (d)
                                    (Informal reconsideration), or is not timely
                                    contested by the PH-MCO under paragraph (c)
                                    (Notice of Sanction), HCFA, based upon
                                    this recommendation of the agency, may deny
                                    payment for new enrollees of the PH-MCO
                                    under Section 1903 (m)(5)(B)(ii) of the Act.
                                    Under Subsections 434.22 and 434.42, HCFA's
                                    denial of payment for new enrollees
                                    automatically results in a denial of agency
                                    payments to the PH-MCO for the same
                                    enrollees.  A new enrollee is an enrollee
                                    that applies for enrollment after the
                                    effective date in paragraph (f)(1) of 42
                                    C.F.R. Section 434.67.

               2.     MATERNITY CARE PAYMENT

                      For each live birth, the Department shall make a one-time
                      maternity care payment to the Contractor with whom the
                      mother is enrolled on the date of birth; however, if the
                      mother is admitted to a hospital and a change in the
                      PH-MCO coverage occurs during the hospital

                                                                             110
<PAGE>

                      admission, the PH-MCO responsible for the hospital stay at
                      the time of birth shall receive the maternity care
                      payment. The amount of the maternity care payment for the
                      agreement year beginning January 1, 2002, is shown in
                      Appendix 3 of this Agreement, Capitated Rates. The payment
                      is a global fee to cover all maternity expenses, including
                      prenatal care, delivery fees and post-partum care for the
                      mother and all services mandated by Act 85 of 1996 ("The
                      Health Security Act").

                      If required by the Department, the Contractor must submit
                      invoices or data files to the Department to receive
                      maternity care payments, consistent with specifications
                      determined by the Department.

               3.     PROGRAM CHANGES

                      Amendments, revisions, or additions to the State Medicaid
                      Plan or to state or federal regulations, laws, guidelines,
                      or policies shall, insofar as they affect the scope or
                      nature of benefits available to eligible persons, amend
                      the Contractor's obligations as specified herein, unless
                      the Department notifies the Contractor otherwise. The
                      Department shall inform the Contractor of any changes,
                      amendments, revisions, or additions to the State Medicaid
                      Plan or changes in the Department's regulations,
                      guidelines, or policies in a timely manner.

                      The Department shall adjust rates, as necessary, to
                      maintain the actuarial soundness of the rates to reflect
                      the impact on costs of program changes. If the Department
                      makes an adjustment to the rates, as provided by this
                      paragraph, the Department will provide information to the
                      Contractor on the methodology used to determine the amount
                      of the rate adjustment.

        C.     HIV/AIDS RISK POOL

               The Department shall withhold the portion of each capitation
               payment that is designated as a RPAA on each rate schedule. RPAA
               funds withheld shall be allocated to an HIV/AIDS Risk Pool and
               distributed to PH-MCOs in accordance with Exhibit VV of this
               Agreement, HIV/AIDS Risk Pool.

        D.     CLAIMS PROCESSING STANDARDS, MONTHLY REPORT AND PENALTIES

               1.     TIMELINESS STANDARDS

                      The Contractor will adjudicate Provider Claims consistent
                      with the requirements below. These requirements apply
                      collectively to

                                                                             111
<PAGE>

                      Claims processed by the Contractor and any subcontractor.
                      Subcapitation payments are excluded from these
                      requirements.

                      The adjudication timeliness standards follow for each of
                      three (3) categories of Claims:

                      a.     CLAIMS RECEIVED FROM A HOSPITAL FOR INPATIENT
                             ADMISSIONS ("INPATIENT")

                             90.0% of Clean Claims must be adjudicated within
                             thirty (30) days of receipt.

                             100.0% of Clean Claims must be adjudicated within
                             forty-five (45) days of receipt.

                             100.0% of all Claims must be adjudicated within
                             ninety (90) days of receipt.

                      b.     DRUG CLAIMS

                             90.0% of Clean Claims must be adjudicated within
                             thirty (30) days of receipt.

                             100.0% of Clean Claims must be adjudicated within
                             forty-five (45) days of receipt.

                             100.0% of all Claims must be adjudicated within
                             ninety (90) days of receipt.

                      c.     ALL CLAIMS OTHER THAN INPATIENT AND DRUG:

                             90.0% of Clean Claims must be adjudicated within
                             thirty (30) days of receipt.

                             100.0% of Clean Claims must be adjudicated within
                             forty-five (45) days of receipt.

                             100.0% of all Claims must be adjudicated within
                             ninety (90) days of receipt.

                      The adjudication timeliness standards do not apply to
                      Claims submitted by Providers under investigation for
                      fraud or abuse from the date of service to the date of
                      adjudication of the Claims. Providers can be under
                      investigation by a governmental agency or the Contractor;
                      however, if under investigation by the Contractor,

                                                                             112
<PAGE>

                      the Department must have immediate written notification of
                      the investigation.

                      Every Claim entered into the Contractor's computer
                      information system that is not a Rejected Claim must be
                      adjudicated. The Contractor must maintain an electronic
                      file of rejected Claims, inclusive of a reason or reason
                      code for rejection.

                      The amount of time required to adjudicate a paid Claim is
                      computed by comparing the date the Claim was received with
                      the check date or the transmission date of an electronic
                      payment. The check date is the date printed on the check.
                      The amount of time required to adjudicate a denied Claim
                      is computed by comparing the date the Claim was received
                      with the date the denial notice was created or the
                      transmission date of an electronic denial notice. For an
                      amended Claim, the date the Contractor received the
                      request to adjust the payment from the Provider must be
                      recorded and counted as the date the Claim was received.
                      Amended Claims do not include Provider Appeals.

                      Checks must be mailed not later than three (3) working
                      days from the check date. The check date is the date
                      printed on the check.

                      The Contractor must record, on every Claim processed, the
                      date the Claim was received. A date of receipt imbedded in
                      a Claim reference number is acceptable for this purpose.
                      This date must be carried on Claims records in the Claims
                      processing computer system. Each hardcopy Claim received
                      by the Contractor, or the electronic image thereof, must
                      be date-stamped with the date of receipt no later than the
                      first work day after the date of receipt. The Contractor
                      must add a date of receipt to each Claim received in the
                      form of an electronic record or file within one work day
                      of receipt.

                      If responsibility to receive Claims is subcontracted, the
                      date of initial receipt by the subcontractor determines
                      the date of receipt applicable to these requirements.

               2.     SANCTIONS

                      The Department will utilize the monthly report that is due
                      on the fifth (5th) calendar day of the fifth (5th)
                      subsequent month after the Claim is received to determine
                      Claims processing penalties. For example, the Department
                      shall utilize the monthly report that is due July 5, 2002,
                      to determine Claims processing penalties for Claims
                      received in January 2002. The Department shall utilize the
                      monthly report that is due August 5, 2002, to determine
                      Claims processing

                                                                             113

<PAGE>

                      penalties for Claims received in February 2002. The
                      Department shall utilize the monthly report that is due
                      September 5, 2002, to determine Claims received in March
                      2002, and so on.

                      All Claims received during the month, for which a penalty
                      is being computed, that remain unadjudicated at the time
                      the sanction is being determined, shall be considered a
                      Clean Claim.

                      If a Commonwealth audit, or an audit required or paid for
                      by the Commonwealth, determines Claims processing
                      timeliness data that are different than data submitted by
                      the Contractor, or if the Contractor has not submitted
                      required Claims processing data, the Department shall use
                      the audit results to determine the penalty amount.

                      The penalties included in the charts below shall apply
                      separately to:

                      a.     Inpatient Claims.

                      b.     Claims other than inpatient and drug.

                      The penalties provided by this Section apply to all Claims
                      included in each of the two (2) Claim categories specified
                      above, including Claims processed by any subcontractor.

                      The Contractor will be considered in compliance with the
                      requirement for adjudication of 100.0% of all inpatient
                      Claims if 99.5% of all inpatient Claims are adjudicated
                      within ninety (90) days of receipt. The Contractor will be
                      considered in compliance with the requirement of
                      adjudication of 100.0% of all Claims other than inpatient
                      or drug if 99.5% of all Claims other than inpatient or
                      drug are adjudicated within ninety (90) days of receipt.

                      Penalties in the charts below shall be reduced by
                      one-third if the Contractor has 25,000-50,000 MA
                      Consumers. Penalties in the charts below shall be reduced
                      by two-thirds if the Contractor has less than 25,000 MA
                      Consumers.

                      CLAIMS ADJUDICATION MONTHLY PENALTY CHART

                      This chart is used to compute any applicable penalty for
                      failure to adjudicate inpatient Claims timely. This chart
                      is also used to compute any applicable penalty for failure
                      to adjudicate Claims other than inpatient or drug.

                             <TABLE>
                             <CAPTION>
                             --------------------------------------------------
                             <S>                                  <C>
                             Percentage of Clean Claims           Penalty
                             --------------------------------------------------
                             </TABLE>

                                                                             114
<PAGE>

                             <TABLE>
                             --------------------------------------------------
                             <S>                                  <C>
                             Adjudicated in 30 Days
                             88.0 - 89.9                          $1,000
                             --------------------------------------------------
                             80.0 - 87.9                          $5,000
                             --------------------------------------------------
                             70.0 - 79.9                          $10,000
                             --------------------------------------------------
                             60.0 - 69.9                          $30,000
                             --------------------------------------------------
                             50.0 - 59.9                          $50,000
                             --------------------------------------------------
                             40.0 - 49.9                          $70,000
                             --------------------------------------------------
                             30.0 - 39.9                          $90,000
                             --------------------------------------------------
                             Less than 30.0                       $100,000
                             --------------------------------------------------
                             Percentage of Clean Claims
                             Adjudicated in 45 Days               Penalty
                             --------------------------------------------------
                             98.0 - 99.9                          $1,000
                             --------------------------------------------------
                             90.0 - 97.9                          $5,000
                             --------------------------------------------------
                             80.0 - 89.9                          $10,000
                             --------------------------------------------------
                             70.0 - 79.9                          $30,000
                             --------------------------------------------------
                             60.0 - 69.9                          $50,000
                             --------------------------------------------------
                             50.0 - 59.9                          $70,000
                             --------------------------------------------------
                             40.0 - 49.9                          $90,000
                             --------------------------------------------------
                             Less than 40.0                       $100,000
                             --------------------------------------------------
                             Percentage of All Claims             Penalty
                             Adjudicated in 90 Days
                             --------------------------------------------------
                             98.0 - 99.9                          $1,000
                             --------------------------------------------------
                             90.0 - 97.9                          $5,000
                             --------------------------------------------------
                             80.0 - 89.9                          $10,000
                             --------------------------------------------------
                             70.0 - 79.9                          $30,000
                             --------------------------------------------------
                             60.0 - 69.9                          $50,000
                             --------------------------------------------------
                             50.0 - 59.9                          $70,000
                             --------------------------------------------------
                             40.0 - 49.9                          $90,000
                             --------------------------------------------------
                             Less than 40.0                       $100,000
                             --------------------------------------------------
                             </TABLE>

               3.     PHYSICIAN INCENTIVE ARRANGEMENTS

                      a.     Federal financial participation is only available
                             for payments to Medicaid MCOs that are in
                             compliance with the Physician Incentive Plan (PIP)
                             requirements included under 42 C.F.R. 417.479.

                      b.     42 C.F.R. 417.479(a) permits MCOs to operate PIPs
                             only if: 1) no specific payment is made directly
                             or indirectly to a physician or physician group as
                             an inducement to reduce or limit Medically
                             Necessary services furnished to an enrollee; and
                             2) the disclosure, computation of Substantial
                             Financial Risk, Stop-Loss Protection, and enrollee
                             survey requirements of this section are met.

                                                                             115
<PAGE>

                      c.     MCOs must provide information specified in the
                             regulations to the Department and HCFA, upon
                             request. In addition, MCOs must provide the
                             information on their physician incentive plans to
                             any Medicaid client, upon request. MCOs that have
                             PIPs placing a physician or physician group at
                             Substantial Financial Risk for the cost of
                             services the physician or physician group does not
                             furnish must assure that the physician or
                             physician group has adequate Stop-Loss Protection.
                             MCOs that have PIPs placing a physician or
                             physician group at Substantial Financial Risk for
                             the cost of service the physician or physician
                             group does not furnish must also conduct surveys
                             of enrollees and disenrollees addressing their
                             satisfaction with the quality of services and
                             their degree of access to the services.

                      d.     MCOs must provide the following disclosure
                             information concerning its PIPs to the Department
                             prior to approval of the contract:

                             -  whether referral services are included in the
                                PIP plan,

                             -  the type of incentive arrangement used, i.e.
                                withhold bonus, capitation,

                             -  a determination of the percent of payment under
                                the contract that is based on the use of
                                referral services to determine if Substantial
                                Financial Risk exists,

                             -  panel size, and if patients are pooled, pooling
                                method used to determine if Substantial
                                Financial Risk exists,

                             -  assurance that the physician or physician group
                                has adequate stop-loss protection and the type
                                of coverage, if this requirement applies.

                             Where enrollee/disenrollee survey requirements
                             exist, MCOs must provide the survey results. In
                             addition, all MCOs must subsequently provide the
                             above disclosure information annually to the
                             Department.

                      e.     These PIP regulations apply to all MCOs and any of
                             their subcontracting arrangements that utilize a
                             PIP in their payment arrangements with individual
                             physicians or physician groups. PIP regulations
                             require that physicians and physician groups be
                             protected from risk beyond the stop-loss threshold.

                                                                             116
<PAGE>

             4.     RETROACTIVE ELIGIBILITY PERIOD

                      The Contractor shall not be responsible for any payments
                      owed to Providers for services that were rendered prior to
                      the effective date of a Member's enrollment into the
                      PH-MCO.

               5.     IN-NETWORK SERVICES

                      The Contractor shall be responsible for making timely
                      payment for Medically Necessary, covered services rendered
                      by Network Providers when:

                      a.     Services were rendered to treat a medical
                             emergency;

                      b.     Services were rendered under the terms of the
                             Contractor's agreement with the Provider;

                      c.     Services were prior authorized; or

                      d.     It is determined by the Department, after a
                             hearing, that the services should have been
                             authorized.

                      The Contractor will not be financially liable for services
                      rendered to treat a non-emergency condition in a hospital
                      emergency room (except to the extent required elsewhere by
                      law), unless the services were prior authorized or
                      otherwise conformed to the terms of the Contractor's
                      agreement with the Provider.

               6.     PAYMENTS FOR OUT-OF-NETWORK PROVIDERS

                      The Contractor will be responsible for making timely
                      payments to Out-of-Network Providers for Medically
                      Necessary, covered services when:

                      a.     Services were rendered to treat a medical
                             emergency;

                      b.     Services were prior authorized;

                      c.     It is determined by the Department, after a
                             hearing, that the services should have been
                             authorized; or

                      d.     A child enrolled in its plan is placed in emergency
                             substitute care and the county placement agency
                             cannot identify the child nor verify MA coverage.
                             See Exhibit O of this Agreement, Description of
                             Special Services.

                                                                             117
<PAGE>

                      The Contractor shall not be financially liable for
                      services rendered to treat a non-emergency condition in a
                      hospital emergency room (except to the extent required
                      elsewhere in law), unless the services were prior
                      authorized.

                      The Contractor must assume financial responsibility, in
                      accordance with applicable law, for emergency room
                      services and urgently needed services as defined in 42
                      C.F.R. Section 417.401 that are obtained by its Members
                      from Providers and suppliers outside the Contractor's
                      Provider Network even in the absence of the Contractor's
                      prior approval.

               7.     PAYMENTS TO FQHCS AND RURAL HEALTH CENTERS (RHCS)

                      The Contractor agrees to negotiate and pay rates to FQHCs
                      and RHCs comparable to other Providers who provide
                      comparable services in the Contractor's Provider Network.

                      The Contractor may require that an FQHC and RHC comply
                      with case management procedures that apply to other
                      entities that provide similar benefits or services.

               8.     LIABILITY DURING AN ACTIVE GRIEVANCE OR APPEAL

                      The Contractor shall not be liable to pay Claims to
                      Providers if the validity of the Claim is being challenged
                      by the Contractor through a Grievance or appeal, unless
                      the Contractor is obligated to pay the Claim or a portion
                      of the Claim through its agreement with the Provider.

               9.     FINANCIAL RESPONSIBILITY FOR DUAL ELIGIBLES

                      The Contractor must pay Medicare deductibles and
                      coinsurance amounts relating to any Medicare-covered
                      service for qualified Medicare beneficiaries in accordance
                      with Section 4714 of the Balanced Budget Act of 1997.

                      If no contracted PH-MCO rate exists or if the Provider of
                      the service is an Out-of-Network Provider, the Contractor
                      must pay deductibles and coinsurance up to the applicable
                      MA fee schedule for the service.

                      For Medicare services that are not covered by either MA or
                      the PH-MCO, the Contractor must pay cost-sharing to the
                      extent that the payment made under Medicare for the
                      service and the payment

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                      made by the PH-MCO do not exceed eighty percent (80%) of
                      the Medicare-approved amount.

                      The Contractor, its subcontractors and Providers are
                      prohibited from balance billing Members for Medicare
                      deductibles or coinsurance. The Contractor must ensure
                      that a Member who is eligible for both Medicaid and
                      Medicare benefits has the right to access a Medicare
                      product or service from the Medicare Provider of his/her
                      choice. The Contractor is responsible to pay any Medicare
                      coinsurance and deductible amount, whether or not the
                      Medicare provider is included in the Contractor's Provider
                      Network and whether or not the Medicare provider has
                      complied with the authorization requirements of the
                      Contractor.

               10.    THIRD PARTY LIABILITY (TPL)

                      The Contractor must comply with the third party liability
                      procedures defined by Section 1902(a)(25) of the Social
                      Security Act, 42 U.S.C.A. 1396(a)(25) and implemented by
                      the Department. Under this Agreement, the third party
                      liability responsibilities of the Department will be
                      allocated between the Department and the Contractor.

                      a.     COST AVOIDANCE ACTIVITIES

                             i.     The Contractor will have primary
                                    responsibility for cost avoidance through
                                    the Coordination of Benefits (COB) relative
                                    to federal and private health insurance-type
                                    resources including, but not limited to,
                                    Medicare, private health insurance,
                                    Employees Retirement Income Security Act of
                                    1974 (ERISA), 29 U.S.C.A. 1396a(a)(25)
                                    plans, and workers compensation. The
                                    Contractor must attempt to avoid initial
                                    payment of Claims, whenever possible, where
                                    federal or private health insurance-type
                                    resources are available. All cost-avoided
                                    funds must be reported to the Commonwealth
                                    via encounter data submissions and financial
                                    report 8A-D. The use of the COB flag,
                                    Medicare fields, and the Other Insurance
                                    Paid (OIP) field shall indicate that TPL has
                                    been pursued and the amount which has been
                                    cost-avoided. The Contractor shall not be
                                    held responsible for any TPL errors in the
                                    Department's Eligibility Verification System
                                    (EVS) or the Department's TPL file.

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                             ii.    The Contractor agrees to pay, and to require
                                    that its subcontractors pay, all Clean
                                    Claims for prenatal or preventive pediatric
                                    care (including EPSDT services to children),
                                    and services to children having medical
                                    coverage under a Title IV-D child support
                                    order to the extent the Contractor is
                                    notified by the Department of such support
                                    orders or to the extent the Contractor
                                    becomes aware of such orders, and then seek
                                    reimbursement from liable third parties. The
                                    Contractor recognizes that cost avoidance of
                                    these Claims is prohibited with the
                                    exception of hospital delivery Claims, which
                                    may be cost-avoided.

                             iii.   The Contractor may not deny or delay
                                    approval of otherwise covered treatment or
                                    services based upon third party liability
                                    considerations. The Contractor may neither
                                    unreasonably delay payment nor deny payment
                                    of Claims unless the probable existence of
                                    third party liability is established at the
                                    time the Claim is filed.

                      b.     POST-PAYMENT RECOVERIES

                             i.     Post-payment recoveries are categorized by
                                    (a) health-related insurance resources and
                                    (b) other resources. Health-related
                                    insurance resources are ERISA health benefit
                                    plans, Blue Cross/Blue Shield subscriber
                                    contracts, Medicare, private health
                                    insurance, workers compensation, and health
                                    insurance contracts.

                             ii.    The Department's TPL Section retains the
                                    sole and exclusive right to investigate,
                                    pursue, collect, and retain all "Other
                                    Resources" as defined in Section II of this
                                    Agreement, Definitions. Any correspondence
                                    or inquiry forwarded to the Contractor (by
                                    an attorney, provider of service, insurance
                                    carrier, etc.) relating to a personal injury
                                    accident or trauma-related medical service,
                                    or which in any way indicates that there is,
                                    or may be, legal involvement regarding the
                                    MA Consumer and the services which were
                                    provided, must be immediately forwarded to
                                    the Department's TPL Section. The Contractor
                                    may neither unreasonably delay payment nor
                                    deny payment of Claims because they involved
                                    an injury stemming from an accident such as
                                    a motor vehicle accident,

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                                    where the services are otherwise covered.
                                    Those funds recovered by the Commonwealth
                                    under the scope of these "Other Resources"
                                    shall be retained by the Commonwealth.

                             iii.   Due to potential time constraints involving
                                    cases subject to litigation, the Department
                                    must ensure that it identifies these cases
                                    and establishes its Claim before a
                                    settlement has been negotiated. Should the
                                    Department fail to identify and establish a
                                    Claim prior to settlement due to the
                                    Contractor's untimely submission of notice
                                    of legal involvement where the Contractor
                                    has received such notice, the amount of the
                                    Department's actual loss of recovery shall
                                    be assessed against the Contractor. The
                                    Department's actual loss of recovery shall
                                    not include the attorney's fees or other
                                    costs, which would not have been retained by
                                    the Department.

                             iv.    The Contractor has the sole and exclusive
                                    right to pursue, collect and retain all
                                    health-related insurance resources for a
                                    period of nine (9) months from the date of
                                    service or six (6) months after the date of
                                    payment, whichever is later. The
                                    Department's TPL Section may pursue,
                                    collect, and retain recoveries of all
                                    health-related insurance cases which are
                                    outstanding after the earlier of nine (9)
                                    months from the date of service or six (6)
                                    months after the date of payment. However,
                                    in those cases subject to this paragraph
                                    where payment is being pursued by the
                                    Contractor but, for whatever reason, has not
                                    been collected by the earlier of nine (9)
                                    months from the date of service or six (6)
                                    months after the date of payment, the
                                    Contractor shall notify the Department if
                                    action to recover has been initiated by the
                                    Contractor. In such cases, the Contractor
                                    shall retain exclusive responsibility for
                                    the cases while they are being actively
                                    pursued.

                             v.     Should the Department lose recovery rights
                                    to any Claim due to late or untimely filing
                                    of a Claim with the liable third party, and
                                    the untimeliness in billing that specific
                                    Claim is directly related to untimely
                                    submission of encounter data or additional
                                    records under special request, or
                                    inappropriate denial of Claims for accidents
                                    or emergency care in casualty

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                                    related situations. The amount of the
                                    unrecoverable Claim shall be assessed
                                    against the Contractor.

                             vi.    Encounter data that is not submitted to the
                                    Department in accordance with the data
                                    requirements and/or timeframes identified in
                                    this Agreement can possibly result in a loss
                                    of revenue to the Department. Strict
                                    compliance with these requirements and
                                    timeframes shall therefore be enforced by
                                    the Department and could result in the
                                    assessment of sanctions against the
                                    Contractor.

                             vii.   As part of its authority under paragraph iv.
                                    above, the Contractor is responsible for
                                    pursuing, collecting, and retaining
                                    recoveries of health-related insurance
                                    resources where the liable party has
                                    improperly denied payment based upon either
                                    lack of a Medically Necessary determination
                                    or lack of coverage. The Contractor is
                                    encouraged to develop and implement
                                    cost-effective procedures to identify and
                                    pursue cases which are susceptible to
                                    collection through either legal action or
                                    traditional subrogation and collection
                                    procedures.

               11.    HEALTH INSURANCE PREMIUM PAYMENT (HIPP) PROGRAM

                      The HIPP Program pays for employment-related health
                      insurance for MA Consumers when it is determined to be
                      cost effective. The cost effectiveness determination
                      involves the review of group health insurance benefits
                      offered by employers to their employees to determine if
                      the anticipated expenditures in MA payments are likely to
                      be greater than the cost of paying the premiums under a
                      group plan for those services.

                      The Department shall not purchase Medigap policies for
                      equally eligible MA Consumers in the zone.

               12.    REQUESTS FOR ADDITIONAL DATA

                      The Contractor must provide, at the Department's request,
                      such information not included in the encounter data
                      submissions that may be necessary for the administration
                      of TPL activity. The Contractor shall use its best efforts
                      to provide this information within fifteen (15) calendar
                      days of the Department's request. There are certain urgent
                      requests involving cases for minors that require
                      information within forty-eight (48) hours. Such
                      information may

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                      include, but is not limited to, individual medical records
                      for the express purpose of determining TPL for the
                      services rendered. Confidentiality of the information
                      shall be maintained as required by federal and state
                      regulations.

               13.    ACCESSIBILITY TO TPL DATA

                      The Department shall provide the Contractor with access to
                      data maintained on the TPL file.

               14.    DAMAGE LIABILITY

                      Liability for damages is identified in Section VII.D.10 of
                      this Agreement, Third Party Liability, due to the large
                      dollar value of many Claims which are potentially
                      recoverable by the Department's TPL Section.

               15.    ESTATE RECOVERY

                      Section 1412 of the Public Welfare Code, 62 P.S. 1412,
                      requires the Department to recover MA costs paid on behalf
                      of certain deceased individuals. Individuals age
                      fifty-five (55) and older who were receiving MA benefits
                      for any of the following services are affected:

                      a.     Public or private Nursing Facility services;

                      b.     Residential care at home or in a community setting;
                             or

                      c.     Any hospital care and prescription drug services
                             provided while receiving Nursing Facility services
                             or residential care at home or in a community
                             setting.

                      The applicable MA costs are recovered from the assets of
                      the individual's probate estate. The Department's TPL
                      Section is solely responsible for administering the Estate
                      Recovery Program.

               16.    AUDITS

                      The Contractor is responsible to comply with audit
                      requirements as specified in Exhibit WW of this Agreement,
                      HealthChoices Audit Clause.

               17.    RESTITUTION

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                      The Contractor shall make full and prompt restitution to
                      the Department, as directed by the Department, for any
                      payments received in excess of amounts due to the
                      Contractor under this Agreement whether such overpayment
                      is discovered by the Contractor, the Department, or other
                      third party.

SECTION VIII:  REPORTING REQUIREMENTS

        A.     GENERAL

               The Contractor must comply with state and federal reporting
               requirements that are set forth in this section and throughout
               this Agreement.

        B.     SYSTEMS REPORTS

               The Contractor must submit electronic files and data as specified
               by the Department. To the extent possible, the Department shall
               provide reasonable advance notice of such reports. These reports
               include, but are not limited to, the following (Refer to Exhibit
               CC of this Agreement, Data Support for PH-MCOs):

               1.     ENCOUNTER DATA AND SUBCAPITATION DATA REPORTS

                      The Contractor must record for internal use and submit to
                      the Department a separate record each time a Member has an
                      encounter with a Provider. A service rendered under this
                      Agreement is considered an encounter regardless of whether
                      or not it has an associated Claim. Every record that is
                      provided is considered to be an encounter and will require
                      the Contractor to submit a separate encounter data record
                      for each service received by a Member. The Provider's MAID
                      number must be used when submitting required encounter
                      data.

                      The Contractor must maintain appropriate systems and
                      mechanisms to obtain all necessary data from its health
                      care Providers to ensure its ability to comply with the
                      encounter data reporting requirements. The failure of a
                      health care Provider to provide the Contractor with
                      necessary encounter data shall not excuse the Contractor's
                      noncompliance with this requirement.

                      Effective on a date to be determined by the Department,
                      the Contractor must submit separate subcapitation records
                      for each advance payment made to a Contractor responsible
                      for all or part of a Member's medical care. If the payment
                      is a capitation payment, a separate record is required to
                      report the amount paid on behalf of each Member. Prior to
                      the effective date of this requirement, the

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                      Contractor must provide a periodic report with summary
                      information on subcapitation payments, consistent with the
                      content, format and due date requirements specified by the
                      Department.

                      The Contractor will be given a minimum of sixty (60) days
                      notification of any new edits or changes that DPW intends
                      to implement regarding encounter data.

                      a.     DATA FORMAT

                             The Contractor must submit encounter and
                             subcapitation data electronically over POSNet using
                             file transfer protocol (FTP). Subcapitation data
                             reporting currently being submitted via paper
                             reports will, at a future date, be required to be
                             transmitted electronically.

                             Encounter data files must be provided in ASCII text
                             format using the appropriate format for the five
                             different record types.

                      a.     TIMING OF DATA SUBMITTAL

                             Claims must be submitted by Providers to the
                             Contractor within one hundred eighty (180) days
                             after the date of service. It is acceptable for the
                             Contractor to include a requirement for more prompt
                             submissions of Claims or encounter records in
                             Provider Agreements. Claims adjudicated by a third
                             party vendor must be provided to the Contractor by
                             the end of the month following the month of
                             adjudication.

                             An encounter must be submitted and found acceptable
                             by the Department on or before the last calendar
                             day of the third month after the encounter's
                             Contractor payment/adjudication calendar month in
                             which the Contractor paid/adjudicated the
                             encounter. References to "accepted by the
                             Department" refer to encounter records sent to DPW
                             by the Contractor that have passed all Department
                             edits; records that fail any Department edits are
                             returned to the Contractor and must be corrected,
                             resubmitted to the Department, and pass all edits
                             before they are accepted by the Department.

                             One "initial" file and one "correction" file may be
                             submitted each weekday. If a file is received at
                             the DPW mainframe computer before 6 p.m. (Eastern
                             Time), it will be processed

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                             that weekday. If a file is received at the DPW
                             mainframe computer after 6 p.m. (Eastern Time), it
                             will be processed on the next weekday. Files
                             received at the DPW mainframe computer after 6 p.m.
                             on Friday are not processed until the following
                             Monday.

                             Acceptable subcapitation data must be submitted to
                             the Department within thirty (30) days after the
                             end of the month of the subcapitation payment data.

                      c.     DATA COMPLETENESS

                             The Contractor shall monitor the completeness and
                             accuracy of the encounter data from all Providers
                             and shall initiate corrective action, as necessary.

                      d.     FINANCIAL PENALTIES

                             The Contractor is required to provide complete,
                             accurate, and timely encounter data to the
                             Department, and to maintain complete medical
                             service history data. The Department may withhold a
                             portion of the monthly capitation payment as
                             reimbursement for financial penalties assessed.
                             Financial penalties shall be calculated monthly.

                             Assessment of financial penalties is based on the
                             identification of penalty occurrences. Encounter
                             Data Penalty occurrences/assessments of financial
                             penalties are outlined in Exhibit XX of this
                             Agreement, Encounter and Subcapitation Data Penalty
                             Occurrences.

                      e.     DATA VALIDATION

                             The Contractor agrees to assist the Department in
                             its validation of encounter data by making
                             available medical records and a sample of its
                             Claims data. The validation may be completed by
                             Department staff and/or independent, external
                             review organizations.

                      f.     SECONDARY RELEASE OF ENCOUNTER DATA

                             All encounter data recorded to document services
                             rendered to MA Consumers under this Agreement are
                             the property of the Department. Access to these
                             data is provided to the Contractor and its agents
                             for the sole purpose of operating the HealthChoices
                             Program under this Agreement. The

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                             Contractor and its agents are prohibited from
                             releasing any data resulting from this Agreement to
                             any third party without the advance written
                             approval of the Department. This prohibition does
                             not apply to internal quality improvement or
                             disease management activities undertaken by the
                             Contractor or its agents in the routine operation
                             of a managed care plan.

               2.     FEDERALIZING GA DATA REPORTING

                      The Contractor shall be required to submit a properly
                      formatted monthly file to the Department regarding
                      payments applicable to state-only general assistance (GA)
                      consumers. The file shall include data on hospital Claims
                      paid by the Contractor during the reporting month. The
                      files shall include data for three (3) types of hospital
                      services that are paid on a capitated basis, as listed
                      below:

                      -  Admissions to acute care hospitals

                      -  Admissions to rehabilitation hospitals

                      -  Outpatient hospital services, defined by the Department

                      The following types of information shall be included in
                      each record on the file:

                      -  Contractor

                      -  Provider

                      -  Consumer

                      -  Claim

                      -  Additional data elements as required.

                      Failure to comply with this requirement shall result in a
                      penalty equal to three (3) times the amount that applies
                      to other reporting requirements.

                      Additional Federalizing GA Data Reporting requirements can
                      be found in Exhibit CC of this Agreement, Data Support for
                      PH-MCOs.

               3.     THIRD PARTY RESOURCE IDENTIFICATION

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                      Third party resources identified by the Contractor, which
                      do not appear on the Department's TPL database, must be
                      supplied to the Department's TPL Section by the Contractor
                      on a monthly basis. The method of reporting shall be
                      electronic submission or hardcopy document, whichever is
                      deemed most convenient and efficient by the Contractor for
                      its individual use. For electronic submissions, the
                      Contractor must follow the required report format, data
                      elements, and tape specifications supplied by the
                      Department. For hardcopy submissions, the Contractor must
                      use an exact replica of the TPL resource referral form
                      supplied by the Department.

        C.     OPERATIONS REPORTS

               The Contractor is required to submit such reports as specified by
               the Department to enable the Department to monitor the
               Contractor's internal operations and service delivery. These
               reports include, but are not limited to, the following:

               1.     CONTINUOUS QUALITY IMPROVEMENT

                      The Contractor agrees to provide the Department with
                      uniform data on services, QM, UM and Member
                      satisfaction/complaint data on a regular basis. All
                      quality reports must be submitted according to
                      specifications defined by the Department. The Contractor
                      also agrees to cooperate with the Department in carrying
                      out data validation steps.

               2.     FEDERAL WAIVER REPORTING REQUIREMENTS

                      As a condition of approval of the Waiver for the operation
                      of HealthChoices in Pennsylvania, the Health Care
                      Financing Administration has imposed specific reporting
                      requirements related to the AIDS Home and Community Based
                      Waiver and Special Needs population, particularly related
                      to Special Needs services provided to children. The
                      Contractor must provide the information necessary to meet
                      these reporting requirements. To the extent possible, the
                      Department will provide reasonable advance notice of such
                      reports.

               3.     COMPLAINT, GRIEVANCE AND DPW FAIR HEARING DATA

                      The Contractor agrees to requirements governing the
                      submission of Complaint, Grievance and DPW Fair Hearing
                      process data found at Section VIII.C.3 of this Agreement,
                      Complaint, Grievance and DPW Fair Hearing Data.

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<PAGE>

                      The Contractor agrees to submit a quarterly Complaint,
                      Grievance and DPW Fair Hearing process report no later
                      than forty-five (45) days from the end of the quarter that
                      conforms to the Department's and DOH's specifications and
                      includes at a minimum:

                      -  Total informal Complaints and Member informal Complaint
                         rate by medical nature of Complaint (quality of care,
                         days to appointment, specialist referral, request for
                         interpreter, denial of ER Claim, etc.); and by
                         non-medical nature of Complaint (PH-MCO office staff,
                         office waiting time, etc.).

                      -  Total Grievances and Grievance rate using the
                         indicators in the bullet above.

                      -  Total Provider appeals by nature of Grievance (quality
                         of care, denial of referral request, denial of Claim,
                         lack of timely payment, etc.) and resolution.

                      The Contractor agrees to report its Provider appeal data
                      and utilization management outcomes to the Department
                      utilizing the standardized report form specified by the
                      Department.

               4.     EPSDT REPORTS

                      The Contractor must submit EPSDT reports in the time and
                      manner prescribed by the Department. The Contractor shall
                      be responsible for maintaining appropriate systems and
                      mechanisms to obtain all necessary encounter data from its
                      health care Providers to ensure its ability to comply with
                      the EPSDT reporting requirements. The failure of a health
                      care Provider to provide the Contractor with necessary
                      EPSDT encounter data shall not excuse the Contractor's
                      compliance with this requirement.

                      The Contractor must submit reports providing all data
                      regarding children in substitute care (e.g., the number of
                      children enrolled in substitute care who have received
                      comprehensive EPSDT screens, the number who have received
                      blood level assessments, etc.).

               5.     HEALTHY BEGINNINGS PLUS REPORTING

                      The Contractor must report certain Healthy Beginnings Plus
                      (HBP) statistics to the Department. HBP reporting periods
                      are January 1 through June 30, and July 1 through December
                      31. The Contractor must submit a semi-annual report to the
                      Department within sixty (60) days from the end of the
                      six-month service period. See Exhibit YY of this
                      Agreement, MCO Obstetrical Reporting Form.

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               6.     MEMBER HOTLINE ACTIVITIES REPORT

                      The Contractor's Member services function shall: provide
                      reports/analyses of hotline activity in a format and
                      frequency to be established by the Department.

               7.     FRAUD AND ABUSE

                      The Contractor must submit to the Department quarterly and
                      annual statistical reports which relate to its Fraud and
                      Abuse detection and sanctioning activities, as well as an
                      annual update in the aggregate.

               8.     PROVIDER NETWORK

                      The Contractor must report the composition of its Provider
                      Network to the Department and receive advance written
                      approval from the Department prior to the end of the
                      Readiness Review. Updates to the Provider file must be
                      provided to the Department monthly. A list of Network
                      composition requirements are found in Section V.S.1 of
                      this Agreement, Network Composition. The file layout for
                      the provider file can be found in the HealthChoices
                      Proposers' Library.

               9.     PROVIDER DISPUTE RESOLUTION SYSTEM

                      The Contractor must submit to the Department copies of the
                      completed Provider Dispute Resolution System Quarterly and
                      Annual Reports relating to Provider specific disputes and
                      resolutions.

               10.    REPORTS SUBMISSION SCHEDULE

                      Reports as defined by the Department must be submitted
                      according to the following schedule unless the Department
                      specifies a different due date:

                      QUARTERLY REPORTS:
                        <TABLE>
                        <CAPTION>
                             Quarter Ending                      Report Due
                            <S>                                 <C>
                             March 31                            May 15
                             June 30                             August 15
                             September 30                        November 15
                             December 31                         February 15
                        </TABLE>

                                                                             130
<PAGE>

                      ANNUAL REPORTS:

                             Annual Reports are to be submitted ninety (90) days
                             after the end of the calendar year.

               11.    HEDIS INCLUDING CAHPS

                      The Contractor must submit annual reports based on the
                      Medicaid HEDIS outcome measures, as outlined in the most
                      current version of the Medicaid HEDIS applicable to the
                      reporting year. See Exhibit M(4) of this Agreement, HEDIS.
                      The Consumer Assessment of Health Plan Satisfaction
                      (CAHPS) 2.0H surveys (Adult and Child) are part of the
                      HEDIS required by the Department. Those HEDIS measures
                      related to behavioral health issues are not the
                      responsibility of the Contractor. In addition, the
                      Contractor's voluntary population is not included in these
                      reports since the HealthChoices Program does not encompass
                      the voluntary plans.

               12.    SERB

                      The Contractor's Quarterly Utilization Report (or similar
                      type document containing the same information) must be
                      completed and submitted to the Contracting Officer and the
                      Bureau of Contract Administration and Business Development
                      within ten (10) business days at the end of each quarter
                      the contract is in force. If there was no activity, the
                      form must also be completed, stating "No activity in this
                      quarter."

        D.     FINANCIAL REPORTS

               The Contractor agrees to submit such reports as specified by the
               Department to assist the Department in assessing the Contractor's
               financial viability and to ensure compliance with this Agreement.

               The Department shall distribute financial data reporting
               requirements to the Contractor. The Contractor will furnish all
               financial reports timely and accurately, with content in the
               format prescribed by the Department.

        E.     EQUITY

               Not later than May 25, August 25, and November 25 of each
               agreement year, the Contractor shall provide the Department with:

               -  A copy of quarterly reports filed with DOI, for the quarter
                  ending the last day of the second previous month.

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               -  A statement that its equity is in compliance with the equity
                  requirements or is not in compliance with the equity
                  requirements.

               -  If equity is not in compliance with the equity requirements,
                  the Contractor shall supply a report that provides an analysis
                  of its fiscal health and steps that management plans to take,
                  if any, to improve fiscal health.

               Not later than March 10 of each agreement year, the Contractor
               shall provide the Department with:

               -  A copy of unaudited annual reports filed with DOI.

               -  A statement that its equity is in compliance with the equity
                  requirements or is not in compliance with the equity
                  requirements.

               -  If equity is not in compliance with the equity requirements,
                  the Contractor shall supply a report that provides an analysis
                  of its fiscal health and steps that management plans to take,
                  if any, to improve fiscal health.

        F.     CLAIMS PROCESSING REPORTS

               The Contractor shall provide the Department with monthly Claims
               processing reports with content and in a format specified by DPW.
               The reports are due on the fifth (5th) calendar day of the second
               subsequent month.

               Failure to submit a Claims processing report timely that is
               accurate and fully compliant with the reporting requirements
               shall result in the following penalties: $200 per day for the
               first ten (10) calendar days from the date that the report is due
               and $1,000 per day for each calendar day thereafter.

        G.     PRESENTATION OF FINDINGS

               The Contractor must obtain advance written approval from the
               Department before publishing or making formal public
               presentations of statistical or analytical material based on its
               HealthChoices membership.

        H.     REFERENCE INFORMATION

               The Department will make files available to the Contractor on a
               routine basis that allow the Contractor to effectively meet its
               obligation to provide services and record information consistent
               with this Agreement. See

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               Exhibit CC of this Agreement, Data Support for PH-MCOs, for
               information on the data files the Department will provide to the
               Contractor.

        I.     SANCTIONS

               1.     The Department may impose sanctions for non-compliance
                      with the requirements under this Agreement in addition to
                      any penalties described in Exhibit D of this Agreement,
                      Standard Contract Terms and Conditions for Services and in
                      Exhibit E of this Agreement, DPW Addendum to Standard
                      Contract Terms and Conditions. The sanctions which can be
                      imposed shall depend on the nature and severity of the
                      breach, which the Department, in its reasonable
                      discretion, shall determine as follows:

                      a.     Imposing civil monetary penalties of a minimum of
                             $1,000.00 per day for non-compliance;

                      b.     Requiring the submission of a corrective action
                             plan;

                      c.     Limiting enrollment of new MA Consumers;

                      d.     Suspension of payments;

                      e.     Temporary management subject to applicable federal
                             or state law; and/or

                      f.     Termination of the Agreement.

               2.     Where this Agreement provides for a specific sanction for
                      a defined infraction, the Department may, at its
                      discretion, apply the specific sanction provided for the
                      non-compliance or apply any of the general sanctions set
                      forth in Section VIII.I of this Agreement, Sanctions.
                      Specific sanctions contained in this Agreement include the
                      following:

                      a.    Claims Processing: Sanctions related to Claims
                            processing are provided in Section VIII.I of this
                            Agreement, Sanctions.

                      b.    Report or File, exclusive of Audit Reports: If the
                            Contractor fails to provide any report or file that
                            is specified by this Agreement by the applicable due
                            date, or if the Contractor provides any report or
                            file specified by this Agreement that does not meet
                            established criteria, a subsequent payment to the
                            Contractor may be reduced by the Department. The
                            reduction shall equal the number of days that elapse
                            between the due date and the day that the Department

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                            receives a report or file that meets established
                            criteria, multiplied by the average
                            Per-Member-Per-Month capitation rate that applies to
                            the first month of the agreement year. If the
                            Contractor provides a report or file on or before
                            the due date, and if the Department notifies the
                            Contractor after the 15th calendar day after the due
                            date that the report or file does not meet
                            established criteria, no reduction in payment shall
                            apply to the sixteenth (16th) day after the due date
                            through the date that the Department notifies the
                            Contractor.

                      c.    Federalizing GA Data Reporting:  The penalty for
                            failure to comply with the Federalizing GA Data
                            Reporting requirement is defined in Section VIII.B.2
                            of this Agreement, Federalizing GA Data Reporting.

                      d.    Encounter Data Reporting: The penalty for late
                            reporting of encounter data is set forth in Section
                            VIII.B of this Agreement, Systems Reports, and
                            Exhibit XX of this Agreement, Encounter and
                            Subcapitation Data Penalty Occurrences.

                      e.    Marketing: The sanctions for engaging in unapproved
                            marketing practices are set forth in Section V.F.3
                            of this Agreement, Contractor Outreach Activities.

                      f.    Access Standard: The sanction for non-compliance
                            with the access standard is set forth in Section
                            V.S.14 of this Agreement, Compliance with Access
                            Standards.

                      g.    Subcontractor Prior Approval: The Contractor's
                            failure to obtain advance written approval of a
                            subcontract will result in the application a
                            penalty of one (1) month's capitation rate for a
                            categorically needy adult female TANF consumer for
                            each day that the subcontractor was in effect
                            without the Department's approval.

        J.     NON-DUPLICATION OF FINANCIAL PENALTIES

               If the Department assesses a financial penalty pursuant to one of
               the provisions of Section VIII.I of this Agreement, Sanctions, it
               shall not impose a financial sanction pursuant to Section VIII.I
               with respect to the same infraction.

SECTION IX:  REPRESENTATIONS AND WARRANTIES OF THE CONTRACTOR

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        A.     ACCURACY OF PROPOSAL

               The Contractor represents and warrants that the representations
               made to the Department in the Proposal are true and correct. The
               Contractor further represents and warrants that all of the
               information submitted to the Department in or with the Proposal
               is accurate and complete in all material respects. The Contractor
               agrees that such representations shall be continuing ones, and
               that it is the Contractor's obligation to notify the Department
               within ten (10) business days, of any material fact, event, or
               condition which arises or is discovered subsequent to the date of
               the Contractor's submission of the Proposal, which affects the
               truth, accuracy, or completeness of such representations.

        B.     DISCLOSURE OF INTERESTS

               The Contractor must disclose to the Department, in writing, the
               name of any person or entity having a direct or indirect
               ownership or control interest of five percent (5%) or more in the
               Contractor. The Contractor must inform the Department, in
               writing, of any change in or addition to the ownership or control
               of the Contractor. Such disclosure shall be made within thirty
               (30) days of any change or addition. The Contractor acknowledges
               and agrees that any failure to comply with this provision in any
               material respect, or making of any misrepresentation which would
               cause the Contractor's application to be precluded from
               participation in the MA Program, shall entitle the Department to
               recover all payments made to the Contractor subsequent to the
               date of the misrepresentation.

        C.     DISCLOSURE OF CHANGE IN CIRCUMSTANCES

               The Contractor agrees to report to the Department, as well as the
               Departments of Health and Insurance, within ten (10) business
               days of the Contractor's notice of same, any change in
               circumstances that may have a material adverse affect upon
               Contractor's or Contractor's parent(s)' financial or operational
               conditions. Such reporting shall be triggered by and include, by
               way of example and without limitation, the following events, any
               of which shall be presumed to be material and adverse:

               1.     Suspension or debarment of Contractor, Contractor's parent
                      (s), or any Affiliate or Related Party of either, by any
                      state or the federal government;

               2.     The Contractor may not knowingly have a person act as a
                      director, officer, partner or person with beneficial
                      ownership of more than five percent (5%) of the
                      Contractor's equity who has been debarred from
                      participating in procurement activities under federal
                      regulations.

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               3.     Notice of suspension or debarment or notice of an intent
                      to suspend/debar issued by any state or the federal
                      government to Contractor, Contractor's parent(s), or any
                      Affiliate or Related Party of either; and

               4.     Any new or previously undisclosed lawsuits or
                      investigations by any federal or state agency involving
                      Contractor, Contractor's parent(s), or any affiliate or
                      related party of either, which would have a material
                      impact upon the Contractor's financial condition or
                      ability to perform under this Agreement.

        D.     SERB COMMITMENT

               Contractor's SERB commitment as set forth in Appendix 5 of this
               Agreement, Contractor SERB Commitment, is hereby incorporated as
               a contractual obligation during the term of this Agreement. The
               Contractor shall make every reasonable effort to utilize SERB
               services. The Contractor shall submit quarterly reports to the
               Department outlining SERB utilization.

               All contracts containing SERB participation must also include a
               provision requiring the Contractor to meet and maintain those
               commitments made to SERBs at the time of submittal or contract
               negotiation, unless a change in the commitment is approved by the
               contracting Commonwealth agency upon recommendation by the Bureau
               of Contract Administration and Business Development (BCABD). All
               contracts containing SERB participation must include a provision
               requiring SERB subcontractors and SERBs in a joint venture to
               incur at least fifty percent (50%) of the cost of the subcontract
               or SERB portion of the joint venture, not including materials.

               Commitments to Minority Business Enterprise (MBE) and Women's
               Business Enterprise (WBE) firms made at the time of bidding must
               be maintained throughout the term of the contract. Any proposed
               change must be submitted to BCABD which will make a
               recommendation as to a course of action to the contracting
               officer.

               If a contract is assigned to another contractor, the new
               contractor must maintain the SERB participation of the original
               contract.

SECTION X:  DURATION OF AGREEMENT AND RENEWAL

        A.     INITIAL TERM

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               This Agreement shall have an initial term of five (5) years and
               three (3) months, commencing on October 1, 2001, the "Initial
               Term", unless sooner terminated in accordance with Section XI of
               this Agreement, Termination and Default; provided that no court
               order, administrative decision, or action by any other
               instrumentality of the United States Government or the
               Commonwealth of Pennsylvania is outstanding which prevents
               commencement of this Agreement.

        B.     RENEWAL

               The Department shall have the option to renew this Agreement for
               an additional three (3) year period after the expiration of the
               Initial Term. The Department shall give written notice to the
               Contractor one hundred twenty (120) days prior to the expiration
               of the Initial Term as to whether it wishes to renew this
               Agreement. If the Department exercises its option to renew this
               Agreement, rate discussions shall commence promptly after notice
               of the same.

               Upon expiration of the Initial Term, the Agreement currently in
               effect will continue to be effective for a period of one hundred
               and twenty (120) days if the Contractor and the Department agree
               to a renewal term, but cannot reach resolution of renewal
               contract terms, or if the parties have not proceeded to terminate
               the Agreement in accordance with Section XI of this Agreement,
               Termination and Default.

SECTION XI:  TERMINATION AND DEFAULT

        A.     TERMINATION BY THE DEPARTMENT

               This Agreement may be terminated by the Department upon the
               happening of any of the following events and upon compliance with
               the notice provisions set forth below:

               1.     TERMINATION FOR CONVENIENCE UPON NOTICE

                      The Department may terminate this Agreement at any time
                      for convenience upon giving one hundred twenty (120) days
                      advance written notice to the Contractor. The effective
                      date of the termination shall be the last day of the month
                      in which the one hundred twentieth (120th) day falls.

               2.     TERMINATION FOR CAUSE

                      The Department may terminate this Agreement for cause upon
                      forty-five (45) days written notice, which notice shall
                      set forth the grounds for termination and, with the
                      exception of termination under

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                      Section XI.A.2.b below, shall provide the Contractor with
                      forty-five (45) days in which to implement corrective
                      action and cure the deficiency. If corrective action is
                      not implemented to the satisfaction of the Department
                      within the forty-five (45) day cure period, the
                      termination shall be effective at the expiration of the
                      forty-five (45) day cure period. "Cause" shall mean the
                      following for the purposes of termination under this
                      Agreement:

                      a.     The Contractor defaults in the performance of any
                             material duties or obligations hereunder or is in
                             material breach of any provision of this Agreement;
                             or

                      b.     The Contractor commits an act of theft or Fraud
                             against the Department, any state agency, or the
                             Federal Government; or

                      c.     An adverse material change in circumstances as
                             described in Section IX.C of this Agreement,
                             Disclosure of Change in Circumstances.

               3.     TERMINATION DUE TO UNAVAILABILITY OF FUNDS/APPROVALS

                      The Department may terminate this Agreement immediately
                      upon the happening of any of the following events:

                      a.     Notification by the United States Department of
                             Health and Human Services of the withdrawal of
                             federal financial participation in all or part of
                             the cost hereof for covered services/contracts; or

                      b.     Notification that there shall be an unavailability
                             of funds available for the HealthChoices Program;
                             or

                      c.     Notification that the federal approvals necessary
                             to operate the HealthChoices Program shall not be
                             retained; or

                      d.     Notification by the Pennsylvania Insurance
                             Department or Health Department that the authority
                             under which the Contractor operates is subject to
                             suspension or revocation proceedings or sanctions,
                             has been suspended, limited, or curtailed to any
                             extent, or has been revoked, or has expired and
                             shall not be renewed.

        B.     TERMINATION BY THE CONTRACTOR

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               The Contractor may terminate this Agreement at any time upon
               giving one hundred twenty (120) days advance written notice to
               the Department. The effective date of the termination shall be
               the last day of the month in which the one hundred twentieth
               (120th)day falls.

        C.     RESPONSIBILITIES OF THE CONTRACTOR UPON TERMINATION

               1.     CONTINUING OBLIGATIONS

                      Termination or expiration of this Agreement shall not
                      discharge the obligations of the Contractor with respect
                      to services or items furnished prior to termination,
                      including retention of records and verification of
                      overpayments or underpayments. Termination or expiration
                      shall not discharge the Department's payment obligations
                      to the Contractor or the Contractor's payment obligations
                      to its subcontractors.

               2.     NOTICE TO MEMBERS

                      In the event that this Agreement is terminated pursuant to
                      Sections XIII.A or XIII.B above, or expires without a new
                      contract in place, the Contractor shall notify all Members
                      of such termination or such expiration at least forty-five
                      (45) days in advance of the effective date of termination,
                      if practical. The Contractor shall be responsible for
                      coordinating the continuation of care for Members who are
                      undergoing treatment for an acute condition.

               3.     SUBMISSION OF INVOICES

                      Upon termination, the Contractor shall submit to the
                      Department all outstanding invoices for allowable services
                      rendered prior to the date of termination in the form
                      stipulated by the Department. Such invoices shall be
                      submitted promptly but in no event later than forty-five
                      (45) days from the effective date of termination. Invoices
                      submitted later than forty-five (45) days from the
                      effective date of termination shall not be payable.

               4.     FAILURE TO PERFORM

                      If the Department terminates a contract due to failure to
                      perform, the Department may add that PH-MCO's
                      responsibility to the responsibilities of one (1) or more
                      different PH-MCOs who are also operating within the
                      context of the HealthChoices Program in the zone, subject
                      to consent by the PH-MCO which would gain that
                      responsibility. The Department will develop a transition
                      plan should

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                      it choose to terminate or not extend a contract with one
                      (1) or more PH-MCOs operating the HealthChoices Program in
                      the zone.

                      During the final quarter of this Agreement, the Contractor
                      will work cooperatively with, and supply program
                      information to, any subsequent contractors. Both the
                      program information and the working relationship among the
                      PH-MCOs will be defined by the Department.

                      Upon termination or expiration of this Agreement, the
                      Contractor must:

                      a.    Provide the Department with all information deemed
                            necessary by the Department within thirty (30) days
                            of the request;

                      b.    Be financially responsible for MA Claims with dates
                            of service through the day of termination, except as
                            provided in c. below, including those submitted
                            within established time limits after the day of
                            termination;

                      c.    Be financially responsible for hospitalized patients
                            through the date of discharge or thirty-one (31)
                            days after termination or expiration of this
                            Agreement, whichever is earlier;

                      d.    Be financially responsible for services rendered
                            through 11:59 p.m. on the day of termination, except
                            as provided in c. above, for which payment is denied
                            by the Contractor and subsequently approved upon
                            appeal by the Provider;

                      e.    Be financially responsible for MA Consumer appeals
                            of adverse decisions rendered by the Contractor
                            concerning treatment of services requested prior to
                            termination which are subsequently overturned at a
                            DPW Fair Hearing or Grievance proceeding; and

                      f.    Arrange for the orderly transfer of patient care
                            and patient records to those Providers who will be
                            assuming care for the Member. For those Members in a
                            course of treatment for which a change of providers
                            could be harmful, the Contractor must continue to
                            provide services on a FFS basis until that treatment
                            is concluded or appropriate transfer of care can be
                            arranged.

        D.     TRANSITION AT EXPIRATION AND/OR TERMINATION OF AGREEMENT

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               A transition period shall begin prior to the last day the
               Contractor awarded this Agreement is responsible for operating
               under this Agreement, if no new contract is in place. During the
               transition period, the Contractor shall work cooperatively with
               any subsequent contractor and the Department. Both the program
               information and the working relationship between the two
               contractors shall be defined by the Department. The length of the
               transition period shall be no less than three (3) months and no
               more than six (6) months in duration.

               All costs relating to the transfer of materials and
               responsibilities will be paid by the Contractor as a normal part
               of doing business with the Department.

               The Contractor shall be responsible for the provision of
               necessary information to the new contractor and/or the Department
               during the transition period to ensure a smooth transition of
               responsibility. The Department shall define the information
               required during this period and time frames for submission, and
               may solicit input from the PH-MCOs involved.

SECTION XII:  RECORDS

        A.     FINANCIAL RECORDS RETENTION

               1.     The Contractor shall maintain and shall cause its
                      subcontractors to maintain all books, records, and other
                      evidence pertaining to revenues, expenditures, and other
                      financial activity pursuant to this Agreement in
                      accordance with the standards and procedures specified in
                      Section V.O.5 of this Agreement, Records Retention.

               2.     The Contractor agrees to submit to the Department or to
                      the Secretary of Health and Human Services or their
                      designees, within thirty-five (35) days of a request,
                      information related to the Contractor's business
                      transactions which are related to the provision of
                      services for the HealthChoices Program pursuant to this
                      Agreement which shall include full and complete
                      information regarding:

                      a.    The Contractor's ownership of any subcontractor with
                            whom the Contractor has had business transactions
                            totaling more than $25,000 during the twelve (12)
                            month period ending on the date of the request; and

                      b.    Any significant business transactions between the
                            Contractor and any wholly-owned supplier or between
                            the

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                            Contractor and any subcontractor during the five (5)
                            year period ending on the date of the request.

               3.     The Contractor agrees to include the requirements set
                      forth in Section XIII in this Agreement, Subcontractual
                      Relationships, in all contracts it enters with
                      subcontractors under the HealthChoices Program, and to
                      ensure that all persons and/or entities with whom it so
                      contracts agree to comply with said provisions.

        B.     OPERATIONAL DATA REPORTS

               The Contractor shall maintain and shall cause its subcontractors
               to maintain all source records for data reports in accordance
               with the procedures specified in Section V.O.5 of this Agreement,
               Records Retention.

        C.     MEDICAL RECORDS RETENTION

               The Contractor shall maintain and shall cause its subcontractors
               to maintain all medical records in accordance with the procedures
               outlined in Section V.O.5 of this Agreement, Records Retention.

               The Contractor must provide MA Consumers medical records to the
               Department or its contractor(s) within fifteen (15) business days
               of the Department's request.

        D.     REVIEW OF RECORDS

               1.     The Contractor shall make all records relating to the
                      HealthChoices Program, including but not limited to, the
                      records referenced in this Section, available for audit,
                      review, or evaluation by the Department, or federal
                      agencies. Such records shall be made available on site at
                      the Contractor's chosen location, subject to the
                      Department's approval, during normal business hours or
                      through the mail. The Department shall, to the extent
                      required by law, maintain as confidential any confidential
                      information provided by the Contractor.

               2.     In the event that the Department, or federal agencies
                      request access to records after the expiration or
                      termination of this Agreement or at such time that the
                      records no longer are required by the terms of this
                      Agreement to be maintained at the Contractor's location,
                      but in any case, before the expiration of the period for
                      which the Contractor is required to retain such records,
                      the Contractor, at its own expense, shall send copies of
                      the requested

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                      records to the requesting entity within thirty (30) days
                      of such request.

SECTION XIII:  SUBCONTRACTUAL RELATIONSHIPS

        A.     COMPLIANCE WITH PROGRAM STANDARDS

               As part of its contracting or subcontracting, with the exception
               of Provider Agreements which are outlined in Section V.S.2 of
               this Agreement, Provider Agreements, the Contractor agrees that
               it shall comply with the procedures set forth in Section V.O.3 of
               this Agreement, Contracts and Subcontracts.

               The written information that must be provided to the Department
               prior to the awarding of any contract or Subcontract must provide
               disclosure of ownership interests of five percent (5%) or more in
               any entity or subcontractor.

               All contracts and Subcontracts must be in writing and must
               contain all items set forth in this Agreement and Exhibit AAA,
               Internal Operations Contract Monitoring Guidelines.

               The Contractor shall require its subcontractors to provide
               written notification of a denial, partial approval, reduction, or
               termination of service or coverage, or a change in the level of
               care, using the standard form notice outlined in Exhibit M(1) of
               this Agreement, Quality Management and Utilization Management
               Program Requirements.

               In addition, all contracts or Subcontracts that cover the
               provision of medical services to the Contractor's Members must
               include the following provisions:

               1.     A requirement for cooperation for the submission of all
                      encounter data for all services provided within the
                      timeframes required in Section VIII of this Agreement,
                      Reporting Requirements, no matter whether reimbursement
                      for these services is made by the Contractor either
                      directly or indirectly through capitation.

               2.     Language which ensures compliance with all applicable
                      federal and state laws.

               3.     Language which prohibits gag clauses which would limit the
                      subcontractor from disclosure of Medically Necessary or
                      appropriate health care information or alternative
                      therapies to Members, other health care professionals, or
                      to the Department.

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<PAGE>

               4.     A requirement that ensures that the Department has ready
                      access to any and all documents and records of
                      transactions pertaining to the provision of services to MA
                      Consumers.

               5.     The definition of Medically Necessary as outlined in
                      Section II of this Agreement, Definitions and Acronyms.

               6.     The Contractor must ensure, if applicable, that its
                      Subcontracts adhere to the standards for Network
                      composition and adequacy.

               7.     Should the Contractor use a subcontracted utilization
                      review entity, the Contractor must ensure that its
                      subcontractors process each request for benefits in
                      accordance with Section V.B.1 of this Agreement, General
                      Prior Authorization Requirements.

               8.     Should the Contractor subcontract with an entity to
                      provide any information systems services, the Subcontract
                      must include provisions for a transition plan in the event
                      that the Contractor terminates the Subcontract or enters
                      into a Subcontract with a different entity. This
                      transition plan must include information on how the data
                      shall be converted and made available to the new
                      subcontractor. The data must include all historical Claims
                      and service data.

               The Contractor must make all necessary revisions to its contracts
               and Subcontracts to be in compliance with the requirements set
               forth in Section XIII.A of this Agreement, Compliance with
               Program Standards. Revisions may be completed as contracts and
               Subcontracts become due for renewal provided that all contracts
               and Subcontracts are amended within one (1) year of execution of
               this Agreement with the exception of the encounter data
               requirements, which must be amended immediately, if necessary, to
               ensure that all subcontractors are submitting encounter data to
               the Contractor within the timeframes specified in Section VIII.B
               of this Agreement, Systems Reports.

        B.     CONSISTENCY WITH POLICY STATEMENTS

               The Contractor agrees that its agreements with all Providers
               shall be consistent, as may be applicable, with the policy
               statements governing HMO Contracting with Integrated Delivery
               Systems issued by the Pennsylvania Department of Health on April
               6, 1996 and those issued by the Pennsylvania Department of
               Insurance on April 6, 1996. (26 Pa. Bulletin 1629, et seq.
               [04/06/96]).

SECTION XIV:  CONFIDENTIALITY

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        A.     The Contractor shall comply with all applicable federal and state
               laws regarding the confidentiality of medical records. The
               Contractor shall also cause each of its subcontractors to comply
               with all applicable federal and state laws regarding the
               confidentiality of medical records. The Contractor shall comply
               with Exhibit M(1) of this Agreement, Quality Management and
               Utilization Management Program Requirements, regarding
               maintaining confidentiality of data. The federal and state laws
               with regard to confidentiality of medical records include, but
               are not limited to: Mental Health Procedures Act, 50 P.S. 7101
               et seq.; Confidentiality of HIV-Related Information Act, 35 P.S.
               7601 et seq.; and the Pennsylvania Drug and Alcohol Abuse
               Contract Act, 71 P.S. 1690.101 et seq., 42 U.S.C. 1396a(a)(7);
               62 P.S. 404(a); 55 Pa. Code 105.1 et seq.; and 42 C.F.R.
               431.300.

        B.     The Contractor shall be liable for any state or federal fines,
               financial penalties, or damages levied upon the Department for a
               breach of confidentiality due to the negligent or intentional
               conduct of the Contractor in relation to the Contractor's
               systems, staff, or other area of responsibility.

        C.     The Contractor agrees to return all data and material obtained in
               connection with this Agreement and the implementation thereof,
               including confidential data and material, at the Department's
               request. No material can be used by the Contractor for any
               purpose after the expiration or termination of this Agreement.
               The Contractor also agrees to transfer all such information to a
               subsequent contractor at the direction of the Department.

        D.     The Contractor considers its financial reports and information,
               marketing plans, provider rates, trade secrets, information or
               materials relating to the Contractor's software, databases or
               technology, and information or materials licensed from, or
               otherwise subject to contractual nondisclosure rights of third
               parties, which would be harmful to the Contractor's competitive
               position to be confidential information. This information shall
               not be disclosed by the Department to other parties except as
               required by law or except as may be determined by the Department
               to be related to the administration and operation of the
               HealthChoices Program. The Department will notify the Contractor
               when it determines that disclosure of information is necessary
               for the administration of the HC Program. The Contractor will be
               given the opportunity to respond to such a determination prior
               to the disclosure of the information.

        E.     The Contractor is entitled to receive all information relating to
               the health status of its Members in accordance with applicable
               confidentiality laws.

SECTION XV:  INDEMNIFICATION AND INSURANCE

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        A.     INDEMNIFICATION

               1.     The Contractor shall indemnify and hold the Department and
                      the Commonwealth of Pennsylvania, their respective
                      employees, agents, and representatives free and harmless
                      against any and all liabilities, losses, settlements,
                      Claims, demands, and expenses of any kind (including, but
                      not limited to, attorneys' fees) which may result or arise
                      out of any dispute of any kind by and between the
                      Contractor and its subcontractors with Members, agents,
                      clients, or any defamation, malpractice, fraud,
                      negligence, or intentional misconduct caused or alleged to
                      have been caused by the Contractor or its agents,
                      subcontractors, employees, or representatives in the
                      performance or omission of any act or responsibility
                      assumed by the Contractor pursuant to this Agreement.

               2.     The Contractor shall indemnify and hold harmless the
                      Department and the Commonwealth of Pennsylvania from any
                      audit disallowance imposed by the federal government
                      resulting from the Contractor's failure to follow state or
                      federal rules, regulations, or procedures unless prior
                      authorization was given by the Department. The Department
                      shall provide timely notice of any disallowance to the
                      Contractor and allow the Contractor an opportunity to
                      participate in the disallowance appeal process and any
                      subsequent judicial review to the extent permitted by law.
                      Any payment required under this provision shall be due
                      from the Contractor upon notice from the Department. The
                      indemnification provision hereunder shall not extend to
                      disallowances which result from a determination by the
                      federal government that the terms of this Agreement are
                      not in accordance with federal law. The obligations under
                      this paragraph shall survive any termination or
                      cancellation of this Agreement.

        B.     INSURANCE

               The Contractor shall maintain for itself, each of its employees,
               agents, and representatives, general liability and all other
               types of insurance in such amounts as reasonably required by the
               Department and all applicable laws. In addition, the Contractor
               shall require that each of the health care professionals with
               which the Contractor contracts maintains professional malpractice
               and all other types of insurance in such amounts as required by
               all applicable laws. The Contractor shall provide to the
               Department, upon the Department's request, certificates
               evidencing such insurance coverage.

SECTION XVI:  DISPUTES

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        A.     In the event that a dispute arises between the parties relating
               to any matter regarding this Agreement, the Contractor shall
               send written notice of an initial level dispute to the
               Contracting Officer for this Agreement, who shall make a
               determination in writing of his/her interpretation and shall
               send the same to the Contractor within thirty (30) days of the
               Contractor's written request for same. That interpretation shall
               be final, conclusive, and binding on the Contractor, and
               unreviewable in all respects unless the Contractor within twenty
               (20) days of its receipt of said interpretation, delivers a
               written appeal to the Secretary of Public Welfare. Unless the
               Contractor consents to extend the time for disposition by the
               Secretary, the decision of the Secretary shall be released
               within thirty (30) days of the Contractor's written appeal and
               shall be final, conclusive, and binding, and the Contractor
               shall thereafter with good faith and diligence, render such
               performance in compliance with the Secretary's determination;
               subject to the provisions of Section XVIII.B below. Notice of
               initial level dispute shall be sent to:

                                    Ms. Christine M. Bowser
                                    Director, Bureau of Managed Care Operations
                                    P.O. Box 2675
                                    Harrisburg, Pennsylvania 17105-2675

        B.     All Claims against the Department relating to any matter
               regarding this Agreement may be filed by the Contractor in the
               Board of Claims pursuant to 72 P.S. 4651-1 et seq., but only
               after first complying with Section XVI.A above. Resolution of
               disputes under this provision must occur prior to any final
               payment of a disputed amount to the Contractor.

SECTION XVII:  FORCE MAJEURE

               In the event of a major disaster or epidemic as declared by the
               Governor of the Commonwealth of Pennsylvania or an act of any
               military or civil authority, outage of communications, power, or
               other utility, the Contractor shall cause its employees and all
               Providers to render all services provided for in the RFP and
               herein as is practical within the limits of Providers' facilities
               and available staff. The Contractor, however, shall not be liable
               nor deemed to be in default for any Provider's failure to provide
               services or for any delay in the provision of services when such
               a failure or delay is the direct or proximate result of the
               depletion of staff or facilities by the major disaster or
               epidemic, or act of any military or civil authority, outage of
               communications, power, or other utility; provided, however, in
               the event that the provision of services is substantially
               interrupted, the Department shall have the right to terminate
               this Agreement upon ten (10) days written notice to the
               Contractor.

                                                                             147
<PAGE>

SECTION XVIII:  GENERAL

        A.     SUSPENSION FROM OTHER PROGRAMS

               In the event that the Contractor learns that a Health Care
               Professional with whom the Contractor contracts is suspended or
               terminated from participation in the MA Program of another state
               or from the Medicare Program, the Contractor shall promptly
               notify the Department, in writing, of such suspension or
               termination.

               No payment shall be made to any Health Care Professional for any
               services rendered by a health care practitioner during the period
               the Contractor knew, or should have known, such practitioner was
               suspended or terminated from the Medical Assistance Program of
               this or another state, or the Medicare Program.

        B.     RIGHTS OF THE DEPARTMENT AND THE CONTRACTOR

               The rights and remedies of the Department provided herein shall
               not be exclusive and are in addition to any rights and remedies
               provided by law.

               Except as otherwise stated in Section XVI of this Agreement,
               Disputes, the rights and remedies of the Contractor provided
               herein shall not be exclusive and are in addition to any rights
               and remedies provided by law.

        C.     WAIVER

               No waiver by either party of a breach or default of this
               Agreement shall be considered as a waiver of any other or
               subsequent breach or default.

        D.     INVALID PROVISIONS

               Any provision of this Agreement which is in violation of any
               state or federal law or regulation shall be deemed amended to
               conform with such law or regulation, pursuant to the terms of
               this Agreement, except that if such change would materially and
               substantially alter the obligations of the parties under this
               Agreement, any such provision shall be renegotiated by the
               parties. The invalidity or unenforceability of any terms or
               provisions hereof shall in no way affect the validity or
               enforceability of any other terms or provisions hereof.

        E.     GOVERNING LAW

               This Agreement shall be governed by and construed in accordance
               with the laws of the Commonwealth of Pennsylvania.

                                                                             148

<PAGE>

     F.     EXPANSION OF THE ZONE

               The Department reserves the right to expand the required
               geographic coverage area of the zone to include additional
               counties under this Agreement. Expansion of the zone will be
               solely at the discretion of the Department.

        G.     NOTICE

               Any notice, request, demand, or other communication required or
               permitted hereunder, with the exception of initial level disputes
               submitted to the Contracting Officer pursuant to Section XVI of
               this Agreement, Disputes, shall be given in writing by certified
               mail, communication charges prepaid, to the party to be notified.
               All communications shall be deemed given and received upon
               delivery or attempted delivery to the address specified herein,
               as from time to time amended. The addresses for the parties for
               the purposes of such communication are:

               To the Department:

                      Department of Public Welfare
                      Office of Medical Assistance Programs
                      Director, Bureau of Managed Care Operations
                      Box 2675
                      Harrisburg State Hospital
                      Harrisburg, Pennsylvania 17110

               With a Copy to:

                      Department of Public Welfare
                      Office of Legal Counsel
                      3rd Floor West,  Health and Welfare Building
                      Forster and 7th Street
                      Harrisburg, Pennsylvania 17120
                      Attention: Chief Counsel

               To the Contractor - See Appendix 4 of this Agreement, Contractor
               Information, for name and address.

        H.     COUNTERPARTS

               This Agreement may be executed in counterparts, each of which
               shall be deemed an original for all purposes, and all of which,
               when taken together shall constitute but one and the same
               instrument.

                                                                             149
<PAGE>

        I.     HEADINGS

               The section headings used herein are for reference and
               convenience only, and shall not enter into the interpretation of
               this Agreement.

        J.     ASSIGNMENT

               Neither this Agreement nor any of the parties' rights hereunder
               shall be assignable by either party hereto without the advance
               written approval of the other party hereto, which approval shall
               not be unreasonably withheld.

        K.     NO THIRD PARTY BENEFICIARIES

               This Agreement does not, nor is it intended to, create any
               rights, benefits, or interest to any third party, person, or
               organization.

        L.     NEWS RELEASES

               News releases pertaining to the HealthChoices Program may not be
               made without advance written approval by the Department, and then
               only in conjunction with the Issuing Office.

        M.     ENTIRE AGREEMENT: MODIFICATION

               This Agreement constitutes the entire understanding of the
               parties hereto and supersedes any and all written or oral
               agreements, representations, or understandings. No modifications,
               discharges, amendments, or alterations shall be effective unless
               evidenced by an instrument in writing signed by both parties.
               Furthermore, neither this Agreement nor any modifications,
               discharges, amendments or alterations thereof shall be considered
               executed by or binding upon the Department or the Commonwealth of
               Pennsylvania unless and until signed by a duly authorized officer
               of the Department or Commonwealth of Pennsylvania.

                                                                             150<PAGE>

                                AGREEMENT BETWEEN

        ----------------------------------------------------------------
                         County Name or City of New York

                                       And

        ----------------------------------------------------------------
                                 Contractor Name

                      This Agreement is made by and between

        ----------------------------------------------------------------
              County Name or City of New York (" County" or "City")

                                 Acting through,

        ----------------------------------------------------------------
           Department of Social Services (" LDSS")or Health (" CDOH")

                                   Located at

        ----------------------------------------------------------------

        ----------------------------------------------------------------

        ----------------------------------------------------------------

                                       And

        ----------------------------------------------------------------
                       Contractor Name (" the Contractor")

                                   Located At

        ----------------------------------------------------------------

        ----------------------------------------------------------------

        ----------------------------------------------------------------

                                    Recitals
                                   Page 1 of 2
                                 October 1, 1999

<PAGE>

                                    RECITALS

        Pursuant to Title XIX of the Federal Social Security Act, codified as 42
U. S. C. Section 1396 et seq. (the "Social Security Act"), and Title 11 of
Article 5 of the New York State Social Services Law ("SSL"), codified as
N.Y.S.S.L. Section 363 et seq., a comprehensive program of Medical Assistance
for needy persons exists in the State of New York ("Medicaid").

        Pursuant to Article 44 of the Public Health Law (" P. H. L."), the New
York State Department of Health (" SDOH") is authorized to issue Certificates of
Authority to establish Health Maintenance Organizations ("HMOs"), P. H. L.
Section 4400 et seq., Prepaid Health Services Plans. ("PHSPs"), P. H. L. Section
4403-a, and Integrated Delivery Systems ("IDS"), P. H. L. Section 4408-a.

        The State Social Services Law defines Medicaid to include payment of
part or all of the cost of care and services furnished by an HMO, PHSP or an
IDS, identified as Managed Care Organizations ("MCOs") in this Agreement, to
Eligible Persons, as defined in this Agreement, residing in the geographic area
specified in Appendix M (Service Area) when such care and services are furnished
in accordance with an agreement approved by the SDOH that meets the requirements
of federal law and regulations.

        The Contractor is a corporation organized under the laws of New York
State and is certified under Article 44 of the State Public Health Law or
Article 43 of the NYS Insurance Law.

         The Contractor offers a comprehensive health services plan and
represents that it is able to make provision for furnishing medical and health
service benefits and has proposed to ______________________________________to
                                            [INSERT LDSS OR CDOH]
provide these services to Eligible Persons; and

        The Contractor has applied to participate in the Medicaid Managed Care
Program and the SDOH and ____________________________________ have determined
                          [INSERT LDSS OR CITY OF NEW YORK]
that the Contractor meets the qualification criteria established for
participation.

NOW THEREFORE, the parties agree as follows:

                                    Recitals
                                   Page 2 of 2
                                 October 1, 1999

<PAGE>

                                                                    EXHIBIT 10.9

                      TABLE OF CONTENTS FOR MODEL CONTRACT

Recitals

Section 1     Definitions

Section 2     Agreement Term, Amendments, Extensions, and General Contract
              Administration Provisions
              2.1     Term
              2.2     Amendments and Extensions
              2.3     Approvals
              2.4     Entire Agreement
              2.5     Renegotiation
              2.6     Assignment and Subcontracting
              2.7     Termination
                      a.  LDSS Initiated Termination of Contract
                      b.  Contractor and LDSS Initiated Termination
                      c.  Contractor Initiated Termination
                      d.  Termination Due to Loss of Funding
              2.8     Close-Out Procedures
              2.9     Rights and Remedies
              2.10    Notices
              2.11    Severability

Section 3     Compensation
              3.1     Capitation Payments
              3.2     Modification of Rates During Contract Period
              3.3     Rate Setting Methodology
              3.4     Payment of Capitation
              3.5     Denial of Capitation Payments
              3.6     SDOH Right to Recover Premiums
              3.7     Third Party Health Insurance Determination
              3.8     Payment for Newborns
              3.9     Contractor Financial Liability
              3.10    Inpatient Hospital Stop-Loss Insurance
              3.11    Mental Health and Alcohol/Substance Abuse Stop-Loss
              3.12    Enrollment Limitations
              3.13    Tracking Visits Provided by Indian Health Clinics

Section 4     Service Area

Section 5     Eligible, Exempt and Excluded Populations
              5.1     Eligible Populations
              5.2     Exempt Populations
              5.3     Excluded Populations
              5.4     Family Enrollment

                                Table of Contents
                                      - 1 -
                                 October 1, 1999

<PAGE>

                      TABLE OF CONTENTS FOR MODEL CONTRACT

Section 6     Enrollment
              6.1     Enrollment Guidelines
              6.2     Equality of Access to Enrollment
              6.3     Enrollment Decisions
              6.4     Auto Assignment
              6.5     Prohibition Against Conditions on Enrollment
              6.6     Family Enrollment
              6.7     Newborn Enrollment
              6.8     Effective Date of Enrollment
              6.9     Roster
              6.10    Automatic Re-Enrollment

Section 7     Lock-In Provisions
              7.1     Lock-In Provisions in Voluntary Counties
              7.2     Lock-In Provisions in Mandatory Counties
              7.3     Lock-In Provisions in New York City
              7.4     Disenrollment During Lock-In Period
              7.5     Notification Regarding Lock-In and End of Lock-In Period

Section 8     Disenrollment
              8.1     Disenrollment Guidelines
              8.2     Disenrollment Prohibitions
              8.3     Reasons for Voluntary Disenrollment
              8.4     Processing of Disenrollment Requests
              8.5     Contractor Notification of Disenrollments
              8.6     Contractor's Liability
              8.7     Enrollee Initiated Disenrollment
                      a.  Disenrollment for Good Cause
                      b.  Expedited Disenrollment
              8.8     Contractor Initiated Disenrollment
              8.9     LDSS Initiated Disenrollment

Section 9     Guaranteed Eligibility

Section 10    Benefit Package, Covered and Non-Covered Services
              10.1    Contractor Responsibilities
              10.2    Compliance with State Medicaid Plan and Applicable Laws
              10.3    Definitions
              10.4    Provision of Services Through Participating and
                      Non-Participating Providers
              10.5    Child Teen Health Program /Adolescent Preventive Services
              10.6    Foster Care Children

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                                 October 1, 1999

<PAGE>

                      TABLE OF CONTENTS FOR MODEL CONTRACT

              10.7    Child Protective Services
              10.8    Welfare Reform
              10.9    Adult Protective Services
              10.10   Court Ordered Services
              10.11   Family Planning and Reproductive Health Services
              10.12   Prenatal Care
              10.13   Direct Access
              10.14   Emergency Services
              10.15   Medicaid Utilization Thresholds (MUTS)
              10.16   Services for Which Enrollees Can Self-Refer
                      a.  Mental Health and Alcohol/Substance Abuse
                      b.  Vision Services
                      c.  Diagnosis and Treatment of Tuberculosis
                      d.  Family Planning/Reproductive Health
                      e.  Sexually Transmitted Disease (STD) Services
              10.17   Second Opinions for Medical or Surgical Care
              10.18   Coordination with Local Public Health Agencies
              10.19   Public Health Services
                      a.  Tuberculosis Screening, Diagnosis and Treatment;
                          Directly Observed Therapy (TB/DOT)
                      b.  Immunizations
                      c.  Prevention and Treatment of Sexually Transmitted
                          Diseases
                      d.  Lead Poisoning
              10.20   Adults with Chronic Illnesses and Physical or
                      Developmental Disabilities
              10.21   Children with Special Health Care Needs
              10.22   Persons Requiring Ongoing Mental Health Services
              10.23   Member Needs Relating to HIV
              10.24   Persons Requiring Alcohol/Substance Abuse Services
              10.25   Native Americans
              10.26   Women, Infants, and Children (WIC)
              10.27   Coordination of Services

Section 11    Marketing
              11.1    Marketing Plan
              11.2    Marketing Activities
              11.3    Prior Approval of Marketing Materials, Procedures,
                      Subcontracts
              11.4    Marketing Infractions
              11.5    LDSS Option to Adopt Additional Marketing Guidelines

Section 12    Member Services
              12.1    General Functions
              12.2    Translation and Oral Interpretation
              12.3    Communicating with the Visually, Hearing and Cognitively
                      Impaired

                                Table of Contents
                                      - 3 -
                                 October 1, 1999

<PAGE>

                      TABLE OF CONTENTS FOR MODEL CONTRACT

Section 13    Enrollee Notification
              13.1    Provider Directories/Office Hours for Participating
                      Providers
              13.2    Member ID Cards
              13.3    Member Handbooks
              13.4    Notification of Effective Date of Enrollment
              13.5    Notification of Enrollee Rights
              13.6    Enrollee's Rights To Advance Directives
              13.7    Approval of Written Notices
              13.8    Contractor's Duty to Report Lack of Contact
              13.9    Contractor Responsibility to Notify Enrollee of Expected
                      Effective Date of Enrollment
              13.10   LDSS Notification of Enrollee's Change in Address

Section 14    Complaint and Appeal Procedure
              14.1    Contractor Program to Address Complaints
              14.2    Notification of Complaint and Appeal Program
              14.3    Guidelines for Complaint and Appeal Program
              14.4    Complaint Investigation Determinations

Section 15    Access Requirements
              15.1    Appointment Availability Standards
              15.2    Twenty-Four (24) Hour Access
              15.3    Appointment Waiting Times
              15.4    Travel Time Standards
              15.5    Service Continuation
                      a.  New Enrollees
                      b.  Enrollees Whose Health Care Provider Leaves Network
              15.6    Standing Referrals
              15.7    Specialist as a Coordinator of Primary Care
              15.8    Specialty Care Centers

Section 16    Quality Assurance
              16.1    Internal Quality Assurance Program
              16.2    Standards of Care

Section 17    Monitoring and Evaluation
              17.1    Right To Monitor Contractor Performance
              17.2    Cooperation During Monitoring And Evaluation
              17.3    Cooperation During Annual On-Site Review
              17.4    Cooperation During Review of Services by External Review
                      Agency

Section 18    Contractor Reporting Requirements
              18.1    Time Frames for Report Submissions

                                Table of Contents
                                      - 4 -
                                 October 1, 1999

<PAGE>

                      TABLE OF CONTENTS FOR MODEL CONTRACT

              18.2    SDOH Instructions for Report Submissions
              18.3    Liquidated Damages
              18.4    Notification of Changes in Report Due Dates, Requirements
                      or Formats
              18.5    Reporting Requirements
                      a.  Annual Financial Statements
                      b.  Quarterly Financial Statements
                      c.  Other Financial Reports
                      d.  Encounter Data
                      e.  Quality of Care Performance Measures
                      f.  Complaint Reports
                      g.  Fraud and Abuse Reporting Requirements
                      h.  Participating Provider Network Reports
                      i.  Appointment Availability/Twenty-Four Hour (24) Access
                           and Availability Surveys
                      j.  Clinical Studies
                      k.  Independent Audits
                      l.  PCP Auto Assignments
                      m.  No Contact Report
                      n.  Additional Reports
                      o.  LDSS Specific Reports
              18.6    Ownership and Related Information Disclosure
              18.7    Revision of Certificate of Authority
              18.8    Public Access to Reports
              18.9    Professional Discipline
              18.10   Certification Regarding Individuals Who Have Been Debarred
                      or Suspended by Federal or State Government
              18.11   Conflict of Interest Disclosure
              18.12   Physician Incentive Plan Reporting

Section 19    Records Maintenance and Audit Rights
              19.1    Maintenance of Contractor Performance Records
              19.2    Maintenance of Financial Records and Statistical Data
              19.3    Access to Contractor Records
              19.4    Retention Periods

Section 20    Confidentiality
              20.1    Confidentiality of Identifying Information about Medicaid
                      Recipients and Applicants
              20.2    Medical Records of Foster Children
              20.3    Confidentiality of Medical Records
              20.4    Length of Confidentiality Requirements

Section 21    Participating Providers
              21.1    Network Requirements

                                Table of Contents
                                      - 5 -
                                 October 1, 1999

<PAGE>

                      TABLE OF CONTENTS FOR MODEL CONTRACT

              21.2    Credentialing
              21.3    SDOH Exclusion or Termination of Providers
              21.4    Evaluation Information
              21.5    Payment In Full
              21.6    Choice/Assignment of PCPs
              21.7    PCP Changes
              21.8    PCP Status Changes
              21.9    PCP Responsibilities
              21.10   Member to Provider Ratios
              21.11   Minimum Office Hours
              21.12   Primary Care Practitioners
              21.13   PCP Teams
              21.14   Hospitals
              21.15   Dental Networks
              21.16   Presumptive Eligibility Providers
              21.17   Mental Health, Alcohol and Substance Abuse Providers
              21.18   Laboratory Procedures
              21.19   School-Based Health Centers
              21.20   Federally Qualified Health Centers (FQHCs)
              21.21   Provider Services Function

Section 22    Subcontracts and Provider Agreements
              22.1    Written Subcontracts
              22.2    Permissible Subcontracts
              22.3    Provision of Services Through Provider Agreements 22.4
                      Approvals
              22.5    Required Components
              22.6    Timely Payment
              22.7    Restrictions on Disclosure
              22.8    Transfer of Liability
              22.9    Termination of Health Care Professional Agreements
              22.10   Health Care Professional Hearings
              22.11   Non-Renewal of Provider Agreements
              22.12   Physician Incentive Plan

Section 23    Fraud and Abuse Prevention Plan

Section 24    Americans With Disabilities Act Compliance Plan

Section 25    Fair Hearings
              25.1    Enrollee Access to Fair Hearing Process
              25.2    Enrollee Rights to a Fair Hearing
              25.3    Contractor Notice to Enrollees
              25.4    Aid Continuing

                                Table of Contents
                                      - 6 -
                                 October 1, 1999

<PAGE>

                      TABLE OF CONTENTS FOR MODEL CONTRACT

              25.5    Responsibilities of SDOH
              25.6    Contractor's Obligations

Section 26    External Appeal

              26.1    Basis for External Appeal
              26.2    Eligibility For External Appeal
              26.3    External Appeal Determinations
              26.4    Compliance With External Appeal Laws and Regulations

Section 27    Intermediate Sanctions

Section 28    Environmental Compliance

Section 29    Energy Conservation

Section 30    Independent Capacity of Contractor

Section 31    No Third Party Beneficiaries

Section 32    Indemnification
              32.1    Indemnification by Contractor
              32.2    Indemnification by LDSS

Section 33    Prohibition on Use of Federal Funds for Lobbying
              33.1    Prohibition of Use of Federal Funds for Lobbying
              33.2    Disclosure Form to Report Lobbying

Section 34    Non-Discrimination
              34.1    Equal Access to Benefit Package
              34.2    Non-Discrimination
              34.3    Equal Employment Opportunity
              34.4    Native Americans Access to Services From Tribal or Urban
                      Indian Health Facility

Section 35    Compliance with Applicable Laws
              35.1    Contractor and LDSS Compliance With Applicable Laws
              35.2    Nullification of Illegal, Unenforceable, Ineffective or
                      Void Contract Provisions
              35.3    Certificate of Authority Requirements
              35.4    Notification of Changes In Certificate of Incorporation
              35.5    Contractor's Financial Solvency Requirements
              35.6    Compliance With Care For Maternity Patients
              35.7    Informed Consent Procedures for Hysterectomy and
                      Sterilization

                                Table of Contents
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                                 October 1, 1999

<PAGE>

                      TABLE OF CONTENTS FOR MODEL CONTRACT

              35.8     Non-Liability of Enrollees For Contractor's Debts
              35.9     LDSS Compliance With Conflict of Interest Laws
              35.10    Compliance With PHL Regarding External Appeals

Section 36    New York State Standard Contract Clauses

Section 37    Insurance Requirements

Signature Page

                                Table of Contents
                                      - 8 -
                                 October 1, 1999

<PAGE>

                      TABLE OF CONTENTS FOR MODEL CONTRACT

                                   APPENDICES

A.      New York State Standard Clauses and Local Standard Clauses, if
        applicable

B.      Certification Regarding Lobbying

C.      New York State Department of Health Guidelines for the Provision of
        Family Planning and Reproductive Health Services

D.      New York State Department of Health Marketing Guidelines

E.      New York State Department of Health Member Handbook Guidelines

F.      New York State Department of Health Managed Care Complaint and Appeals
        Program Guidelines

G.      New York State Department of Health Guidelines for the Provision of
        Emergency Care and Services

H.      New York State Department of Health Guidelines for the Processing of
        Enrollments and Disenrollments

I.      New York State Department of Health Guidelines for Use of Medical
        Residents

J.      New York State Department of Health Guidelines of Federal Americans with
        Disabilities Act

K.      Prepaid Benefit Package Definitions of Covered and Non-Covered Services

L.      Approved Upper Payment Limit and Capitation Payment Rates

M.      Service Area

N.      Contractor-County Specific Agreements

Copies of Appendices will be abailable upon request.

                                Table of Contents
                                      - 9 -
                                 October 1, 1999

<PAGE>

1.      DEFINITIONS

        "ALCOHOL AND SUBSTANCE ABUSE SERVICE" means the treatment of addiction
        to alcohol and/or one or more drugs or the treatment of impairments to
        normal development or functioning including, but not limited to, social,
        emotional, familial, educational, vocational or physical impairments due
        to use of alcohol or drugs.

        "AUTO-ASSIGNMENT" means a process by which an Eligible Person, who is
        mandated to enroll in managed care, but who has not chosen to enroll
        within sixty (60) days of receipt of the mandatory notice, is assigned
        to a MCO contracted with the LDSS as a Medicaid Managed Care Provider in
        accordance with the auto-assignment algorithm determined by the SDOH.

        "BEHAVIORAL HEALTH SERVICE" means the assessment or treatment of mental
        and/or alcohol disorders and/or substance abuse disorders.

        "BENEFIT PACKAGE" means the covered services described in Appendix K of
        this Agreement to be provided to the Enrollee, as Enrollee is
        hereinafter defined, by or through the Contractor.

        "CAPITATION RATE" means the fixed monthly amount that the Contractor
        receives for an Enrollee to provide that Enrollee with the Benefit
        Package.

        "CHILD/TEEN HEALTH PROGRAM" or "C/THP" means the program of early and
        periodic screening, including inter-periodic, diagnostic and treatment
        services (EPSDT) that New York State offers all Medicaid eligible
        children under twenty-one (21) years of age. Care and services are
        provided in accordance with the periodicity schedule and guidelines
        developed by the New York State Department of Health. The services
        include administrative services designed to help families obtain
        services for children including outreach, information, appointment
        scheduling, administrative case management and transportation
        assistance, to the extent that transportation is included in the Benefit
        Package.

        "COURT-ORDERED SERVICES" means those services that the Contractor is
        required to provide to Enrollees pursuant to orders of courts of
        competent jurisdiction, provided however, that such ordered services are
        within the Contractor's Medicaid managed care Benefit Package and
        reimbursable under Title XIX of the Federal Social Security Act (SSL
        364-j(4)(r)).

        "DAYS" means calendar days except as otherwise stated.

        "DISENROLLMENT" means the process by which an Enrollee's membership in
        the Contractor's plan terminates.

                                    SECTION 1
                                  (DEFINITIONS)
                                 October 1, 1999
                                       1-1

<PAGE>

        "EFFECTIVE DATE OF DISENROLLMENT" means the date on which an Enrollee
        may no longer receive services from the Contractor, pursuant to Section
        6.8(b) and Appendix H of this Agreement.

        "EFFECTIVE DATE OF ENROLLMENT" means the date on which an Enrollee may
        receive services from the Contractor, pursuant to Section 6.8(b) and
        Appendix H of this Agreement.

        "ELIGIBLE PERSON" means a person whom the LDSS, state or federal
        government determines to be eligible for Medicaid and who meets all the
        other conditions for enrollment in Medicaid managed care as set forth in
        this Agreement.

        "EMERGENCY MEDICAL CONDITION" means a medical or behavioral condition,
        the onset of which is sudden, that manifests itself by symptoms of
        sufficient severity, including severe pain, that a prudent lay person,
        possessing an average knowledge of medicine and health, could reasonably
        expect the absence of immediate medical attention to result in: (i)
        placing the health of the person afflicted with such condition in
        serious jeopardy, or in the case of a behavioral condition, placing the
        health of the person or others in serious jeopardy; or (ii) serious
        impairment to such person's bodily functions; or (iii) serious
        dysfunction of any bodily organ or part of such person; or (iv) serious
        disfigurement of such person.

        "ENROLLEE" means an Eligible Person who, either personally or through an
        authorized representative, has enrolled (or who has been auto-assigned)
        in the Contractor's plan pursuant to Section 6 of this Agreement.

        "ENROLLMENT" means the process by which an Enrollee's membership in a
        Contractor's Plan begins.

        "ENROLLMENT BROKER" means the state and/or county-contracted entity that
        provides enrollment, education, and outreach services; effectuates
        enrollments and disenrollments in Medicaid managed care; and provides
        other contracted services on behalf of the SDOH and the LDSS.

        "FAMILY" means a mother and child(ren), a father and child(ren), a
        father and mother and child(ren), or a husband and wife residing in the
        same household or persons included in the same case for purposes of
        family enrollment in mandatory counties.

        "FISCAL AGENT" means the entity that processes or pays vendor claims on
        behalf of the Medicaid state agency pursuant to an agreement between the
        entity and such agency.

        "GUARANTEED ELIGIBILITY" means the period beginning on the Enrollee's
        Effective Date of Enrollment with the Contractor and ending six (6)
        months thereafter, during which the Enrollee may be entitled to
        continued enrollment in the Contractor's plan despite the loss of
        Medicaid eligibility as set forth in Section 9 of this Agreement.

                                    SECTION 1
                                  (DEFINITIONS)
                                 October 1, 1999
                                       1-2

<PAGE>

        "HEALTH PROVIDER NETWORK" or "HPN" means a closed communication network
        dedicated to secure data exchange and distribution of health related
        information between various health facility providers and the SDOH. HPN
        functions include: collection of Medicaid complaint and disenrollment
        information; collection of Medicaid financial reports; collection and
        reporting of managed care provider networks systems (PNS); and the
        reporting of Medicaid encounter data systems (MEDS).

        "INSTITUTION FOR MENTAL DISEASE" or "MID" means a hospital, nursing
        facility, or other institution of more than sixteen (16) beds that is
        primarily engaged in providing diagnosis, treatment or care of persons
        with mental diseases, including medical attention, nursing care and
        related services. Whether an institution is an Institution for Mental
        Disease is determined by its overall character as that of a facility
        established and maintained primarily for the care and treatment of
        individuals with mental diseases, whether or not it is licensed as such.
        An institution f or the mentally retarded is not an Institution for
        Mental Diseases.

        "LOCAL PUBLIC HEALTH Agency" means ___________________________________.
                                                  Insert Name of Agency

        "LOCK-IN PERIOD" means the period of time during which the Enrollee may
        not disenroll from the Contractor's plan, unless the Enrollee becomes
        eligible for an exclusion or an exemption or can demonstrate good cause
        as established in state law and in 18 NYCRR Section 360-10.13.

        "MANAGED CARE ORGANIZATION" or "MCO" means a health maintenance
        organization ("HMO "), prepaid health service plan ("PHSP"), or
        integrated delivery system ("IDS") certified under Article 44 of the New
        York State P. H. L.

        "MARKETING" means any activity of the Contractor, subcontractor or
        individuals or entities affiliated with the Contractor by which
        information about the Contractor is made known to Eligible Persons for
        the purpose of persuading such persons to enroll with the Contractor.

        "MARKETING Representative" means any individual or entity engaged by the
        Contractor to market on behalf of the Contractor.

        "MEDICAID MANAGEMENT INFORMATION System" or "MMIS" means the Medical
        Assistance Information and Payment System of the SDOH.

        "MEDICAL RECORD" means a complete record of care rendered by a provider
        documenting the care rendered to the Enrollee, including inpatient,
        outpatient, and emergency care, in accordance with all applicable
        federal, state and local laws, rules and regulations. Such record shall
        be signed by the medical professional rendering the services.

        "MEDICALLY NECESSARY" means health care and services that are necessary
        to prevent, diagnose, manage or treat conditions in the person that
        cause acute suffering, endanger

                                    SECTION 1
                                  (DEFINITIONS)
                                 October 1, 1999
                                       1-3

<PAGE>

        life, result in illness or infirmity, interfere with such person's
        capacity for normal activity, or threaten some significant handicap.

        "NATIVE AMERICAN" means, for purposes of this contract, a person
        identified in the Medicaid eligibility system as a Native American.

        "NON-PARTICIPATING PROVIDER" means a provider of medical care and/or
        services with which the Contractor has no Provider Agreement.

        "PARTICIPATING PROVIDER" means a provider of medical care and/or
        services that has a Provider Agreement with the Contractor.

        "PHYSICIAN INCENTIVE PLAN" or "PIP" means any compensation arrangement
        between the Contractor or one of its contracting entities and a
        physician or physician group that may directly or indirectly have the
        effect of reducing or limiting services furnished to Medicaid recipients
        enrolled by the MCO.

        "PREPAID CAPITATION PLAN ROSTER" OR "ROSTER" means the enrollment list
        generated on a monthly basis by SDOH by which LDSS and Contractor are
        informed of specifically which recipients the Contractor will be serving
        for the coming month, subject to any revisions communicated in writing
        or electronically by SDOH, LDSS, or the Enrollment Broker.

        "PRESUMPTIVE ELIGIBILITY PROVIDER" means a provider designated by the
        SDOH as qualified to determine the presumptive eligibility for pregnant
        women to allow them to receive prenatal services immediately. Such
        providers assist recipients with the completion of the full application
        for Medicaid and they may be comprehensive Prenatal Care Programs, Local
        Public Health Agencies, Certified Home Health Agencies, Public Health
        Nursing Services, Article 28 facilities, and individually licensed
        physicians and nurse practitioners.

        "PREVENTIVE CARE" means the care or services rendered to avert
        disease/illness and/or its consequences. There are three levels of
        preventive care: primary, such as immunizations, aimed at preventing
        disease; secondary, such as disease screening programs aimed at early
        detection of disease; and tertiary, such as physical therapy, aimed at
        restoring function after the disease has occurred. Commonly, the term
        "preventive care" is used to designate prevention and early detection
        programs rather than treatment programs.

        "PRIMARY CARE PROVIDER" or "PCP" means a qualified physician, or nurse
        practitioner or team of no more than four (4) qualified physicians/nurse
        practitioners which provides all required primary care services
        contained in the Benefit Package to Enrollees.

        "PROVIDER AGREEMENT" means any written contract between the Contractor
        and Participating Providers to provide medical care and/or services to
        Contractor's Enrollees.

        "SCHOOL BASED HEALTH CENTERS" or "SBHC" are SDOH approved centers which
        provide comprehensive primary and mental health services including
        health assessments,

                                    SECTION 1
                                  (DEFINITIONS)
                                 October 1, 1999
                                       1-4

<PAGE>

        diagnosis and treatment of acute illnesses, screenings and
        immunizations, routine management of chronic diseases, healtheducation,
        mental health counseling and treatment on-site in schools. Services are
        offered by multi-disciplinary staff from sponsoring Article 28 licensed
        hospitals and community health centers.

        "SERIOUSLY EMOTIONALLY DISTURBED" or "SED" means, a child through
        seventeen (17) years of age who has utilized the following during the
        twelve (12) month period prior to scheduled enrollment:
        -   ten (10) or more encounters, including visits to a mental health
            clinic, psychiatrist or psychologist, and inpatient hospital days
            relating to a psychiatric diagnosis; or
        -   one (1) or more specialty mental health visits (i. e., psychiatric
            rehabilitation treatment program; day treatment; continuing day
            treatment; comprehensive case management; partial hospitalization;
            rehabilitation services provided to residents of Office of Mental
            Health (OMH) licensed community residences and family-based
            treatment; and mental health clinics for seriously emotionally
            disturbed children).

        "SERIOUSLY AND PERSISTENTLY MENTALLY ILL" or "SPMI" means an adult
        eighteen (18) years or older who has utilized the following during the
        twelve (12) month period prior to scheduled enrollment:
        -   ten (10) or more encounters, including visits to a mental health
            clinic, psychiatrist or psychologist, and inpatient hospital days
            relating to a psychiatric diagnosis; or
        -   one (1) or more specialty mental health visits (i. e., psychiatric
            rehabilitation treatment program; day treatment; continuing day
            treatment; comprehensive case management; partial hospitalization;
            rehabilitation services provided to residents of OMH licensed
            community residences and family-based treatment; and mental health
            clinics for seriously emotionally disturbed children).

        "SUPPLEMENTAL NEWBORN CAPITATION PAYMENT" means the fixed amount paid to
        the Contractor for the inpatient birthing costs for a newborn enrolled
        in the plan, limited to those cases in which the plan has evidence of
        payment to the hospital for the newborn hospital stay.

        "TUBERCULOSIS DIRECTLY OBSERVED THERAPY" or "TB/DOT" means the direct
        observation of ingestion of oral TB medications to assure patient
        compliance with the physician's prescribed medication regimen.

        "URGENT MEDICAL CONDITION" means a medical or behavioral condition other
        than an emergency condition, manifesting itself by acute symptoms of
        sufficient severity that, in the assessment of a "prudent lay person",
        possessing an average knowledge of medicine and health, could reasonably
        be expected to result in serious impairment of bodily functions, serious
        dysfunction of a bodily organ, body part, or mental ability, or any
        other condition that would place the health or safety of the Enrollee or
        another individual in serious jeopardy in the absence of medical or
        behavioral treatment within twenty-four (24) hours.

                                    SECTION 1
                                  (DEFINITIONS)
                                 October 1, 1999
                                       1-5

<PAGE>

2.      AGREEMENT TERM, AMENDMENTS, EXTENSIONS, AND GENERAL CONTRACT
        ADMINISTRATION PROVISIONS

        2.1     Term

                a)      This Agreement is effective October 1, 1999 and shall
                        remain in effect until September 30, 2001 or until the
                        execution of an extension, renewal or successor
                        Agreement approved by the SDOH and the Department of
                        Health and Human Services (DHHS), whichever occurs
                        first.

                b)      The parties to this Agreement shall have the option to
                        renew this Agreement for an additional two (2) year term
                        and for a subsequent one (1) year term, subject to the
                        approval of the LDSS, SDOH, DHHS, and any other entities
                        as required by law or regulation.

                c)      However, in no event, shall the maximum duration of this
                        Agreement exceed five (5) years.

        2.2     Amendments and Extensions

                a)      This Agreement may only be modified in writing. Unless
                        otherwise specified in this Agreement, modifications
                        must be signed by the parties and approved by the SDOH,
                        DHHS, and any other entities as required by law or
                        regulation, prior to the end of the quarter in which the
                        amendment is to be effective.

                b)      This Agreement shall not be automatically renewed at its
                        expiration. This Agreement may be extended by written
                        amendment, in accordance with the procedures set forth
                        in this Section.

                c)      An extension to this Agreement may be granted for
                        reasons including, but not limited, to the following:

                        i)      Negotiations for a successor Agreement will not
                                be completed by the expiration date of the
                                current contract; or

                        ii)     The Contractor has submitted a termination
                                notice and transition of Enrollees will not be
                                completed by the expiration date of the current
                                contract.

                d)      The parties will submit, to the extent practicable, the
                        proposed signed and dated extensions, including all
                        necessary local government approvals, to SDOH prior to
                        the scheduled expiration date of this Agreement.

                                    SECTION 2
                    (AGREEMENT TERM, AMENDMENTS, EXTENSIONS,
                 AND GENERAL CONTRACT ADMINISTRATION PROVISIONS)
                                 October 1, 1999
                                       2-1

<PAGE>

        2.3     Approvals

                This Agreement and any amendments to this Agreement shall not be
                effective or binding unless and until approved, in writing, by
                the DHHS, the SDOH and any other entity as required in law and
                regulation. SDOH will provide a notice of each such approval to
                the Contractor and the LDSS upon such approval.

        2.4     Entire Agreement

                This Agreement shall supersede all prior Agreements between the
                Contractor and the LDSS. This Agreement, including those
                attachments, schedules, appendices, exhibits, and addenda that
                have been specifically incorporated herein and written plans
                submitted by the Contractor and maintained on file by SDOH
                and/or LDSS pursuant to this Agreement, contains all the terms
                and conditions agreed upon by the parties, and no other
                Agreement, oral or otherwise, regarding the subject matter of
                this Agreement shall be deemed to exist or to bind any of the
                parties or vary any of the terms contained in this Agreement. In
                the event of any inconsistency or conflict among the document
                elements of this Agreement, such inconsistency or conflict
                shall be resolved by giving precedence to the document elements
                in the following order:

                        1)      The body of this Agreement;

                        2)      The appendices attached to the body of this
                                Agreement;

                        3)      The Contractor's approved:

                                i)      Marketing Plan on file with SDOH and
                                        LDSS

                                ii)     Complaint and Appeals Procedure on file
                                        with SDOH and LDSS

                                iii)    Quality Assurance Plan on file with SDOH
                                        and LDSS

                                iv)     Americans with Disabilities Act
                                        Compliance Plan on file with SDOH and
                                        LDSS

                                v)      Fraud and Abuse Prevention Plan on file
                                        with SDOH and LDSS.

        2.5     Renegotiation

                The parties to this Agreement shall have the right to
                renegotiate the terms and conditions of this Agreement in the
                event applicable local, state or federal law, regulations or
                policy are altered from those existing at the time of this
                Agreement in order to be in continuous compliance therewith.
                This Section shall not limit the right of the parties to this
                Agreement from renegotiating or amending other terms and
                conditions of this agreement. Such changes shall only be made
                with the consent of the parties and the prior approval of the
                SDOH and the DHHS.

                                    SECTION 2
                    (AGREEMENT TERM, AMENDMENTS, EXTENSIONS,
                 AND GENERAL CONTRACT ADMINISTRATION PROVISIONS)
                                 October 1, 1999
                                       2-2

<PAGE>

        2.6     Assignment and Subcontracting

                a)      The Contractor shall not, without LDSS and SDOH's prior
                        written consent, assign, transfer, convey, sublet, or
                        otherwise dispose of this Agreement; of the Contractor's
                        right, title, interest, obligations, or duties under the
                        Agreement; of the Contractor's power to execute the
                        Agreement; or, by power of attorney or otherwise, of any
                        of the Contractor's rights to receive monies due or to
                        become due under this Agreement. Any assignment,
                        transfer, conveyance, sublease, or other disposition
                        without LDSS and SDOH's consent shall be void.

                b)      Contractor may not enter into any subcontracts related
                        to the delivery of services to Enrollees, except by a
                        written agreement, as set forth in Section 22 of this
                        Agreement. The Contractor may subcontract for provider
                        services and management services including, but not
                        limited to, marketing, quality assurance and utilization
                        review activities and such other services as are
                        acceptable to LDSS. If such written agreement would be
                        between Contractor and a provider of health care or
                        ancillary health services or between Contractor and an
                        independent practice association, the agreement must be
                        in a form previously approved by SDOH. If such
                        subcontract is for management services under 10 NYCRR
                        '98.11, it must be approved by SDOH prior to its
                        becoming effective. Other such subcontracts are subject
                        to the prior approval of the LDSS unless prior approval
                        is waived by the LDSS. Any subcontract entered into by
                        Contractor shall fulfill the requirements of 42 CFR
                        Parts 434 and 438 that are appropriate to the service or
                        activity delegated under such subcontract. Contractor
                        agrees that it shall remain legally responsible to LDSS
                        for carrying out all activities under this Agreement and
                        that no subcontract shall limit or terminate
                        Contractor's responsibility.

                [ ]     The LDSS has elected to waive prior approval of
                        subcontracts not related to provider services and
                        management services.

                OR

                [ ]     The LDSS has elected to prior approve all subcontracts.

        2.7     Termination

                a)      LDSS Initiated Termination of Contract

                        i)      LDSS shall have the right to terminate this
                                Agreement, in whole or in part if the
                                Contractor:

                                A)      takes any action that threatens the
                                        health, safety, or welfare of its
                                        Enrollees;

                                    SECTION 2
                    (AGREEMENT TERM, AMENDMENTS, EXTENSIONS,
                 AND GENERAL CONTRACT ADMINISTRATION PROVISIONS)
                                 October 1, 1999
                                       2-3

<PAGE>

                                B)      has engaged in an unacceptable practice
                                        under 18 NYCRR, Part 515, that affects
                                        the fiscal integrity of the Medicaid
                                        program;

                                C)      has its Certificate of Authority
                                        suspended, limited or revoked by SDOH;

                                D)      materially breaches the Agreement or
                                        fails to comply with any term or
                                        condition of this Agreement that is not
                                        cured within twenty (20) days, or to
                                        such longer period as the parties may
                                        agree, of LDSS's written request for
                                        compliance;

                                E)      becomes insolvent;

                                F)      brings a proceeding voluntarily, or has
                                        a proceeding brought against it
                                        involuntarily, under Title 11 of the
                                        U. S. Code (the Bankruptcy Code);

                                G)      changes the provider net work, such that
                                        Enrollees access to the Contractor's
                                        services is no longer consistent with
                                        the standards set forth in Sections 15,
                                        21 and 22 and Appendix I of this
                                        Agreement; or

                                H)      knowingly has a director, officer,
                                        partner or person owning or controlling
                                        more than five percent (5%) of the
                                        Contractor's equity, or h as a n
                                        employment, consulting, or other
                                        agreement with such a person for the
                                        provision of items and/or services that
                                        are significant to the Contractor's
                                        contractual obligation who has been
                                        debarred or suspended by the federal,
                                        state or local government, or other wise
                                        excluded from participating in
                                        procurement activities.

                        ii)     The LDDSs will notify the Contractor of its
                                intent to terminate this Agreement for the
                                Contractors failure to meet the requirements of
                                this Agreement and provide Contractor with a
                                hearing prior to the termination.

                        iii)    If SDOH suspends, limits or revokes Contractors
                                Certificate of Authority under P. H. L. '4404,
                                this Agreement shall expire on the date the
                                Contractor ceases to have authority to serve the
                                geographic area of the LDSS. No hearing will be
                                required if the contract expires due to SDOH
                                suspension, limitation or revocation of the
                                Contractors Certificate of Authority.

                        iv)     Prior to the effective date of the termination
                                the LDSS shall notify Enrollees of the
                                termination, or delegate responsibility for such
                                notification to the Contractor, and such notice
                                shall include a statement that Enrollees may
                                disenroll immediately without cause.

                b)      Contractor and LDSS Initiated Termination

                                    SECTION 2
                    (AGREEMENT TERM, AMENDMENTS, EXTENSIONS,
                 AND GENERAL CONTRACT ADMINISTRATION PROVISIONS)
                                 October 1, 1999
                                       2-4

<PAGE>

                        The Contractor and the LDSS each shall have the right to
                        terminate this Agreement in the event that SDOH and the
                        Contractor fail to reach agreement on the monthly
                        Capitation Rates. In such event, the party exercising
                        its right shall give the other party, LDSS, and SDOH
                        written notice specifying the reason for and the
                        effective date of termination, which shall not be less
                        time than will permit an orderly disenrollment of
                        Enrollees to the Medicaid fee-for-service payment
                        mechanism or transfer to another MCO, as determined by
                        LDSS, but no more than ninety (90) days.

                c)      Contractor Initiated Termination

                        i)      The Contractor shall have the right to terminate
                                this Agreement in the event that LDSS materially
                                breaches the Agreement or fails to comply with
                                any term or condition of this Agreement that is
                                not cured within twenty (20) days, or to such
                                longer period as the parties may agree, of the
                                Contractor's written request for compliance. The
                                Contractor shall give LDSS written notice
                                specifying the reason for and the effective date
                                of the termination, which shall not be less time
                                than will permit an orderly disenrollment of
                                Enrollees to the Medicaid fee-for-service
                                payment mechanism or transfer to another managed
                                care program, as determined by LDSS, but no more
                                than ninety (90) days.

                        ii)     The Contractor shall have the right to terminate
                                this Agreement in the event that its obligations
                                are materially changed by modifications to this
                                Agreement and its Appendices by SDOH or LDSS. In
                                such event, Contractor shall give LDSS and SDOH
                                written notice within thirty (30) days of
                                notification of changes to the Agreement or
                                Appendices specifying the reason and the
                                effective date of termination, which shall not
                                be less time than will permit an orderly
                                disenrollment of Enrollees to the Medicaid
                                fee-for-service program or transfer to another
                                MCO, as determined by the LDSS, but no more than
                                ninety (90) days.

                        iii)    The Contractor shall also have the right to
                                terminate this Agreement if the Contractor is
                                unable to provide services pursuant to this
                                Agreement because of a natural disaster and/or
                                an act of God to such a degree that Enrollees
                                cannot obtain reasonable access to services
                                within the Contractor's organization, and, after
                                diligent efforts, the Contractor cannot make
                                other provisions for the delivery of such
                                services. The Contractor shall give LDSS written
                                notice of any such termination that specifies:

                                A)      the reason for the termination, with
                                        appropriate documentation of the
                                        circumstances arising from a natural
                                        disaster and/or an act of God that
                                        preclude reasonable access to services;

                                    SECTION 2
                    (AGREEMENT TERM, AMENDMENTS, EXTENSIONS,
                 AND GENERAL CONTRACT ADMINISTRATION PROVISIONS)
                                 October 1, 1999
                                       2-5

<PAGE>

                                B)      the Contractor's attempts to make other
                                        provision for the delivery of services;
                                        and

                                C)      the effective date of the termination,
                                        which shall not be less time than will
                                        permit an orderly disenrollment of
                                        Enrollees to the Medicaid
                                        fee-for-service payment mechanism or
                                        transfer to another MCO, as determined
                                        by LDSS, but no more than ninety
                                        (90)days.

                d)      Termination Due To Loss of Funding

                        In the event that State and/or Federal funding used to
                        pay for services under this Agreement is reduced so that
                        payments cannot be made in full, this Agreement shall
                        automatically terminate, unless both parties agree to a
                        modification of the obligations under this Agreement.
                        The effective date of such termination shall be ninety
                        (90) days after the Contractor receives written notice
                        of the reduction in payment, unless available funds are
                        insufficient to continue payments in full during the
                        ninety (90) day period, in which case LDSS shall give
                        the Contractor written notice of the earlier date upon
                        which the Agreement shall terminate. A reduction in
                        State and/or Federal funding cannot reduce monies due
                        and owing to the Contractor on or before the effective
                        date of the termination of the Agreement.

        2.8     Close-Out Procedures

                Upon termination or expiration of this Agreement and in the
                event that it is not scheduled for renewal, the Contractor shall
                comply with close-out procedures that the Contractor develops in
                conjunction with LDSS and that the LDSS, and the SDOH have
                approved. The close-out procedures shall include the following:

                a)      The Contractor shall promptly account for and repay
                        funds advanced by SDOH for coverage of Enrollees for
                        periods subsequent to the effective date of termination;

                b)      The Contractor shall give LDSS, SDOH, and other
                        authorized federal, state or local agencies access to
                        all books, records, and other documents and upon
                        request, portions of such books, records, or documents
                        that may be required by such agencies pursuant to the
                        terms of this Agreement;

                c)      The Contractor shall submit to LDSS, SDOH, and other
                        authorized federal, state or local agencies, within
                        ninety (90) days of termination, a final financial
                        statement and audit report relating to this Agreement,
                        made by a certified public accountant or a licensed
                        public accountant, unless the Contractor requests of
                        LDSS and receives written approval from LDSS, SDOH and
                        all other governmental agencies from which approval is
                        required, for an extension of time for this submission;

                                    SECTION 2
                    (AGREEMENT TERM, AMENDMENTS, EXTENSIONS,
                 AND GENERAL CONTRACT ADMINISTRATION PROVISIONS)
                                 October 1, 1999
                                       2-6

<PAGE>

                d)      The Contractor shall furnish to SDOH immediately upon
                        receipt all information related to any request for
                        reimbursement of any medical claims that result from
                        services delivered after the date of termination of this
                        Agreement;

                e)      The Contractor shall establish an appropriate plan
                        acceptable to and prior approved by the LDSS and SDOH
                        for the orderly disenrollment of Enrollees to the
                        Medicaid fee-for-service program or enrollment into
                        another MCO. This plan shall include the provision of
                        pertinent information to identified Enrollees who are:
                        pregnant; currently receiving treatment for a chronic or
                        life threatening condition; prior approved for services
                        or surgery; or whose care is being monitored by a case
                        manager to assist them in making decisions which will
                        promote continuity of care.

                f)      The Contractor shall allow an Enrollee to continue
                        treatment with a Participating Provider if the Enrollee
                        has entered the second trimester of pregnancy, for a
                        transitional period that includes the provision of
                        post-partum are directly related to the delivery; only
                        if a participating provider is willing to:

                        i)      accept reimbursement from the Contractor at
                                rates established by the Contractor as payment
                                in full, which rates shall be no more than the
                                level of reimbursement applicable to similar
                                providers within the Contractor's network for
                                such services;

                        ii)     adhere to the Contractor's quality assurance
                                requirements and agree to provide to the
                                Contractor necessary medical information related
                                to such care; and

                        iii)    otherwise adhere to the Contractor's policies
                                and procedures including, but not limited to,
                                procedures regarding referrals and obtaining
                                preauthorization in a treatment plan approved by
                                the Contractor;

                g)      SDOH shall promptly pay all claims and amounts owed to
                        the Contractor;

                h)      Any termination of this Agreement by either the
                        Contractor or LDSS shall be done by amendment to this
                        Agreement, unless the contract is terminated by the LDSS
                        due to conditions in Section 2.7 a.(i) or Appendix A of
                        this Agreement.

        2.9     Rights and Remedies

                The rights and remedies of LDSS and the Contractor provided
                expressly in this Article shall not be exclusive and are in
                addition to all other rights and remedies provided by law or
                under this Agreement.

                                    SECTION 2
                    (AGREEMENT TERM, AMENDMENTS, EXTENSIONS,
                 AND GENERAL CONTRACT ADMINISTRATION PROVISIONS)
                                 October 1, 1999
                                       2-7

<PAGE>

        2.10    Notices

                All notices to be given under this Agreement shall be in writing
                and shall be deemed to have been given when mailed to, or, if
                personally delivered, when received by the Contractor, LDSS, and
                the SDOH at the following addresses:

                For LDSS:

                ----------------------------------

                ----------------------------------

                ----------------------------------

                ----------------------------------
                [Insert Name and Address]

                For SDOH:
                New York State Department of Health
                Empire State Plaza
                Corning Tower, Rm. 2074
                Albany, NY 12237-0065

                For the Contractor:

                --------------------------------

                --------------------------------

                --------------------------------

                --------------------------------
                [Insert Name and Address]

        2.11    Severability

                If this Agreement contains any unlawful provision that is not an
                essential part of this Agreement and that was not a controlling
                or material inducement to enter into this Agreement, the
                provision shall have no effect and, upon notice by either party,
                shall be deemed stricken from this Agreement without affecting
                the binding force of the remainder of this Agreement.

                                    SECTION 2
                    (AGREEMENT TERM, AMENDMENTS, EXTENSIONS,
                 AND GENERAL CONTRACT ADMINISTRATION PROVISIONS)
                                 October 1, 1999
                                       2-8

<PAGE>

3.      COMPENSATION

        3.1     Capitation Payments

                Compensation to the Contractor shall consist of a monthly
                capitation payment for each Enrollee and the Supplemental
                Newborn Capitation Payment where applicable.

                a)      In no event shall monthly capitation payments to the
                        Contractor for the Benefit Package exceed the cost of
                        providing the Benefit Package on a fee-for-service basis
                        to an actuarially equivalent, non-enrolled population
                        group Upper Payment Limit (UPL) as determined by SDOH.

                b)      The monthly Capitation Rates are attached hereto as
                        Appendix L and shall be deemed incorporated into this
                        Agreement without further action by the parties.

                c)      The monthly capitation payments and the Supplemental
                        Newborn Capitation Payment to the Contractor shall
                        constitute full and complete payments to the Contractor
                        for all services that the Contractor provides pursuant
                        to this Agreement subject to stop-loss provisions set
                        forth in Section 3.10 and 3.11 of this Agreement.

                d)      Capitation Rates shall be effective for the entire
                        contract period, except as described in Section 3.2.

        3.2     Modification of Rates During Contract Period

                a)      Any technical modification to Capitation Rates during
                        the term of the Agreement as agreed to by the
                        Contractor, including but not limited to, changes in
                        reinsurance or the Benefit Package, shall be deemed
                        incorporated into this Agreement without further action
                        by the parties, upon approval by SDOH, and upon written
                        notice by SDOH to the LDSS.

                b)      Any other modification to Capitation Rates, as agreed to
                        by SDOH and the Contractor, during the term of the
                        Agreement shall be deemed incorporated into this
                        Agreement without further action by the parties upon
                        approval of such modifications by the SDOH and the State
                        Division of the Budget, and upon written notice by SDOH
                        to the LDSS.

                c)      In the event that SDOH and the Contractor fail to reach
                        agreement on modifications to the monthly Capitation
                        Rates, the SDOH will provide formal written notice to
                        the Contractor and LDSS of the amount and effective date
                        of the modified Capitation Rates approved by the State
                        Division of the Budget. The Contractor shall have the
                        option of terminating this Agreement if such

                                    SECTION 3
                                  COMPENSATION
                                 October 1, 1999
                                       3-1

<PAGE>

                        approved modified Capitation Rates are not acceptable.
                        In such case, the Contractor shall give written notice
                        to the SDOH and the LDSS within thirty (30) days of the
                        d ate of the formal written notice of the modified
                        Capitation Rates from SDOH specifying the reasons for
                        and effective date of termination. The effective date of
                        termination shall be ninety (90) days from the date of
                        the Contractor's written notice, unless the SDOH
                        determines that an orderly disenrollment to Medicaid
                        fee-for-service or transfer to another MCO can be
                        accomplished in fewer days. During the period commencing
                        with the effective date of the SDOH modified Capitation
                        Rates through the effective date of termination of the
                        Agreement, the Contractor shall have the option of
                        continuing to receive capitation payments at the expired
                        Capitation Rates or at the modified Capitation Rates
                        approved by SDOH and State Division of the Budget for
                        the rate period.

                        If the Contractor fails to exercise its right to
                        terminate in accordance with this Section, then the
                        modified Capitation Rates approved by SDOH and the State
                        Division of the Bud get shall be deemed incorporated
                        into this Agreement without further action by the
                        parties as of the effective date of the modified
                        Capitation Rates as established by SDOH and approved by
                        State Division of the Budget.

        3.3     Rate Setting Methodology

                Capitation Rates are determined using a prospective methodology
                whereby cost, utilization and other rate-setting data available
                for the time period prior to the time period covered by the
                rates are used to establish premiums. Capitation rates will not
                be retroactively adjusted to reflect actual fee-for-service data
                or plan experience for the time period covered by the rates.

        3.4     Payment of Capitation

                a)      The monthly Capitation payments for each Enrollee are
                        due to the Contractor from the Effective D ate of
                        Enrollment until the Effective Date of Disenrollment of
                        the Enrollee or termination of this Agreement, which
                        ever occurs first. The Contractor shall receive a full
                        month's capitation payment for the month in which
                        disenrollment occurs. The Roster generated by SDOH with
                        any modification communicated electronically or in
                        writing by the LDSS or the Enrollment Broker prior to
                        the end of the month in which the Roster is generated,
                        shall be the enrollment list for purposes of MMIS
                        premium billing and payment, as discussed in Section 6.9
                        and Appendix H.

                b)      Upon receipt by the Fiscal Agent of a properly completed
                        claim for monthly capitation payments submitted by the
                        Contractor pursuant to this Agreement, the Fiscal Agent
                        will promptly process such claim for payment through
                        MMIS and use its best efforts to complete such
                        processing within thirty (30) business

                                    SECTION 3
                                  COMPENSATION
                                 October 1, 1999
                                       3-2

<PAGE>

                        days from date of receipt of the claim by the Fiscal
                        Agent. Processing of Contractor claims shall be in
                        compliance with the requirements of 42 CF R 447.45. The
                        Fiscal Agent will also use its best efforts to resolve
                        any billing problem relating to the Contractor's claims
                        as soon as possible. In accordance with Section 41 of
                        the State Finance Law, the State and LDSS shall have no
                        liability under this Agreement to the Contractor or
                        anyone else beyond funds appropriated and available for
                        payment of Medical Assistance care, services and
                        supplies.

        3.5     Denial of Capitation Payments

                If the Health Care Financing Administration (HCFA) denies
                payment for new Enrollees, as authorized by Social Security Act
                (SSA) '1903(m)(5)and 42 CFR ' 434.67, or such other applicable
                federal statutes or regulations, based upon a determination that
                Contractor failed substantially to provide medically necessary
                items and services, imposed premium amounts or charges in excess
                of permitted payments, engaged in discriminatory practices as
                described in SSA         ' 1932(e)(1)(A)(iii), misrepresented or
                falsified information submitted to HCFA, SDOH, LDSS, the
                Enrollment Broker, or an Enrollee, potential Enrollee, or health
                care provider, or failed to comply with federal requirements (i.
                e. 42 CFR          ' 417.479 and 42 CFR '434.70) relating to the
                Physician Incentive Plans, SDOH and LDSS will deny capitation
                payments to the Contractor for the same Enrollees for the period
                of time for which HCFA denies such payment.

        3.6     SDOH Right to Recover Premiums

                The parties acknowledge and accept that the SDOH has a right to
                recover premiums paid to the Contractor for Enrollees listed on
                the monthly Roster who are later determined f or the entire
                applicable payment month, to have been in an institution; to
                have been incarcerated; to have moved out of the Contractor's
                service area subject to any time remaining in the Enrollee's
                Guaranteed Eligibility period; or to have died. In any event,
                the State may only recover premiums paid for Medicaid Enrollees
                listed on a Roster if it is determined by the SDOH that the
                Contractor was not at risk for provision of medical services
                for any portion of the payment period.

        3.7     Third Party Health Insurance Determination

                The Contractor and the LDSS will make diligent efforts to
                determine whether Enrollees have third party health insurance
                (TPHI). The LDSS shall use its best efforts to maintain third
                party information on the WMS/MMIS Third Party Resource System.
                The Contractor shall make good faith efforts to coordinate
                benefits with and collect TPHI recoveries from other insurers,
                and must inform the LDSS of any known changes in status of TPHI
                insurance eligibility within thirty (30) days of learning of a
                change in TPHI. The Contractor may use the Roster as

                                    SECTION 3
                                  COMPENSATION
                                 October 1, 1999
                                       3-3

<PAGE>

                one method to determine TPHI information. The Contractor will be
                permitted to retain 100 per cent of any reimbursement for
                Benefit Package services obtained from TPHI. Capitation Rates
                are net of TPHI recoveries. In no instances may an Enrollee be
                held responsible for disputes over these recoveries.

        3.8     Payment For Newborns

                a)      The Contractor shall be responsible for all costs and
                        services included in the Benefit Package associated with
                        the Enrollee's newborn, unless the child is excluded
                        from Medicaid Managed Care.

                b)      The Contractor shall receive a capitation payment from
                        the first day of the newborn's month of birth and, in
                        instances where the plan pays the hospital for the
                        newborn hospital stay, a Supplemental Newborn Capitation
                        Payment.

                c)      Capitation Rate and Supplemental Newborn Capitation
                        Payment for a newborn will beg in the month following
                        certification of the newborn's eligibility and
                        enrollment, retroactive to the first day of the month in
                        which the child was born.

                d)      The Contractor must maintain on file evidence of payment
                        to the hospital of the inpatient claim f or the newborn
                        hospital stay to be eligible to receive a Supplemental
                        Newborn Capitation Payment. Failure to have supporting
                        records may, upon an audit, result in recoupment of the
                        supplemental newborn payment by SDOH.

        3.9     Contractor Financial Liability

                Contractor shall not be financially liable for any services
                rendered to an Enrollee prior to his or her Effective Date of
                Enrollment in the Contractor's plan.

        3.10    Inpatient Hospital Stop-Loss Insurance

                The Contractor must obtain stop-loss coverage for inpatient
                hospital services. A Contractor may elect to purchase stop-loss
                cove rage from New York State. In such cases, the Capitation
                Rates paid to the Contractor shall be adjusted to reflect the
                cost of such stop-loss coverage. The cost of such coverage shall
                be determined by SDOH.

                Under NYS stop-loss coverage, if the hospital inpatient expenses
                incurred by the Contractor for an individual Enrollee during any
                calendar year reaches $50,000, the Contractor shall be
                compensated for 80% of the cost of hospital inpatient services
                in excess of this amount up to a maximum of $250,000. Above that
                amount, the Contractor will be compensated for 100% of cost. All
                compensation shall be based on the lower of the Contractor's
                negotiated hospital rate or Medicaid rates of payment.

                                    SECTION 3
                                  COMPENSATION
                                 October 1, 1999
                                       3-4

<PAGE>

                [ ]     The Contractor has elected to have NYS provide stop-loss
                        reinsurance.

                OR

                [ ]     Contractor has not elected to have NYS provide stop-loss
                        reinsurance.

        3.11    Mental Health and Alcohol/Substance Abuse Stop-Loss

                a)      The Contractor will be compensated for medically
                        necessary and clinically appropriate Medicaid
                        reimbursable mental health treatment outpatient visits
                        in excess of twenty (20) visits during any calendar year
                        at rates set forth in contracted fee schedules. Any
                        Court Ordered Services for mental health treatment
                        outpatient visits which specify the use of Non
                        Participating Providers shall be compensated at the
                        Medicaid rate of payment.

                b)      The Contractor will be compensated for medically
                        necessary and clinically appropriate Medicaid
                        reimbursable alcohol and substance abuse treatment
                        outpatient visits in excess of sixty (60) visits during
                        a calendar year at rates set forth in contracted fee
                        schedules. Any Court Ordered Services for alcohol and
                        substance abuse treatment outpatient visits, which
                        specify the use of Non-Participating Providers, shall be
                        compensated at the Medicaid rate of payment.

                c)      The Contractor will be compensated for medically
                        necessary and clinically appropriate Medicaid
                        reimbursable inpatient mental health services and/or
                        inpatient alcohol and substance abuse treatment services
                        as defined in Appendix K in excess of a combined total
                        of thirty (30) days during a calendar year at the lower
                        of the Contractor's negotiated inpatient rate or
                        Medicaid rate of payment. The stop-loss insurance does
                        not apply to inpatient detoxification services provided
                        in Article 28 hospitals.

        3.12    Enrollment Limitations

                a)      For purposes of this Agreement, enrollment shall not
                        exceed _________ Medicaid recipients. The upper limit
                        may be modified by mutual written agreement of the
                        Contractor, the LDSS, the SDOH and DHHS or HCFA.

                b)      LDSS shall have the right, upon consultation with and
                        notice to the SDOH, to limit, suspend, or terminate
                        enrollment activities by the Contractor and/or
                        enrollment into the Contractor's plan upon ten (10) days
                        written notice to the Contractor, specifying the actions
                        contemplated and

                                    SECTION 3
                                  COMPENSATION
                                 October 1, 1999
                                       3-5

<PAGE>

                the reason(s) for such action(s). Nothing in this paragraph
                limits other remedies available to the LDSS under this
                Agreement.

        3.13    Tracking Visits Provided by Indian Health Clinics

                The SDOH shall monitor all visits provided by tribal or Indian
                health clinics or urban Indian health facilities or centers to
                enrolled Native Americans, so that the SDOH can reconcile
                payment made for those services, should it be deemed necessary
                to do so.

                                    SECTION 3
                                  COMPENSATION
                                 October 1, 1999
                                       3-6

<PAGE>

4.      SERVICE AREA

        The Service Area described in Appendix M of this Agreement, which is
        hereby made a part of this Agreement as if set forth fully herein, is
        the specific geographic area within which Eligible Persons must reside
        to enroll in the Contractor's plan.

                                    SECTION 4
                                 (SERVICE AREA)
                                 October 1, 1999
                                       4-1

<PAGE>

5.      ELIGIBLE, EXEMPT AND EXCLUDED POPULATIONS

        5.1     Eligible Populations

                a)      Except as specified in Section 5.1(b) and 5.3 be low,
                        all persons in the following Medicaid-eligible
                        beneficiary categories who reside in the service area
                        shall be eligible for enrollment in the Contractor's
                        plan:

                        i)      Singles/Childless Couples -Cash and Medicaid
                                only

                        ii)     Low Income Families with Children -Cash and
                                Medicaid only

                        iii)    Aid to Families with Dependent Children
                                -Medicaid only

                        iv)     Pregnant women whose net available income is at
                                or below one hundred and eighty-five percent
                                (185 %) of the federal poverty level for the
                                applicable household size.

                        v)      Children aged one (1) year or below whose
                                family's net available income is at or below one
                                hundred and eighty-five percent (185%) of the
                                federal poverty level for the applicable
                                household size.

                        vi)     Children between ages one (1) and five (5),
                                whose family's net available income is at or
                                below one hundred and thirty-three percent
                                (133%) of the federal poverty level for the
                                applicable household size.

                        vii)    Children six (6) to nine teen (19), whose
                                family's net available income is at or below one
                                hundred percent (100%) of the federal poverty
                                level for the applicable household size.

                        viii)   Transitional Medical Assistance Beneficiaries

                        ix)     Supplemental Security Income (cash) and
                                Supplemental Security Income Related (Medicaid
                                only).

                b)      All Medicaid eligible individuals in the following
                        categories may be eligible for enrollment in the
                        Contractor 's plan at the LDSS' option, as indicated by
                        an X below.

                        i)      Foster care children in the direct care of LDSS.

                                YES______             NO_______

                        ii)     Homeless persons living in shelters outside
                                of New York City may be eligible for enrollment
                                if so determined by the LDSS.

                                YES______             NO_______

        5.2     Exempt Populations

                The following populations are exempt from mandatory enrollment
                in Medicaid managed care, but may enroll on a voluntary basis,
                if otherwise eligible.

                                   Section 5
                  (ELIGIBLE, EXEMPT AND EXCLUDED POPULATIONS)
                                October 1, 1999
                                      5-1

<PAGE>

a)              Individuals who are HIV+ or have AIDS.

        b)      Individuals who are Seriously and Persistently Mentally Ill or
                Seriously Emotionally Disturbed.

        c)      Individuals for whom a Man aged Care Provider is not
                geographically accessible so as to reasonably provide services.
                To qualify for this exemption, an individual must demonstrate
                that no participating MCO has a provider located within thirty
                (30) minute s travel time /thirty (30) mile s travel distance
                from the individual's home, who is accepting new patients, and
                that there is a fee-for-service Medicaid provider available
                within the thirty (30) minutes travel time /thirty (30) miles
                travel distance.

        d)      Pregnant women who are already receiving prenatal care from a
                provider authorized to provide such care not participating in
                any Medicaid managed care plan. This status will last through a
                woman's pregnancy, extend through the sixty (60) day post-partum
                period and end at the end of the month in which the sixtieth
                (60th) day occurs.

        e)      Individuals with a chronic medical condition who, for at least
                six (6) months, have been under active treatment with a
                non-participating sub-specialist physician who is not a network
                provider for any MCO participating in the Medicaid managed care
                program service area. This status will last as long as the
                individual's chronic medical condition exists or until the
                physician joins a participating MCO's network. The SDOH 's
                Office of Managed Care, Medical Director will, upon the request
                of an individual or his/her guardian or legally authorized
                representative (health care agent authorized through a health
                care proxy), review cases of individuals with unusually severe
                chronic care needs for a possible exemption from mandatory
                enrollment in managed care if such individuals are not otherwise
                eligible for an exemption (i. e., meet one of the seventeen (17)
                criteria listed here). The SDOH's OMC Medical Director may also
                authorize a plan disenrollment for such individuals.
                Diserollment requests should be made in a manner consistent with
                the over all disenrollment request process for "good cause"
                disenrollment.

        f)      Individuals with End Stage Renal Disease (ESRD).

        g)      Individuals who are residents of Intermediate Care Facilities
                for the Mentally Retarded ("ICF/MR").

        h)      Individuals with characteristics and needs similar to those who
                are residents of ICF/MRs based on criteria cooperatively
                established by the State Office of Mental Retardation and
                Developmental Disabilities (OMRDD) and the SDOH.

        i)      Individuals already scheduled for a major surgical procedure
                (within thirty (30) days of scheduled enrollment) with a
                provider who is not a participant in the

                                    Section 5
                   (ELIGIBLE, EXEMPT AND EXCLUDED POPULATIONS)
                                 October 1, 1999
                                       5-2

<PAGE>

                        network of a Medicaid MCO under contract with the LDSS.
                        This exemption will only apply until such time as the
                        individual's course of treatment is complete.

                j)      Individuals with a developmental or physical disability
                        who receive services through a Medicaid
                        Home-and-Community-Based Services Waiver or Medicaid
                        Model Waiver (care-at-home) through a Section 1915c
                        waiver, or individuals having characteristics and needs
                        similar to such individuals (including individuals on
                        the waiting list), based on criteria cooperatively
                        established by OMRDD and SDOH.

                k)      Individuals who are residents of Alcohol and Substance
                        Abuse Long Term Residential Treatment Programs.

                l)      In New York City, individuals who are homeless and do
                        not reside in a Department of Homeless Services (DHS)
                        shelter are exempt. Homeless individuals residing in a
                        NYC DHS shelter and already enrolled in a plan at the
                        time they enter the shelter may choose to remain
                        enrolled. In areas outside of NYC, exemption of homeless
                        individuals residing in the shelter system is at the
                        discretion of the LDSS -see Section 5.1b.

                m)      Native Americans

                n)      Individuals who cannot be served by a managed care
                        provider due to a language barrier which exists when the
                        individual is not capable of effectively communicating
                        his or her medical needs in English or in a secondary
                        language for which PCPs are available within the
                        Medicaid managed care pro gram. Individuals with a
                        language barrier will be deemed able to be served if
                        they have a choice of three (3) PCPs, at least one (1)
                        of which is able to communicate in the primary language
                        of the eligible individual or has a person on his/her
                        staff capable of translating medical terminology, and
                        the other two (2) PCPs have access to Language Line
                        Services as an alternative to communicating directly
                        with the eligible individual in his/her language.
                        Individuals will be eligible for an exemption when:

                I)      The individual has a relationship with a primary care
                        provider who:
                        A)      has the language capability to serve the
                                individual;
                        B)      does not participate in any of the Medicaid
                                managed care plans within a thirty (30) minute
                                /thirty (30) mile radius of the eligible
                                individual's residence; OR

                ii)     The three following circumstances exist:
                        A)      neither a fee-for-service provider nor the above
                                described three (3) participating PCPs are
                                available within the thirty (30) minute /thirty
                                (30) mile radius; and

                                    Section 5
                   (ELIGIBLE, EXEMPT AND EXCLUDED POPULATIONS)
                                 October 1, 1999
                                       5-3

<PAGE>

                        B)      a fee-for-service provider with the language
                                capability to serve the individual is available
                                outside the thirty (30) minute/thirty (30) mile
                                radius; and
                        C)      the above described three (3) participating PCPs
                                are not available outside the thirty (30)
                                minute/thirty (30) mile radius.

                o)      Individuals temporarily residing out of district, (e.
                        g., college students) will be exempt until the last day
                        of the month in which the purpose of the absence is
                        accomplished. The definition of temporary absence is set
                        forth in Social Services regulations 18 NYCRR Section
                        360-1.4 (p).

                p)      SST and SS I-related beneficiaries are considered exempt
                        and may enroll on a voluntary basis.

        5.3     Excluded Populations

                The following populations are ineligible for enrollment in
Medicaid managed care.

                a)      Individuals who are Dually Eligible for
                        Medicare/Medicaid.

                b)      Individuals who become eligible for Medicaid only after
                        spending down a portion of their income (Spend-down).

                c)      Individuals who are residents of State-operated
                        psychiatric facilities or residential treatment
                        facilities for children and youth.

                d)      Individuals who are residents of Residential Health Care
                        Facilities ("RHCF") at the time of enrollment and
                        individuals who enter a RHCF subsequent to enrollment,
                        except for short term rehabilitative stays anticipated
                        to be no greater than thirty (30) days.

                e)      Individuals enrolled in managed long term care
                        demonstrations authorized under Article 4403-f of the
                        New York State P. H. L.

                f)      Medicaid-eligible infants living with incarcerated
                        mothers.

                g)      Infants weighing less than 1200 grams at birth and other
                        infants under six (6) months of age who meet the
                        criteria for the SSI or SSI related category (shall not
                        be enrolled or shall be disenrolled retroactive to date
                        of birth).

                h)      Individuals with access to comprehensive private health
                        care coverage including those already enrolled in an
                        MCO. Such health care coverage, purchased either
                        partially or in full, by or on behalf of the individual,
                        must be determined to be cost effective by the local
                        social services district.

                                    Section 5
                   (ELIGIBLE, EXEMPT AND EXCLUDED POPULATIONS)
                                 October 1, 1999
                                       5-4

<PAGE>

                i)      Foster children in the placement of a voluntary agency.

                j)      Certified blind or disabled children living or expected
                        to b e living separate and apart from the parent for
                        thirty (30) days or more.

                k)      Individuals expected to be eligible for Medicaid for
                        less than six (6) months, except for pregnant women (e.
                        g., seasonal agricultural workers).

                l)      Foster children in direct care (unless LDSS opts to
                        enroll them see Section 5.1(b)).

                m)      Homeless individuals residing in a NYCDHS shelter and
                        not enrolled in a Managed Care plan at the time they
                        enter the shelter.

                n)      Individuals in receipt of institutional long-term care
                        services through Long Term Home Health Care programs, or
                        Child Care Facilities (except ICF services for the
                        Developmentally Disabled).

                o)      Individuals eligible for Medical assistance benefits
                        only with respect to TB related services.

                p)      Individuals placed in State Office of Mental Health
                        licensed family care homes pursuant to NYS Mental
                        Hygiene Law, Section 31.03.

                q)      Individuals enrolled in the Restricted Recipient
                        Program.

                r)      Individuals with a "County of Fiscal Responsibility"
                        code of 99.

                s)      Individuals admitted to a Hospice program a t the time
                        of enrollment (if an Enrollee enters a Hospice program
                        while enrolled in the Contractor's plan, he/she may
                        remain enrolled in the Contractor's plan to maintain
                        continuity of care with his/her PCP). Hospice services
                        are accessed through the fee-for-service Medicaid
                        Program.

                t)      Individuals with a "County of Fiscal Responsibility"
                        code of 97 (OMH in MMIS) or 98 (OMRDD in MMIS).

        5.4     Family Enrollment

Upon implementation of the 1115 waiver in a county, the Contractor agrees that
members of the same family (defined as mother and her child(ren), father and his
child(ren), a husband, wife and child(ren) or a husband and wife residing in the
same household, or persons included in the same case) will be required to enroll
in the same health plan, in accordance with Section 6.6 of this Agreement.

                                    Section 5
                   (ELIGIBLE, EXEMPT AND EXCLUDED POPULATIONS)
                                 October 1, 1999
                                       5-5

<PAGE>

6.      ENROLLMENT

        6.1     Enrollment Guidelines

                a)      The LDSS may employ a variety of methods and programs
                        for enrollment of Eligible Persons including, but not
                        limited to enrollment assisted by the Contractor,
                        enrollment assisted by an Enrollment Broker, enrollment
                        by LDSS, or a combination of such. The policies and
                        procedural guidelines which will be used for enrollment
                        a reset forth in Appendix H, which is hereby made a part
                        of this Agreement as if set forth fully herein.

                b)      The LDSS and the Contractor agree to conduct enrollment
                        of eligible individuals in accordance with the
                        guidelines set forth in Appendix H.

                c)      The SDOH and LDSS, upon mutual agreement, may make
                        modifications to the guidelines set forth in Appendix H.
                        The parties further acknowledge that such modifications
                        shall be effective and made a part of t his Agreement
                        without further action by the parties upon sixty (60)
                        days written notice to the LDSS and the Contractor.

        6.2     Equality of Access to Enrollment

                Eligible Person's shall be enrolled in the Contractor's plan, in
                accordance with the requirements set forth in Appendix H,
                Section A. In those instances in which the Contractor is
                directly involved in enrolling eligible recipients, the
                Contractor shall accept enrollments in the order they are
                received without regard to the Eligible Person's age, sex, race,
                creed, physical or mental handicap/developmental disability,
                national origin, sexual orientation, type of illness or
                condition, need for health services or to the Capitation Rate
                that the Contractor will receive for such Eligible Person.

        6.3     Enrollment Decisions

                An Eligible Person's decision to enroll in the Contractor's plan
                shall be voluntary except as otherwise provided in Section 6.4
                of the Agreement.

        6.4     Auto Assignment

                Upon implementation of the 1115 Waiver, or other applicable
                waivers of federal requirements, an Eligible Person whose
                enrollment in a MCO is mandatory and who fails to select a MCO
                within sixty (60) days of receipt of notice of mandatory
                enrollment may be assigned by the LDSS to the Contractor's plan
                pursuant to NYS Social Services Law Section 364-j and in
                accordance with Appendix H.

                                    SECTION 6
                                  (ENROLLMENT)
                                 October 1, 1999
                                       6-1

<PAGE>

        6.5     Prohibition Against Conditions on Enrollment

                Unless otherwise required by law or this agreement, neither the
                Contractor nor LDSS shall condition any Eligible Person's
                enrollment upon the performance of any act or suggest in any way
                that failure to enroll may result in a loss of Medicaid
                benefits.

        6.6     Family Enrollment

                a)      Upon implementation of the 1115 Waiver, all eligible
                        members of the Eligible Person's Family shall be
                        enrolled into the same plan.

b)              Upon implementation of the 1115 Waiver, the LDSS must inform
                        Enrollees who have Family members enrolled in other MCOs
                        that if anyone in the Family wishes to change plans, all
                        members of the Family must enroll together in the
                        newly-selected plan. The LDSS shall also notify the
                        Enrollee that all members of the Family will be required
                        to enroll together in a single MCO at the time of their
                        next recertification for Medicaid eligibility unless
                        waiver of this requirement is approved by the LDSS.

                c)      Notwithstanding the foregoing, the LDSS may, on a
                        case-by-case basis, approve enrollment of Family
                        member(s) of an Enrollee in another MCO if one or more
                        members of the Family are receiving prenatal care and/or
                        continuing care for a complex/chronic medical condition
                        from Non Participating Providers.

        6.7     Newborn Enrollment

a)              All newborn children not in an excluded category shall be
                        enrolled in the MCO of the mother, effective from the
                        first day of the child's month of birth.

                b)      In addition to the responsibilities set forth in
                        Appendix H, the Contractor is responsible for doing all
                        of the following with respect to newborns:

                        i)      Coordinating with the LDSS the efforts to ensure
                                that all newborns are enrolled in the managed
                                care plan;

                        ii)     Issuing a letter informing parent(s) about
                                newborn child's enrollment or a member
                                identification card within 14 days of the date
                                on which the Contractor becomes aware of the
                                birth;

                        iii)    Assuring that enrolled pregnant women select a
                                PCP for an infant prior to

                                    SECTION 6
                                  (ENROLLMENT)
                                 October 1, 1999
                                       6-2

<PAGE>

                                birth and the mother to make an appointment with
                                the PCP immediately upon birth; and
                        iv)     Ensuring that the newborn is linked with a PCP
                                prior to discharge from the hospital, in those
                                instances in which the Contractor has received
                                appropriate notification of the birth prior to
                                discharge.

                c)      The LDSS shall be responsible for ensuring that timely
                        Medicaid Eligibility determination and enrollment of the
                        newborns is effected consistent with state laws,
                        regulations, and policy and with the newborn enrollment
                        guidelines set forth in Appendix H, Section B of this
                        Agreement.

        6.8     Effective Date of Enrollment

                a)      The Contractor and the LDSS must notify the Enrollee of
                        the expected Effective Date of Enrollment. This may be
                        accomplished through a "Welcome Letter". To the extent
                        practicable, such notification must precede the
                        Effective Date of Enrollment. In the event that the
                        actual Effective Date of Enrollment changes, the
                        Contractor and the LDSS must notify the Enrollee of the
                        change.

                b)      As of the Effective Date of Enrollment, and until the
                        Effective Date of Disenrollment from the Contractor's
                        plan, the Contractor shall be responsible for the
                        provision and cost of all care and services covered by
                        the Benefit Package and provided to Enrollees whose
                        names appear on the Prepaid Capitation Plan Roster,
                        except as hereinafter provided.

i)                      Contractor shall not be liable for the cost of any
                                services rendered to an Enrollee prior to his or
                                her Effective Date of Enrollment.
ii)                     Contractor shall not be liable for the cost of
                                hospitalization for an Eligible Person, who is
                                hospitalized after completing and submitting an
                                enrollment form to enroll in the Contractor's
                                plan, and who remains hospitalized on or after
                                the Effective Date of Enrollment.
                        iii)    Except for newborns, an Enrollee's Effective
                                Date of Enrollment shall be the first day of the
                                month on which the Enrollee's name appears on
                                the PCP roster for that month.

        6.9     Roster

a)              The first and second monthly Rosters generated by SDOH in
                        combination shall serve as the official Contractor
                        enrollment list for purposes of MMIS premium billing and
                        payment, subject to on going eligibility of the
                        Enrollees as of the first (1st) day of the enrollment
                        month. Modifications to the first (1st) Roster may be
                        made electronically or in writing by the LDSS

                                    SECTION 6
                                  (ENROLLMENT)
                                 October 1, 1999
                                       6-3

<PAGE>

                        or the Enrollment Broker prior to the end of the month
                        in which the Roster is generated.

                b)      The LDSS shall make data on eligibility determinations
                        available to the Contractor and SDOH to resolve
                        discrepancies that may arise between the Roster and the
                        Contractor's enrollment files in accordance with the
                        provisions in Appendix H, Section D.

c)              If LDSS or Enrollment Broker notifies the Contractor in writing
                        or electronically of changes in the first (1st ) Roster
                        and provides supporting information as necessary prior
                        to the effective date of the Roster, the Contractor will
                        accept that notification in the same manner as the
                        Roster. If the Contractor does not receive the Roster
                        before the last business day of the month prior to the
                        Roster effective date, the Contractor shall receive the
                        applicable monthly Capitation Rate for any individual
                        who is no longer on the Roster, was eligible the prior
                        month, and is inadvertently served by the Contractor
                        before receipt of the Roster.

                d)      All Contractors must have the ability to receive these
                        Rosters electronically.

        6.10    Automatic Re-Enrollment

                The Contractor agrees that Eligible Persons who are disenrolled
                from the Contractor's plan due to loss of Medicaid eligibility
                and who regain eligibility within three (3) months will
                automatically be prospectively re-enrolled with the Contractor's
                plan, subject to availability of enrollment capacity in the
                plan.

                                    SECTION 6
                                  (ENROLLMENT)
                                 October 1, 1999
                                       6-4

<PAGE>

7.      LOCK-IN PROVISIONS

        7.1     Lock-In Provisions in Voluntary Counties

                All Enrollees in local social service districts where enrollment
                in managed care is voluntary shall be subject to a Lock-In
                Period under this Agreement if so required by the LDSS as
                indicated by an x below:

                [ ]     Enrollees are subject to a twelve (12) month Lock-In
                        Period following the Effective Date of Enrollment in the
                        Contractor's plan with an initial ninety (90) day grace
                        period to disenroll from the Contractor's plan without
                        cause.

                [ ]     Enrollees are not subject to a Lock-In Period.

        7.2     Lock-In Provisions in Mandatory Counties

                All Enrollees in local social service districts, except New York
                City, where enrollment in managed care is mandatory, are subject
                to a twelve (12) month Lock-In period following the Effective
                Date of Enrollment in the Contractor's plan, with an initial
                thirty (30) day Grace period in which to disenroll from the
                Contractor's plan without cause, or a sixty (60) day grace
                period in which to disenroll from the Contractor's plan without
                cause, if the Enrollee was auto assigned by the LDSS to the
                Contractor's plan.

        7.3     Lock-In Provisions in New York City

                All Enrollees residing in New York City are subject to a twelve
                (12) month Lock-In Period following the Effective Date of
                Enrollment in the Contractor's plan with an initial ninety (90)
                day grace period in which to disenroll without cause from the
                Contractor 's Plan, regardless of zip code of residence, and
                regardless of whether the Enrollee selected or was auto-assigned
                to the Contractor's plan.

        7.4     Disenrollment During Lock-In Period

                An Enrollee, subject to Lock-In, may disenroll from the
                Contractor's plan during the Lock-In period for "good cause" as
                established in 18 NYCRR Section 360-10.13 or, if the Enrollee be
                comes eligible for an exemption or exclusion from Medicaid
                Managed Care as set forth in Sections 5.2 and 5.3 of this
                Agreement.

        7.5     Notification Regarding Lock-In and End of Lock-In Period

                LDSS, either directly or through the Enrollment Broker, shall
                notify Enrollees of their right to change MCOs in the enrollment
                confirmation notice sent to individuals after they have selected
                a CO or been auto-assigned (the latter being applicable to areas
                where the mandatory program is in effect). LDSS and the

                                    Section 7
                              (LOCK-IN PROVISIONS)
                                 October 1, 1999
                                       7-1

<PAGE>

                Enrollment Broker will be responsible for providing a notice of
                end of Lock-In and the right to change MCOs at least sixty (60)
                days prior to the first plan enrollment anniversary date.

                                    Section 7
                              (LOCK-IN PROVISIONS)
                                 October 1, 1999
                                       7-2

<PAGE>

8.      DISENROLLMENT

        8.1     Disenrollment Guidelines

                a)      Disenrollment of an Enrollee from the Contractor's Plan
                        may be initiated by the Enrollee, LDSS, and/or the
                        Contractor under the conditions specified in Sections
                        8.7, 8.8 and 8.9 and as detailed in Appendix H, Section
                        E of this Agreement.

                b)      The LDSS and the Contractor agree to conduct
                        disenrollment in accordance with the guidelines set
                        forth in Appendix H, Section E.

                c)      The SDOH and LDSS, upon mutual agreement, may modify
                        Appendix H of this Agreement upon sixty (60) days prior
                        written notice to the Contractor and such modifications
                        shall become binding and incorporated into this
                        Agreement without further action by the parties.

                d)      LDSS shall make the final determination concerning
                        disenrollment, except for Contractor initiated
                        disenrollments and expedited disenrollments, which ma y
                        be subject to SDOH approval as specified elsewhere in
                        this Agreement.

        8.2     Disenrollment Prohibitions

                Disenrollment shall not be based in whole or in part on any of
the following reasons:

                a)      an existing condition or a change in the Enrollee's
                        health which would necessitate disenrollment pursuant to
                        the terms of this Agreement, unless the change
                        i)      results in the Enrollee being reclassified into
                                an excluded category for Medicaid managed care
                                as listed in Section 5.3 of this Agreement;
                        ii)     results in the Enrollee being reclassified into
                                an exempt category as listed in Section 5.2 of
                                this Agreement and the Enrollee wants to
                                disenroll from managed care.

                b)      any of the factors listed in Section 34 -
                        Non-Discrimination of this Agreement; or

                c)      on the Capitation Rate payable to the Contractor r
                        elated to the Enrollee's participation with the
                        Contractor.

        8.3     Reasons for Voluntary Disenrollment

                                    Section 8
                                 (Disenrollment)
                                 October 1, 1999
                                       8-1

<PAGE>

                The LDSS or the Contractor, as agreed upon between the LDSS and
                Contractor, shall provide Enrollees who disenroll voluntarily
                with an opportunity to identify, in writing, their reason(s) for
                disenrollment.

        8.4     Processing of Disenrollment Requests

                Unless otherwise specified in Appendix H, Section F
                disenrollment requests will be processed to take effect on the
                first (1st) day of the next month if the request is made before
                the date specified in Appendix H. In no event shall the
                Effective Date of Disenrollment be later than the first (1st)
                day of the second (2nd) month after the month in which an
                Enrollee requests a disenrollment.

        8.5     Contractor Notification of Disenrollments

                Notwithstanding anything herein to the contrary, the Roster,
                along with any changes sent by the LDSS to the Contractor in
                writing or electronically, shall serve as official notice to the
                Contractor of disenrollment of an Enrollee.

        8.6     Contractor's Liability

                The Contractor is not responsible for providing the Benefit
                Package under this Agreement after the Effective Date of
                Disenrollment unless the Enrollee is admitted to a hospital
                prior to the expected Effective Date of Disenrollment and is not
                discharged from the hospital until after the expected Effective
                Date of Disenrollment, in which case the Contractor is
                responsible for the entire hospital claim. The Contractor shall
                notify the LDSS that the Enrollee remains in the hospital and
                provide the LDSS with information regarding his or her medical
                status. The Contractor is required to cooperate with the
                Enrollee and the new MCO (if applicable) on a timely basis to
                ensure a smooth transition and continuity of care.

        8.7     Enrollee Initiated Disenrollment

                a)      Disenrollment For Good Cause

i)                      An Enrollee subject to Lock-In may initiate
                                disenrollment from the Contractor's plan for
                                "good cause" as defined in 18 NYCRR '360-10.13
                                at any time during the Lock-In period and may
                                disenroll for any reason at any time after the
                                twelfth (12th) month following the Effective
                                Date of Enrollment.

                        ii)     An Enrollee subject to Lock-In may initiate
                                disenrollment for "good cause" by filing a
                                written request with the LDSS or the Contractor.
                                The Contractor must notify the LDSS of the
                                request. The LDSS must respond with a
                                determination within thirty (30) days after
                                receipt of the request.

                                    Section 8
                                 (Disenrollment)
                                 October 1, 1999
                                       8-2

<PAGE>

                        iii)    Enrollees granted disenrollment for "good cause"
                                in a voluntary county may join another plan, if
                                one is available, or participate in Medicaid
                                fee-for-service program. In mandatory counties,
                                unless the Enrollee becomes exempt or excluded,
                                he/she may be required to enroll with another
                                MCO.

iv)                     In the event that the LDSS denies an Enrollee's request
                                for disenrollment for "good cause", the LDSS
                                must inform the Enrollee of the denial of the re
                                quest with a written notice which explains the
                                reason for the denial, states the facts upon
                                which denial is based, cites the statutory and
                                regulatory authority and advises the recipient
                                of his or her right to a fair hearing pursuant
                                to 18 NYCRR Part 358. In the event that the
                                Enrollee's request to disenroll is approved, the
                                notice must state the Effective Date of
                                Disenrollment.

                        v)      Once the Lock-In Period has expired, an Enrollee
                                may disenroll from the Contractor's plan at any
                                time, for any reason.

                b)      Expedited Disenrollment

                        i)      In cases where the Enrollee's request for
                                disenrollment includes an urgent medical need to
                                disenroll from the Contractor 's plan without
                                delay, the SDOH or the LDSS may approve an
                                expedited disenrollment as set forth in Chapter
                                23 of New York State 's 1115 Waiver Operational
                                Protocol, and as set forth in Appendix H. The
                                LDSS will make this decision unless the LDSS
                                delegates this responsibility to SDOH.

ii)                     In cases where an Enrollee's request for disenrollment
                                may include a complaint of non-consensual
                                enrollment, Enrollees may initiate a request for
                                an expedited disenrollment to the LDSS or the
                                SDOH. Substantiation of such a request by the
                                LDSS or the SDOH may result in an expedited
                                disenrollment as set forth in Chapter 23 of New
                                York State's 1115 Waiver Operational Protocol
                                and as set forth in Appendix H.

        8.8     Contractor Initiated Disenrollment

                a)      Contractor initiated disenrollment(s) will be limited to
                        circumstances wherein there is clear and consistent
                        documentation that the individual's behavior is verbally
                        or physically abusive and/or causes harm to other
                        Enrollees or to the plan providers and staff, or is
                        repeatedly non-compliant. Disenrollment may not be
                        initiated due to an Enrollee's refusal to accept a
                        specific treatment nor for behavior resulting from an
                        underlying medical condition, alcohol or substance
                        abuse, mental illness, mental retardation or other
                        developmental disability.

                b)      To request disenrollment of an Enrollee, the Contractor
                        must do the following if applicable:

                                    Section 8
                                 (Disenrollment)
                                 October 1, 1999
                                       8-3

<PAGE>

                        i)      show evidence of professional evaluation ruling
                                out an underlying medical condition, alcohol or
                                substance abuse, mental illness, mental
                                retardation or other developmental disability as
                                cause for Enrollee behavior.
                        ii)     document difficulty encountered with the
                                Enrollee; nature, extent and frequency of
                                abusive or harmful behavior, violence, inability
                                to treat or engage client.
                        iii)    identify and document unique issue s that may be
                                affecting the Contractor's ability to provide
                                treatment effectively to certain Enrollees as
                                well as the appropriateness of providers in
                                network.
                        iv)     document special training offered to providers
                                to improve their ability to deal with difficult,
                                non-compliant patients, or those having the
                                above mentioned conditions.

                c)      The Contractor must make a reasonable effort to identify
                        for the Enrollee, both verbally and in writing, those
                        actions of the Enrollee that have interfered with the
                        effective provision of covered services as well as
                        explain what actions or procedures are acceptable.

                d)      Prior to requesting disenrollment by the LDSS of an
                        Enrollee for whom an agency other than the LDSS provides
                        oversight, the Contractor must make reasonable efforts
                        to engage the Enrollee, directly or by working with such
                        agencies.

                e)      The Contractor shall give prior verbal and written
                        notice to the Enrollee, with a copy to the LDSS, of its
                        intent to request disenrollment. The notice shall advise
                        the Enrollee that the request has been forwarded to the
                        LDSS f or review and approval. The written notice must
                        include the mailing address and telephone number of the
                        LDSS.

                f)      The Contractor shall keep the LDSS informed of decisions
                        related to all complaints filed by an Enrollee as a
                        result of, or subsequent to, the notice of intent to
                        disenroll.

                g)      The SDOH or LDSS will review each Contractor initiated
                        disenrollment request in accordance with protocols
                        established by SDOH in conjunction with the applicable
                        over sight agency. Where applicable, as set out in those
                        protocols, the LDSS or the SDOH, through or with the
                        cooperation of the LDSS, shall consult with local mental
                        health and substance abuse authorities in the County
                        when making the determination to approve or disapprove a
                        Contractor initiated disenrollment request.

                h)      The LDSS will render a decision within thirty (30) days
                        of receipt of the final request. Final written
                        determination will be provided to the Enrollee and the
                        Contractor. If the LDSS determination upholds the
                        Contractor's request to disenroll, the LDSS's written
                        determination must inform the

                                    Section 8
                                 (Disenrollment)
                                 October 1, 1999
                                       8-4

<PAGE>

                        Enrollee of the Effective Date of Disenrollment and
                        include a notice of rights to a fair hearing. Should an
                        Enrollee request a fair hearing as a result of the LDSS
                        determination, the LDSS shall inform the Contractor of
                        the fair hearing request and the Enrollee will remain
                        enrolled in the Contractor's plan until disposition of
                        the fair hearing.

                i)      Once an Enrollee has been disenrolled at the
                        Contractor's request, he/she will not be re-enrolled
                        with the Contractor's plan unless the Contractor first
                        agrees to such re-enrollment.

                j)      In New York City, the Metropolitan Regional Office of
                        the SDOH will assume the LDSS responsibility for
                        reviewing and approving requests as set forth in
                        Sections 8.8(g) and (h) of this Agreement.

        8.9     LDSS Initiated Disenrollment

                a)      LDSS will promptly initiate disenrollment when:

                        i)      an Enrollee is no longer eligible for any
                                Medicaid benefits; or
                        ii)     the Guaranteed Eligibility period ends (See
                                Section 9) and an Enrollee is no longer eligible
                                for any Medicaid benefits; or
                        iii)    an Enrollee is no longer the financial
                                responsibility of the LDSS; or
                        iv)     an Enrollee becomes ineligible for enrollment
                                pursuant to Section 5.3 of this Agreement, as
                                appropriate; or
                        v)      an Enrollee resides out side the Service Area
                                covered by this Agreement, unless Contractor can
                                demonstrate that the Enrollee has made an
                                informed choice to continue enrollment with
                                Contractor and that Enrollee will have
                                sufficient access to Contractor's provider
                                network.

                                    Section 8
                                 (Disenrollment)
                                 October 1, 1999
                                       8-5

<PAGE>

9.      GUARANTEED ELIGIBILITY

        Except as may otherwise be required by law:

9.1     New Enrollees, other than those identified in Sections 9.2 who would
                otherwise lose Medicaid eligibility during the first six (6)
                months of enrollment will retain the right to remain enrolled in
                the Contractor's plan under this Agreement for a period of six
                (6) months from their Effective Date of Enrollment.

        9.2     Guaranteed eligibility is not available to Enrollees who lose
                Medicaid eligibility for one of the following reasons:

                a.      death, moving out of State, incarceration, or the LDSS
                        is unable to locate;

b.              engagement in fraudulent activities prior to the Effective Date
                        of Enrollment, which would render them ineligible for
                        Medicaid;

c.              commitment of an international program violation by a single
                        childless adult between the age of twenty-one (21) to
                        sixty-five (65 ) who is not pregnant o r disabled prior
                        to the Effective Date of Enrollment;

d.              being a woman with a net available income in excess of medically
                        necessary income but at or below 185% of the federal
                        poverty level who is only eligible for Medicaid while
                        she is pregnant and then through the end of the month in
                        which the sixtieth (60th) day following the end of the
                        pregnancy occurs.

9.3     If, during the first six (6) months of enrollment in the Contractor's
                plan, an Enrollee becomes eligible for Medicaid only as a
                spend-down, the Enrollee will be eligible to remain enrolled in
                the Contractor's plan for the remainder of the six (6) month
                guarantee period. During the six (6) month guarantee period, an
                Enrollee eligible for spend-down and in need of wraparound
                services has the option of spending down to gain full Medicaid
                eligibility for the wraparound services. In this situation, the
                LDSS will monitor the Enrollee's need for wrap around services
                and manually set coverage codes as appropriate.

        9.4     The services covered during the Guaranteed Eligibility period
                shall be those contained in the Benefit Package, as specified in
                Appendix K, including free access to family planning services as
                s et forth in Section 10.12 of this Agreement. During the
                Guaranteed Eligibility period Enrollees are also eligible for
                pharmacy services on a Medicaid fee-for service basis.

        9.5     An Enrollee-initiated disenrollment from the Contractor's plan
                terminates the Guaranteed Eligibility period.

                                    SECTION 9
                            (GUARANTEED ELIGIBILITY)
                                 October 1, 1999
                                       9-1

<PAGE>

9.6     Enrollees who lose and regain Medicaid eligibility within a three (3)
                month period will not be entitled to a new period of six (6)
                months Guaranteed Eligibility.

        9.7     During the guarantee period, an Enrollee may not change health
                plans. An Enrollee may choose to disenroll from the Contractor's
                Plan during the guarantee period but is not eligible to enroll
                in any other MCO because he/she has lost eligibility for
                Medicaid.

                                    SECTION 9
                            (GUARANTEED ELIGIBILITY)
                                 October 1, 1999
                                       9-2

<PAGE>

10.     BENEFIT PACKAGE, COVERED AND NON-COVERED SERVICES

        10.1    Contractor Responsibilities

                Contractor must provide all services set forth in the Benefit
                Package (Appendix K) that are cove red under the Medic aid fee
                for service program except for services specifically excluded by
                the contract, or enacted or affected by Federal or State Law
                during the period of this agreement. SDOH and LDSS shall assure
                the continued availability and accessibility of Medicaid
                services not covered in the Benefit Package.

        10.2    Compliance with State Medicaid Plan and Applicable Laws

                Benefit Package services provided by the Contractor under this
                Agreement shall comply with all standards of the State Medicaid
                Plan established pursuant to Section 363-a of the State Social
                Services Law and shall satisfy all applicable requirements of
                the State Public Health and Social Services Laws.

        10.3    Definitions

                Benefit Package and Non-Covered Service definitions agreed to by
                the Contractor and the LDSS are contained in Appendix K, which
                is hereby made a part of this contract as if set forth fully
                herein.

        10.4    Provision of Services Through Participating and
                Non-Participating Providers

                With the exception of Emergency services described in Section
                10.14 of this Agreement, Family Planning Services described in
                Section 10.11 of this Agreement, and services for which
                Enrollees can self refer as described in Section 10.16 of this
                Agreement, the Benefit Package must be provided and authorized
                by the Contractor through Provider Agreements with Participating
                Providers, a s specified in Section 22 of this Agreement. A plan
                may also arrange for specialty or other services for Enrollees
                with Non -Participating Providers, in accordance with Section
                21.1(b) of this Agreement.

        10.5    Child Teen Health Program/Adolescent Preventive Services

                a)      The Contractor and its Participating Providers are
                        required to provide the Child Teen Health Program C/THP
                        services outlined in Appendix K (Benefit Package) and
                        comply with applicable EPSDT requirements specified in
                        42 CFR, Part 441, sub-part B, 18NYCRR, Part 508 and the
                        New York State Department of Health C/THP manual. The
                        Contractor and its Participating Providers are required
                        to provide C/THP services to Medicaid Enrollees under 21
                        years of age when:

                                   Section 10
               (BENEFIT PACKAGE, COVERED AND NON-COVERED SERVICES)
                                 October 1, 1999
                                      10-1

<PAGE>

                        i)      The care or services are essential to prevent,
                                diagnose, prevent the worsening of , alleviate
                                or a meliorate the effects of an illness,
                                injury, disability, disorder or condition.
                        ii)     The care or services are essential to the
                                overall physical, cognitive and mental growth
                                and developmental needs of the child.
                        iii)    The care or service will assist the individual
                                to achieve or maintain maximum functional
                                capacity in performing daily activities, taking
                                into account both the functional capacity of the
                                individual and those functional capacities that
                                are appropriate for individuals of the same age.

                The Contractor shall base its determination on medical and other
                relevant information provided by the Enrollee's PCP, other
                health care providers, school, local social services, and/or
                local public health officials that have evaluated the child.

                b)      The Contractor and its Participating Providers must
                        comply with the C/THP program standards and must do at
                        least the following with respect to all Enrollees under
                        age 21:

                        i)      Educate pregnant women and families with under
                                age 21 Enrollees about the program and its
                                importance to a child's or adolescent's health.

                        ii)     Educate network providers about the pro gram and
                                their responsibilities under it.

                        iii)    Conduct outreach, including by mail, telephone,
                                and through home visits (where appropriate), to
                                ensure children are kept cur rent with respect t
                                o their periodicity schedules.

                        iv)     Schedule appointments for children and
                                adolescents pursuant to the periodicity
                                schedule, assist with referrals, and conduct
                                follow-up with children and adolescents who miss
                                or cancel appointments.

                        v)      Ensure that all appropriate diagnostic and
                                treatment services, including specialist
                                referrals, are furnished pursuant to findings
                                from a C/THP screen.

                        vi)     Achieve and maintain an acceptable compliance
                                rate for screening schedules during the contract
                                period.

                c)              In addition to C/THP requirements, the
                                Contractor and its Participating Providers are
                                required to comply with the American Medical
                                Association's Guidelines for Adolescent
                                Preventive Services which require annual well
                                adolescent preventive visits which focus on
                                health guidance, immunizations, and screening
                                for physical, emotional, and behavioral
                                conditions.

10.6    Foster Care Children

                                   Section 10
               (BENEFIT PACKAGE, COVERED AND NON-COVERED SERVICES)
                                 October 1, 1999
                                      10-2

<PAGE>

                The Contractor shall comply with the health requirements for
                foster children specified in 18 NYCRR Section 441.22 and Part
                507 and any subsequent amendments thereto. These requirements
                include thirty (30) day obligations for a comprehensive physical
                and behavioral health assessment and assessment of the risk that
                the child may be HIV+ and should be tested.

        10.7    Child Protective Services

                The Contractor shall comply with the requirements specified for
                child protective examinations, provision of medical information
                to the child protective services investigation and court ordered
                services as specified in 18 NYCRR Section 432, and any
                subsequent amendments thereto. Medically necessary services,
                whether provided in or out of plan, must be provided. Out of
                plan providers will be reimbursed at the Medicaid fee schedule
                by the Contractor.

        10.8    Welfare Reform

                a)      The LDSS must determine whether each public assistance
                        or combined public assistance/Medicaid applicant is
                        incapacitated or can participate in work activities. As
                        part of this work determination process, the LDSS may
                        require medical documentation and/or an initial mental
                        and/or physical examination to determine whether an
                        individual has a mental or physical impairment that
                        limits his/her ability to engage in work (12 NYCRR
                        Section 1300.2(d)(13)(i)). The LDSS may not require the
                        Contractor to provide the initial district mandated or
                        requested medical examination necessary for an Enrollee
                        to meet welfare reform work participation requirements.

                b)      The Contractor shall arrange for the provision of
                        medical documentation and health, mental health and
                        alcohol and substance abuse assessments as follows:

                        i)      Within ten (10) days of a request of an Enrollee
                                or a former Enrollee, currently receiving public
                                assistance or who is applying for public
                                assistance, the Enrollee's or former Enrollee's
                                PCP or specialist provider, as appropriate,
                                shall provide medical documentation concerning
                                the Enrollee or former Enrollee's health or
                                mental health status to the LDSS or to the LDSS'
                                designee. Medical documentation includes but is
                                not limited to drug prescriptions and reports
                                from the Enrollee's PCP or specialist provider.
                                The Contractor shall include the foregoing as a
                                responsibility of the PCP and specialist
                                provider in its provider contracts or in their
                                provider manuals.

                        ii)     Within ten (10) days of a request of an
                                Enrollee, who has already undergone, or is
                                scheduled to under go, an initial LDSS required
                                mental and/or physical examination, the
                                Enrollee's PCP shall provide a health,

                                   Section 10
               (BENEFIT PACKAGE, COVERED AND NON-COVERED SERVICES)
                                 October 1, 1999
                                      10-3

<PAGE>

                        or mental health and/or alcohol and substance abuse
                        assessment, mental and/or medical examination or other
                        services as appropriate to identify or quantify an
                        Enrollee's level of incapacitation. Such assessment must
                        contain a specific diagnosis resulting from any
                        medically appropriate tests and specify any work
                        limitations. The LDSS, may, upon written notice to the
                        Contractor, specify the format and instructions for such
                        an assessment.

                c)      The Contractor is not responsible for the provision and
                        payment of alcohol and substance abuse treatment
                        services mandated by the LDSS for Enrollees as a
                        condition of eligibility for Public Assistance or
                        Medicaid. Public Assistance or Medicaid recipients who
                        are mandated into alcohol and substance abuse treatment
                        will be identified by the LDSS by the use of Welfare
                        Reform Exception Code 83 except:
                        i)      The Contractor will continue to be responsible
                                for a base Benefit Package of Alcohol and
                                Substance Abuse Services (ASA) and for the
                                provision and payment of ASA services to
                                Enrollees when such treatment is underway and
                                the LDSS is satisfied with the health care and
                                treatment plan.
                        ii)     The Contractor will continue to be responsible
                                for the provision and payment of inpatient
                                detoxification services in acute settings.
                        iii)    The Contractor will continue to be responsible
                                for Court Ordered Services as specified in
                                Section 10.10 of this Agreement.
                        (iv)    The Contractor will continue to be responsible
                                for Alcohol and Substance Abuse Services
                                specified in Section 10.16(a) of this Agreement.
                        (v)     The Contractor will continue to be responsible
                                for Alcohol and Substance Abuse Services
                                specified in Section 10.24 of this Agreement.
                        (vi)    The Contractor will continue to be responsible
                                for evaluation and treatment services when the
                                PCP or other designated Participating Provider
                                refers the patient to a Participating Provider
                                for evaluation and/or treatment.

        10.9    Adult Protective Services

                The Contractor shall cooperate with LDSS in the implementation
                of 18 NYCRR Part 457 and any subsequent amendments thereto with
                regard to medically necessary health and mental health services
                and all Court Ordered Services for adults. These services are to
                be provided in or out of plan. Out of plan providers will be
                reimbursed at the Medicaid fee schedule.

        10.10   Court-Ordered Services

                a)      The Contractor shall provide any Benefit Package
                        services to Enrollees as ordered by a court of competent
                        jurisdiction, regardless of whether such services are
                        provided by Participating Providers within the plan or
                        by a

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                        Non-Participating Provider in compliance with such court
                        order. The Non-Participating Provider shall be
                        reimbursed by the Contractor at the Medicaid fee
                        schedule.

                b)      Court Ordered Services are those services ordered by the
                        court performed by, or under the supervision of a
                        physician, dentist, or other provider qualified under
                        State Law to furnish medical, dental, behavior al health
                        (including treatment f or mental health and/or alcohol
                        and/or substance abuse or dependence), or other Medicaid
                        covered services. The plan is responsible f or payment
                        of those Medicaid services as covered by the Benefit
                        Package.

                c)      Court Ordered Services are not covered if they are
                        ordered for the purpose of determining some legal
                        disposition, e. g., custody or visitation
                        determinations.

        10.11   Family Planning and Reproductive Health Services

                a)      Nothing in this Agreement shall restrict the right of
                        Enrollees to receive Family Planning and Reproductive
                        Health Services from any qualified Medicaid provider,
                        regardless of whether the provider is a participating
                        provider or a non-participating provider, without
                        referral from the Enrollee's PCP and without approval
                        from the Contractor.

                b)      The Contractor agrees to permit Enrollees to exercise
                        their right to obtain Family Planning and Reproductive
                        Health Services as defined in Part C-1 of Appendix C,
                        which is hereby made a part of this contract as if s et
                        forth fully herein, from either the Contractor, if
                        family planning is a part of the Contractor's Benefit
                        Package, or from any appropriate Medicaid enrolled
                        Non-Participating Family Planning Provider without a
                        referral from the Enrollee's PCP and without approval by
                        the Contractor.

                c)      The Contractor agrees to permit Enrollees to obtain pre
                        and post-test HIV counseling and blood testing when
                        performed as part of a Family Planning encounter from
                        the Contractor, if Family Planning is a part of the
                        Contractor's Benefit Package, or from any appropriate
                        Medicaid enrolled Non-Participating family planning
                        Provider without a referral from the Enrollee's PCP and
                        without approval by the Contractor.

                d)      The Contractor will inform Enrollees about the
                        availability of in-plan HIV counseling and testing
                        services, out-of-plan HIV counseling and testing
                        services when performed as part of a Family Planning
                        encounter and anonymous counseling and testing services
                        available from SDOH, Local Public Health Agency clinics
                        and other county programs. Counseling and testing
                        rendered outside of a Family Planning encounter, as well
                        as services provided as the result of an HIV+ diagnosis,
                        will be furnished by the Contractor in accordance with
                        standards of care.

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                e)      Contractor must comply with federal, state, and local
                        laws, regulations and policies regarding informed
                        consent and confidentiality. Providers who are employed
                        by the Contractor may share patient information with
                        appropriate Contractor personnel for the purposes of
                        claims payment, utilization review and quality
                        assurance. Providers who have a contract with the
                        Contractor, with a n appropriate consent, may share
                        patient information with the Contractor for purposes of
                        claims payment, utilization review and quality
                        assurance. Contractor must ensure that a n individual's
                        use of family planning services remains confidential and
                        is not disclosed to family members or other unauthorized
                        parties.

                f)      Contractor must inform its practitioners and
                        administrative personnel about policies concerning free
                        access to family planning services, HIV counseling and
                        testing, reimbursement, enrollee education and
                        confidentiality. Contractor must inform its providers
                        that they must comply with professional medical
                        standards of practice, the Contractor 's practice
                        guidelines, and all applicable federal, state, and local
                        laws. These include but are not limited to, standards
                        established by the American College of Obstetricians and
                        Gynecologists, the American Academy of Family
                        Physicians, the U. S. Task Force on Preventive Services
                        and the New York State Child/Teen Health Program. These
                        standards and laws indicate that family planning
                        counseling is an integral part of primary and preventive
                        care.

                g)      The Contractor agrees that if Family Planning is part of
                        the Contractor's Benefit Package, the Contractor will be
                        charged for the services of out of network providers at
                        the applicable Medicaid rate or fee. In such instances,
                        out of network providers will bill Medicaid and the SDOH
                        will issue a confidential charge back to the Contractor.
                        Such charge back mechanism will comply with all
                        applicable patient confidentiality requirements.

                h)      If Contractor includes family planning and reproductive
                        health services in its benefits package, the Contractor
                        shall comply with the requirements for informing
                        Enrollees about family planning and reproductive health
                        services set forth in Part C-2 of Appendix C, which is
                        hereby made a part of this contract as if set forth
                        herein.

                i)      If Contractor does not include family planning and
                        reproductive health services in its Benefit Package,
                        within ninety (90) days of signing this Agreement,
                        Contractor must submit to the SDOH and LDSS a statement
                        of the policy and procedure that the Contractor will use
                        to ensure that its Enrollees are fully informed of their
                        rights to access a full range of family planning and
                        reproductive health services. Refer to Part C-3 of
                        Appendix C for the SDOH Guidelines for Plans That Do Not
                        Provide Family

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                        Planning Services in their Capitation. Contractor shall
                        ensure that prospective Enrollees and Enrollees are
                        advised of the family planning services which are not
                        provided by the Contractor and of their right of access
                        to such services in accordance with the provisions of P
                        art C -3 of Appendix C, which is hereby made a p art of
                        this contract as if set forth fully herein.

                j)      SDOH with DHHS approval may issue modifications to
                        Appendix (C) consistent with relevant provisions of
                        federal and state statutes and regulations. Once issued
                        and upon sixty (60) days notice to the LDSS and
                        Contractor, such modifications shall be deemed
                        incorporated into t his Agreement without further action
                        by the parties.

        10.12   Prenatal Care

                Contractors are responsible for the provision of comprehensive
                Prenatal Care Services to all pregnant woman including all
                services enumerated in Subdivision 1, Section 2522 of the Public
                Health Law in accordance with 10 NYCRR Part 85.40 (Prenatal Care
                Assistance Program).

        10.13   Direct Access

                The Contractor shall offer female Enrollees direct access to
                primary and preventive obstetrics and gynecology services,
                follow-up care as a result of a primary and preventive visit,
                and any care related to pregnancy from the Contractor's network
                providers without referral from the PCP as set forth in Public
                Health Law Section 4406-b(1).

        10.14   Emergency Services

                a)      The Contractor shall maintain coverage utilizing a toll
                        free telephone number twenty-four (24) hours per day
                        seven (7) days per week, answered by a live voice, to
                        advise Enrollees of procedures for accessing Emergency
                        Health Care Services and Urgent Health Care Services.
                        Emergency mental health calls must be triaged via
                        telephone by a trained mental health professional.

                b)      The Contractor agrees that it will not require prior
                        authorization for services in a medical or behavioral
                        health emergency. The Contractor agrees to inform its
                        Enrollees that access to Emergency Services is not
                        restricted and Emergency Services may be obtained from a
                        Non-Participating Provider without penalty. The
                        Contractor must pay for Emergency Medical Services. The
                        Contractor also may require Enrollees to notify the plan
                        or their PCP within a specified time after receiving
                        emergency care and to obtain prior authorization for any
                        follow-up care delivered pursuant to the emergency, as
                        stated in Appendix G.

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                c)      Emergency Services rendered by Non-Participating
                        Providers: The Contractor shall advise its Enrollees how
                        to obtain Emergency Services when it is not feasible for
                        Enrollees to receive Emergency Services from or through
                        a Participating Provider. The Contractor shall bear the
                        cost of providing Emergency Services through
                        Non-Participating Providers.

                d)      The Contractor agrees to abide by guidelines for the
                        provision and payment of Emergency Care and Services
                        which are specified in Appendix G, which is hereby made
                        a part of this contract as if set forth fully herein.

                e)      When emergency transportation is included in the
                        Contractor's Benefit Package, the Contractor shall
                        reimburse for all emergency ambulance services without
                        regard to final diagnosis or prudent layperson
                        standards.

        10.15   Medical Utilization Thresholds (MUTS)

                The Contractors Enrollees are not subject to Medicaid
                Utilization Thresholds (MUTS), limitations on, or copayments for
                services included in the Benefit Package. Enrollees may be
                subject to MUTS for outpatient pharmacy services which are
                billed Medicaid fee-for-service.

        10.16   Services for Which Enrollees Can Self-Refer

                a)      Mental Health and Alcohol/Substance Abuse

                        The Contractor will allow Enrollees or LDSS officials on
                        the Enrollee's behalf to make self referral or referral
                        for one mental health and one alcohol/substance abuse
                        assessment from a Participating Provider in any calendar
                        year period without requiring preauthorization or
                        referral from the Enrollee's Primary Care Provider. In
                        the case of children, such self-referrals may originate
                        at the request of a school guidance counselor (with
                        parental or guardian consent, or pursuant to procedures
                        set forth in Section 33.21 of the Mental Hygiene Law),
                        LDSS Official, Judicial Official, Probation Officer,
                        parent or similar source.

                        i)      The Contractor shall make available to all
                                Enrollees a complete listing of their
                                participating mental health and
                                alcohol/substance abuse providers. The listing
                                should specify which provider groups or
                                practitioners specialize in children's mental
                                health services.
                        ii)     The Contractor will also ensure that its
                                Participating Providers have available and use
                                formal assessment instruments to identify
                                Enrollees requiring mental health and
                                alcohol/substance abuse services, and to
                                determine the types of services that should be
                                furnished.
                        iii)    The Contractor will implement policies and
                                procedures to ensure that Enrollees receive
                                follow-up services from appropriate providers
                                based on the findings of their assessment.

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                b)      Vision Services

                        The Contractor will allow its Enrollees to self-refer to
                        any participating provider of vision services
                        (optometrist or opthalmologist) for refractive vision
                        services. (See Appendix K).

                c)      Diagnosis and Treatment of Tuberculosis

                        Enrollees may self-refer to public health agency
                        facilities for the diagnosis and/or treatment of TB.

                d)      Family Planning and Reproductive Health Services.

                        Enrollees may self-refer to family planning and
                        reproductive health services as described in this
                        Section and Appendix C of this Agreement.

                e)      Sexually Transmitted Disease (STD) Services

                        Enrollees may self refer to any qualified Medicaid
                        provider for STD services as described in Section
                        10.19(c) of this Agreement.

        10.17   Second Opinions for Medical or Surgical Care

                The Contractor will allow Enrollees to obtain a second opinion
                within the Contractor's network of providers for diagnosis of a
                condition, treatment or surgical procedure.

        10.18   Coordination with Local Public Health Agencies

                The Contractor will coordinate its public health-related
                activities with the Local Public Health Agency. Coordination
                mechanisms and operational protocols for addressing public
                health issues will be negotiated with the Local Public Health
                and Social Services Departments and be customized to reflect
                County public health priorities. Negotiations must result in
                agreements regarding required health plan activities related to
                public health. The outcome of negotiations may take the form of
                an informal agreement among the parties which may include memos;
                a separate memorandum of understanding signed by the Local
                Public Health Agency, LDSS , and the Contractor; or an appendix
                to the contract between the LDSS and the Contractor which shall
                be included in Appendix N as if set forth fully herein.

        10.19   Public Health Services

                a)      Tuberculosis Screening, Diagnosis and Treatment;
                        Directly Observed

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                        Therapy(TB\DOT):

                        i)      Consistent with New York State law, public
                                health clinics are required to provide or
                                arrange for treatment to individuals presenting
                                with tuberculosis, regardless of the person's
                                insurance or enrollment status. It is the
                                State's preference that the Contractor's
                                Enrollees receive TB diagnosis and treatment
                                through the Contractor's plan, to the extent
                                that providers experienced in this type of care
                                are available in the Contractor's network of
                                Participating Providers, although Enrollees may
                                self-refer to public health agency facilities
                                for the diagnosis and/or treatment of TB. The
                                Contractor agrees to reimburse public health
                                clinics when physician visit and patient
                                management or laboratory and radiology services
                                are rendered to their Enrollees, within the
                                context of TB diagnosis and treatment.
                        ii)     The Contractor's Participating Providers must
                                report T B cases to the Local Public Health
                                Agency. The LDSS will have the Local Public
                                Health Agency review the tuberculosis treatment
                                protocols and networks of Participating
                                Providers of the Contractor, to verify their
                                readiness to treat Tuberculosis patients. The
                                Contractor's protocols will be evaluated against
                                State and local guidelines. State and local
                                departments of health also will be available to
                                offer technical assistance to the Contractor in
                                establishing TB policies and procedures.
                        iii)    The Contractor may require the Local Public
                                Health Agency to give notification before
                                delivering services, unless these services are
                                ordered by a court of competent jurisdiction.
                                The Local Public Health Agency will: 1) make
                                reasonable efforts to verify with the Enrollee's
                                PCP that he/she has not already provided TB care
                                and treatment, and 2) provide documentation of
                                services rendered along with the claim.
                        iv)     The Contractor may use locally negotiated fees.
                                In addition, SDOH will establish fee schedules
                                for these services, which the Contractor may use
                                in the absence of locally negotiated fees.
                        v)      Contractors may require prior authorization for
                                non-emergency inpatient hospital admissions,
                                except that prior authorization will not be
                                required for an admission pursuant to a court
                                order or an order of detention issued by the
                                Local Commissioner or Director of Public Health.
                        vi)     The Contractor shall provide the Local Public
                                Health Agency with access to health care
                                practitioners on a twenty-four (24) hour a day,
                                seven (7) day a week basis who can authorize
                                inpatient hospital admissions. The Contractor
                                shall respond to the Local Public Health
                                Agency's request for authorization within the
                                same day.
                        vii)    The Contractor Will not be capitated or
                                financially liable for Directly Observed Therapy
                                (DOT) costs. The Contractor also will not be
                                financially liable for treatments rendered to
                                Enrollees who have been institutionalized due to
                                non-compliance with TB care regimens. The
                                Contractor agrees to make all reasonable efforts
                                to ensure coordination with DOT providers
                                regarding clinical care and services. HIV
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                                and testing during a TB related visit at a
                                public health clinic will be covered by Medicaid
                                Fee-For-Service (FFS) at a rate established by
                                the State.
                        viii)   While all other clinical management of
                                tuberculosis is covered by the Contractor,
                                TB/DOT where applicable, can be billed directly
                                to Medicaid by any SDOH approved fee-for-service
                                Medicaid TB/DOT provider. The Contractor remains
                                responsible for communicating, cooperating, and
                                coordinating clinic management of TB with the TB
                                /DOT provider. The Enrollee reserves the right
                                to use any fee-for-service DOT provider because
                                TB/DOT is a non-covered benefit.

                b)      Immunizations

                        i)      Immunizations for adults and administration of
                                immunizations for children will be included in
                                the Benefit Package and the Contractor will be
                                required to reimburse the Local Public Health
                                Agency when Enrollees self-refer.
                        ii)     In order to be eligible for reimbursement, a
                                Local Public Health Agency must make reasonable
                                efforts to (1) determine the Enrollee's managed
                                care membership status; and (2) ascertain the
                                Enrollee's immunization status. Such efforts
                                shall consist of client interviews and, when
                                available, access to the Immunization Registry.
                                When an Enrollee presents a membership card with
                                a PCP's name, the Local Public Health Agency
                                shall all the PCP. If the agency is unable to
                                verify the immunization status from the PCP or
                                learns that immunization is needed, the agency
                                shall proceed to deliver the service as
                                appropriate, and the Contractor will reimburse
                                the Local Public Health Agency at the negotiated
                                rate or at a fee schedule to be used in the
                                absence of a negotiated rate. Upon
                                implementation of the immunization registry, the
                                Local Public Health Agency shall not be required
                                to contact the PCP.
                        iii)    If the immunization is administered by the PCP,
                                immunization materials for children should be
                                obtained free of charge from the "Vaccine For
                                Children Program". The Contractor will be
                                reimbursed only for administering the vaccine to
                                children.

                c)      Prevention and Treatment of Sexually Transmitted
                        Diseases

                        The Contractor will be responsible for ensuring that its
                        Participating Providers educate their Enrollees about
                        the risk and prevention of sexually transmitted disease
                        (STD). The Contractor also will be responsible for
                        ensuring that its Participating Providers screen and
                        treat Enrollees for STDs and report cases of STD to
                        Local Public Health Agency and cooperate in contact
                        investigation, in accordance with existing state and
                        local laws and regulations. HIV counseling and testing
                        provided during a STD related visit at a public health
                        clinic will be covered by Medicaid FFS at a rate
                        established by the State. Nothing in this Agreement
                        shall restrict the right of Enrollees to receive STD
                        services from any qualified Medicaid provider,
                        regardless of whether the provider is a

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                        Participating Provider or a Non-Participating Provider,
                        without referral from the Enrollee's PCP and without
                        approval from the Contractor

                d)      Lead Poisoning

                        The Contractor will be responsible for carrying out and
                        ensuring that its Participating Providers comply with
                        lead poisoning screening and follow-up as specified in
                        10 NYCRR, Sub-part 67.1. The Contractor shall coordinate
                        the care of such children with Local Public Health
                        Agencies to assure appropriate follow-up in terms of
                        environmental investigation, risk management and
                        reporting requirements.

        10.20   Adults with Chronic Illnesses and Physical or Developmental
                Disabilities

                The Contractor will implement all of the following to meet the
                needs of their adult Enrollees with chronic illnesses and
                physical or developmental disabilities:

                a)      Satisfactory methods for ensuring that the Contractor
                        and it Participating Providers are in compliance with
                        the Americans with Disabilities Act ("ADA") and with the
                        SDOH Guidelines for Medicaid MCO Compliance with the ADA
                        which are set forth in Appendix J, which is hereby made
                        a part of this Agreement as if set forth fully herein,
                        and in accordance with Section 24 of this Agreement.
                        (see Section 24).

                b)      Satisfactory methods/guidelines for identifying persons
                        at risk of, or having, chronic diseases and disabilities
                        and determining their specific needs in terms of
                        specialist physician referrals, durable medical
                        equipment, home health services, etc.

                c)      Satisfactory case management systems.

                d)      Satisfactory systems for coordinating service delivery
                        with out-of-network providers, including behavioral
                        health providers for all Enrollees.

                e)      Policies and procedures to allow for the continuation of
                        existing relationships with out-of-network providers,
                        consistent with P. H. L. 4403 6(e ) and Section 15.5 of
                        this Agreement.

        10.21   Children with Special Health Care Needs

                Children with special health care needs are those who have or
                are suspected of having a serious or chronic physical,
                developmental, behavioral, or emotional condition and who also
                require health and related services of a type or amount beyond
                that required by children generally. The Contractor will be
                responsible

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                for performing all of the same activities for this population as
                for adults. In addition, the Contractor will implement the
                following for these children:

                a)      Satisfactory methods for interacting with school
                        districts, preschool services, child protective service
                        agencies, early intervention officials, behavioral
                        health, and developmental disabilities service
                        organizations for the purpose of coordinating and
                        assuring appropriate service delivery.

                b)      An adequate network of pediatric providers and
                        sub-specialists, contractual relationships with tertiary
                        institutions, to meet their medical needs.

                c)      Satisfactory methods for assuring that children with
                        serious, chronic, and rare disorders receive appropriate
                        diagnostic work-ups on a timely basis.

                d)      Satisfactory arrangements for assuring access to
                        specialty centers in and out of New York State for
                        diagnosis and treatment of rare disorders.

                e)      A satisfactory approach for assuring access to allied
                        health professionals (Physical Therapists, Occupational
                        Therapists, Speech Therapists, and Audiologists)
                        experienced in dealing with children and families.

        10.22   Persons Requiring Ongoing Mental Health Services

                These individuals, while not diagnosed as SPMI or SED, may have
                relatively significant needs for mental health services.
                Accordingly, the Contractor will implement all of the following
                for its Enrollees with chronic or ongoing mental health service
                needs:

                a)      Inclusion of all of the required provider types listed
                        in Section 21 of this Contract.

                b)      Satisfactory methods for identifying persons requiring
                        such services and encouraging self-referral and early
                        entry into treatment.

                c)      Satisfactory case management system.

                d)      Satisfactory systems for coordinating service delivery
                        between physical health, alcohol/substance abuse, and
                        mental health providers, and coordinating services with
                        other available services, including Social Services.

                The Contractor agrees to participate in the local planning
                process for serving persons with mental health needs to the
                extent requested by the LDSS. At the LDSS' discretion, the
                Contractor will develop linkages with local governmental units
                on coordination, procedures and standards related to mental
                health services and related activities.

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        10.23   Member Needs Relating to HIV

                HIV positive (+) persons will be permitted to enroll voluntarily
                into health plans at the start of this program, and plans must
                inform newly diagnosed HIV (+) Enrollees known to the plan of
                their enrollment options due to such exemption status.

                The Contractor agrees that anonymous testing may be furnished
                without prior approval by the Contractor and may be conducted at
                anonymous testing sites available to clients. Services provided
                for HIV treatment may only be obtained from the Contractor if
                the individual chooses to enroll and stay enrolled in the
                Contractor's plan.

                To adequately address the HIV prevention needs of uninfected
                Enrollees, as well as the special needs of HIV positive (+)
                individuals who do enroll in managed care, the Contractor shall
                have in place all of the following:

                a)      Methods for promoting HIV prevention to all Plan
                        Enrollees. H IV prevention information, both primary
                        (targeted to uninfected Enrollees ), as well as
                        secondary (targeted to those Enrollees with HIV
                        infection) should be tailored to the Enrollee's age,
                        sex, and risk factor(s), including sexual orientation
                        and injection drug use, and must be culturally and
                        linguistically appropriate. All plan Enrollees should be
                        informed of the availability of both in-plan HIV
                        counseling and testing services, out-of-plan HIV
                        counseling and testing services when performed as part
                        of a family planning encounter, as well as HIV
                        counseling and testing services available through SDOH,
                        local health units and Anonymous Counseling and Testing
                        Programs.

                b)      Satisfactory methods for assuring the performance of
                        risk assessments, risk reduction counseling, diagnosis
                        and early entry into treatment.

                c)      The Contractor shall comply with the requirements in
                        Title 10 NYCRR which mandate that HIV counseling with
                        testing , presented as a clinical recommendation, be
                        provided to all women in prenatal care and their
                        newborns.

                d)      Satisfactory case management system linkages must be
                        established with traditional HIV providers, including
                        Designated AIDS Center Hospitals, HIV primary care
                        providers, providers funded under the Ryan White CARE
                        Act and clinical education providers, as available.

                e)      The Contractor shall assure that its Participating
                        Providers shall report positive HIV results to the Local
                        Public Health Agency and assist in contact
                        investigation.

        10.24   Persons Requiring Alcohol/Substance Abuse Services

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                The Contractor will have in place all of the following for its
                Enrollees requiring alcohol/substance abuse services:

                a)      Participating Provider networks consisting of licensed
                        providers, as defined in Section 21.17 of this contract.

                b)      Satisfactory methods for identifying persons requiring
                        such services and encouraging self-referral and early
                        entry into treatment. In the case of pregnant women,
                        having methods for referring to OASAS for appropriate
                        services beyond the Contractor's Benefit Package (e. g.,
                        halfway houses).

                c)      Satisfactory systems of care (provider networks and
                        referral processes sufficient to ensure that emergency
                        services can be provided in a timely manner), including
                        crisis services.

                d)      Satisfactory case management systems.

                e)      Satisfactory systems for coordinating service delivery
                        between physical health, alcohol/substance abuse, and
                        mental health providers, and coordinating in-plan
                        services with other services, including Social Services.

                The Contractor agrees to also participate in the local planning
                process for serving persons with alcohol and substance
                addictions, to the extent requested by the LDSS. At the LDSS's
                discretion, the Contractor will develop linkages with local
                governmental units on coordination procedures and standards
                related to Alcohol/Substance Abuse Services and related
                activities.

        10.25   Native Americans

                If the Contractor 's Enrollee is a Native American and the
                Enrollee chooses to access primary care services through their
                tribal health center, the PCP authorized by the Contractor to
                refer the Enrollee for plan benefits must develop a relationship
                with the Enrollee's PCP at the tribal health center to
                coordinate services for said Native American Enrollee.

        10.26   Women, Infants, and Children (WIC)

                The Contractor shall develop linkage agreements or other
                mechanisms to ensure women and children enrollees are referred
                to W IC services if qualified to receive such services. The
                Contractor shall refer pregnant women and children, five (5)
                years of age or younger, to W IC local agencies for nutritional
                assessments and supplements.

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        10.27   Coordination of Services

                The Contractor shall coordinate care for Enrollees with:

                a)      the court system (for court ordered evaluations and
                        treatment);

                b)      specialized providers of health care for the homeless,
                        and other providers of services for victims of domestic
                        violence;

                c)      family planning clinics, community health centers,
                        migrant health centers, rural health centers;

                d)      WIC, Head Start, Early Intervention;

                e)      special needs plans;

                f)      programs funded through the Ryan White CARE Act;

                g)      other pertinent entities that provide services out of
                        network;

                h)      Prenatal Care Assistance Program (PCAP) Providers;

                i)      local governmental units responsible for public health,
                        mental health, mental retardation or alcohol and
                        substance abuse services; and

                j)      specialized providers of long term care for people with
                        developmental disabilities.

        Coordination may involve contracts or linkage agreements (if entities
        are willing to enter into such agreement), or other mechanisms to ensure
        coordinated care for Enrollees.

                                   Section 10
               (BENEFIT PACKAGE, COVERED AND NON-COVERED SERVICES)
                                 October 1, 1999
                                      10-16

<PAGE>

11.     MARKETING

        11.1    Marketing Plan

                The Contractor shall have a Marketing Plan, that has been
                prior-approved by the SDOH and/or LDSS, that describes the
                Marketing activities the Contractor will undertake within the
                local district during the term of this Agreement.

                The Marketing Plan and all marketing activities must be
                consistent with the Marketing Guidelines which are set forth in
                Appendix D, which is hereby made a part of this Agreement as if
                set forth fully herein.

                The Marketing Plan shall be kept on file in the offices of the
                Contractor, LDSS, and the SDOH. The Marketing Plan may be
                modified by the Contractor subject to prior written approval by
                the SDOH and/or the LDSS. The LDSS or SDOH must take action on
                the changes submitted within sixty (60) calendar days of
                submission or the Contractor may deem the changes approved.

        11.2    Marketing Activities

                Marketing activities by the Contractor shall conform to the
                approved Marketing Plan.

        11.3    Prior Approval of Marketing Materials, Procedures,
                Subcontractors

                The Contractor shall submit all subcontracts, procedures, and
                materials related to Marketing to Eligible Persons to the SDOH
                and/or LDSS for prior written approval. The Contractor shall not
                enter into any subcontracts or use any marketing subcontractors,
                procedures, or materials that the SDOH and/or LDSS has not
                approved.

        11.4    Marketing Infractions

                Infractions of the Marketing Guidelines may result in the
                following actions being taken by the LDSS to protect the
                interests of the program and its clients. These actions shall be
                taken at the sole discretion of the LDSS.

                a)      If an MCO or its representative commits a first time
                        infraction of marketing guidelines and the LDSS deems
                        the infraction to be minor or unintentional in nature,
                        the LDSS may issue a warning letter to the MCO.

                b)      For subsequent or more serious infractions, the LDSS may
                        impose liquidated damages of $2,000 or other appropriate
                        non-monetary sanction for each infraction.

                                   SECTION 11
                                   (MARKETING)
                                 October 1, 1999
                                      11-1

<PAGE>

                c)      The LDSS may require the MCO to prepare a corrective
                        action plan with a specified deadline for
                        implementation.

                d)      If the MCO commits further infractions, fails to pay
                        liquidated damages within the specified timeframe, fails
                        to implement a corrective action plan in a timely manner
                        or commits an egregious first-time infraction, the LDSS
                        may:

                        i)      prohibit the plan from conducting any marketing
                                activities for a period up to the end of the
                                contract period;
                        ii)     suspend new enrollments, other than newborns,
                                for a period up to the remainder of the
                                contract; or
                        iii)    terminate the contract pursuant to termination
                                procedures described therein.

        11.5    LDSS Option to Adopt Additional Marketing Guidelines

                The LDSS may adopt, subject to SDOH approval, additional and/or
                more restrictive terms in the Marketing Guidelines to the extent
                appropriate to local conditions and circumstances, which shall
                be appended to Appendix D, Section E.

                                   SECTION 11
                                   (MARKETING)
                                 October 1, 1999
                                      11-2

<PAGE>
12.     MEMBER SERVICES

        12.1    General Functions

                The Contractor shall operate a Member Services function during
                regular business hours, which must be accessible to Enrollees
                via a toll-free telephone line. Personnel must also be available
                via a toll-free telephone line (which can be the member services
                toll-free line or separate toll-free lines) not less than during
                regular business hours to address complaints and utilization
                review inquiries. In addition, the Contractor must have a
                telephone system capable of accepting, recording or providing
                instruction to incoming calls regarding complaints and
                utilization review during other than normal business hours and
                measures in place to ensure a response to those calls the next
                business day after the call was received. At a minimum, the
                Member Services Department must be staffed at a ratio of at
                least one (1) full time equivalent Member Service Representative
                for every 4,000 or fewer Enrollees. Member Services staff must
                be responsible for the following:

                a)      Explaining the Contractor's rules for obtaining services
                        and assisting Enrollees in making appointments.

                b)      Assisting Enrollees to select or change Primary Care
                        Providers.

                c)      Fielding and responding to Enrollee questions and
                        complaints, and advising Enrollees of the prerogative to
                        complain to the SDOH and LDSS at any time.

                d)      Clarifying information in the member handbook for
                        Enrollees.

                e)      Advising Enrollees of the Contractor's complaint and
                        appeals program, the utilization review process, and
                        Enrollee's rights to a fair hearing or external review.

                f)      Clarifying for potential Enrollees current categories of
                        exemptions and/or exclusions the Contractor may refer to
                        the LDSS or the Enrollment Broker, where one is in
                        place, if necessary, for more information on exemptions
                        and exclusions.

        12.2    Translation and Oral Interpretation

                a)      The Contractor must make available written marketing and
                        other informational materials (e. g., member handbooks)
                        in a language other than English whenever at least five
                        percent (5 %) of the potential Enrollees of the
                        Contractor in any county of the service area speak that
                        particular language and do not speak English as a first
                        language.

                                   SECTION 12
                                (MEMBER SERVICES)
                                 October 1, 1999
                                      12-1
<PAGE>

                b)      In addition, verbal interpretation services must be made
                        available to Enrollees who speak a language other than
                        English as a primary language. Interpreter services must
                        be offered in person where practical, but otherwise may
                        be offered by telephone.

                c)      The SDOH will determine the need for other than English
                        translations based on County-specific census data or
                        other available measures.

        12.3    Communicating With The Visually, Hearing and Cognitively
                Impaired

                The Contractor also must have in place appropriate alternative
                mechanisms for communicating effectively with persons with
                visual, hearing, speech, physical or developmental disabilities.
                These alternative mechanisms include Braille or audio tapes for
                the visually impaired, TTY access for those with certified
                speech or hearing disabilities, and use of American Sign
                Language and/or integrative technologies.

                                   SECTION 12
                                (MEMBER SERVICES)
                                 October 1, 1999
                                      12-2

<PAGE>

13.     ENROLLEE NOTIFICATION

        13.1    Provider Directories/Office Hours for Participating Providers

                a)      The Contractor will provide the following information to
                        each Enrollee, and upon request, to each prospective
                        Enrollee a list of Participating Providers by specialty
                        and a list of facilities, for the county/borough in
                        which the Enrollee or prospective Enrollee resides. Such
                        list shall include names, office addresses, telephone
                        numbers, board certification for physicians, and
                        information on language capabilities and wheelchair
                        accessibility of Participating Providers. This
                        information ma y be provided in the form of a Provider
                        Directory and must be updated by the Contractor
                        annually, or twice a year at the option of the LDSS. Mid
                        year updates may be accomplished through an insert which
                        lists additions or deletions of Participating Providers.

                b)      In addition, the Contractor must make available to the
                        LDSS the office hours for Participating Providers. This
                        requirement may be satisfied by providing a copy of the
                        list or Provider Directory described in this Section
                        with the addition of office hours or by providing a
                        separate listing of office hours for Participating
                        Providers

        13.2    Member ID Cards

                a)      The Contractor must issue an identification card to the
                        Enrollee containing the following information:

                        i)      the name of the Enrollee's clinic (if
                                applicable);

                        ii)     the name of the Enrollee's PCP and the PCP's
                                telephone number;

                        iii)    the member services toll free telephone number;
                                and

                        iv)     the twenty-four (24) hour toll free telephone
                                number that Enrollees may use to access
                                information on obtaining services when his/her
                                PCP is not available.

                b)      If an Enrollee is being served by a PCP team, the name
                        of the individual shown on the card should be the lead
                        provider. PCP information may be embossed on the card or
                        affixed to the card by a sticker.

                c)      The Contractor shall issue an identification card within
                        fourteen (14) days of an Enrollees Effective Date of
                        Enrollment. If unforeseen circumstances, such as the
                        lack of identification of a PCP, prevent the MCO from
                        forwarding the official identification card to new
                        Enrollees within the fourteen (14) day period,
                        alternative measures by which Enrollees may identify
                        themselves such as use of a Welcome Letter or a
                        temporary identification card shall be deemed acceptable
                        until such time as a PCP is either chosen by the
                        Enrollee or auto assigned by the Contractor. The
                        Contractor agrees to implement an alternative method by
                        which individuals may identify themselves as Enrollees
                        prior to receiving the card (e.g., using a "welcome
                        letter" from the plan) and to

                                   Section 13
                             (ENROLLEE NOTIFICATION)
                                 October 1, 1999
                                      13-1

<PAGE>

                        update PCP information on the identification card.
                        Newborns of Enrollees need not present ID cards in order
                        to be seen by the MCO and its Participating Providers.

        13.3    Member Handbooks

                The Contractor shall issue to a new Enrollee within fourteen
                (14) days of the Effective Date of Enrollment a Member Handbook,
                which is consistent with the SDOH guidelines described in
                Appendix E, which is hereby made a part of this Agreement as if
                set forth fully herein.

        13.4    Notification of Effective Date of Enrollment

                The Contractor shall inform each Enrollee in writing within
                fourteen (14) days of the Effective Date of Enrollment of any
                restriction on the Enrollee's right to terminate enrollment. The
                initial enrollment information and the Member Handbook shall be
                adequate to convey this notice.

        13.5    Notification of Enrollee Rights

                The Contractor agrees to make all reasonable efforts to contact
                new Enrollees, in person, by telephone, or by mail, within
                thirty (30) days of their Effective Date of Enrollment.
                "Reasonable efforts" are defined to me an at least three (3)
                attempts, with more than one method of contact being employed.
                Upon contacting the new Enrollee(s), the Contractor agrees to do
                at least the following:

                a)      Inform the Enrollee about the Contractor's policies with
                        respect to obtaining medical services, including
                        services for which the Enrollee may self-refer, and what
                        to do in an emergency.

                b)      Conduct a brief health screening to assess the
                        Enrollee's need for any special health care (e.g.,
                        prenatal or behavioral health services) or
                        language/communication needs. If a special need is
                        identified, the Contractor shall assist the Enrollee in
                        arranging for an appointment with his/her PCP or other
                        appropriate provider.

                c)      Offer assistance in arranging an initial visit to the
                        Enrollee's PCP for a baseline physical and other
                        preventive services, including an assessment of the
                        Enrollee's potential risk, if any, for specific diseases
                        or conditions.

                d)      Inform new Enrollees about their rights for continuation
                        of certain existing services.

                e)      Provide the Enrollee with the Contractor's toll free
                        telephone number that may be called twenty-four (24)
                        hours a day, seven (7) days a week if the Enrollee has
                        questions about obtaining services and cannot reach
                        his/her PCP (this

                                   Section 13
                             (ENROLLEE NOTIFICATION)
                                 October 1, 1999
                                      13-2

<PAGE>

                        telephone number need not be the Member Services line
                        and need not be staffed to respond to Member
                        Services-related inquiries). The Contractor must have
                        appropriate mechanisms in place to accommodate Enrollees
                        who do not have telephones and therefore cannot readily
                        receive a Call back.

                f)      Advise Enrollee about opportunities available to learn
                        about MCO policies and benefits in greater detail (e.g.,
                        welcome meeting, Enrollee orientation and education
                        sessions).

                g)      Provide the Enrollee with a complete list of network
                        providers that may be accessed directly, without
                        referral. The list should group providers by service
                        type and must include addresses and telephone numbers.

                h)      Assist the Enrollee in selecting a primary care provider
                        if one has not already been chosen.

        13.6    Enrollee's Rights to Advance Directives

                The Contractor shall, in compliance with the requirements of 42
                FR 434.28, maintain written policies and procedures regarding
                advance directives and inform each Enrollee in writing at the
                time of enrollment of an individual 's rights under State law to
                formulate advance directives and of the Contractor's policies
                regarding the implementation of such rights. The Contractor
                shall include in such written notice to the Enrollee materials
                relating to advance directives and health care proxies as
                specified in 10 NYCRR Sections 98.14(f) and 700.5.

        13.7    Approval of Written Notices

                The Contractor shall submit the format and content of all
                written notifications described in this Section to LDSS for
                review and prior approval by LDSS or SDOH. All written
                notifications must be written at a fourth (4th) to sixth (6th)
                grade level and in at least ten (10) point print.

        13.8    Contractor's Duty to Report Lack of Contact

                The Contractor must inform the LDSS of any Enrollee they are
                unable to contact within ninety (90) days of enrollment using
                reasonable efforts as defined in Section 13.5 of the Agreement
                and who have not presented for any health care services through
                the Contractor or its Participating Providers.

        13.9    Contractor Responsibility to Notify Enrollee of Expected
                Effective Date of Enrollment

                The Contractor must notify the Enrollee of the expected
                Effective Date of Enrollment. In the event that the actual
                Effective Date of Enrollment is different

                                   Section 13
                             (ENROLLEE NOTIFICATION)
                                 October 1, 1999
                                      13-3
<PAGE>

                from that given to the Enrollee the Contractor must notify the
                Enrollee of the actual date of enrollment. This ma y be
                accomplished through a Welcome Letter. To the extent
                practicable, such notification must precede the Effective Date
                of Enrollment.

        13.10   LDSS Notification of Enrollee's Change in Address

                The LDSS must notify the Contractor of any known change in
                address of Enrollees in the Contractor's plan.

                                   Section 13
                             (ENROLLEE NOTIFICATION)
                                 October 1, 1999
                                      13-4

<PAGE>

14.     COMPLAINT AND APPEAL PROCEDURE

        14.1    Contractor's Program to Address Complaints

                a)      The Contractor shall establish and maintain a
                        comprehensive program designed to address clinical and
                        other complaints, and appeals of complaint
                        determinations, which may be brought by Enrollees,
                        consistent with Articles 44 and 49 of the New York State
                        P. H. L.

                b)      The program must include methods for prompt internal
                        adjudication of Enrollee complaints and appeals and
                        provide for the maintenance of a written record of all
                        complaints and appeals received and reviewed and their
                        disposition.

                c)      The Contractor shall ensure that persons with authority
                        to require corrective action participate in the
                        complaint and appeal process.

        14.2    Notification of Complaint and Appeal Program

                a)      The Contractor's specific complaint and appeal program
                        shall be described in the Contractor's member handbook
                        and shall be made available to all Enrollees.

                b)      The Contractor will advise Enrollees of their right to a
                        fair hearing as appropriate and comply with the
                        procedures established by SDOH for the Contractor to
                        participate in the fair hearing process, asset forth in
                        Section 25 of this Agreement. The Contractor will also
                        advise Enrollees of their right to an external appeal,
                        in accordance with Section 26 of this Agreement.

        14.3    Guidelines for Complaint and Appeal Program

                a)      The Contractor's complaint and appeal program will
                        comply with the Managed Care Complaint and Appeals
                        Program Guidelines described in Appendix F, which is
                        hereby made apart of this Agreement as if set forth
                        fully herein. The SDOH and LDSS may modify Appendix F of
                        this Agreement upon sixty (60) days prior written notice
                        to the Contractor and such modifications shall become
                        binding and incorporated into this Agreement without
                        further action by the parties.

                b)      The Contractor's complaint and appeal procedures shall
                        be approved by the SDOH and LDSS and kept on file with
                        the Contractor, LDSS and SDOH.

                c)      The Contractor shall not modify its complaint and
                        appeals procedure without the prior written approval of
                        SDOH, in consultation with LDSS, and shall provide LDSS
                        and SDOH with a copy of the approved modification within
                        fifteen (15) days after its approval.

                                   Section 14
                        (COMPLAINT AND APPEAL PROCEDURE)
                                 October 1, 1999
                                      14-1

<PAGE>

        14.4    Complaint Investigation Determinations

                The MCO must adhere to determinations resulting from complaint
                investigations conducted by SDOH.

                                   Section 14
                        (COMPLAINT AND APPEAL PROCEDURE)
                                 October 1, 1999
                                      14-2

<PAGE>

15.     ACCESS REQUIREMENTS

        15.1    Appointment Availability Standards

                The Contractor shall comply with the following appointment
                availability standards.(1)

                a)      For emergency care: immediately upon presentation at a
                        service delivery site.

                b)      For urgent care: within twenty-four (24) hours of
                        request.

                c)      Non-urgent "sick" visit: within forty-eight (48) to
                        seventy-two (72) hours of request, as clinically
                        indicated.

                d)      Routine non-urgent, preventive appointments: within four
                        (4) weeks of request.

                e)      Specialist referrals (not urgent): within four (4) to
                        six (6) weeks of request.

                f)      Initial prenatal visit: within three (3) weeks during
                        first trimester, within two (2) weeks during the second
                        trimester and within one (1) week during the third
                        trimester.

                g)      Adult Baseline and routine physicals: within twelve (12)
                        weeks from enrollment. (Adults >21).

                h)      Well child care: within four (4) weeks of request.

                i)      Initial family planning visits: within two (2) weeks of
                        request.

                j)      In-plan mental health or substance abuse follow-up
                        visits (pursuant to an emergency or hospital discharge):
                        within five (5 ) days of request, or as clinically
                        indicated.

                k)      In-plan, non-urgent mental health or substance abuse
                        visits: within two (2) weeks of request.

                l)      Initial PCP office visit for newborns: within two (2)
                        weeks of hospital discharge.

                m)      Provider visits to make health, mental health and
                        substance abuse assessments for the purpose of making
                        recommendations regarding a recipient's ability to
                        perform work when requested by a LDSS: within ten (10)
                        days of request by an Enrollee, in accordance with
                        Section 10.8 of this Agreement.

        15.2    Twenty-Four (24) Hour Access

                a)      The Contractor must provide access to medical services
                        and coverage to Enrollees, either directly or through
                        their PCPs, on a twenty-four (24) hour a day, seven (7)
                        day a week basis. The Contractor must instruct Enrollees
                        on what to do to obtain services after business hours
                        and on weekends.

                                   Section 15
                        (EQUALITY OF ACCESS AND TREATMENT
                                 October 1, 1999
                                      15-1

--------------------
(1) These are general standards and are not intended to supersede sound clinical
judgement as to the necessity for care and services on a more expedient basis,
when judged clinically necessary and appropriate.
<PAGE>

                b)      The Contractor may satisfy the requirement in Section
                        15.2(a) by requiring their PCPs to have primary
                        responsibility for serving as an after hours "on-call"
                        telephone resource to members with medical problems.
                        Under no circumstances may the Contractor routinely
                        refer calls to an emergency room.

        15.3    Appointment Waiting Times

                Enrollees with appointments shall not routinely be made to wait
                longer than one hour.

        15.4    Travel Time Standards

                The Contractor will maintain a network that is geographically
                accessible to the population to be served.

                a)      Primary Care

                        Travel time/distance to primary care sites shall not
                        exceed 30 minutes in Metropolitan areas or 30 minutes/30
                        miles in non-metropolitan areas, except in rural areas
                        where the State has granted the Contractor an exemption
                        from this requirement based on community standards.

                        Enrollees may, at their discretion, select participating
                        PCPs located farther from their homes as long as they
                        are able to arrange and pay for transportation to the
                        PCP themselves.

                b)      Other Providers

                        Travel time/distance to specialty care, hospitals,
                        mental health, lab and x-ray providers shall not exceed
                        30 minutes/30 miles, except in rural areas where the
                        SDOH has granted the Contractor an exemption from this
                        requirement based on community standards.

        15.5    Service Continuation

                a)      New Enrollees

                        If a new Enrollee has an existing relationship with a
                        health care provider who is not a member of the
                        Contractor's provider network, the contractor shall
                        permit the Enrollee to continue an on going course of
                        treatment by the Non-Participating Provider during a
                        transitional period of up to sixty (60) days from the
                        Effective Date of Enrollment, if, (1) the Enrollee has a
                        life-threatening disease or condition or a degenerative
                        and disabling disease or condition, or (2) the Enrollee
                        has entered the second trimester of pregnancy at the
                        Effective Date of Enrollment, in which case the
                        transitional period shall

                                   Section 15
                        (EQUALITY OF ACCESS AND TREATMENT
                                 October 1, 1999
                                      15-2

<PAGE>

                        include the provision of post-partum care directly
                        related to the delivery up until sixty (60) days post
                        partum. If the Enrollee elects to continue to receive
                        care from such Non-Participating Provider, such care
                        shall be authorized by the Contractor for the
                        transitional period only if the Non-Participating
                        Provider agrees to:

                        i)      accept reimbursement from the Contractor at
                                rates established by the Contractor as payment
                                in full, which rates shall be no more than the
                                level of reimbursement applicable to similar
                                providers within the Contractor's network for
                                such services; and

                        ii)     adhere to the Contractor's quality assurance
                                requirements and agrees to provide to the
                                Contractor necessary medical information related
                                to such care; and

                        iii)    otherwise adhere to the Contractor's policies
                                and procedures including, but not limited to
                                procedures regarding referrals and obtaining
                                preauthorization in a treatment plan approved by
                                the Contractor.

                In no event shall this requirement be construed to require the
                Contractor to provide coverage for benefits not otherwise
                covered.

                b)      Enrollees Whose Health Care Provider Leaves Network

                        The Contractor shall permit an Enrollee, whose health
                        care provider has left the Contractor's network of
                        providers, for reasons other than imminent harm to
                        patient care, a determination of fraud or a final
                        disciplinary action by a state licensing board that
                        impairs the health professional's ability to practice,
                        to continue an ongoing course of treatment with the
                        Enrollee's current health care provider during a
                        transitional period, consistent with New York State P.
                        H. L. Section 4403(6)(e).

                        The transitional period shall continue up to ninety (90)
                        days from the date of notice to the Enrollee of the
                        provider's disaffiliation from the network; or, if the
                        Enrollee has entered the second trimester of pregnancy,
                        for a transitional period that includes the provision of
                        post-partum care directly related to the delivery
                        through sixty (60) days post partum. If the Enrollee
                        elects to continue to receive care from such
                        Non-Participating Provider, such care shall be
                        authorized by the Contractor for the transitional period
                        only if the Non Participating Provider agrees to:

                        i)      accept reimbursement from the Contractor at
                                rates established by the Contractor as payment
                                in full, which rates shall be no more than the
                                level of reimbursement applicable to similar
                                providers within the Contractor's network for
                                such services;

                        ii)     adhere to the Contractor's quality assurance
                                requirements and agrees to provide to the
                                Contractor necessary medical information related
                                to such care; and

                                   Section 15
                        (EQUALITY OF ACCESS AND TREATMENT
                                 October 1, 1999
                                      15-3
<PAGE>

                        iii)    otherwise adhere to the Contractor's policies
                                and procedures including, but not limited to
                                procedures regarding referrals and obtaining
                                preauthorization in a treatment plan approved by
                                the Contractor.

                In no event shall this requirement be construed to require the
                Contractor to provide coverage for benefits not otherwise
                covered.

        15.6    Standing Referrals

                The Contractor will implement policies and procedures to allow
                for standing referrals to specialist physicians for Enrollees
                who have ongoing needs for care from such specialists,
                consistent with P. H. L. Section 4403(6)(b).

        15.7    Specialist as a Coordinator of Primary Care

                The Contractor will implement policies and procedures to allow
                Enrollees with a life-threatening or degenerative and disabling
                disease or condition, which requires prolonged specialized
                medical care, to receive a referral to a specialist, who will
                then function as the coordinator of primary and specialty care
                for that Enrollee, consistent with P. H. L. Section 4403(6)(c).

        15.8    Specialty Care Centers

                The Contractor will implement policies and procedures to allow
                Enrollees with a life-threatening or a degenerative and
                disabling condition or disease, which requires prolonged
                specialized medical care to receive a referral to an accredited
                or designated specialty care center with expertise in treating
                the life-threatening or degenerative and disabling disease or
                condition, consistent with New York State P. H. L. Section
                4403(6)(d).

                                   Section 15
                        (EQUALITY OF ACCESS AND TREATMENT
                                 October 1, 1999
                                      15-4

<PAGE>

16.     QUALITY ASSURANCE

        16.1    Internal Quality Assurance Program

                a)      Contractor must operate a quality assurance program
                        which is approved by SDOH and which includes methods and
                        procedures to control the utilization of Medicaid
                        services consistent with P H.L. Article 49 and 42 CFR
                        Part 456. Recipients records must include information
                        needed to perform utilization review as specified in 42
                        CFR "456.111 and 456.211. The Contractor's approved
                        quality assurance program must be kept on file by the
                        Contractor and the LDSS. The Contractor shall not modify
                        the quality assurance program without the prior written
                        approval of the SDOH, and notice to the LDSS.

                b)      The Contractor shall incorporate the findings from
                        reports in Section 18 of this Agreement into its quality
                        assurance program. Where performance is less than the
                        statewide average or another standard as defined by the
                        SDOH and developed in consultation with plans and
                        appropriate clinical experts, the Contractor will be
                        required to develop a plan for improving performance
                        that is approved by the SDOH and LDSS. The Contractor
                        agrees to me et with the SDOH and LDSS up to twice a
                        year to review improvement plans and quality
                        performance.

        16.2    Standards of Care

                The Contractor must adopt practice guidelines consistent with
                current standards of care, complying with recommendations of
                professional specialty groups such as the American Academy of
                Pediatrics, the American Academy of Family Physicians, the U.S.
                Task Force on Preventive C are, the New York State Child/Teen
                Health Program (C/THP) standards for provision of care to
                individuals under age 21, the American Medical Association's
                Guidelines for Adolescent and Preventive Services, the US
                Department of Health and Human Services Center for Substance
                Abuse Treatment, the American College of Obstetricians and
                Gynecologists and the AIDS Institute Clinical Standards for
                Adult and Pediatric Care.

                                   Section 16
                               (QUALITY ASSURANCE)
                                 October 1, 1999
                                      16-1

<PAGE>

17.     MONITORING AND EVALUATION

        17.1    Right to Monitor Contractor Performance

                The SDOH, LDSS, and DHHS shall each have the right, during the
                Contractor's normal operating hours, and at any other time a
                Contractor function or activity is being conducted, to monitor
                and evaluate, through inspection or other means, the
                Contractor's performance, including, but not limited to, the
                quality, appropriateness, and timeliness of services provided
                under this Agreement.

        17.2    Cooperation During Monitoring and Evaluation

                The Contractor shall cooperate with and provide reasonable
                assistance to the SDOH, LDSS, and DHHS in the monitoring and
                evaluation of the services provided under this Agreement.

        17.3    Cooperation During Annual On-Site Review

                The Contractor shall cooperate with SDOH and LDSS in an annual
                on-site review of the MCO's operations. SDOH shall give the
                Contractor notification of the annual review and survey format
                at least forty-five (45) days prior to the annual site visit.
                This requirement shall not preclude LDSS or SDOH from site
                visits upon shorter notice for other monitoring purposes.

        17.4    Cooperation During Review of Services by External Review Agency

                The Contractor shall comply with all requirements associated
                with the annual review of the quality of services rendered to
                its Enrollees to be performed by an external review agent
                selected by the SDOH.

                                   Section 17
                           (MONITORING AND EVALUATION)
                                 October 1, 1999
                                      17-1

<PAGE>

18.     CONTRACTOR REPORTING REQUIREMENTS

        18.1    Time Frames for Report Submissions

                Except as otherwise specified herein, the Contractor shall
                prepare and submit to SDOH and the LDSS the reports required
                under this Agreement in an agreed media format within sixty (60)
                days of the close of the applicable semi-annual or annual
                reporting period, and within fifteen (15) business days of the
                close of the applicable quarterly reporting period.

        18.2    SDOH Instructions for Report Submissions

                SDOH, with prior notice to the LDSS, will provide Contractor
                with instructions for submitting the reports required by Section
                18.5 (a) through (n), including time frames, and requisite
                formats. The instructions, time frames and formats may be
                modified by SDOH with prior notice to the LDSS, and thereafter
                upon sixty (60) days written notice to the Contractor. The LDSS,
                with prior notice to SDOH, shall provide the Contractor with
                instructions for submitting the reports, required by Section
                18.5(o) including time frames and requisite formats.

        18.3    Liquidated Damages

                The Contractor shall pay liquidated damages of $2,500 if any
                report required pursuant to this Section is materially
                incomplete, contains material misstatements or inaccurate
                information, or is not submitted on time in the requested
                format. The Contractor shall pay liquidated damages of $2,500 to
                the LDSS if its monthly encounter data submission is not
                received by the Fiscal Agent by the due date specified in
                Section 18.5(d). The Contractor shall pay liquidated damages of
                $500 to the LDSS for each day other reports required by this
                Section are late. The LDSS shall not impose liquidated damages
                for a first time infraction by the Contractor unless the LDSS
                deems the infraction to be a material misrepresentation of fact
                or the Contractor fails to cure the first infraction within a
                reasonable period of time upon notice from the LDSS. Liquidated
                damages may be waived at the sole discretion of LDSS. Nothing in
                this Section shall limit other remedies or rights available to
                LDSS and SDOH relating to the timeliness, completeness and/or
                accuracy of Contractor's reporting submission.

        18.4    Notification of Changes in Report Due Dates Requirements or
                Formats

                SDOH or LDSS may extend due dates, or modify report requirements
                or formats upon a written request by the Contractor to the SDOH
                or LDSS with a copy of the request to the other agency, where
                the Contractor has demonstrated a good and compelling reason for
                the extension or modification. The determination to grant a
                modification or, extension of time shall be made by SDOH with
                regard to annual and quarterly statements, complaint reports,
                audits, encounter data, change of ownership, clinical studies,
                QARR, and provider network reports. The

                                   SECTION 18
                       (CONTRACTOR REPORTING REQUIREMENTS)
                                 October 1, 1999
                                      18-1
<PAGE>

                determination to grant a modification or extension of time shall
                be made by the LDSS with respect to No-Contact, PCP auto
                assignment, and reports required by Sections 18.5 (n) and (o) of
                the Agreement.

        18.5    Reporting Requirements

                The Contractor shall submit the following reports to SDOH and to
                the LDSS except in those instances in which t his Agreement
                specifies the reports shall be submitted solely to SDOH:

                a)      Annual Financial Statements:

                        The due date for annual statements shall be April 1
                        following the report closing date.

                b)      Quarterly Financial Statements:

                        The due date for quarterly reports shall be forty-five
                        (45) days after the end of the calendar quarter.

                c)      Other Financial Reports:

                        Contractor shall submit financial reports, including
                        certified annual financial statements, and make
                        available documents relevant to its financial condition
                        to SDOH and the State Insurance Department (SID) in a
                        timely manner as required by State laws and regulations
                        including but not limited to PHL' '4403-a, 4404 and
                        4409, Title 10 NYCRR "98.11, 98.16 and 98.17 and
                        applicable Insurance Law "304, 305, 306, and 310. The
                        LDSS reserves the right to require Contractor to submit
                        such relevant financial reports and documents related to
                        the financial condition of the MCO to the LDSS, as set
                        forth in Section 18.5(o) of this Agreement.

                d)      Encounter Data:

                        The Contractor shall prepare and submit encounter data
                        on a monthly basis to SDOH through its designated Fiscal
                        Agent. Each provider is required to have a unique
                        identifier. Submissions shall be comprised of encounter
                        records, or adjustments to previously submitted records,
                        which the Contractor has received and processed from
                        provider encounter or claim records of any contracted
                        services rendered to the Enrollee in the current or any
                        preceding months. Monthly submissions must be received
                        by the Fiscal Agent by the Tuesday before the last
                        Monday of the month to assure the submission is included
                        in the Fiscal Agent's monthly production processing.

                e)      Quality of Care Performance Measures:

                                   SECTION 18
                       (CONTRACTOR REPORTING REQUIREMENTS)
                                 October 1, 1999
                                      18-2

<PAGE>

                        The Contractor shall prepare and submit reports to SDOH,
                        as specified in the Quality Assurance Reporting
                        Requirements (QARR). The Contractor must arrange for an
                        NCQA-certified entity to audit the QARR data prior to
                        its submission to the SDOH, unless this requirement is
                        specifically waived by the SDOH. The SDOH will select
                        the measures which will be audited

                f)      Complaint Reports:

                        The Contractor must provide the SDOH on a quarterly
                        basis, and within fifteen (15) business days of the
                        close of the quarter, a summary of all complaints
                        received during the preceding quarter on the Health
                        Provider Network ("HPN").

                        The Contractor also agrees to provide on a quarterly
                        basis, via the HPN, the total number of complaints that
                        have been unresolved for more than forty-five (45) days.
                        The Contractor shall maintain records on these and other
                        complaints which shall include all correspondence
                        related to the complaint, and an explanation of
                        disposition. These records shall be readily available
                        for review by the SDOH or LDSS upon request.

                        Nothing in this Section is intended to limit the rig ht
                        of the SDOH and the LDSS to obtain information
                        immediately from a Contractor pursuant to investigating
                        a particular Enrollee or provider complaint.

                        The LDSS reserves the right to require the Contractor to
                        submit a hardcopy of complaint reports in Section
                        18.5(o) of this Agreement.

                g)      Fraud and Abuse Reporting Requirements

                        i)      The Contractor must submit quarterly, via the
                                HPN complaint reporting format, the number of
                                complaints of fraud or abuse made to the
                                Contractor that warrant preliminary
                                investigation by the Contractor.

                        ii)     The Contractor must also submit to the SDOH the
                                following on an ongoing basis for each confirmed
                                case of fraud and abuse it identifies through
                                complaints, organizational monitoring,
                                contractors, subcontractors, providers,
                                beneficiaries, Enrollees, etc:

                                        A)      The name of the individual or
                                                entity that committed the fraud
                                                or abuse;

                                        B)      The source that identified the
                                                fraud or abuse;

                                        C)      The type of provider, entity or
                                                organization that committed the
                                                fraud or abuse;

                                        D)      A description of the fraud or
                                                abuse;

                                        E)      The approximate range of dollars
                                                involved;

                                   SECTION 18
                       (CONTRACTOR REPORTING REQUIREMENTS)
                                 October 1, 1999
                                      18-3
<PAGE>

                                        F)      The legal and administrative
                                                disposition of the case
                                                including actions taken by law
                                                enforcement officials to whom
                                                the case has been referred; and

                                        G)      Other data/information as
                                                prescribed by SDOH.

                        iii)    Such report shall be submitted when cases of
                                fraud and abuse are confirmed, and shall be
                                reviewed and signed by an executive officer of
                                the Contractor.

                h)      Participating Provider Network Reports:

                        The Contractor shall submit electronically, to the HPN,
                        an updated provider network report on a quarterly basis.
                        The Contractor shall submit an annual notarized
                        attestation that the providers listed in each submission
                        have executed an agreement with the Contractor to serve
                        Contractor's Medicaid Enrollees. The report submission
                        must comply with the Managed Care Provider Network Data
                        Dictionary. Networks must be reported separately for
                        each county in which the Contractor operates.

                i)      Appointment Availability/Twenty-four (24) Hour/Access
                        and Availability Surveys:

                        The Contractor will conduct a county specific (or
                        service area if appropriate) review of appointment
                        availability and twenty-four (24) hour access and
                        availability surveys annually. Results of such surveys
                        must be kept on file and be readily available for review
                        by the SDOH or LDSS, upon request. Guidelines for such
                        studies may be obtained by contacting the SDOH, Office
                        of Managed Care, Bureau of Certification and
                        Surveillance.

                        The LDSS reserves the right to require the Contractor to
                        conduct appointment availability and twenty-four (24)
                        hour access studies twice a year, and to submit these
                        reports to the LDSS, as stated in Section 18.5(o) of
                        this Agreement.

                j)      Clinical Studies:

                        The Contractor will participate in up to four (4) SDOH
                        sponsored focused clinical studies annually. The purpose
                        of these studies will be to promote quality improvement
                        within the MCO.

                        The Contractor will be required to conduct at least one
                        (1) internal focused clinical study each year in a
                        priority topic area of its choosing, from a list to be
                        generated through the mutual agreement of the SDOH and
                        the Contractor's Medical Director. The purpose of these
                        studies will be to promote quality improvement within
                        the MCO. SDOH will provide

                                   SECTION 18
                       (CONTRACTOR REPORTING REQUIREMENTS)
                                 October 1, 1999
                                      18-4
<PAGE>

                        guidelines for the studies' structure. Results of these
                        studies will be provided to the SDOH and the LDSS.

                k)      Independent Audits:

                        The Contractor must submit copies of all certified
                        financial statements and a QARR validation audit by
                        independent auditors of their plan to the SDOH and the
                        LDSS within thirty (30) days of receipt by the
                        Contractor.

                l)      PCP Auto Assignments:

                        The Contractor shall submit semi-annually to the SDOH
                        and the LDSS a report showing the percentage of PCP
                        assignments for Enrollees which were made automatically
                        by the Contractor, rather than by the Enrollee.

                m)      No Contact Report:

                        The Contractor shall submit a monthly report within
                        thirty (30) days of the close of the reporting period to
                        the LDSS of any Enrollee it is unable to contact,
                        through reasonable means, including by mail, and by
                        telephone, using methods described in Section 13.5,
                        and/or of any Enrollees who have not utilized any health
                        care services through the Contractor or its
                        Participating Providers, within ninety (90) days of the
                        Effective Date of Enrollment.

                n)      Additional Reports:

                        Upon request by the SDOH and/or the LDSS, the Contractor
                        shall prepare and submit other operational data reports.
                        Such requests will be limited to situations in which the
                        desired data is considered essential and cannot be
                        obtained through existing Contractor reports. Whenever
                        possible, the Contractor will be provided with ninety
                        (90) days notice and the opportunity to discuss and
                        comment on the proposed requirements before work is
                        begun. However, the SDOH and the LDSS reserve the right
                        to give thirty (30) days notice in circumstances where
                        time is of the essence.

                o)      LDSS Specific Reports:

                        {INSERT LDSS SPECIFIC REPORTS AS APPLICABLE}

        18.6    Ownership and Related Information Disclosure

                The Contractor shall report ownership and related information to
                SDOH and the LDSS, and upon request to the Secretary of
                Department of Health and Human Services and the Inspector
                General of Health and Human Services, in accordance with 42 U.
                S. C. Section 1320a-3 and 1396b(m)(4) (Sections 1124 and
                1903(m)(4) of the Federal Social Security Act).

                                   SECTION 18
                       (CONTRACTOR REPORTING REQUIREMENTS)
                                 October 1, 1999
                                      18-5

<PAGE>

        18.7    Revision of Certificate of Authority

                The Contractor shall give prompt written notice to LDSS of any
                revisions of its Certificate of Authority issued pursuant to
                Article 44 of the State Public Health Law.

        18.8    Public Access to Reports

                Any data, information, or reports collected and prepared by the
                Contractor and submitted to NYS authorities in the course of
                performing their duties and obligation under this program will
                be deemed to be owned by the State of New York subject to and
                consistent with the requirements of Freedom of Information Law.
                This provision is made in consideration of the Contractor's use
                of public funds in collecting and preparing such data,
                information, and reports.

        18.9    Professional Discipline

                a)      Pursuant to P. H. L. Section 4405-b, the Contractor
                        shall have in place policies and procedures to report to
                        the appropriate professional disciplinary agency within
                        thirty (30) days of occurrence, any of the following:

                        i)      the termination of a health care provider
                                contract pursuant to Section 4406-d of the
                                Public Health Law for reasons relating to
                                alleged mental and physical impairment,
                                misconduct or impairment of patient safety or
                                welfare;

                        ii)     the voluntary or involuntary termination of a
                                contract or employment or other affiliation with
                                such Contractor to avoid the imposition of
                                disciplinary measures; or

                        iii)    the termination of a health care provider
                                contract in the case of a determination of fraud
                                or in a case of imminent harm to patient health.

                b)      The Contractor shall make a report to the appropriate
                        professional disciplinary agency within sixty (60) days
                        of obtaining knowledge of any information that
                        reasonably appears to show that a health professional is
                        guilty of professional misconduct as defined in Articles
                        130 and 131(a) of the State Education Law.

        18.10   Certification Regarding Individuals Who Have Been Debarred Or
                Suspended By Federal or State Government

                Contractor will certify to the SDOH and LDSS initially and
                immediately upon changed circumstances from the last such
                certification that it does not knowingly have an individual who
                has been debarred or suspended by the federal or state
                government, or otherwise excluded from participating in
                procurement activities:

                                   SECTION 18
                       (CONTRACTOR REPORTING REQUIREMENTS)
                                 October 1, 1999
                                      18-6

<PAGE>

                a)      as a director, officer, partner or person with
                        beneficial ownership of more than 5% of the Contractor's
                        equity; or

                b)      as a party to an employment, consulting or other
                        agreement with the Contractor for the provision of items
                        and services that are significant and material to the
                        Contractors obligations in the Medicaid managed care
                        program, consistent with requirements of SSA '1932
                        (d)(1).

        18.11   Conflict of Interest Disclosure

                Contractor shall report to SDOH, in a format specified by SDOH,
                documentation, including but not limited to the identity of and
                financial statements of, person(s) or corporation(s) with an
                ownership or contract interest in the managed care plan, or with
                any subcontract(s) in which the managed care plan has a 5% or
                more ownership interest, consistent with requirements of SSA
                '1903 (m)(2)(a)(viii) and 42 CFR "455.100 B 455.104.

        18.12   Physician Incentive Plan Reporting

                The Contractor shall submit to SDOH annual reports containing
                the information on all of its Physician Incentive Plan
                arrangements in accordance with 42 CFR Section 434.70 or, if no
                such arrangements are in place, attest to that. The contents and
                time frame of such reports shall comply with the requirements of
                42 CFR Section 417.479 and be in a format provided by SDOH.

                                   SECTION 18
                       (CONTRACTOR REPORTING REQUIREMENTS)
                                 October 1, 1999
                                      18-7

<PAGE>

19.     RECORDS MAINTENANCE AND AUDIT RIGHTS

        19.1    Maintenance of Contractor Performance Records

                The Contractor shall maintain and shall require its
                subcontractors, including its Participating Providers, to
                maintain appropriate records relating to Contractor performance
                under this Agreement, including:

                a)      records related to services provided to Enrollees,
                        including a separate Medical Record for each Enrollee;

                b)      all financial records and statistical data that LDSS,
                        SDOH and any other authorized governmental agency may
                        require including books, accounts, journals, ledgers,
                        and all financial records relating to capitation
                        payments, third party health insurance recovery, and
                        other revenue received and expenses incurred under this
                        Agreement;

                c)      appropriate financial records to document fiscal
                        activities and expenditures, including records relating
                        to the sources and application of funds and to the
                        capacity of the Contractor or its subcontractors,
                        including its Participating Providers, if relevant, to
                        bear the risk of potential financial losses.

        19.2    Maintenance of Financial Records and Statistical Data

                The Contractor shall maintain all financial records and
                statistical data according to generally accepted accounting
                principles.

        19.3    Access to Contractor Records

                The Contractor shall provide LDSS, SDOH, the Comptroller of the
                State of New York, DHHS, the Comptroller General of the United
                States, and their authorized representatives with access to all
                records relating to Contractor performance under this Agreement
                for the purposes of examination, audit, and copying (at
                reasonable cost to the requesting party) of such records. The
                Contractor shall give access to such records on two (2) business
                days prior written notice, during normal business hours, unless
                otherwise provided or permitted by applicable laws, rules, or
                regulations.

        19.4    Retention Periods

                The Contractor shall preserve and retain all records relating to
                Contractor performance under this Agreement in readily
                accessible form during the term of this Agreement and for a
                period of six (6) years thereafter. All provisions of this
                Agreement relating to record maintenance and audit access shall
                survive the termination of this Agreement and shall bind the
                Contractor until the expiration of

                                   Section 19
                     (RECORDS MAINTENANCE AND AUDIT RIGHTS)
                                 October 1, 1999
                                      19-1

<PAGE>

                a period of six (6) years commencing with termination of this
                Agreement or if an audit is commenced, until the completion of
                the audit, whichever occurs later.

                                   Section 19
                     (RECORDS MAINTENANCE AND AUDIT RIGHTS)
                                 October 1, 1999
                                      19-2

<PAGE>

20.     CONFIDENTIALITY

        20.1    Confidentiality of Identifying Information about Medicaid
                Recipients and Applicants

                All information relating to services to Medicaid recipients and
                applicants which is obtained by the Contractor shall be
                confidential pursuant to the New York State P. H. L. including
                P. H. L. Article 27 F, the provisions of Section 369(4) of the
                NYS Social Services Law, 42 U .S. C. Section 1396a(a)(7)
                (Section 1902(a)(7) of the Federal Social Security Act), Section
                33.13 of the Mental Hygiene Law, and regulations promulgated
                under such laws including 42 CFR Part 2 pertaining to Alcohol
                and Substance Abuse Services. Such information including
                information relating to services to Medicaid recipients and
                applicants as these relate to the provision of services to the
                recipient or applicant under this Agreement shall be used or
                disclosed by the Contractor only for a purpose directly
                connected with performance of the Contractor's obligations. It
                shall be the responsibility of the Contractor to inform its
                employees and contractors of the confidential nature of Medicaid
                information.

        20.2    Medical Records of Foster Children

                Medical records of enrolled Medicaid recipients enrolled in
                foster care programs shall be disclosed to local social service
                officials in accordance with State Social Services Law including
                Sections 358-a, 384-a and 392 and 18 NYCRR Section 507.1.

        20.3    Confidentiality of Medical Records

                Medical records of Medicaid recipients enrolled pursuant to this
                Agreement shall be confidential and shall be disclosed to and by
                other persons within the Contractor's organization including
                Participating Providers, only as necessary to provide medical
                care, to conduct quality assurance functions and peer review
                functions, or as necessary to respond to a complaint and appeal
                under the terms of this Agreement.

        20.4    Length of Confidentiality Requirements

                The provisions of this Section shall survive the termination of
                this Agreement and shall bind the Contractor so long as the
                Contractor maintains any individually identifiable information
                relating to Medicaid recipients and applicants.

                                   Section 20
                                (CONFIDENTIALITY)
                                 October 1, 1999
                                      20-1

<PAGE>

21.     PARTICIPATING PROVIDERS

        21.1    Network Requirements

                a)      Sufficient Number

                        i)      The Contractor will establish and maintain a
                                network of Participating Providers.

                        ii)     The Contractor's network must contain all of the
                                provider types necessary to furnish the prepaid
                                Benefit Package, including but not limited to:
                                hospitals, physicians (primary care and
                                specialists), mental health and substance abuse
                                providers, allied health professionals,
                                ancillary providers, DME providers and home
                                health providers.

                        iii)    To be considered accessible, the network must
                                contain a sufficient number and array of
                                providers to meet the diverse needs of the
                                Enrollee population. This includes being
                                geographically accessible (meeting time/distance
                                standards) and being accessible for the
                                disabled.

                        iv)     The Contractor shall not include in its network
                                any provider who has been sanctioned or
                                prohibited from serving Medicaid recipients or
                                receiving Medical Assistance payments.

                b)      Absence of Appropriate Network Provider

                        In the event that the Contractor determines that it does
                        not have a Participating Provider with appropriate
                        training and experience to meet the particular health
                        care needs of an Enrollee, the Contractor shall make a
                        referral to an appropriate Non-Participating Provider,
                        pursuant to a treatment plan approved by the Contractor
                        in consultation with the Primary Care Provider, the
                        Non-Participating Provider and the Enrollee or the
                        Enrollee's designee. The Contractor shall pay for the
                        cost of the services in the treatment plan provided by
                        the Non-Participating Provider.

                c)      Suspension of Enrollee Assignments To Providers

                        The Contractor shall ensure that there is sufficient
                        capacity, consistent with SDOH standards, to serve
                        Enrollees under this Agreement. In the event any of the
                        Contractor's Participating Providers are no longer able
                        to accept assignment of new Enrollees due to capacity
                        limitations, as determined by the SDOH and the LDSS, the
                        Contractor will suspend assignment of any additional
                        Enrollees to such Participating Provider until it is
                        capable of further accepting Enrollees. When a
                        Participating Provider has more than one (1) site, the
                        suspension will be made by site.

                d)      Notice of Provider Termination

                                   Section 21
                        (PROVIDER NETWORK AND AGREEMENTS)
                                 October 1, 1999
                                      21-1
<PAGE>

                        At least thirty (30 ) days prior to termination, of any
                        Provider Agreement that substantially alters or limits
                        Enrollees access to the Contractor's services, as
                        determined by the LDSS, the Contractor shall notify the
                        LDSS and SDOH and specify how services previously
                        furnished by the Participating Provider will be
                        provided. In the event a Provider Agreement is
                        terminated effective immediately or with less than
                        thirty (30) days notice, the Contractor shall notify
                        LDSS and SDOH promptly and in no event in more than
                        seventy-two (72) hours after the termination becomes
                        effective.

        21.2    Credentialing

                a)      Licensure

                        The Contractor shall ensure, in accordance with Article
                        44 of the Public Health Law, that persons and entities
                        providing care and services for the Contractor in the
                        capacity of physician, dentist, physician's assistant,
                        registered nurse, other medical professional or
                        paraprofessional, or other such person or entity satisfy
                        all applicable licensing, certification, or
                        qualification requirements under New York law and that
                        the functions and responsibilities of such persons and
                        entities in providing Benefit Package services under
                        this Agreement do not exceed those permissible under New
                        York law.

                b)      Minimum Standards

                        The Contractor agrees that all network physicians will
                        meet at least one (1) of the following standards, except
                        as specified in Section 21.13(b) and Appendix I of this
                        agreement:

                        i)      Be board-certified or -eligible in their area of
                                specialty;

                        ii)     Have completed an accredited residency program;
                                or

                        iii)    Have admitting privileges at one (1) or more
                                hospitals participating in the Contractor's
                                network.

                c)      Credentialing/Recredentialing Process

                        The Contractor shall have in place a formal process for
                        credentialing Participating Providers on a periodic
                        basis (not less than once every two (2) years) and for
                        monitoring Participating Providers performance.

                d)      Application Procedure

                        The Contractor shall establish a written application
                        procedure to be used by a health care professional
                        interested in serving as a Participating Provider with
                        the Contractor. The criteria for selecting providers,
                        including the minimum qualification requirements that a
                        health care professional must meet to be considered by
                        the Contractor, must be defined in writing and developed
                        in consultation with appropriately qualified health care
                        professionals. Upon

                                   Section 21
                        PROVIDER NETWORK AND AGREEMENTS)
                                 October 1, 1999
                                      21-2

<PAGE>

                        request, the application procedures and minimum
                        qualification requirements must be made available to
                        health care professionals.

        21.3    SDOH Exclusion or Termination of Providers

                If SDOH excludes or terminates a provider from its Medicaid
                Program, the Contractor shall, upon learning of such exclusion
                or termination, immediately terminate the provider agreement
                with the Participating Provider as it pertains to the
                Contractor's Medicaid program, and agrees to no longer utilize
                the services of the subject provider, as applicable. The
                Contractor will receive a paper listing of currently excluded
                Medic aid providers mailed monthly to their correspondence
                address, that the Contractor specified to SDOH during the
                initial provider enrollment process. Such paper shall be deemed
                to constitute constructive notice. This notification should not
                be the sole basis for identifying current exclusions or
                termination of previously approved providers. Should the
                Contractor become aware, through any source, of an SDOH
                exclusion or termination, the Contractor shall validate this
                information with the Office of Medicaid Management, Bureau of
                Enforcement Activities and comply with the provisions of this
                Section.

        21.4    Evaluation Information

                The Contractor shall develop and implement policies and
                procedures to ensure that health care professionals are
                regularly advised of information maintained by the Contractor to
                evaluate the performance or practice of health care
                professionals. The Contractor shall consult with health care
                professionals in developing methodologies to collect and analyze
                health care professional profiling data. The Contractor shall
                provide any such information and profiling data and analysis to
                health care professionals. Such information, data or analysis
                shall be provided on a periodic basis appropriate to the nature
                and amount of data and the volume and scope of services
                provided. Any profiling data used to evaluate the performance or
                practice of a health care professional shall be measured against
                stated criteria and an appropriate group of health care
                professionals using similar treatment modalities serving a
                comparable patient population. Upon presentation of such
                information or data, each health care professional shall be
                given the opportunity to discuss the unique nature of the health
                care professional's patient population which ma y have a bearing
                on the health care professional's profile and to work
                cooperatively with the Contractor to improve performance.

        21.5    Payment In Full

                Contractor must limit participation to providers who agree that
                payment received from the Contractor for services included in
                the Benefit Package is payment in full for services provided to
                Enrollees.

                                   Section 21
                        (PROVIDER NETWORK AND AGREEMENTS)
                                 October 1, 1999
                                      21-3

<PAGE>

        21.6    Choice/Assignment of PCP's

                a)      The Contractor shall offer each Enrollee the choice of
                        no fewer than three (3) Primary Care Providers within
                        program distance/travel time standards. Contractor must
                        assign a PCP to individuals that fail to select a PCP.
                        The assignment of a PCP by the Contractor may occur
                        after written notification of Contractor by LDSS of the
                        enrollment (through Roster or other method) and after
                        written notification of the Enrollee by the Contractor
                        but in no event later than thirty (30) days after
                        notification of enrollment, and only after the
                        Contractor has made reasonable efforts as set forth in
                        Section 13.5 of this Agreement to contact the Enrollee
                        and inform him/her of his/her right to choose a PCP.

                b)      PCP assignments should be made taking into consideration
                        the following:

                        i)      Enrollee's geographic location;

                        ii)     any special health care needs, if known by the
                                Contractor; and

                        iii)    any special language needs, if known by the
                                Contractor.

                c)      In circumstances where the Contractor operates or
                        contracts with a multiprovider clinic to deliver primary
                        care services, the Enrollee must choose or be assigned a
                        specific provider or provider team within the clinic to
                        serve as his/her PCP. This " lead" provider will be held
                        accountable for performing the PCP duties.

        21.7    PCP Changes

                a)      The Contractor must allow Enrollees the freedom to
                        change PCPs, without cause, within thirty (30) days of
                        the Enrollee's first appointment with the PCP. After the
                        first thirty (30) days PCP may be changed once every six
                        (6) months without cause.

                b)      The Contractor must process a request to change PCPs and
                        advise the Enrollee of the effective date of the change
                        within forty-five (45) days of receipt of the request.
                        The change must be effective no later than the first
                        (1st) day of the second (2nd) month following the month
                        in which the request is made.

                c)      The Contractor will provide Enrollees with an
                        opportunity to select a new PCP in the event that the
                        Enrollee's current PCP leaves the network or otherwise
                        becomes unavailable. Such changes shall not be
                        considered in the calculation of changes for cause
                        allowed within a six (6) month period.

                d)      In the event that an assignment of a new PCP is
                        necessary due to the unavailability of the Enrollee's
                        former PCP, such assignment shall be made in accordance
                        with the requirements of Section 21.7 of this Agreement.

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                                      21-4

<PAGE>

                e)      In addition to those conditions and circumstances under
                        which the Contractor may assign an Enrollee a PCP when
                        the Enrollee fails to make an affirmative choice of a
                        PCP, the Contractor may initiate a PCP change for an
                        Enrollee under the following circumstances:

                        i)      The Enrollee requires specialized care for an
                                acute or chronic condition and the Enrollee and
                                Contractor agree that reassignment to a
                                different PCP is in the Enrollee's interest.

                        ii)     The Enrollee's place of residence has changed
                                such that he/she has moved beyond the PCP travel
                                time/distance standard.

                        iii)    The Enrollee's PCP ceases to participate in the
                                Contractor's network.

                        iv)     The Enrollee's behavior toward the PCP is
                                disruptive and the PCP has made all reasonable
                                efforts to accommodate the Enrollee.

                        v)      The Enrollee has taken legal action against the
                                PCP.

                f)      Whenever initiating a change, the Contractor must offer
                        affected Enrollees the opportunity to select a new PCP
                        in the manner described in this Section.

        21.8    PCP Status Changes

                The Contractor agrees to notify its Enrollees of any of the
                following PCP changes:

                a)      Enrollees will be notified within three (3) business
                        days from the date on which the Contractor becomes aware
                        of the change if:

                        i)      Office address/telephone number change.

                        ii)     Office hours change.

                b)      Enrollees will be notified within fifteen (15) days from
                        the date on which the Contractor became aware of the
                        change if:

                        i)      An Enrollee's PCP ceases participation with the
                                Contractor (in such cases, the Contractor must
                                ensure that a new PCP is assigned within thirty
                                (30) days of the date of notice to the
                                Enrollee).

                        ii)     An Enrollee is in an on going course of
                                treatment with another Participating Provider
                                who becomes unavailable to continue to provide
                                services to such Enrollee. In such cases, the
                                notice shall also describe the procedures for
                                continuing care.

        21.9    PCP Responsibilities

                In conformance with the Benefit Package, the PCP shall provide
                health counseling and advice; conduct baseline and periodic
                health examinations; diagnose and treat conditions not requiring
                the services of a specialist; arrange inpatient care,
                consultation with specialists, and laboratory and radiological
                services when medically necessary; coordinate the findings of
                consultants and

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                                      21-5
<PAGE>

                laboratories; and interpret such findings to the Enrollee and
                the Enrollee's family, subject to the confidentiality provisions
                of Section 20 of this Agreement, and maintain a current medical
                record for the Enrollee. The PCP shall also be responsible for
                determining the urgency of a consultation with a specialist and
                shall arrange for all consultation appointments within
                appropriate time frames.

        21.10   Member to Provider Ratios

                The Contractor agrees to adhere to the member -to-PCP ratios
                shown below. These ratios are for Medicaid Enrollees only, are
                Contractor-specific, and assume the practitioner is a full time
                equivalent (FTE)(defined as a provider practicing forty (40)
                hours per week for the Contractor):

                i)      No more than 1,500 Medic aid Enrollees for each
                        physician, o r 2,400 for a physician practicing in
                        combination with a physician assistant or a nurse
                        practitioner.

                ii)     No more than 1,000 Medicaid Enrollees for each nurse
                        practitioner.

                The Contractor agrees that these ratios will be prorated for
                Participating Providers who represent less than a FTE to the
                Contractor.

        21.11   Minimum Office Hours

                a)      General Requirements

                        A PCP must practice a minimum of sixteen (16) hours a
                        week at each primary care site.

                b)      The minimum office hours requirement may be waived under
                        certain circumstances. A request for a waiver must be
                        submitted by the MCO to the Medical Director of the
                        Office of Managed Care for review and approval; and the
                        physician must be available at least eight hours/week;
                        and the physician must be practicing in a Health
                        Provider Shortage Area (HAPS) or other similarly
                        determined shortage area; and the physician must be able
                        to fulfill the other responsibilities of a PCP (as
                        described in this Section); and the waiver request must
                        demonstrate there are systems in place to guarantee
                        continuity of care and to meet all access and
                        availability standards, (24-hr/7 day week cover age,
                        appointment availability, et c.). SDOH shall notify the
                        LDSS when a waiver has been granted.

        21.12   Primary Care Practitioners

                a)      General Limitations

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                        The Contractor agrees to limit its PCPs to the following
                        primary care specialties: Family Practice, General
                        Practice, General Pediatrics, General Internal Medicine,
                        except as specified in (b), (c), (d)and (e) of this
                        Section.

                b)      Specialist and Sub-specialist as PCPs

                        The Contractor is permitted to use specialist and
                        sub-specialist physicians as PCPs when such an action is
                        considered by the Contractor to be medically appropriate
                        and cost-effective. As an alternative, the Contractor
                        may restrict it's PCP network to primary care
                        specialties only, while relying on standing referrals to
                        specialists and sub-specialists for Enrollees who
                        require regular visits to such physicians.

                c)      OB/GYN Providers as PCPs

                        The Contractor, at its option, is permitted to use OB
                        /GYN providers as PCPs, subject to SDOH qualifications.

                d)      Nurse Practitioners as PCPs

                        The Contractor is permitted to use nurse practitioners
                        as PCPs, subject to their scope of practice limitations
                        under New York State Law.

                e)      Physician's Assistants as Physician Extenders

                        The Contractor is permitted to use physician's
                        assistants as physician-extenders, subject to their
                        scope of practice limitations under New York State Law.

        21.13   PCP Teams

                a)      General Requirements

                        The Contractor may designate teams of physicians/nurse
                        practitioners to serve as PCPs for Enrollees. Such teams
                        may include no more than four (4) physicians/nurse
                        practitioners and, when an Enrollee chooses or is
                        assigned to a team, one of the practitioners must be
                        designated as "lead provider" for that Enrollee. In the
                        case of teams comprised of medical residents under the
                        supervision of an attending physician, the attending
                        physician must be designated as the lead physician.

                b)      Medical Residents

                        The Contractor shall comply with SDOH Guidelines for use
                        of Medical Residents as found in Appendix I, which is
                        hereby made a part of this Agreement as if set forth
                        fully herein.

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                                      21-7

<PAGE>

        21.14   Hospitals

                a)      Tertiary Services

                        The Contractor will establish hospital networks capable
                        of furnishing the full range of tertiary services to
                        Enrollees. Contractors shall ensure that all Enrollees
                        have access to at least one (1) general a cute care
                        hospital within thirty (30) minutes/thirty (30) Miles
                        travel time (by car or public transportation) from the
                        Enrollee's residence, unless none are located within
                        such a distance. If none are located within thirty (30)
                        minutes travel time/ thirty (30) miles travel distance,
                        the Contractor must include the next closest site in its
                        network.

                b)      Emergency Services

                        The Contractor shall ensure and demonstrate that it
                        maintains relationships with hospital emergency
                        facilities, including comprehensive psychiatric
                        emergency programs (where available) within and around
                        its Service Area to provide Emergency Services.

        21.15   Dental Networks

                If the Contractor includes dental services in it's Benefit
                Package, the Contractor's dental network shall include
                geographically accessible general dentists sufficient to offer
                each Enrollee a choice of two (2) primary care dentists in their
                Service Area and to achieve a ratio of at least one (1) primary
                care dentist for each 2,000 Enrollees. Networks must also
                include at least one (1) pediatric dentist and one (1) oral
                surgeon. Orthognathic surgery, temporal mandibular disorders
                (TMD) and oral/maxillofacial prosthodontics must be provided
                through any qualified dentist, either in-network or by referral.
                Periodontists and endodontists must also be available by
                referral. The network should include dentists with expertise in
                serving special needs populations (e.g., HIV+ and
                developmentally disabled patients).

                Dental surgery performed in an ambulatory or inpatient setting
                is the responsibility of the Contractor whether dental services
                are a covered benefit or not, as set forth in Appendix K-II
                -B-Optional Service, Dental Services.

        21.16   Presumptive Eligibility Providers

                Contractors must offer Presumptive Eligibility Providers the
                opportunity to contract at terms which are at least as favorable
                as the terms offered to other providers performing equivalent
                services (prenatal care). Contractors need not contract with
                every Presumptive Eligibility Provider in their County, but must

                                   Section 21
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                                 October 1, 1999
                                      21-8
<PAGE>

                include a sufficient number in their networks of Participating
                Providers to meet the distance/travel time standards defined for
                primary care.

        21.17   Mental Health, Alcohol and Substance Abuse Providers

                The Contractor will include a full array of mental health and
                substance abuse providers in its networks, in sufficient numbers
                to assure accessibility to services on the part of both children
                and adults, using either individual, appropriately licensed
                practitioners or New York State Office of Mental Health (OMH)
                and Office of Alcohol and Substance Abuse Services (OASAS)
                licensed programs and clinics, or both.

                The State defines mental health and substance abuse providers to
                include the following: Individual Practitioners, Psychiatrists,
                Psychologists, Psychiatric Nurse Practitioners, Psychiatric
                Clinical Nurse Specialists, Licensed Certified Social Workers,
                OMH and OASAS Programs and Clinics, and Providers of mental
                health and/or alcoholism/substance abuse services certified or
                licensed pursuant to Article 23 or 31 of Mental Hygiene Law, as
                appropriate. OASAS programs include Certified Drug and Alcohol
                Counselors, employed only by OASAS licensed programs.

        21.18   Laboratory Procedures

                The Contractor agrees to restrict its laboratory provider
                network to entities having either a CLIA certificate of
                registration or a CLIA certificate of waiver.

        21.19   School-Based Health Centers

                a)      By January 1, 2000, the Contractor must develop, in
                        collaboration with school-based health centers in their
                        Service Areas, protocols for reciprocal referral and
                        communication of data and clinical information on MCO
                        Enrollees enrolled in school-based health centers.

                b)      By March 31, 2000, the Contractor must enter into
                        contractual and payment arrangements with school-based
                        health centers in their Service Area consistent with
                        SDOH clinical coordination guidelines and the protocols
                        referred to in (a) above.

        21.20   Federally Qualified Health Centers (FQHCs)

                In voluntary counties, the Contractor is not required to
                contract with FQHCs.

                However, when an FQHC is part of the provider network (voluntary
                or mandatory counties) the Provider Agreement must include a
                provision whereby the Contractor agrees to compensate the FQHC
                for services provided to Enrollees at a

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                                      21-9

<PAGE>

                payment rate that is not less than the level and amount for a
                similar set of services which the Contractor would make to a
                provider that is not an FQHC.

                In mandatory counties, the Contractor shall contract with FQHCs
                operating in its Service Area. However, the Contractor has the
                option to make a written request to the SDOH for an exemption
                from the FQHC contracting requirement, if the Contractor can
                demonstrate, with supporting documentation, that it has adequate
                capacity and will provide a comparable level of clinical and
                enabling services (e. g., outreach, referral services, social
                support services, culturally sensitive services such as training
                for medical and administrative staff, medical and non-medical
                and case management services) to vulnerable populations in lieu
                of contracting with an FQHC in its Service Area. Written
                requests for exemption from this requirement are subject to
                approval by HCFA.

                When the Contractor is participating in a county where an MCO
                that is sponsored, owned and/or operated by one or more FQHCs
                exists, the Contractor is not required to include any FQHCs
                within its network in that county.

        21.21   Provider Services Function

                The Contractor will operate a Provider Services function during
                regular business hours. At a minimum, the Contractor's Provider
                Services staff must be responsible for the following:

                a)      Assisting providers with prior authorization and
                        referral protocols.
                b)      Assisting providers with claims payment procedures.
                c)      Fielding and responding to provider questions and
                        complaints.

                                   Section 21
                        (PROVIDER NETWORK AND AGREEMENTS)
                                 October 1, 1999
                                      21-10

<PAGE>

22.     SUBCONTRACTS AND PROVIDER AGREEMENTS

        22.1    Written Subcontracts

                Contractor may not enter into any subcontracts related to the
                delivery of services to Enrollees, except by a written
                agreement.

        22.2    Permissible Subcontracts

                Contractor may subcontract for provider services as set forth in
                Section 2.6 and 21 of this contract and management services
                including, but not limited to, marketing, quality assurance and
                utilization review activities and such other services as are
                acceptable to the LDSS.

        22.3    Provisions of Services through Provider Agreements

                All medical care and/or services covered under this Agreement,
                with the exception of seldom used subspecialty and Emergency
                Services, Family Planning Services, and services for which
                Enrollees can self refer, shall be provided through Provider
                Agreements with Participating Providers.

        22.4    Approvals

                a)      Provider Agreements shall require the approval of SDOH
                        as set forth in P.H.L. 4402 and 10 NYCRR Part 98.

                b)      If a subcontract is for management services under 10
                        NYCRR Section 98.11, it must be approved by SDOH prior
                        to its becoming effective.

                c)      LDSS may require that the Contractor submit any
                        subcontracts, including Provider Agreements with
                        Participating Providers, and including material
                        amendments to and renewals of such sub-contracts to
                        LDSS.

                d)      The Contractor shall notify SDOH of any material
                        amendments to any Provider Agreement as set forth in 10
                        NYCRR 98.8. The Contractor shall provide LDSS with a
                        copy of any such amendment within fifteen (15) days
                        after its approval by SDOH, unless LDSS notifies the
                        Contractor otherwise.

        22.5    Required Components

                a)      The Contractor shall impose obligations and duties on
                        its subcontractors, including its Participating
                        Providers, that are consistent with this Agreement, and
                        that do not impair any rights accorded to LDSS, SDOH, or
                        DHHS.

                                   Section 22
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                                      22-1

<PAGE>

                b)      No subcontract, including any Provider Agreement shall
                        limit or terminate the Contractor's duties and
                        obligations under this Agreement.

                c)      Nothing contained in this Agreement between LDSS and the
                        Contractor shall create any contractual relationship
                        between any subcontractor of the Contractor, including
                        Participating Providers, and the County or LDSS.

                d)      Any sub contract entered into by the Contractor shall
                        fulfill the requirements of 42 C FR Part 434 that are
                        appropriate to the service or activity delegated under
                        such subcontract.

                e)      The Contractor shall also ensure that, in the event the
                        Contractor fails t o pay any subcontractor, including
                        any Participating Provider in accordance with the
                        subcontract or Provider Agreement, the subcontractor or
                        Participating Provider will not seek payment from the
                        LDSS, the Enrollees, or their eligible dependents.

                f)      The Contractor shall include in every Provider Agreement
                        a procedure for the resolution of disputes between the
                        Contractor and its Participating Providers.

                g)      The Contractor shall ensure that all Provider Agreements
                        entered into with Providers require acceptance of a
                        woman's enrollment in the MCO as sufficient to provide
                        services to her newborn, unless the newborn is excluded
                        from participating in Medicaid managed care.

        22.6    Timely Payment

                Contractor shall make payments to affiliated health care
                providers for items and services covered under this Agreement on
                a timely basis, consistent with the claims payment procedures
                described in NYS Insurance Law Section 3224-a.

        22.7    Restrictions on Disclosure

                The Contractor shall not by contract or written policy o r
                written procedure prohibit or restrict any health care provider
                from the following:

                a)      disclosing to any subscriber, Enrollee, patient,
                        designated representative or, where appropriate,
                        prospective Enrollee any information that such provider
                        deems appropriate regarding:
                        i)      a condition or a course of treatment with such
                                subscriber, Enrollee, patient, designated
                                representative or prospective Enrollee,
                                including the availability of other therapies,
                                consultations, or tests; or
                        ii)     The provisions, terms, or requirements of the
                                Contractor's products as they relate to the
                                Enrollee, where applicable.

                                   Section 22
                              (PROVIDER AGREEMENTS)
                                 October 1, 1999
                                      22-2

<PAGE>

                b)      filing a complaint, making a report or comment to an
                        appropriate governmental body regarding the policies or
                        practices of the Contractor when they believe that the
                        policies or practices negatively impact upon the quality
                        of, or access to, patient care.

                c)      advocating to the Contractor on behalf of the Enrollee
                        for approval or coverage of a particular treatment or
                        for the provision of health care services.

        22.8    Transfer of Liability

                No contract or agreement between the Contractor and a health
                care provider shall contain any clause purporting to transfer to
                the health care provider, other than a medical group, by
                indemnification or otherwise, any liability relating to
                activities, actions or omissions of the Contractor as opposed to
                those of the health care provider.

        22.9    Termination of Health Care Professional Agreements

                The Contractor shall not terminate a contract with a health care
                professional unless the Contractor provides to the health care
                professional a written explanation of the reasons for the
                proposed termination and an opportunity for a review or hearing
                as hereinafter provided. For purposes of this Section a health
                care professional is an individual licensed, registered or
                certified pursuant to Title 8 of the Education Law.

                These requirements shall not apply in cases involving imminent
                harm to patient care, a determination of fraud, or a final
                disciplinary action by a state licensing board or other
                governmental agency that impairs the health care professional's
                ability to practice.

                When the Contractor desires to terminate a contract with a
                health care professional, the notification of the proposed
                termination by the Contractor to the health care professional
                shall include:

                a)      the reasons for the proposed action;

                b)      notice that the health care professional has the right
                        to request a hearing or review, at the provider's
                        discretion, before a panel appointed by the Contractor;

                c)      a time limit of not less than thirty (30) days within
                        which a health care professional may request a hearing;
                        and

                d)      a time limit for a hearing date which must be held
                        within thirty (30) days after the date of receipt of a
                        request for a hearing.

                                   Section 22
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<PAGE>

                        No contract or agreement between the Contractor and a
                        health care professional shall contain any provision
                        which shall supersede or impair a health care
                        professional's right to notice of reasons for
                        termination and the opportunity for a hearing or review
                        concerning such termination.

        22.10   Health Care Professional Hearings

                A health care professional that has been notified of his or her
                proposed termination must be allowed a hearing. The procedures
                for this hearing must meet the following standards:

                a)      The hearing panel shall be comprised of at least three
                        persons appointed by the Contractor. At least one person
                        on such panel shall be a clinical peer in the same
                        discipline and the same or similar specialty as the
                        health care professional under review. The hearing panel
                        may consist of more than three persons, provided how
                        ever that the number of clinical peers on such panel
                        shall constitute one-third or more of the total
                        membership of the panel.

                b)      The hearing panel shall render a decision on the
                        proposed action in a timely manner. Such decision shall
                        include reinstatement of the health care professional by
                        the Contractor, provisional reinstatement subject to
                        conditions set forth by the Contractor or termination of
                        the health care professional. Such decision shall be
                        provided in writing to the health care professional.

                c)      A decision by the hearing panel to terminate a health
                        care professional shall be effective not less than
                        thirty (30) days after the receipt by the health care
                        professional of the hearing panel's decision.
                        Notwithstanding the termination of a health care
                        professional for cause or pursuant to a hearing, a plan
                        shall permit an Enrollee to continue an on-going course
                        of treatment for a transition period of up to ninety
                        (90) days, and post-partum care, subject to provider
                        agreement, pursuant to P. H. L. Section 4406(6)(e).

                d)      In no event shall termination be effective earlier than
                        sixty (60) days from the receipt of the notice of
                        termination.

        22.11   Non-Renewal of Provider Agreements

                Either party to a contract may exercise a right of non-renewal
                at the expiration of the contract period set forth therein or,
                for a contract without a specific expiration date, on each
                January first occurring after the contract has been in effect
                for at least one year, upon sixty (60) days notice to the other
                party; provided, however, that any non -renewal shall not
                constitute a termination for the purposes of this Section.

                                   Section 22
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                                      22-4

<PAGE>

        22.12   Physician Incentive Plan

                If Contractor elects t o operate a Physician Incentive Plan,
                Contractor agrees that no specific payment will be made directly
                or indirectly under the plan to a physician or physician group
                as an inducement to reduce or limit medically necessary services
                furnished to an Enrollee. Contractor agrees to submit to SDOH
                annual reports containing the information on its physician
                incentive plan in accordance with 42 CFR Section 434.70. The
                contents of such reports shall comply with the requirements of
                42 CFR Section 417.479 and be in a format to be provided by
                SDOH.

                The Contractor must ensure that any agreements for contracted
                services covered by this Agreement, such as agreements between
                the Contractor and other entities or between the Contractor's
                subcontracted entities and their contractors, at all levels
                including the physician level, include language requiring that
                the physician incentive plan information be provided by the
                sub-contractor in an accurate and timely manner to the
                Contractor, in the format requested by SDOH.

                In the event that the incentive arrangements place the physician
                or physician group at risk for services beyond those provided
                directly by the physician or physician group for an amount
                beyond the risk threshold of 25% of potential payments for
                covered services (substantial financial risk), the Contractor
                must comply with all additional requirements listed in
                regulation, such as: conduct enrollee/disenrollee satisfaction
                surveys; disclose the requirements for the physician incentive
                plans to its beneficiaries upon request; and ensure that all
                physicians and physician groups at substantial financial risk
                have adequate stop-loss protection. Any of these additional
                requirements that are passed on to the subcontractors must be
                clearly stated in their Agreement.

                                   Section 22
                              (PROVIDER AGREEMENTS)
                                 October 1, 1999
                                      22-5

<PAGE>

23.     FRAUD AND ABUSE PREVENTION PLAN

                A Fraud and Abuse Prevention Plan for the detection,
                investigation and prevention of fraudulent activities must be
                filed by the Contractor with the Commissioner of Health to the
                extent required by SDOH regulations. A copy of this plan must be
                submitted to the LDSS, upon request of the LDSS.

24.     AMERICANS WITH DISABILITIES ACT COMPLIANCE PLAN

        Contractor must comply with the Americans with Disabilities Act (ADA)
        and Section 504 of the Rehabilitation Act of 1973 for program
        accessibility, and must develop an ADA Compliance Plan consistent with
        the guidelines in Appendix J of this Agreement. Said plan must be
        approved by the SDOH and/or the LDSS, and filed with the Contractor,
        SDOH and the LDSS.

25.     FAIR HEARINGS

        25.1    Enrollee Access To Fair Hearing Process

                Enrollees may access the fair hearing process in accordance with
                applicable federal and state laws and regulations. Contractors
                must abide by and participate in New York State's Fair Hearing
                Process and comply with determinations made by a fair hearing
                officer.

        25.2    Enrollee Rights to a Fair Hearing

                Enrollees may request a fair hearing regarding adverse LDSS
                determinations concerning enrollment, disenrollment and
                eligibility, and regarding the denial, termination, suspension
                or reduction of a clinical treatment or other Benefit Package
                services by the Contractor. For issues related to disputed
                services, Enrollees must have received an adverse determination
                from the Contractor or its approved utilization review agent
                either overriding are commendation to provide services by a
                Participating Provider or confirming the decision of a
                Participating Provider to deny those services. An Enrollee may
                also seek a fair hearing for a failure by the Contractor to act
                with reasonable promptness with respect to such services.
                Reasonable promptness shall mean compliance with the time frames
                established for review of grievances and utilization review in
                Sections 44 and 49 of the Public Health Law.

        25.3    Contractor Notice to Enrollees

                a)      Contractor must issue a written Notice of Adverse
                        Determination and Fair Hearing Rights to any Enrollee:

                             Section 23 --Section 39
                                 October 1, 1999
                                       -1

<PAGE>

                        i)      When Contractor or its utilization review a gent
                                ha s denied a request to approve a Benefit
                                Package service ordered by an MCO provider; or
                        ii)     When an Enrollee is denied a requested service
                                or benefit by an MCO provider and has exhausted
                                the Contractor's approved internal complaint and
                                appeal procedures or utilization review
                                processes; or
                        iii)    At least 10 days before the effective date of
                                Contractor's termination, suspension or
                                reduction of a benefit or treatment already in
                                progress for that Enrollee.

                b)      Contractor agrees to serve notice on affected Enrollees
                        by mail and must maintain documentation of such.

                c)      Contractor's Notice of Adverse Determination and Notice
                        of a Right to Request a Fair Hearing shall include the
                        following:

                        i)      A description of the action Contractor intends
                                to take;
                        ii)     Contractor's reasons for the intended action;
                        iii)    The circumstances under which expedited
                                complaint or utilization review is available and
                                how to request it;
                        iv)     Notice of Enrollee's right to file a complaint
                                with the Contractor, a complaint with SDOH,
                                and/or to request a State fair hearing through
                                the Office of Administrative Hearings (OAH);
                        v)      Instructions to the Enrollee regarding how the
                                Enrollee may file complaints, utilization
                                appeals and State fair hearing requests,
                                including use of the Notice of Right to Request
                                a Fair Hearing which will inform Enrollees of
                                their possible right to aid continuing and that
                                such aid can be accessed only if the Enrollee
                                requests a State fair hearing.

        25.4    Aid Continuing

                Contractor shall be required to continue the provision of the
                Benefit Package services that are the subject of the fair
                hearing to an Enrollee (hereafter referred to as "aid
                continuing") if so ordered by the OAH under the following
                circumstances:

                        i)      Contractor has or is seeking to reduce, suspend
                                or terminate a treatment or Benefit Package
                                service currently being provided;
                        ii)     Enrollee has filed a timely request for a fair
                                hearing with OAH; and
                        iii)    There is a valid order for the treatment or
                                service from a participating provider.
                                Contractor shall provide aid continuing until
                                the matter has been resolved to the Enrollee's
                                satisfaction or until the administrative process
                                is completed and there is a determination from
                                OAH that Enrollee is not entitled to receive the
                                service, the Enrollee withdraws the request for
                                aid continuing and/or the fair hearing in
                                writing, or the treatment or service originally
                                ordered by the provider has been completed,
                                whichever occurs first.

                             Section 23 --Section 39
                                 October 1, 1999
                                       -2

<PAGE>

                        iv)     If the services and/or benefits in dispute have
                                been terminated, suspended or reduced and the
                                Enrollee timely requests a fair hearing,
                                Contractor shall, at the direction of either
                                SDOH or LDSS, restore the disputed services
                                and/or benefits consistent with the provisions
                                of Section 25.4(iii) of this Agreement.

        25.5    Responsibilities of SDOH

                SDOH will make every reasonable effort to ensure that the
                Contractor receives timely notice in writing by fax, or e-mail,
                of all requests, schedules and directives regarding fair
                hearings.

        25.6    Contractor's Obligations

                a)      Contractor shall appear at all scheduled fair hearings
                        concerning its clinical determinations and/or
                        Contractor-initiated disenrollments to present evidence
                        as justification for its determination or submit written
                        evidence as justification for its determination
                        regarding the disputed benefits and/or services. If
                        Contractor will not be making a personal appearance at
                        the fair hearing, the written material must be submitted
                        to OAH and Enrollee or Enrollee's representative at
                        least three (3) business days prior to the scheduled
                        hearing. If the hearing is scheduled fewer than three
                        (3) business days after the request, Contractor must
                        deliver the evidence to the hearing site no later than
                        one (1) business day prior to the hearing, otherwise
                        Contractor must appear in person. Notwithstanding the
                        above provisions, Contractor may be required to make a
                        personal appearance at the discretion of the hearing
                        officer and/or SDOH.

                b)      Despite an Enrollee's request for a State fair hearing
                        in any given dispute, Contractor is required to maintain
                        and operate in good faith its own internal complaint and
                        appeal process as required under state and federal laws
                        and by Section 14 and Appendix F of this Agreement.
                        Enrollees may seek redress of adverse determinations
                        simultaneously through Contractor's internal process and
                        the State fair hearing process. If Contractor has
                        reversed its initial determination and provided the
                        service to the Enrollee, Contractor may request a waiver
                        from appearing at the hearing and, in submitted papers,
                        explain that it has withdrawn its initial determination
                        and is providing the service or treatment formerly in
                        dispute.

                c)      Contractor shall comply with all determinations rendered
                        by OAH at fair hearings. Contractor shall cooperate with
                        SDOH efforts to ensure that Contractor is in compliance
                        with fair hearing determinations. Failure by Contractor
                        to maintain such compliance shall constitute breach of
                        this Agreement. Nothing in this Section shall limit the
                        remedies available to SDOH, LDSS or the federal
                        government relating to any non-compliance by Contractor
                        with a fair hearing determination or Contractor's
                        refusal to provide disputed services.

                             Section 23 --Section 39
                                 October 1, 1999
                                       -3

<PAGE>

                d)      If SDOH investigates a complaint that has as its basis
                        the same dispute that is the subject of a pending fair
                        hearing and, as a result of its investigation, concludes
                        that the disputed services and/or benefits should be
                        provided to the Enrollee, Contractor shall comply with
                        SDOH's directive to provide those services and/or
                        benefits and provide notice to OAH and Enrollee as
                        required by Section 25.6(b) of this Agreement.

                e)      If S DOH, through its complaint investigation process,
                        or OAH, by a determination after a fair hearing, directs
                        Contractor to provide a service that was initially
                        denied by Contractor, Contractor may either directly
                        provide the service, arrange for the provision of that
                        service or pay for the provision of that service by a
                        Non-Participating Provider.

                f)      Contractor agrees to abide by changes made to this
                        Section of the Agreement with respect to the fair
                        hearing, grievance and complaint processes by SDOH in
                        order to comply with any amendments to applicable state
                        or federal statutes or regulations. Such changes shall
                        become effective without need for any further action by
                        the parties to this Agreement.

                g)      Contractor agrees to identify a contact person within
                        its organization who will serve as a liaison to SDOH for
                        the purpose of receiving fair hearing requests,
                        scheduled fair hearing dates and adjourned fair hearing
                        dates and compliance with State directives. Such
                        individual: shall be accessible to the State by e-mail;
                        shall monitor e-mail for correspondence from the State
                        at least once every business day; and shall agree, on
                        behalf of Contractor, to accept notices to Contractor
                        transmitted via e-mail as legally valid.

                h)      The information describing fair hearing rights, aid
                        continuing, complaint procedures and utilization review
                        appeals shall be included in all Medicaid managed care
                        member handbooks and shall comply with SDOH's member
                        handbook guidelines.

                i)      Contractor shall bear the burden of proof at hearings
                        regarding the reduction, suspension or termination of
                        ongoing services. In the event that Contractor 's
                        initial adverse determination is upheld as a result of a
                        fair hearing, any aid continuing provided pursuant to
                        that hearing request, may be recouped by Contractor.

26.     EXTERNAL APPEAL

        26.1    Basis for External Appeal

                Effective July 1, 1999, managed care Enrollees will be able to
                request an external appeal when one or more covered health care
                services have been denied by the

                             Section 23 --Section 39
                                 October 1, 1999
                                       -4

<PAGE>

                Contractor on the basis that the service(s) is not medically
                necessary or is experimental or investigational.

        26.2    Eligibility for External Appeal

                An Enrollee is eligible for an external appeal when the Enrollee
                has exhausted the Contractor's internal utilization review
                procedure or both the Enrollee and the Contractor have agreed to
                waive internal appeal procedures in accordance with New York
                State P. H. L. Section 4914(2)2(a). A provider is also eligible
                for an external appeal of retrospective denials.

        26.3    External Appeal Determination

                The external appeal determination is binding on the Contractor,
                how ever, a fair hearing determination supercedes an external
                appeal determination for Medicaid Enrollees.

        26.4    Compliance with External Appeal Laws and Regulations

                MCOs must comply with the provisions of New York State P. H. L.
                Sections 4910-4914 and Title 10 of NYCRR Subpart 98-1 regarding
                the external appeal program.

27.     INTERMEDIATE SANCTIONS

        Contractor is subject to the imposition of sanctions as authorized by
        State law including the SDOH's right to impose sanctions for
        unacceptable practices as set forth in Title 18 of the Official
        Compilation of Codes, Rules and Regulations of the State of New York
        (NYCRR) Part 515 and civil and monetary penalties pursuant to 18 NYCRR
        Part 516 and such other sanctions and penalties as are authorized by
        local laws and ordinances and resultant administrative c odes, rules and
        regulations related to the Medical Assistance Program or to the delivery
        of the contracted for services.

28.     ENVIRONMENTAL COMPLIANCE

        The Contractor shall comply with all applicable standards, orders, or
        requirements issued under Section 306 of the Clean Air Act 42 U. S. C.
        Section 1857(h), Section 508 of the Clean Water Act (33 U. S. C. Section
        1368), Executive Order 11738, and the Environmental Protection Agency ("
        EPA") regulations (40 C FR, Part 15) that prohibit the use of the
        facilities included on the EPA List of Violating Facilities. The
        Contractor shall report violations to SDOH and to the Assistant
        Administrator for Enforcement of the EPA.

                             Section 23 --Section 39
                                 October 1, 1999
                                       -5

<PAGE>

29.     ENERGY CONSERVATION

        The Contractor shall comply with any applicable mandatory standards and
        policies relating to energy efficiency that are contained in the State
        Energy Conservation regulation issued in compliance with the Energy
        Policy and Conservation Act of 1975 (Pub. L. 94-165) and any amendment
        to the Act.

30.     INDEPENDENT CAPACITY OF CONTRACTOR

        The parties agree that the Contractor is an independent Contractor, and
        that the Contractor, its a gents, officers, and employees act in an
        independent capacity and not as officers or employees of LDSS, DHHS or
        the SDOH.

31.     NO THIRD PARTY BENEFICIARIES

        Only the parties to this Agreement and their successors in interest and
        assigns have any rights or remedies under or by reason of this
        Agreement.

32.     INDEMNIFICATION

        32.1    Indemnification by Contractor

                The Contractor shall indemnify, defend, and hold harmless the
                LDSS, its officers, agents, and employees and the Enrollees and
                their eligible dependents from:

                a)      any and all claims and losses accruing or resulting to
                        any and all Contractors, subcontractors, materialmen,
                        laborers, and any other person, firm, or corporation
                        furnishing or supplying work, services, materials, or
                        supplies in connection with the performance of this
                        Agreement;

                b)      any and all claims and losses accruing or resulting to
                        any person, firm, or corporation that may be injured or
                        damaged by the Contractor, its officers, agents,
                        employees, or subcontractors, including Participating
                        Providers, in connection with the performance of this
                        Agreement;

                c)      any liability, including costs and expenses, for
                        violation of proprietary rights, copyrights, or rights
                        of privacy, arising out of the publication, translation,
                        reproduction, delivery, performance, use, or disposition
                        of any data furnished under this Agreement, or based on
                        any libelous or otherwise unlawful matter contained in
                        such data.

                        i)      The LDSS will provide the Contractor with prompt
                                written notice of any claim made against the
                                LDSS, and the Contractor, at its sole option,
                                shall defend or settle said claim. The LDSS
                                shall cooperate with the Contractor to the
                                extent necessary for the Contractor to discharge
                                its obligation under Section 32.1.

                             Section 23 --Section 39
                                 October 1, 1999
                                       -6

<PAGE>

                        ii)     The Contractor shall have no obligation under
                                this section with respect to any claim or cause
                                of action for damages to persons or property
                                solely caused by the negligence of LDSS, its
                                employees, or agents.

        32.2    Indemnification by LDSS

                The LDSS shall indemnify and hold h armless the Contractor and
                its officers, agents, and employees from any and all claims for
                damages resulting from actions by the LDSS or their Contractors
                in connection with their performance under this Agreement,
                except for such damages, costs, and expenses resulting from the
                negligence or culpable act of the Contractor, its officers,
                agents, employees, or subcontractors, including Participating
                Providers.

33.     PROHIBITION ON USE OF FEDERAL FUNDS FOR LOBBYING

        33.1    Prohibition of Use of Federal Funds for Lobbying

                The Contractor agrees, pursuant to 31 U. S. C. Section 1352 and
                45 CF R Part 93, that no Federally appropriated funds have been
                paid or will be paid to any person by or on behalf of the
                Contractor for the purpose of influencing or attempting to
                influence an officer o r employee of any agency, a Member of
                Congress, an officer or employee of Congress, or an employee of
                a Member of Congress in connection with the award of any Federal
                contract, the making of any federal grant, the making of any
                Federal loan, the entering into of any cooperative agreement, or
                the extension, continuation, renewal, amendment, or modification
                of any Federal contract, grant, loan, or cooperative agreement.
                The Contractor agrees to complete and submit the " Certification
                Regarding Lobbying", Appendix B attached hereto and incorporated
                herein, if this Agreement exceeds $100,000.

        33.2    Disclosure Form to Report Lobbying

                If any funds other than Federally appropriated funds have been
                paid or will be paid to any person for the purpose of
                influencing or attempting to influence an officer or employee of
                any agency, a Member of Congress, an officer or employee of
                Congress, or an employee of a M ember of Congress in connection
                with the award of any Federal contract, the making of any
                Federal grant, the making of any Federal loan, the entering into
                of any cooperative agreement, or the extension, continuation,
                renewal, amendment, or modification of any Federal contract,
                grant, loan, or cooperative agreement, and the Agreement exceeds
                $100,000, the Contractor shall complete and submit Standard Form
                LLL. "Disclosure Form to Report Lobbying," in accordance with
                its instructions.

        33.3    The Contractor shall include the provisions of this section in
                its subcontracts, including its Provider Agreements. For all
                subcontracts, including Provider

                             Section 23 --Section 39
                                 October 1, 1999
                                       -7

<PAGE>

                Agreements, that exceed $100,000, the Contractor shall require
                the subcontractor, including any Participating Provider to
                certify and disclose accordingly to the Contractor.

34.     NON-DISCRIMINATION

        34.1    Equal Access to Benefit Package

                Except as otherwise provided in applicable sections of this
                Agreement the Contractor shall provide the Benefit Package to
                all Enrollees in the same manner, in accordance with the same
                standards, and with the same priority as Enrollees of the
                Contractor under any other contracts.

        34.2    Non-Discrimination

                The Contractor shall not discriminate against Eligible Persons
                or Enrollees on the basis of age, sex , race, creed, physical or
                mental handicap/developmental disability, national origin,
                sexual orientation or type of illness or condition.

        34.3    Equal Employment Opportunity

                Contractor must comply with Executive Order 11246, entitled
                "Equal Employment Opportunity," as amended by Executive Order
                11375, and as supplemented in Department of Labor regulations.

        34.4    Native Americans Access to Services From Tribal or Urban Indian
                Health Facility

                The Contractor shall not prohibit, restrict or discourage
                enrolled Native Americans from receiving care from or accessing
                Medicaid reimbursed health services from or through a tribal
                health or Urban Indian health facility or center.

35.     COMPLIANCE WITH APPLICABLE LAWS

        35.1    Contractor and LDSS Compliance With Applicable Laws

                The Contractor and L DDSs shall comply with all applicable
                requirements of the State Public Health Law; the State Social
                Services Law; Title IX of the Social Security Act; Title V I of
                the Civil Rights Act of 1964 and 45 C. F .R. Part 80, as
                amended; Section 504 of the Rehabilitation Act of 1973 and 45 C.
                F. R. Part 84, as amended; Age Discrimination Act of 1975 and 45
                C. F. R. Part 91, as amended; and the Americans with
                Disabilities Act; and Title X III of the Federal Public Health
                Services Act, 42 U.S.C. Section 300e et seq., regulations
                promulgated thereunder; and all other applicable legal and
                regulatory requirements in effect at the time that this
                Agreement is signed and as adopted or amended during the term of
                this Agreement. The parties agree that this Agreement shall be
                interpreted according to the laws of the State of New York.

                             Section 23 --Section 39
                                 October 1, 1999
                                       -8

<PAGE>

        35.2    Nullification of Illegal, Unenforceable, Ineffective or Void
                Contract Provisions

                Should any provision of this Agreement be declared or found to
                be illegal or unenforceable, ineffective or void, then each
                party shall be relieved of any obligation arising from such
                provision; the balance of this Agreement, if capable of
                performance, shall remain in full force and effect.

        35.3    Certificate of Authority Requirements

                The Contractor must satisfy conditions for issuance of a
                certificate of authority, including proof of financial solvency,
                as specified in 10 NYCRR, '98.6.

        35.4    Notification of Changes in Certificate to Incorporation

                The Contractor shall notify LDSS of any amendment t o its
                Certificate of Incorporation in the same manner as and
                simultaneously with the notice given to SDOH pursuant to 10
                NYCRR Section 98.4(a).

        35.5    Contractor's Financial Solvency Requirements

                The Contractor, for the duration of this Agreement, shall remain
                in compliance with all applicable state requirements for
                financial solvency for MCOs participating in the Medicaid
                Program. The Contractor shall continue to be financially
                responsible as defined in PHL '4403(1)(c) and shall comply with
                the contingent reserve fund and escrow deposit requirements of
                10 NYCRR " 98.11(d) and 98.11(e), respectively, and must meet
                minimum net worth requirements established by SDOH and the State
                Insurance Department. The Contractor shall make provision,
                satisfactory to SDOH, for protections for SDOH, LDSS and the
                Enrollees in the event of HMO or sub contractor insolvency,
                including but not limited to, hold harmless and continuation of
                treatment provisions in all provider agreements which protect
                SDOH, LDSS and Enrollees from costs of treatment and assures
                continued access to care for Enrollees.

        35.6    Compliance With Care for Maternity Patients

                Contractor must comply with '2803-n of the Public Health Law and
                '3216 (i) (10)(a) of the State Insurance Law related to hospital
                care for maternity patients.

        35.7    Informed Consent Procedures for Hysterectomy and Sterilization

                The Contractor is required and shall require Participating
                Providers to comply with the informed consent procedures for
                Hysterectomy and Sterilization specified in 42 CFR, Part 441,
                sub-part F, and 18 NYCRR Section 505.13.

                             Section 23 --Section 39
                                 October 1, 1999
                                       -9

<PAGE>

        35.8    Non-Liability of Enrollees for Contractor's Debts

                Contractor agrees that in no event shall the Enrollee become
                liable for the Contractor's debts as set forth in SSA
                '1932(b)(6).

        35.9    LDSS Compliance With Conflict of Interest Laws

                LDSS and its employees shall comply with General Municipal Law
                Article 18 and all other appropriate provisions of New York
                State law, local laws and ordinances and all resultant codes,
                rules and regulations pertaining to conflicts of interest.

        35.10   Compliance With PHL Regarding External Appeals

                Contractor must comply with Article 49 Title II of the Public
                Health Law regarding external appeal of adverse determinations.

36.     NEW YORK STATE STANDARD CONTRACT CLAUSES

        The parties agree to be bound by the standard clauses for all New York
        State contracts and standard clauses, if any, for local government
        contracts contained in Appendix A, attached to and incorporated as if
        set forth fully herein, and any amendment thereto.

37.     INSURANCE REQUIREMENTS

        MODEL CON TRACT NOTE: The LDSS may propose insurance requirements based
        on the contract practices of its Count y. Such requirements must be
        reasonable and consistent with the attainment of managed care program
        objectives.

        [ ]     The LDSS has insurance requirements (attached) as Section 37 of
                this Agreement.

        [ ]     The LDSS does not have insurance requirements.

                             Section 23 --Section 39
                                 October 1, 1999
                                       -10

<PAGE>

        [MODEL CON TRACT NOTE: Format of signature pages is established by the
        LDSS. However, the "Term of Agreement" should be specified on the
        signature pages.]

        In Witness Whereof, the parties have duly executed this Agreement on the
        date set opposite their respective signatures.

By: /s/                                    By: /s/
   ------------------------------             ---------------------------------
   AmeriChoice of New York, Inc.                City of New York

                                 Signature Page
                               September 10, 1999

<PAGE>

                            Second Contract Amendment
                                     Between
                                City of New York
                                       And
                          AmeriChoice of New York, Inc.

                This Amendment, effective April 1, 2002, amends the Medicaid
                Managed Care Model Contract (hereinafter referred to as the
                "Agreement") made by and between the City of New York
                (hereinafter referred to as "CDOH") and AmeriChoice of New York,
                Inc. (hereinafter referred to as "MCO" or "Contractor").

                WHEREAS, the parties entered into an Agreement effective October
                1, 1999, amended October 1, 2001, for the purpose of providing
                prepaid case managed health services to Medical Assistance
                recipients residing in the City of New York;

                WHEREAS, the parties desire to amend said Agreement to modify
                certain provisions to reflect current circumstances and
                intentions;

                NOW THEREFORE, effective April 1, 2002, it is mutually agreed by
                the parties to amend this Agreement as follows:

                The attached "Table of Contents for Model Contract" is
                substituted for the period beginning April 1, 2002.

                Delete from Section 1, Definitions, the definition for "Alcohol
                and Substance Abuse Services."

                Amend Section 1, Definitions, the definition for "Behavioral
                Health Service," to read as follows:

                "BEHAVIORAL HEALTH SERVICE" means services to address mental
                health disorders and/or chemical dependence.

                Add to Section 1, Definitions, a definition for "Chemical
                Dependence Services," to read as follows:

                "CHEMICAL DEPENDENCE SERVICES" means examination, diagnosis,
                level of care determination, treatment, rehabilitation, or
                habilitation of persons suffering from chemical abuse or
                dependence, and includes the provision of alcohol and/or
                substance abuse services.

                Add to Section 1, Definitions, a new definition for
                "Detoxification Services," to read as follows:

                "DETOXIFICATION SERVICES" means Medically Managed Detoxification
                Services; and Medically Supervised Inpatient and Outpatient
                Withdrawal Services as defined in Appendix K.

                Rename Section 3.11, "Mental Health and Chemical Dependence Stop
                Loss," and delete

<PAGE>

                Section 3.11 b).

                Renumber Section 3.11 c), "Mental Health and Chemical
                Dependence," as 3.11 b), and amend to read as follows:

                b)      The Contractor will be compensated for medically
                        necessary and clinically appropriate inpatient mental
                        health services and/or Chemical Dependence Inpatient
                        Rehabilitation and Treatment Services as defined in
                        Appendix K in excess of a combined total of thirty (30)
                        days during a calendar year at the lower of the
                        Contractor's negotiated inpatient rate or Medicaid rate
                        of payment.

                Add a new Section 3.11 c), "Mental Health and Chemical
                Dependence," to read as follows:

                c)      Detoxification Services in Article 28 inpatient hospital
                        facilities are subject to the stop-loss provisions
                        specified in Section 3.10 of this Agreement.

                Amend Section 5.1 a) v), "Eligible Populations," to read as
                follows:

                v)      Children age one (1) year or below whose family's net
                        available income is at or below two hundred percent
                        (200%) of the federal poverty level for the applicable
                        household size.

                Amend Section 5.1 a) vii), "Eligible Populations," to read as
                follows:

                vii)    Children age six (6) up to age nineteen (19), whose
                        family's net available income is at or below one hundred
                        and thirty-three percent (133%) of the federal poverty
                        level for the applicable household size.

                Amend Section 5.2 k) "Exempt Populations," to read as follows:

                k)      Individuals who are residents of Alcohol and Substance
                        Abuse or Chemical Dependence Long Term Residential
                        Treatment Programs.

                Add Section 5.2 r), "Exempt Populations," to read as follows:

                r)      Effective April 1, 2003, individuals who are eligible
                        for Medical Assistance pursuant to the "Medicaid buy-in
                        for the working disabled" (subparagraphs twelve or
                        thirteen of paragraph (a) of subdivision one of Section
                        366 of the Social Services Law), and who, pursuant to
                        subdivision 12 of Section 367-a of the Social Services
                        Law, are not required to pay a premium.

                Add Sections 5.3 w) and 5.3x), "Excluded Populations," to read
                as follows:

                w)      Effective April 1, 2003, individuals who are eligible
                        for Medical Assistance pursuant to the "Medicaid buy-in
                        for the working disabled" (subparagraphs twelve or
                        thirteen of paragraph (a) of subdivision one of Section
                        366 of the Social Services Law), and who, pursuant to
                        subdivision 12 of Section 367-a of the Social Services
                        Law, are required to pay a premium.

                x)      Effective October 1, 2002, individuals who are eligible
                        for Medical Assistance

                             April 1, 2002 Amendment
                                       119

<PAGE>

                        pursuant to paragraph (v) of
                        subdivision four of Section 366 of the Social Services
                        Law (persons who are under 65 years of age, have been
                        screened for breast and/or cervical cancer under the
                        Centers for Disease Control and Prevention Breast and
                        Cervical Cancer Early Detection Program and need
                        treatment for breast or cervical cancer, and are not
                        otherwise covered under creditable coverage as defined
                        in the Federal Public Health Service Act).

                Amend Section 6.6, "Family Enrollment," to read as follows:

                6.6     Family Enrollment

                a)      Upon implementation of the 1115 Waiver, all eligible
                        members of the Eligible Person's Family shall be
                        enrolled into the same plan.

                b)      Upon implementation of the 1115 Waiver, the LDSS must
                        inform Enrollees who have Family members enrolled in
                        other MCOs that if anyone in the Family wishes to change
                        plans, all members of the Family must enroll together in
                        the newly-selected plan. The LDSS shall also notify the
                        Enrollee that all members of the Family will be required
                        to enroll together in a single MCO at the time of their
                        next recertification for Medicaid eligibility unless
                        waiver of this requirement is approved by the LDSS.

                c)      Notwithstanding the forgoing,

                i) the LDSS may, on a case-by-case basis, waive the same family
                rule specified in Sections 6.6 (a) and (b) to preserve
                continuity of care:

                1) if one or more members of the Family are receiving prenatal
                care and/or continuing care for a complex chronic medical
                condition from Non-Participating Providers; or
                2) if one or more members of the Family transition from one
                government-sponsored insurance program to another.

                ii) the LDSS must allow HIV SNP-eligible individuals within a
                family to enroll in an HIV SNP, in Service Areas in which an HIV
                SNP exists.

                Amend Section 7.2, Lock-In Provisions in Mandatory Counties," to
                read as follows:

                7.2     Lock-In Provisions in Mandatory Counties and New York
                        City

                        All Enrollees in local social service districts where
                        enrollment in managed care is mandatory and in New York
                        City are subject to a twelve (12) month Lock-In period
                        following the Effective Date of Enrollment in the
                        Contractor's plan, with an initial ninety (90) day grace
                        period in which to disenroll from the Contractor's plan
                        without cause, regardless of whether the Enrollee
                        selected or was auto- assigned to the Contractor's plan.

                Delete Section 7.3, "Lock-In Provisions in New York City," and
                renumber Sections 7.4, "Disenrollment During Lock-In Period" and
                7.5 "Notification Regarding Lock-In and End of Lock-In Period,"
                as Sections 7.3 and 7.4 respectively.

                Amend Section 10.8 b), "Welfare Reform," to read as follows:

                             April 1, 2002 Amendment
                                       120

<PAGE>

                b)      The Contractor shall require that its Participating
                Providers, upon Enrollee consent, provide medical documentation
                and health, mental health and chemical dependence assessments as
                follows:

                i)      Within ten (10) days of a request of an Enrollee or a
                        former Enrollee, currently receiving public assistance
                        or who is applying for public assistance, the Enrollee's
                        or former Enrollee's PCP or specialist provider, as
                        appropriate, shall provide medical documentation
                        concerning the Enrollee or former Enrollee's health or
                        mental health status to the LDSS or to the LDSS'
                        designee. Medical documentation includes but is not
                        limited to drug prescriptions and reports from the
                        Enrollee's PCP or specialist provider. The Contractor
                        shall include the foregoing as a responsibility of the
                        PCP and specialist provider in its provider contracts or
                        in their provider manuals.

                ii)     Within ten (10) days of a request of an Enrollee, who
                        has already undergone, or is scheduled to undergo, an
                        initial LDSS required mental and/or physical
                        examination, the Enrollee's PCP shall provide a health,
                        or mental health and/or chemical dependence assessment,
                        examination or other services as appropriate to identify
                        or quantify an Enrollee's level of incapacitation. Such
                        assessment must contain a specific diagnosis resulting
                        from any medically appropriate tests and specify any
                        work limitations. The LDSS, may, upon written notice to
                        the Contractor, specify the format and instructions for
                        such an assessment

                Amend Section 10.8 c),"Welfare Reform," and add Sections 10.8 d)
                through 10.8 g), to read as follows:

                c)      The Contractor will continue to be responsible for the
                        provision and payment of Chemical Dependence Services in
                        the Benefit Package for Enrollees mandated by the LDSS
                        under Welfare Reform if such services are already
                        underway and the LDSS is satisfied with the level of
                        care and services.

                d)      The Contractor is not responsible for the provision and
                        payment of Chemical Dependence Inpatient Rehabilitation
                        and Treatment Services for Enrollees mandated by the
                        LDSS as a condition of eligibility for Public Assistance
                        or Medicaid under Welfare Reform (as indicated by Code
                        83) unless such services are already under way as
                        described in (c) above.

                e)      The Contractor is not responsible for the provision and
                        payment of Medically Supervised Inpatient and Outpatient
                        Withdrawal Services for Enrollees mandated by the LDSS
                        under Welfare Reform (as indicated by Code 83) unless
                        such services are already under way as described in (c)
                        above.

                f)      The Contractor is responsible for the provision and
                        payment of Medically Managed Detoxification Services
                        ordered by the LDSS under Welfare Reform.

                g)      The Contractor is responsible for the provisions of
                        Sections 10.10, 10.16 (a) and 10.24 of this Agreement
                        for Enrollees requiring LDSS mandated Chemical
                        Dependence Services.

                Amend Section 10.10 b), "Court-Ordered Services," to read as
                follows:

                             April 1, 2002 Amendment
                                       121

<PAGE>

                b)      Court Ordered Services are those services ordered by the
                        court performed by, or under the supervision of a
                        physician, dentist, or other provider qualified under
                        State Law to furnish medical, dental, behavioral health
                        (including mental health and/or Chemical Dependence), or
                        other Medicaid covered services. The Contractor is
                        responsible for payment of those Medicaid services as
                        covered by the Benefit Package, even when the providers
                        are not in the Contractor's provider network.

                Amend Section 10.16 a), "Services for Which Enrollees Can
                Self-Refer," to read as follows:

                a)      Mental Health and Chemical Dependence Services

                        The Contractor will allow Enrollees or LDSS officials on
                        the Enrollee's behalf to make self-referral or referral
                        for one mental health assessment from a Participating
                        Provider and one chemical dependence assessment from a
                        Detoxification or Chemical Dependence Inpatient
                        Rehabilitation and Treatment Participating Provider in
                        any calendar year period without requiring pre-
                        authorization or referral from the Enrollee's Primary
                        Care Provider. In the case of children, such
                        self-referrals may originate at the request of a school
                        guidance counselor (with parental or guardian consent,
                        or pursuant to procedures set forth in Section 33.21 of
                        the Mental Hygiene Law), LDSS Official, Judicial
                        Official, Probation Officer, parent or similar source.

                        i)      The Contractor shall make available to all
                        Enrollees a complete listing of their participating
                        mental health and Chemical Dependence Services
                        providers. The listing should specify which provider
                        groups or practitioners specialize in children's mental
                        health services.

                        ii)     The Contractor will also ensure that its
                        Participating Providers have available and use formal
                        assessment instruments to identify Enrollees requiring
                        mental health and Chemical Dependence Services, and to
                        determine the types of services that should be
                        furnished.

                        iii)    The Contractor will implement policies and
                        procedures to ensure that Enrollees receive follow-up
                        Benefit Package services from appropriate providers
                        based on the findings of their mental health and/or
                        Detoxification or Chemical Dependence Inpatient
                        Rehabilitation and Treatment assessment(s).

                        iv)     The Contractor will implement policies and
                        procedures to ensure that Enrollees are referred to
                        appropriate Chemical Dependence outpatient
                        rehabilitation and treatment providers based on the
                        findings of the Chemical Dependence assessment by the
                        Contractor's Participating Provider.

                Amend Section 10.22 d), "Persons Requiring Ongoing Mental Health
                Services," to read as follows:

                d)      Satisfactory systems for coordinating service delivery
                        between physical health, chemical dependence, and mental
                        health providers, and coordinating services with other
                        available services, including Social Services.

                             April 1, 2002 Amendment
                                       122

<PAGE>

                Amend Section 10.24, title, leader language, 10.24 e), and last
                paragraph of 10.24, "Persons Requiring Alcohol/Substance Abuse
                Services," to read as follows:

                10.24   Persons Requiring Chemical Dependence Services

                        The Contractor will have in place all of the following
                        for its Enrollees requiring Chemical Dependence
                        Services:

                e)      Satisfactory systems for coordinating service delivery
                        between physical health, chemical dependence, and mental
                        health providers, and coordinating in-plan services with
                        other services, including Social Services.

                        The Contractor agrees to also participate in the local
                        planning process for serving persons with chemical
                        dependence, to the extent requested by the LDSS. At the
                        LDSS's discretion, the Contractor will develop linkages
                        with local governmental units on coordination procedures
                        and standards related to Chemical Dependence Services
                        and related activities.

                Amend Section 10.27 i), "Coordination of Services," to read as
                follows:

                i)      local governmental units responsible for public health,
                        mental health, mental retardation or Chemical Dependence
                        Services; and

                Amend Section 18.5(m), "No Contact Report" to read as follows:

                18.5(m) No Contact Report:

                        The Contractor shall submit a quarterly report within
                        thirty (30) days of the close of the reporting period to
                        the CDOH of any Enrollee it is unable to contact,
                        through reasonable means, including by mail, and by
                        telephone, using methods and performing the activities
                        described in Section 13.5, within thirty days of their
                        effective date of enrollment.

                Amend Section 21.17, "Mental Health, Alcohol and Substance Abuse
                Providers," to read as follows:

                21.17   Mental Health and Chemical Dependence Services Providers

                The Contractor will include a full array of mental health and
                Chemical Dependence Services providers in its networks, in
                sufficient numbers to assure accessibility to Benefit Package
                services on the part of both children and adults, using either
                individual, appropriately licensed practitioners or New York
                State Office of Mental Health (OMH) and Office of Alcohol and
                Substance Abuse Services (OASAS) licensed programs and clinics,
                or both.

                The State defines mental health and Chemical Dependence Services
                providers to include the following: Individual Practitioners,
                Psychiatrists, Psychologists, Psychiatric Nurse Practitioners,
                Psychiatric Clinical Nurse Specialists, Licensed Certified
                Social Workers, OMH and OASAS Programs and Clinics, and
                providers of mental health and/or Chemical Dependence Services
                certified or licensed pursuant to Article 31 or 32 of the

                             April 1, 2002 Amendment
                                       123

<PAGE>

                Mental Hygiene Law, as appropriate.

                Amend Section 21.19, "School-Based Health Centers," to read as
                follows:

                21.19 School-Based Health Centers

                a)      The Contractor must develop, in collaboration with
                        school-based health centers in their Service Areas,
                        protocols for reciprocal referral and communication of
                        data and clinical information on MCO Enrollees enrolled
                        in school-based health centers.

                b)      By March 31, 2003, the Contractor must enter into
                        contractual and payment arrangements with school-based
                        health centers in their Service Area, consistent with
                        the protocols referred to in (a) above.

                The attached Appendix K, "Prepaid Benefit Package Definitions of
                Covered and Non-Covered Services," is substituted for the period
                beginning April 1, 2002.

                        This Amendment is effective April 1, 2002, and the
                        Agreement, including the modifications made by this
                        Amendment, shall remain in effect until September 30,
                        2003 or until the execution of an extension, renewal or
                        successor agreement as provided for in the Agreement.

                             April 1, 2002 Amendment
                                       124
<PAGE>

                In Witness Whereof, the parties have duly executed this
                Amendment to the Agreement on the dates appearing below their
                respective signatures below.

                By /s/                               By /s/
                  --------------------------          --------------------------
                AmeriChoice of New York,  Inc.                  City of New York

                Date
                    --------------------------
                        Date
                            --------------------------

                             April 1, 2002 Amendment
                                       125

<PAGE>

                STATE OF NEW YORK)
                                        SS:
                COUNTY OF _________

                        On this _____ day of ____, 200__, _________________ came
                before me, to me known and known to be the
                ______________________________ of ________________________, who
                is duly authorized to execute the foregoing instrument on behalf
                of said corporation and s/he acknowledged to me that s/he
                executed the same for the purpose therein mentioned.

                                                       /s/
                                                      --------------------------
                                                            NOTARY PUBLIC

                STATE OF NEW YORK)
                              SS:
                COUNTY OF NEW YORK

                        On this ______ day of ______, 20____, _________ came
                before me, to me known and known to be the
                ___________________________ in the New York City Department of
                Health, who is duly authorized to execute the foregoing
                instrument on behalf of the City and/he acknowledged to me that
                s/he executed the same for the purpose therein mentioned.

                                                       /s/
                                                      --------------------------
                                                            NOTARY PUBLIC

                             April 1, 2002 Amendment
                                       126

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