Document:

ACCOUNTS RECEIVABLE PURCHASE &
SECURITY AGREEMENT

 

This Accounts Receivable Purchase &
Security Agreement (the "Agreement"), effective January 11, 2012. Is entered into by and between SOUTHERN PRODUCTS, INC.
a Nevada Corporation doing business as SIGMAC USA (hereafter "Client") and PACIFIC BUSINESS CAPITAL CORPORATION. a California
corporation (hereinafter "PBCC"). The parties agree as follows:

 

PURPOSE OF AGREEMENT

 

1. Client desires to obtain short term financing by factoring.
selling and assigning to PBCC acceptable accounts receivable at a discount below face value. The purpose of this financing is commercial
in nature, and not for household. family, and/or personal use.

 

DEFINITIONS

 

2. "Account" or "Account Receivable"
means any right to payment of a monetary obligation as defined in Commercial Code Section 9102 and includes, without limitation,
for goods sold, leased, and/or delivered, or services rendered which are not evidenced by an instrument or chattel paper.

3. "Acceptable Account" means an Account conforming
to the warranties and terms set forth herein.

4. "Customer" means Client's customer or the account
debtor.

5. "Client" means the seller and assignor of the
Accounts.

6. "Collateral" means the intangible or tangible
property given as security to PBCC by Client for any obligations and liabilities of Client to PBCC under this Agreement.

7. "Warrant" means to guarantee, as a material
element of this Agreement. Each separate warranty herein is also an independent condition to PBCC's duties under this Agreement.

8. "Credit Problem" means a customer is unable
to pay his debts because of insolvency. the filing of a voluntary petition in bankruptcy, the quitting of business, and the like.

9. "Customer Dispute" means a claim, by customer
against Client, of any kind whatsoever, that reduces the amount collectible from customer by PBCC.

(a) A "Customer Dispute" may arise from any kind
of disagreement between customer and Client whatsoever, valid or invalid.

(b) A "Customer Dispute" may arise at anytime,
both before and/or after the signing of this agreement or the purchase of the Account.

 

WARRANTIES AND COVENANTS BY CLIENT

 

10. As an inducement for PBCC to enter into this Agreement,
and with full knowledge that the truth and accuracy of the warranties in this Agreement are being relied upon by PBCC instead of
the delay of a complete credit

investigation, Client warrants and/or covenants that:

11 Client is properly licensed and authorized to operate
its business under the trade name of SIGMAC USA and Client's trade name(s) has been properly filed and published as required by
applicable law.

12. Client's business is solvent, and Client has made and
shall continue to make timely payment on deposit of any tax required to be deducted and withheld by Client from the wages of any
employee of Client.

13. Each customer's business is solvent to the best of Client's
information and knowledge.

14. Client is, at the time of purchase by PBCC the lawful
owner of and has good and undisputed title to the Accounts purchased by PBCC.

15. Each Account offered for sale to PBCC is an accurate
and undisputed statement of indebtedness by customer to Client for a certain sum which is due and payable in thirty days or less.
or within such time as is agreed to, in writing, by PBCC and Client.

16. Each Account offered for sale to PBCC is an accurate
statement of a bonafide sale, delivery and acceptance of merchandise or performance of service by Client to customer.

1 Client does not own, control or exercise dominion over.
in any way whatsoever. the business of any customer/account debtor to be factored by Client to PBCC.

18. All financial records, statements, books or other documents
shown to PBCC by Client at anytime. Either before or after the signing of this Agreement are true and accurate.

19, Client will not, under any circumstances or in any manner
whatsoever, interfere with any of PBCC’s rights

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under this Agreement.

20. Client will not factor or sell Accounts except to PBCC
for the period of this Agreement, and/or for as long s any indebtedness whatsoever remains owing by Client to PBCC.

21. Client has not transferred, pledged or granted a security
interest in Client's Accounts or other personal property to any other party which Client has not fully disclosed in \\Titing to
PBCC and Client \\ill not transfer, pledge or grant a security interest to any other party in said Accounts or personal properly
for the term of this Agreement and for as long as Client is indebted to PBCC hereunder.

22. Client will not change or modify the terms of the original
Account with customer unless PBCC first consents to such change in writing. For example. Client may not extend credit to a customer
beyond thil1y days without prior written consent from PBCC.

23. Client shall not consent to the placement of any lien,
security interest or encumbrance upon Client's fixtures. personal property of any type and wherever located except upon \written
notice to PBCC, and Client shall provide written notice to PBCC within ten days of Client obtaining any knowledge, from any source,
of the filing, recording or perfection by any means, of any non-consensual lien, claim or encumbrance against the aforementioned
property of Client.

24. Client will maintain such insurance covering Client's
business and/or the property of Client's customers as is customary for businesses similar to the business of Client and, at the
request of PBCC, name PBCC as loss payee of such insurance.

25. Client will notify PBCC in writing prior to any change
in the location of Client's place of business or, if Client has or intends to acquire any additional place(s) of business, or prior
to any change in Client's chief executive office, the office or offices where Client's books and records concerning Accounts are
kept.

26. Client will immediately notify PBCC in writing of any
proposed change of Client's name, identity, legal entity, corporate structure, use of additional trade name(s), and/or any proposed
change in any of the officers, principals, partners, and/or owners of Client.

 

FURTHER PROMISES

 

27. SECURITY INTEREST/COLLATERAL: As a further inducement
for PBCC to enter into this Agreement, Client gives to PBCC, as collateral for the repayment of any and all obligations and liabilities
whatsoever of Client to PBCC, a security interest, under the Uniform Commercial Code, in the following described property hereinafter
collectively called "Collateral": ALL ASSETS, including, without limitation. any and all presently existing, or hereafter
arising, now owned or hereafter acquired Accounts, Accounts Receivable. contract rights, chattel paper, choses in action, documents,
instruments, reserves, reserve accounts, rebates, and general intangibles, and all books and records pertaining to Accounts and
all proceeds of the foregoing property, and all properly set forth in Exhibit "A" attached hereto and incorporated by
reference herein.

28. NOTIFICATION: PBCC may at any time and at its
sole discretion notify any customer/account debtor of Client to make payments directly to PBCC.

29. ASSIGNMENT: Client shall from time to time at
Client's option sell, transfer and assign Accounts to PBCC and said Accounts shall be identified by separate and subsequent written
assignments on a form to be provided to Client by PBCC known as Schedule of Accounts.

30. APPROVAL: PBCC will not purchase an Account unless
such Account is first submitted to PBCC by Client for approval. PBCC is not obligated to buy any Account from Client.

31. DISCOUNT: PBCC agrees to buy Acceptable Accounts
from Client at a minimum discount (fee) of .813 Percent (.00813) of the face value of each Account.

32. RESERVE: PBCC may reserve and withhold an amount
in a reserve account equal to Twenty Percent (20%) or more of the gross face amount of all Accounts purchased. Said reserve account
may be held by PBCC and applied by PBCC against charge-backs or any obligations of Client to PBCC known or anticipated, and said
reserve account is not due and payable to Client until any and all such obligations are fully paid and/or satisfied. Client gives
to PBCC a security interest in this reserve account \\hich secures all obligations and indebtedness arising hereunder. 33. PURCHASE
TERMS: The purchase price for each Acceptable Account shall be the gross amount due of each Account. less PBCC's earned discount
of .813 Percent (.00813) of said gross amount. In the event that an) Account remains unpaid after the fifteenth (l5th) from
the date said Account was purchased by PBCC, the purchase price shall be reduced by an additional service discount of 0.54 Percent
(.00054) per day, until said Account

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is paid in full commencing from the sixteenth (16th) day
after purchase of each such Account. The additional service discount shall be consideration for PBCC's prolonging the period its
funds are outstanding and the additional services required in collecting Accounts which are paid the initial fifteen (15) day period
contemplated in this Agreement. The service discount fees stated herein assume an advance rate of eighty percent (80%). In the
event the advance rate is more or than eighty percent the service discount fees applicable thereto shall be adjusted pro-rata,
as applicable, in order to maintain the same effective yield assuming an eighty percent (80%) advance rate. PBCC will not apply
any partial payments against factored invoices. Partial payments shall be held by PBCC until such time as the Client repurchases
the invoice(s) in full and complete payment is received from the customer. PBCC shall continue to charge its full service fee on
the gross invoice amount until full payment is received. PBCC reserves the right to renegotiate its discount rate on specific Accounts,
and/or all Accounts purchased pursuant to this Agreement, as market conditions, interest rates, and credit risks warrant. Any payments
received by Client on PBCC's Accounts shall be the sole property of PBCC and Client agrees and commits to hold the exact payment
instrument, (e.g., check received from any account debtor in partial or full settlement of Accounts sold to PBCC) and to remit
to PBCC said payment instrument immediately. The receipt of any check or other items of payment from account debtors or Client,
shall not be considered a payment on account until such check or other item of payment is presented to PBCC's bank for payment,
in which event, said check or other item of payment shall be deemed to have been paid to PBCC three (3) calendar days after
advise of receipt of funds in PBCC's account at WELLS FARGO BANK located in Orange County California. Should Client intercept
and deposit checks into Client's bank account which represent payment on any invoice(s) purchased by PBCC and fail to reimburse
PBCC for the full amount of such intercepted funds within two (2) business days after receipt of funds by Client, in addition to
the discounts earned and due under the terms of this Agreement, Client shall forfeit the entire initial reserve associated
with the invoices involved as well as be charged any and all reasonable collection and/or legal fees associated with the collection
of the same.

34. RESERVES. As set forth in Paragraph 32 above,
the reserve shall be held by PBCC and applied to any obligations of Client to PBCC including all discounts earned. PBCC will pay
(i.e. rebate) to Client the balance of the reserve account, after deducting all discounts earned (PBCC fees), hard costs
(legal fees and other collection charges, UPS and other freight charges, and any other advances required before an Account can
be collected), charge backs (e.g. short payment because of customer deductions, Client-intercepted payments), on each Account
included on the Schedule of Accounts. PBCC will generally rebate the reserve on an invoice by invoice basis, but retains the right
under appropriate circumstances to delay payment of the reserve until all the Accounts included on the Schedule of Accounts have
been collected in full by PBCC. Reserve account rebates shall be paid once each week on the same day (i.e. every Monday
for schedules paid in full by 12:00 pm of the preceding Monday, Tuesday or Wednesday, and every Wednesday for schedules paid in
full by 12:00 pm of the preceding Thursday or Friday). Any sums received by PBCC with regard to an Account shall be applied as
specified in the payment or, if not readily ascertainable, against the oldest Account of that customer. Any reserve money owing
to Client may be held by PBCC in PBCC's sole discretion as further security for payment of any and all obligations owing by Client
to PBCC. In the event that Client intercepts any funds due to PBCC, any sums due as a result of such intercept may be charged against
any reserves otherwise due Client.

35. REQUIRED FORMS: When Client offers a Schedule
of Accounts to PBCC for sale, PBCC shall receive an original invoice(s) together with one copy thereof, a copy of the Bill of Lading,
Proof of Delivery, Contract or Purchase Order, and/or a Purchase Order number which corresponds with such invoice(s), and any other
necessary documents as appropriate to the business of Client.

36. RECOURSE: PBCC will have recourse against Client
in any of the following events;

(a) If the Customer or Account has a Credit Problem (as defined
in Paragraph 8);

(b) If the Customer asserts a claim of or offset of any kind
against Client or PBCC;

(c) If an invoice purchased by PBCC remains uncollected after
90 days of the invoice date;

(d) If the Client has breached any warranties or promises.
or has misrepresented any material facts, with respect to this Agreement or any unpaid account;

(e) If the Client has contributed to, or aggravated Customer's
credit problem or ability to pay, or Client directly or indirectly interferes with PBCC's to collect the unpaid and

(f) If the Client and Customer are involved in a dispute
kind which remains unresolved for more than of validity.

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PBCC may require the Client to repurchase these accounts
or invoices, as the case may be. The repurchase price shall include PBCC's purchase price plus applicable factoring fees, or earned
discounts, as set forth in this Agreement. Should Client fail to repurchase each uncollected invoice or account within five (5)
days after receiving written notice from PBCC, PBCC may apply any and all monies due Client held by PBCC including advances, rebates
and collections of non-factored invoices, to the invoices or accounts to be repurchased. or PBCC may seek recovery through any
other remedies legally available to it. Furthermore, if Client has materially breached any warranties or promises in this Agreement,
misrepresented any material facts with regard to the accounts purchased by PBCC, or is in default as defined in this Agreement,
PBCC reserves the right to require the Client to repurchase all the outstanding accounts held by PBCC for the repurchase price
defined above.

37. NOTICE OF DISPUTE: Client will immediately notify
PBCC of any disputes between customer and Client.

38. PAYMENT OF DISPUTED ACCOUNT: Client will immediately pay to PBCC the
full amount of any Account subject to a Customer Dispute (see Paragraph 9 for definition) of any kind whatsoever.

39. SETTLEMENT OF DISPUTE: PBCC may settle any dispute
with customer. Such settlement does not relieve Client of final responsibility for such Accounts.

40. CHARGE-BACK: If Client does not fully settle the
dispute with immediacy, PBCC may, in addition to any other remedies under this Agreement, charge back or sell back the Account
to Client.

41. CHARGE-BACK FOR INVOICING ERROR: Mistaken, incorrect
and/or erroneous invoicing, submitted by Client to PBCC may, at PBCC's discretion be deemed a disputed invoice and be charged back
to Client.

42. STATEMENT OF CHARGE-BACK: PBCC shall identify
in writing all charge-backs and provide to Client a written statement thereof. Said statement shall be deemed an "Account
Stated" between Client and PBCC as to said charge-backs except for any errors of which Client shall have notified PBCC in
writing within fifteen (15) days after the date of receipt by Client of said statement

43. SOLE PROPERTY: Once PBCC has purchased an Account,
the payment from customer as to that Account is the sole property of PBCC. Any interference by Client with this payment will result
in civil and/or criminal liability.

44. HOLD IN TRUST: Client will hold in trust and safekeeping.
as the property of PBCC, and immediately turn over to PBCC the identical check or other form of payment received by Client, whenever
any payment on an Account purchased by PBCC comes into Client's possession. Should Client come into possession of a check comprising
payments owing to both Client and PBCC, Client shall turn over said check to PBCC. PBCC will refund Client's portion to Client.

45. FINANCIAL RECORDS: Client will furnish PBCC financial
statements and information as requested by PBCC from time to time.

46. TAX COMPLIANCE: Client will furnish PBCC upon
request satisfactory proof of payment and/or compliance with all Federal, State and/or local tax requirements.

47. NOTICE OF LEVY: Client will promptly notify PBCC
of any attachment, tax assessment or other legal process levied against Client or any of Client's customers.

48. NO PLEDGE: Client will not pledge the credit of
PBCC to any person or business for any purpose whatsoever. 49. BOOK ENTRY: Client will, immediately upon sale of Accounts
to PBCC, make proper entries on its books and records disclosing the absolute sale of said Accounts to PBCC.

50. LEGAL & COLLECTION FEES: Except as is prohibited
by law, Client shall pay to PBCC all costs and expenses including without limitation attorney's fees and costs incurred by PBCC
in the prosecution or enforcement of any of PBCC's rights, claims or causes of action which arise out or relate to or pertain to
this Agreement

51. POWER OF ATTORNEY: Anyone or more of the following
shall constitute a default provided that same is not cured or resolved within ten (10) business days:

(a) Strike out Client's address on all Accounts mailed to
customers and put PBCC's address on all Accounts.

(b) Receive, open and dispose of all mail addressed to Client,
or to Client's fictitious trade name via PBCC's address.

(c)Endorse the name of Client or Client's fictitious trade
name on any checks or other payment that may come into the possession of PBCC on Accounts purchased by PBCC or pursuant to default.

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(d) In the event Client has not cured any default hereunder
within the time specified, PBCC may, in Client's name, or otherwise, demand, sue for, collect, and give releases for any and all
monies due or to become due on Accounts.

(e) Do any and all things necessary and proper to carry out
the purpose intended by this Agreement.

(f) Execute and file a UCC-l Financing Statement, or UCC-2
as applicable, on behalf of Client evidencing and perfecting the security interest granted by Client to PBCC and renewing the security
interest granted herein.

The authority granted PBCC herein shall remain in full force
and effect until all assigned Accounts are paid in full and any indebtedness of Client to PBCC is discharged.

52. DOUBLE PAYMENTS: Should PBCC receive a double
payment on an Account or other payment which is not identified, PBCC shall carry these sums as open items and shall return them
to said Payor upon proper identification.

53. MAXIMUM ACCOUNT: The outstanding amount of Client's
account with PBCC (that is, Accounts purchased by PBCC from Client and not yet paid by customer) shall not exceed the sum of unless
otherwise agreed by the parties in writing.

54. HOLD HARMLESS: Client shall indemnify and hold
PBCC free and harmless from and against any customer ill will arising from PBCC's collecting or attempting to collect any Accounts.

55. DEFAULTS: Anyone or more of the following shall
be a default hereunder:

(a) Client shall fail to pay any indebtedness to PBCC when
due.

(b) Client shall breach any term, provision, covenant, warranty
or representation under this Agreement, or under any other agreements or contracts between Client and PBCC or obligation of Client
to PBCC.

(c) The appointment of any receiver or trustee of all or
a substantial portion of the assets of Client.

(d) Client shall become insolvent or unable to pay debts
as they mature, shall make a general assignment for the benefit of creditors, or shall voluntarily file under any bankruptcy or
similar law.

(e) Any involuntary petition in bankruptcy shall be filed
against Client and shall not be dismissed within 60 days.

(f) Any levies of attachment, executions, tax assessments,
tax liens, or similar process shall be issued against the Collateral and shall not be released within ten days thereof.

(g) Any financial statements, profit and loss statements,
borrowing certificates, or schedules, or other statements furnished by Client to PBCC prove false or incorrect in any material
respect.

(h) Client shall terminate/cease factoring while PBCC has
factored Accounts outstanding as to which the entire collectability is uncertain.

56. REMEDIES AFTER DEFAULT: In the event of any default
PBCC may do anyone or more of the following:

(a) Declare any indebtedness including outstanding factored
Accounts, immediately due and payable;

(b) Notify any customers of Client default and take possession
of Collateral and collect any Accounts without judicial process;

(c) Require Client to assemble the Collateral and the records
pertaining to Accounts and make them available to PBCC at a place designated by PBCC:

(d) Enter the premises of Client and take possession of the
Collateral and of the records pertaining to the Accounts and any other Collateral;

(e) Grant extensions, compromise claims, and settle Accounts
for less than face value, all without prior notice to Client;

(f) Use, in connection with any assembly or disposition of
the Collateral, any trademark. trade name, trade style, copyright, patent right or technical process L1sed or utilized by Client;

(g) Return any surplus realized to Client after deducting
the actual expenses, attorneys' fees incurred by PBCC in resolving said default;

(h) Hold Client liable for any deficiency:

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(i) Any other remedy available to PBCC, whether in law or
equity; and

(j) Terminate the Agreement forthwith.

57. TERMINATION: This Agreement shall have a minimum
term of twelve (12) months and shall thereafter automatically renew for successive twelve (1 month periods unless terminated by
certified written notice by either party thirty (30) prior to such renewal period.

58. POST-TERMINATION: Afterterminatiol1, Client shall
be liable to PBCC for the full and prompt payment of the full amount of factored Accounts which are then outstanding and unpaid.
disputed or undisputed, as well as any other indebtedness whatsoever, PBCC continues to have a security interest in the Collateral
of Client until any existing indebtedness of Client to PBCC is paid in full.

59. BINDING ON FUTURE PARTIES: This Agreement inures
to the benefit of and is binding upon the heirs, executors, administrators, successors and assigns of the parties thereto.

60. CUMULATIVE RIGHTS: All rights, remedies and powers
granted to PBCC in this Agreement, or in any note or other agreement given by Client to PBCC, are cumulative and may be exercised
singularly or concurrently with such other rights and PBCC may have. These rights may be exercised from time to time as to all
or any part of the pledged Collateral as PBCC in its discretion may determine.

61. WRITTEN WAIVER: PBCC may not waive its rights
and remedies unless the waiver is in writing and signed by PBCC. A waiver by PBCC of a right or remedy under this Agreement on
one occasion is not a waiver of the right or remedy on any subsequent occasion.

62. GOVERNING LAW; JURISDICTION AND VENUE: This Agreement
shall be governed by and construed in accordance with the laws of the State of California. The sole and only proper jurisdiction
and venue for any action under this Agreement shall be Orange County, California.

63. ARBITRATION: Any controversy or claim arising
out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the American Arbitration
Association ("AAA") in accordance with its Commercial Arbitration Rules, including the Optional Rules for Emergency Measures
of Protection, unless the parties agree to another arbitrator in writing, and judgment on the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof. The arbitration will be conducted in Orange County, California. In the
event that any party's claim exceeds $1,500,000.00 exclusive of interest and attorneys' fees, the dispute shall be heard and determined
by three (3) arbitrators. Within fifteen (15) days after the commencement of arbitration, each party shall select one person to
act as arbitrator, and the two (2) so selected shall select a third arbitrator within thirty (30) days of the commencement of the
arbitration. If the arbitrators selected by the pa11ies are unable or fail to agree upon the third arbitrator within the allotted
time, the third arbitrator shall be appointed by AAA in accordance with its rules. All arbitrators shall serve as neutral, independent
and impartial arbitrators. If the arbitration is to be conducted by a sole arbitrator, the arbitrator must be:

1. A retired judge with at least five (5) years of civil
law experience; or

2. A lawyer with ten (10) years of active practice in commercial
finance and asset based lending.

If the arbitration is conducted by three (3) arbitrators,
at least two (2) of the three (3) arbitrators shall meet the requirements of items 1 and 2 above.

At the request of a pa11y, the arbitrator(s) shall have the
discretion to order examination by deposition of witnesses to the extent the arbitrator deems such additional discovery relevant
and appropriate. Depositions shall be limited to a maximum of three (3) per party and shall be held within forty-five (45) days
of the making of a request. Additional depositions may be scheduled only with the permission of the arbitrator(s), and for good
cause shown. Each deposition shall be limited to a maximum of six (6) hours duration. All objections are reserved for the arbitration
hearing except for objections based on privilege and proprietary or confidential information. In any arbitration arising out of
or related to this Agreement, requests for documents:

1. Shall be limited to documents which are directly relevant
to significant issues in the case or to the case’s outcome;

2. Shall be restricted in terms of time frame, subject matter
and persons or entities to which the requests

pertain; and

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3. Shall not include broad phraseology such as "documents
directly or indirectly related to arbitrators will have no authority to punitive or other not measured by the prevailing party's
actual damages, except as may be required by statute. The arbitrator(s) may not award any incidental. indirect or consequential
damages, including damages for lost profits. The award shall be in writing, shall be signed by a majority of the arbitrator(s),
and shall include a statement setting forth the reasons for the disposition of any claim. The parties shall maintain the confidential
nature of the arbitration proceeding and the reward, including the hearing, except as may be necessary to prepare for or conduct
the arbitration hearing on the merits, or except as may be necessary in connection with a court application for a preliminary remedy,
a judicial challenge to an award or its enforcement, or unless otherwise required by law or judicial decision.

64. INVALID PROVISIONS: If any provision of this Agreement
shall be declared illegal or contrary to law, it is agreed that such provision shall be disregarded and this Agreement shall continue
in force as though such provision had not been incorporated herein.

65. ENTIRE AGREEMENT: This instrument contains the
entire Agreement between the parties. It is further agreed and represented by each party hereto that in executing this Agreement
no party is relying on representations or promises of the other except as expressly set forth herein. It is further agreed that
this Agreement is the final entire Agreement of the Parties. It supersedes all prior oral or written negotiations or Agreements.
This Agreement may not be modified except in writing signed by both parties and attached hereto.

66. COUNTERPARTS: This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original Agreement, and all of which shall constitute one agreement to
be effective as of the Effective Date.

67. EFFECTIVE DATE: This Agreement becomes effective
when it is accepted and executed by an authorized officer of PBCC.

68. INDEMNIFICATION: Client agrees to indemnify and
hold PBCC harmless from any and all liability, claims and damages, including attorney fees, costs of suit and interest which PBCC
may incur as a result of the failure of Client to pay withholding taxes due and payable to any taxing authority.

69. COSTS: Client shall pay $1,500.00 to PBCC for
underwriting and other costs associated with verification of credit, consulting and credit research. UCC filing and registration
fees shall be billed at PBCC's cost. All costs shall be reimbursed out of the first funding. Client shall pay said fee before or
out of first funding and such fees are nonrefundable.

70. MINIMUM USAGE: Anything to the contrary notwithstanding,
Client shall be charged a minimum usage

discount fee each month equal to a factoring volume of not
less than $500,000.00

 

	SOUTHERN PRODUCTS. INC.		
        PACIFIC BUSINESS CAPITAL CORPORATION

         

	By: /s/ Edward Meadows		By: /s/ Bernard J. Hittner
	EDWARD MEADOWS, CEO		BERNARD J. HITTNER, CEO

 

ACKNOWLEDGMENT

STATE OF CALIFORNIA )

) SS

COUNTY OF ORANGE )

 

On the undersigned February 4, 2012, before me, Cathie F.
Messenger, the undersigned Notary Public in and for the said State, personally EDWARD MEADOWS, who proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed within instrument and acknowledged to me that he executed the same
in his authorized capacity. and that by his signature on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.

 

I certify under PENALTY OF PERJURY under the laws of the
State of California that the foregoing paragraph is

true and correct.

 

WITNESS my hand and official seal

 

/s/ Cathie F. Messenger

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EXHIBIT "A"

 

DEBTOR: SOUTHERN PRODUCTS. INC. dba SIGMAC USA

 

SECURED PARTY' PACIFIC BUSINESS CAPITAL CORPORATION

 

As collateral securing all present and
future obligations of Debtor to Secured Party, Debtor hereby grants to Secured Party a security interest in the following, whether
now owned or hereafter acquired:

 

1. ALL ASSETS, including but not limited to the following:

 

a. All accounts, contract rights, instruments, documents,
chattel paper, choses in action, commercial tort claims, general intangibles (including but not limited to trademarks, tradenames.
patents, copyrights and all other forms of intellectual property, and tax refunds), returned and repossessed goods and all rights
as a seller of goods; all collateral securing any of the foregoing; all deposit or reserve accounts, special and general, whether
on deposit with Secured Party or others;

 

b. All books and records including, but not limited to, computer
tapes, disks, programs and other things upon which

or in which such books or records are stored or maintained
together with all equipment, machinery and inventory

containing or used in connection with the use, preparation
or maintenance of such books and records;

 

c. All inventory wherever located; all present and future
claims against any supplier of any of the foregoing,

including claims for defective goods or overpayments to or
undershipments by suppliers; all proceeds arising from the lease or rental of any of the foregoing; INVENTORY RETURNED BY DEBTOR
TO ITS SUPPLIERS SHALL REMAIN SUBJECT TO SECURED PARTY'S SECURITY INTEREST;

 

d. All equipment and fixtures, NONE OF WHICH THE DEBTOR IS
AUTHORIZED TO SELL, LEASE OR\ OTHERWISE DISPOSE OF WITHOUT THE WRITTEN CONSENT OF SECURED PARTY. All warranty and other claims
against any vendor or lessor of any of the foregoing;

 

e. All substitutions, replacements, additions, accessions,
proceeds and products of any of the foregoing, whether due to voluntary or involuntary disposition, including, but not limited
to money, deposit accounts, goods, tax refunds. Other tangible and intangible property;

 

f. All letter(s) of credit and beneficial interest there
under;

 

g. All investment property; and

 

h. Insurance and the proceeds thereof covering any of the
foregoing.

 

NOTICE- PURSUANT TO AN AGREEMENT
BETWEEN DEBTOR AND SECURED PARTY, DEBTOR HAS AGREED NOT TO FURTHER ENCUMBER THE COLLATERAL DESCRIBED HEREIN, THE FURTHER
ENCUMBERING OF WHICH MAY CONSTITUTE THE TORTIOUS INTERFERENCE WITH SECURED PARTY'S RIGHTS BY SUCH ENCUMBRANCER.

 

IN THE EVENT THAT ANY ENTITY IS GRANTED
A SECURITY INTEREST IN DEBTOR'S ACCOUNTS. CHATTEL PAPER OR GENERAL INTANGIBLES CONTRARY TO THE ABOVE, THE SECURED PARTY ASSERTS
A CLAIM TO ANY PROCEEDS THEREOF RECEIVED BY SUCH ENTITY AND THE COLLECTION AND RETENTION OF THE PROCEEDS OF THE ACCOUNTS WILL VIOLATE
THE RIGHTS OF THE SECURED PARTY NAMED HEREIN.

 

SOUTHERN PRODUCTS. INC.

By: /s/ Edward Meadows

Name & Title: EDWARD MEADOWS - CEO

 

    	8EX-10.1

	 	 	 
	Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: HHSC Managed Care Contract

	 	

HHSC Contract No. 529-12-0002-00019-A

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Contractual Document (CD)

	 	 	 
	Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A – Uniform Managed Care Contract Terms and Conditions

	 	

Version 2.1

Texas Health & Human Services Commission

Uniform Managed Care Terms and ConditionsDOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	STATUS1
	 	DOCUMENT

REVISION2
	 	EFFECTIVE DATE

	 	DESCRIPTION3

	 
	 	 	 	 	 	 
	 	 

	Baseline
	 	 	n/a	 	 	September 1, 2011
	 	Initial version of the Attachment A, “Medicaid

and CHIP Uniform Managed Care Contract

Terms & Conditions.”

	 
	 	 	 	 	 	 
	 	 

	Revision
	 	 	2.1	 	 	March 1, 2012
	 	Definition “1915(c) Nursing Facility

Waiver” is modified to correct a

cross-reference.

Definition for Medically Necessary is modified

for clarification. The State has determined

that all acute care behavioral health and

non-behavioral health services for Medicaid

children fall within the scope of Texas Health

Steps. Note that for LTSS, such as PCS (PAS)

services for children

in STAR+PLUS, the functional necessity

standard for LTSS also applies (see Attachment

B-1, Section 8.3.3).

Definition for Rate Period 1 is modified.

Section 4.04 is modified to clarify the

requirements for Medical Director designees,

and to clarify that the provision does not

apply to prior authorization determinations

made by Texas licensed pharmacists.

New Section 4.11 “Prohibition Against

Performance Outside of the United States”

added.

Section 5.02(b) is modified to clarify that

MCOs may not sell or transfer their Member

base.

Section 5.06(a)(2) is modified to clarify the

exceptions to enrollment in an MCO during an

Inpatient Stay.

Section 5.06(a)(3) and (4) are modified to

clarify that Members cannot move from FFS to

an MCO or from one MCO to another during

residential treatment or residential

detoxification.

References to the PCCM program are removed.

In addition, Section 5.06(a)(8) is modified to

clarify movement requirements for SSI Members

in the MRSA.

Section 5.08 is modified to clarify the default

methodology.

Section 7.02 is modified to clarify

applicability to pharmacy.

Section 7.08(b) is modified to correct 2

crossreferences.

Section 10.05 is modified to include the

Medicaid Only rate cell for the MRSA.

Section 10.06(b) is modified to remove the

Perinate Newborn 0% — 185% rate cell.

Section 10.10 is modified to consolidate

STAR+PLUS with STAR and CHIP for the

Experience Rebate calculation.

Section 10.10.1 is deleted in its entirety.

Section 10.10.2 is modified to consolidate

STAR+PLUS into STAR and CHIP for the

Experience Rebate calculation.

	 
	 	 	 	 	 	 
	 	

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

TABLE OF CONTENTS

Article 1. Introduction

Section 1.01 Purpose

Section 1.02 Risk-based contract.

Section 1.03 Inducements

Section 1.04 Construction of the Contract.

Section 1.05 No implied authority.

Section 1.06 Legal Authority.

Article 2. Definitions

Article 3. General Terms & Conditions

Section 3.01 Contract elements.

Section 3.02 Term of the Contract.

Section 3.03 Funding.

Section 3.04 Delegation of authority.

Section 3.05 No waiver of sovereign immunity.

Section 3.06 Force Majeure.

Section 3.07 Publicity

Section 3.08 Assignment.

Section 3.09 Cooperation with other vendors and prospective vendors.

Section 3.10 Renegotiation and reprocurement rights.

Section 3.11 RFP errors and omissions

Section 3.12 Enforcement Costs

Section 3.13 Preferences under service contracts

Section 3.14 Time of the essence

Section 3.15 Notice

Article 4. Contract Administration & Management

Section 4.01 Qualifications, retention and replacement of MCO employees.

Section 4.02 MCO’s Key Personnel.

Section 4.03 Executive Director.

Section 4.04 Medical Director.

Section 4.05 Responsibility for MCO personnel and Subcontractors.

Section 4.06 Cooperation with HHSC and state administrative agencies.

Section 4.07 Conduct of MCO personnel and Subcontractors

Section 4.08 Subcontractors.

Section 4.09 HHSC’s ability to contract with Subcontractors.

Section 4.10 MCO Agreements with Third Parties

Section 4.11 Prohibition Against Performance Outside the United States.

Article 5. Member Eligibility & Enrollment

Section 5.01 Eligibility Determination

Section 5.02 Member Enrollment & Disenrollment

Section 5.03 STAR enrollment for pregnant women and infants

Section 5.04 CHIP eligibility and enrollment.

Section 5.05 CHIP Perinatal eligibility, enrollment, and disenrollment

Section 5.06 Span of Coverage

Section 5.07 Verification of Member Eligibility.

Section 5.08 Special Temporary STAR Default Process

Section 5.09 Special Temporary STAR+PLUS Default Process

Section 5.10 Special Temporary CHIP Default Process

Section 5.11 Default Methodology for Frew Incentives

Article 6. Service Levels & Performance Measurement

Article 6.01 Performance measurement

Article 7. Governing Law & Regulations

Section 7.01 Governing law and venue.

Section 7.02 MCO responsibility for compliance with laws and regulations

Section 7.03 TDI licensure/ANHC certification and solvency.

Section 7.04 Immigration Reform and Control Act of 1986.

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

Section 7.06 Environmental protection laws.

Section 7.07 HIPAA.

Section 7.08 Historically Underutilized Business Participation Requirements

Article 8. Amendments & Modifications

Section 8.01 Mutual agreement.

Section 8.02 Changes in law or contract

Section 8.03 Modifications as a remedy.

Section 8.04 Modification Process.

Section 8.05 Modification of the Uniform Managed Care Manual.

Section 8.06 CMS approval of amendments

Section 8.07 Required compliance with amendment and modification procedures.

Article 9. Audit & Financial Compliance

Section 9.01 Record retention and audit

Section 9.02 Access to records, books, and documents

Section 9.03 Audits of Services, Deliverables and inspections.

Section 9.04 SAO Audit

Section 9.05 Response/compliance with audit or inspection findings.

Section 9.06 Notification of Legal and Other Proceedings, and Related Events

Article 10. Terms & Conditions of Payment

Section 10.01 Calculation of monthly Capitation Payment

Section 10.02 Time and Manner of Payment

Section 10.03 Certification of Capitation Rates

Section 10.04 Modification of Capitation Rates

Section 10.05 STAR and STAR+PLUS Capitation Structure.

Section 10.06 CHIP Capitation Rates Structure

Section 10.07 MCO input during rate setting process

Section 10.08 Adjustments to Capitation Payments.

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

Section 10.10 Experience Rebate

Section 10.11 Restriction on assignment of fees.

Section 10.12 Liability for taxes.

Section 10.13 Liability for employment-related charges and benefits.

Section 10.14 No additional consideration.

Section 10.15 Federal Disallowance

Article 11. Disclosure & Confidentiality of Information

Section 11.01 Confidentiality

Section 11.02 Disclosure of HHSC’s Confidential Information

Section 11.03 Member Records

Section 11.04 Requests for public information

Section 11.05 Privileged Work Product

Section 11.06 Unauthorized acts.

Section 11.07 Legal action

Section 11.08 Information Security

Article 12. Remedies & Disputes

Section 12.01 Understanding and expectations.

Section 12.02 Tailored remedies.

Section 12.03 Termination by HHSC.

Section 12.04 Termination by MCO.

Section 12.05 Termination by mutual agreement

Section 12.06 Effective date of termination

Section 12.07 Extension of termination effective date.

Section 12.08 Payment and other provisions at Contract termination

Section 12.09 Modification of Contract in the event of remedies.

Section 12.10 Turnover assistance.

Section 12.11 Rights upon termination or expiration of Contract.

Section 12.12 MCO responsibility for associated costs.

Section 12.13 Dispute resolution.

Section 12.14 Liability of MCO

Section 12.15 Pre-termination Process

Article 13. Assurances & Certifications

Section 13.01 Proposal certifications.

Section 13.02 Conflicts of interest

Section 13.03 Organizational conflicts of interest.

Section 13.04 HHSC personnel recruitment prohibition

Section 13.05 Anti-kickback provision

Section 13.06 Debt or back taxes owed to State of Texas

Section 13.07 Outstanding debts and judgments

Article 14. Representations & Warranties

Section 14.01 Authorization.

Section 14.02 Ability to perform.

Section 14.03 Minimum Net Worth.

Section 14.04 Insurer solvency.

Section 14.05 Workmanship and performance.

Section 14.06 Warranty of deliverables.

Section 14.07 Compliance with Contract.

Section 14.08 Technology Access

Section 14.09 Electronic & Information Resources Accessibility Standards

Article 15. Intellectual Property

Section 15.01 Infringement and misappropriation

Section 15.02 Exceptions

Section 15.03 Ownership and Licenses

Article 16. Liability

Section 16.01 Property damage

Section 16.02 Risk of Loss

Section 16.03 Limitation of HHSC’s Liability.

Article 17. Insurance & Bonding

Section 17.01 Insurance Coverage.

Section 17.02 Performance Bond.

Section 17.03 TDI Fidelity Bond

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Article 1. Introduction Section 1.01 Purpose.

The purpose of this Contract is to set forth the terms and conditions for the MCO’s participation
as a managed care organization in one (1) or more of the MCO Programs administered by HHSC. Under
the terms of this Contract, MCO will provide comprehensive health care services to qualified
Program recipients through a managed care delivery system.

Section 1.02 Risk-based contract. This is a Risk-based contract.

Section 1.03 Inducements.

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

(1) MCO is a health maintenance organization, Approved Non-Profit Health Corporation
(ANHC), or Exclusive Provider Organization that arranges for the delivery of Health Care
Services, and is either (1) has received Texas Department of Insurance (TDI) licensure or
approval as such an entity and is fully authorized to conduct business in the Service Areas, or
(2) will receive TDI licensure or approval as such an entity and be fully authorized to conduct
business in all Service Areas no later than 60 calendar days after HHSC executes this Contract;

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

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

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

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

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

Section 1.04 Construction of the Contract.

(a) Scope of Introductory Article.

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

(b) References to the “State.”

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

(c) Severability.

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

(d) Survival of terms.

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

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

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

(e) Headings.

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

(f) Global drafting conventions.

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

(2)

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

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

Section 1.05 No implied authority.

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

(1) make public policy;

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

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

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

Section 1.06 Legal Authority.

(a) HHSC is authorized to enter into this

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

(b) The person or persons signing and

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

Article 2. Definitions

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

1915(c) Nursing Facility Waiver or 1915(c) STAR+PLUS Waiver (SPW)  means the HHSC
waiver program that provides home and community based services to aged and disabled adults as
cost-effective alternatives to institutional care in nursing homes. Should HHSC begin operating
this waiver program under a 1115 Waiver structure, then references to the 1915(c) Nursing Facility
Waiver or SPW will mean the home and community based services component of the 1115 Waiver for
Members who qualify for the additional services described in Attachment B-2 “STAR+PLUS Covered
Services,” under the heading “1915 (c) STAR+PLUS Waiver Services for those Members who qualify for
such services.”

AAP means the American Academy of Pediatrics.

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

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

Action (Medicaid only) means:

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

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

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

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

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

(6) for a resident of a rural area with only one (1) MCO, the denial of a Medicaid Members’
request to obtain services outside of the Network.

An Adverse Determination is one (1) type of Action.

Acute Care means preventive care, primary care,

and other medical care provided under the direction of a physician for a condition having a
relatively short duration.

Acute Care Hospital means a Hospital that provides Acute Care Services.

Adjudicate means to deny or pay a Clean Claim.

Administrative Services see MCO Administrative Services.

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Administrative Services Contractor see HHSC Administrative Services Contractor.

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

Affiliate means any individual or entity that meets any of the following criteria:

(1) owns or holds more than a five percent (5%)

interest in the MCO (either directly, or through one

(1) or more intermediaries);

(2) in which the MCO owns or holds more than a five percent (5%) interest (either directly,
or through one (1) or more intermediaries);

(3) any parent entity or subsidiary entity of the MCO, regardless of the organizational
structure of the entity;

(4) any entity that has a common parent with the MCO (either directly, or through one
(1) or more intermediaries);

(5) any entity that directly, or indirectly through

one (1) or more intermediaries, controls, or is controlled by, or is under common control
with, the MCO; or

(6) any entity that would be considered to be an affiliate by any Securities and Exchange
Commission (SEC) or Internal Revenue Service (IRS) regulation, Federal Acquisition Regulations
(FAR), or by another applicable regulatory body.

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

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

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

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

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

Auxiliary Aids and Services includes:

(1) qualified interpreters or other effective

methods of making aurally delivered materials understood by persons with hearing impairments;

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

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

Batch Processing  is a billing technique that uses a single program loading to process
many individual jobs, tasks, or requests for service. In managed care, batch billing is a
technique that allows providers to send billing information all at once in a “batch” rather than
in separate individual transactions.

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

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

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

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

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

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

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

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

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

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

9

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

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

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

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

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

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

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

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

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

CHIP MCOs means MCOs participating in the CHIP MCO Program.

CHIP Perinatal MCOs means MCOs participating in

the CHIP Perinatal Program, a subprogram of CHIP.

CHIP Perinatal Program means the State of Texas program in which HHSC contracts with MCOs
to provide, arrange for, and coordinate Covered Services for enrolled CHIP Perinate and CHIP
Perinate Newborn Members. Although the CHIP Perinatal Program is part of the CHIP Program, for
Contract administration purposes it is sometimes identified independently in this Contract.

CHIP Perinate  means a CHIP Perinatal Program

Member identified prior to birth (an unborn child).

CHIP Perinate Newborn  means a CHIP Perinate who has been born alive and whose family
income meets the criteria for continued participation in the CHIP Perinatal Program (refer to
Section 5.04.1 for information concerning eligibility).

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

Clean Claim means a claim submitted by a physician or provider for medical care or health
care services rendered to a Member, with the data necessary for the MCO or subcontracted claims
processor to adjudicate and accurately report the claim. A Clean Claim must meet all requirements
for accurate and complete data as defined in the appropriate 837- (claim type) encounter guides as
follows:

(1) 837 Professional Combined Implementation Guide;

(2) 837 Institutional Combined Implementation Guide;

(3) 837 Professional Companion Guide; and

(4) 837 Institutional Companion Guide.

(5) National Council for Prescription Drug Programs (NCPDP) Companion Guide.

The MCO may not require a physician or provider to submit documentation that conflicts with the
requirements of Texas Administrative Code, Title 28, Part 1, Chapter 21, Subchapters C and T.

Clinical Edit means a process for verifying that a Member’s medical condition matches the
clinical criteria for dispensing a requested drug. Clinical Edits must be based on evidence-based
clinical criteria and nationally recognized peer-reviewed information. If the information about a
Member’s medical condition meets the Clinical Edit criteria, the claim can be approved. If a
Member’s medical condition does not meet the Clinical Edit criteria, then prior authorization is
required.

CMS means the Centers for Medicare and Medicaid Services, which is the federal agency responsible
for administering Medicare and overseeing state administration of Medicaid and CHIP.

COLA means the Cost of Living Adjustment.

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

Community Resource Coordination Groups (CRCGs) means a statewide system of local

10

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

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

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

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

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

Comprehensive Care Program: see definition for Texas Health Steps.

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

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

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

(3) All Privileged Work Product;

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

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

Consumer-Directed Services means the Member or his legal guardian is the employer of and
retains control over the hiring, management, and termination of an individual providing personal
assistance or respite.

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

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

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

Contractor or MCO means the MCO that is a party to this Contract and is an insurer licensed
or approved by TDI as an HMO, ANHC formed in compliance with Chapter 844 of the Texas Insurance
Code, or an EPO with an Exclusive Provider Benefit Plan approved by TDI in accordance with 28
T.A.C. §3.9201-3.92 12.

Copayment (CHIP only) means the amount that a Member is required to pay when utilizing
certain CHIP Covered Services. Once the copayment is made, further payment is not required by the
Member.

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

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

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

CPW means Case Management for Children and Pregnant Women; a Medicaid program for children with a
health condition/health risk, birth through 20 years of age and to women with high-risk pregnancies
of all ages, in order to help them gain access to medical, social, educational and other
health-related services.

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

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

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

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

Day means a calendar day unless specified otherwise.

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

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

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

Designated Provider means a physician, clinical practice or clinical group practice, rural
clinic, community heath center, community mental health center, home health agency, or any other
entity or provider (including pediatricians, gynecologists, and obstetricians) that are determined
by the State and approved by the U.S. Secretary of Health and Human Services to be qualified to be
a Health Home for Members with chronic conditions on the basis of documentation that the physician
practice or clinic (A) has the systems and infrastructure in place to provide Health Home services
and (B) satisfies the qualification standards established by the U.S. Secretary of Health and
Human Services.

Diagnostic means assessment that may include gathering of information through interview,
observation, examination, and use of specific tests that allows a provider to diagnose existing
conditions.

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

Disability means a physical or mental impairment that substantially limits one (1) or
more of an individual’s major life activities, such as caring for oneself, performing manual
tasks, walking, seeing, hearing, speaking, breathing, learning, and/or working.

Disability-related Access means that facilities are readily accessible to and usable by
individuals with disabilities, and that auxiliary aids and services are provided to ensure
effective communication, in

compliance with Title III of the Americans with Disabilities Act.

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

Discharge means a formal release of a Member from an Inpatient Hospital stay when the need
for continued care at an inpatient level has concluded. Movement or Transfer from one (1) Acute
Care Hospital or Long Term Care Hospital /facility and readmission to another within 24 hours for
continued treatment is not a discharge under this Contract.

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

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

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

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

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

ECI means Early Childhood Intervention, a federally mandated program for infants and children
under the age of three (3) with or at risk for developmental delays and/or disabilities. The
federal ECI regulations are found at 34 §C.F.R. 303.1 et seq. The State ECI rules are found at 25
TAC §621.21 et seq.

EDI means electronic data interchange.

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

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

Eligibles means individuals residing in one (1) of the Service Areas and eligible to
enroll in a STAR, STAR+PLUS, CHIP, or CHIP Perinatal MCO, as applicable.

Emergency Behavioral Health Condition means any condition, without regard to the nature or
cause of

S.CONTthe condition, which in the opinion of a prudent layperson possessing an
average knowledge of health and medicine:

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

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

Emergency Medical Condition means a medical condition manifesting itself by acute symptoms
of recent onset and sufficient severity (including severe pain), such that a prudent layperson,
who possesses an average knowledge of health and medicine, could reasonably expect the absence of
immediate medical care could result in:

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

(2) serious impairment to bodily functions;

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

(4) serious disfigurement; or

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

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

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

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

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

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

Exclusive Provider Organization (EPO) means an insurer with an Exclusive Provider Benefit
Plan approved by TDI in accordance with 28 T.A.C. §3.9201-3.9212

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

Expansion Children  means children who are generally at least age one (1), but under age
six (6), and live in a family whose income is at or below 133 percent of the federal poverty level
(FPL). Children in this coverage group have either elected to bypass TANF or are not eligible for
TANF in Texas.

Expansion Service Areas are the Hidalgo and Medicaid Rural Service Areas for the STAR
Program; and the El Paso, Hidalgo, and Lubbock Service Areas for the STAR+PLUS Program.

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

Experience Rebate means the portion of the MCO’s Net Income Before Taxes that is returned
to the State in accordance with Section 10.10 for the STAR, CHIP and CHIP Perinatal Programs and
10.10.1 for the

STAR+PLUS Program (“Experience Rebate”).

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

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

Fair Hearing means the process adopted and implemented by HHSC in 1 T.A.C. Chapter 357,
in compliance with federal regulations and state rules relating to Medicaid Fair Hearings.

Farm Worker Child (FWC) means a child birth through age 20 of a Migrant Farm Worker.

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

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

FPL means the Federal Poverty Level.

FQHC means a Federally Qualified Health Center, certified by CMS to meet the requirements
of

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§1861(aa)(3) of the Social Security Act as a federally qualified health center, that is enrolled
as a provider in the Texas Medicaid program.

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

FSR means Financial Statistical Report. The FSR is a report designed by HHSC, and
submitted to HHSC by the MCO in accordance with Contract requirements. The FSR is a form of
modified income statement, subject to audit, and contains revenue, cost, and other data, as
defined by the Contract. Not all incurred expenses may be included in the FSR.

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

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

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

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

Health Home means a Designated Provider (including a provider that operates in
coordination with a team of health care professionals) or a Heath Team selected by a Member with
chronic conditions to provide Health Home Services.

Health Home Services  means comprehensive and timely high-quality services that are
provided by a Designated Provider, a Team of Health Care Professionals operating with such a
provider, or a Health Team. Health Home Services include:

(1) Comprehensive care management;

(2) Care coordination and health promotion;

(3) Comprehensive transitional care, including appropriate follow-up, from inpatient to
other settings;

(4) Patient and family support (including authorized representatives);

(5) Referral to community and social support services, if relevant; and

(6) Use of health information technology to link services, as feasible and appropriate.

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

Health Team means such term as described in Section 3502 of the Patient Protection and
Affordable Care Act, P.L. 111-148 (March 23, 2010), as

amended or modified.

HEDIS, the Health Plan Employer Data and Information Set, is a registered trademark of NCQA.
HEDIS is a set of standardized performance

measures designed to reliably compare the performance of managed health care plans. HEDIS is
sponsored, supported and maintained by NCQA.

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

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

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

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

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

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

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

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

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Initial Contract Period means the Effective Date of the Contract through August 31, 2015.

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

JCAHO means Joint Commission on Accreditation of Health Care Organizations.

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

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

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

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

Local Mental Health Authority (LMHA) means an entity within a specified region responsible
for planning, policy development, coordination, and resource development and allocation and for
supervising and ensuring the provision of mental health care services to persons with mental
illness in one (1) or more local service areas.

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

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

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

(1) enroll with the MCO; or

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

Marketing Materials means materials that are produced in any medium by or on behalf of the
MCO and can reasonably be interpreted as intending to

market to potential Members. Health-related Materials are not Marketing Materials.

Material Subcontract means any contract, Subcontract, or agreement between the MCO and
another entity that meets any of the following criteria:

- the other entity is an Affiliate of the MCO;

- the Subcontract is considered by HHSC to be

for a key type of service or function, including

o Administrative Services (including but not

limited to third party administrator, Network

administration, and claims processing);

o delegated Networks (including but not

limited to behavioral health, dental,

pharmacy, and vision);

	 	•	 	management services (including management agreements with parent) o
reinsurance;	 

o Disease Management;

	 	•	 	pharmacy benefit management (PBM); or o call lines (including nurse and medical
consultation); or	 

	 	•	 	 any other Subcontract that is, or is reasonably expected to be, more $200,000 per
year. Any Subcontracts between the MCO and a single entity that are split into separate
agreements by time period, Program, or SDA, etc., will be consolidated for the purpose of
this definition.

For the purposes of this Agreement, Material Subcontracts do not include contracts with any non-
Affiliates for any of the following, regardless of the value of the contract:: utilities (e.g.,
water, electricity, telephone, Internet), mail/shipping, office space, or computer hardware.

Material Subcontractor or Major Subcontractor means any entity with a Material
Subcontract with the MCO. For the purposes of this Agreement, Material Subcontractors do not
include providers in the MCO’s Provider Network. Material Subcontractors may include, without
limitation, Affiliates, subsidiaries, and affiliated and unaffiliated third parties.

MCO means managed care organization.

MCO or Contractor means the MCO that is a party to this Contract and is an insurer
licensed or approved by TDI as an HMO, ANHC formed in compliance with Chapter 844 of the Texas
Insurance Code, or an EPO with an Exclusive Provider Benefit Plan approved by TDI in accordance
with 28 T.A.C. §3.9201-3.92 12.

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

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

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

Medicaid MCOs means contracted MCOs participating in STAR, STAR+PLUS, and/or STAR
Health.

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

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

Medically Necessary  means:

(1) For Medicaid Members birth through age 20, the following Texas Health Steps services:

(a) screening, vision, and hearing

services; and

(b) other Health Care Services,

including Behavioral Health Services, that are necessary to correct or ameliorate a defect
or physical or mental illness or condition. A determination of whether a service is necessary
to correct or ameliorate a defect or physical or mental illness or condition:

(i) must comply with the requirements

of the Alberto N., et al. v. Suehs, et al. partial settlement agreements; and

(ii) may include consideration of other

relevant factors, such as the criteria described in parts (2)(b-g) and (3)(b-g) of
this definition.

(2) For Medicaid Members over age 20 and CHIP Members, non-behavioral health related Health
Care Services that are:

(a) reasonable and necessary to

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

(b) provided at appropriate facilities

and at the appropriate levels of care for the treatment of a Member’s health
conditions;

(c) consistent with health care practice

guidelines and standards that are endorsed by

professionally recognized health care

organizations or governmental agencies;

(d) consistent with the Member’s

diagnoses;

(e) no more intrusive or restrictive than

necessary to provide a proper balance of safety, effectiveness, and efficiency;

(f) are not experimental or

investigative; and

(g) are not primarily for the

convenience of the Member or Provider; and

(3) For Medicaid Members over age 20 and CHIP Members, Behavioral Health Services that are:

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

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

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

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

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

(f) are not experimental or investigative; and

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

Member means a person who:

(1)

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

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

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

13

(4) has met CHIP Perinatal Program eligibility

criteria and is enrolled in the MCO’s CHIP Perinatal Program.

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

Member Month means one (1) Member enrolled with the MCO during any given month. The total
Member Months for each month of a year comprise the annual Member Months.

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

(1) has a serious ongoing illness, a Chronic or

Complex Condition, or a Disability that has lasted or is anticipated to last for a
significant period of time, and

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

Migrant Farm Worker means a migratory agricultural worker, generally defined as an
individual:

(1) whose principal employment is in agriculture on a seasonal basis;

(2) who has been so employed within the last twenty-four months;

(3) who performs any activity directly related to the production or processing of crops,
dairy products, poultry, or livestock for initial commercial sale or as a principal means of
personal subsistence; and

(4) who establishes for the purposes of such employment a temporary abode.

MIS means Management Information System.

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

Net Income before Taxes or Pre-tax Income means an aggregate excess of Revenues
over Allowable Expenses.

Network  or Provider Network  means all Providers that have entered into Network
Provider agreements with the MCO or its Subcontractor for the delivery of Medicaid or CHIP
Covered Services to the MCO’s Members.

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

Network Provider Agreement or Provider Agreement means a contract between and MCO
and a Network Provider for the delivery of Covered Services to members.

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

Non-provider Subcontracts means contracts between the MCO and a third party that performs a
function, excluding delivery of Health Care Services, that the MCO is required to perform under its
Contract with HHSC.

Non-Urban County or Rural County  means any county with fewer than 50,000
residents as reported by the Texas Association of Counties at: http://www.county.org/.

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

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

OB/GYN means obstetrician-gynecologist.

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

Operational Start Date means the first day on which an MCO is responsible for providing
Covered

Services to MCO Program Members and all related Contract functions in a Service Area. The
Operational Start Date may vary per MCO Program and Service Area. The Operational Start Date(s)
applicable to this Contract are set forth in the HHSC Managed Care Contract document.

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

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

14

Outpatient Hospital Services means diagnostic, therapeutic, and rehabilitative services
that are provided to Members in an organized medical facility, for less than a 24-hour period, by
or under the direction of a physician.

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

Pended Claim means a claim for payment that requires additional information before the
claim can be Adjudicated as a Clean Claim.

Pharmacy Benefit Manager (PBM) is a third party administrator of prescription drug
programs.

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

Post-stabilization Care Services means Covered Services, related to an Emergency Medical
Condition that are provided after a Member is stabilized in order to maintain the stabilized
condition, or, for a Medicaid Member, under the circumstances described in 42 §§C.F.R. 438.1
14(b)&(e) and 42 C.F.R.

§422.1 13(c)(iii) to improve or resolve the Medicaid Member’s condition.

PPACA – means the Patient Protection and Affordable Care Act of 2010 (P.L. 111-148), as amended
by the Health Care and Education Reconciliation Act of 2010 (Public Law 111-152), together
known as the Affordable Care Act (ACA).

Pre-tax Income or Net Income before Taxes means an aggregate excess of Revenues
over Allowable Expenses.

Primary Care Physician or Primary Care Provider (PCP) means a physician or provider who has
agreed with the MCO to provide a Medical Home to Members and who is responsible for providing
initial and

primary care to patients, maintaining the continuity of patient care, and initiating referral for
care.

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

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

Provider or Network Provider  means an appropriately credentialed and licensed
individual,

facility, agency, institution, organization or other entity, and its employees and subcontractors,
that has a contract with the MCO for the delivery of Covered Services to the MCO’s Members.

Provider Agreement or Network Provider Agreement means a contract between and MCO and a
Network Provider for the delivery of Covered Services to members.

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

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

Public Health Entity means a HHSC Public Health Region, a Local Health Department, or a
Hospital District.

Public Information means information that:

(1) Is collected, assembled, or maintained

under a law or ordinance or in connection with the transaction of official business by a
governmental body or for a governmental body; and

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

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

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

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

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

Rate Period 1 means the period of time beginning on the Operational Start Date and ending
on August 31, 2013. For purposes of rate setting, Rate Period 1 will be divided into two periods:
March 1, 2012 through August 31, 2012, and September 1, 2012 to August 31, 2013.

Rate Period 2  means the period of time beginning on September 1, 2013 and ending on
August 31, 2014.

Readiness Review means the assurances made by a selected MCO and the examination
conducted by HHSC, or its agents, of MCO’s ability, preparedness,

15

and availability to fulfill its obligations under the Contract.

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

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

Revenue means all revenue received by the MCO pursuant to this Contract, including
retroactive adjustments made by HHSC. Revenue includes any funds earned on Medicaid or CHIP managed
care funds such as investment income and earned interest. Revenue excludes any reinsurance
recoveries, which shall be shown as a contra-cost, or reported offset to reinsurance expense.
Revenues are reported at gross, and are not netted for any reinsurance premiums paid. See also the
Uniform Managed Care Manual’s “Cost Principles for Expenses.”

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

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

Rural County or Non-Urban County  means any county with fewer than 50,000
residents as reported by the Texas Association of Counties at: http://www.county.org/.

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

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

SDX means State Data Exchange.

Security Plan means a document that contains detailed management, operational, and
technical information about a system, its security requirements, and the controls implemented to
provide protection against risks and vulnerabilities.

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

Service Area  means the counties included in any HHSC-defined areas as applicable to
each MCO Program.

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

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

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

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

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

(5) coordination of Covered Services with Noncapitated Services, as necessary and
appropriate.

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

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

Service Plan (SP) means an individualized plan developed with and for Members with
Special Health Care Needs, including persons with disabilities or chronic or complex conditions.

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

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

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

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

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

16

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

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

SSA means the Social Security Administration.

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

STAR+PLUS or STAR+PLUS Program means the State of Texas Medicaid managed care program in
which HHSC contracts with MCOs to provide, arrange, and coordinate preventive, primary, acute and
Long-term Services and Supports Covered Services to adult persons with disabilities and elderly
persons age 65 and over who qualify for Medicaid through the SSI program and/or the MAO program.
Children birth through age 20 who qualify for Medicaid through the SSI program, may voluntarily
participate in the STAR+PLUS program.

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

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

Subcontract means any agreement between the MCO and another party to fulfill the
requirements of the Contract.

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

Subsidiary  means an Affiliate controlled by such person or entity directly or
indirectly through one (1) or more intermediaries.

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

T.A.C. means Texas Administrative Code.

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

TDI means the Texas Department of Insurance.

Team of Health Care Professionals  means physicians and other professionals, such a a nurse
care coordinator, nutritionist, social worker, behavioral health professional, or any professionals
deemed appropriate by HHSC and approved by CMS. The team may be free-standing, virtual, or based at
a

Hospital, community health center, community mental health center, rural clinic, clinical practice
or clinical group practice, academic health center, or any entity deemed appropriate by HHSC and
approved by CMS.

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

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

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

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

Texas Public Information Act refers to the provisions of Chapter 552 of the Texas
Government Code.

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

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

Transfer means the movement of the Member from one (1) Acute Care Hospital or Long Term
Care Hospital/facility and readmission to another Acute Care Hospital or Long Term Care
Hospital/facility within 24 hours for continued treatment.

Transition Phase includes all activities the MCO is required to perform between the
Contract Effective Date and the Operational Start Date for an MCO Program and all or part of a
Service Area.

Turnover Phase includes all activities the MCO is required to perform in order to close
out the Contract

S.CONTand/or transition Contract activities and operations to HHSC or a subsequent
contractor.

Turnover Plan means the written plan developed by MCO, approved by HHSC, to be employed
during the Turnover Phase.

Uniform Managed Care Manual (UMCM) means the manual published by or on behalf of HHSC that
contains policies and procedures required of all MCOs participating in the HHSC Programs. The UMCM,
as amended or modified, is incorporated by reference into the Contract.

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

Urban County means any county with 50,000 or more residents as reported by the Texas
Association of Counties at: http://www.county.org/.

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

Urgent Condition means a health condition including an Urgent Behavioral Health Situation
that is not an emergency but is severe or painful enough to cause a prudent layperson, possessing
the average

knowledge of medicine, to believe that his or her condition requires medical treatment evaluation
or treatment within 24 hours by the Member’s PCP or PCP designee to prevent serious deterioration
of the Member’s condition or health.

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

Value-added Services means additional services for coverage beyond those specified in
Attachments B2, B-2.1, and B-2.2. Value-added Services may be actual Health Care Services,
benefits, or positive incentives that HHSC determines will promote healthy lifestyles and improve
health outcomes among Members. Value-added Services that promote healthy lifestyles should target
specific weight loss, smoking cessation, or other programs approved by HHSC. Temporary phones, cell
phones, additional transportation benefits, and extra home health services may be Value-added
Services, if approved by HHSC. Best practice approaches to delivering Covered Services are not
considered Value-added Services.

Waste means practices that are not cost-efficient.

Wrap-Around Services means services for Dual Eligible Members that are covered by
Medicaid:

(1) when the Dual Eligible Member has exceeded the Medicare coverage limit; or

	 	(2)	 	that are not covered by Medicare. Article 3. General Terms & Conditions
Section 3.01 Contract elements.	 

(a) Contract documentation.

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

(b) Order of documents.

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

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

(2) HHSC Managed Care Contract Attachment

A – “Uniform Managed Care Contract Terms and Conditions,” and all amendments thereto;

(3) HHSC Managed Care Contract Attachment

B – “Scope of Work/Performance Measures,” and all attachments and amendments thereto;

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

(5) HHSC Managed Care Contract Attachment C-1 – “MCO’s Proposal.”

Section 3.02 Term of the Contract.

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

Section 3.03 Funding.

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

S.CONTDeliverables that are pending at the time funds become unavailable. HHSC must make
best efforts to provide reasonable written advance notice to MCO upon learning that funding for
this Contract may be unavailable.

Section 3.04 Delegation of authority.

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

Section 3.05 No waiver of sovereign immunity.

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

Section 3.06 Force Majeure.

Neither Party will be liable for any failure or delay in performing its obligations under the
Contract if such failure or delay is due to a Force Majeure Event. The existence of such causes of
delay or failure will extend the period of performance in the exercise of reasonable diligence
until after the causes of delay or failure have been removed. Each Party must inform the other in
writing with proof of receipt within five (5) Business Days of the existence of a Force Majeure
Event.

Section 3.07 Publicity.

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

(b) MCO will provide HHSC with one (1) electronic copy of any information described in
Subsection 3.07(a) prior to public release. MCO will provide additional copies, including hard
copies, at the request of HHSC.

(c) The requirements of Subsection 3.07(a) do

not apply to:

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

(2) information concerning the Contract’s terms,

subject matter, and estimated value:

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

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

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

Section 3.08 Assignment.

(a) Assignment by MCO.

MCO must not assign all or any portion of its rights under or interests in the Contract or
delegate any of its duties without prior written consent of HHSC. Any written request for
assignment or delegation must be accompanied by written acceptance of the

assignment or delegation by the assignee or delegation by the delegate. Except where otherwise
agreed in writing by HHSC, assignment or delegation will not release MCO from its obligations
pursuant to the Contract. An HHSC-approved Material Subcontract will not be considered to be an
assignment or delegation for purposes of this section.

(b) Assignment by HHSC.

MCO understands and agrees HHSC may in one (1) or more transactions assign, pledge, transfer, or
hypothecate the Contract. This assignment will only be made to another State agency or a
non-State agency that is contracted to perform agency support.

(c) Assumption.

Each party to whom a transfer is made (an “Assignee”) must assume all or any part of MCO’S or
HHSC’s interests in the Contract, the product, and any documents executed with respect to the
Contract.

Section 3.09 Cooperation with other vendors and prospective vendors.

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

S.CONTSection 3.10 Renegotiation and reprocurement rights.

(a) Renegotiation of Contract terms.

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

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

Notwithstanding anything in the Contract to the contrary, whether or not HHSC has accepted or
rejected MCO’s Services and/or Deliverables

provided during any period of the Contract, HHSC may at any time issue requests for proposals or
offers to other potential contractors for performance of any portion of the Scope of Work covered
by the Contract or Scope of Work similar or comparable to the Scope of Work performed by MCO under
the Contract.

(c) Termination rights upon reprocurement.

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

Section 3.11 RFP errors and omissions.

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

Section 3.12 Enforcement Costs.

In the event of any litigation, appeal, or other legal action to enforce any provision of the
Contract, MCO agrees to pay all reasonable expenses of such action, if HHSC is the prevailing
Party.

Section 3.13 Preferences under service

contracts.

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

Section 3.14 Time of the essence.

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

Section 3.15 Notice

(a) Any notice or other legal communication

required or permitted to be made or given by either

Party pursuant to the Contract will be in writing and in English, and will be deemed to have been
given:

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

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

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

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

(c) All notices must be sent to the Project

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

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

Article 4. Contract Administration & Management

Section 4.01 Qualifications, retention and replacement of MCO employees.

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

Section 4.02 MCO’s Key Personnel. (a) Designation of Key Personnel.

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

(1) Member Services;

(2) Management Information Systems;

(3) Claims Processing,

(4) Provider Network Development and Management;

(5) Benefit Administration and Utilization and Care Management;

(6) Quality Improvement;

(7) Behavioral Health Services;

S.CONT(8) Financial Functions;

(9) Reporting;

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

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

(12) Management positions for STAR+PLUS Service Coordinators for STAR+PLUS MCOs as
defined in Section 4.04.1, “STAR+PLUS Service Coordinator.”

(b) Support and Replacement of Key Personnel.

The MCO must maintain, throughout the Contract Term, the ability to supply its Key Personnel with
the required resources necessary to meet Contract requirements and comply with applicable law.
The MCO must ensure project continuity by timely replacement of Key Personnel, if necessary, with
a sufficient number of persons having the requisite skills, experience and other qualifications.

Regardless of specific personnel changes, the MCO must maintain the overall level of expertise,
experience, and skill reflected in the Key MCO Personnel job descriptions and qualifications
included in the MCO’s proposal.

(c) Notification of replacement of Key

Personnel.

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

Section 4.03 Executive Director.

(a) The MCO must employ a qualified individual to serve as the Executive Director for its HHSC
MCO Program(s). Such Executive Director must be employed full-time by the MCO, be primarily

dedicated to HHSC MCO Program(s), and must hold a Senior Executive or Management position in the
MCO’s organization, except that the MCO may propose an alternate structure for the Executive
Director position, subject to HHSC’s prior written approval.

(b) The Executive Director must be authorized and empowered to represent the MCO regarding
all matters pertaining to the Contract prior to such representation. The Executive Director must
act as liaison between the MCO and the HHSC and must have responsibilities that include, but are
not limited to, the following:

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

(2) receiving and responding to all inquiries and

requests made by HHSC related to the Contract, in the timeframes and formats specified by
HHSC. Where practicable, HHSC must consult with the MCO to establish timeframes and formats
reasonably acceptable to the Parties;

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

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

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

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

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

Section 4.04 Medical Director.

(a) The MCO must have a qualified individual to

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

(b) The Medical Director, or his or her

designee, must be available by telephone 24 hours a day, seven (7) days a week, for
Utilization Review decisions. The Medical Director, and his/her designee, must either possess
expertise with Behavioral Health Services, or ready access to such expertise to ensure timely and
appropriate medical decisions for Members, including after regular business hours.

(c) The Medical Director, or his or her designee,

must be authorized and empowered to represent the MCO regarding clinical issues, Utilization
Review and quality of care inquiries. The Medical Director, or his or her designee, must exercise
independent medical judgment in all decisions relating to Medical Necessity. The MCO must ensure
that its decisions relating to m Medical Necessity are not adversely influenced by fiscal
management decisions. HHSC

17

may conduct reviews of decisions relating to Medical Necessity upon reasonable notice.

(d) For purposes of this section, the Medical

Director’s designee must be:

(1) a physician that meets the qualifications for a Medical Director, as described in
subparts (a) through (c), above; or

(2) for prior authorization determinations for outpatient pharmacy benefits, a
Texas-licensed pharmacist working under the direction of the Medical Director, provided such
delegation is included in the MCO’s TDI-approved utilization review plan.

(e) The Medical Director, or his or her physician

designee, must make determinations regarding Utilization Review appeals, including appeals of
prior authorization denials for outpatient pharmacy benefits.

Section 4.04.1 STAR+PLUS Service

Coordinator

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

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

(c) The Service Coordinator must be

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

(d)

The STAR+PLUS MCO must empower its

Service Coordinators to authorize the provision and delivery of Covered Services, including
Community Long-term Services and Supports Covered Services.

Section 4.05 Responsibility for MCO personnel and Subcontractors.

(a) MCO’s employees and Subcontractors will

not in any sense be considered employees of HHSC or the State of Texas, but will be considered
for all purposes as the MCO’s employees or its Subcontractor’s employees, as applicable.

(b) Except as expressly provided in this

Contract, neither MCO nor any of MCO’s employees or Subcontractors may act in any sense as agents
or representatives of HHSC or the State of Texas.

(c) MCO agrees that anyone employed by MCO

to fulfill the terms of the Contract is an employee of MCO and remains under MCO’s sole direction
and control. MCO assumes sole and full responsibility for its acts and the acts of its employees
and Subcontractors.

(d) MCO agrees that any claim on behalf of any

person arising out of employment or alleged employment by the MCO (including, but not limited to,
claims of discrimination against MCO, its officers,

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

(e) MCO agrees to be responsible for the

following in respect to its employees:

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

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

(f) MCO agrees and will inform its employees

and Subcontractor(s) that there is no right of subrogation, contribution, or indemnification
against HHSC for any duty owed to them by MCO pursuant to this Contract or any judgment rendered
against the MCO. HHSC’s liability to the MCO’s employees, agents and Subcontractors, if any, will
be governed by the Texas Tort Claims Act, as amended or modified (TEX. CIV.
PRACT. & REM. CODE §101 .001et seq.).

18

(g) MCO understands that HHSC does not

assume liability for the actions of, or judgments rendered against, the MCO, its employees, agents
or Subcontractors. MCO agrees that it has no right to indemnification or contribution from HHSC
for any such judgments rendered against MCO or its Subcontractors.

Section 4.06 Cooperation with HHSC and state administrative agencies.

(a) Cooperation with Other MCOs.

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

(b) Cooperation with state and federal administrative agencies.

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

(1) The investigation and prosecution of Fraud, Abuse, and Waste in the HHSC programs;

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

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

Section 4.07 Conduct of MCO personnel and Subcontractors.

(a) While performing the Scope of Work, MCO’s

personnel and Subcontractors must:

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

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

(b) If HHSC determines in good faith that a

particular employee or Subcontractor is not conducting himself or herself in accordance with this
Contract, HHSC may provide MCO with notice and documentation concerning such conduct. Upon receipt
of such notice, MCO must promptly investigate the matter and take appropriate action that may
include:

(1) Removing the employee or Subcontractor from the project;

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

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

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

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

(e) MCO must have policies regarding disciplinary action for all employees who have failed
to comply with federal and/or state laws and the MCO’s standards of conduct, policies and

procedures, and Contract requirements. MCO must have policies regarding disciplinary action for
all employees who have engaged in illegal or unethical conduct.

Section 4.08 Subcontractors.

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

(b) MCO must:

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

(2) provide HHSC with a copy of TDI filings of delegation agreements;

(3) unless otherwise provided in this Contract, provide HHSC with written notice no
later than:

(i) three (3) Business Days after

receiving notice from a Material Subcontractor of its intent to terminate a
Subcontract;

(ii) 180 calendar days prior to the

termination date of a Material Subcontract for MIS systems operation or reporting;

S.CONT(iii) 90 calendar days prior to the termination date of a Material
Subcontract for non-MIS MCO Administrative Services; and

(iv) 30 calendar days prior to the termination date of any other Material
Subcontract.

HHSC may grant a written exception to these notice requirements if, in HHSC’s reasonable
determination, the MCO has shown good cause for a shorter notice period.

(c) During the Contract Period, Readiness

Reviews by HHSC or its designated agent may occur if:

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

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

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

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

(5) an existing Material Subcontractor changes one (1) or more of its MIS subsystems,
claims processing or operational functions; or

(6) a Readiness Review is requested by HHSC.

The MCO must submit information required by HHSC for each proposed Material Subcontractor as
indicated in Section 7, “Transition Phase Requirements.” Refer to Sections 8.1.1.2, “Additional
Readiness Reviews and Monitoring Efforts,” and 8.1.18, “Management Information System
Requirements” for additional information regarding MCO Readiness Reviews during the Contract
Period.

(d) MCO must not disclose Confidential

Information of HHSC or the State of Texas to a Subcontractor unless and until such Subcontractor
has agreed in writing to protect the confidentiality of such Confidential Information in the
manner required of MCO under this Contract.

(e) MCO must identify any Subcontractor that is

a subsidiary or entity formed after the Effective Date of the Contract, whether or not an
Affiliate of MCO. The MCO must substantiate the proposed Subcontractor’s ability to perform the
subcontracted Services, and certify to HHSC that no loss of service will occur as a result of the
performance of such Subcontractor. The MCO will be the sole point of contact with regard to
contractual matters..

(f) Except as provided herein, all Subcontracts

must be in writing and must provide HHSC the right to examine the Subcontract and all Subcontractor
records relating to the Contract and the Subcontract.

This requirement does not apply to agreements with utility or mail service providers.

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

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

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

(j) Network Provider Contracts must include the mandatory provisions included in Uniform
Managed Care Manual Chapter 8.1, “Provider Contract Checklist.”

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

(l) MCO must comply with the requirements of Section 6505 of the PPACA, entitled “Prohibition
on Payments to Institutions or Entities Located Outside of the United States.”

(m) Provider payment must comply with the requirements of Section 2702 of PPACA, entitled
“Payment Adjustment for Health Acquired Conditions.”

Section 4.09 HHSC’s ability to contract with Subcontractors.

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

Section 4.10 MCO Agreements with Third Parties

(a) If the MCO intends to report compensation

paid to a third party (including without limitation an Affiliate) as an Allowable Expense under
this Contract, the compensation paid to the third party exceeds $200,000, or is reasonably
anticipated to exceed $200,000, in a State Fiscal Year, then the MCO’s agreement with the third
party must be in writing. The agreement must provide HHSC the right

S.CONTto examine the agreement and all records relating to the agreement.

(b) All agreements whereby the MCO or its Subcontractors receive discounts, incentives,
rebates, fees, free goods, bundling arrangements, recoupments, retrocession, payments, or other
consideration from a third party (including without limitation Affiliates) pursuant to or related
to the execution of this Contract, must be in writing and must provide HHSC and the Office of
Attorney General the right to examine the agreement and all records relating to such consideration.

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

(d) MCO must submit a copy of each third party agreement described in subsections (a) and (b)
to HHSC. If the third party agreement is entered into prior to the Effective Date of the Contract,
MCO must submit a copy no later than thirty (30) days after the Effective Date of the Contract. If
the third party agreement is executed after the Effective Date of the Contract, MCO must submit a
copy no later than five (5) Business Days after execution.

(e) For third party agreements valued under $200,000 per State Fiscal Year that are reported
as Allowable Expenses, the MCO must maintain financial records and data sufficient to verify the
accuracy of such expenses in accordance with the requirements of Article 9, “Audit and Financial
Compliance.”

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

compliance with this Contract.

(g) Upon request, the MCO and its Subcontractors must provide all information described in
Section 4.10 to HHSC and the Office of Attorney General at no cost.

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

(i) MCO must comply with the requirements of Section 6505 of the PPACA, entitled “Prohibition
on Payments to Institutions or Entities Located Outside of the United States.”

(j) Provider payment must comply with the requirements of Section 2702 of PPACA, entitled
“Payment Adjustment for Health Acquired Conditions.”

Section 4.11 Prohibition Against Performance Outside the United States.

(a) Findings.

(1) HHSC finds the following:

(A) HHSC is responsible for administering several public programs that require the
collection and maintenance of information relating to persons who apply for and receive services
from HHSC programs. This information consists of, among other things, personal financial and
medical information and information designated “Confidential Information” under state and
federal law and this Agreement. Some of this information may, within the limits of the law and
this Agreement, be shared from time to time with MCO or a subcontractor for purposes of
performing the Services or providing the Deliverables under this Agreement.

(B) HHSC is legally responsible for maintaining the confidentiality and integrity of
information relating to applicants and recipients of HHSC services and ensuring that any person
or entity that receives such information—including MCO and any subcontractor—is similarly bound
by these obligations.

(C) HHSC also is responsible for the development and implementation of computer software
and hardware to support HHSC programs. These items are paid for, in whole or in part, with
state and federal funds. The federal agencies that fund these items maintain a limited
interest in the software and hardware so developed or acquired.

(D) Some of the software used or developed by HHSC may also be subject to statutory
restrictions on the export of technology to foreign nations, including but not limited to the
Export Administration Regulations, 15 C.F.R. Parts 730-774.

(2) In view of these obligations, and to ensure accountability, integrity, and the security of
the information maintained by or for HHSC and the work performed on behalf of HHSC, HHSC

DETERMINES that it is necessary and appropriate to require THAT:

(A) All work performed under this

Agreement must be performed exclusively within the United States; and

(B) All information obtained by MCO or

a subcontractor under this Agreement must be maintained within the United States.

(3) Further, HHSC finds it necessary and appropriate to forbid the performance of any work

S.CONTor the maintenance of any information relating or obtained pursuant to this
Agreement to occur outside of the United States except as specifically authorized or approved by
HHSC.

(b) Meaning of “within the United States” and

“outside the United States.”

(1) As used in this Section 4.11, the term “within the United States” means any location
inside the territorial boundaries comprising the republic of the United States of America,
including of any of the 48 coterminous states in North America, the states of Alaska and
Hawaii, and the District of Columbia.

(2) Conversely, the phrase “outside the United States” means any location that is not
within the territorial boundaries comprising the republic of the United States of America,
including of any of the 48 coterminous states in North America, the states of Alaska and
Hawaii, and the District of Columbia.

(c) Maintenance of Confidential Information.

(1) MCO and all subcontractors, vendors, agents, and service providers of or for MCO must
not allow any Confidential Information that MCO receives from or on behalf of HHSC to leave the
United States by any means (physical or electronic) at any time, for any period of time, for any
reason.

(2) MCO and all subcontractors, vendors, agents, and service providers of or for MCO must
not permit any person to have remote access to HHSC information, systems, or Deliverables from a
location outside the United States.

(d) Performance of Work under Agreement.

(1) Unless otherwise approved in advance by HHSC in writing, and subject to the exceptions

specified in paragraph (d) of this Section 4.11, MCO and all subcontractors, vendors, agents,
and service providers of or for MCO must perform all services under the Agreement, including
all tasks, functions, and responsibilities assigned and delegated to MCO under this Agreement,
within the United States.

(A) This obligation includes, but is not limited to, all Services, including but not
limited to information technology services, processing, transmission, storage, archiving,
data center services, disaster recovery sites and services, customer support), medical,
dental, laboratory and clinical services.

(B) All custom software prepared for performance of this Agreement, and all
modifications of custom, third party, or

vendor proprietary software, must be performed within the United States.

(2) Unless otherwise approved in advance by HHSC in writing, and subject to the exceptions
specified in paragraph (d) of this Section 4.11, MCO and all subcontractors, vendors, agents,
and service providers of or for MCO must not permit any person to perform work under this
Agreement from a location outside the United States.

(e) Exceptions.

(1) COTS Software. The foregoing requirements will not preclude the acquisition or use of
commercial off-the-shelf software that is developed outside the United States or hardware that
is generically configured outside the United States.

(2) Foreign-made Products and Supplies. The foregoing requirements will not preclude MCO
from acquiring, using, or reimbursing products or supplies that are manufactured outside the
United States, provided such products or supplies are commercially available within the United
States for acquisition or reimbursement by HHSC.

(3) HHSC Prior Approval. The foregoing requirements will not preclude MCO from
performing work outside the United States that HHSC has approved in writing and that HHSC has
confirmed will not involve the sharing of Confidential Information outside the United States.

(f) Disclosure.

MCO must disclose all Services and Deliverables under or related to this Agreement that MCO
intends to perform or has performed outside the United States, whether directly or via
subcontractors, vendors, agents, or service providers.

(g) Remedy.

(1) MCO’s violation of this Section 4.11 will constitute a material breach in accordance
with Article 12. MCO will be liable to HHSC for all monetary damages, in the form of actual,
consequential, direct, indirect, special and/or liquidated damages in accordance with this
Agreement.

(2) HHSC may terminate the Agreement with notice to MCO at least one calendar day before
the effective date of such termination.

S.CONTArticle 5. Member Eligibility & Enrollment

Section 5.01 Eligibility Determination

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

Section 5.02 Member Enrollment &

Disenrollment.

(a) The HHSC Administrative Services

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

(b) HHSC makes no guarantees or representations to the MCO regarding the number of eligible
Members who will ultimately be enrolled into the MCO or the length of time any such enrolling
Members remain enrolled with the MCO. The MCO has no ownership interest in its Member base, and
therefore cannot sell or transfer this base to another entity.

(c) The HHSC Administrative Services

Contractor will electronically transmit to the MCO new Member information and change
information applicable to active Members.

(d) As described in the following Sections,

depending on the MCO Program, special conditions may also apply to enrollment and span of
coverage for the MCO.

(e) A Medicaid MCO has a limited right to

request a Member be disenrolled from MCO without the Member’s consent. HHSC must approve any
MCO request for disenrollment of a Member for cause. HHSC may permit disenrollment of a Member
under the following circumstances:

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

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

(3) Member steadfastly refuses to comply with managed care restrictions (e.g., repeatedly
using emergency room in combination with refusing to allow MCO to treat the underlying medical
condition).

(4) MCO must take reasonable measures to correct Member behavior prior to requesting
disenrollment. Reasonable measures may include

providing education and counseling regarding the offensive acts or behaviors.

(5) For STAR+PLUS MCOs, under limited conditions, the MCO may request disenrollment of
members who are totally dependent on a

ventilator or who have been diagnosed with End Stage Renal Disease.

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

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

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

(i) Members taken into conservatorship by the Department of Family and Protective Services
(DFPS) will be disenrolled from the MCO effective the date of conservatorship, and enrolled in the
STAR Health Program unless otherwise determined by DFPS.

Section 5.03 STAR enrollment for pregnant women and infants.

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

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

Section 5.03.1 Enrollment for infants born to pregnant women in STAR+PLUS.

If a newborn is born to a Medicaid-eligible mother enrolled in a STAR+PLUS MCO, the HHSC
Administrative Service Contractor will enroll the newborn into that MCO’s STAR MCO product, if one
(1) exists. All rules related to STAR newborn enrollment will apply to the newborn. If the
STAR+PLUS MCO does not have a STAR product but the newborn is eligible for STAR, the newborn will
be enrolled in traditional Fee-for-Service Medicaid, and given the opportunity to select a STAR
MCO.

19

Section 5.04 CHIP eligibility and enrollment.

(a) Term of coverage.

The HHSC Administrative Services Contractor determines CHIP eligibility on HHSC’s behalf. The HHSC
Administrative Services Contractor will enroll and disenroll eligible individuals into and out of
CHIP.

(b) Pregnant Members and Infants.

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

(2) In the event the MCO remains unaware of a CHIP Member’s pregnancy until delivery, the
facility and professional costs associated with the delivery will be covered by CHIP in
accordance with Attachment B-1.1, “CHIP Covered Services.” This includes the post-delivery costs
for the newborn’s care while in the facility, as described in Attachment B-1.1, “CHIP Covered
Services.,” The HHSC Administrative Services Contractor will set a pregnant CHIP mother’s
eligibility expiration date at the later of (1) the end of the second month following the month
of the pregnancy delivery or the pregnancy termination or (2) the Member’s original eligibility
expiration date.

The Administrative Services Contractor will screen the newborn’s eligibility for Medicaid, and
then CHIP (if the newborn is not eligible for Medicaid). If the newborn is eligible for CHIP,
the Administrative Services Contractor will enroll the newborn in the mother’s CHIP plan
prospectively, following standard cut-off rules. The newborn’s CHIP eligibility ends when the
mother’s CHIP eligibility expires, as described above.

Section 5.05 CHIP Perinatal eligibility, enrollment, and disenrollment

(a) The HHSC Administrative Contractor will

electronically transmit to the MCO new CHIP Perinate Member information based on the
appropriate CHIP Perinate or CHIP Perinate Newborn Rate Cell. There is no waiting period for CHIP
Perinatal Program Members.

(b) Once born, a CHIP Perinate who lives in a

family with an income at or below 185% of the FPL will be deemed eligible for 12 months of
continuous Medicaid coverage (beginning on the date of birth). A CHIP Perinate will continue to
receive coverage through the CHIP Perinatal Program as a “CHIP Perinate Newborn” after birth if the
child’s family income is above 185% to 200% FPL. A CHIP Perinate Newborn is eligible for 12 months
continuous enrollment, beginning with the month of enrollment as a CHIP Perinate (month of
enrollment as an unborn child plus 11 months). A CHIP Perinate Newborn will maintain coverage in
his or her CHIP Perinatal MCO.

(c) HHSC’s Administrative Services Contractor

will send an enrollment packet to the prospective CHIP Perinate Members’ households. If the
household does not make a selection within 15 calendar days, the HHSC Administrative Services
Contractor will notify the household that the prospective member has been assigned to a CHIP
Perinatal MCO (“Default Enrollment”). When this occurs the household has 90 calendar days to
select another CHIP Perinatal MCO for the Member.

(d) HHSC’s Administrative Services Contractor

will assign prospective members to CHIP Perinatal MCOs in a Service Area in a rotational
basis. Should HHSC implement one (1) or more administrative rules governing the Default Enrollment
processes, such administrative rules will take precedence over the Default Enrollment process set
forth herein.

(e) When a member of a household enrolls in

the CHIP Perinatal Program, all traditional CHIP members in the household will be disenrolled
from their current health plans and prospectively enrolled in the CHIP Perinatal Program Member’s
health plan. All members of the household must remain in the same health plan until the later of:
(1) the end of the CHIP Perinatal Program Member’s enrollment period, or (2) the end of the
traditional CHIP members’ enrollment period.

(f) In the 10th month of the CHIP Perinate

Newborn’s coverage, the family will receive a CHIP renewal form. The family must complete
and submit the renewal form, which will be pre-populated to include the CHIP Perinate Newborn’s
and the CHIP Program Members’ information. Once the Member’s CHIP Perinatal Program coverage
expires, the Member will be added to his or her siblings’ existing CHIP program case.

Section 5.06 Span of Coverage (a) Medicaid MCOs.

(1) Open Enrollment.

HHSC will conduct continuous open enrollment for Medicaid Eligibles and the MCO must accept all
persons who choose to enroll as Members in the MCO or who are assigned as Members in the MCO by
HHSC, without regard to the Member’s health status or any other factor.

(2) Enrollment of New Medicaid Eligibles.

Persons who become eligible for Medicaid during an Inpatient Stay in a Hospital will not be
enrolled

20

in a Medicaid MCO until discharged from the Hospital, with the following exceptions: (1)
Members retroactively enrolled in STAR in accordance with Section 5.03, “STAR Enrollment of
Pregnant Women and Infants,” (2) Members prospectively enrolled in STAR or STAR+PLUS who are at
or below 12 months of age, and (3) Members retroactively enrolled in STAR in accordance with
Section 5.03.1, “Enrollment for infants born to pregnant women in

STAR+PLUS.” Except as provided in the following table, if a Member is enrolled in a Medicaid
MCO during an Inpatient Stay, the Medicaid MCO will be responsible for all Covered Services
beginning on the Effective Date of

Coverage. If a Member is enrolled during an Inpatient Stay under either of the above-
referenced exceptions, responsibility for the

Inpatient Stay services is assigned as follows:

	 	 	 	 	 
	Responsibility for Inpatient Stay Services

	 

	Exception

	 	Hospital

Facility

Charges
	 	Professional

Services

Charges
	 

	 	 
	 	 
	Member Retroactively

Enrolled in STAR per §5.03 or in

STAR+PLUS per

§5.03.1

	 	MCO

	 	MCO

	 

	 	 
	 	 
	Member = 12 Months of Age Who Is

Prospectively

Enrolled in STAR or

STAR+PLUS

	 	Medicaid MCO

	 	MCO

	 

	 	 
	 	 

(3) Movement between STAR or STAR+PLUS MCOs.

Except as provided in Section 5.06(a)(8), a Member cannot change from a STAR or STAR+PLUS MCO
to a different STAR or STAR+PLUS MCO during an Inpatient Stay in a Hospital, residential
substance use disorder treatment facility, or residential detoxification for substance use
disorder treatment facility.

(4) Movement from Medicaid Fee-for-Service to a STAR or STAR+PLUS MCO.

A Medicaid recipient can move from Medicaid Fee-for-Service into a STAR or STAR+PLUS MCO during
an Inpatient Stay in a Hospital, residential treatment facility, or residential detoxification
facility. Except as provided in subpart (a)(2), responsibility for claims incurred during the
Inpatient Stay will be divided as follows: (1) the Medicaid Fee-for-Service program will
continue to pay allowable facility charges until the earlier of the date of Discharge or loss
of Medicaid eligibility; and (2) beginning on the Effective Date

of Coverage, the STAR or STAR+PLUS MCO will pay for all other Covered Services.

Responsibility for claims incurred during residential treatment or residential detoxification will
be divided as follows: (1) the Medicaid Feefor-Service program will continue to pay all covered
services until the earlier of the date of Discharge or loss of Medicaid eligibility; and (2)
beginning on the Effective Date of Coverage, the STAR or STAR+PLUS MCO will pay for all covered
services. The MCO may evaluate for medical necessity prior to the end of the authorized services
period.

(5) Movement from a STAR MCO to the STAR Health MCO.

A Medicaid recipient can move from the STAR Program into the STAR Health Program during an
Inpatient Stay. In such cases, responsibility for claims incurred during the Inpatient stay will be
divided as follows: (1) the STAR MCO will continue to pay Hospital facility charges for Covered
Services until the earlier of the date of Discharge or loss of Medicaid eligibility, and (2)
beginning on the Effective Date of Coverage, the STAR Health MCO will pay for all other Covered
Services.

(6) Movement from a STAR+ PLUS MCO to the STAR Health MCO.

A Medicaid recipient can move from the STAR+PLUS Program into the STAR Health Program during an
Inpatient Stay. In such cases, responsibility for claims incurred during the Inpatient stay will be
divided as follows: (1) the STAR+PLUS MCO will continue to pay Hospital facility charges for
Behavioral Health Covered Services until the earlier of the date of Discharge or loss of Medicaid
eligibility, (2) and the Medicaid FFS program will continue to pay Hospital facility charges for
non-Behavioral Health Covered Services until the earlier of the date of Discharge or loss of
Medicaid eligibility, and (3) beginning on the Effective Date of Coverage, the STAR Health MCO will
pay for all other Covered Services.

(7) Movement from STAR+PLUS to Medicaid Fee-for-Service.

A Medicaid recipient can move from the STAR+PLUS Program to FFS (if a child) during an Inpatient
Stay. In such cases, responsibility for claims incurred during the Inpatient Stay will be divided
as follows: (1) the STAR+PLUS MCO will continue to pay Hospital facility charges for inpatient
Behavioral Health Covered Services until the earlier of the date of Discharge or loss of Medicaid
eligibility, and (2) beginning on the

S.CONTeffective date of FFS coverage, FFS will pay for all other Medicaid services.

(8) Movement from STAR to STAR+ PLUS or Medicaid Fee-for-Service due to SSI Status.

When a STAR member in the Medicaid Rural Service Area becomes qualified for SSI, the member will
remain in STAR (if an adult without Medicare), or may choose to stay in STAR or move to FFS (if
a child). The process described in Section 5.06(c) will apply if a child member elects to move
to FFS.

When a STAR member in another Service Area becomes qualified for SSI, the STAR member will
move, in accordance with the processes

described in Section 5.06(c): (1) to FFS or STAR+PLUS (if a child), or (2) to STAR+PLUS (if an
adult).

If a move occurs during an Inpatient Stay in a Hospital, residential substance use disorder
treatment facility, or residential detoxification for substance use disorder treatment facility,
responsibility for claims incurred during the Inpatient Stay will be divided as follows: (1) the
STAR MCO will continue to pay facility charges for Covered Services until the earlier of the
date of Discharge or loss of Medicaid eligibility, and (2) beginning on the Effective Date of
Coverage for STAR+ PLUS or the effective date of FFS coverage, the new entity will pay for all
other Medicaid services.

(9) Responsibility for Costs Incurred After Loss of Medicaid Eligibility.

Medicaid MCOs are not responsible for services incurred on or after the effective date of
loss of Medicaid eligibility.

(10) Reenrollment after Temporary Loss of Medicaid Eligibility.

Members who are disenrolled because they are temporarily ineligible for Medicaid will be
automatically re-enrolled into the same MCO, if available. Temporary loss of eligibility is
defined as a period of six (6) months or less.

(b) CHIP MCOs.

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

(c) Effective Date of SSI Status.

In accordance with Section 8.2.13, SSI status is effective on the date the State’s eligibility
system identifies a STAR, CHIP, or CHIP Perinatal Program Member as Type Program 13 (TP 13).
HHSC is responsible for updating the State’s eligibility system within 45 days of official
notice of the Member’s Federal SSI status by the Social Security Administration (SSA). Once HHSC
has updated the State’s eligibility system to identify the STAR, CHIP, or CHIP Perinatal Program
Member as TP13, following standard eligibility cut-off rules, HHSC will allow the Member to:

(1) prospectively move to Medicaid FFS (if the Member is a child in any part of the
State);

(2) prospectively move to STAR+PLUS (if the Member is a child in a STAR+PLUS Service
Area); or

(3) remain in STAR (if the Member is a child who is already enrolled in STAR in a Service
Area not served by STAR+PLUS).

HHSC will not retroactively disenroll a Member from the STAR, CHIP, or CHIP Perinatal Programs.

Section 5.07 Verification of Member Eligibility.

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

information from the State.

Section 5.08 Special Temporary STAR Default Process

(a) STAR MCOs that did not contract with HHSC to provide STAR services in a Service Area
prior to the Effective Date of the Contract will be assigned a limited number of STAR eligibles
who have not actively made an MCO choice, for a finite period. The number will vary by Service
Area as set forth below.

(b) For the Bexar, Dallas, El Paso, Harris, Lubbock, Nueces, Tarrant, and Travis Service
Areas, the special default process will begin with the Operational Start Date and conclude when
the MCO has achieved an enrollment of 15,000 mandatory STAR members, or at the end of six (6)
months, whichever comes first.

(c) Special default periods may be extended for one (1) or more Service Areas if consistent
with HHSC administrative rules.

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Section 5.09 Special Temporary STAR+PLUS Default Process

(a) STAR+PLUS MCOs that did not contract

with HHSC to provide STAR+PLUS services in a Service Area prior to the Effective Date of
the Contract will be assigned a limited number of STAR+PLUS eligibles who have not actively made
an MCO choice, for a finite period. To the extent possible, the special default assignment will
be based on each eligible’s prior history with a PCP and geographic proximity to a PCP.

(b) The special default process will begin on the

Operational Start Date.

Section 5.10 Special Temporary CHIP Default Process

(a) CHIP MCOs that did not contract with

HHSC to provide CHIP services in a Service Area prior to the Effective Date of the Contract
will be assigned a limited number of CHIP eligibles who have not actively made an MCO choice,
for a finite period.

(b) In Service Areas where there is only one (1)

new CHIP MCO, Members will be defaulted into the new CHIP MCO until it reaches 3,000
members or until six (6) months from the Operational Start Date, whichever comes first.

(c) In Service Areas where there are two (2) or

more new MCOs, Members are distributed evenly between the new MCOs until the MCOs reach
3,000 members or until six (6) months from the Operational Start Date, whichever comes first.

(d) Once one (1) of these criteria is met,

HHSC’s standard default process begins for all participating MCO.

Section 5.11 Default Methodology for Frew Incentives

As required by the “Frew vs. Suehs Corrective Action Order: Managed Care,” this Contract
includes a system of incentives and disincentives associated with the Medicaid Managed Care
Texas Health Steps Medical Checkups Reports. The default assignment methodology associated with
these reports, and corresponding incentives and disincentives for Medicaid MCOs, will be
included in the Uniform Managed Care Manual.

	 	 	Article 6. Service Levels & Performance Measurement Section 6.01 Performance measurement.

Satisfactory performance of this Contract will be measured by:

(a) Adherence to this Contract, including all

representations and warranties;

(b)

Delivery of the Services and Deliverables;

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

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

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

Article 7. Governing Law & Regulations Section 7.01 Governing law and venue.

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

Section 7.02 MCO responsibility for compliance with laws and regulations.

(a) MCO must comply, to the satisfaction of

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

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

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

(3) Chapters 531 and 533, Texas Government Code;

(4) 42 C.F.R. Parts 417, 455, and 457, as applicable;

(5) 45 C.F.R. Parts 74 and 92;

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

(7) 1 T.A.C. Part 15, Chapters 361, 370, 371, 391, and 392;

(8) Consent Decree and Corrective Action Orders, Frew, et al. v. Suehs, et al., (applies
to Medicaid MCOs only);

(9) partial settlement agreements, Alberto N., et al. v. Suehs, et al., (applies to Medicaid
MCOs only);

(10) Texas Human Resources Code Chapters 32 and 36;

(11) Texas Penal Code Chapter 35A (Medicaid Fraud);

S.CONT(12) 1 T.A.C. Chapter 353;

(13) 1 T.A.C. Chapter 354, Subchapters B, J, and F, with the exception of the following
provisions in Subchapter F: 1 T.A.C. §354.1865, §354.1867, §354.1873, and Division 6, “Pharmacy
Claims; and §354.3047:

(14) 1 T.A.C. Chapter 354, Subchapters I and K, as applicable;

(15) The Patient Protection and Affordable Care Act (“PPACA”; Public Law 111-148);

(16) The Health Care and Education Reconciliation Act of 2010 (“HCERA”; Public Law 111-152) 42
CFR Part 455; and

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

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

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

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

(e) MCO is responsible for ensuring each of its employees, agents or Subcontractors who
provide Services under the Contract are properly licensed,

certified, and/or have proper permits to perform any activity related to the Services.

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

Section 7.03 TDI licensure/ANHC certification and solvency.

(a) Licensure

MCO must receive TDI approval to operate in all counties of the Service Areas included within
the scope of the Contract.

(b) Solvency

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

(1) continuation of benefits, until the time of discharge, to Members who are confined on
the date of insolvency in a Hospital or other inpatient facility;

(2) payment to unaffiliated health care providers and affiliated health care providers
whose agreements do not contain member “hold harmless” clauses acceptable to TDI for required
services rendered to Members for the duration of the Contract period for which HHSC has paid a
Capitation Payment, and

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

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

Section 7.04 Immigration Reform and Control Act of 1986.

MCO must comply with the requirements of the Immigration Reform and Control Act of 1986 and the
Immigration Act of 1990 (8 U.S.C. §1 101, et seq.) regarding employment verification and retention
of verification forms for any individual(s) hired on or after November 6, 1986, who will perform
any labor or services under this Contract.

S.CONTSection 7.05 Compliance with state and federal
anti-discrimination laws.

(a) MCO agrees to comply with state and

federal anti-discrimination laws, including without limitation:

(1) Title VI of the Civil Rights Act of 1964 (42 U.S.C. §2000d et seq.);

(2) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. §794);

(3) Americans with Disabilities Act of 1990 (42 U.S.C. §12101 et seq.);

(4) Age Discrimination Act of 1975 (42 U.S.C. §§6101-6107);

(5) Title IX of the Education Amendments of 1972 (20 U.S.C. §§1681-1688);

(6) Food Stamp Act of 1977 (7 U.S.C. §200 et seq.); and

(7) The HHS agency’s administrative rules, as set forth in the Texas Administrative Code,
to the extent applicable to this Agreement.

MCO agrees to comply with all amendments to the above-referenced laws, and all requirements imposed
by the regulations issued pursuant to these laws. These laws provide in part that no persons in the
United States may, on the grounds of race, color, national origin, sex, age, disability, political
beliefs, or religion, be excluded from participation in or denied any aid, care, service or other
benefits provided by Federal or State funding, or otherwise be subjected to discrimination.

(b) MCO agrees to comply with Title VI of the

Civil Rights Act of 1964, and its implementing regulations at 45 C.F.R. Part 80 or 7 C.F.R. Part
15, prohibiting a contractor from adopting and implementing policies and procedures that exclude
or have the effect of excluding or limiting the

participation of clients in its programs, benefits, or activities on the basis of national origin.
Applicable state and federal civil rights laws require contractors to provide alternative methods
for ensuring access to services for applicants and recipients who cannot express themselves
fluently in English. MCO agrees to ensure that its policies do not have the effect of excluding or
limiting the participation of persons in its programs, benefits, and activities on the basis of
national origin. MCO also agrees to take reasonable steps to provide services and information,
both orally and in writing, in appropriate languages other than English, in order to ensure that
persons with limited English proficiency are effectively informed and can have meaningful access
to programs, benefits, and activities.

(c) MCO agrees to comply with Executive

Order 13279, and its implementing regulations at 45

C.F.R. Part 87 or 7 C.F.R. Part 16. These provide in

part that any organization that participates in programs funded by direct financial assistance
from the United States Department of Agriculture or the United States Department of Health and
Human Services must not, in providing services, discriminate against a program beneficiary or
prospective program beneficiary on the basis of religion or religious belief.

(d) Upon request, MCO will provide HHSC Civil Rights Office with copies of all of the MCO’s
civil rights policies and procedures.

(e) MCO must notify HHSC’s Civil Rights Office of any civil rights complaints received
relating to its performance under this Agreement. This notice must be delivered no more than ten
(10) calendar days after receipt of a complaint. Notice provided pursuant to this section must be
directed to:

HHSC Civil Rights Office

at

701 W. 51 Street, Mail Code W206 Austin, Texas 78751

Phone Toll Free: (888) 388-6332 Phone: (512) 438-4313

TTY Toll Free: (877) 432-7232 Fax: (512) 438-5885.

Section 7.06 Environmental protection laws.

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

(a) Pro-Children Act of 1994.

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

(b) National Environmental Policy Act of 1969.

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

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

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

(d) State Clean Air Implementation Plan.

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

S.CONT(e) Safe Drinking Water Act of 1974.

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

Section 7.07 HIPAA.

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

(b) Additionally, MCO must comply with HIPAA notification requirements, including those set
forth in the Health Information Technology for Economic and Clinical Health Act (HITECH Act) at 42
U.S.C. 17931 et.seq. MCO must notify HHSC of all breaches or potential breaches of unsecured
protected health information, as defined by the HITECH Act, without unreasonable delay and in no
event later than 60 calendar days after discovery of the breach or potential breach. If, in HHSC’s
determination, MCO has not provided notice in the manner or format prescribed by the HITECH Act,
then HHSC may require the MCO to provide such notice.

Section 7.08 Historically Underutilized Business Participation Requirements

(a) Definitions.

For purposes of this Section:

(1) “Historically Underutilized Business” or “HUB” means a minority or
women-owned business as defined by Texas Government Code, Chapter 2161.

(2) “HSP” means a HUB Subcontracting Plan.

(b) HUB Requirements.

(1) In accordance with Attachment B-1, Section 8.1.20.2, the MCO must submit an HSP for HHSC’s
approval during the Transition Phase, and maintain the HSP thereafter.

(2) MCO must report to HHSC’s contract manager and HUB Office monthly, in the format
required by Chapter 5.4.4.5 of the Uniform Managed Care Manual, its use of HUB subcontractors
to fulfill the subcontracting opportunities identified in the HSP.

(3) MCO must obtain prior written approval from the HHSC HUB Office before making any
changes to the HSP. The proposed changes must comply with HHSC’s good faith effort requirements
relating to the development and submission of HSPs.

(i) The MCO must submit a revised

HSP to the HHSC HUB Office when it: changes the dollar amount of, terminates, or modifies an
existing Subcontract for MCO Administrative Services; or enters into a new Subcontract for
MCO Administrative Services. All proposed changes to the HSP must comply

with the requirements of this Agreement.

(4) HHSC will determine if the value of Subcontracts to HUBs meet or exceed the HUB
subcontracting provisions specified in the MCO’s HSP. If HHSC determines that the MCO’s
subcontracting activity does not demonstrate a good faith effort, the MCO may be subject to
provisions in the Vendor Performance and Debarment Program (Title 34, Part 1, Chapter 20,
Subchapter C, Rule §20.105), and subject to remedies for Breach.

Article 8. Amendments & Modifications Section 8.01 Mutual agreement.

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

Section 8.02 Changes in law or contract.

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

Section 8.03 Modifications as a remedy.

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

Section 8.04 Modification Process.

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

(b) MCO must respond to HHSC’s proposed modification within the timeframe specified by HHSC,
generally within ten (10) Business Days of receipt. Upon receipt of MCO’s response to the proposed
modifications, HHSC may enter into negotiations with MCO to arrive at mutually agreeable Contract

S.CONTamendments. In the event that HHSC determines that the Parties will be unable to
reach agreement on mutually satisfactory contract modifications, then HHSC will provide written
notice to MCO of its intent terminate the Contract, or not to extend the Contract beyond the
current Contract Term.

Section 8.05 Modification of the Uniform Managed Care Manual.

(a) HHSC will provide MCO with at least ten (10) Business Days advance written notice before
implementing a substantive and material change in the Uniform Managed Care Manual (a change that
materially and substantively alters the MCO’s ability to fulfill its obligations under the
Contract). The Uniform Managed Care Manual, and all modifications thereto made during the Contract
Term, are incorporated by reference into this Contract. HHSC will provide MCO with a reasonable
amount of time to comment on such changes, generally at least five (5) Business Days. HHSC is not
required to provide advance written notice of changes that are not material and substantive in
nature, such as corrections of clerical errors or policy clarifications.

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

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

Section 8.06 CMS approval of amendments

Amendments, modifications, and changes to the Contract are subject to the approval of the Centers
for Medicare and Medicaid Services (“CMS.”)

Section 8.07 Required compliance with amendment and modification procedures.

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

that are not authorized by a properly executed Contract amendment or modification.

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

MCO agrees to maintain, and require its Subcontractors to maintain, records, books, documents, and
information (collectively “records”) that are adequate to ensure that services are provided and
payments are made in accordance with the requirements of this Contract, including applicable
Federal and State requirements (e.g., 45 CFR

§74.53). Such records must be retained by MCO or its Subcontractors for a period of five (5) years
after the Contract Expiration Date or until the resolution of all litigation, claim, financial
management review or audit pertaining to this Contract, whichever is longer.

Section 9.02 Access to records, books, and documents.

(a) Upon reasonable notice, MCO must

provide, and cause its Subcontractors to provide, the officials and entities identified in this
Section with prompt, reasonable, and adequate access to any records that are related to the scope
of this Contract.

(b) MCO and its Subcontractors must provide

the access described in this Section upon HHSC’s request. This request may be for, but is not
limited to, the following purposes:

(1) Examination;

(2) Audit;

(3) Investigation;

(4) Contract administration; or

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

(c) The access required must be provided to

the following officials and/or entities:

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

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

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

(4) The Office of Inspector General;

(5) The Medicaid Fraud Control Unit of the Texas Attorney General’s Office or its
designee;

(6) Any independent verification and validation contractor, audit firm, or quality
assurance contractor acting on behalf of HHSC;

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

(8) A State or Federal law enforcement agency;

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

S.CONT(10) Any other state or federal entity identified by HHSC, or any other entity
engaged by HHSC.

(d) MCO agrees to provide the access

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

(e) Upon request, the MCO must provide copies of the information described in this Section
free of charge to HHSC and the entities described in subsection (c).

(f) In accordance with Texas Government Code §533.012(e), any information submitted to HHSC or
the Texas Attorney General’s Office pursuant to Texas Government Code §533.012(a)(1) is
confidential and is not subject to disclosure under the Texas Public Information Act.

Section 9.03 Audits of Services, Deliverables and inspections.

(a) Upon reasonable notice from HHSC, MCO

will provide, and will cause its Subcontractors to provide, such auditors and inspectors as HHSC
may from time to time designate, with access to:

(1) service locations, facilities, or installations;

(2) records; and

(3) Software and Equipment.

(b) The access described in this Section will be

for the purpose of examining, auditing, or investigating:

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

(2) the Services and Deliverables

provided;

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

(4) a determination of the allowability of costs reported under this Contract;

(5) an examination of Subcontract terms and/or transactions;

(6) an assessment of financial results under this Contract;

(7) detection of Fraud, Waste and/or Abuse; or

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

(c) MCO must provide, as part of the Scope of

Work, any assistance that such auditors and inspectors reasonably may require to complete such
audits or inspections.

(d) If, as a result of an audit or review of

payments made to the MCO, HHSC discovers a payment error or overcharge, HHSC will notify the MCO of
such error or overcharge. HHSC will be entitled to recover such funds as an offset to future
payments to the MCO, or to collect such funds directly from the MCO. MCO must return funds owed to
HHSC within 30 days after receiving notice of the error or overcharge, or interest will accrue on
the amount due. HHSC will calculate interest at 12% per annum, compounded daily. In the event that
an audit reveals that errors in reporting by the MCO have resulted in errors in payments to the MCO
or errors in the calculation of the Experience Rebate, the MCO will indemnify HHSC for any losses
resulting from such errors, including the cost of audit. If the interest rate stipulated hereunder
is found by a court of competent jurisdiction to be outside the range

deemed legal and enforceable, then the rate hereunder will be adjusted as little as possible so
as to be deemed legal and enforceable.

Section 9.04 SAO Audit

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

Section 9.05 Response/compliance with audit or inspection findings.

(a) MCO must take action to ensure its or a

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

(b) MCO must bear the expense of compliance

with any finding of noncompliance under this Section that is:

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

(2)

22

Performed by MCO as part of the Scope of Work; or

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

(c) As part of the Scope of Work, MCO must

provide to HHSC upon request a copy of those portions of MCO’s and its Subcontractors’ internal
audit reports relating to the Services and Deliverables provided to HHSC under the Contract.

Section 9.06 Notification of Legal and Other Proceedings, and Related Events.

The MCO must notify HHSC of all proceedings, reports, documents, actions, and events as specified
in Uniform Managed Care Manual Chapter 5.8, “Report of Legal and Other Proceedings, and Related
Events.”

Article 10. Terms & Conditions of Payment

Section 10.01 Calculation of monthly Capitation Payment.

(a) This is a Risk-based contract. For each

applicable MCO Program, HHSC will pay the MCO fixed monthly Capitation Payments based on the
number of eligible and enrolled Members. HHSC will calculate the monthly Capitation Payments by
multiplying the number of Members by each applicable Member Rate Cell. In consideration of the
Monthly Capitation Payments, the MCO agrees to provide the Services and Deliverables described in
this Contract.

(b) MCO will be required to provide timely

financial and statistical information necessary in the Capitation Rate determination process.
Encounter Data provided by MCO must conform to all HHSC requirements. Encounter Data containing
noncompliant information, including, but not limited to, inaccurate Member identification numbers,
inaccurate provider identification numbers, or diagnosis or procedures codes insufficient to
adequately describe the diagnosis or medical procedure performed, will not be considered in the
MCO’s experience for rate- setting purposes.

(c) Information or data, including complete and

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

(d) The fixed monthly Capitation Rate consists

of the following components:

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

(2) an amount for administering the MCO Program, and an amount for the MCO’s Risk
margin.

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

(e) MCO understands and expressly assumes

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

Section 10.02 Time and Manner of Payment.

(a) During the Contract Term and beginning

after the Operational Start Date, HHSC will pay the monthly Capitation Payments by the 10th
Business Day of each month.

(b) The MCO must accept Capitation Payments

by direct deposit into the MCO’s account.

(c) HHSC may adjust the monthly Capitation

Payment to the MCO in the case of an overpayment to the MCO; for Experience Rebate amounts due and
unpaid, including any associated interest; and if monetary damages are assessed in accordance with
Article 12, “Remedies and Disputes.”

(d) HHSC’s payment of monthly Capitation

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

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

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

Section 10.03 Certification of Capitation Rates.

HHSC will employ or retain a qualified actuary to certify the actuarial soundness of the
Capitation Rates, and all revisions or modifications thereto.

Section 10.04 Modification of Capitation Rates.

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

S.CONTaccordance with Article 12, “Remedies and Disputes.”

Section 10.05 STAR and STAR+PLUS Capitation Structure.

(a) STAR Rate Cells.

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

(1) TANF adults;

(2) TANF children over 12 months of age;

(3) Expansion children over 12 months of age;

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

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

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

(7) Federal mandate children;

(8) Pregnant women; and

(9) SSI (applies to the Medicaid Rural Service Area only).

These Rate Cells are subject to change.

(b) STAR+PLUS Rate Cells.

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

(1) Medicaid Only Standard Rate

(2) Medicaid Only 1915 (c) Nursing Facility Waiver Rate – Above Floor

(3) Medicaid Only 1915 (c) Nursing Facility Waiver Rate – Below Floor

(4) Dual Eligible Standard Rate

(5) Dual Eligible 191 5(c) Nursing Facility Waiver Rate – Above Floor

(6) Dual Eligible 191 5(c) Nursing Facility Waiver Rate – Below Floor

(7) Nursing Facility – Medicaid only

(8) Nursing Facility — Dual Eligible These Rate Cells are subject to change.

(c) STAR and STAR+PLUS Capitation Rate

development:

(1) Capitation Rates for Service Areas with historical Medicaid MCO Program participation.

For Service Areas where HHSC operated a Medicaid MCO Program prior to the Effective Date of this
Contract, HHSC will develop base Capitation Rates by analyzing the Medicaid MCO Program’s
historical Encounter Data and financial data for the Service Area (e.g., Capitation Rates for
the STAR Program will be based on STAR

Program historical Encounter Data and financial data for the Service Area). This analysis will
apply to all MCOs in the Service Area, including MCOs that have no historical participation in
the

Medicaid MCO Program in Service Area. The analysis will include a review of historical
enrollment and claims experience information; any changes to Covered Services and covered
populations; rate changes specified by the Texas Legislature; and any other relevant
information. If the MCO participated in the Medicaid MCO Program in the Service Area prior to
the Effective Date of this Contract, HHSC may modify the Service Area base Capitation Rates
using diagnosis-based risk adjusters to yield the final Capitation Rates.

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

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

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

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

(d) Acuity adjustment.

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

S.CONTMCOs in a Service Area to get an average rate for the Service Area.

(e) Value-added Services.

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

(f) Delay in Increased STAR+PLUS Capitation Level for Certain Members Receiving Waiver
Services

Once a current STAR+PLUS MCO Member has been certified to receive STAR+PLUS Waiver (SPW) services,
there is a two (2) month delay before the MCO will begin receiving the higher capitation payment.

Non-Waiver Members who qualify for STAR+PLUS based on eligibility for SPW services and Waiver
recipients who transfer from another region will not be subject to this two (2) month delay in the
increased capitation payment.

All SPW recipients will be registered into Service Authorization System Online (SASO). The
Premium Payment System (PPS) will process data from the SASO system in establishing a Member’s
correct capitation payment.

Section 10.06 CHIP Capitation Rates Structure.

(a) CHIP Rate Cells.

CHIP Capitation Rates are defined on a per Member per month basis by the Rate Cells applicable to
a Service Area. CHIP Rate Cells are based on the Member’s age group as follows:

(1) under age one (1);

(2) ages one (1) through five (5);

(3) ages six (6) through fourteen (14); and

(4) ages fifteen (15) through eighteen (18).

(b) CHIP Perinatal Program Rate Cells.

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

(1) CHIP Perinate 0% to 185% of FPL;

(2) CHIP Perinate Above 185% to 200% of FPL; and

(3) CHIP Perinate Newborn Above 185% to 200% of FPL.

(c) CHIP and CHIP Perinatal Program

Capitation Rate development:

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

HHSC may modify the Service Area base Capitation Rate using diagnosis based risk adjusters to
yield the final Capitation Rates.

(d) Acuity adjustment.

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

(e) Value-added Services.

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

Section 10.07 MCO input during rate setting process.

(a) In Service Areas with historical STAR or STAR+PLUS Program participation, MCO must
provide certified Encounter Data and financial data as prescribed in Uniform Managed Care Manual
Chapter 5.0, “Deliverable Matrix.” Such information may include, without limitation: claims lag
information by Rate Cell, capitation expenses, and stop loss reinsurance expenses. HHSC may
request clarification or for additional financial information from the MCO. HHSC will notify the
MCO of the deadline for submitting a response, which will include a reasonable amount of time for
response.

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

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

S.CONTsecond meeting to discuss the final Capitation Rates and changes resulting from MCO
comments, if any.

Section 10.08 Adjustments to Capitation Payments.

(a) Recoupment.

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

(1) the Member is enrolled into the MCO in error;

(2) the Member moves outside the United States;

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

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

(5) payment has been denied by the CMS in accordance with the requirements in 42 C.F.R.
§438.730.

(b) Appeal of recoupment.

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

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

(a) The Delivery Supplemental Payment (DSP)

is a function of the average delivery cost in each Service Area. Delivery costs include
facility and professional charges.

(b) CHIP and STAR MCOs will receive a

Delivery Supplemental Payment (DSP) from HHSC for each live or stillbirth by a Member. CHIP
Perinatal MCOs will receive a DSP from HHSC for each live or stillbirth by a mother of a CHIP
Perinatal Program Member in the above 185% to 200% FPL (measured at the time of enrollment in the
CHIP Perinatal subprogram). CHIP Perinatal MCOs will not receive a DSP from HHSC for a live or
stillbirth by the mother of a CHIP Perinatal Program Member in the 0% to185% FPL. For STAR
and CHIP and CHIP Perinatal Program MCOs, the one-time DSP payment is made in the amount
identified in the HHSC Managed Care Contract document regardless of whether there is a single
birth or there are multiple births at time of delivery. A delivery is the birth of a live born
infant, regardless of the duration of the pregnancy, or a stillborn (fetal death) infant of twenty
(20) weeks or more of gestation. A delivery does not include a spontaneous or induced abortion,

regardless of the duration of the pregnancy.

(c) MCO must submit a monthly DSP Report as

described in, Section 8.1 .20.2, “Reports” to the RFP, in the format prescribed in Uniform
Managed Care

Manual Chapter 5.3.9, “Disproportionate Share Hospital Report.”

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

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

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

Section 10.10 Experience Rebate

(a) MCO’s duty to pay.

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

(b) Graduated Experience Rebate Sharing

Method.

	 	 	 	 	 	 	 	 	 
	Pre-tax Income as a % of Revenues

	 	MCO Share
	 	HHSC Share

	
 
	 	 	 	 	 	 	 	 
	=3%

	 	 	100	%	 	 	0	%
	 

	 	 	 	 	 	 	 	 
	> 3% and = 5%

	 	 	80	%	 	 	20	%
	 

	 	 	 	 	 	 	 	 
	> 5% and = 7%

	 	 	60	%	 	 	40	%
	 

	 	 	 	 	 	 	 	 
	> 7% and = 9%

	 	 	40	%	 	 	60	%
	 

	 	 	 	 	 	 	 	 
	> 9% and = 12%

	 	 	20	%	 	 	80	%
	 

	 	 	 	 	 	 	 	 
	> 12%

	 	 	0	%	 	 	100	%
	 

	 	 	 	 	 	 	 	 

HHSC and the MCO will share the consolidated Net Income before Taxes for the STAR, CHIP, and
STAR+PLUS Programs (hereinafter, “the applicable Programs”) as follows, unless HHSC provides the
MCO an Experience Rebate Reward in accordance with Section 6, “Premium Payment Incentives and
Disincentives,” and Uniform Managed Care Manual Chapter 6.2, “Financial Incentive Methodology”:

(1) The MCO will retain all the Net Income before Taxes that is equal to or less than 3% of

S.CONTthe total applicable Program Revenues received by the MCO;

(2) HHSC and the MCO will share that portion of the Net Income before Taxes that is over
3% and less than or equal to 5% of the total applicable Program Revenues received, with 80% to
the MCO and 20% to HHSC.

(3) HHSC and the MCO will share that portion of the Net Income before Taxes that is over
5% and less than or equal to 7% of the total applicable Program Revenues received, with 60% to
the MCO and 40% to HHSC.

(4) HHSC and the MCO will share that portion of the Net Income before Taxes that is over
7% and less than or equal to 9% of the total applicable Program Revenues received, with 40% to
the MCO and 60% to HHSC.

(5) HHSC and the MCO will share that portion of the Net Income before Taxes that is over
9% and less than or equal to 12% of the total applicable Program Revenues received, with 20% to
the MCO and 80% to HHSC.

(6) HHSC will be paid the entire portion of the Net Income before Taxes that exceeds 12%
of the total applicable Program Revenues.

(c) Net income before taxes.

(1) The MCO must compute the Net Income before Taxes in accordance with Uniform Managed
Care Manual Chapter 6.1 “Cost Principles for Expenses,” Chapter 5.3.1.2, “CHIP FSR Instructions
for Completion,” Chapter 5.3.1.4, “STAR FSR Instructions for Completion,” ”Chapter 5.3.1.6,
“STAR+PLUS FSR Instructions for Completion,” and applicable federal regulations. The Net Income
before Taxes will be confirmed by HHSC or its agent for the Rate Year relating to all revenues
and expenses incurred pursuant to the Contract. HHSC reserves the right to modify the “Cost
Principles for Expenses” and “FSR Instructions for Completion” found in the Uniform Managed
Care Manual in accordance with Section 8.05, “Modification of the Uniform Managed Care Manual.”

(2) For purposes of calculating Net Income before Taxes certain items are omitted from
the calculation; these include, but are not limited to:

(i) the payment of an Experience Rebate;

(ii) any interest expense associated with late or underpayment of the Experience
Rebate;

(iii) financial incentives, including without limitation the Quality Challenge Award
described in Attachment B-1, Section 6.3.2.3; and

(iv) financial disincentives, including

without limitation: the Performance-based Capitation Rate described in Attachment B-1,
Section 6.3.2.2; and the liquidated damages described in Attachment B-5.

See Uniform Managed Care Manual Chapter 6.1, “Cost Principles for Expenses.”

(3) Financial incentives will not be reduced by potential increased Experience Rebate
payments. Financial disincentives will not be offset in whole or part by potential decreases
in Experience Rebate payments.

(4) For FSR reporting purposes, financial

incentives incurred must not be reported as an increase in Revenues or as an offset to
costs, and any award of such will not increase reported income. Financial disincentives
incurred must not be included as reported expenses, and must not reduce reported income. The
reporting or recording of any of these incurred items will be done on a memo basis, which is
below the income line, and will be listed as separate items.

(d) Carry forward of prior Rate Year losses.

Losses incurred on a consolidated basis for the applicable Programs by an MCO for one (1) Rate
Year may be carried forward to the next Rate Year, and applied as an offset against applicable
Program pre-tax net income. Prior losses may be carried forward for two (2) contiguous Rate Years
for this purpose. If the MCO offsets a loss against another applicable Program Service Area, only
that portion of the loss that was not used as an offset may be carried forward to the next Rate
Year.

In the case of a loss in a given Rate Year being carried forward and applied against profits in
both of the next two (2) Rate Years, the loss must first be applied against the first subsequent
Rate Year such that the profit in the first subsequent Rate Year is reduced to a zero pre-tax
income; any additional loss then remaining unapplied may be carried forward to any profit in the
next subsequent Rate Year. In such case, the revised income in the third Rate Year would be equal
to the cumulative income of the three (3) contiguous periods.

Carry forward of losses may be impacted by the Admin Cap; see Section 10.10.2 (f) below.

Losses incurred in the last or next-to-last year of a prior contiguous contract with HHSC may be
carried forward up to two (2) years into the first or potentially second year of this Contract
if such losses meet all other requirements of both the prior and current contracts.

(e) Settlements for payment.

(1) There may be one (1) or more MCO payment(s) of the State share of the Experience

S.CONTRebate on income generated for a given State Fiscal Year under the applicable
Programs. The first scheduled payment (the “Primary Settlement”) will equal 100% of the State
share of the

Experience Rebate as derived from the FSR, and will be paid on the same day the 90-day FSR
Report is submitted to HHSC.

The “Primary Settlement,” as utilized herein, refers strictly to what should be paid with the
90-day

FSR, and does not refer to the first instance in which an MCO may tender a payment. For
example, an MCO may submit a 90-day FSR indicating no Experience Rebate is due, but then
submit a 334-day FSR with a higher income and a

corresponding Experience Rebate payment. In such case, this initial payment would be
subsequent to the Primary Settlement.

(2) The next scheduled payment will be an adjustment to the Primary Settlement, if required,
and will be paid on the same day that the 334-day FSR Report is submitted to HHSC if the

adjustment is a payment from the MCO to HHSC. Section 10.10(f) describes the interest
expenses associated with any payment after the Primary Settlement.

An MCO may make non-scheduled payments at any time to reduce the accumulation of interest
under Section 10.10(f). For any nonscheduled payments prior to the 334-day FSR, the MCO is
not required to submit a revised FSR, but is

required to submit an Experience Rebate calculation form and an adjusted summary page of the
FSR. The FSR summary page is labeled “Summary Income Statements (Dollars), All Coverage
Groups Combined (FSR, Part I).”

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

HHSC, then HHSC will make final adjustments. Any payment resulting from an audit or final

adjustment will be due from the MCO within 30 days of the earlier of:

(i) the date of the management representation letter resulting from the audit; or

(ii) the date of any invoice issued by HHSC.

Payment within this 30-day timeframe will not relieve the MCO of any interest payment

obligation that may exist under Section 10.10(f).

(4) In the event that any Experience Rebates and/or corresponding interest payments owed to
the State are not paid by the required due dates, then HHSC may offset such amounts from any

future Capitation Payments, or collect such sums directly from the MCO. HHSC may adjust the
Experience Rebate if HHSC determines the MCO has paid amounts for goods or services that are
not reasonable, necessary, or allowable in accordance with Uniform Managed Care Manual Chapter
6.1, “Cost Principles for Expenses,” Chapter 5.3.1.2, “CHIP FSR Instructions for Completion,”
Chapter 5.3.1.4, “STAR FSR Instructions for Completion,” ”Chapter 5.3.1.6, “STAR+PLUS FSR
Instructions for Completion,” and the Federal Acquisition Regulations (FAR), or other
applicable federal or state regulations. HHSC has final authority in auditing and determining
the amount of the Experience Rebate.

(f) Interest on Experience Rebate.

(1) Interest on any Experience Rebate owed to HHSC will be charged beginning 35 days
after the due date of the Primary Settlement, as described in Section 10.10(e)(1). Thus, any
Experience Rebate due or paid on or after the Primary Settlement will accrue interest starting
at 35 days after the due date for the 90-day FSR Report. For example, any Experience Rebate
payment (s) made in conjunction with the 334-day FSR, or as a result of audit findings, will
accrue interest back to 35 days after the due-date for submission of the 90-day FSR.

The MCO has the option of preparing an

additional FSR based on 120 days of claims run- out (a “120- day FSR”). If a 120-day FSR, and
an Experience Rebate payment based on it, are received by HHSC before the interest
commencement date above, then such a payment would be counted as part of the Primary

Settlement.

(2) If an audit or adjustment determines a downward revision of income after an
interest payment has previously been required for the same State Fiscal Year, then HHSC
will

recalculate the interest and, if necessary, issue a full or partial refund or credit to the
MCO.

(3) Any interest obligations that are incurred pursuant to Section 10.10 that are not
timely paid will be subject to accumulation of interest as well, at the same rate as
applicable to the underlying Experience Rebate.

(4) All interest assessed pursuant to Section 10.10 will continue to accrue until such
point as a payment is received by HHSC, at which point interest on the amount received will
stop accruing. If a balance remains at that point that is subject to interest, then the
balance will continue to accrue interest. If interim payments are made, then any interest that
may be due will only be charged on

23

amounts for the time period during which they remained unpaid. By way of example only, if
$100,000 is subject to interest commencing on a given day, and a payment is received for
$75,000 45 days after the start of interest, then the $75,000 will be subject to 45 days of
interest, and the $25,000 balance will continue to accrue interest until paid. The accrual of
interest as defined under Section 10.10(f) will not stop during any period of dispute. If a
dispute is resolved in the MCO’s favor, then interest will only be assessed on the revised
unpaid amount.

(5) If the MCO incurs an interest obligation pursuant to Section 10.10 for an Experience
Rebate payment HHSC will assess such interest at 12% per annum, compounded daily. If any
interest rate stipulated hereunder is found by a court of competent jurisdiction to be outside
the range deemed legal and enforceable, then the rate hereunder will be adjusted as little as
possible so as to be deemed legal and enforceable.

(6) Any such interest expense incurred pursuant to Section 10.10 is not an Allowable
Expense for reporting purposes on the FSR.

Section 10.10.1 This Section Intentionally Left Blank

Section 10.10.2 Administrative Expense Cap.

(a) General requirement.

The calculation methodology of Experience Rebates described in Section 10.10 will be adjusted by
an Administrative Expense Cap (“Admin Cap.”) The Admin Cap is a calculated maximum amount of
administrative expense dollars (corresponding to a given FSR) that can be deducted from Revenues
for purposes of determining income subject to the Experience Rebate. While Administrative Expenses
may be limited by the Admin Cap to determine Experience Rebates, all valid Allowable Expenses will
continue to be reported on the Financial Statistical Reports (FSRs). Thus, the Admin Cap does not
impact FSR reporting, but may impact any associated Experience Rebate calculation.

The calculation of any corresponding Experience Rebate due will be subject to limitations on
total deductible administrative expenses.

Such limitations will be calculated as follows:

(b) Calculation methodology.

HHSC will determine the administrative expense component of the applicable Capitation Rate
structure for each Program and Service Area prior to each applicable Rate Period. At the
conclusion of a Rate Period, HHSC will apply that predetermined administrative expense component
against the MCO’s actually incurred number of Member Months and

aggregate premiums received (monthly Capitation Payments plus Delivery Supplemental Payments
and/or Bariatric Supplemental Payments if applicable to the Program), to determine the specific
Admin Cap, in aggregate dollars, for a given MCO, Service Area, and Program.

(c) Data sources.

In determining the amount of Experience Rebate payment to include in the Primary Settlement (or
in conjunction with any subsequent payment or settlement), the MCO will need to make the
appropriate calculation, in order to assess the impact, if any, of the Admin Cap.

(1) The total premiums paid by HHSC (received

by the MCO), and corresponding Member Months, will be taken from the relevant FSR (or audit
report) for the Rate Period.

(2) There are two (2) components of the administrative expense portion of the Capitation
Rate structure:

(i) the percentage rate to apply against the total premiums paid (the “percentage of
premium” within the administrative expenses), and,

(ii) the dollar rate per Member Month (the “fixed amount” within the administrative
expenses).

These will be taken from the supporting details associated with the official notification of
final

Capitation Rates, as supplied by HHSC. This notification is sent to the MCOs during the annual
rate setting process via email, labeled as “the final rate exhibits for your health plan.” The
email has one (1) or more spreadsheet files attached, which are particular to the given MCO.
The spreadsheet(s) show the fixed amount and percentage of premium components for the
administrative component of the Capitation Rate.

The components of the administrative expense portion of the Capitation Rate can also be found
on HHSC’s Medicaid website, under “Rate Analysis for Managed Care Services.” Under each
Program, there is a separate Rate Setting document for each Rate Period that describes the
development of the Capitation Rates. Within each such document, there is a section entitled
“Administrative Fees,” where it refers to “the

amount allocated for administrative expenses.”

(3) In cases where the administrative expense portion of the Capitation Rate refers to “the
greater of (a) [one (1) set of factors], and (b) [another set of factors],” then the Admin Cap
will be calculated each way, and the larger of the two

(2) results will be the Admin Cap utilized for the determination of any Experience Rebates
due.

S.CONT(d) Separate calculations, by FSR.

Each MCO will have a separate Admin Cap for each Program and each Service Area in which it
participates. This will require calculating a separate Admin Cap corresponding to each FSR (for
annual, or complete period, versions of FSRs only). All administrative expenses reported on an FSR
in excess of the calculated corresponding Admin Cap will be subtracted from the total Allowable
Expense in the Experience Rebate calculation of income for that Program and Service Area, subject
to any consolidation or offset that may apply, as described in Section 10.10.2(e).

By way of example only, HHSC will calculate the Admin Cap for a Rate Period as follows:

(1) Multiply the predetermined administrative expense rate structure “fixed amount,” or
dollar rate per Member Month (for example, $11.00), by the actual number of Member Months for
the Program and Service Area during the Rate Period (for example, 70,000):

- $11.00 x 70,000 = $770,000.

(2) Multiply the predetermined percent of premiums in the administrative expense rate
structure (for example, 5.75%), by the actual aggregate premiums earned for the Program and
Service Area during the Rate Period (for example, $6,000,000).

- 5.75% x $6,000,000 = $345,000.

(3) Add the totals of items 1 and 2, plus applicable premium taxes and maintenance taxes
(for example, $112,000), to determine the Admin Cap for the Program and Service Area:

	 	•	 	 ($770,000 + $345,000) + $112,000 = $1,227,000.	 

In this example, $1,227,000 would be the Admin Cap for a single Program in a given Service
Area for an MCO in a particular Rate Period.

(e) Consolidation and offsets.

STAR, CHIP, CHIP Perinatal, and STAR+PLUS Program results will be consolidated. For a given MCO,
total incurred administrative expenses, as reported on the FSRs for the MCO’s Service Areas and/or
Programs, will be summed, and compared to the total Admin Caps for the MCO’s various Service Areas
and Programs. Thus, an MCO that exceeds its Admin Cap limit in one (1) or more Service Areas or
Programs, but does not exceed the Admin Cap in another Service area or Program, may have an
offset. The net impact of the Admin Cap across relevant FSRs will be applied to the Experience
Rebate calculation.

(f) Impact on Loss carry-forward.

For Experience Rebate calculation purposes, the calculation of any loss carry-forward, as
described in

Section 10.10(d), will be based on the allowable pretax loss as determined under the Admin Cap.

(g) MCOs entering a Service Delivery Area or Program.

If an MCO enters a new Service Area or offers a Program that it did not offer under a previous
contract, it will be exempt from the Admin Cap for those Service Areas and Programs for a period
of time to be determined by HHSC, up through the first State Fiscal Year or portion thereof.

(h) Service Delivery Areas with only one (1) MCO in a Program.

In Service Areas operating with only one (1) MCO for a Program, HHSC may, at its sole
discretion, revise the Admin Cap if its application would create an undue hardship on the MCO.

(i) Unforeseen events.

If, in HHSC’s sole discretion, it determines that unforeseen events have created significant
hardships for one (1) or more MCOs, HHSC may revise or temporarily suspend the Admin Cap as it
deems necessary.

Section 10.10.3 Reinsurance Cap 

(a) General requirement.

Reinsurance is reported on HHSC’s FSR report format as: 1) gross reinsurance premiums paid, and 2)
reinsurance recoveries received. The premiums paid are treated as a part of medical expenses, and
the recoveries received are treated as an offset to those medical expenses (also known as a
contra- cost). The net of the gross premiums paid minus the recoveries received is called the net
reinsurance cost. The net reinsurance cost, as measured in aggregate dollars over the SFY, divided
by the number of member-months for that same period, is referred to as the net reinsurance cost
per-member-per-month (PMPM).

MCOs are limited to a maximum amount of net reinsurance cost PMPM for purposes of calculating
pre-tax net income on HHSC’s FSR report format. This limitation does not impact an MCO’s
ability to purchase or arrange for reinsurance; it only impacts what is reportable on HHSC’s
FSR. The maximum amount of allowed net reinsurance cost PMPM (i.e., the “Reinsurance Cap”)
varies by MCO Program, as described in subpart (d)..

Regardless of the maximum amounts as represented by the Reinsurance Cap, all reinsurance
reported on the FSR is subject to audit, and must comply with the UMCM Cost Principles.

(b) Rates.

The Reinsurance Cap for Rate Period 1, and thereafter unless modified herein, will be:

S.CONT

	 	 	 	 	 
	Program

	 	Maximum net reinsurance cost, $-PMPM

	 

	 	 	 	 
	STAR

	 	$	1.00	 
	 

	 	 	 	 
	CHIP

	 	$	1.00	 
	 

	 	 	 	 
	STAR+PLUS

	 	$	1.00	 
	 

	 	 	 	 

Section 10.11 Restriction on assignment of fees.

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

Section 10.12 Liability for taxes.

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

Section 10.13 Liability for employment- related charges and benefits.

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

Section 10.14 No additional consideration.

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

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

(c) MCO will not be entitled by virtue of the Contract to consideration in the form of
overtime, health insurance benefits, retirement benefits, disability retirement benefits, sick
leave, vacation

time, paid holidays, or other paid leaves of absence of any type or kind whatsoever.

Section 10.15 Federal Disallowance

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

Article 11. Disclosure & Confidentiality

of Information

Section 11.01 Confidentiality.

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

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

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

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

(e) In addition to the requirements expressly stated in this Section, MCO must comply with
any policy, rule, or reasonable requirement of HHSC that relates to the safeguarding or
disclosure of

information relating to Members, MCO’s operations, or MCO’s performance of the Contract.

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

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

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

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

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

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

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

(5) Lawfully released without restriction to anyone.

Section 11.02 Disclosure of HHSC’s Confidential Information.

(a) MCO will immediately report to HHSC any

and all unauthorized disclosures or uses of HHSC’s Confidential Information of which it or its
Subcontractors, consultants, or agents is aware or has knowledge. MCO acknowledges that any
publication or disclosure of HHSC’s Confidential Information to others may cause immediate and
irreparable harm to HHSC and may constitute a violation of State or federal laws. If MCO, its
Subcontractors, consultants, or agents should publish or disclose such Confidential Information to
others without authorization, HHSC will immediately be entitled to injunctive relief or any other
remedies to which it is entitled under law or equity. HHSC will have the right to recover from MCO
all damages and liabilities caused by or arising from MCO’s, its Subcontractors’, consultants’, or
agents’ failure to protect HHSC’s Confidential Information. MCO will defend with counsel approved
by HHSC, indemnify and hold harmless HHSC from all damages, costs, liabilities, and expenses
caused by or arising from MCO’s or its Subcontractors’, consultants’ or agents’ failure to protect
HHSC’s Confidential Information. HHSC will not unreasonably withhold approval of counsel selected
by the MCO.

(b) MCO will require its Subcontractors,

consultants, and agents to comply with the terms of this provision.

Section 11.03 Member Records

(a) MCO must comply with the requirements of

state and federal laws, including the HIPAA requirements set forth in Section 7.07,
regarding the transfer of Member Records.

(b) If at any time during the Contract Term this

Contract is terminated, HHSC may require the transfer of Member Records, upon written notice
to MCO, to another entity, as consistent with federal and state laws and applicable releases.

(c) The term “Member Record” for this Section

means only those administrative, enrollment, case management and other such records
maintained by MCO and is not intended to include patient records maintained by participating
Network Providers.

Section 11.04 Requests for public information.

(a) When the MCO produces reports or other

forms of information that the MCO believes consist of proprietary or otherwise confidental
information, the MCO must clearly mark such information as confidential information or provide
written notice to HHSC that it considers the information confidential.

(b) If HHSC receives a request, filed in

accordance with the Texas Public Information Act (“Act,”) seeking information that has been
identified by the MCO as proprietary or otherwise confidential, HHSC will deliver a copy of the
request for public information to MCO, in accordance with the requirements of the Act.

(c) With respect to any information that is the

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

Section 11.05 Privileged Work Product.

(a) MCO acknowledges that HHSC asserts that

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

(b) HHSC will notify MCO of any privileged

work product to which MCO has or may have access. After the MCO is notified or otherwise
becomes aware that such documents, data, database, or communications are privileged work product,
only

S.CONTMCO personnel, for whom such access is necessary for the purposes of providing the
Services, may have access to privileged work product.

(c) If MCO receives notice of any judicial or

other proceeding seeking to obtain access to HHSC’s privileged work product, MCO will:

(1) Immediately notify HHSC; and

(2) Use all reasonable efforts to resist providing such access.

(d) If MCO resists disclosure of HHSC’s

privileged work product in accordance with this Section, HHSC will, to the extent authorized
under Civil Practices and Remedies Code or other applicable State law, have the right and duty
to:

(1) Represent MCO in such resistance;

(2) Retain counsel to represent MCO; or

(3) Reimburse MCO for reasonable attorneys’ fees and expenses incurred in resisting such
access.

(e) If a court of competent jurisdiction orders

MCO to produce documents, disclose data, or otherwise breach the confidentiality obligations
imposed in the Contract, or otherwise with respect to maintaining the confidentiality, proprietary
nature, and secrecy of privileged work product, MCO will not be liable for breach of such
obligation.

Section 11.06 Unauthorized acts. Each Party agrees to:

(1) Notify the other Party promptly of any unauthorized possession, use, or knowledge,
or attempt thereof, by any person or entity that may become known to it, of any HHSC
Confidential Information or any information identified by the MCO as confidential or
proprietary;

(2) Promptly furnish to the other Party full details of the unauthorized possession, use,
or

knowledge, or attempt thereof, and use

reasonable efforts to assist the other Party in investigating or preventing the reoccurrence
of any unauthorized possession, use, or knowledge,

or attempt thereof, of Confidential Information;

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

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

Section 11.07 Legal action.

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

possession, use, or knowledge, or attempt thereof by any person or entity of HHSC’s Confidential
Information or information identified by the MCO as

confidential or proprietary, which action or proceeding identifies the other Party’s information
without such Party’s consent.

Section 11.08 Information Security

The HMO and all Subcontractors, consultants, or agents must comply with all applicable laws,
rules, and regulations regarding information security, including without limitation the
following:

(1) Health and Human Services Enterprise Information Security Standards
and Guidelines;

(2) Title 1, Sections 202.1 and 202.3 through

202.28, Texas Administrative Code;

(3) The Health Insurance Portability and

Accountability Act of 1996 (HIPAA); and

(4) The Health Information Technology for Economic and Clinical Health Act (HITECH
Act).

Article 12. Remedies & Disputes

Section 12.01 Understanding and expectations.

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

Section 12.02 Tailored remedies.

(a) Understanding of the Parties.

MCO agrees and understands that HHSC may pursue tailored contractual remedies for noncompliance
with the Contract. At any time and at its discretion, HHSC may impose or pursue one (1) or more
remedies for each item of noncompliance and will determine remedies on a case-by-case basis.
HHSC’s pursuit or non-pursuit of a tailored remedy does not constitute a waiver of any other
remedy that HHSC may have at law or equity.

(b) Notice and opportunity to cure for non-

material breach.

(1) HHSC will notify MCO in writing of specific

areas of MCO performance that fail to meet performance expectations, standards, or schedules
set forth in the Contract, but that, in the determination of HHSC, do not result in a material

S.CONTdeficiency or delay in the implementation or operation of the Services.

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

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

(ii) If MCO disagrees with HHSC’s findings, its reasons for disagreeing with HHSC’s
findings.

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

(c) Corrective action plan.

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

(2) The Corrective Action Plan must provide:

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

(ii) MCO’s assessment or diagnosis of the cause; and

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

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

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

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

(ii) Disapprove portions of MCO’s proposed Corrective Action Plan; or

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

Notwithstanding the submission and acceptance of a Corrective Action Plan, MCO remains

responsible for achieving all written performance criteria.

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

(i) Excuse MCO’s prior substandard performance;

(ii) Relieve MCO of its duty to comply with performance standards; or

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

(d) Administrative remedies.

(1) At its discretion, HHSC may impose one (1) or more of the following remedies for each item
of

material noncompliance and will determine the scope and severity of the remedy on a
case-bycase basis:

(i) Assess liquidated damages in accordance with Attachment B-3, “Liquidated Damages
Matrix;”

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

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

(iv) Require additional and/or more detailed financial and/or programmatic audits or
other reviews of the MCO;

(v) Decline to renew or extend the Contract;

(vi) Appoint temporary management under the circumstances described in 42 C.F.R.
§438.706;

(vii) Initiate disenrollment of a Member or Members;

(viii) Suspend enrollment of Members;

(ix) Withhold or recoup payment to MCO;

(x) Require forfeiture of all or part of the MCO’s bond; or

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

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

(i) Violates a material provision of the Contract;

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

S.CONT(iii) Represents a failure of MCO to be

reasonably responsive to a reasonable request of HHSC relating to the Scope of Work for
information, assistance, or support within the timeframe specified by HHSC.

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

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

(e) Damages.

(1) HHSC will be entitled to monetary damages in the form of actual, consequential, direct,
indirect, special, and/or liquidated damages resulting from Contractor’s Breach of this
Agreement In some cases, the actual damage to HHSC or State of Texas as a result of MCO’s
failure to meet any aspect of the responsibilities of the Contract and/or to meet specific
performance standards set forth in the Contract are difficult or impossible to determine with
precise accuracy. Therefore, liquidated damages will be assessed in writing against and paid by
the MCO in for failure to meet any aspect of the responsibilities of the Contract and/or to meet
the specific performance standards identified by the HHSC in Attachment B-3,
“Deliverables/Liquidated Damages Matrix.” Liquidated damages will be assessed if HHSC determines
such failure is the fault of the MCO (including the MCO’S Subcontractors, agents and/or
consultants) and is not materially caused or contributed to by HHSC or its agents. If at any
time HHSC determines the MCO has not met any aspect of the responsibilities of the Contract
and/or the specific performance standards due to mitigating circumstances, HHSC reserves the
right to waive all or part of the liquidated damages. All such waivers must be in writing,
contain the reasons for the waiver, and be signed by the appropriate executive of HHSC.

(2) The liquidated damages prescribed in this Section are not intended to be in the
nature of a penalty, but are intended to be reasonable estimates of HHSC’s projected financial
loss and damage resulting from the MCO’s nonperformance, including financial loss as a result
of project delays. Accordingly, in the event MCO fails to perform in accordance with the
Contract, HHSC may assess liquidated damages as provided in this Section.

(3)

If MCO fails to perform any of the Services described in the Contract, HHSC may assess
liquidated damages for each occurrence of a liquidated damages event, to the extent consistent
with HHSC’s tailored approach to remedies and Texas law.

(4) HHSC may elect to collect liquidated damages:

(i) Through direct assessment and demand for payment delivered to MCO; or

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

(f) Equitable Remedies

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

(2) If a court of competent jurisdiction finds that MCO breached (or attempted or
threatened to breach) any such obligations, MCO agrees that without any additional findings of
irreparable injury or other conditions to injunctive relief, it will not oppose the entry of an
appropriate order

compelling performance by MCO and restraining it from any further breaches (or attempted or
threatened breaches).

(g) Suspension of Contract

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

(i) HHSC determines that MCO has committed a material breach of the Contract;

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

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

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

(2) HHSC will notify MCO in writing of its

intention to suspend the Contract in whole or in part. Such notice will:

(i)

24

Be delivered in writing to MCO;

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

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

Section 12.03 Termination by HHSC.

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

(a) Termination in the best interest of HHSC.

HHSC may terminate the Contract without cause at any time when, in its sole discretion, HHSC

determines that termination is in the best interests of the State of Texas. HHSC will provide
reasonable advance written notice of the termination, as it deems appropriate under the
circumstances. The

termination will be effective on the date specified in HHSC’s notice of termination.

(b) Termination for cause.

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

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

HHSC may terminate this Contract at any time if MCO:

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

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

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

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

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

(3) Breach of confidentiality.

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

(4) Failure to maintain adequate personnel or resources.

HHSC may terminate this Contract if, after

providing notice and an opportunity to correct, HHSC determines that MCO has failed to supply
personnel or resources and such failure results in MCO’s inability to fulfill its duties
under this

Contract. HHSC will provide at least 30 days advance written notice of such termination.

(5) Termination for gifts and gratuities.

(i) HHSC may terminate this Contract at

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

(ii) MCO must include a similar provision in

each of its Subcontracts and must enforce this provision against a Subcontractor who has
offered or given any thing of value to any of

the persons or entities described in this Section, whether or not the offer or gift was in
MCO’s behalf.

(iii) Termination of a Subcontract by

MCO pursuant to this provision will not be a cause for termination of the Contract
unless:

(a) MCO fails to replace such

terminated Subcontractor within a reasonable time; and

(b) Such failure constitutes cause, as

	 	 	 
	(iv)
	 	described in this Subsection 12.03(b).

For purposes of this Section, a

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

(6) Termination for non-appropriation of funds.

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

S.CONTsuch termination. HHSC will use reasonable efforts to ensure appropriated funds
are available.

(7) Judgment and execution.

(i) HHSC may terminate the Contract

at any time if judgment for the payment of money in excess of $500,000.00 that is not
covered by insurance, is rendered by any court or governmental body against MCO, and MCO
does not:

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

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

(c) Perfect an appeal of such

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

(ii) If a writ or warrant of attachment

or any similar process is issued by any court against all or any material portion of the
property of MCO, and such writ or warrant of

attachment or any similar process is not released or bonded within 30 days after its
entry, HHSC may terminate the Contract in accordance with this Section.

(8) Termination for insolvency.

(i) HHSC may terminate the Contract

at any time if MCO:

(a) Files for bankruptcy;

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

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

(d) Enters into a contract for the composition, extension, or readjustment of
substantially all of its obligations.

(ii) MCO agrees to pay for all

reasonable expenses of HHSC including the cost of counsel, incident to:

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

(b)

A case or proceeding involving a receiver or other similar officer duly

appointed to handle the MCO’s business; or

(c) A case or proceeding in a State court initiated by HHSC when previous
collection attempts have been unsuccessful.

(9) Termination for Criminal Conviction

HHSC will have the right to terminate the Contract in whole or in part, or require the
replacement of a Material Subcontractor, if the MCO or a Material Subcontractor is convicted
of a criminal offense in a state or federal court:

(i) Related to the delivery of an item or service;

(ii) Related to the neglect or abuse of patients in connection with the delivery of an
item or service;

(iii) Consisting of a felony related to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct, or

(iv) resulting in a penalty or fine in the amount of $500,000 or more in a state or
federal administrative proceeding.

(10) Termination for MCO’S material

breach of the Contract.

HHSC will have the right to terminate the Contract in whole or in part if HHSC determines,

at its sole discretion, that MCO has materially breached the Contract. HHSC will provide at
least 30 days advance written notice of such termination, unless HHSC in its reasonable
determination finds that a shorter notice period is warranted.

Section 12.04 Termination by MCO. (a) Failure to pay.

MCO may terminate this Contract if HHSC fails to pay the MCO undisputed charges when due as
required under this Contract. Retaining premium, recoupment, sanctions, or penalties that are
allowed under this Contract or that result from the MCO’s failure to perform or the MCO’s default
under the terms of this Contract is not cause for termination. Termination for failure to pay
does not release HHSC from the obligation to pay undisputed charges for services provided prior
to the termination date.

If HHSC fails to pay undisputed charges when due, then the MCO may submit a notice of intent to
terminate for failure to pay in accordance with the requirements of Subsection 12.04(d). If HHSC
pays all undisputed amounts then due within 30 days after receiving the notice of intent to
terminate, the MCO cannot proceed with termination of the Contract under this Article.

S.CONT(b) Change to HHSC Uniform Managed Care Manual.

MCO may terminate this agreement if the Parties are unable to resolve a dispute concerning a
material and substantive change to the Uniform Managed Care Manual (a change that materially and
substantively alters the MCO’s ability to fulfill its obligations under the Contract). MCO must
submit a notice of intent to terminate due to a material and substantive change in the Uniform
Managed Care Manual no later than 30 days after the effective date of the policy change. HHSC will
not enforce the policy change for the MCO during the period of time between the receipt of the
notice of intent to terminate and the effective date of termination.

(c) Change to Capitation Rate.

If HHSC proposes a modification to the Capitation Rate that is unacceptable to the MCO, the MCO
may terminate the Contract. MCO must submit a written notice of intent to terminate due to a
change in the Capitation Rate no later than 30 days after HHSC’s notice of the proposed change.
HHSC will not enforce the rate change against the MCO during the period of time between the
receipt of the notice of intent to terminate and the effective date of termination.

(d) Notice of intent to terminate.

In order to terminate the Contract pursuant to this Section, MCO must give HHSC at least 90 days
written notice of intent to terminate. The termination date will be calculated as the last day of
the month following 90 days from the date the notice of intent to terminate is received by HHSC.

Section 12.05 Termination by mutual agreement.

This Contract may be terminated by mutual written agreement of the Parties.

Section 12.06 Effective date of termination.

Except as otherwise provided in this Contract, termination will be effective as of the date
specified in the notice of termination.

Section 12.07 Extension of termination

effective date.

The Parties may extend the effective date of termination one (1) or more times by mutual written
agreement.

Section 12.08 Payment and other provisions at Contract termination.

(a) In the event of termination pursuant to this

Article, HHSC will pay the Capitation Payment for Services and Deliverables rendered through the
effective date of termination. All pertinent provisions of the Contract will form the basis of
settlement.

(b)

MCO must provide HHSC all reasonable access to records, facilities, and documentation as is
required to efficiently and expeditiously close out the Services and Deliverables provided under
this Contract.

(c) MCO must prepare a Turnover Plan, which is acceptable to and approved by HHSC. The
Turnover Plan will be implemented during the time period between receipt of notice and the
termination date, in accordance with Attachment B-1, RFP Section 9.

Section 12.09 Modification of Contract in the event of remedies.

HHSC may propose a modification of this Contract in response to the imposition of a remedy under
this Article. Any modifications under this Section must be reasonable, limited to the matters
causing the exercise of a remedy, in writing, and executed in accordance with Article 8,
“Amendments and Modifications.” MCO must negotiate such proposed modifications in good faith.

Section 12.10 Turnover assistance.

Upon receipt of notice of termination of the Contract by HHSC, MCO will provide any turnover
assistance reasonably necessary to enable HHSC or its designee to effectively close out the
Contract and move the work to another vendor or to perform the work itself.

Section 12.11 Rights upon termination or expiration of Contract.

In the event that the Contract is terminated for any reason, or upon its expiration, HHSC will,
at HHSC’s discretion, retain ownership of any and all associated work products, Deliverables
and/or documentation in whatever form that they exist.

Section 12.12 MCO responsibility for associated costs.

If HHSC terminates the Contract for Cause, the MCO will be responsible to HHSC for all
reasonable costs incurred by HHSC, the State of Texas, or any of its administrative agencies to
replace the MCO. These costs include, but are not limited to, the costs of procuring a
substitute vendor and the cost of any claim or litigation that is reasonably attributable to
MCO’s failure to perform any Service in accordance with the terms of the Contract

Section 12.13 Dispute resolution. (a) General agreement of the Parties.

The Parties mutually agree that the interests of fairness, efficiency, and good business
practices are best served when the Parties employ all reasonable and informal means to resolve
any dispute under this Contract. The Parties express their mutual commitment to using all
reasonable and informal

25

means of resolving disputes prior to invoking a remedy provided elsewhere in this Section.

(b) Duty to negotiate in good faith.

Any dispute that in the judgment of any Party to this Contract may materially or substantially
affect the performance of any Party will be reduced to writing and delivered to the other Party.
The Parties must then negotiate in good faith and use every reasonable effort to resolve such
dispute and the Parties must not resort to any formal proceedings unless they have reasonably
determined that a negotiated resolution is not possible. The resolution of any dispute disposed of
by Contract between the Parties must be reduced to writing and delivered to all Parties within ten
(10) Business Days.

(c) Claims for breach of Contract.

(1) General requirement. MCO’s claim for breach of this Contract will be resolved in
accordance with the dispute resolution process established by HHSC in accordance with Chapter
2260, Texas Government Code.

(2) Negotiation of claims. The Parties expressly agree that the MCO’s claim for breach of this
Contract that the Parties cannot resolve in the ordinary course of business or through the use
of all reasonable and informal means will be submitted to the negotiation process provided in
Chapter 2260, Subchapter B, Texas Government Code.

(i) To initiate the process, MCO must submit written notice to HHSC that specifically
states that MCO invokes the provisions of Chapter 2260, Subchapter B, Texas Government
Code. The notice must comply with the requirements of Title 1, Chapter 392, Subchapter B of
the Texas Administrative Code.

(ii) The Parties expressly agree that the MCO’s compliance with Chapter 2260, Subchapter
B, Texas Government Code, will be a condition precedent to the filing of a contested case
proceeding under Chapter 2260, Subchapter C, of the Texas Government Code.

(3) Contested case proceedings. The contested case process provided in Chapter 2260,
Subchapter C, Texas Government Code, will be MCO’s sole and exclusive process for seeking a
remedy for any and all alleged breaches of contract by HHSC if the Parties are unable to
resolve their disputes under Subsection (c)(2) of this Section.

The Parties expressly agree that compliance with the contested case process provided in Chapter
2260, Subchapter C, Texas Government Code, will be a condition precedent to seeking consent to

sue from the Texas Legislature under Chapter 107, Civil Practices & Remedies Code. Neither the
execution of this Contract by HHSC nor any other conduct of any representative of HHSC
relating to this Contract will be considered a waiver of HHSC’s sovereign immunity to suit.

(4) HHSC rules. The submission, processing and resolution of MCO’s claim is governed by
the rules adopted by HHSC pursuant to Chapter 2260, Texas Government Code, found at Title 1,
Chapter 392, Subchapter B of the Texas Administrative Code.

(5) MCO’s duty to perform. Neither the occurrence of an event constituting an alleged
breach of contract nor the pending status of any claim for breach of contract is grounds for
the suspension of performance, in whole or in part, by MCO of any duty or obligation with
respect to the performance of this Contract. Any changes to the Contract as a result of a
dispute resolution will be implemented in accordance with Article 8, “Amendments and
Modifications.”

Section 12.14 Liability of MCO.

(a) MCO bears all risk of loss or damage to

HHSC or the State due to:

(1) Defects in Services or Deliverables;

(2) Unfitness or obsolescence of Services or Deliverables; or

(3) The negligence or intentional misconduct of MCO or its employees, agents,
consultants, Subcontractors, or representatives.

(b) MCO must, at the MCO’s own expense,

defend with counsel approved by HHSC, indemnify, and hold harmless HHSC and State employees,
officers, directors, contractors and agents from and against any losses, liabilities, damages,
penalties, costs, fees, and expenses from any claim or action for property damage, bodily injury
or death, to the extent caused by or arising from the negligence or

intentional misconduct of the MCO and its employees, officers, agents, consultants, or
Subcontractors. HHSC will not unreasonably withhold approval of counsel selected by MCO.

(c) MCO will not be liable to HHSC for any loss,

damages or liabilities attributable to or arising from the failure of HHSC or any state
agency to perform a service or activity in connection with this Contract.

Section 12.15 Pre-termination Process.

The following process will apply when HHSC terminates the Agreement for any reason set forth in
Section 12.03(b), “Termination for Cause,” other than Subpart 6, “Termination for
Non-appropriation of Funds.” HHSC will provide the MCO with reasonable advance written notice of
the proposed termination, as it deems appropriate under the circumstances.

S.CONTThe notice will include the reason for the proposed termination, the proposed
effective date of the termination, and the time and place where the parties will meet regarding
the proposed termination. During this meeting, the MCO may present written information explaining
why HHSC should not affirm the proposed termination. HHSC’s Associate Commissioner for Medicaid
and CHIP will consider the written information, if any, and will provide the MCO with a written
notice of HHSC’s final decision affirming or reversing the termination. An affirming decision will
include the effective date of termination.

The pre-termination process described herein will not limit or otherwise reduce the parties’
rights and responsibilities under Section 12.13, “Dispute Resolution;” however, HHSC’s final
decision to terminate is binding and is not subject to review by the State Office of
Administrative Hearings under Chapter 2260, Texas Government Code.

Article 13. Assurances & Certifications Section 13.01 Proposal
certifications.

MCO acknowledges its continuing obligation to comply with the requirements of the following
certifications contained in its Proposal, and will immediately notify HHSC of any changes in
circumstances affecting these certifications:

(1) Federal lobbying;

(2) Debarment and suspension;

(3) Child support; and

(4) Nondisclosure statement.

Section 13.02 Conflicts of interest.

(a) Representation.

MCO agrees to comply with applicable state and federal laws, rules, and regulations regarding
conflicts of interest in the performance of its duties under this Contract. MCO warrants that it
has no interest and will not acquire any direct or indirect interest that would conflict in any
manner or degree with its performance under this Contract.

(b) General duty regarding conflicts of interest.

MCO will establish safeguards to prohibit employees from using their positions for a purpose that
constitutes or presents the appearance of personal or organizational conflict of interest, or
personal gain. MCO will operate with complete independence and objectivity without actual,
potential or apparent conflict of interest with respect to the activities conducted under this
Contract.

Section 13.03 Organizational conflicts of interest.

(a) Definition.

An organizational conflict of interest is a set of facts or circumstances, a relationship, or
other situation under which an MCO or a Subcontractor has past, present, or currently planned
personal or financial activities or interests that either directly or indirectly:

(1) Impairs or diminishes the MCO’s or Subcontractor’s ability to render impartial
or objective assistance or advice to HHSC; or

(2) Provides the MCO or Subcontractor an unfair competitive advantage in future HHSC
procurements (excluding the award of this Contract).

(b) Warranty.

Except as otherwise disclosed and approved by HHSC prior to the Effective Date of the Contract,
MCO warrants that, as of the Effective Date and to the best of its knowledge and belief, there are
no relevant facts or circumstances that could give rise to an organizational conflict of interest
affecting this Contract. MCO affirms that it has neither given, nor intends to give, at any time
hereafter, any economic opportunity, future employment, gift, loan, gratuity, special discount,
trip, favor, or service to a public servant or any employee or representative of same, at any time
during the procurement process or in connection with the procurement process except as allowed
under relevant state and federal law.

(c) Continuing duty to disclose.

(1) MCO agrees that, if after the Effective Date, MCO discovers or is made aware of an
organizational conflict of interest, MCO will immediately and fully disclose such interest in
writing to the HHSC project manager. In addition, MCO must promptly disclose any relationship
that might be perceived or represented as a conflict after its discovery by MCO or by HHSC as a
potential conflict. HHSC reserves the right to make a final determination regarding the

existence of conflicts of interest, and MCO agrees to abide by HHSC’s decision.

(2) The disclosure will include a description of the actions that MCO has taken or
proposes to take to avoid or mitigate such conflicts.

(d) Remedy.

If HHSC determines that an organizational conflict of interest exists, HHSC may, at its
discretion, terminate the Contract pursuant to Subsection 12.03(b)(9). If HHSC determines that
MCO was aware of an organizational conflict of interest before the award of this Contract and did
not disclose the conflict to the contracting officer, such nondisclosure will be considered a
material breach of the Contract.

S.CONTFurthermore, such breach may be submitted to the Office of the Attorney General,
Texas Ethics Commission, or appropriate State or Federal law enforcement officials for further
action.

(e) Flow-down obligation.

MCO must include the provisions of this Section in all Subcontracts for work to be performed
similar to the service provided by MCO, and the terms “Contract,” “MCO,” and “project manager”
modified appropriately to preserve the state’s rights.

Section 13.04 HHSC personnel recruitment prohibition.

MCO has not retained or promised to retain any person or company, or utilized or promised to
utilize a consultant that participated in HHSC’s development of specific criteria of the RFP or who
participated in the selection of the MCO for this Contract.

Unless authorized in writing by HHSC, MCO will not recruit or employ any HHSC personnel who have
worked on projects relating to the subject matter of this Contract, or who have had any influence
on decisions affecting the subject matter of this Contract, for two (2) years following the
completion of this Contract.

Section 13.05 Anti-kickback provision.

MCO certifies that it will comply with the Anti-Kickback Act of 1986, 41 U.S.C. §51-58 and Federal

Acquisition Regulation 52.203-7, to the extent applicable.

Section 13.06 Debt or back taxes owed to

State of Texas.

In accordance with Section 403.055 of the Texas Government Code, MCO agrees that any payments due
to MCO under the Contract will be first applied toward any debt and/or back taxes MCO owes State
of Texas. MCO further agrees that payments will be so applied until such debts and back taxes are
paid in full.

Section 13.07 Outstanding debts and judgments.

MCO certifies that it is not presently indebted to the State of Texas, and that MCO is not subject
to an outstanding judgment in a suit by State of Texas against MCO for collection of the balance.
For purposes of this Section, an indebtedness is any amount or sum of money that is due and owing
to the State of Texas and is not currently under dispute. A false statement regarding MCO’s status
will be treated as a material breach of this Contract and may be grounds for termination at the
option of HHSC.

Article 14. Representations & Warranties Section 14.01 Authorization.

(a) The execution, delivery and performance of

this Contract has been duly authorized by MCO and no additional approval, authorization or
consent of any governmental or regulatory agency is required to be obtained in order for MCO to
enter into this Contract and perform its obligations under this Contract.

(b) MCO has obtained all licenses, certifications,

permits, and authorizations necessary to perform the Services under this Contract and
currently is in good standing with all regulatory agencies that regulate any or all aspects of
MCO’s performance of this Contract. MCO will maintain all required certifications, licenses,
permits, and authorizations during the term of this Contract.

Section 14.02 Ability to perform.

MCO warrants that it has the financial resources to fund the capital expenditures required under
the Contract without advances by HHSC or assignment of any payments by HHSC to a financing source.

Section 14.03 Minimum Net Worth.

The MCO has, and will maintain throughout the life of this Contract, minimum net worth that
complies with standards adopted by TDI. Minimum net worth means the excess total admitted assets
over total liabilities, excluding liability for subordinated debt issued in compliance with
Chapter 843 of the Texas Insurance Code.

Section 14.04 Insurer solvency.

(a) The MCO must be and remain in full

compliance with all applicable state and federal solvency requirements for basic-service
health maintenance organizations, including but not limited to, all reserve requirements, net
worth standards, debt-to-equity ratios, or other debt limitations. In the event the MCO fails to
maintain such compliance, HHSC, without limiting any other rights it may have by law or under the
Contract, may terminate the Contract.

(b) If the MCO becomes aware of any

impending changes to its financial or business structure that could adversely impact its
compliance with the requirements of the Contract or its ability to pay its debts as they come
due, the MCO must notify HHSC immediately in writing.

(c) The MCO must have a plan and take

appropriate measures to ensure adequate provision against the risk of insolvency as
required by TDI. Such provision must be adequate to provide for the following in the event of
insolvency:

(1) continuation of Covered Services, until the

time of discharge, to Members who are confined

S.CONTon the date of insolvency in a hospital or other inpatient facility;

(2) payments to unaffiliated health care providers and affiliated healthcare providers
whose Contracts do not contain Member “hold harmless” clauses acceptable to the TDI;

(3) continuation of Covered Services for the duration of the Contract Period for which
a capitation has been paid for a Member;

(4) provision against the risk of insolvency must be made by establishing adequate
reserves, insurance or other guarantees in full compliance with all financial requirements of
TDI and the Contract.

Should TDI determine that there is an immediate risk of insolvency or the MCO is unable to
provide Covered Services to its Members, HHSC, without limiting any other rights it may have by
law, or under the Contract, may terminate the Contract.

Section 14.05 Workmanship and performance.

(a) All Services and Deliverables provided under

this Contract will be provided in a manner consistent with the standards of quality and
integrity as outlined in the Contract.

(b) All Services and Deliverables must meet or exceed the required levels of performance
specified in or pursuant to this Contract.

(c) MCO will perform the Services and provide the Deliverables in a workmanlike manner, in
accordance with best practices and high professional standards used in well-managed operations
performing services similar to the Services described in this Contract.

Section 14.06 Warranty of deliverables.

MCO warrants that Deliverables developed and delivered under this Contract will meet in all
material respects the specifications as described in the Contract during the period following its
acceptance by HHSC, through the term of the Contract, including any subsequently negotiated by MCO
and HHSC. MCO will promptly repair or replace any such Deliverables not in compliance with this
warranty at no charge to HHSC.

Section 14.07 Compliance with Contract.

MCO will not take any action substantially or materially inconsistent with any of the terms
and conditions set forth in this Contract without the express written approval of HHSC.

Section 14.08 Technology Access

(a) MCO expressly acknowledges that State

funds may not be expended in connection with the purchase of an automated information system
unless that system meets certain statutory requirements relating to accessibility by persons with
visual

impairments. Accordingly, MCO represents and warrants to HHSC that this technology is capable,
either by virtue of features included within the technology or because it is readily adaptable
by use with other technology, of:

(1) Providing equivalent access for effective

use by both visual and non-visual means;

(2) Presenting information, including prompts

used for interactive communications, in formats intended for non-visual use; and

(3) Being integrated into networks for obtaining,

retrieving, and disseminating information used by individuals who are not blind or
visually impaired.

(b) For purposes of this Section, the phrase

“equivalent access” means a substantially similar ability to communicate with or make use
of the technology, either directly by features incorporated within the technology or by other
reasonable means such as assistive devices or services that would constitute reasonable
accommodations under the Americans with Disabilities Act or similar State or Federal laws.
Examples of methods by which equivalent access may be provided include, but are not limited to,
keyboard alternatives to mouse commands and other means of navigating graphical displays, and
customizable display appearance.

(c) In addition, all technological solutions

offered by the MCO must comply with the requirements of Texas Government Code §531.0162. This
includes, but is not limited to providing technological solutions that meet federal accessibility
standards for persons with disabilities, as applicable.

Section 14.09 Electronic & Information Resources Accessibility Standards

(a) Applicability

The following Electronic and Information Resources (EIR) requirements apply to the Contract
because the MCO perform services that include EIR that: (i) HHSC employees are required or
permitted to access; or (ii) members of the public are required or permitted to access. This
Section does not apply to incidental uses of EIR in the performance of a Contract, unless the
Parties agree that the EIR will become property of the State or will be used by the HHSC’s clients
or recipients after completion of the Contract. Nothing in this section is intended to prescribe
the use of particular designs or technologies or to prevent the use of alternative technologies,
provided they result in substantially equivalent or greater access to and use of a Product.

(b) Definitions. For purposes of this Section:

“Accessibility Standards” means the Electronic and Information Resources Accessibility
Standards and the Web Site Accessibility Standards/Specifications.

S.CONT“Electronic and Information Resources” means information
resources, including information resources technologies, and any equipment or interconnected
system of equipment that is used in the creation, conversion, duplication, or delivery of data
or information. The term includes, but is not limited to, telephones and other
telecommunications products, information kiosks, transaction machines, Internet websites,
multimedia resources, and office equipment, including copy machines and fax machines.

“Electronic and Information Resources Accessibility Standards” means the
accessibility standards for electronic and information resources contained in Volume 1 Texas
Administrative Code Chapter 213.

“Web Site Accessibility Standards/ 

Specifications” means standards contained in Volume 1 Texas Administrative Code Chapter
206.

“Product” means information resources technology that is, or is related to, EIR.

(c) Accessibility Requirements.

Under Texas Government Code Chapter 2054, Subchapter M, and implementing rules of the Texas
Department of Information Resources, HHSC must procure Products that comply with the Accessibility
Standards when such Products are available in the commercial marketplace or when such Products are
developed in response to a procurement solicitation. Accordingly, MCO must provide electronic and
information resources and associated Product documentation and technical support that comply with
the Accessibility Standards.

(d) Evaluation, Testing, and Monitoring.

(1) HHSC may review, test, evaluate and monitor MCO’s Products and associated documentation
and technical support for compliance with the Accessibility Standards. Review, testing,
evaluation and monitoring may be conducted before and after the award of a contract. Testing and
monitoring may include user acceptance testing.

Neither (1) the review, testing (including acceptance testing), evaluation or monitoring of
any Product, nor (2) the absence of such review,

testing, evaluation or monitoring, will result in a waiver of the State’s right to contest
the MCO’s assertion of compliance with the Accessibility Standards.

(2) MCO agrees to cooperate fully and provide HHSC and its representatives timely access
to Products, records, and other items and

information needed to conduct such review, evaluation, testing and monitoring.

(e) Representations and Warranties.

(1) MCO represents and warrants that: (i) as of the Effective Date of the Contract, the
Products and associated documentation and technical support comply with the Accessibility
Standards as they exist at the time of entering the Contract, unless and to the extent the
Parties otherwise expressly agree in writing; and (ii) if the Products will be in the custody of
the state or an HHS Agency’s client or recipient after the Contract expiration or termination,
the Products will continue to comply with such Accessibility Standards after the expiration or
termination of the Contract Term, unless HHSC and/or its clients or recipients, as applicable,
use the Products in a manner that renders it noncompliant.

(2) In the event MCO should have known, becomes aware, or is notified that the Product and
associated documentation and technical support do not comply with the Accessibility Standards,
MCO represents and warrants that it will, in a timely manner and at no cost to HHSC, perform
all necessary steps to satisfy the Accessibility Standards, including but not limited to

remediation, replacement, and upgrading of the Product, or providing a suitable substitute.

(3) MCO acknowledges and agrees that these representations and warranties are essential
inducements on which HHSC relies in awarding this Contract.

(4) MCO’s representations and warranties under this subsection will survive the
termination or expiration of the Contract and will remain in full force and effect throughout
the useful life of the Product.

(f) Remedies.

(1) Pursuant to Texas Government Code Sec. 2054.465, neither MCO nor any other person has
cause of action against HHSC for a claim of a failure to comply with Texas Government Code
Chapter 2054, Subchapter M, and rules of the Department of Information Resources.

(2) In the event of a breach of MCO’s representations and warranties, MCO will be liable
for direct, consequential, indirect, special, and/or liquidated damages and any other remedies
to which HHSC may be entitled under this Contract and other applicable law. This remedy is
cumulative of any and all other remedies to which HHSC may be entitled under this Contract and
other applicable law.

S.CONTArticle 15. Intellectual Property

Section 15.01 Infringement and misappropriation.

(a) MCO warrants that all Deliverables provided by MCO will not infringe or misappropriate
any right of, and will be free of any claim of, any third person or entity based on copyright,
patent, trade secret, or other intellectual property rights.

(b) MCO will, at its expense, defend with counsel approved by HHSC, indemnify, and hold
harmless HHSC, its employees, officers, directors, contractors, and agents from and against any
losses, liabilities, damages, penalties, costs, and fees from any claim or action against HHSC
that is based on a claim of breach of the warranty set forth in the preceding paragraph. HHSC will
promptly notify MCO in writing of the claim, provide MCO a copy of all information received by
HHSC with respect to the claim, and cooperate with MCO in defending or settling the claim. HHSC
will not unreasonably withhold, delay or condition approval of counsel selected by the MCO.

(c) In case the Deliverables, or any one (1) or part thereof, is in such action held to
constitute an infringement or misappropriation, or the use thereof is enjoined or restricted or if
a proceeding appears to MCO to be likely to be brought, MCO will, at its own expense, either:

(1) Procure for HHSC the right to continue using the Deliverables; or

(2) Modify or replace the Deliverables to comply with the Specifications and to not
violate any intellectual property rights.

Section 15.02 Exceptions.

MCO is not responsible for any claimed breaches of the warranties set forth in Section 15.01 to
the extent caused by:

(a) Modifications made to the item in question by anyone other than MCO or its
Subcontractors, or modifications made by HHSC or its contractors working at MCO’s direction or
in accordance with the specifications; or

(b) The combination, operation, or use of the item with other items if MCO did not supply
or approve for use with the item; or

(c) HHSC’s failure to use any new or corrected versions of the item made available by MCO.

Section 15.03 Ownership and Licenses (a) Definitions.

For purposes of this Section 15.03, the following terms have the meanings set forth below:

(1) “Custom Software” means any software

developed by the MCO: for HHSC; in connection with the Contract; and with funds received from

HHSC. The term does not include MCO

Proprietary Software or Third Party Software.

(2) “MCO Proprietary Software” means software: (i)
developed by the MCO prior to the Effective Date of the Contract, or (ii) software developed
by the MCO after the Effective Date of the Contract that is not developed: for HHSC; in
connection with the Contract; and with funds received from HHSC.

(3) “Third Party Software” means software that is:
developed for general commercial use; available to the public; or not developed for HHSC.
Third Party Software includes without limitation: commercial off-the-shelf software;
operating system software; and application software, tools, and utilities.

(b) Deliverables.

The Parties agree that any Deliverable, including without limitation the Custom Software, will
be the exclusive property of HHSC.

(c) Ownership rights.

(1) HHSC will own all right, title, and interest in and to its Confidential Information
and the Deliverables provided by the MCO, including without limitation the Custom Software
and associated documentation. For purposes of this Section 15.03, the Deliverables will not
include MCO Proprietary Software or Third Party Software. MCO will take all actions
necessary and transfer ownership of the Deliverables to HHSC, including, without limitation,
the Custom Software and associated documentation prior to Contract termination.

(2) MCO will furnish such Deliverables, upon

request of HHSC, in accordance with applicable State law. All Deliverables, in whole and
in part, will be deemed works made for hire of HHSC for all purposes of copyright law, and
copyright will belong solely to HHSC. To the extent that any such Deliverable does not qualify
as a work for hire under applicable law, and to the extent that the Deliverable includes
materials subject to copyright, patent, trade secret, or other proprietary right protection,
MCO agrees to assign, and hereby assigns, all right, title, and interest in and to
Deliverables, including without limitation all copyrights, inventions, patents, trade secrets,
and other proprietary rights therein (including renewals thereof) to HHSC.

(3) MCO will, at the expense of HHSC, assist HHSC or its nominees to obtain copyrights,
trademarks, or patents for all such Deliverables in the United States and any other
countries. MCO agrees to execute all papers and to give all facts known to it necessary to
secure United States or

S.CONTforeign country copyrights and patents, and to transfer or cause to transfer to
HHSC all the right, title, and interest in and to such Deliverables. MCO also agrees not to
assert any moral rights under applicable copyright law with regard to such Deliverables.

(d) License Rights

HHSC will have a royalty-free and non-exclusive license to access the MCO Proprietary Software
and associated documentation during the term of the Contract. HHSC will also have ownership and
unlimited rights to use, disclose, duplicate, or publish all information and data developed,
derived, documented, or furnished by MCO under or resulting from the Contract. Such data will
include all results, technical information, and materials developed for and/or obtained by HHSC
from MCO in the performance of the Services hereunder, including but not limited to all reports,
surveys, plans, charts, recordings (video and/or sound), pictures, drawings, analyses, graphic
representations, computer printouts, notes and memoranda, and documents whether finished or
unfinished, which result from or are prepared in connection with the Scope of Work performed as a
result of the Contract.

(e) Proprietary Notices

MCO will reproduce and include HHSC’s copyright and other proprietary notices and product
identifications provided by MCO on such copies, in whole or in part, or on any form of the
Deliverables.

(f) State and Federal Governments

In accordance with 45 C.F.R. §95.617, all appropriate State and Federal agencies will have a
royalty-free, nonexclusive, and irrevocable license to reproduce, publish, translate, or otherwise
use, and to authorize others to use for Federal Government purposes all materials, the Custom
Software and modifications thereof, and associated documentation designed, developed, or installed
with federal financial participation under the Contract, including but not limited to those
materials covered by copyright, all software source and object code, instructions, files, and
documentation.

Article 16. Liability Section 16.01 Property damage.

(a) MCO will protect HHSC’s real and personal

property from damage arising from MCO’s, its agent’s, employees.’ Consultants’, and
Subcontractors’ performance of the Scope of Work, and MCO will be responsible for any loss,
destruction, or damage to HHSC’s property that results from or is caused by MCO’s, its agents’,
employees’, consultant’s, or Subcontractors’ negligent or wrongful acts or omissions. Upon the
loss of, destruction of, or damage to any property of HHSC, MCO will notify the

HHSC Project Manager thereof and, subject to direction from the Project Manager or her or his
designee, will take all reasonable steps to protect that property from further damage.

(b) MCO agrees to observe and encourage its

employees and agents to observe safety measures and proper operating procedures at HHSC
sites at all times.

(c) MCO will distribute a policy statement to all

of its employees and agents that directs the employee or agent to promptly report to HHSC or
to MCO any special defect or unsafe condition encountered while on HHSC premises. MCO will
promptly report to HHSC any special defect or an unsafe condition it encounters or otherwise
learns about.

Section 16.02 Risk of Loss.

During the period Deliverables are in transit and in possession of MCO, its carriers or HHSC
prior to being accepted by HHSC, MCO will bear the risk of loss or damage thereto, unless such
loss or damage is caused by the negligence or intentional misconduct of HHSC. After HHSC accepts
a Deliverable, the risk of loss or damage to the Deliverable will be borne by HHSC, except loss
or damage attributable to the negligence or intentional misconduct of MCO’s agents, employees,
consultants, or Subcontractors.

Section 16.03 Limitation of HHSC’s Liability.

HHSC WILL NOT BE LIABLE FOR ANY

INCIDENTAL, INDIRECT, SPECIAL, OR CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES UNDER
CONTRACT, TORT

(INCLUDING NEGLIGENCE), OR OTHER LEGAL THEORY. THIS WILL APPLY REGARDLESS OF THE CAUSE OF ACTION
AND EVEN IF HHSC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

HHSC’S LIABILITY TO MCO UNDER THE CONTRACT WILL NOT EXCEED THE TOTAL CHARGES TO BE PAID BY HHSC
TO MCO UNDER THE CONTRACT, INCLUDING CHANGE ORDER PRICES AGREED TO BY THE PARTIES OR OTHERWISE
ADJUDICATED.

MCO’s remedies are governed by the provisions in Article 12.

Article 17. Insurance & Bonding Section 17.01 Insurance Coverage. (a)
Statutory and General Coverage

MCO will maintain, at the MCO’s expense, the following insurance coverage:

(1) Business Automobile Liability Insurance for

all owned, non-owned, and hired vehicles for bodily injury and property damage;

S.CONT(2) Comprehensive General Liability Insurance of at least $1,000,000.00
per occurrence and $5,000,000.00 in the aggregate (including Bodily Injury coverage of
$100,000.00 per each occurrence and Property Damage Coverage of $25,000.00 per occurrence);
and

(3) If MCO’s current Comprehensive General Liability insurance coverage does not meet the
above stated requirements, MCO will obtain Umbrella Liability Insurance to compensate for the
difference in the coverage amounts. If Umbrella Liability Insurance is provided, it must follow
the form of the primary coverage.

(b) Professional Liability Coverage.

(1) MCO must maintain, or cause its Network Providers to maintain, Professional
Liability Insurance for each Network Provider of $100,000.00 per occurrence and $300,000.00
in the aggregate, or the limits required by the hospital at which the Network Provider has
admitting privileges.

(2) MCO must maintain an Excess Professional Liability (Errors and Omissions) Insurance
Policy for the greater of $3,000,000.00 or an amount (rounded to the nearest $100,000.00) that
represents the number of Members enrolled in the MCO in the first month of the applicable State
Fiscal Year multiplied by $150.00, not to exceed $10,000,000.00.

(c) General Requirements for All Insurance

Coverage

(1) Except as provided herein, all exceptions to

the Contract’s insurance requirements must be approved in writing by HHSC. HHSC’s written
approval is not required in the following situations:

(i) An MCO or a Network Provider is not required to obtain the insurance coverage
described in Section 17.01 if the MCO or Network Provider qualifies as a state governmental
unit or municipality under the Texas Tort Claims Act, and is required to comply with, and
subject to the provisions of, the Texas Tort Claims Act.

(ii) An MCO may waive the Professional Liability Insurance requirement described in
Section 17.01(b)(1) for a Network Provider of Community-based Long-term Services and
Supports. An MCO may not waive this requirement if the Network Provider provides other
Covered Services in addition to Community-based Long Term Services and Supports, or if a
Texas licensing entity requires the Network Provider to carry such

Professional Liability coverage. An MCO that waives the Professional Liability Insurance
requirement for a Network Provider pursuant

to this provision is not required to obtain such coverage on behalf of the Network
Provider.

(2) MCO or the Network Provider is responsible for any and all deductibles stated in the
insurance policies.

(3) Insurance coverage must be issued by insurance companies authorized to conduct
business in the State of Texas.

(4) With the exception of Professional Liability Insurance maintained by Network
Providers, all insurance coverage must name HHSC as an additional insured. In addition, with
the exception of Professional Liability Insurance maintained by Network Providers and
Business Automobile Liability Insurance, all insurance coverage must name HHSC as a loss
payee.

(5) Insurance coverage kept by the MCO must be maintained in full force at all times
during the Term of the Contract, and until HHSC’s final acceptance of all Services and
Deliverables. Failure to maintain such insurance coverage will constitute a material breach of
this Contract.

(6) With the exception of Professional Liability Insurance maintained by Network
Providers, the insurance policies described in this Section must have extended reporting
periods of two (2) years. When policies are renewed or replaced, the policy retroactive date
must coincide with, or precede, the Contract Effective Date.

(7) With the exception of Professional Liability Insurance maintained by Network
Providers, the insurance policies described in this Section must provide that prior written
notice be given to HHSC at least 30 calendar days before coverage is reduced below minimum
HHSC contractual requirements, canceled, or non-renewed. MCO must submit a new coverage binder
to HHSC to ensure no break in coverage.

(8) The Parties expressly understand and agree that any insurance coverages and limits
furnished by MCO will in no way expand or limit MCO’s liabilities and responsibilities
specified within the Contract documents or by applicable law.

(9) MCO expressly understands and agrees that any insurance maintained by HHSC will apply
in excess of and not contribute to insurance provided by MCO under the Contract.

(10) If MCO, or its Network Providers, desire additional coverage, higher limits of
liability, or other modifications for its own protection, MCO or its Network Providers will be
responsible for the acquisition and cost of such additional protection. Such additional
protection will not be an Allowable Expense under this Contract.

S.CONT(11) MCO will require all insurers to waive their rights of subrogation against
HHSC for claims arising from or relating to this Contract.

(d) Proof of Insurance Coverage

(1) Except as provided in Section 17.01(d)(2), the MCO must furnish the HHSC Project
Manager original Certificates of Insurance evidencing the required insurance coverage on or
before the Effective Date of the Contract. If insurance coverage is renewed during the Term of
the Contract, the MCO must furnish the HHSC Project Manager renewal certificates of insurance,
or such similar evidence, within five (5) Business Days of renewal. The failure of HHSC to
obtain such evidence from MCO will not be deemed to be a waiver by HHSC and MCO will remain
under continuing obligation to maintain and provide proof of insurance coverage.

(2) The MCO is not required to furnish the HHSC Project Manager proof of Professional
Liability Insurance maintained by Network Providers on or before the Effective Date of the
Contract, but must provide such information upon HHSC’s request during the Term of the
Contract.

Section 17.02 Performance Bond.

(a) The MCO must obtain a performance bond with a one (1) year term. The performance bond
must be renewable and renewal must occur no later than the first day of each subsequent State
Fiscal Year. The performance bond must continue to be in effect for one (1) year following the
expiration of the final renewal period. MCO must obtain and maintain the performance bonds in the
form prescribed by HHSC and approved by TDI, naming HHSC as Obligee, securing MCO’s faithful
performance of the terms and conditions of this Contract. The performance bonds must comply with
Chapter 843 of the Texas Insurance Code and 28 T.A.C. §11.1805. At least one (1) performance bond
must be issued. The amount of the performance bond(s) should total $100,000.00 for each MCO
Program within each Service Area that the MCO covers under this Contract. Performance bonds must
be issued by a surety licensed by TDI, and specify cash payment as the sole remedy. MCO must
deliver each renewal prior to the first day of the State Fiscal Year.

(b) Since the CHIP Perinatal Program is a subprogram of the CHIP Program, neither a separate
performance bond for the CHIP Perinatal Program nor a combined performance bond for the CHIP and
CHIP Perinatal Programs is required. The same bond that the MCO obtains for its CHIP Program
within a particular Service Area also will cover the MCO’s CHIP Perinatal Program in that same
Service Area.

Section 17.03 TDI Fidelity Bond

The MCO will secure and maintain throughout the life of the Contract a fidelity bond in compliance
with Chapter 843 of the Texas Insurance Code and 28 T.A.C. §11.1805. The MCO must promptly provide
HHSC with copies of the bond and any amendments or renewals thereto.

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	STATUS1
	 	DOCUMENT

REVISION2
	 	EFFECTIVE DATE

	 	DESCRIPTION3

	 
	 	 	 	 	 	 
	 	 

	Baseline
	 	 	n/a	 	 	September 1, 2011
	 	Initial version of

Attachment B-1, RFP

Sections 1 – 5,

“Introduction;

Procurement

Strategy; General

Instructions &

Requirements;

Submission

Requirements; and

Evaluation Process

& Criteria.”

	 
	 	 	 	 	 	 
	 	 

	Revision
	 	 	2.1	 	 	March 1, 2012
	 	Section 1.3 is

modified to clarify

that Medicaid Wrap

Services will

become covered

services at a

future date to be

determined by HHSC.

Section 1.8.1 is

modified to clarify

that Medicaid Wrap

Services will

become covered

services at a

future date to be

determined by HHSC.

	 
	 	 	 	 	 	 
	 	 

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

Table of Contents

	 	 	 	 	 
	1. Introduction.

	1.1 Point-of-Contact.

	1.2 Procurement Schedule.

	1.3 Purpose.

	1.4 Mission Statement.

	1.5 Mission Objectives.

	1.6 Overview of the HHSC MCO Programs.

	1.6.1 STAR.

	1.6.2 STAR+PLUS.

	1.6.3 CHIP.

	1.7 Other HHSC Managed Care Programs.

	1.8 Eligible Populations for HHSC MCO Programs.

	1.8.1 STAR Program Eligibility.

	1.8.2 STAR+PLUS Eligibility.

	1.8.3 CHIP Program Eligibility.

	1.9 Authorization.

	1.10 Eligible Respondents.

	1.11 Term of Contract.

	1.12 Development of Contracts.

	1.13 Medicaid and CHIP Service Areas.

	2. Procurement Strategy and Approach.

	2.1 HHSC Model Management Strategy.

	2.2 Performance Measures and Associated Remedies.

	3. General Instructions and Requirements.

	3.1 Strategic Elements.

	3.1.1 Contract Elements.

	3.1.2 HHSC’s Basic Philosophy: Contracting for

Results.

	3.2 External Factors.

	3.3 Legal and Regulatory Constraints.

	3.3.1 Delegation of Authority.

	 	 	 	 	 	 	 
	
 
	 	3.3.2 Conflicts of Interest.
	
 
	 	3.3.3 Former Employees of a State Agency.
	
 
	 	3.4 HHSC Amendments and Announcements Regarding this RFP.
	
 
	 	3.5 RFP Cancellation/Partial Award/Non-Award.
	
 
	 	3.6 Right to Reject Proposals or Portions of Proposals.
	
 
	 	3.7 Costs Incurred.
	
 
	 	3.8 Protest Procedures.
	
 
	 	3.9 Vendor Conference.
	
 
	 	3.10 Questions and Comments.
	
 
	 	3.11 Modification or Withdrawal of Proposal.
	
 
	 	3.12 News Releases.
	
 
	 	3.13 Incomplete Proposals.
	
 
	 	3.14 State Use of Proposal Information.
	
 
	 	3.15 Property of HHSC.
	
 
	 	3.16 Copyright Restriction.
	
 
	 	3.17 Additional Information.
	
 
	 	3.18 Multiple Responses.
	
 
	 	3.19 No Joint Proposals.
	
 
	 	3.20 Use of Subcontractors.
	
 
	 	3.21 Texas Public Information Act.
	
 
	 	3.22 Inducements.
	
 
	 	3.23 Definition of Terms.
	4.

	 	Submission Requirements.
	
 
	 	4.1 General Instructions.
	
 
	 	4.1 .1 Economy of Presentation.
	
 
	 	4.1.2 Number of Copies and Packaging.
	
 
	 	4.1.3 Due Date, Time, and Location.
	
 
	 	4.2 Part 1 – Business Proposal.
	
 
	 	4.2.1 Section 1 – Executive Summary.
	
 
	 	4.2.2 Section 2 – Respondent Identification and

Information.
	
 
	 	4.2.3 Section 3 – Corporate Background and Experience.
	
 
	 	4.2.4 Section 4 – Material Subcontractor Information.

	 	 	 	 	 
	4.2.5 Section 5 – Historically Underutilized Business (HUB) Participation
	4.2.6 Section 6 – Certifications and Other Required Forms
	 	4.3	 	 	Part 2 – Programmatic Proposal

	 	 	 
	4.3.1 Section 1 – Proposed Programs, Service Area, and Capacity
	4.3.2 Section 2 – Experience Providing Covered Services
	4.3.3 Section 3 – Value-added Services
	4.3.4 Section 4 – Access to Care
	 	

	4.3.5 Section 5 – Provider Network Provisions
	4.3.6 Section 6 – Member Services
	 	

	4.3.7 Section 7 – Quality Assessment and Performance Improvement
	4.3.8 Section 8 – Utilization Management
	4.3.9 Section 9 – Early Childhood Intervention (ECI)
	4.3.10

4.3.11

4.3.12

4.3.13

4.3.14

4.3.15

4.3.16

4.3.17

4.3.18

only)
	 	Section 10 – Services for People with Special Health Care Needs

Section 11 – Care Management and/or Service Coordination

Section 12 – Disease Management (DM)/Health Home Services

Section 13 – Behavioral Health Services and Network

Section 14 – Management Information System (MIS) Requirements

Section 15 – Fraud and Abuse

Section 16 – Pharmacy Services

Section 17 – Transition Plan

Section 18 – Additional Requirements Regarding Dual Eligibles (for STAR+PLUS

4-74

5. Evaluation Process and Criteria

	 	 	 
	5.1

5.2

5.3

5.4

5.5

5.6

5.7

5.8
	 	Overview of Evaluation Process

Evaluation Criteria

Initial Compliance Screening

Competitive Field Determinations

Oral Presentations and Site Visits

Best and Final Offer

Discussions with Respondents

Contract Awards

1. Introduction

1.1 Point-of-Contact

The sole point of contact for inquiries concerning this RFP is:

Texas Health and Human Services Commission

Enterprise Contracts and Procurement Services

4405 North Lamar Blvd

Austin, Texas 78756-3422

ATT: Alice Hanna, Purchaser

(512) 206-5277

alice.hanna@hhsc.state.tx.us

All communications relating to this RFP must be directed to the HHSC contact person named above.
All communications between Respondents and other HHSC staff members concerning this RFP are
strictly prohibited. Failure to comply with these requirements may result in proposal
disqualification.

1.2 Procurement Schedule

The following table documents the critical pre-award events for the procurement. All dates
are subject to change at HHSC’s discretion.

	 	 	 
	Procurement Schedule
	Draft RFP Release Date
	 	November 5, 2010

	 
	 	 

	Draft RFP Respondent Comments Due
	 	December 6, 2010

	 
	 	 

	Vendor Conference
	 	April 18, 2011 1:00pm CDT

	 
	 	 

	Respondent Questions Due
	 	April 19, 2011

	 
	 	 

	Letters Claiming Mandatory Contract Status Due
	 	April 28, 2011

	 
	 	 

	HHSC Posts Responses to Respondent Questions
	 	April 29, 2011

	 
	 	 

	Proposals Due
	 	May 23, 2011

	 
	 	 

	Deadline for Proposal Withdrawal
	 	May 23, 2011

	 
	 	 

	Respondent Demonstrations/Oral Presentations (HHSC option)
	 	HHSC will not be holding

presentations

	 
	 	 

	Tentative Award Announcement
	 	August 1, 2011

	 
	 	 

	Anticipated Contract Start Date
	 	September 1, 2011

	 
	 	 

	Operational Start Date
	 	March 1, 2012

	 
	 	 

1.3 Purpose

The State of Texas, by and through the Texas Health and Human Services Commission
(HHSC), is soliciting competitive proposals for managed care services for recipients who
participate in the following managed care programs:

> Medicaid State of Texas Access Reform Program (STAR);

> Medicaid STAR+PLUS Program;

> Children’s Health Insurance Program (CHIP), including the CHIP Perinatal
subprogram.

In order to ensure that recipients have a choice of health plans in all MCO Programs, HHSC will
select at least two (2) managed care organizations (MCOs) per MCO Program and Service Area.

Through this Request for Proposals (RFP), HHSC is expanding both the scope of services and the
geographical areas covered by its current managed care programs. New features include:

	 	 	 	> Expansion of STAR into two (2) new regions, the Hidalgo Service Area and
Medicaid Rural Service Area (MRSA).	 

	 	 	 	> Expansion of STAR+PLUS into the El Paso and Lubbock Service Areas, as well as
the new Hidalgo Service Area.	 

	 	 	 	> Adjustments to the Service Area boundaries for STAR, STAR+PLUS and CHIP Service
Areas, so that the Service Areas are consistent for all Programs.	 

	 	 	 	> The addition of prescription drug benefits to the managed care structure. The
prescription drug benefit will no longer be carved-out of managed care and paid through	 

HHSC’s Vendor Drug Program. Medicaid and CHIP MCOs will be responsible for
recruiting and maintaining pharmacy providers and paying for pharmacy benefits.

> The addition of inpatient facility services to the managed care structure for

STAR+PLUS.

> For Dual Eligible Members in the STAR+PLUS Program, the addition of Medicaid Wrap

Services to the scope of Covered Services at a date to be determined by HHSC.

Attachments B-5, 5.1, and 5.2 include maps of the planned STAR, STAR+PLUS and CHIP Service
Areas.

1.4 Mission Statement

HHSC’s mission is to create a customer-focused, innovative, and adaptable managed care system
that provides the highest quality of care to clients while at the same time ensures access to
services. Through this procurement, HHSC seeks to accomplish its mission by contracting for
measurable results that improve Member access and satisfaction; maximize program efficiency,
effectiveness, and responsiveness; and limit operational costs.

1.5 Mission Objectives

To accomplish the HHSC’s mission, HHSC will prioritize desired outcomes and benefits for
the managed care programs, and will focus its monitoring efforts on the MCOs’ ability to provide
satisfactory results in the following areas.

1. Network adequacy and access to care

All Members must have timely access to quality of care through a Network of Providers designed
to meet the needs of the population served. The MCO will be held accountable for creating and
maintaining a Network capable of delivering all Covered Services to Members. The MCO must
provide Members with access to qualified Network Providers within the travel distance and
waiting time for appointment standards defined in this RFP.

2. Quality

HHSC is accountable to Texans for ensuring that all Members receive quality services in the most
efficient and effective manner possible. Accordingly, the MCO will be responsible for providing
high quality services in a professional and ethical manner. HHSC expects the MCO to implement new
and creative approaches that ensure quality services, cost-effective service delivery, and careful
stewardship of public resources.

3. Timeliness of claim payment

The MCO’s ability to ensure that Network Providers receive timely and fair payment for services
rendered is a key component of their success in the STAR, STAR+PLUS, and CHIP programs. The MCO
must have the ability to timely comply with HHSC’s claims adjudication requirements, as set forth
in the Uniform Managed Care Manual. Therefore, HHSC will require strict adherence to claims
adjudication standards during the term of the Contract. HHSC also encourages MCOs to provide a
no-cost alternative for providers to allow billing without the use of a clearinghouse, and to
include attendant care payments as part of the regular claims payment process.

4. Timeliness with which prenatal care is initiated

STAR Program data has revealed that 83% of pregnant women received prenatal care in the first
trimester or within 42 days of enrollment. While this rate approximates the Medicaid managed
care national average, HHSC believes that the high prevalence of births in the STAR population
warrants efforts to improve timeliness of prenatal care initiation.

5. Behavioral health services

Members must have timely access to Medically Necessary Behavioral Health Services, such as mental
health counseling and treatment, as well as timely and appropriate follow-up care.

6. Delivery of health care to diverse populations

Member populations in Texas are as diverse as those of any state in the nation. Health Care
Services must be delivered without regard to racial or ethnic factors. HHSC expects the MCO to
implement intervention strategies to avoid disparities in the delivery of Health Care Services
to diverse populations and provide services in a culturally competent manner as described in
Section 8.1.5.8 of the RFP.

7. Disease management requirements

The MCO must provide a comprehensive disease management program or coverage for Disease Management
(DM) services for asthma, diabetes, and other chronic diseases identified by the MCO, based upon
an evaluation of the prevalence of the diseases within the MCO’s membership. Please refer to the
Uniform Managed Care Manual, Chapter 9.1 “Disease Management,” for additional DM requirements.

8. Service Coordination

The integration of Acute Care services and Community-based Long-Term Services and Supports is an
essential feature of STAR+PLUS. A STAR+PLUS MCO must demonstrate that there are sufficient levels
of qualified and competent personnel devoted to Service Coordination to meet the everyday needs of
STAR+PLUS Members, including Dual Eligibles.

9. Continuity Of Care

HHSC expects that established Member/Provider relationships, existing treatment protocols, and
ongoing care plans will not be impacted significantly by this procurement. Transition to the MCO
must be as seamless as possible for Members and their Providers.

1.6 Overview of the HHSC MCO Programs

House Bill 7 from the 72nd Regular Session of the Texas Legislature mandated the
establishment of Medicaid managed care pilot projects that utilized proven approaches for
delivering comprehensive health care. In 1991, the Texas Department of Health created the Bureau
of Managed Care. Since that time, Texas has administered a comprehensive set of managed care
programs to serve low income Texans. These programs, as presently constituted and administered by
HHSC, include the STAR, STAR+PLUS, and CHIP Programs as described in this section.

1.6.1 STAR

STAR is currently HHSC’s primary managed care program for Medicaid Eligibles and operates
under a federal waiver issued pursuant to §1915(b) of the Social Security Act. It grew out of a
pilot project in Travis County in 1993.

STAR is currently available in Bexar, Dallas, El Paso, Harris, Nueces, Jefferson, Lubbock,
Tarrant, and Travis regions. Total STAR enrollment as of August 1, 2010 was 1,452,531.

All non-STAR counties in Texas (primarily rural areas) are currently served by the Medicaid
Primary Care Case Management Program (PCCM). Total PCCM enrollment as of August 1, 2010 was
840,172. As a result of this procurement, PCCM will be replaced by STAR in the Hidalgo Service
Area and the Medicaid Rural Service Area (MRSA). Note, however, that in the Hidalgo Service Area,
HHSC will secure legislative direction before including Cameron, Hidalgo, and Maverick Counties in
the STAR Program. Refer to the Procurement Library for current and projected STAR enrollment by
Service Area.

1.6.2 STAR+PLUS

STAR+PLUS is a Texas Medicaid program integrating the delivery of Acute Care services and
Community-based Long-Term Services and Supports to aged, blind, and disabled (ABD) Medicaid
recipients through a managed care system. STAR+PLUS began as a Medicaid pilot project in Harris
County in 1998. The STAR+PLUS program operates under three (3) federal Medicaid waivers, one (1)
§1915(b) and two (2) §1915(c) waivers. The waivers allow the state to provide home and
community-based services for Supplemental Security Income (SSI) eligible and SSI-related Medicaid
clients, and to mandate managed care participation for clients who are 21 years of age and older.
Enrollment in STAR+PLUS is voluntary for clients who are 20 years of age and younger.

As of August 1, 2010, STAR+PLUS MCOs served 169,873 Members in the Bexar, Harris, Nueces, and
Travis Service Areas. Through this procurement, HHSC intends to expand STAR+PLUS to the El Paso,
Hidalgo, and Lubbock Service Areas (see Attachment B-5.2 “STAR+PLUS Service Area Map”). As in
STAR, HHSC will seek legislative direction before including Cameron, Hidalgo, and Maverick
Counties in the STAR+PLUS Hidalgo Service Area. Refer to the Procurement Library for current and
projected STAR+PLUS enrollment by Service Area.

1.6.3 CHIP

CHIP is HHSC’s program to help Texas families obtain affordable coverage for their uninsured
children (from birth through the month of their 19th birthday). In 1999, the 76th Texas
Legislatureauthorized the state’s participation in the federal CHIP program. The principal
objective of the state legislation was to provide primary and preventative health care to
low-income, uninsured children of Texas, including Children with Special Health Care Needs (CSHCN)
who were not served by or eligible for other state-assisted health insurance programs.

HHSC began operating CHIP in 2000. CHIP Members are currently covered through two (2) types of
managed care entities – health maintenance organizations (HMOs) licensed by the Texas Department
of Insurance (TDI) and exclusive provider organizations (EPOs) with TDIapproved exclusive provider
benefit plans (EPBPs). HMOs serve CHIP Members in eight (8), primarily urban Service Areas. EPOs
serve the remaining CHIP Members, who reside primarily in the 174-county rural service area (the
CHIP RSA). As of September 1, 2010, 523,895 children were enrolled in CHIP. Of these, 400,243 were
enrolled in HMOs. The balance of the CHIP enrollment is in the EPOs serving the CHIP RSA. Refer to
the Procurement Library for current and projected CHIP enrollment by Service Area.

The CHIP Perinatal Program, a subprogram of CHIP, is for unborn children of women who are not
eligible for Medicaid. The 2006-07 General Appropriations Act (Article II, Health and Human
Services Commission, Rider 70, S.B. 1, 79th Legislature, Regular Session, 2005)
authorized HHSC to expend funds to provide unborn children with health benefit coverage under
CHIP. The result was the CHIP Perinatal Program, which began in January 2007. This benefit allows
pregnant women who are ineligible for Medicaid due to income (whose income is greater than 185
percent and up to 200 percent of FPL) or immigration status (and whose income is below 200 percent
of FPL) to receive prenatal care for their unborn children. Upon delivery, newborns in families
with incomes at or below 185 percent of the Federal Poverty Level (FPL) move from the CHIP
Perinatal Program to Medicaid, where they receive 12-months of continuous Medicaid coverage. CHIP
Perinatal newborns in families with incomes above 185 percent FPL up to and including 200 percent
FPL remain in the CHIP Perinatal Program and receive CHIP benefits for a 12-month coverage period,
beginning on the date of enrollment as an unborn child. CHIP Perinatal Program Members are exempt
from the 90-day waiting period, the asset test, and all cost-sharing that applies to traditional
CHIP Members, including enrollment fees and co-pays, for the duration of their coverage period. As
of September 1, 2010, 33,860 CHIP Perinates (unborn children) and 19,076 CHIP Perinate Newborns
were enrolled in this subprogram.

Throughout this RFP, references to “CHIP” apply to both the traditional CHIP Program and the
CHIP Perinatal subprogram unless the context indicates otherwise.

1.7 Other HHSC Managed Care Programs

The following managed care options are not included in the scope of this
procurement: CHIP Rural Service Area (RSA): 174 primarily-rural counties.

Medicaid and CHIP Dental Programs: The Medicaid State Plan encourages eligible individuals to
improve and maintain good oral health by providing access to comprehensive dental care. The
CHIP Dental Program is a statewide program that provides services such as routine check-ups,
cleanings, X-rays, sealants, fillings, tooth removal, crowns/caps and root canals for all CHIP
children. HHSC has issued a managed care procurement with an anticipated operational start date
of March 1, 2012 for both the Medicaid and CHIP Dental Programs.

STAR+PLUS Program in the Dallas and Tarrant Service Areas: Effective February 1, 2011, STAR+PLUS
began serve approximately 78,000 Medicaid clients in the Dallas and Tarrant Service Areas.

STAR Health Program: On April 1, 2008, HHSC launched the STAR Health program as the first
comprehensive health and medical network for children who are in the state’s foster care
system. The goal is to give children health care services that are coordinated, comprehensive,
easy to find, and uninterrupted when the child moves.

NorthSTAR: NorthSTAR is an integrated behavioral health delivery system for Medicaid Eligibles in
the Dallas Service Area. It is an initiative of the Texas Department of Mental Health and Mental
Retardation and the Texas Commission on Alcohol and Drug Abuse. Behavioral Health Services are
provided by a licensed behavioral health organization. Due to the presence of NorthSTAR in the
Dallas Service Area, MCOs in the Service Area will not be required to provide Behavioral Health
Services to STAR Members.

1.8 Eligible Populations for HHSC MCO Programs

Within the STAR, STAR+PLUS, and CHIP Service Areas described in Section 1.6, the following
populations are eligible for HHSC’s MCO Programs. Federal law requires a choice of Medicaid
managed care health plans in any given Service Area. For the STAR Program, during the period after
which the Medicaid eligibility determination has been made, but prior to enrollment in the MCO,
Medicaid Eligibles, with the exception of certain newborns and pregnant women will be enrolled
under the traditional fee-for-service Medicaid program (see Article 5 of Attachment A, “Uniform
Managed Care Contract Terms and Conditions” of the RFP). All such Medicaid Eligibles will remain
in the fee-for-service Medicaid program until enrolled in or assigned to a STAR or STAR+PLUS MCO,
as applicable. For the CHIP MCO Program, there is no benefit coverage for CHIP-eligible children
prior to enrollment in a CHIP MCO.

1.8.1 STAR Program Eligibility

Mandatory

Medicaid Eligibles in the following categories who reside in any part of a STAR Service Area
must enroll in a STAR MCO:

1. Temporary Assistance to Needy Families (TANF) adults — individuals age 21 and over who
are eligible for the TANF program. This category may also include some pregnant women;

	 	2.	 	TANF children — individuals birth through age 20 who are eligible for the TANF
program. This category may also include some pregnant women and some children less than
one year of age;	 

	 	3.	 	pregnant women receiving Medical Assistance only (MAO) — pregnant women whose
families’ income is below 185% of the Federal Poverty Level (FPL);	 

	 	4.	 	pregnant women (MAO) under age 18 whose family income is below 185% of the FPL;

	 	5.	 	newborns (MAO) — children under age one born to Medicaid-eligible mothers;

	 	6.	 	expansion children (MAO) — children under age 18, ineligible for TANF because of
the applied income of their stepparents or grandparents;	 

	 	7.	 	expansion children (MAO) — children under age 1 whose families’ income is below
185% FPL;	 

	 	8.	 	expansion children (MAO) — children age 1- 5 whose families’ income is at or
below 133% of FPL;	 

	 	9.	 	federal mandate children (MAO) — children aged 6-18 whose families’ income is
below 100% Federal Poverty Income Limit; and	 

	 	10.	 	SSI Medicaid Eligible adults in all areas where STAR+PLUS is not an option.

Voluntary

SSI Medicaid Eligible children who reside in a service areas where STAR+PLUS is not available have
the option to enroll in a STAR MCO.

1.8.2 STAR+PLUS Eligibility

Mandatory 

Medicaid Eligibles in the following categories who reside in any part of a STAR+PLUS Service
Area must enroll a STAR+PLUS MCO:

• SSI-eligibles over age 20;

	 	•	 	individuals over age 20 who are Medicaid-eligible because they are in a Social
Security Exclusion Program. NOTE: These individuals are considered MAO for purposes of
19 15(c) Waiver eligibility;	 

	 	•	 	MAO eligibles that qualify for 1915(c) Waiver services.

Note: Dual Eligibles are persons covered both by Medicaid and Medicare. Acute Care Services and
prescription drugs for this population are generally covered by Medicare. Participation in
STAR+PLUS does not affect a Member’s right to receive Medicare services in any way.

Voluntary 

Medicaid Eligibles in the following category who reside in any part of a STAR+PLUS Service
Area may enroll in one (1) of the STAR+PLUS MCOs providing services in the Service Area
(voluntary enrollment):

• children birth through age 20 who are SSI eligible or who are Medicaid-eligible
because they are in a Social Security Exclusion Program.

Excluded 

The following types of Medicaid-eligible individuals are excluded from participation in
the STAR+PLUS program:

• Persons in institutional settings:

o persons residing in a nursing facility;

o residents of Intermediate Care Facilities for the Mentally Retarded (ICF-MR); o
residents of Institutions of Mental Diseases or State Hospitals.

	 	•	 	Persons enrolled in a wavier program other than a 19 15(c) STAR+PLUS Waiver
program:	 

o Community Living Assistance and Support Services;

o Medically Dependent Children’s Waiver; o
Home and Community Services Waiver; o Deaf
Blind Multiple Disability Waiver;

o Consolidated Waiver Program.

	 	•	 	individuals not eligible for full Medicaid benefits (e.g., Frail Elderly program,
Qualified Medicare Beneficiary (QMB), Specified Low-income Medicare Beneficiary
(SLMB), Qualified Disabled and Working Individual (QDWI), undocumented aliens);	 

	 	•	 	individuals receiving long term services and supports through non-Medicaid funded
programs;	 

	 	•	 	individuals who are diagnosed with End Stage Renal Disease (ESRD) (except those in
a1915(c) STAR+PLUS Waiver);	 

	 	•	 	individuals who are ventilator dependent (except those in a 19 15(c) STAR+PLUS
Waiver); and	 

	 	 	 
	•

1.8.3
	 	individuals enrolled in the STAR Health Program.

CHIP Program Eligibility

In the traditional CHIP Program, children are eligible from birth through the month of their
19th birthday if they reside in families with incomes at or below 200 percent of the
FPL, provided they are not eligible for Medicaid. CHIP-eligible children who reside in any part of
a CHIP Service Area must enroll in a CHIP MCO.

Pregnant women who are ineligible for Medicaid due to income (whose income is greater than 185
percent and up to 200 percent of FPL) or immigration status (and whose income is below 200
percent of FPL) receive prenatal care for their unborn children through the CHIP Perinatal

Program. Members receiving the CHIP Perinatal benefit are exempt from the 90-day waiting
period, the asset test, and all cost-sharing, including enrollment fees and co-pays, for the
duration of their coverage period.

1.9 Authorization

The Texas Legislature has designated HHSC as the single state agency to administer the
Medicaid and CHIP Programs in the State of Texas. HHSC has authority to contract with MCOs to carry
out the duties and functions of the Medicaid Managed Care Program under Title XIX of the Social
Security Act; §12.011 and §12.02, Texas Health and Safety Code; and Chapter 533, Texas Government
Code. HHSC has the authority to contract with MCOs to carry out the duties of the CHIP Managed Care
Program under Title XXI of the Social Security Act, and Chapter 62, Texas Health and Safety Code.

Contracts awarded under this RFP are subject to all necessary federal and state approvals,
including, but not limited to, Centers for Medicare and Medicaid Services (CMS) approval.

1.10 Eligible Respondents

Except as provided herein, eligible Respondents include insurers that are licensed by the TDI
as HMOs in accordance with Chapter 843 of the Texas Insurance Code, or a certified Approved
Non-Profit Health Corporation (ANHC), formed in compliance with Chapter 844 of the Texas Insurance
Code.

For the STAR and STAR+PLUS Hidalgo Service Area, eligible respondents include HMOs, ANHCs, and
EPOs with TDI-approved EPBPs. Note that under current state law, HHSC is precluded from providing
services to Medicaid recipients through an HMO model in the following three (3) counties in the
Hidalgo Service Area: Cameron, Hidalgo, and Maverick. HHSC will not implement any form of
capitated managed care in these three (3) counties in the Hidalgo Service Area without guidance
from the Texas Legislature. Respondents who are interested in bidding on the Hidalgo Service Area
should nevertheless pursue one or more forms of TDI approval appropriate to these counties.

For the Medicaid Rural Service Area for STAR, eligible respondents include HMOs, ANHCs, EPOs with
TDI-approved EPBPs. Note that, for purposes of bidding, HHSC has subdivided the Medicaid Rural
Service Area into three (3) areas – West, Central, and Northeast Texas. Respondents may seek TDI
approval in one (1) or more of these areas, but should note that HHSC will more favorably
evaluate responses that propose to serve all three (3) areas. Should HHSC determine that it is in
the state’s best interest to subdivide the Medicaid Rural Service Area for purposes of award, the
Medicaid Rural Service Area will still be treated as one (1) Service Area for rate-setting
purposes.

Throughout this RFP, the term “MCO” is used to refer to HMOs, ANHCs, and EPOs. A Respondent that
has submitted its application for licensure as an HMO, for certification as an ANHC, or for
approval of an EPBP prior to the Proposal due date is also eligible to respond to this RFP;
however, the Respondent must receive TDI approval no later than 60 days after HHSC executes the
Contract (see Section 1.2, “Procurement Schedule”). Failure to receive the required approval within
60 days after HHSC executes the Contract will result in the cancellation of the award.

For more information on the reasons for HHSC’s disqualification of Respondents, see Section
3.3.2, “Conflicts of Interest,” and Section 3.3.3, “Former Employees of a State Agency.”

1.11 Term of Contract

The Initial Contract Period will begin on the Contract’s Effective Date (generally the date
HHSC signs the contract) and will continue through August 31, 2015 (the “Initial Contract
Period”). HHSC may, at its option, extend the Contract for an additional period or periods, not to
exceed a total of eight (8) operational years. All reserved Contract extensions beyond the Initial
Contract Period will be subject to good faith negotiation between the parties.

1.12 Development of Contracts

HHSC intends to execute one (1) Contract per MCO, which will include all awarded MCO
Programs and Service Areas. For reference only, HHSC has included a copy of the standard
Managed Care Contract in the Procurement Library. The Managed Care Contract identifies an MCO’s
awarded MCO Programs and Service Areas, and identifies all documents that will become part of
the agreement, including Attachment A, “Uniform Managed Care Contract Terms and Conditions.”

1.13 Medicaid and CHIP Service Areas

In this RFP, HHSC distinguishes areas of Texas by MCO Program Service Areas. If a Respondent
proposes to participate in an HHSC MCO Program Service Area, the Respondent must propose to serve
all counties in the HHSC-defined Service Area, with the following exception. As described above,
Respondents may chose to serve all or part of the STAR Medicaid Rural Service Area. Maps and
tables depicting the Service Area configuration for each of the MCO Programs can be found in
Attachments B-5, 5.1, and 5.2. The tables indicate the counties included in each of the
designated Service Areas. The following chart summarizes the MCO Program options included in the
scope of this procurement, by Service Area.

26

	 	 	 	 	 	 	 
	Service Areas

	 	STAR
	 	STAR+PLUS
	 	CHIP MCO
	 

	 	 
	 	 
	 	 
	Bexar

	 	X
	 	X
	 	X
	 

	 	 
	 	 
	 	 
	Dallas

	 	X
	 	 	 	X
	 

	 	 
	 	 	 	 
	El Paso

	 	X
	 	X
	 	X
	 

	 	 
	 	 
	 	 
	Harris

	 	X
	 	X
	 	X
	 

	 	 
	 	 
	 	 
	Hidalgo

	 	X
	 	X
	 	

	 

	 	 
	 	 
	 	

	Jefferson

	 	X
	 	X
	 	X
	 

	 	 
	 	 
	 	 
	Lubbock

	 	X
	 	X
	 	X
	 

	 	 
	 	 
	 	 
	Medicaid RSA (Entire Service Area)

	 	X
	 	

	 	

	 

	 	 
	 	

	 	

	West Texas

	 	X
	 	

	 	

	 

	 	 
	 	

	 	

	Central Texas

	 	X
	 	

	 	

	 

	 	 
	 	

	 	

	Northeast Texas

	 	X
	 	

	 	

	 

	 	 
	 	

	 	

	Nueces

	 	X
	 	X
	 	X
	 

	 	 
	 	 
	 	 
	Tarrant

	 	X
	 	 	 	X
	 

	 	 
	 	 	 	 
	Travis

	 	X
	 	X
	 	X
	 

	 	 
	 	 
	 	 

As described above, HHSC intends to expand the STAR Program to include the Hidalgo Service
Area and Medicaid RSA, and the STAR+PLUS MCO Program to include the El Paso, Hidalgo, and Lubbock
Service Areas. HHSC reserves the right to change the boundaries for, or otherwise modify, the
Service Areas if it determines that such action is in the best interest of the State.

2. Procurement Strategy and Approach

HHSC seeks to contract with at least two (2) MCOs for each MCO Program and Service Areas to
provide for client choice. It is possible that a Service Area could have more than two (2) MCOs.
HHSC reserves the right to enter into Contracts with more than two (2) MCOs in any Service Area
based on:

	 	•	 	the number of managed care Eligibles in the Service Area compared to the
combined capacity of qualified MCO Respondents, and	 

	 	•	 	statutory requirements, such as HHSC’s consideration of Proposals from an MCO
owned or operated by a hospital district.	 

Section 2155.144, Texas Government Code obligates HHSC to purchase goods and services
on the basis of best value. HHSC rules define “best value” as the optimum combination of
economy and quality that is the result of fair, efficient, and practical procurement decision-
making and that achieves health and human services procurement objectives (see 1 TAC
§391.31). HHSC will evaluate proposals using the best value criteria set forth in Section 5
of this RFP.

2.1 HHSC Model Management Strategy

HHSC has identified performance measures and objectives that it expects the MCO to address
during the term of the Contract (see Section 1.5, “Mission Objectives” and Section 8,
“Operations Phase Requirements.”)

HHSC has further focused its performance measurement efforts by developing a Performance
Indicator Dashboard, which is a series of performance measures that identify key aspects of
performance to ensure the MCO’s accountability. The Performance Indicator Dashboard is included
in the Uniform Managed Care Manual Chapter 10.1.1, “Performance Indicator Dashboard.”
The Performance Indicator Dashboard is not an all-inclusive set of performance measures; HHSC
will measure other aspects of the MCO’s performance as well. Rather, the Performance Indicator
Dashboard assembles performance indicators that assess many of the most important dimensions of
the MCO’s performance, and includes measures that, when publicly shared, will also serve to
incentivize excellence.

As described in Section 8.1.1.1, “Performance Evaluation,” after Rate Year 1 HHSC will also
collaborate with each MCO to establish an annual series of performance improvement projects. The
MCO will be committed to making its best efforts to achieve the established goals.

HHSC may establish some or all of the annual performance improvement projects. HHSC and each MCO
will negotiate any remaining projects or goals. These projects will be highly specified and
measurable. The projects will reflect areas that present significant opportunities for performance
improvement. Once finalized and approved by HHSC, the projects will become part of each MCO’s
annual plan for its Quality Assurance and Performance Improvement (QAPI) Program, as defined in
Section 8.1.7, “Quality Assessment and Performance Improvement,” and will be incorporated by
reference into the Contract.

HHSC recognizes the importance of applying a variety of financial and non-financial incentives and
disincentives for demonstrated MCO performance. It is HHSC’s objective to recognize and reward
both excellence in performance and improvement in performance within existing state and federal
financial constraints. It is likely that this approach will be modified over time based on several
variables, including accumulated experience by HHSC and the MCO, changes in the status of state
finances, and changes in each MCO’s performance levels. Section 6.3, “Performance Incentives and
Disincentives,” describes the incentive and disincentive approach in additional detail.

The incentives and disincentives will be linked to some of the measures in the Performance
Indicator Dashboard. The MCO’s performance relative to the annual performance improvement projects
may be used by HHSC to identify and reward excellence and improvement by the MCO in subsequent
years.

Finally, HHSC plans to improve methods for sharing information regarding the Texas Medicaid and
CHIP Programs with all of the MCOs through HHSC-sponsored workgroups and other initiatives.

2.2 Performance Measures and Associated Remedies

The MCO must provide all services and deliverables under the Contract at an acceptable
quality level and in a manner consistent with acceptable industry standard, custom, and practice.
Failure to do so may result in HHSC’s assessment of contractual remedies, including liquidated
damages, as set forth in Attachment B-4, “Deliverables/Liquidated Damages Matrix.”

3. General Instructions and Requirements

3.1 Strategic Elements

3.1.1 Contract Elements

The term “Contract” means the contract awarded as a result of this RFP and all exhibits
thereto. At a minimum, the following documents will be incorporated into the contract: this RFP
and all attachments and exhibits; any modifications, addendum or amendments issued in conjunction
with this RFP; HHSC’s “Uniform Managed Care Contract Terms and Conditions;” and the MCO’s
Proposal.

Respondents are responsible for reviewing all parts of the Contract, including the “Uniform
Managed Care Contract Terms and Conditions,” and noting any exceptions, reservations, and
limitations on the Respondent Information and Disclosures Form.

3.1.2 HHSC’s Basic Philosophy: Contracting for Results

HHSC’s fundamental commitment is to contract for results. HHSC defines a successful result
as the generation of defined, measurable, and beneficial outcomes that satisfy the Contract
requirements and support HHSC’s missions and objectives. This RFP describes what is required of
the MCO in terms of services, deliverables, performance measures, and outcomes, and unless
otherwise noted in the RFP, places the responsibility for how they are accomplished on the MCO.

3.2 External Factors

External factors may affect the project, including budgetary and resource constraints. Any
contract resulting from the RFP is subject to the availability of state and federal funds. As of
the issuance of this RFP, HHSC anticipates that budgeted funds will be available to reasonably
fulfill the project requirements. If, however, funds are not available, HHSC reserves the right
to withdraw the RFP or terminate the resulting contract without penalty.

3.3 Legal and Regulatory Constraints

3.3.1 Delegation of Authority

State and federal laws generally limit HHSC’s ability to delegate certain decisions and
functions to a vendor, including, but not limited to: (1) policy-making authority, and (2) final
decision- making authority on the acceptance or rejection of contracted services.

3.3.2 Conflicts of Interest

A conflict of interest is a set of facts or circumstances in which either a Respondent or
anyone acting on its behalf in connection with this procurement has past, present, or currently
planned personal, professional, or financial interests or obligations that, in HHSC’s
determination, would actually or apparently conflict or interfere with the Respondent’s
contractual obligations to HHSC. A conflict of interest would include circumstances in which a
party’s personal, professional, or financial interests or obligations may directly or indirectly:

	 	•	 	make it difficult or impossible to fulfill its contractual obligations to HHSC in a
manner that is consistent with the best interests of the State of Texas;

	 	•	 	impair, diminish, or interfere with that party’s ability to render impartial or
objective assistance or advice to HHSC; and/or

	 	•	 	provide the party with an unfair competitive advantage in future HHSC procurements.

Neither the Respondent nor any other person or entity acting on its behalf, including, but not
limited to subcontractors, employees, agents, and representatives, may have a conflict of
interest with respect to this procurement. Before submitting a proposal, Respondents should
carefully review Attachment A, “Uniform Managed Care Contract Terms and Conditions,” for
additional information concerning conflicts of interests.

A Respondent must certify that it does not have personal or business interests that present a
conflict of interest with respect to this RFP and resulting contract (see the Required
Certifications form). Additionally, if applicable, the Respondent must disclose all potential
conflicts of interest. The Respondent must describe the measures it will take to ensure that there
will be no actual conflict of interest and that its fairness, independence, and objectivity will
be maintained (see the Respondent Information and Disclosures Form). HHSC will determine
to what extent, if any, a potential conflict of interest can be mitigated and managed during the
term of the Contract. Failure to identify potential conflicts of interest may result in HHSC’s
disqualification of a proposal or termination of the Contract.

3.3.3 Former Employees of a State Agency

Respondents must comply with Texas and federal laws and regulations relating to the hiring
of former state employees (see e.g., Texas Government Code §572.054 and 45 C.F.R.
§74.43). Such “revolving door” provisions generally restrict former agency heads from
communicating with or appearing before the agency on certain matters for two (2) years after
leaving the agency. The revolving door provisions also restrict some former employees from
representing clients on matters that the employee participated in during state service or
matters that were in the employees’ official responsibility.

As a result of such laws and regulations, a Respondent must certify that it has complied with
all applicable laws and regulations regarding former state employees (see the Required
Certifications Form). Furthermore, a Respondent must disclose any relevant past state employment
of the Respondent’s or its subcontractors’ employees and agents in the Respondent Information
and Disclosure Form.

27

3.4 HHSC Amendments and Announcements Regarding this

RFP

HHSC will post all official communication regarding this RFP on its website, including the
notice of tentative award. HHSC reserves the right to revise the RFP at any time. Any changes,
amendments, or clarifications will be made in the form of written responses to Respondents’
questions, amendments, or addendum issued by HHSC on its website. Respondents should check the
website frequently for notice of matters affecting the RFP. To access the website, go to the
“HHSC Contracting Opportunities” page and enter a search for this procurement.

3.5 RFP Cancellation/Partial Award/Non-Award

HHSC reserves the right to cancel this RFP, to make a partial award, or to make no award
if it determines that such action is in the best interest of the State of Texas.

3.6 Right to Reject Proposals or Portions of Proposals

	 	 	 	 	 
	HHSC may, in its discretion, reject any and all proposals or portions thereof.
		3.7		 	Costs Incurred

Respondents understand that issuance of this RFP in no way constitutes a commitment by HHSC
to award a contract or to pay any costs incurred by a Respondent in the preparation of a response
to this RFP. HHSC is not liable for any costs incurred by a Respondent prior to issuance of or
entering into a formal agreement, contract, or purchase order. Costs of developing proposals,
preparing for or participating in oral presentations and site visits, or any other similar
expenses incurred by a Respondent are entirely the responsibility of the Respondent, and will not
be reimbursed in any manner by the State of Texas.

3.8 Protest Procedures

Texas Administrative Code, Title 1, Part 15, Chapter 392, Subchapter C
outlines HHSC’s Respondent protest procedures.

3.9 Vendor Conference

HHSC will hold a vendor conference according to the time and date in Section 1.2,
“Procurement Schedule” in the Lone Star Conference Room located at 11209 Metric Blvd, Building H,
Austin, Texas. Vendor conference attendance is strongly recommended, but is not required.

Respondents may email questions for the conference to the HHSC Point of Contact (see Section 1.1)
no later than five (5) days before the conference. HHSC will also give Respondents the opportunity
to submit written questions at the conference. All questions should reference the appropriate RFP
page and section number. HHSC will attempt to respond to questions at the vendor conference, but
responses are not official until posted in final form on the HHSC website. HHSC reserves the right
to amend answers prior to the proposal submission deadline.

3.10 Questions and Comments

All questions and comments regarding this RFP should be sent to the HHSC Point of Contact
(see Section 1.1). Questions should reference the appropriate RFP page and section number, and
must be submitted by the deadline set forth in Section 1.2. HHSC will not respond to questions
received after the deadline. HHSC’s responses to Respondent questions will be posted to the HHSC
website. HHSC reserves the right to amend answers prior to the proposal submission deadline.

Respondents must notify HHSC of any ambiguity, conflict, discrepancy, exclusionary
specification, omission, or other error in the RFP by the deadline for submitting questions and
comments. If a Respondent fails to notify HHSC of these issues, it will submit a proposal at
its own risk, and if awarded a contract:

(1) must have waived any claim of error or ambiguity in the RFP or resulting contract;

(2) must not contest HHSC’s interpretation of such provision(s); and

(3) must not be entitled to additional compensation, relief, or time by reason
of the ambiguity, error, or its later correction.

3.11 Modification or Withdrawal of Proposal

Prior to the proposal submission deadline set forth in Section 1.2, a Respondent may: (1)
withdraw its proposal by submitting a written request to the HHSC Point of Contact, or (2)
modify its proposal by submitting a written amendment to the HHSC Point of Contact. HHSC may
request proposal modifications at any time.HHSC reserves the right to waive minor informalities
in a proposal and award a contract that is in the best interest of the State of Texas. A “minor
informality” is an omission or error that, in HHSC’s determination, if waived or modified when
evaluating proposals, would not give a Respondent an unfair advantage over other Respondents or
result in a material change in the proposal or RFP requirements. When HHSC determines that a
proposal contains a minor informality, it may at its discretion provide the Respondent with the
opportunity to correct.

3.12 News Releases

Prior to tentative award, a Respondent may not issue a press release or provide any
information for public consumption regarding its participation in the procurement. After
tentative award, a Respondent must receive prior written approval from HHSC before issuing a
press release or providing information for public consumption regarding its participation in the
procurement. Requests should be directed to the HHSC Point of Contact identified in Section 1.1.

Section 3.12 does not preclude business communications necessary for a Respondent to
develop a proposal, or required reporting to shareholders or governmental authorities.

3.13 Incomplete Proposals

HHSC may reject without further consideration a proposal that does not include a
complete, comprehensive, or total solution as requested by this RFP.

3.14 State Use of Proposal Information

HHSC reserves the right to use any and all ideas and information presented in a proposal.
A Respondent may not object to HHSC’s use of such information.

3.15 Property of HHSC

Except as otherwise provided in this RFP or the resulting Contract, all products produced by
a Respondent, including without limitations the proposal, all plans, designs, software, and other
contract deliverables, become the sole property of HHSC. See Attachment A, “Uniform Managed Care
Contract Terms and Conditions,” Article 15 for additional information concerning intellectual
property rights.

3.16 Copyright Restriction

	 	 	 	 	 
	HHSC will not consider any proposal that is copyrighted by the Respondent, in whole or part.
		3.17		 	Additional Information

By submitting a proposal, the Respondent grants HHSC the right to obtain information from
any lawful source regarding the Respondent’s and its directors’, officers’, and employees’:

(1) past business history, practices, and conduct;

(2) ability to supply the goods and services; and

(3) ability to comply with Contract requirements.

By submitting a proposal, a Respondent generally releases from liability and waives all claims
against any party providing HHSC information about the Respondent. HHSC may take such
information into consideration in evaluating proposals.

3.18 Multiple Responses

A Respondent may only submit one (1) proposal as a prime contractor. If a Respondent
submits more than one (1) proposal, HHSC may reject one or more of the submissions. This
requirement does not limit a subcontractor’s ability to collaborate with one (1) or more
Respondents submitting proposals.

A Respondent may not entice or require a subcontractor to enter into an exclusive subcontract for
the purpose of this procurement. Any subcontract entered into by a Respondent with a third party
to meet a requirement of this RFP must not include any provision that would prevent or bar that
subcontractor from entering into a comparable contractual relationship with another Respondent
submitting a proposal under this procurement. This prohibition against exclusive subcontracts
does not apply to professional services that solely pertain to development of the proposal,
including gathering of competitive intelligence.

3.19 No Joint Proposals

HHSC will not consider joint or collaborative proposals that require it to contract with
more than one (1) Respondent.

3.20 Use of Subcontractors

Subcontractors providing services under the Contract must meet the same requirements and
level of experience as required of the Respondent. No subcontract under the Contract must
relieve the Respondent of the responsibility for ensuring the requested services are provided.
Respondents planning to subcontract all or a portion of the work to be performed must identify
the proposed subcontractors and describe the subcontracted functions in their proposals.

3.21 Texas Public Information Act

Proposals will be subject to the Texas Public Information Act (the Act), located in
Chapter 552 of the Texas Government Code, and may be disclosed to the public upon request. By
submitting a proposal, the Respondent acknowledges that all information and ideas presented in the
proposal are public information and subject to disclosure under the Texas Public Information Act,
with the limited exception of Social Security Numbers and certain non-public financial reports or
information submitted in response to RFP Sections 4.2.3.3 and 4.2.3.4.

If the Respondent asserts that financial reports or information provided in response to RFP
Sections 4.2.3.3 and 4.2.3.4 contains trade secret or other confidential information, it must
be clearly marked such information in boldface type and include the words “confidential” or
“trade secret” at top of the page. Furthermore, the Respondent must identify the financial
reports or information, and provide an explanation of why the reports or information are
excepted from public disclosure, on the Respondent Information and Disclosures form.

HHSC will process any request from a member of the public in accordance with the procedures
outlined in the Act. Respondents should consult the Texas Attorney General’s website
(www.oag.state.tx.us) for information concerning the Act’s application to applications
and potential exceptions to disclosure.

3.22 Inducements

HHSC submits this RFP setting forth certain information regarding the objectives of the
Contract and HHSC’s desire to mitigate risk throughout the life of the Contract by use of expert
MCO services.

Therefore, HHSC will consider all representations contained in a Respondent’s proposal, oral or
written presentations, correspondence, discussions, and negotiations as representations of the
Respondent’s expertise. HHSC accepts these representations as inducements to contract.

3.23 Definition of Terms

Defined terms must have the meaning stated as described in the Attachment A, “Uniform
Managed Care Contract Terms and Conditions,” unless the context clearly indicates otherwise.
Defined terms are capitalized throughout this RFP. For example, the word “Provider,” when
capitalized, refers to Network provider. When the word “provider” is not capitalized, the
connotation is all providers, whether Network or Out-of-Network.

4. Submission Requirements

To be considered for award, the Respondent must address all applicable RFP specifications to
HHSC’s satisfaction. If requested by HHSC, the Respondent must provide HHSC with information
necessary to validate any statements made in its Proposal. This includes, but may not be limited
to, granting permission or access for HHSC to verify information with third parties, whether
identified by the Respondent or HHSC. If any requested information is not provided within the
timeframe allotted, HHSC may reject the Proposal.

Respondents must prepare and submit proposals in accordance with the provisions of this
section. Proposals received that do not follow these instructions may be evaluated as
nonresponsive and may not be considered for award.

4.1 General Instructions

For Respondents bidding on more than one MCO Program, i.e., STAR, STAR+PLUS, or CHIP
Program, HHSC has attempted to minimize the need for Respondents to submit multiple copies of the
same information.

Each bid for participation in the STAR Program, the STAR+PLUS Program,
and/or the CHIP Program must include the following two (2)
components:

1. Business Specifications; and

2. General Programmatic Proposal.

Respondents proposing to participate in multiple MCO Programs do not need to submit multiple
copies of the Business Specifications or the General Programmatic Proposal. However, these
Respondents will need to carefully read each submission requirement to ensure that they provide
specific information for each MCO Program bid and Service Area, as applicable, when completing
any element of their Proposals.

All Proposal information must be submitted on 8 1/2 x 11 inch, white bond paper, three (3)-hole
punched, and placed in sturdy three (3) ring binders. Text must be no smaller than 11-point font,
single-spaced. Figures may not incorporate text smaller than 8-pt font. All pages must have
one-inch margins and page numbering must be sequential per section. Where practical, pages should
be double-sided. Each binder must be clearly labeled with the title of this RFP, the Respondent’s
legal name, and the title of the document contained in the binder, e.g., Business Proposal or
Programmatic Proposal.

Proposals must be organized and numbered in a manner that facilitates reference to this RFP and
its requirements. Respondents must respond to each item in the order it appears in the RFP. The
response must include headings and numbering to match the corresponding section of the RFP.
Respondents may place attachments and appendices in a separate section if the RFP provides that
such attachments are not included in the section’s specified page limits.

4.1.1 Economy of Presentation

Unnecessarily elaborate Proposals beyond those sufficient to provide a complete and
effective response to this RFP are not desired and may be construed as an indication of the
Respondent’s lack of ability to provide efficient work products.

The Respondent must adhere to page limits where specified. Page limits are listed in parentheses
at the end of the title of the section. A three (3) page limit, for example, means that the
response should not be in excess of three (3) one-sided pages that meet the size, font, and
margin requirements specified in the General Instructions in Section 4.1 above.

Some page limits are identical regardless of the number of MCO Programs in which a Respondent
is proposing to participate. If a page limit is listed but does not include the phrase “per MCO
Program,” the page limit applies to the entire response regardless of the number of MCO
Programs bid. In these cases, the page limit will be indicated as a set number, e.g., “3
pages.”

In some cases, additional pages are provided for Respondents proposing to serve more than one MCO
Program. For example, “3 pages plus 1 additional page per additional MCO Program” indicates that
a Respondent proposing to serve one (1) MCO Program has a three (3) page limit, a Respondent
proposing to serve two (2) MCO Programs has a four (4) page limit, and a Respondent proposing to
serve all three (3) MCO Programs has a five (5) page limit. This page limit approach is designed
to give Respondents submitting a Proposal for multiple MCO Programs sufficient space to respond
to the submission requirement when submission responses differ across MCO Programs. Respondents
proposing to serve multiple programs should have similar or identical approaches across MCO
Programs where administrative efficiencies are possible and appropriate. Respondents must clearly
indicate differences, if any, in their response to each submission requirement for each
applicable MCO Program.

In other cases, additional pages may be provided based on certain aspects of the Respondent’s
Proposal or organization, such as the number of organizational charts submitted reflecting
arrangements with Material Subcontractors, or the number of Key Contract Personnel included in the
Proposal for Respondents proposing to serve more than one MCO Program.

Finally, some page limits are by MCO Program, e.g., two (2) pages per MCO Program means that a
Respondent proposing to serve all three (3) MCO Programs would have a six (6) page limit for
that requirement.

If the Respondent chooses to repeat the RFP question in its Proposal, the question text will be
included in the page limit.

In responding to questions in Section 4.2 (“Business Proposal”) and Section 4.3 (“Programmatic
Proposal”) for which the Respondent includes information about a Material Subcontractor or Action
Plans, up to one (1) page may be used to describe each Material Subcontractor arrangement, and up
to one (1) page may be used to describe each Action Plan. These pages are outside of the page
limit instructions for the specific submission requirement.

HHSC reserves the right not to review information provided in excess of the page limits.
Respondents need not feel compelled to submit unnecessary text in order to reach the page
limits.

Attachments required by the RFP, such as certain policies and procedures, are not counted in
calculating the Respondent’s page limits. Respondents must not submit information or
attachments that are not explicitly requested in the RFP. Elaborate artwork, expensive paper
and bindings, and expensive visual or other presentation aids are neither necessary nor
desired.

4.1.2 Number of Copies and Packaging

Respondents must submit one (1) hardbound original and eight (8) hardbound copies of the
Proposal. The original must be clearly labeled “Original” on the outside of the binder. In
addition to the hardbound original and copies, Respondents must submit 22 electronic copies of
each Proposal component. At the Respondent’s option, it may produce only electronic copies of
certain attachments and appendices. This exception applies to attachments and appendices that
exceed ten (10) pages, such as GeoAccess tables, Significant Traditional Provider (STP) files, TDI
filings, and other financial documents. The exception does not apply to the attachments referenced
in Section 4.2, Section 5, “HUB Subcontracting Plan,” or Section 6, “Certifications and Other
Required Forms,” which must be included in both the hardbound and electronic copies of the
Proposal. If the Respondent produces only an electronic copy of an attachment or appendix, the
hardbound Proposals should refer the reader to the electronic Proposal for the required
information.

For the electronic copies, the Proposal, attachments, financial documents, signed forms,
pamphlets, and all other documents included in the proposal hardcopy must be submitted on CDs
compatible with Microsoft Office 2000 files. PDF files should be prepared in a format that
allows for OCR text recognition. HHSC will not accept Proposals by facsimile or e-mail.

4.1.3 Due Date, Time, and Location

Submit all copies of the Proposal to HHSC’s Enterprise Contracts and Procurement Services
(ECPS) no later than 2:00 p.m. Central Time (CT) according to the timeline in Section 1.2,
“Procurement Schedule.” All submissions will be date and time stamped when received by ECPS. The
clock in the ECPS office is the official timepiece for determining compliance with the deadlines
in this procurement. HHSC reserves the right to reject late submissions. It is the Respondent’s
responsibility to appropriately mark and deliver the Proposal to HHSC by the specified date and
time. The sole point of contact for inquiries concerning this RFP is:

Texas Health and Human Services Commission

Enterprise Contracts and Procurement Services

4405 North Lamar Blvd

Austin, Texas 78756-3422

ATT: Alice Hanna, Purchaser

(512) 206-5277

alice.hanna@hhsc.state.tx.us

4.2 Part 1 – Business Proposal

The Business Proposal must include the following:

Section 1 – Executive Summary

Section 2 – Respondent Identification and Information
Section 3 – Corporate Background and Experience
Section 4 – Material Subcontractor Information Section
5 – HUB Subcontracting Plan

	 	 	 	 	 
		4.2.1		 	Section 6 – Certifications and Other Required Forms

Section 1 – Executive Summary

(2 pages, excluding Table 1)

In this section, condense and highlight the content of the Business Proposal to provide HHSC with
a broad understanding of the respondent’s approach to meeting the RFP’s business requirements. The
summary must demonstrate an understanding of HHSC’s goals and objectives for this procurement.
Please identify the Respondent’s proposed MCO Program(s) and the Service Areas. The Respondent
should complete Table 1 by placing an “X” in all Service Areas and MCO Programs bid. (The Service
Areas are described in the Attachments B-5, 5.1, 5.2, and 5.3. A Respondent may elect to bid on
some, all, or none of the Service Areas.) Respondents should note that, for purposes of bidding,
HHSC has subdivided the Medicaid Rural Service Area into three (3) areas – West, Central, and
Northeast Texas. Respondents may bid on one (1) or more of these areas; however, HHSC will more
favorably evaluate responses that propose to serve all three (3) areas.

Table 1: Proposed MCO Programs and Service Areas

	 	 	 	 	 	 	 
	Service Areas

	 	STAR
	 	STAR+PLUS
	 	CHIP MCO
	 

	 	 
	 	 
	 	 
	Bexar

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Dallas

	 	

	 	

	 	

	 

	 	

	 	

	 	

	El Paso

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Harris

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Hidalgo

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Jefferson

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Lubbock

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Medicaid RSA (Entire Service Area)

	 	

	 	

	 	

	 

	 	

	 	

	 	

	West Texas

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Central Texas

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Northeast Texas

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Nueces

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Tarrant

	 	

	 	

	 	

	 

	 	

	 	

	 	

	Travis

	 	

	 	

	 	

	 

	 	

	 	

	 	

4.2.2 Section 2 – Respondent Identification and Information

(no page limit)

Submit the following information:

1. Respondent identification and basic information.

	 	a.	 	The Respondent’s legal name, trade name, dba, acronym, and any other
name under which the Respondent does business.	 

	 	b.	 	The physical address, mailing address, and telephone number of the
Respondent’s headquarters office.	 

	 	2.	 	TDI Authority. A copy of the MCO’s licensure, certification, or approval to
operate as an HMO, ANHC, or EPBP. If the Respondent has not received TDI approval, then
submit a copy of the application filed with TDI. In accordance with RFP Section 7.2.9, the
Respondent must receive TDI approval no later than 60 days after HHSC executes the
Contract.

	 	3.	 	Authorized Counties. Indicate whether the Respondent is currently authorized
by TDI to operate as an MCO in each county in the Service Area with a “Yes-MCO,” “No MCO,”
or “Partial MCO.” If the Respondent is not authorized to conduct business as an MCO in all
or part of a county, it should list those areas in Column C.

For each county listed in Column C, the Respondent must document that it applied to TDI for
such approval prior to the submission of a Proposal for this RFP. The Respondent must
indicate the date that it applied for such approval and the status of its application to
get TDI approval in the relevant counties in this section of its submission to HHSC.

Table 2: TDI Authority in Proposed Service Area

	 	 	 	 	 
	Column A

	 	Column B
	 	Column C
	 

	 	 
	 	 
	Service Area

	 	TDI Authority/Status of

Approval
	 	Counties/Partial

Counties Without TDI

Authority
	 

	 	 
	 	 
	Bexar

	 	

	 	

	 

	 	

	 	

	Dallas

	 	

	 	

	 

	 	

	 	

	El Paso

	 	

	 	

	 

	 	

	 	

	Harris

	 	

	 	

	 

	 	

	 	

	Hidalgo

	 	

	 	

	 

	 	

	 	

	Jefferson

	 	

	 	

	 

	 	

	 	

	Lubbock

	 	

	 	

	 

	 	

	 	

	Medicaid RSA (Entire

Service Area)

	 	

	 	

	 

	 	

	 	

	West Texas

	 	

	 	

	 

	 	

	 	

	Central Texas

	 	

	 	

	 

	 	

	 	

	Northeast Texas

	 	

	 	

	 

	 	

	 	

	Nueces

	 	

	 	

	 

	 	

	 	

	Tarrant

	 	

	 	

	 

	 	

	 	

	Travis

	 	

	 	

	 

	 	

	 	

	 	4.	 	Texas Comptroller Certificate. A current Certificate of Good
Standing issued by the Texas Comptroller of Public Accounts, or an explanation for why
this form is not applicable to the Respondent.	 

	 	5.	 	Respondent Legal Status and Ownership.

a. The type of ownership of the Respondent by its ultimate parent:

• wholly-owned subsidiary of a publicly-traded corporation;

• wholly-owned subsidiary of a private (closely-held) stock corporation;

• subsidiary or component of a non-profit foundation;

	 	•	 	subsidiary or component of a governmental entity such as a County
Hospital District;	 

	 	•	 	independently-owned member of an alliance or cooperative network;

	 	•	 	joint venture (describe ultimate owners)

	 	•	 	stand-alone privately-owned corporation (no parents or subsidiaries); or

	 	•	 	other (describe).

b. The legal status of the Respondent and its parent (any/all that may apply):

(i.) Respondent is a corporation, partnership, sole proprietor, or other (describe);

• Respondent is for-profit, or non-profit;

• the Respondent’s ultimate parent is for-profit, or non-profit;

	 	•	 	the Respondent’s ultimate parent is privately-owned, listed on a stock
exchange, a component of government, or other (describe).	 

	 	c.	 	The legal name of the Respondent’s ultimate parent (e.g., the name of
a publicly- traded corporation, or a County Hospital District, etc.).	 

	 	d.	 	The name and address of any other sponsoring corporation, or others
(excluding the Respondent’s parent) who provide financial support to the
Respondent, and the type of support, e.g., guarantees, letters of credit, etc.
Indicate if there are maximum limits of the additional financial support.	 

	 	6.	 	Hospital District/Non-Profit Corporation. Section 5 of the RFP requires
Respondents who believe they qualify for mandatory STAR or STAR+PLUS contracts under
Texas Government Code §533.004 to submit notice to HHSC no later than April 28,
2011, explaining the basis for this belief for each proposed Service Area. Please
indicate whether the Respondent provided such notice to HHSC.	 

	 	7.	 	The name and address of any health professional that has at least a five
percent (5%) financial interest in the Respondent, and the type of financial
interest.	 

	 	8.	 	The full names and titles of the Respondent’s officers and directors.

	 	9.	 	The state in which the Respondent is incorporated, and the state(s) in which the
Respondent is licensed to do business as an MCO. The Respondent must also indicate the
state where it is commercially domiciled, if outside Texas.	 

	 	10.	 	The Respondent’s federal taxpayer identification number.

	 	11.	 	If any change of ownership of the Respondent’s company or its parent is
anticipated during the 12 months following the Proposal Due Date, the Respondent
must describe the circumstances of such change and indicate when the change is
likely to occur.	 

	 	12.	 	Whether the Respondent or its parent (including other managed care subsidiaries
of the parent) had a managed care contract terminated or not renewed for any reason
within the past five (5) years. In such instance, the Respondent must describe the
issues and the parties involved, and provide the address and telephone number of the
principal terminating party. The Respondent must also describe any corrective action
taken to prevent any future occurrence of the problem(s) that may have led to the
termination or non-renewal.	 

	 	13.	 	Whether the Respondent has ever sought, or is currently seeking, National
Committee for Quality Assurance (NCQA) or American Accreditation HealthCare
Commission (URAC) accreditation status, and if it has or is, indicate:	 

• its current NCQA or URAC accreditation status;

• if NCQA or URAC accredited, its accreditation term effective dates; and

	 	•	 	if not accredited, a statement describing whether and when NCQA or URAC
accreditation status was ever denied the Contractor.	 

	 	14.	 	The website address (URL) for the homepage(s) of any website(s) operated, owned,
or controlled by the Respondent, including any that the Respondent may have contracted
to be run by another entity. If the Respondent has a parent, then also provide the same
for the parent, and any parent(s) of the parent. If none exist, provide a clear and
definitive statement to that effect.	 

4.2.3 Section 3 – Corporate Background and Experience

(no page limit)

	 	1.	 	Provide the following information on all publicly-funded managed care contracts
(if the Respondent does not have publicly-funded managed care contracts, it may include
information on privately-funded managed care contracts). Include information for all
current contracts, as well as work performed in the past three (3) years:	 

	 	a.	 	client name and address;

	 	b.	 	name, telephone, and e-mail address of the person HHSC could
contact as a reference that can speak to the Respondent’s performance;	 

	 	c.	 	contract size: average monthly covered lives and annual revenues;

	 	d.	 	whether payments under the contract were capitated or
non-capitated;

	 	e.	 	contract start date and duration;

	 	f.	 	whether work was performed as a prime contractor or subcontractor;
and

	 	g.	 	a general and brief description of the scope of services provided
by the Respondent; including the covered population and services (e.g.,
Medicaid, CHIP, state-funded program).	 

	 	2.	 	With respect to the Respondent and its parent (and including other managed care
subsidiaries of the parent), briefly describe any regulatory actions, sanctions, and/or
fines imposed by any federal or Texas regulatory entity, or a regulatory entity in
another state, within the last three (3) years. Include a description of any letters of
deficiencies, corrective actions, findings of non-compliance, and/or sanctions. Please
indicate which of these actions or fines, if any, were related to Medicaid or CHIP
programs. HHSC may, at its option, contact these clients or regulatory agencies and any
other individual or organization whether or not identified by the Respondent.	 

Respondents should not include letters of support or endorsement from any individual,
organization, agency, interest group, or other identified entity in this section or other
parts of the Proposal.

When evaluating proposals, HHSC may consider a current or past contractor’s performance
under an agreement with an HHS agency in Texas, including but not limited to any corrective
actions or liquidated damages imposed by HHSC or another HHS agency.

4.2.3.1 Organizational Chart

(1 page narrative for each organizational chart, excluding organizational chart
itself) Respondents should submit the following:

	 	1.	 	an organizational chart (Chart A), showing the corporate structure and
lines of responsibility and authority in the administration of the Respondent’s
business as a health plan;	 

	 	2.	 	an organizational chart (Chart B) showing the Texas organizational structure and
how it relates to the proposed Service Area(s), including staffing and functions
performed at the local level. If Chart A represents the entire organizational
structure, label the submission as Charts A and B;	 

	 	3.	 	an organizational chart (Chart C) showing the Management Information System
(MIS) staff organizational structure and how it relates to the proposed Service	 

Area(s),including staffing and functions performed at the local level;

	 	4.	 	if the Respondent is proposing to use one or more Material Subcontractors, the
Respondent must include an organizational chart demonstrating how the Material
Subcontractor(s) will be managed within the Respondent’s Texas organizational
structure, including the primary individuals at the Respondent’s organization and at
each Material Subcontractor organization responsible for overseeing such Material
Subcontract. This information may be included in Chart B, or in a separate
organizational chart(s); and	 

	 	5.	 	submit a brief narrative explaining the organizational charts submitted, and
highlighting the key functional responsibilities and reporting requirements of each
organizational unit relating to the Respondent’s proposed management of the MCO
Program(s), including its management of any proposed Material Subcontractors.	 

4.2.3.2 Résumés

(1 page per Key Personnel, excluding résumés)

Identify and describe the Respondent’s and its Subcontractor’s proposed labor skill set, years
of experience, and provide résumés of all proposed key personnel. Résumés must demonstrate
experience germane to the position proposed. Résumés should include work on projects cited
under the respondent’s corporate experience, and the specific functions performed on such
projects. Each résumé should include at least three (3) references from recent projects, if the
projects were performed for unaffiliated parties. References may not be the Respondent’s or
Subcontractor’s employees.

Key personnel include: Executive Director (as defined in Attachment A, Article 4), Medical
Director (as defined in Attachment A, Article 4), Member Services Manager, Service Coordination
Manager (STAR+PLUS only), Management Information Systems Manager, Claims Processing Manager,
Provider Network Development Manager, Benefit Administration and Utilization Management
Manager, Quality Improvement Manager, Behavioral Health Services Manager, Financial Functions
Manager, and Reporting Manager.

STAR+PLUS Service Coordinators. Please refer to Section 8.3.2.1 for a description of Service
Coordinator responsibilities. In addition to the Service Coordinator Manager, please submit
the following for each Service Coordinator function:

	 	1.	 	a job description and qualifications; and

	 	2.	 	the anticipated maximum caseload for each Service Coordinator (number of
Members per Service Coordinator) and the assumptions the Respondent used in
developing the maximum caseload estimate.	 

4.2.3.3 Financial Capacity

(no page limit)

Submit the following financial documents to demonstrate the Respondent’s financial
solvency, and its capacity to comply with Section 6, “Premium Payment, Incentives, and
Disincentives,” and Section 8, “Operations Phase Requirements,” and Attachment A, “Uniform
Managed Care Contract Terms and Conditions”:

	 	1.	 	Audited Financial Statements covering the two (2) most recent years of the
Respondent’s financial results. These statements must include the independent auditor’s	 

report (audit opinion letter to the Board or shareholders), the notes to the
financial statements, any written description(s) of legal issues or contingencies,
and any management discussion or analysis.

Make sure that the name and address of the firm that audits the Respondent is shown.
State the date of the most-recent audit, and whether the Respondent is audited annually

or otherwise. State definitively if there has, or has not, been any of the following:

• a “going concern” statement was issued by any auditor in the last three (3)
years;

• a qualified opinion was issued by any auditor in the last three (3) years;

• a change of audit firms in the last three (3) years; and

• any significant delay (two (2) months or more) in completing the current audit.

	 	2.	 	The most recent quarterly and annual financial statements filed with the TDI, and
if the Respondent is domiciled in another state, the financial statements filed with
the state insurance department in its state of domicile. The annual financial statement
must include all schedules, attachments, supplements, management discussion, analysis
and actuarial opinions.	 

	 	3.	 	The most recent financial examination report issued by TDI, and also by any
state insurance department in states where the Respondent operates a Medicaid, CHIP,
or comparable managed care product. If any submitted financial examination report is
two (2) or more years old, or if Respondent has never had a financial examination
report issued, submit the anticipated approximate date of the next issuance of a TDI
or state department of insurance financial examination report.	 

	 	4.	 	The most recent Form B Registration Statement disclosure filed by Respondent with
TDI, and any similar form filed with any state insurance department in other states
where the Respondent operates a Medicaid, CHIP, or comparable managed care product. If
Respondent is exempt from the TDI Form B filing requirement, demonstrate this and
explain the nature of the exemption.	 

	 	5.	 	Other related documents, as applicable:

	 	a.	 	SEC Form 10-K and 10-Q. If Respondent is a publicly-traded
(stock-exchange-listed) corporation, then submit the most recent United States
Securities and Exchange Commission (SEC) Form 10K Annual Report, and the
most-recent 10-Q Quarterly report.	 

	 	b.	 	IRS Form 990. If the Respondent is a non-profit entity, then submit
the most recent annual Internal Revenue Service (IRS) Form 990 filing, complete
with any and all attachments or schedules. If Respondent is a non-profit entity
that is exempt from the IRS 990 filing requirement, demonstrate this and explain
the nature of the exemption.	 

	 	c.	 	If the Respondent is a non-profit entity that is a component or
subsidiary of a County Hospital District, or otherwise an entity of a government,
then submit the most recent annual financial statements as prepared under the
relevant rules or statutes	 

governing annual financial reporting and disclosure for Respondent,
including all attachments, schedules, and supplements.

	 	d.	 	Bond or debt rating analysis. If Respondent has been, in the last
three (3) years, the subject of any bond rating analysis, ratings affirmation,
write-up, or related report, such as by AM Best, Fitch Ratings, Moody’s, Standard &
Poor, etc., submit the most- recent detailed report from each rating entity that
has produced such a report.	 

	 	e.	 	Annual Report. If Respondent produces any written “annual report”
or similar item that is in addition to the above-referenced documents, submit
the most recent version. This might be a yearly report or letter to
shareholders, the community, regulators, lenders, customers, employees, the
Respondent’s owner, or other constituents.	 

	 	f.	 	If the Respondent has issued any press releases in the 12 months prior to
the submission due date, wherein the press release mentions or discusses financial
results, acquisitions, divestitures, new facilities, closures, layoffs, significant
contract awards or losses, penalties/fines/sanctions, expansion, new or departing
officers or directors, litigation, change of ownership, or other very similar
issues, provide a copy of each such press release. HHSC does not wish to receive
other types of press releases that are primarily promotional in nature.	 

With respect to items 5(a) through (e) above, Respondent must also submit a schedule that shows
for each of the five (5) categories: whether there is any applicable filing or report; the
name(s) of the entity that does the filing or report; and the regular or estimated
filing/distribution date(s).

At a minimum, the financial statements and reports submitted hereunder must include:

	 	1.	 	balance sheet;

2. statement of income and expense;

3. statement of cash flows;

4. statement of changes in financial position (capitol & surplus; equity);

5. independent auditor’s letter of opinion;

	 	6.	 	description of organization and operation, including ownership, markets
served, type of entity, number of locations and employees, and, dollar amount and
type of any Respondent business outside of that with HHSC; and	 

	 	7.	 	disclosure of any material contingencies, and any current, recent past,
or known potential material litigation, regulatory proceedings, legal matters, or
similar issues.	 

The Respondent must include key non-financial metrics and descriptions, such as facilities,
number of covered lives, area of geographic coverage, years in business, material changes in
business situation, key risks and prospective issues, etc.

4.2.3.4 Financial Report of Parent Organization and Corporate Guarantee

(no page limit)

If another corporation or entity either substantially or wholly owns the Respondent,
submit the most recent detailed financial reports (as required above in Section 4.2.3.3) for
the parent organization. If there are one (1) or more intermediate owners between the
Respondent and the ultimate owner, this additional requirement is applicable only to the
ultimate owner.

The Respondent must also include a statement that the parent organization will unconditionally
guarantee performance by the Respondent of each and every obligation, warranty, covenant, term
and condition of the Contract. This guarantee is not required for Respondents owned by
political subdivisions of the State (i.e., hospital districts).

If HHSC determines that an entity does not have sufficient financial resources to guarantee
the Respondent’s performance, HHSC may require the Respondent to obtain another acceptable
financial instrument or resource from such entity, or to obtain an acceptable guarantee from
another entity with sufficient financial resources to guarantee performance.

4.2.3.5 Bonding

The Respondent must submit a statement that, if selected as a Contractor, the Respondent
agrees to:

	 	1.	 	secure and maintain throughout the life of the Contract, fidelity bonds required
by the Texas Department of Insurance in compliance with §843.402, Texas Insurance
Code; and	 

	 	2.	 	secure and maintain throughout the life of the Contract, a performance bond in
accordance with the Attachment A, “Uniform Managed Care Contract Terms and Conditions”
and 28 T.A.C. §11.1805.	 

4.2.4 Section 4 – Material Subcontractor Information

(no page limit)

See Attachment A, “Uniform Managed Care Contract Terms and Conditions,” for contractual
definition of Material Subcontractor. Organize this information by Material Subcontractor,
and list them in descending order of estimated annual payments. For each Material
Subcontractor, the MCO must provide:

	 	1.	 	The Material Subcontractor’s legal name, trade name, acronym, d.b.a., and any
other name under which the Material Subcontractor does business.	 

	 	2.	 	The Respondent’s estimated annual payments to the Material Subcontractor, by
MCO Program.	 

	 	3.	 	The physical address, mailing address, and telephone number of the
Material Subcontractor’s headquarters office, and the name of its Chief
Executive Officer.	 

	 	4.	 	Whether the Material Subcontractor is an Affiliate of the Respondent or an
unrelated third party (see the “Uniform Managed Care Contract Terms and
Conditions” for the definition of “Affiliate.”)	 

5. If the Material Subcontractor is an Affiliate, then provide:

	 	a.	 	the name of the Material Subcontractor’s parent organization, and
the Material Subcontractor’s relationship to the Respondent;	 

	 	b.	 	the proportion, if any, of the Material Subcontractor’s total revenues
that are received from non-Affiliates. If the Material Subcontractor has
significant revenues from non- Affiliates, then also indicate the portion, if any,
of those external (non-Affiliate) revenues that are for services similar to those
that the Respondent would procure under the proposed Subcontract;	 

	 	c.	 	a description of the proposed method of pricing under the Subcontract;

	 	d.	 	indicate if the Respondent presently procures, or has ever procured,
similar services from a non-Affiliate;	 

	 	e.	 	the number of employees (staff and management) who are dedicated
full-time to the Affiliate’s business;	 

	 	f.	 	whether the Affiliate’s office facilities are completely separate from
the Respondent and the Respondent’s parent. If not, identify the approximate
number of square feet of office space that are dedicated solely to the Affiliate’s
business;	 

	 	g.	 	attach an organization chart for the Affiliate, showing head count,
Key Personnel names, titles, and locations; and	 

	 	h.	 	indicate if the staff and management of the Affiliate are directly
employed by the Affiliate itself, or are they actually, from a technical legal
perspective, employed by a different legal entity (such as a parent corporation).
What corporation’s name shows up on the employee’s W2 form?	 

	 	6.	 	A description of each Material Subcontractor’s corporate background and
experience, including its estimated annual revenues from unaffiliated parties, number
of employees, location(s), and identification of three (3) major clients.	 

	 	7.	 	A signed letter of commitment from each Material Subcontractor that states the
Material Subcontractor’s willingness to enter into a Subcontractor agreement with the	 

Respondent, and a statement of work for activities to be subcontracted. Letters of
Commitment must be provided on the Material Subcontractor’s official company letterhead,
signed by an official with the authority to bind the company for the subcontracted work.
The Letter of Commitment must state, if applicable, the company’s certified HUB status.

	 	8.	 	The type of ownership [e.g., wholly-owned subsidiary of a publicly-traded
corporation; wholly-owned subsidiary of a private (closely-held) stock corporation;
subsidiary or component of a non-profit foundation; subsidiary or component of a
governmental entity	 

such as a County Hospital District; independently-owned member of an alliance or
cooperative network; joint venture (describe owners); etc.] Indicate the name of the
ultimate owner (e.g., the name of a publicly-traded corporation or a County Hospital
District).

	 	9.	 	Indicate status (any/all that may apply): sole proprietor, partnership,
corporation, for- profit, non-profit, privately owned, and/or listed on a stock
exchange. If a Subsidiary or Affiliate, name of the direct and ultimate parent
organization.	 

	 	10.	 	The name and address of any sponsoring corporation or others who provide
financial support to the Material Subcontractor and the type of support, e.g.,
guarantees, letters of credit, etc. Indicate if there are maximum limits of the
additional financial support.	 

	 	11.	 	The name and address of any health professional that has at least a five
percent (5%) financial interest in the Material Subcontractor and the type of
financial interest.	 

	 	12.	 	The state in which the Material Subcontractor is incorporated, commercially
domiciled, and the state(s) in which the organization is licensed to do business.	 

	 	13.	 	The Material Subcontractor’s federal taxpayer identification number.

	 	14.	 	Whether the Material Subcontractor had a managed care contract terminated or not
renewed for any reason within the past five (5) years. In such instance, the
Respondent must describe the issues, the parties involved, and provide the address and
telephone number of the principal terminating party. The Respondent must also describe
any corrective action taken to prevent any future occurrence of the problem that may
have lead to the termination.	 

	 	15.	 	Whether the Material Subcontractor has ever sought, or is currently seeking,
National	 

Committee for Quality Assurance (NCQA) or American Accreditation HealthCare

Commission (URAC) accreditation or certification status, and if it has or is,
indicate:

• its current NCQA or URAC accreditation or certification status;

	 	•	 	if NCQA or URAC accredited or certified, its accreditation or
certification term effective dates; and	 

	 	•	 	if not accredited, a statement describing whether and when NCQA or URAC
accreditation status was ever denied the Material Subcontractor.	 

	 	16.	 	The website address (URL) for the homepage(s) of any website(s) operated, owned,
or controlled by the Material Subcontractor, including any websites run by another
entity on the Material Subcontractor’s behalf. If the Material Subcontractor has a
parent, then	 

also provide the same for the parent organization, and any parent(s) of the parent
organization. If none exist, provide a clear and definitive statement to this
effect.

4.2.5 Section 5 – Historically Underutilized Business (HUB)

Participation

In accordance with Texas Government Code §2162.252, a proposal that does not contain a
HUB Subcontracting Plan (HSP) is non-responsive and will be rejected without further
evaluation. In addition, if HHSC determines that the HSP was not developed in good faith, it
will reject the proposal for failing to comply with material RFP specifications.

4.2.5.1 Introduction

HHSC is committed to promoting full and equal business opportunities for businesses in state
contracting in accordance with the goals specified in the State of Texas Disparity Study. HHSC
encourages the use of HUBs through race, ethnic and gender-neutral means. HHSC has adopted
administrative rules relating to HUBs, and a policy on the Utilization of HUBs, which
is located on HHSC’s website.

Pursuant to Texas Government Code §2161.181 and §2161.182, and HHSC’s HUB
policy and rules, HHSC is required to make a good faith effort to increase HUB participation
in its contracts. HHSC may accomplish the goal of increased HUB participation by contracting
directly with HUBs or indirectly through subcontracting opportunities.

4.2.5.2 HHSC’s Administrative Rules

HHSC has adopted the Comptroller of Public Accounts’ (CPA) HUB rules as its own. HHSC’s rules
are located in Title 1, Part 15, Chapter 392, Subchapter J of the Texas Administrative
Code, and the CPA rules are located in Title 34, Part 1, Chapter 20, Subchapter C. If
there are any discrepancies between HHSC’s administrative rules and this RFP, the rules will
take priority.

4.2.5.3 HUB Participation Goal

The CPA has established statewide HUB participation goals for different categories of contracts
in 34 T.A.C. §20.13. In order to meet or exceed the HUB participation goals, HHSC
encourages outreach to certified HUBs. Contractors must make a good faith effort to include
certified HUBs in the procurement process.

This contract is classified as an “All Other Services” contract under the CPA rule, and
therefore has a HUB Annual Procurement Utilization Goal of 33% per fiscal year. This goal
applies to MCO Administrative Services, as defined below.

4.2.5.4 Required HUB Subcontracting Plan

HHSC has determined that subcontracting opportunities are probable for this RFP for MCO
Administrative Services. MCO Administrative Services are those services or functions other than
the direct delivery of medical Covered Services necessary to manage the delivery of and payment
for such services. MCO Administrative Services include but are not limited to Network,
utilization, clinical and/or quality management, service authorization, claims processing,
Management Information System (MIS) operation and reporting. The Respondent must submit an HSP
(see the Procurement Library) with its proposal for such MCO Administrative Services. The HSP
is required whether or not a Respondent intends to subcontract.

HSP requirements will not apply to Subcontracts with Network Providers (providers who
contract directly with the MCO to deliver medical Covered Services to Members). A

Respondent therefore should not include Network Providers’ participation in
its HSP submissions.

In conjunction with the HSP, a Respondent must indicate whether it is a Texas certified HUB.
Being a certified HUB does not exempt a respondent from completing the HSP requirement.

During the good faith effort evaluation, HHSC may, at its discretion, allow clarifications or
request additional information to support the Respondent’s good faith effort development of the
HSP.

4.2.5.5 CPA Centralized Master Bidders List

Respondents may search for HUB subcontractors in the CPA’s Centralized Master Bidders List
(CMBL) HUB Directory, which is located on the CPA’s website at
http://www2.cpa.state.tx.us/cmbl/cmblhub.html. For this procurement, HHSC has
identified the following class and item codes for potential subcontracting opportunities:

NIGP Commodity Codes:

• 948-07: Administration Services, Health

• 958-56: Health Care Management Services (Including Managed Care Services)

	 	•	 	915-49: High Volume, Telephone Call Answering Services (See 915-05 for Low
Volume Services)	 

Respondents are not required to use, nor limited to using, the class and item codes
identified above, and may identify other areas for subcontracting.

HHSC does not endorse, recommend nor attest to the capabilities of any company or individual
listed on the CPA’s CMBL. The list of certified HUBs is subject to change, so Respondents are
encouraged to refer to the CMBL often to find the most current listing of HUBs.

4.2.5.6 HUB Subcontracting Procedures – If a Respondent Intends to Subcontract

An HSP must demonstrate that the Respondent made a good faith effort to comply with HHSC’s HUB
policies and procedures. The following subparts outline the items that HHSC will review in
determining whether an HSP meets the good faith effort standard. A Respondent that intends to
subcontract must complete the HSP to document its good faith efforts.

For step-by-step audio/video instructions on how to complete the HSP, you may also visit the

CPA’s website at: http://www.cpa.state.tx.us/procurement/prog/hub/hub-subcontracting-plan/.

1. Identify Subcontracting Areas and Divide Them into Reasonable Lots

A Respondent should first identify each area of the MCO Administrative Service work it intends
to subcontract. Then, to maximize HUB participation, it should divide the MCO Administrative

Service work into reasonable lots or portions, to the extent consistent with
prudent industry practices.

2. Notify Potential HUB Subcontractors

Respondents must notify three (3) or more certified HUBs of each subcontracting opportunity.
For example, if a Respondent intends to subcontract two (2) areas of MCO Administrative
Service work, then for each class/item code, the Respondent must notify at least three (3)
vendors who provide that type of work.

Respondents must provide written notice to potential HUB subcontractors prior to submitting
proposals. The notice must include:

1. a description of the scope of work to be subcontracted;

2. information regarding the location to review project plans or specifications;

3. information about bonding and insurance requirements;

4. required qualifications and other contract requirements; and

5. a description of how the subcontractor can contact the Respondent.

Respondents must give potential HUB subcontractors a reasonable amount of time to respond to
the notice, generally no less than five (5) working days from receipt. In rare situations, HHSC
will allow a shorter notification period if the Respondent demonstrates: (1) circumstances
warranting a shorter notification period, and (2) potential subcontractors still had sufficient
time to complete their responses.

Respondents must use the CMBL, the HUB Directory, and Internet resources when searching for HUB
subcontractors. Respondents may rely on the services of contractor groups; local, state and
federal business assistance offices; and other organizations that provide assistance in
identifying qualified applicants for the HUB program. Respondents also must provide written
notice to minority or women trade organizations or development centers, which can disseminate
notice of subcontracting opportunities to their members/participants. A list of minority and
women trade organizations is located on HHSC’s website under the Minority and Women
Organization link.

3. Written Justification of the Selection Process

A Respondent must provide written justification of its selection process if it chooses a
non-HUB subcontractor. The justification should demonstrate that the Respondent negotiated in
good faith with qualified HUB bidders, and did not reject qualified HUBs who were the best
value responsive bidders.

4.2.5.7 Alternatives to Good Faith Effort Requirements (Applies Only to Mentor

Protégé and Professional Services Contracts)

HHSC will accept a Mentor Protégé Agreement that has been entered into by a Respondent (mentor)
and a certified HUB (protégé) in accordance with Texas Government Code §2161.065.

Participation in the Mentor Protégé Program, along with the submission of a protégé as
a subcontractor in an HSP, constitutes a good faith effort for the particular area
subcontracted to the protégé. If a Respondent proposes to subcontract with a protégé, it does
not need to provide notice to three (3) vendors for that subcontracted area. To demonstrate
that a Respondent meets the good faith requirement for mentor/protégé arrangements, the HSP
should:

	 	1.	 	include a fully executed copy of the Mentor Protégé Agreement, which
must be registered with the CPA prior to submission to HHSC; and	 

	 	2.	 	identify areas of the HSP that will be performed by the protégé.

4.2.5.8 HUB Subcontracting Procedures – If a Respondent Does Not Intend to

Subcontract

If the Respondent plans to complete all MCO Administrative Service requirements with its own
equipment, supplies, materials and/or employees, it is still required to complete an HSP. The
Respondent must complete the “Self Performance Justification” portion of the HSP, and attest
that it does not intend to subcontract for any administrative goods or services, including the
class and item codes identified in Section 4.2.5.5. In addition, the Respondent must identify
the sections of the proposal that describe how it will complete the Scope of Work using its own
resources or provide a statement explaining how it will complete the Scope of Work using its own
resources. The Respondent must provide the following information regarding self- performance if
requested by HHSC:

	 	1.	 	evidence of sufficient Respondent staffing to meet the RFP requirements;

	 	2.	 	monthly payroll records showing the Respondent staff fully dedicated to the
contract; and	 

	 	3.	 	documentation proving employment of qualified personnel holding the
necessary licenses and certificates required to perform the Scope of Work.	 

4.2.5.9 Post-award HSP Requirements

After contract award, HHSC will coordinate a post-award meeting with the successful Respondents
to discuss HSP reporting requirements. The MCO must maintain business records documenting
compliance with the HSP, and must submit monthly reports to HHSC by completing the HUB
“Prime Contractor Progress Assessment Report.” This monthly report is required as a
condition for payment. In addition, the MCO must allow periodic onsite reviews of the MCO’s
headquarters or work site where services are to be performed if requested by HHSC.

Once accepted, the finalized HSP will become part of the Contract with the successful
Respondents. The Uniform Managed Care Manual outlines the procedures for changing the
HSP, as well as the HSP compliance and reporting requirements. All changes to the approved HSP
require prior HHSC approval. In general, if the MCO decides to subcontract any part of the
Contract after the award, it must follow the good faith effort procedures outlined in Section
4.2.5.6 (e.g., divide work into reasonable lots, notify at least three (3) vendors per
subcontracted area, provide written justification of the selection process, participate in the
Mentor Protégé Program, or for professional services contracts meet the 20% goal). For this
reason, HHSC

encourages Respondents to identify, as part of their HSP, multiple subcontractors who
are able to perform the work in each area the Respondent plans to subcontract. Selecting
additional subcontractors may help the selected MCO make changes to its original HSP, when
needed, and will allow HHSC to approve any necessary changes expeditiously.

Failure to meet the HSP and post-award requirements will constitute a breach of contract, and
will be subject to remedial actions. HHSC may also report noncompliance to the CPA in
accordance with the CPA’s respondent performance (see 34 T.A.C. §20.108) and
debarment program (see 34 T.A.C. §20.105).

4.2.6 Section 6 – Certifications and Other Required Forms

Respondents must submit the following required forms with their proposals:

1. Child Support Certification;

2. Debarment, Suspension, Ineligibility, and Voluntary Exclusion of Covered Contracts;

3. Federal Lobbying Certification;

4. Nondisclosure Statement;

5. Required Certifications; and

6. Respondent Information and Disclosures.

The required forms are located on HHSC’s website, under the “Business Opportunities” link.
HHSC encourages Respondents to carefully review all of these forms and submit questions
regarding their completion prior to the deadline for submitting questions (see Section 1.2,
“Procurement Schedule”).

Respondents should note that the “Respondent Information and Disclosures” form asks
Respondents to provide information on certain litigation matters. In addition to the
information required on this form, Respondents must provide all of the information described
in Uniform Managed Care Manual Chapter 5.8, “Report of Legal and Other Proceedings.”
Respondents may include this supplemental information on the “Respondent Information and
Disclosures” form, or under a separate submission.

4.3 Part 2 – Programmatic Proposal

Respondents must provide a detailed description of the proposed programmatic solution,
which must support all business activities and requirements described in the RFP. The
Programmatic Proposal must reflect a clear understanding of the nature of the work undertaken.

Respondents should carefully read the submission requirement instructions for specific
questions in this section. For each applicable programmatic submission requirement, the
Respondent must indicate, in addition to the information requested in each subsection, the
following information if applicable to the Respondent and its Proposal:

Material Subcontractor: If the Respondent plans to provide the service or perform the
function through a Material Subcontractor, the Respondent must detail the services and/or
function to be subcontracted, and how the Respondent and the Material Subcontractor will
coordinate such service or function. Respondents should describe any prior working
relationships with the Material Subcontractor.

Action Plan: This requirement applies to any Respondent who is not currently: (1) providing
services or performing functions relating to a specific RFP submission requirement as a current
vendor in STAR, STAR+PLUS, and/or CHIP, or (2) meeting the Operations Phase Requirements in
Section 8 relating to a specific submission requirement for STAR, STAR+PLUS, and/or CHIP. In
the Action Plan, the Respondent must, for each such submission requirement: (1) submit a
description of its current comparable experience and abilities, if any; (2) describe how the
Respondent will meet the Contract responsibilities, including assigned resources for completing
such activities; and (3) and a timeline for completing such activities.

In responding to questions for which the Respondent includes information about a Material
Subcontractor or Action Plans, up to one (1) page may be used to describe each Material
Subcontractor arrangement and up to one (1) page may be used to describe each Action Plan.
These pages are not included in the page limit instructions for the specific submission
requirement.

HHSC understands that some Respondents may not have current experience providing managed care
services to STAR, STAR+PLUS, and/or CHIP members in Texas. In responding to questions relating
to experience, Respondents should clearly indicate if their experience is in Texas, and if
their experience is with STAR, STAR+PLUS, CHIP, or other comparable populations of managed care
members. For Respondents proposing to serve STAR+PLUS members, the Proposal should describe the
Respondent’s experience with elderly and disabled populations, including persons eligible for
Medicare.

The Programmatic Proposal must include a detailed description of the following program
components, at a minimum:

1. Section 1 – Proposed Programs, Service Area, and Capacity

2. Section 2 – Experience Providing Covered Services

3. Section 3 – Value-added Services

4. Section 4 – Access to Care

5. Section 5 – Provider Network Provisions

6. Section 6 – Member Services

7. Section 7 – Quality Assessment and Performance Improvement

8. Section 8 – Utilization Management

9. Section 9 – Early Childhood Intervention (ECI)

10. Section 10 – Services for People with Special Health Care Needs

11. Section 11 – Care Management/Service Coordination

12. Section 12 – Disease Management (DM)/Health Home Services

13. Section 13 – Behavioral Health Services and Network

14. Section 14 – Management Information Systems Requirements

15. Section 15 – Fraud and Abuse

16. Section 16 – Pharmacy Services

17. Section 17 – Transition Plan

18. Section 18 – Additional Requirements Regarding Dual Eligibles

4.3.1 Section 1 – Proposed Programs, Service Area, and

Capacity

(3 pages, excluding
tables) The Respondent
shall:

	 	1.	 	complete the MCO Program Proposed Service Area and Capacity table found in the
Procurement Library, which must include for each proposed Service Area indicated in Table
1 of the Respondent’s Executive Summary, an estimate of the number of HHSC MCO Members
the Bidder has the capacity to serve in each MCO Program bid on the Operational Start
Date;	 

	 	2.	 	describe the calculations and assumptions used to arrive at these Service Area
capacity projections. In developing these projections, the Respondent should consider the
capacity of its Network, including its PCP Network, its Behavioral Health Services
Network, its specialty care Network, its Pharmacy Network, and for STAR+PLUS, its home
and community-based services Network. Respondents should specify:	 

• the anticipated STAR, STAR+PLUS, or CHIP Program enrollment, as applicable;

	 	•	 	the expected utilization of services, taking into consideration the
characteristics and health care needs of specific populations represented in the
particular HHSC MCO Program;	 

	 	•	 	the numbers and types (in terms of training, experience, and
specialization) of providers required to furnish the Covered Services;	 

	 	•	 	the numbers of Network Providers and providers with signed contracts, LOAs,
or LOIs who are not accepting new patients, by MCO Program;	 

	 	•	 	the geographic location of providers and HHSC MCO members, considering travel
time, the means of transportation ordinarily used by HHSC MCO members, and
whether the location provides physical access for members with disabilities; and	 

	 	•	 	generally describe anticipated Service Area capacity changes, if any, for each
of the proposed Service Areas over the Initial Contract Period; and	 

	 	3.	 	generally describe methods that the MCO will use to ensure access to all Covered
Services upon potential population growth due to changes in law, including growth
resulting from the	 

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation
Act of 2010.

4.3.2 Section 2 – Experience Providing Covered Services

(3 pages, plus 1 additional page for each additional MCO Program bid, if any.)

Covered Services are described in Section 8.1.2, “Covered Services;” Section 8.2.2, “Provisions
Related to Covered Services for Medicaid Members;” and Attachment B-1, “STAR Covered Services,”
Attachment B-1.1, “CHIP Covered Services,” and Attachment B-1.2, “STAR+PLUS Covered Services.”

For all MCO Programs bid, the Respondent must:

	 	1.	 	briefly describe the Respondent’s experience providing, on a capitated basis, Acute Care
services, including Behavioral Health Services, equivalent or comparable to Covered
Services included in the MCO Programs bid (STAR Covered Services are described in
Attachment B-1, CHIP Covered Services are described in Attachment B-1.1, and STAR+PLUS
Covered Services are described in Attachment B-1.2). The description should indicate:	 

	 	a.	 	the extent to which the Respondent has experience providing
such Acute Care services for a managed care population(s) comparable to the
population in the MCO Programs bid; and	 

	 	b.	 	the Respondent’s experience providing such Acute Care services
in Texas, and in the Respondent’s proposed Service Areas, if applicable;	 

	 	2.	 	indicate which STAR or CHIP Covered Service(s) (in whole or in part) the Respondent
does not have experience providing on a capitated basis or does not have experience
providing to a comparable Medicaid or CHIP population;	 

3. for STAR+PLUS Respondents, briefly describe the Respondent’s experience providing

managed Community-based Long-Term Services and Supports and Acute Care services
equivalent or comparable to STAR+PLUS Covered Services described in Attachment B1.2. The
description should indicate:

	 	a.	 	the extent to which the Respondent has experience providing
Community-based Long-Term Services and Supports and Acute Care services for a
managed care population(s) comparable to the population in STAR+PLUS; and	 

	 	b.	 	the Respondent’s experience providing such Community-based
Long-Term Services and Supports in Texas, and in the Respondent’s
proposed Service Areas, if applicable;	 

	 	4.	 	indicate which STAR+PLUS Covered Service(s) (in whole or in part) the Respondent does
not have experience providing on a capitated basis or does not have experience providing
to a comparable Medicaid population;	 

	 	5.	 	briefly describe the Respondent’s proposal for providing Covered Services, including any
plans for expansions of its Provider Network in any of the proposed Service Areas prior to
a Readiness Review. If the Respondent proposes to use a Material Subcontractor to provide
or manage Behavioral Health Services, Pharmacy Services, or any other Covered Service, the
Respondent must describe its relationship with the Material Subcontractor, as required by
Section 4.3;	 

6. for STAR Respondents for the Medicaid Rural Service Area, describe the Respondent’s

experience in providing Medicaid wrap-around services for Dual Eligibles entitled to these

benefits. If the Respondent does not have experience in providing these services,
indicate how the Respondent intends to meet this requirement; and

	 	7.	 	for STAR+PLUS Respondents, describe the Respondent’s experience in providing Service
Coordination for Dual Eligibles. Respondent should specifically describe the processes
and	 

procedures used to coordinate Medicare services with Medicaid Community-based Long- Term
Services and Supports and related services. If the Respondent does not have

experience coordinating these services, indicate how the Respondent intends to meet this
requirement.

4.3.3 Section 3 – Value-added Services

(1 page per Value-added Service)

Respondents may propose to offer Value-added Services as described in Section 8.1.2.1. If
offered, the Respondent will not receive additional compensation for Value-added Services, and
may not report the costs of Value-added Services as allowable medical or administrative costs.

For each MCO Program and Value-added Service proposed, the Respondent must:

	 	1.	 	define and describe the Value-added Service;

2. specify the applicable Service Areas for the proposed Value-added Services;

	 	3.	 	identify the category or group of Members eligible to receive the proposed
Value-added Services if it is a type of service that is not appropriate for all
Members;	 

	 	4.	 	note any limitations or restrictions that apply to the Value-added Services;

	 	5.	 	for each Service Area, identify the types of Providers responsible for providing
the Value-added Service, including any limitations on Provider capacity if applicable.	 

	 	6.	 	propose how and when Providers and Members will be notified about the
availability of such Value-added Service;	 

	 	7.	 	describe how a Member may obtain or access the Value-added Service;

	 	8.	 	include a statement that the Respondent will provide any Value-added Service(s)
that are approved by HHSC for at least 12 months after the Operational Start Date of
the Contract; and	 

	 	9.	 	describe if, and how, the Respondent will identify the Value-added Service in
administrative data (Encounter Data).	 

The Respondent may propose different Value-added Services for each MCO Program and Service Area
bid.

4.3.4 Section 4 – Access to Care

Access to Care standards are described in
Section 8.1.3. 4.3.4.1 Travel Distances

(no page limit, should only submit applicable tables)

For each proposed Service Area and for each MCO Program bid (if the proposed Provider
Network would be different across MCO Programs within a Service Area), submit tables created
using GeoAccess, or a comparable software program, to demonstrate the geographic adequacy of
the Respondent’s proposed Provider Network compared to the projected population in each
proposed Service Area.

Providers in the demonstrated Provider Network must have an executed contract with the
Respondent, a letter of intent (LOI), or a letter of agreement (LOA) indicating the provider
intends to contract with the Respondent if HHSC awards the Respondent an MCO Contract.
Respondents do not need to submit the signed contracts, LOIs, or LOAs with the Proposal, but
HHSC may request to review these documents during its evaluation of the Proposal. Providers
who have not signed a Network Provider contract or LOI/LOAs may not be included in the
Respondent’s Network for purposes of responding to this RFP submission requirement.

For each proposed Service Area, the Respondent must generate GeoAccess or comparable tables to
display the following information on its proposed Provider Network utilizing the Member Files
provided by HHSC. For purposes of Geo Mapping, the distribution method will be to place all
members at the center of the zip code.

1. adults with access to PCPs (STAR and STAR+PLUS only):

	 	a.	 	Percentage and number of adult Members with access
to one (1) Open- Panel, age-appropriate Network PCP within 30 miles,
and the average number of miles within which adults have such access;	 

	 	b.	 	Percentage and number of adult Members with access
to two (2) Open- Panel, age-appropriate Network PCPs within 30 miles,
and the average number of miles within which adults have such access;	 

2. children with access to PCPs:

	 	a.	 	Percentage and number of child Members with access
to one (1) Open- Panel, age-appropriate Network PCP within 30 miles,
and the average number of miles within which children have such
access;	 

	 	b.	 	Percentage and number of child Members with access
to two (2) Open- Panel, age-appropriate Network PCPs within 30 miles,
and the average number of miles within which children have such
access;	 

3. access to cardiologists (STAR and STAR+PLUS only):

	 	a.	 	Percentage and number of adult Members with access to
one (1) Network cardiologist within 75 miles, and the average number of
miles within which adults have such access;	 

	 	b.	 	Percentage and number of adult Members with access to
two (2) Network cardiologists within 75 miles, and the average number of
miles within which adults have such access;	 

4. access to Acute Care Hospitals:

	 	a.	 	Percentage and number of Members with access to a
Network Acute Care Hospital within 30 miles;	 

	 	5.	 	access to outpatient Behavioral Health Services Providers (does not apply to the
STAR Dallas Service Area, where Behavioral Health services are provided through
NorthSTAR):	 

	 	a.	 	Percentage and number of Members with access to one (1) Network
outpatient Behavioral Health Service Provider within 75 miles, and
the average number of miles within which Members have such access;	 

	 	b.	 	Percentage and number of Members with access to two
(2) Network outpatient Behavioral Health Providers within 75 miles,
and the average number of miles within which Members have such
access;	 

	 	6.	 	access to OB/GYNs (does not apply to CHIP Members or CHIP Perinatal Newborn
Members – but does apply to CHIP Perinate Members (unborn children)):	 

a. Percentage and number of female Members over age 19 with access to one

(1) Network OB/GYN within 75 miles, and the average number of miles within
which such female Members have such access (applies to Medicaid Members and
CHIP Perinate Members in both urban and rural areas);

b. Percentage and number of female Members over age 19 with access to two

(2) Network OB/GYNs within 75 miles, and the average number of miles
within which such female Members have such access(applies to Medicaid
Members and CHIP Perinate Members in both urban and rural areas);

	 	c.	 	Percentage and number of CHIP Perinate Members in
rural areas with access to one (1) Network OB/GYN within 125 miles,
and the average number of miles within which such Members have such
access;	 

	 	d.	 	Percentage and number of CHIP Perinate Members in
rural areas with access to one (1) Network OB/GYN within 125 miles,
and the average number of miles within which such Members have such
access;	 

7. access to otolaryngologists (STAR and CHIP only):

	 	a.	 	Percentage and number of child Members with access to
one (1) Network otolaryngologist (ENT) within 75 miles, and the average
number of miles within which children have such access; and	 

	 	b.	 	Percentage and number of child Members with access to
two (2) Network otolaryngologists (ENTs) within 75 miles, and the
average number of miles within which children have such access; and	 

8. access to Pharmacies:

	 	a.	 	Percentage and number Members with access to one (1)
Network pharmacy within 15 miles, and the average number of miles within
which Members have such access;	 

	 	b.	 	Percentage and number Members with access to two (2)
Network pharmacies within 15 miles, and the average number of miles
within which Members have such access;	 

	 	c.	 	Percentage and number Members with access to one (1)
24 hour Network pharmacy within 75 miles, and the average number of
miles within which Members have such access; and	 

	 	d.	 	Percentage and number Members with access to two (2)
24 hour Network pharmacies within 75 miles, and the average number of
miles within which Members have such access.	 

Respondents should submit one (1) set of the above tables for each MCO Program and Service Area
bid (e.g, one (1) table for the STAR Tarrant Service Area, one (1) table for the STAR Harris
Service Area, etc.). Respondents should report the zip code, the city or town associated with
the zip code, the percentage and number of eligible Members residing within the zip code,

and the percentage and number of eligible Members residing within a zip code who have
access to Network Provider addresses within the HHSC-specified travel distance standard. Each
table should be sorted in descending order based on zip code-eligible Member population. In
addition, each Service Area table should report the aggregate percentage of eligible Members
residing within the Service Area who have access within the HHSC-specified travel standard.

4.3.4.2 Assessing Access to Care

(3 pages, plus one additional page per additional MCO Program bid if the Respondent’s
response is different by MCO Program)

1. Identify the process(es) by which the Respondent must measure and regularly verify:

	 	a.	 	Network compliance, including pharmacy, regarding travel
distance access in Section 8.1.3.2;	 

	 	b.	 	Provider compliance regarding appointment access standards in
Section 8.1.3.1, and	 

	 	c.	 	PCP compliance with after-hours coverage standards in Section
8.1.4.2.

2. Describe the steps the Respondent has taken in the past when it identified:

	 	a.	 	a deficiency in its compliance with plan or state travel distance
access standards;

b. a Provider that was not meeting plan or state appointment access standards, and

	 	c.	 	a PCP that was not in compliance with the plan or state
after-hours coverage requirements.	 

If the Respondent has not taken such steps listed in 2a, b, or c above with
regularity, describe how it proposes to take such steps in the future.

	 	3.	 	Describe the processes the Respondent implement to accommodate additional
Members and to ensure the access standards are met if actual enrollment exceeds
projected enrollment.	 

4.3.5 Section 5 – Provider Network Provisions

Provider Network requirements are primarily described in Section 8.1.4. In addition, the
Significant Traditional Provider (STP) requirements applicable to Medicaid MCOs are described
in Section 8.2.3.

4.3.5.1 Provider Network

(1 page, excluding Provider listing and tables)

Network Providers must have an executed contract with the Respondent, a letter of intent (LOI)
or a letter of agreement (LOA) indicating the Provider intends to contract with the Respondent

should HHSC award the Respondent a contract for the applicable MCO Program. Network
Providers must be licensed in the State of Texas to provide the contracted Covered Services.
As described in Section 8.1.4.4, the MCO must credential Network Providers before they may
serve Members. Sample LOI/LOA agreements and sample Network Providers tables can be found in
the Procurement Library.

	 	1.	 	For each Service Area in which the Respondent proposes to participate in the
STAR, STAR+PLUS, and/or CHIP Program, the Respondent must submit a complete listing of
proposed Network Providers for each of the following Acute Care provider types. Such
listing must indicate for each provider type: the name, address, and NPI and/or TPI,
if applicable, of the Providers with signed contracts, LOIs or LOAs. If the
Respondent’s Provider Network is identical across more than one MCO Program within a
Service Area, the Respondent may submit one Excel file worksheet for the Service Area
that specifies the applicable MCO Programs. The Respondent must include in an Excel
file at least the two (2) nearest Providers meeting each of the following provider
type descriptions.	 

The Respondent must also include in the Excel file all Providers in the designated
provider type within the Service Area. The listing must include separate lists of
each provider type in the order listed below and a separate worksheet for each
proposed Service Area:

Acute Care Services

a. Acute Care Hospitals, inpatient and outpatient services;

b. Hospitals providing Level 1 trauma care;

c. Hospitals providing Level 2 trauma care;

d. Hospitals designated as transplant centers;

e. Hospitals designated as Children’s Hospitals by the CMS;

f. other Hospitals with specialized pediatric services;

g. Psychiatric Hospitals providing mental health services, inpatient and outpatient;

h. Other facilities or clinics that provide outpatient mental health services;

i. Hospitals providing substance abuse services, inpatient and outpatient; and

j. other facilities or clinics providing outpatient substance abuse services.

2. For STAR+PLUS only, identify a list of Community-based Long-Term Services and

Supports Providers with whom the Respondent has a signed contract, LOI or LOA. These
Providers should be listed by type, name, and address. Respondent should also list the
array of Community-based Long-Term Services and Supports each of these entities
provides.

Community-based Long-Term Services and Supports (for STAR+PLUS only)

a. Personal Assistance Services (PAS);

b. Day Activity and Health Services (DAHS);

c. adaptive aids and medical supplies;

d. adult foster care;

e. assisted living and residential care services;

f. emergency response services;

g. home delivered meals;

h. in-home skilled nursing care;

i. dental services;

j. minor home modifications;

k. respite care;

l. therapy – occupational;

m. therapy – physical;

n. therapy – speech, hearing, and/or language pathology services;

o. consumer directed services; and

p. transition assistance services.

3. Identify the types of Providers the Respondent allows to be PCPs for adults, PCPs for

children, OB/GYNs, and outpatient Behavioral Health Service Providers. The Respondent
should identify its contract requirements for these provider types and any exceptions. For
example, Respondent should note under what circumstances, if any, an internist is allowed
to be a PCP for children, or a family practitioner is allowed to be an OB/GYN.

4.3.5.2 Significant Traditional Providers

(No page limit, Respondents should only submit STP tables, not text, with the exception of
bidders not meeting the 50 percent threshold described in Section 5.2. These Respondents
should provide clear documentation of any problems in meeting this threshold)

The STP requirements in Section 8.2.3 are applicable as follows:

Medicaid STP requirements apply statewide for pharmacy and substance use disorder providers
(SUDs) in STAR and STAR+PLUS. For STAR MCOs, STP requirements for other provider types are
limited to the following areas: Hidalgo, Jefferson, and Medicaid Rural Service Area(s); and in
the following counties: Hudspeth, Carson, Deaf Smith, Hutchinson, Potter, Randall, Swisher,
Austin, Wharton, Matagorda, Bandera, Brooks, Goliad, Karnes, Kenedy, Live Oak, and Fayette.
For STAR+PLUS MCOs, STP requirements for other provider types apply to Jefferson, El Paso,
Lubbock and Hidalgo Service Areas; as well as the following counties: Austin, Wharton,
Matagorda, Bandera, Brooks, Goliad, Karnes, Kenedy, Live Oak, and Fayette.

HHSC-designated Medicaid Significant Traditional Providers (STPs) can be found in the
Procurement Library. The STP list includes, without limitation, SUD, pharmacy, and State
Mental Health Hospitals for all MCO Programs. For STAR+PLUS, STPs also include
Community-based Long-Term Services and Supports Providers.

For each STP provider type in the MCO Program(s) and Service Area(s) bid, the Respondent must
complete the charts provided in the Procurement Library.

4.3.5.3 Provider Network Capacity

(3 pages, plus 1 additional page per additional MCO Program bid if the Respondent’s response
differs by MCO Program)

HHSC has targeted improved Network capacity and improved Member access to Covered
Services as a priority for the Initial Contract Period.

	 	1.	 	indicate which, if any, Covered Services are not available from a qualified
Provider in the Respondent’s proposed Network in the Service Area and how the
Respondent proposes to provide such Covered Services to Members in the Service Area;
and	 

	 	2.	 	briefly describe how deficiencies will be addressed when the Provider Network is
unable to provide a Member with appropriate access to Covered Services due to lack of
a qualified Network Provider within the travel distance of the Member’s residence
specified in Section 8.1.3.2. The description should include, but not be limited to,
how the Respondent will address deficiencies in the Network related to:	 

	 	a.	 	the lack of an age-appropriate Network PCP with an
Open-Panel within the required travel distance of the Member’s
residence;	 

	 	b.	 	for female Members, the lack of an Network OB/GYN with an
open practice within the travel distance of the Member’s residence;	 

	 	c.	 	the lack of a Network cardiologist within the travel
distance of the Member’s residence (STAR and STAR+PLUS only); and	 

	 	d.	 	the lack of a Network pharmacy within the travel distance
of the Member’s residence.	 

4.3.5.4 Credentialing and Re-credentialing

(4 pages plus 2 additional pages for Respondents bidding STAR+PLUS)

Provider credentialing and re-credentialing requirements are described in Section 8.1.4.4. For
all of the following submission requirements, instead of attaching copies of the Respondent’s
credentialing/re-credentialing policies and procedures, the Respondent should provide a brief
summary of its policies and procedures.

	 	1.	 	Describe the Respondent’s minimum credentialing and/or licensure requirements
and procedures for Acute Care Providers by type of Provider, and demonstrate how
the Respondent ensures, or proposes to ensure, that the minimum credentialing
requirements are met. Such description must demonstrate compliance with Section
8.1.4.4.	 

	 	2.	 	Describe the re-credentialing process or process between re-credentialing
cycles for Acute Care Providers and how the Respondent will capture and assess the
following information:	 

a. Member Complaints and Appeals;

b. results from quality reviews and Provider quality profiling;

c. utilization management information; and

d. information from licensing and accreditation agencies.

	 	3.	 	For STAR+PLUS only, describe the Respondent’s minimum credentialing and/or
licensure requirements and procedures for Providers of Community-based Long-Term
Services and Supports by type of Provider, and how Respondent will ensure that the
minimum credentialing and licensing requirements are met by any Provider rendering
Covered Services.	 

	 	4.	 	For STAR+PLUS only, describe the re-credentialing process for Providers of
Community-based Long-Term Services and Supports. The description of the
recredentialing process should include how the Respondent will capture and assesses
the following information:	 

a. Member Complaints and Appeals;

b. results from quality reviews and quality Provider profiling;

c. utilization management information; and

d. information from licensing and accreditation agencies.

	 	5.	 	A Respondent currently operating in Texas must separately report the following
information for its Texas Network. A Respondent not currently operating in Texas must	 

separately report the same information for a managed care program it operates in
another state that is similar to the MCO Program bid:

	 	a.	 	the percentage of providers in its Network re-credentialed in the
past three (3) years, for the following provider types: primary care physician,
specialty care provider, and masters-level outpatient Behavioral Health Service
providers; and	 

	 	b.	 	the number and percentage of providers in its Network who were
subjected to the regularly scheduled re-credentialing process over the past 24
months that were denied continued Network status.	 

4.3.5.5 Provider Hotline

(3 pages, plus 2 additional pages for each additional MCO Program bid if the Respondent’s
response differs by MCO Program; excluding hotline telephone reports)

Describe the proposed Provider Hotline function and how the Respondent would meet the
requirements of Section 8.1.4.7. Such description must include:

	 	1.	 	normal hours of operation of the hotline;

2. staffing for the hotline;

	 	3.	 	training for the hotline staff on Covered Services and HHSC MCO
Program requirements;	 

	 	4.	 	the routing of calls among hotline staff to ensure timely and appropriate
response to provider inquiries;	 

	 	5.	 	responsibilities of hotline staff, if any, in addition to responding to HHSC
Provider Hotline calls (e.g., responding to non-Network provider calls and/or HHSC
Member Hotline calls);	 

	 	6.	 	after-hours procedures and available services;

	 	7.	 	provider hotline telephone reports for the most recent four (4) quarters with
data that show the monthly call volume, the monthly trends for average speed of
answer (where answer is defined by reaching a live voice, not an automated call
system) and the monthly trends for the abandonment rate; and	 

	 	8.	 	Whether the Provider Hotline has the capability to administer automated
surveys to callers at the end of calls.	 

A Respondent currently participating in any of the MCO Programs bid must submit the
information in #7 above for each provider hotline operated, and identify any proposed changes
to provider hotline functions.

A Respondent not currently participating in any of the MCO Programs bid must submit
the information in #7 above for a similar managed care program that it operates. If such a
Respondent referenced a non-H HSC managed care program in another submission requirement,
the Respondent must submit its provider hotline telephone report for the same managed care
program.

A Respondent proposing to participate in more than one (1) MCO Program should note that it is
not required to operate separate STAR, STAR+PLUS, and CHIP Provider Hotlines, so long it meets
the RFP Provider Hotline requirements for all MCO Programs bid.

If a Respondent is submitting a multi-program response to this RFP, the Respondent should
separately describe each proposed Provider Hotline, or if proposing to staff a single
Provider Hotline for multiple programs, and should note in its Proposal the differences, if
any, in its Provider Hotline and staffing for each MCO Program bid.

4.3.5.6 Provider Training

(2 pages, plus 1 additional page per additional MCO Program bid if the Respondent’s response
differs by MCO Program)

Provider training requirements are described in Section 8.1.4.6.

	 	1.	 	Provide a brief description of the proposed Provider training programs for each MCO
Program bid. For STAR+PLUS only, distinguish between training programs for Acute Care
Providers and Community-based Long-Term Services and Supports Providers. The description
should include:	 

	 	a.	 	the types of programs to be offered, including the modality of
training;

b. what topics will be covered;

c. which Providers will be invited to attend;

d. how the Respondent proposes to maximize Provider participation;

e. how Provider training programs will be evaluated;

f. the frequency of Provider training; and

	 	g.	 	for STAR+PLUS Long Term Services and Supports providers in El
Paso, Lubbock, and Hidalgo, who have never submitted traditional claim forms,
a brief summary of additional methods to assist these providers.	 

	 	2.	 	Briefly describe two (2) examples of recent Provider training programs relevant to
each of the MCO Programs bid. These examples must include:	 

a. a description of the training program;

b. a summary of distributed materials (the actual materials are not to be submitted);

c. number and type of attendees; and

d. results of any evaluations from the training.

A Respondent currently participating in any of the MCO Programs bid must submit the above
Provider training examples for each such MCO Program. A Respondent may use the same such
Provider education example for more than one (1) MCO Program, provided the education program
was given to Providers participating in each MCO Program.

A Respondent not currently participating in one (1) or more of the MCO Programs bid
must submit the above provider training examples for a similar managed care program. If the
Respondent referenced a non-H HSC managed care program in another submission requirement, the
Respondent must submit its provider education information in this submission requirement.

4.3.5.7 Provider Incentives

(2 pages, plus 1 additional page per additional MCO Program bid if the Respondent’s response
differs by MCO Program)

The Respondent must submit a proposal for a pilot “gain sharing” program. The program should
focus on collaborating with Network physicians and Hospitals in order to allow them to share a
portion of the Respondent’s savings resulting from reducing inappropriate utilization of
services, including inappropriate admissions and readmissions. The proposal should include
mechanisms whereby the Respondent will provide incentive payments to Hospitals and physicians
for quality care. The proposal should include quality metrics required for incentives,
recruitment strategies of providers, and a proposed structure for payment.

4.3.6 Section 6 – Member Services

4.3.6.1 Member Services Staffing

(5 pages, plus 1 additional page per additional MCO Program bid if the Respondent’s response
differs by MCO Program; excluding organizational chart(s))

The MCO must maintain a Member Services Department to assist Members and Members’
representatives in obtaining Covered Services as described in Section 8.1.5.

	 	1.	 	Provide an organizational chart of the Member Services Department, showing the
placement of Member Services within the Respondent’s organization and showing the
key staff within the Member Services Department.	 

	 	2.	 	Explain the functions of the Member Services staff, including brief job
descriptions and qualifications.	 

	 	3.	 	Describe the curriculum for training to be provided to Member Services
representatives, including when the training is conducted and how the training
addresses:	 

	 	a.	 	Covered Services, including Behavioral Health Services and
Community-based Long Term Services and Supports;	 

	 	b.	 	MCO Program requirements;

	 	c.	 	Cultural Competency; and

	 	d.	 	providing assistance to Members with limited English proficiency.

	 	4.	 	Identify the turnover rate for Member Services staff in the past two (2) years.
A Respondent operating any HHSC MCO Program must provide the staff turnover rate for	 

each of its MCO Programs. A Respondent not currently operating an HHSC MCO

Program must provide its Member Services staff turnover rate for a
comparable managed care program and identify the managed care program.

	 	5.	 	For STAR+PLUS only, identify the number and professional background of
Member Services staff that the Respondent intends to dedicate to the Service
Coordination function.	 

	 	6.	 	Identify the percentage of Member Services staff who will be physically
located in the Service Area.	 

A Respondent submitting a multi-program response must clearly indicate any differences in the
Respondent’s Member services approach across each of the MCO Program bid.

4.3.6.2 Member Hotline

(3 pages, plus 2 additional pages per additional MCO Program bid if the Respondent’s response
differs by MCO Program; excluding hotline telephone reports)

The Member Hotline requirements are described in Section 8.1.5.6.
Describe the proposed Member Hotline function, including:

	 	1.	 	normal hours of operation;

	 	2.	 	number of Member Hotline staff, expressed in the number of full time employees
(FTEs) per 1000 Members who are available 8:00 a.m. to 5:00 p.m., local time in the
Service Area, Monday through Friday, excluding state-approved holidays;	 

	 	3.	 	routing of calls among Member Hotline staff to ensure timely and accurate
response to Member inquiries;	 

	 	4.	 	responsibilities of Member Hotline staff, if any, in addition to
responding to HHSC Member Hotline calls, (e.g., responding to non-HHSC Member
calls and/or HHSC Provider Hotline or Behavioral Health Hotline calls);	 

	 	5.	 	after-hours procedures and available services, including those provided to
non-English speaking Members in Major Population Groups;	 

	 	6.	 	the number and percentage of FTE Member Hotline staff who are bilingual in
English and Spanish;	 

	 	7.	 	the number and percentage of FTE Member Hotline staff who are multi-lingual
for any additional language, by language spoken;	 

	 	8.	 	for STAR+PLUS only, the number and percentage of FTE Member Hotline
staff dedicated to the Service Coordination function;	 

	 	9.	 	Member Hotline telephone reports for the most recent four (4) quarters with
data that show the monthly trends for call volume, monthly trends for average speed
of answer (where answer is defined by reaching a live voice, not an automated call
system) and monthly trends for the abandonment rate; and	 

	 	10.	 	Whether the Member Hotline has the capability to administer automated
surveys to callers at the end of calls.	 

A Respondent currently participating in any of HHSC’s MCO Programs must submit the information
in #9 above for each Member Hotline operated, and identify any proposed changes to hotline
functions.

If the Respondent is not currently participating in any of HHSC’s MCO Programs, it
should describe its experience and proposed approach in establishing and maintaining an
accessible call center for Members that is comparable to the Member Hotline described in
Section 8.1.5.6. Such a description must include the information listed in items 1 to 10 above.

A Respondent proposing to participate in more than one (1) MCO Program should note that it is
not required to operate separate STAR, STAR+PLUS, and CHIP Member Hotlines, if it meets the RFP
Member Hotline requirements for all MCO Program bid.

If a Respondent is submitting a multi-program response to this RFP, the Respondent should
separately describe each proposed Member Hotline, or if proposing to staff a single Member
Hotline for multiple programs, and should note the differences, if any, in its Member Hotline
and staffing for each MCO Program bid.

4.3.6.3 Member Service Scenarios

(5 pages)

Describe the procedures a Member Services representative will follow to respond to the
following situations:

	 	1.	 	a Member has received a bill for payment of Covered Services from a Network
Provider or Out-of-Network Provider;	 

	 	2.	 	a Member is unable to reach her PCP after normal business hours;

	 	3.	 	a Member is having difficulty scheduling an appointment for preventive care
with her PCP,	 

	 	4.	 	for STAR+PLUS only, a Member is having difficulty scheduling an
appointment for preventive care with her Medicare PCP;	 

	 	5.	 	for STAR+PLUS only, a Member is in urgent need of meals, adaptive aids, or
other Community-Based Long- Term Services and Supports and is unable to reach
their Service Coordinator or provider,	 

	 	6.	 	a Member becomes ill while traveling outside of the Service Area, and

	 	7.	 	a Member has a request for a specific medication that the pharmacy is
unable to provide.	 

4.3.6.4 Cultural Competency

(3 pages)

Provide a high-level description of the processes the Respondent will put in place to the
meet the requirements of the cultural competency requirements as described in Section
8.1.5.8, “Cultural Competency Plan.”

	 	1.	 	Describe how the Respondent will ensure culturally competent services to people
of all cultures, races, ethnic backgrounds, and religions as well as those with
disabilities in a	 

manner that recognizes values, affirms, and respects the worth of the
individuals and protects and preserves the dignity of each.

2. Describe how the Respondent will develop intervention strategies and work with Network

Providers to avoid disparities in the delivery of medical services to diverse populations.

4.3.6.5 Member Complaint and Appeal Processes

(3 pages per MCO Program, excluding flow chart)

Medicaid Member Complaint and Appeal Processes are described in Section 8.2.6. CHIP Member
Complaint and Appeal Processes are described in Section 8.4.2. For each MCO Program bid, a
Respondent’s proposal should describe how it intends to meet the applicable Member Complaint
and Appeal requirements. A Respondent should not submit detailed Complaint and Appeal
policies and procedures as an attachment.

For each MCO Program bid, the Respondent must:

	 	1.	 	describe the process the Respondent will put in place for the review of
Member Complaints and Appeals, including which staff will be involved;	 

	 	2.	 	provide a flowchart that depicts the process the Respondent will employ, from the
receipt of a request through each phase of the review to notification of disposition,
including providing notice of access to HHSC Fair Hearings;	 

	 	3.	 	document the MCO’s average time for resolution over the past 12 months for
Member Complaints and Appeals (excluding Expedited Appeals), from date of receipt to
date of notification of disposition; and	 

	 	4.	 	for STAR and STAR+PLUS only, describe the number and job descriptions of Member
Advocates, how Members are informed of the availability of Member Advocates, and how
Members access Advocates.	 

4.3.6.6 Marketing Activities and Prohibited Practices

(no page limit)

If the Respondent has been sanctioned or placed under corrective action for prohibited
Marketing practices related to managed care products by the CMS, Texas, or by another state:

	 	1.	 	describe the basis for each sanction or corrective action, and

	 	2.	 	explain how the Respondent would ensure that it would not commit any
practices prohibited by the CMS or HHSC in its Marketing activities.	 

A Respondent should have reported whether it has been sanctioned or been placed under corrective
action by the federal government, Texas, or any other state in the past three (3) years as part
of its Business Specifications submission.

4.3.6.7 Continuity of Care (for STAR and STAR+PLUS only)

(3 pages plus 1 additional page if the Respondent is proposing to participate in both STAR and
STAR+PLUS)

Continuity of Care transition requirements for certain new Members with Out-of-Network
providers are described in Section 8.2.1.

Describe the proposed Continuity of Care Transition Plan for serving new Members whose current
PCP, OB/GYN, specialty care providers (including Behavioral Health Service providers) or
Community-based Long-Term Services and Supports are not participants in the Respondent’s
Provider Network. Respondents proposing to serve STAR+PLUS Members must also describe the
proposed Continuity of Care Transition Plan for serving new Members whose current home health
services provider is not a participant in the Respondent’s proposed Provider Network.

If a Respondent is proposing to serve both STAR and STAR+PLUS MCO Members, the Respondent
should note the differences, if any, in its Continuity of Care Transition Plan in each MCO
Program bid.

4.3.6.8 Objection to Providing Certain Services

(1 page)

In accordance with 42 C.F.R. §438.102, the Respondent may file an objection to provide,
reimburse for, or provide coverage of, counseling or referral service for a Covered Service
based on moral or religious grounds (see Section 8.2.2.7). HHSC reserves the right to make
downward adjustments to Capitation Rates for any Respondent that objects to providing certain
services based on moral or religious grounds.

Respondent should indicate objections, if any, to providing a Covered Service based on moral or
religious grounds. Identify the specific service(s) to which it objects and describe the basis
for its objection on moral or religious grounds.

4.3.6.9 Coordination of Services for Dual Eligibles

(2 pages)

Coordination of Services for STAR+PLUS Dual Eligibles is described in Section 8.3.7.1, and
Medicaid wrap-services are described in Section 8.2.3.

As applicable to the Programs bid, please describe the Respondent’s process for coordinating
Medicaid and Medicare care for STAR+PLUS Dual Eligibles, and providing Medicaid wraparound
services to Dual Eligibles in STAR+PLUS and STAR (Medicaid Rural Service Area only).

4.3.7 Section 7 – Quality Assessment and Performance

Improvement

The Quality Assessment and Performance Improvement (QAPI) requirements of the RFP are
described in Section 8.1.7.

4.3.7.1 Clinical Initiatives

(3 pages, plus 2 additional pages per additional MCO Program, excluding QA plan)

	 	1.	 	For each MCO Program bid, describe data-driven clinical initiatives that the
Respondent initiated within the past 24 months that have yielded improvement in
clinical care for a	 

managed care population comparable to the population bid and document two (2)
statistically significant improvements generated by the Respondent’s clinical
initiatives.

	 	2.	 	For STAR+PLUS only, propose two (2) clinical initiatives focused on
Community-based Long-Term Services and Supports for STAR+PLUS Members, including how
Members will be involved in such initiatives and the Respondent’s experience
implementing similar clinical initiatives.	 

3. For each MCO Program bid, describe two (2) new or ongoing Acute Care clinical

initiatives that the Respondent proposes to pursue in the first year of the Contract.
Document why each topic warrants quality improvement investment, and describe the
Respondent’s measurable goals for the initiative.

	 	4.	 	For STAR+PLUS only, describe the planned approach the Respondent will take
towards quality assessment and ongoing review of providers with whom it intends to
contract, using the following provider types as an example:	 

a. Adult Day Health Facilities;

b. Personal Assistance Services providers, and

c. Home and Community Support Services Agencies (HCSSAs).

	 	5.	 	For Respondents that already participate in an HHSC MCO Program, provide a copy
of the most recent QAPI Plan. For Respondents that do not participate in an HHSC MCO
Program, provide a copy of a 2009 quality assurance plan for a comparable managed care
population.	 

	 	6.	 	Many Texas Medicaid and CHIP children reportedly receive their immunizations
through Local Health Departments. Discuss the impact this has on creating a Medical
Home for child Members, and what steps, if any, the Respondent proposes to take to
improve child preventive services delivery.	 

4.3.7.2 Health Plan Employer Data and Information Set (HEDIS) and Other Quality

Data

(3 pages, plus 2 additional pages per additional MCO Program bid)

HHSC’s External Quality Review Organization (EQRO) will perform HEDIS and Consumer Assessment
of Health Plans Survey (CAHPS) calculations required by HHSC for MCO Program management. The
following questions are designed to solicit information on a Respondent’s

proposed approach to generating its own clinical indicator information to identify
and address opportunities for improvement, as well as the Respondent’s approach to acting on
clinical indicator data reported by HHSC’s EQRO.

For each MCO Program bid, the Respondent must:

	 	1.	 	identify the MCO-level HEDIS and any other statistical clinical indicator
measures the Respondent will generate to identify opportunities for clinical
quality improvement;	 

	 	2.	 	document examples of statistical clinical indicator measures previously
generated by the Respondent during 2008-2009 for a managed care population comparable
to the population in the MCO Program bid;	 

	 	3.	 	describe efforts that the Respondent has made to assess member satisfaction
during 2008-2009 for a managed care population comparable to the population in the
MCO Program bid; and	 

	 	4.	 	describe management interventions implemented in 2008 or 2009 based on member
satisfaction measurement findings for a managed care population comparable to the
population in the MCO Program bid, and whether these interventions resulted in
measurable improvements in later member satisfaction findings.	 

4.3.7.3 Clinical Practice Guidelines

(2 pages per MCO Program bid)

There is significant evidence that medical professionals are often slow to adopt evidence-based
clinical practice guidelines.

	 	1.	 	For each MCO Program bid, describe two (2) clinical guidelines that are
relevant to the enrolled populations and that the Respondent believes are currently
not being adhered to at a satisfactory level.	 

	 	2.	 	Describe what steps the Respondent will take to increase compliance with the
clinical guidelines noted in its response to question number 1 above.	 

	 	3.	 	Provide a general description of the Respondent’s process for developing and
updating clinical guidelines, and for disseminating them to participating Providers.	 

4.3.7.4 Provider Profiling

(3 pages, excluding sample profile reports)

	 	1.	 	Describe the Respondent’s practice of profiling the quality of care delivered
by Network PCPs, and any other Acute Care Providers (e.g., high volume specialists,
Hospitals), including the methodology for determining which and how many Providers
will be profiled.	 

	 	2.	 	For STAR+PLUS, describe the Respondent’s method to ensure the quality of
care delivered by Long-Term Services and Supports Providers.	 

	 	3.	 	Submit sample quality profile reports used by the Respondent, or proposed for
future use (identify which).	 

	 	4.	 	Describe the rationale for selecting the performance measures presented in the
sample profile reports.	 

	 	5.	 	Describe the proposed frequency with which the Respondent will distribute such
reports to Network Providers, and identify which Providers will receive such profile
reports.	 

If a Respondent is submitting a multi-program response to this RFP, the Respondent should note
in its Proposal the differences, if any, in its provider profiling activities and reports for
each MCO Program bid.

4.3.7.5 Network Management

(4 pages, plus 1 additional page per additional MCO Program bid if the Respondent’s response
differs by MCO Program)

Describe how the Respondent will actively work with Network Providers to ensure accountability
and improvement in the quality of care provided by both Acute and Long-Term Services and
Supports Providers. The description should include:

	 	1.	 	the steps the Respondent will take with each profiled Provider following the
production of each profile report, including a description of how the Respondent will
motivate and facilitate improvement in the performance of each profiled Provider;	 

	 	2.	 	the process and timeline the Respondent proposes for periodically assessing
Provider progress on its implementation of strategies to attain improvement goals;	 

	 	3.	 	how the Respondent will reward Providers who demonstrate continued excellence
and/or significant performance improvement over time, through non-financial or
financial means, including pay-for-performance;	 

	 	4.	 	how the Respondent will share “best practice” methods or programs with
Providers of similar programs in its Network;	 

	 	5.	 	how the Respondent will take action with Providers who demonstrate
continued unacceptable performance and performance that does not improve over
time;	 

	 	6.	 	the steps the Respondent will take with a Provider that specifically is not
meeting HHSC contractual access standards; and	 

	 	7.	 	the extent to which the Respondent currently operates a Network management
program consistent with HHSC requirements in Section 8.1.7.8, and measurable results
it has achieved from such Network management efforts.	 

If a Respondent is submitting a multi-program response to this RFP, the Respondent should note
in its Proposal the differences, if any, in its Network Management activities and reports for
each MCO Program bid.

4.3.8 Section 8 – Utilization Management

(3 pages, plus 1 additional page for each additional MCO Program bid if the
Respondent’s response differs by MCO Program)

Utilization Management (UM) requirements are described generally in Section 8.1.8 and
specifically for Behavioral Health Services in Section 8.1.15. A Respondent’s response to this
submission requirement should address UM for all Covered Services.

	 	1.	 	Describe the UM guidelines the Respondent plans to employ, including whether
and how the guidelines comply with the standards in Sections 8.1.8 and 8.1.15.	 

	 	2.	 	If the UM guidelines were developed internally, describe the process by which
they were developed and when they were developed or last revised.	 

	 	3.	 	Describe how the UM guidelines will generally be applied to authorize or
retrospectively review services for the spectrum of Covered Services.	 

If a Respondent is submitting a multi-program response to this RFP, the Respondent should
note in its Proposal the differences, if any, in its UM activities for each MCO Program bid.

4.3.9 Section 9 – Early Childhood Intervention (ECI)

(3 pages, plus one additional page for each additional MCO Program bid if the
Respondent’s response differs by MCO Program)

ECI Services are described in Section 8.1.9.

	 	1.	 	Describe the Respondent’s experience with, and general approach to, providing
ECI services, including how the Respondent will identify such individuals.	 

	 	2.	 	Describe procedures and protocols for using the IFSP information to develop a
Member Care Plan and authorize services.	 

	 	3.	 	Describe procedures and protocols for developing and including the
interdisciplinary team in the assessment and care planning process.	 

	 	4.	 	Describe the process by which the Respondent will provide the IFSP and
other necessary information to the PCP.	 

If a Respondent is submitting a multi-program response to this RFP, the Respondent should

note in its Proposal the differences, if any, in its services for ECI for each MCO Program bid.

4.3.10 Section 10 – Services for People with Special Health Care

Needs

(3 pages, plus one additional page for each additional MCO Program bid if the
Respondent’s response differs by MCO Program)

Services for people with special health care needs are described in Section 8.1.12. Note: All
STAR+PLUS Members are considered to be persons with Special Health Care Needs as defined in
Attachment A, “Uniform Managed Care Contract Terms and Conditions.”

	 	1.	 	Describe the Respondent’s experience with, and general approach to, providing
services for adults with Special Health Care Needs (STAR and STAR+PLUS only),
including how the Respondent will identify such individuals and the criteria it will
use in assessing whether an adult is a Member with Special Health Care Needs (MSHCN).	 

	 	2.	 	Describe the Respondent’s experience with, and general approach to, providing
services for Children with Special Health Care Needs (CSHCN), including how the
Respondent will identify such individuals and the criteria it will use in assessing
whether a Member is a CSHCN.	 

	 	3.	 	Describe the process for initially and periodically assessing Members’
needs for services, and identify the staff performing the assessments and
their credentials.	 

	 	4.	 	Describe procedures and protocols for using the assessment information to
develop a Member Care Plan and authorize services.	 

	 	5.	 	Describe procedures and protocols for including the Member and/or
Member’s Representative in the assessment and care planning process.	 

	 	6.	 	Describe the process by which the Respondent will allow MSHCN to have:

	 	a.	 	direct access to a specialist as appropriate for the
Member’s condition and identified needs, such as a standing referral to
a specialty physician; and	 

	 	b.	 	access to non-primary care physician specialists as PCPs, as
required by 28 T.A.C. § 11.900 and Section 8.1.3.	 

If a Respondent is submitting a multi-program response to this RFP, the Respondent should
note in its Proposal the differences, if any, in its services for MSHCN for each MCO Program
bid.

4.3.11 Section 11 – Care Management and/or Service

Coordination

(9 pages, plus 1 additional page per additional MCO Program bid if the Respondent’s
response differs by MCO Program)

Care Management and/or Service Coordination is described in Sections 8.1 .12.2 and 8.1.13.
Additional requirements for Service Coordination are described in Section 8.3.2.

	 	1.	 	Describe the Respondent’s experience providing Care Management and/or Service
Coordination to members with high-cost catastrophic situations (e.g., recent spinal cord
injury) and the Respondent’s proposal for implementing high-cost catastrophic Care
Management and/or Service Coordination, including how the Respondent will identify
Members for high cost catastrophic Care Management and/or Service Coordination, and the
criteria used to identify such Members.	 

	 	2.	 	Describe the Respondent’s experience providing Care Management and/or Service
Coordination services to Members with the following serious health care conditions,
as applicable to the MCO Programs bid, and the Respondent’s proposal for offering
Care Management and/or Service Coordination services to these Members. Include how	 

Members will be identified for Care Management and/or Service Coordination,
and the criteria used to identify such Members:

a. women with high-risk pregnancies (STAR only); and

b. individuals with mental illness and co-occurring substance abuse.

	 	3.	 	Identify any measurable results in terms of clinical outcomes and program savings that
have resulted from the Respondent’s Care Management and/or Service Coordination
initiatives.	 

	 	4.	 	For STAR+PLUS only, describe the duties and responsibilities of the Service Coordinator
to authorize Community-based Long-Term Services and Supports. The Respondent must describe
in detail how the Service Coordinator will function in relation to the Member’s PCP for:	 

	 	a.	 	Dual Eligible STAR+PLUS Members receiving both Medicaid
and Medicare services from the MCO, and	 

	 	b.	 	Dual Eligible STAR+PLUS Members receiving Medicare services
through either fee-for-service Medicare or another Medicare MCO.	 

	 	5.	 	For STAR+PLUS only, submit detailed information, including protocols and procedures,
for identifying Members requiring Service Coordination, and for providing the Service
Coordination function to them. The information should include how the protocols and
procedures vary for:	 

	 	a.	 	Dual Eligible STAR+PLUS Members receiving both Medicaid
and Medicare services from the MCO, and for	 

	 	b.	 	Dual Eligible STAR+PLUS Members receiving Medicare services
through either fee-for-service Medicare or another Medicare MCO.	 

6. For STAR+PLUS only, describe the circumstances or conditions when the Member would

require a licensed nurse or other allied health care provider as a Service Coordinator.

7. For STAR+PLUS only, submit criteria for identifying and training certain Members and their

Member Representative(s) to coordinate and direct the Member’s own care, to the extent
the Member is capable of doing so. Criteria should include those used to enable the

Member and family to select, train, and supervise providers of Community-based Long-Term
Services and Supports.

	 	8.	 	For STAR+PLUS only, describe the criteria and processes for advising Members of, and
assisting them to access, the most appropriate, least restrictive home and community-based
services as alternatives to institutional care. Additionally, describe how the Respondent
will	 

ensure that the Member is given the opportunity to make an informed choice among the
options for care settings.

	 	9.	 	For STAR+PLUS only, submit a list of the relevant community organizations in each
proposed STAR+PLUS Service Area with which the Respondent will coordinate services for
Members and to which it will refer Members for services.	 

	 	10.	 	For STAR+PLUS only, describe the process for initially and periodically assessing
Members’ needs for services.	 

	 	11.	 	For STAR+PLUS only, describe how the Respondent will identify Members who are at risk
of nursing facility placement.	 

	 	12.	 	For STAR+PLUS only, submit all functional assessment instruments proposed for use and
describe how the assessment instrument(s) will be employed to identify the Member’s need
for Community-based Long-Term Services and Supports. (Note: If the MCO is allowed to
modify a functional assessment instrument required by the State, HHSC must approve the
proposed instrument prior to implementation. See Section 8.3.3 for more information.)	 

	 	13.	 	For STAR+PLUS only, identify who will perform each assessment and specify their
credentials.	 

	 	14.	 	Describe procedures and protocols for using the assessment information to
develop a Member Service/Care Plan and authorize services.	 

	 	15.	 	Describe procedures and protocols for including the Member and/or
Member’s Representative in the assessment and care planning process.	 

	 	16.	 	For STAR+PLUS only, provide a description of the appropriate staffing ratio of
Service Coordinators to Members, and the Respondent’s target ratio of Service
Coordinators to Members.	 

If a Respondent is submitting a multi-program response to this RFP, the Respondent should note
in its Proposal the differences, if any, in its Care Management and/or Service Coordination
activities in the applicable MCO Programs.

4.3.12 Section 12 – Disease Management (DM)/Health Home

Services

(3 pages, plus 1 additional page for each MCO Program bid)

Disease Management/Health Home Services is described in Section 8.1.14.

	 	1.	 	Describe the Respondent’s experience in implementing Disease Management/Health Home
Services programs for populations comparable to the proposed HHSC MCO Program.	 

	 	2.	 	Identify any measurable results in terms of clinical outcomes and program savings that
have resulted from the Respondent’s Disease Management/Health Home Services initiatives,
and briefly describe the analyses used to identify such outcomes and savings.	 

	 	3.	 	Identify the process by which the Respondent proposes to provide Members with Disease
Management/Health Home Services. Describe how the Respondent will identify Members in
need of such Disease Management/Health Home Services program, the proposed outreach
approach, and the Disease Management/Health Home Services program components for Members
of different risk levels.	 

	 	4.	 	Describe the process by which the Respondent will ensure continuity of care
with the Member’s previous Disease Management/Health Home Services program(s), if
any.	 

4.3.13 Section 13 – Behavioral Health Services and Network

The Behavioral Health Services and Network requirements are described in Section 8.1.15.
Note: STAR Members in the Dallas Service Area will receive Behavioral Health services through
the NorthSTAR Program instead of STAR.

4.3.13.1 Behavioral Health Services Hotline

(3 pages, plus 2 additional pages per additional MCO Program bid if the Respondent’s response
differs by MCO Program; excluding telephone reports)

The Behavioral Health Services Hotline requirements are described in Section 8.1 .15.3.

Describe the proposed Behavioral Health Services Hotline function, including:

	 	1.	 	verification that it is, or will be, staffed 24 hours per day, 365 days per year;

2. staffing of Behavioral Health Services Hotline staff, including clinical credentials;

	 	3.	 	routing of calls among Behavioral Health Services Hotline staff to ensure
timely and accurate response to Member inquiries;	 

	 	4.	 	the curriculum for training to be provided to Behavioral Health Services
Hotline representatives, including when the training will be conducted and how the
training will address a) Covered Services; b) HHSC MCO Program requirements; c)
Cultural Competency; and d) providing assistance to Members with limited English
proficiency.	 

	 	5.	 	responsibilities of Behavioral Health Services Hotline staff, if any, in
addition to responding to HHSC Member Hotline calls, (e.g., responding to non-HHSC
member calls and/or HHSC Provider Hotline or Member Hotline calls );	 

	 	6.	 	the number and percentage of FTE Behavioral Health Services Hotline staff
who are bilingual in English and Spanish;	 

	 	7.	 	the number and percentage of FTE Behavioral Health Services Hotline staff
who are multi-lingual for any additional language, by language spoken;	 

	 	8.	 	Behavioral Health Services telephone reports for the most recent four (4)
quarters with data that show the monthly trends for call volume, monthly trends for
average speed of answer (where answer is defined by reaching a live voice, not an
automated call system), and monthly trends for the abandonment rate; and	 

	 	9.	 	whether the Behavioral Health Services Hotline has the capability to
administer automated surveys to callers at the end of calls.	 

A Respondent currently participating in any of the HHSC MCO Programs bid must submit the
information above for each Behavioral Health Services Hotline that it operates, and should
provide the monthly call volume for each Service Area by MCO Program. Such a Respondent
should also indicate any changes it proposes to its Behavioral Health Services Hotline.

If the Respondent is not currently participating in the STAR, STAR+PLUS, or CHIP MCO Programs,
describe its experience and proposed approach in establishing and maintaining an accessible
call center for Members that is comparable to the Behavioral Health Services Hotline described
in Section 8.1.15.3. Such a description must include the information listed in items 1 to 9
above.

If a Respondent is submitting a multi-program response to this RFP, the Respondent should
separately describe each proposed Behavioral Health Services Hotline, or if proposing to staff
a single Behavioral Health Services Hotline for multiple programs, shall note in its Proposal
the differences, if any, in its Behavioral Health Services Hotline and staffing for each
applicable MCO Program.

4.3.13.2 Behavioral Health Provider Network Expertise

(no page limit)

	 	1.	 	For each proposed Service Area, identify Behavioral Health Service Providers
with expertise in providing services to each of the following populations, as
applicable to the Respondent’s Proposal.	 

a. substance abusers;

b. children and adolescents;

c. persons with a dual diagnosis of mental health and substance abuse; and

d. services for linguistic and cultural minorities.

	 	2.	 	Indicate the criteria the Respondent will use to determine that such
Behavioral Health Providers have the requisite expertise.	 

4.3.13.3 Coordination of Behavioral Health Care

(2 pages, plus 1 additional page per additional MCO Program bid if the Respondent’s response
differs by MCO Program)

	 	1.	 	Describe the Respondent’s approach to coordinating Behavioral Health Service
delivery with primary care services delivered by a Member’s PCP, and vice versa.	 

	 	2.	 	Describe or propose innovative programs and identify Network Providers
contracted to serve special populations through integrated medical/Behavioral Health
Service delivery models. Describe the program model services, treatment approach,
special considerations, and expected outcomes for the special populations.	 

	 	3.	 	Describe the process by which the Respondent will ensure the delivery of
outpatient Behavioral Health Services within seven (7) days of inpatient discharge
for Behavioral Health Services.	 

If a Respondent is submitting a multi-program response to this RFP, the Respondent should
note in its Proposal the differences, if any, in its coordination of Behavioral Health
Services in the applicable MCO Programs.

4.3.13.4 Behavioral Health Quality Management

(2 pages per MCO Program bid)

	 	1.	 	Identify the areas Respondent believes to be the greatest opportunities for
clinical quality improvement in behavioral health in each MCO Program bid and provide
supporting information.	 

	 	2.	 	Discuss the approaches the Respondent will pursue to realize one such
opportunity for each MCO Program bid.	 

	 	3.	 	Describe how the Respondent proposes to integrate behavioral health into its
quality assurance program, as described in Section 8.1.7.5.	 

If a Respondent is submitting a multi-program response to this RFP, the Respondent should
note in its Proposal the differences, if any, in the Respondent’s Behavioral Health quality
management activities in each applicable MCO Program.

4.3.13.5 Behavioral Health Emergency Services

(2 pages per MCO Program bid)

For each MCO Program bid, describe the Respondent’s experience with, and plans for,
providing Behavioral Health Emergency Services, including, emergency screening services,
Emergency Services, and short-term crisis stabilization to Medicaid, CHIP, or other similar
populations.

4.3.14 Section 14 – Management Information System (MIS)

Requirements

(10 pages plus an additional 6 pages per additional MCO Program bid if the
Respondent’s response differs by MCO Program — Page limit excludes system diagrams and
process flow charts.)

For each MCO Program bid, the Respondent must:

	 	1.	 	describe the Management Information System (MIS) the Respondent will
implement, including how the MIS will comply with Health Insurance Portability and
Accountability Act of 1996 (HIPAA). The response must address the requirements of
Section 8.1.18. At a minimum, the description should address:	 

	 	a.	 	hardware and system architecture specifications;

b. data and process flows for all key business processes in Section 8.1 .18.3; and

	 	c.	 	attest to the availability of the data elements required
to produce required management reports;	 

	 	2.	 	if claims processing and payment functions are outsourced, provide the
above information for the Material Subcontractor;	 

	 	3.	 	describe how the Respondent would ensure accuracy, timeliness, and completeness
of Encounter Data submissions for each of the MCO Programs bid;	 

	 	4.	 	describe the Respondent’s ability and experience in performing coordination of
benefits and Third Party Liability/Third Party Recovery (TPL/TPR);	 

	 	5.	 	describe the Respondent’s ability and experience in allowing providers to
submit claims electronically and its ability and experience in processing electronic
claims payments to providers:	 

	 	a.	 	if currently processing claims electronically, generally
describe the type and volume of provider claims received electronically in
the previous year versus paper claims for each claim type;	 

	 	b.	 	if currently making claims payments to providers
electronically, generally describe the type and volume of provider
claims payment processed electronically;	 

	 	c.	 	does the MCO provide a no-cost alternative for providers to
allow billing without the use of a clearinghouse? If so please describe; and	 

	 	d.	 	does the MCO include attendant care payments as part of the
regular claims payment process (for STAR+PLUS only)? If so please
describe;	 

	 	6.	 	describe the Respondent’s experience and capability to comply with the Internet
website requirements of Section 8.1.5.5, and briefly describe any additional website
capabilities that the Respondent proposes to offer to Members or Providers;	 

	 	7.	 	provide acknowledgment and verification that the Respondent’s proposed systems
are 5010 compliant by submitting a copy of the 5010 compliancy plan, and proposed
timeline for meeting the deadlines for being 5010 compliant; and	 

	 	8.	 	describe the Respondent’s capability to pay providers via direct deposit and its
experience in doing so, including the percentage, number, and types of providers paid
via direct deposit in the most recent 12 month period for which the Respondent has
such statistics. If the Respondent operates in Texas, the Respondent must provide this
information related to its experience in Texas. If the Respondent does not currently
operate in Texas, the Respondent must provide this information for a state in which
the Respondent currently operates a managed care program similar to the MCO Programs
bid.	 

4.3.15 Section 15 – Fraud and Abuse

(3 pages, plus 1 additional page per additional MCO Program bid if the Respondent’s
response differs by MCO Program)

The Fraud and Abuse requirements of the RFP are described in Section 8.1.19. The Respondent
must describe how it will implement a Fraud and Abuse Plan that will comply with state and
federal law and this RFP, including the requirements of §531.113, Texas Government Code. The
Respondent must:

	 	1.	 	include detail about what parts of the organization and which key staff will
have responsibilities in implementing and carrying out the Fraud and Abuse
program; and	 

	 	2.	 	identify which officer or director of the Respondent organization will have
overall responsibility and authority for carrying out the Fraud and Abuse Program
provisions.	 

4.3.16 Section 16 – Pharmacy Services

(8 pages plus an additional 2 pages per additional MCO Program bid if the
Respondent’s response differs by MCO Program)

The Pharmacy Services requirements are described in Section 8.1.21. For all of the following
submission requirements, instead of attaching copies of the Respondent’s policies and
procedures, the Respondent should provide a brief summary of its policies and procedures.

	 	1.	 	The Respondent must describe the processes it will use to manage the
pharmacy benefit under both of the following scenarios:	 

	 	a.	 	HHSC requires the MCO to implement the Medicaid and CHIP
formularies and preferred drug lists (PDLs); and	 

b. the MCO is allowed to establish its own formularies and PDLs.

	 	2.	 	The Respondent must describe the policies and procedures for how
mail-order pharmacies will be available to Members.	 

	 	3.	 	The Respondent must identify the rationale for requiring prior authorizations,
identify the types of drugs that normally require prior authorization, and describe
the policies and procedures for the prior authorization process.	 

	 	4.	 	The Respondent must describe how rebates will be negotiated (if HHSC determines
that the MCO will perform this service), identified, and reported.	 

	 	5.	 	The Respondent must describe the policies and procedures for drug utilization
reviews, including ensuring prospective reviews take place at the dispensing
pharmacy’s point of sale (POS).	 

	 	6.	 	The Respondent must describe its policies and procedures for targeted
interventions for Network Providers over-utilizing certain drugs.	 

4.3.17 Section 17 – Transition Plan

(4 pages per MCO Program bid)

The Transition Plan Requirements are described in Section 7.

	 	1.	 	Briefly describe the Respondent’s experience establishing and maintaining
electronic interfaces with other contractors responsible for portions of Medicaid and
CHIP operations. A Respondent with experience participating in one or more MCO
Programs must clearly note its experience in establishing and maintaining such
interfaces in Texas. A Respondent without experience establishing and maintaining
electronic interfaces with other contractors responsible for Medicaid or CHIP
operations must note its experience in establishing and maintaining similar electronic
interfaces with similar contractors.	 

	 	2.	 	A Respondent that is proposing to participate in an HHSC MCO Program in a
Service Area for the first time must, for each MCO Program bid, briefly describe its
Transition Plan for all proposed Service Areas, including major activities related to
the System Readiness Review and the Operational Readiness Review, including Network
development, internal system testing, and proposed schedule to comply with the
anticipated Operational Start Date and other requirements described in Section 7. The
Respondent must clearly indicate in which Service Area(s) it currently does not
operate as an MCO and any differences in its transition approach by Service Area.	 

	 	3.	 	A Respondent that is currently a contractor for an HHSC MCO Program must, for
each such MCO Program, briefly describe its Transition Plan, including major
activities related to the System Readiness Review and the Operational Readiness
Review, such as Network Development, internal system testing, and schedule to comply
with the anticipated Operational Start Date and other requirements described in
Section 7. The Respondent must clearly indicate in which Service Area(s) it currently
does not operate as an MCO, and any differences in its transition approach by Service
Area.	 

4.3.18 Section 18 – Additional Requirements Regarding Dual

Eligibles (for STAR+PLUS only)

(4 pages)

The additional provisions regarding certain categories of Dual Eligibles are described in
Section 8.3.7.

	 	1.	 	Submit evidence of Respondent’s MA Dual SNP contract with CMS if any, including
the contract number and counties/zip codes served, or submit documentation showing
that an application for such a contract has or will be submitted to CMS. For
Respondents	 

that do not already have an MA Dual SNP contract and who intend to obtain one,
describe the plans for submitting an application and obtaining such a contract. The
description should include the timeline for submitting the application and the
proposed counties/zip codes for coverage.

	 	2.	 	Describe the Respondent’s experience in providing Medicare encounter data in
HIPAAcompliant formats to federal or state authorities.	 

	 	3.	 	Describe how the Respondent intends to coordinate care for Dual Eligible
Members, including:	 

	 	a.	 	How the Respondent will identify Long-Term Services and Supports
providers in the relevant Service Areas.	 

	 	b.	 	The processes and procedures Respondent will use to coordinate
the delivery of Community-based Long-Term Services and Supports with Medicare
benefits for Dual Eligible Members.	 

	 	c.	 	The training Respondent will provide to staff and providers
regarding Community- based Long-Term Services and Supports and the coordination
of those services with Medicare benefits.	 

	 	4.	 	Describe how the Respondent will work with the State to share information
regarding Medicare and Medicaid participating providers, Member complaints, and
HEDIS data.	 

5. Evaluation Process and Criteria

5.1 Overview of Evaluation Process

HHSC will use a formal evaluation process to select the successful Respondent. HHSC will
consider capabilities or advantages that are clearly described in the proposal, which may be
confirmed by oral presentations, site visits, demonstrations, and/or references contacted by
HHSC. HHSC reserves the right to contact individuals, entities, or organizations that have had
dealings with the Respondent or proposed staff, whether or not identified in the proposal.

HHSC will more favorably evaluate proposals that offer no or few exceptions, reservations, or
limitations to the terms and conditions of the RFP, including Attachment A, “Uniform Managed
Care Contract Terms and Conditions.”

5.2 Evaluation Criteria

HHSC will evaluate proposals based on the following best value criteria, listed in
order of precedence:

	 	•	 	The extent to which the Respondent’s proposal demonstrates an ability to
accomplish the missions and objectives for this procurement, including:	 

	 	•	 	the extent to which the proposal meets HHSC’s needs, and the MCO Program clients’
needs for high quality and accessible medical care;	 

	 	•	 	The degree to which the proposal demonstrates program innovation, adaptability,
and exceptional customer service; and	 

	 	•	 	the extent to which the Respondent accepts without reservation or exception the
RFP’s terms and conditions, including Attachment A, “Uniform Managed Care Contract
Terms and Conditions.”	 

	 	•	 	Indicators of probable performance under the Contract, including past performance
in Texas or comparable experience; financial resources and solvency, including the
impact on the Respondent’s and its Subcontractors’ ability to perform, and relevant
organizational experience.	 

	 	•	 	Effect of the acquisition on agency productivity; including the level of
effort and resources required to monitor the Respondent’s performance and
maintain a good working relationship with the Respondent.	 

Proposals for the STAR Medicaid Rural Service Area that include all three (3) regions will
be given preference over proposals that do not include all three (3) regions.

If all other considerations are equal, HHSC will give preference to:

	 	1.	 	proposals from Texas institutions providing graduate medical education;

	 	2.	 	proposals that include substantial participation by Network providers who are
Significant Traditional Providers (STP). HHSC defines “substantial participation” as
proposals that include at least 50 percent of the STPs in a Service Area. The
Respondent must either have a Network Provider agreement in place with the STP, or a
Letter of Intent/Letter of Agreement to participate in the Network. A listing of STPs
for the new Service Areas can be found in the Procurement Library; and	 

	 	3.	 	proposals that ensure continuity of coverage for Medicaid Members for at least
three (3) months beyond the period of Medicaid eligibility. For purposes of this
provision, HHSC defines “continuity of coverage” as providing the full set of Covered
Services.	 

NOTE: Respondents who are licensed as health maintenance organizations pursuant to Chapter 843
of the Texas Insurance Code, and believe they meet the requirements for mandatory contracting
under Texas Government Code §533.004, must provide written notice to HHSC’s Point of
Contact (see RFP Section 1.1) no later than April 28, 2011. The notice must provide a clear
description of why the Respondent believes it is entitled to a mandatory contract under the
Texas Government Code.

5.3 Initial Compliance Screening

HHSC will perform an initial screening of all proposals received. Unsigned proposals
and proposals that do not include all required forms and sections are subject to rejection
without further evaluation.

In accordance with Section 3.11, “Modification or Withdrawal of Proposal,” HHSC reserves the
right to waive minor informalities in a proposal and award contracts that are in the best
interest of the State of Texas.

5.4 Competitive Field Determinations

HHSC may determine that certain proposals are within the field of competition for
admission to discussions. The field of competition consists of the proposals that receive the
highest or most satisfactory evaluations. HHSC may, in the interest of administrative
efficiency, place reasonable limits on the number of proposals admitted to the field of
competition.

5.5 Oral Presentations and Site Visits

HHSC may, at its sole discretion, request oral presentations, site visits, and/or
demonstrations from one or more Respondents admitted to the field of competition. HHSC will
notify selected Respondents of the time and location for these activities, and may supply
agendas or topics for discussion. HHSC reserves the right to ask additional questions during
oral presentations, site visits, and or demonstrations to clarify the scope and content of the
written proposal.

The Respondent’s oral presentation, site visit, and/or demonstration must
substantially represent material included in the written proposal, and should not introduce
new concepts or offers unless specifically requested by HHSC.

5.6 Best and Final Offer

Respondents will not submit cost proposals for this RFP. HHSC will establish the
Capitation Rates for each Program and Service Area in accordance with the methodology
described in Attachment A, “Uniform Managed Care Contract Terms and Conditions,” Article 10,
“Terms and Conditions of Payment.”

HHSC may, but is not required to, permit Respondents to prepare one or more revised offers for
services. For this reason, Respondents are encouraged to treat their original proposals, and
any revised offers requested by HHSC, as best and final offers of services.

5.7 Discussions with Respondents

HHSC may, but is not required to, conduct discussions with all, some, or none of the
Respondents admitted to the field of competition for the purpose of obtaining the best value
for the State of Texas. It may conduct discussions for the purpose of:

• obtaining clarification of proposal ambiguities;

• requesting modifications to a proposal; and/or

• obtaining a best and final offer of services.

HHSC may make an award prior to the completion of discussions with all Respondents admitted to
the field of competition if HHSC determines that the award represents best value to the State
of Texas.

5.8 Contract Awards

Respondents are allowed to select which MCO Programs and Services Areas to include in
their Proposals. It is possible that a Respondent submitting a Proposal for more than one MCO
Program in a Service Area could be awarded a Contract for some, but not all, of the MCO
Programs. Similarly, a Respondent could be awarded a Contract for some, but not all, of its
proposed Service Areas. HHSC reserves the right to change the boundaries for, or otherwise
modify, the Service Areas if it determines that such action is in the best interest of the
State.

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	STATUS1
	 	DOCUMENT

REVISION2
	 	EFFECTIVE DATE

	 	DESCRIPTION3

	 
	 	 	 	 	 	 
	 	 

	Baseline
	 	 	n/a	 	 	September 1, 2011
	 	Initial version of

Attachment B-1, RFP

Section 6,

“Incentives &

Disincentives.”

	 
	 	 	 	 	 	 
	 	 

	Revision
	 	 	2.1	 	 	March 1, 2012
	 	Contract

amendment did not

revise Attachment

B-1, RFP Section 6,

“Incentives &

Disincentives.”

	 
	 	 	 	 	 	 
	 	 

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

Table of Contents

	 	 	 	 	 
	6. Premium Payment, Incentives, and

Disincentives.

	6.1 Capitation Rate Development.

	6.2 Financial Payment Structure and Provisions.

	6.2.1 Capitation Payments.

	6.3 Performance Incentives and Disincentives.

	6.3.1 Non-financial Incentives.

	6.3.2 Financial Incentives and Disincentives.

6. Premium Payment, Incentives, and Disincentives

This section describes performance incentives and disincentives related to HHSC’s value-based
purchasing approach. For further information, MCOs should refer to Attachment A, “Uniform Managed
Care Contract Terms and Conditions.”

Under the MCO Contracts, health care coverage for Members will be provided on a fully insured
basis. The MCO must provide the Services and Deliverables, including Covered Services, to
enrolled Members in exchange for the monthly Capitation Payments. Section 8, “Operations Phase
Requirements” includes the MCO’s financial responsibilities regarding Out-of-Network Emergency
Services and Medically Necessary Covered Services that are not available through Network
Providers.

6.1 Capitation Rate Development

Refer to Attachment A, “Uniform Managed Care Contract Terms and Conditions,” Article 10,
“Terms & Conditions of Payment” for information concerning Capitation Rate development.

6.2 Financial Payment Structure and Provisions

HHSC will pay the MCO monthly Capitation Payments based on the number of eligible and
enrolled Members. HHSC will calculate the monthly Capitation Payments by multiplying the number
of Member Months times the applicable monthly Capitation Rate by Member Rate Cell.

The MCO must understand and expressly assume the risks associated with the performance of the
duties and responsibilities under the Contract, including the failure, termination, or suspension
of funding to HHSC, delays or denials of required approvals, cost of claims incorrectly paid by
the MCO, and cost overruns not reasonably attributable to HHSC. The MCO must further agree that
no other charges for tasks, functions, or activities that are incidental or ancillary to the
delivery of the Services and Deliverables will be sought from HHSC or any other state agency, nor
will the failure of HHSC or any other party to pay for such incidental or ancillary services
entitle the MCO to withhold Services or Deliverables due under the Contract.

6.2.1 Capitation Payments

The MCO must refer to Attachment A, “Uniform Managed Care Contract Terms and
Conditions” for information and Contract requirements on the:

1. time and Manner of Payment,

2. adjustments to Capitation Payments,

3. Delivery Supplemental Payment and Bariatric Supplemental Payments, and

4. Experience Rebate.

6.3 Performance Incentives and Disincentives

HHSC has included several financial and non-financial performance incentives and
disincentives on this Contract. These incentives and disincentives are subject to change by
HHSC over the course of the Contract. The MCO is prohibited from passing down financial
disincentives and/or sanctions imposed on the MCO to health care providers, except on an
individual basis and related to the individual provider’s inadequate performance.

6.3.1 Non-financial Incentives

6.3.1.1 Performance Profiling

HHSC intends to distribute information on key performance indicators to MCOs on a regular
basis, identifying an MCO’s performance, and comparing that performance to other MCOs and to HHSC
standards and/or external Benchmarks. HHSC may recognize MCOs that attain superior performance
and/or improvement by publicizing their achievements. For example, HHSC may post information
concerning exceptional performance on its website, where it will be available to both
stakeholders and members of the public. Likewise, HHSC may post its final determination regarding
poor performance or MCO peer group performance comparisons on its website, where it will be
available to both stakeholders and members of the public.

6.3.1.2 Auto-assignment Methodology for Medicaid MCOs

HHSC may revise its auto-assignment methodology during the Contract Period for new Medicaid
Members who do not select an MCO (Default Members). The new assignment methodology may reward
those MCOs that demonstrate superior performance and/or improvement on one or more key dimensions
of performance. In establishing the assignment methodology, HHSC will employ a subset of the
performance indicators contained within the Performance Indicator Dashboard. HHSC may recognize
those MCOs that exceed the minimum geographic access standards defined within Section 8,
“Operations Phase Requirements,” and the Performance Indicator Dashboard. HHSC may also use its
assessment of MCO performance on annual quality improvement goals (described in Section 8,
“Operations Phase Requirements”) in developing the assignment methodology. The methodology will
disproportionately assign Default Members to the MCO(s) in a given Service Area that performed
comparably favorably on the selected performance indicators.

HHSC reserves the right to implement a performance-based auto-assignment algorithm. HHSC will
invite MCO comments on potential approaches prior to implementation of the new performance-based
auto-assignment algorithm.

6.3.2 Financial Incentives and Disincentives

6.3.2.1 Experience Rebate Reward

The standard Experience Rebate (see Attachment A, “Uniform Managed Care Contract Terms and
Conditions,” Article 10.11, “STAR and CHIP Experience Rebate”) provides for an MCO to retain 100
percent of pre-tax income (as costs and income are defined by the Uniform Managed Care Manual),
when such income is three percent (3%) (or less) of revenues, and further provides for a
graduated scale of rebating to HHSC a portion of relevant MCO income in excess of three percent
(3%) of revenues (subject to loss carry-forwards and other stipulations). As a financial
incentive for demonstrated superior performance with respect to HHSC-specified performance
indicators, the HHSC may raise the three percent (3%) threshold that commences rebates to three
and one-half percent (3.5%). In consultation with the MCOs, HHSC will develop the methodology for
determining the level of performance necessary for an MCO to earn the Experience Rebate Reward.
The finalized methodology will be added to the Uniform Managed Care Manual.

HHSC will calculate whether a MCO is eligible for the Experience Rebate Reward, if applicable,
prior to the 90-day Financial Statistical Report (FSR) filing.

HHSC anticipates that it will not implement the Experience Rebate Reward incentive for Rate
Period 1 of the Contract. HHSC will invite MCO comments on potential approaches prior to
implementation of the new performance-based Experience Rebate Reward.

6.3.2.2 Performance-Based Capitation Rate (5%-at-risk)

HHSC will place each MCO at risk for five percent (5%) of the Capitation Payment(s). HHSC
retains the right to vary the percentage of the Capitation Payment placed at risk in a given Rate
Period.

During the Rate Period, HHSC will pay the MCO the full monthly Capitation Payments as described in
Section 6.2. Then, at the end of each Rate Period, HHSC will evaluate if the MCO has demonstrated
that it has fully met the performance expectations for which the MCO is at risk. If the MCO falls
short on some or all of the performance expectations, HHSC will adjust a future monthly Capitation
Payment in accordance with Uniform Managed Care Manual Chapter 6.2, “Financial Incentive
Methodology,” by an appropriate portion of the aggregate at- risk amount. HHSC’s objective is that
all MCOs achieve performance levels that enable them to retain the full at-risk amount.

HHSC will determine the extent to which the MCO has met the performance expectations by assessing
the MCO’s performance for each applicable MCO Program relative to performance targets for the
rate period. HHSC will conduct separate accounting for each MCO Program’s at- risk Capitation
Payment amount.

HHSC will identify no more than 10 at-risk performance indicators for each MCO Program. Some
of the performance indicators will be standard across all Programs while others may apply to
only one (1) Program.

Specific contractual requirements are set forth in the Uniform Managed Care Manual, Chapter 6.2,
“Financial Incentive Methodology.”

Failure to timely provide HHSC with necessary data related to the calculation of the
performance indicators will result in HHSC’s assignment of a zero percent (0%) performance rate
for each related performance indicator.

MCOs will report actual Capitation Payments received on the Financial Statistical Report (FSR)
during the Rate Period that is at risk (i.e., the MCO will not report 95% of the payments
received, leaving five percent (5%) as contingent). Actual Capitation Payments received include
all of the at-risk Capitation Payment paid to the MCO. Any loss of the at-risk amount that may be
realized in a subsequent Rate Period, via reduction to a monthly payment, will not be reported in
the FSR as a reduced amount of capitation revenue, but will instead be reported below the income
line, as an informational item, as described in the Uniform Managed Care Manual, Chapter 5.3.1,
“Financial Statistical Report and Instructions.” Any performance assessment based on performance
for a contract period will appear on the final (334-day) FSR for that contract period.

HHSC will evaluate the performance-based Capitation Rate methodology annually in consultation
with MCOs. HHSC may then modify the methodology as it deems necessary and appropriate, in order
to motivate, recognize, and reward MCOs for superior performance. The methodologies for all Rate
Periods will be included in Uniform Managed Care Manual Chapter 6.2, “Financial Incentive
Methodology.”

6.3.2.3 Quality Challenge Award

Should one or more MCOs be unable to earn the full amount of the performance-based at-risk
portion of the Capitation Rate, HHSC will reallocate the funds through the MCO Program’s Quality
Challenge Award. HHSC will use these funds to reward MCOs that demonstrate superior clinical
quality, service delivery, access to care, and/or Member satisfaction. HHSC will determine the
number of MCOs that will receive Quality Challenge Award funds annually based on the amount of
the funds to be reallocated. Separate Quality Challenge Award payments will be made for each of
the MCO Programs.

As with the performance-based Capitation Rate, each MCO will be evaluated separately for each MCO
Program. HHSC intends to evaluate MCO performance annually on some combination of performance
indicators in order to determine which MCOs demonstrate superior performance. In no event will a
distribution from the Quality Challenge Award, plus any other incentive payments made in
accordance with the MCO Contract, when combined with the Capitation Rate payments, exceed 105% of
the Capitation Rate payments to an MCO.

Information about the data collection period to be used and each indicator that will be
considered for any specific time period can be found in Uniform Managed Care Manual
Chapter 6.2.6, “Quality Challenge Award Performance Indicators.”

HHSC will calculate the MCOs’ degree of compliance with the Quality Challenge Award indicators
based on Encounter Data and other information supplied by the MCOs. Failure to provide timely and
accurate information will result in HHSC’s assignment of a zero percent (0%) performance rate for
each applicable Quality Challenge Award indicator.

HHSC will evaluate the Quality Challenge Award methodology annually in consultation with MCOs.
HHSC will make methodology modifications annually as it deems necessary and appropriate to
motivate, recognize, and reward MCOs for superior performance based on available Quality
Challenge Award funds and/or other performance incentives applicable to the award. HHSC will
include the Quality Challenge Award methodology and any modifications in Uniform Managed Care
Manual Chapter 6.2.6, “Quality Challenge Award Performance Indicators.”

6.3.2.4 Remedies and Liquidated Damages

All areas of responsibility and all requirements in the Contract will be subject to
performance evaluation by HHSC. Any and all responsibilities or requirements not fulfilled will
be subject to contractual remedies, including without limitation liquidated damages. Refer to
Attachment A, “Uniform Managed Care Contract Terms and Conditions,” and Attachment B-3,
“Deliverables/Liquidated Damages Matrix” for performance standards that carry liquidated damage
values.

6.3.2.5 Frew Incentives and Disincentives

As required by the “Frew vs. Suehs Corrective Action Order: Managed Care,” this Contract
includes a system of incentives and disincentives associated with the Medicaid Managed Care Texas
Health Steps Medical Checkups Reports and Children of Migrant Farm Workers Reports. These
incentives and disincentives apply to Medicaid MCOs. These incentives and disincentives may also
include adjusting the auto-assignment default methodology based on MCO performance.

The incentives and disincentives and corresponding methodology are set forth in the Uniform
Managed Care Manual, Chapter 12 “Frew.”

6.3.2.6 Nursing Facility Utilization Disincentive

HHSC has developed the nursing facility utilization disincentive to prevent inappropriate
admission to nursing facilities. The rate of nursing facility admissions for Medicaid-only
STAR+PLUS Members will be part of the Performance Indicator Dashboard (see Section 6.3.2.2).

6.3.2.7 Additional Incentives and Disincentives

HHSC will evaluate all performance-based incentives and disincentive methodologies annually
and in consultation with the MCOs. HHSC may then modify the methodologies as needed, as funds
become available, or as mandated by court decree, statute, or rule, in an effort to motivate,
recognize, and reward MCOs for performance.

Information about the data collection period to be used, performance indicators selected or
developed, or MCO ranking methodologies used for any specific time period will be found in the
Uniform Managed Care Manual.

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	STATUS1
	 	DOCUMENT

REVISION2
	 	EFFECTIVE DATE

	 	DESCRIPTION3

	 
	 	 	 	 	 	 
	 	 

	Baseline
	 	 	n/a	 	 	September 1, 2011
	 	Initial version of

Attachment B-1, RFP

Section 7,

“Transition Phase

Requirements.”

	 
	 	 	 	 	 	 
	 	 

	Revision
	 	 	2.1	 	 	March 1, 2012
	 	Section 7.1 is

modified to add

termination of the

contract to the

list of remedies

for failure to

timely satisfy

Readiness Review

requirements.

	 
	 	 	 	 	 	 
	 	 

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

Table of Contents

	 	 	 	 	 	 	 	 	 
	 	7.	 	 	Transition Phase Requirements
	 	 	 	 	 	7.1	 	 	Introduction

	 	 	 	 	 	7.2	 	 	Transition Phase Schedule and Tasks

	 	 	 	 	 	7.2.1	 	 	Contract Start-Up and Planning.

	 	 	 	 	 	7.2.2	 	 	Administration and Key MCO Personnel.

	 	 	 	 	 	7.2.3	 	 	Organizational Readiness Review.

	 	 	 	 	 	7.2.4	 	 	Financial Readiness Review.

	 	 	 	 	 	7.2.5	 	 	System Testing and Transfer of Data.

	 	 	 	 	 	7.2.6	 	 	System Readiness Review.

	 	 	 	 	 	7.2.7	 	 	Demonstration and Assessment of System Readiness.

	 	 	 	 	 	7.2.8	 	 	Operations Readiness.

	 	 	 	 	 	7.2.9	 	 	Assurance of System and Operational Readiness.

	 	 	 	 	7.2.10 TDI and Centers for Medicare and Medicaid Services (CMS) Licensure,
	 	 	 	 	Certification or Approval
	 	 	 	 	7.2.11 Post-Transition

7. Transition Phase Requirements

7.1 Introduction

This Section presents the scope of work for the Transition Phase of the Contract, which
includes those activities that must take place between the time of Contract award and the
Operational Start Date.

The Transition Phase will include all activities that must be completed successfully prior to a
MCO’s Operational Start Date for each applicable MCO Program and Service Area, including all
Readiness Review activities. HHSC will conduct Readiness Reviews to determine whether the MCO
has implemented all systems and processes necessary to begin serving Members. MCOs must satisfy
all Readiness Review requirements no later than 60 days prior to the Operational Start Date for
each applicable MCO Program and Service Area, with the exception of HHSC’s review of the Service
Coordination function. HHSC may, at its discretion, terminate the Contract, postpone the MCO’s
Operational Start Date(s), and/or assess other contractual remedies if an MCO fails to timely
correct all Readiness Review deficiencies within a reasonable cure period, as determined by
HHSC. Refer to Attachment A, “Uniform Managed Care Contract Terms and Conditions” and the
Attachment B-3, “Deliverables/Liquidated Damages Matrix” for additional information.

The MCO is required to promptly provide a Corrective Action Plan and/or Risk Mitigation Plan as
requested by HHSC in response to Transition Phase deficiencies identified by theMCO, HHSC, or
its agent. The MCO must promptly alert HHSC of deficiencies, and must correct a deficiency or
provide a Corrective Action Plan and/or Risk Mitigation Plan no later than ten (10) calendar
days after HHSC’s notification of deficiencies. If the MCO documents to HHSC’s satisfaction
that the deficiency has been corrected within ten (10) calendar days of such deficiency
notification by HHSC, no Corrective Action Plan is required.

7.2 Transition Phase Schedule and Tasks

The MCO has overall responsibility for the timely and successful completion of each of the
Transition Phase tasks. The MCO is responsible for clearly specifying and requesting
information needed from HHSC, other HHSC contractors, and Providers in a manner that does not
delay the schedule or work to be performed.

7.2.1 Contract Start-Up and Planning

HHSC and the MCO will work together during the initial Contract start-up phase to:

• define project management and reporting standards;

• establish communication protocols between HHSC and the MCO;

• establish contacts with other HHSC contractors;

• establish a schedule for key activities and milestones; and

• clarify expectations for the content and format of Contract Deliverables.

The MCO will be responsible for developing a written work plan, referred to as the
“Transition/Implementation Plan,” which will be used to monitor progress throughout the
Transition Phase. The MCO must update the Transition/Implementation Plan provided with its
proposal no later than 30 days after the Contract’s Effective Date, then provide monthly
implementation progress reports through the sixth month of MCO Program operations. HHSC may
require more frequent reporting as it determines necessary.

7.2.2 Administration and Key MCO Personnel

No later than the Effective Date of the Contract, the MCO must designate and identify Key
MCO Personnel that meet the requirements in Attachment A, “Uniform Managed Care Contract Terms
and Conditions,” Article 4, “Contract Administration and Management.” The MCO will supply HHSC
with resumes of each Key MCO Personnel as well as any organizational information that has
changed relative to the MCO’s Proposal, such as updated job descriptions and updated
organizational charts (including updated Management Information System (MIS) job descriptions
and an updated MIS staff organizational chart), if applicable. If the MCO is using a Material
Subcontractors, the MCO must also provide the organizational chart for these Material
Subcontractors.

7.2.3 Organizational Readiness Review

In order to complete an organizational review and assess the most current corporate
environment, the MCO must submit an Organization Update Report no later than 60 days prior to
the Operational Start Date that updates the organizational information submitted in its
proposal (see Section 4.2, “Business Proposal”). For each of the numbered items below, the
report must describe whether the information provided in MCO’s proposal has changed. If so, the
report must include relevant portions of the proposal with changes highlighted.

1. Respondent identification and information, Section 4.2.2.

2. Corporate background and experience:

a. Item #1, concerning publicly-funded managed care contracts, under Section 4.2.3;

b. Item # 2, concerning regulatory actions, sanctions, and/or fines, under
Section 4.2.3;

c. Section 4.2.3.1, concerning organizational charts; and

d. Section 4.2.3.2, concerning resumes; and

3. Material Subcontractor information, Section 4.2.4.

7.2.4 Financial Readiness Review

To complete a financial review, the MCO must submit a Financial Update Report no later
than 60 days prior to the Operational Start Date. At a minimum, the report must include the
following:

1. Material change in financial condition.

For both the MCO and its ultimate parent, the report must identify whether either entity has
experienced any material financial deterioration following proposal submission. The report
must identify and briefly describe any changes to the financial statements, including
changes to net worth; cash flow; loss of contracts; credit, audit, regulatory, and/or legal
issues; major contingencies, etc. The report must also describe any known potential issues,
and any issues with respect to change of ownership or control.

2. Updated financial statements.

The report must include the most recently updated financial statements, which should be more
current than those provided in the proposal. The updated financial statements should include
the most recent quarterly (or monthly) internal financial statements, the most- recently
completed annual statements, and the most-recent audited statements. The statements should
generally include the notes, management discussion, and where

appropriate, the audit letter. Internal most-recent-month statements are not expected to
include these items.

The report must include any of the following new or updated reports (as referenced under
Sections 4.2.3.3 and 4.2.3.4) that have become available since proposal submission: TDI
financial examination report (or similar report from another state); Form B Registration
statement filing; IRS Form 990; and bond or debt rating analysis. It is not necessary to
submit updated SEC 10-K or 10-Q filings with the report.

In addition to the Financial Update Report, the MCO must submit documentation demonstrating
it has secured all required bonds in accordance with TDI requirements, Section 8, “Operations
Phase Requirements,” and Attachment A, “Uniform Managed Care Terms and Conditions,” Article 17.
Such documentation is due no later than ten (10) business days after the Contract Effective
Date.

7.2.4.1 Employee Bonus and/or Incentive Payment Plan

If the MCO intends to include Employee Bonus or Incentive Payments as allowable
administrative expenses, the MCO must furnish a written Employee Bonus and/or Incentive Payments
Plan to HHSC. The written plan must include a description of the MCO’s criteria for establishing
bonus and/or incentive payments, the methodology to calculate bonus and/or incentive payments,
and the timing of bonus and/or incentive payments. The Bonus and/or Incentive Payment Plan and
description must be submitted during the Transition Phase, no later than 30 days after the
Effective Date of the Contract. If the MCO substantively revises the Employee Bonus and/or
Incentive Payment Plan during the Operations Phase, the MCO must submit the revised plan to HHSC
at least 30 days in advance of its effective date.

HHSC reserves the right to disallow all or part of a plan that it deems inappropriate. Any such
payments are subject to audit, and must conform with the Uniform Managed Care Manual, Chapter
6.1, “Cost Principles for Expenses.”

7.2.5 System Testing and Transfer of Data

The MCO must have hardware, software, network and communications systems with the
capability and capacity to handle and operate all MIS systems and subsystems identified in
Section 8.1.18, “Management Information System Requirements.” For example, the MCO’s MIS
system must comply with the Health Insurance Portability and Accountability Act of 1996
(HIPAA) as indicated in Section 8.1 .18.4, “HIPAA Compliance.”

During this Readiness Review task, the MCO will accept into its system any and all necessary
data files and information available from HHSC or its contractors. The MCO will install and test
all hardware, software, and telecommunications required to support the Contract. The MCO will
define and test modifications to the MCO’s systems required to support the business functions of
the Contract.

The MCO will produce data extracts and receive all electronic data transfers and transmissions.

If any errors or deficiencies are evident, the MCO will develop resolution procedures to address
problems identified. The MCO will provide HHSC, or a designated vendor, with test data files for
systems and interface testing for all external interfaces. This includes testing of the required
telephone lines for Providers and Members and any necessary connections to the HHSC
Administrative Services Contractor. The HHSC Administrative Services Contractor will provide
enrollment test files to new MCOs that do not have previous HHSC enrollment files. The MCO will
demonstrate its system capabilities and adherence to Contract specifications during Readiness
Review.

7.2.6 System Readiness Review

The MCO must assure that systems services are not disrupted or interrupted during the
Operations Phase of the Contract. The MCO must coordinate with HHSC and other contractors to
ensure the business and systems continuity for the processing of all health care claims and data
as required under this contract.

The MCO must submit descriptions of interface and data and process flow for each key
business processes described in Section 8.1.18.3, “System-wide Functions.”

The MCO must clearly define and document the policies and procedures that will be followed to
support day-to-day systems activities. No later than 90 days prior to the Operational Start
Date, new MCOs must develop and incumbent MCOs must update the following plans:

1. Disaster Recovery Plan;*

2. Business Continuity Plan*;

3. Security Plan;

4. Joint Interface Plan;

5. Risk Management Plan; and

6. Systems Quality Assurance Plan.

*The Business Continuity Plan and the Disaster Recovery Plan may be combined into one
document.

7.2.7 Demonstration and Assessment of System Readiness

The MCO must provide documentation on systems and facility security and provide evidence or
demonstrate that it is compliant with HIPAA. The MCO must also provide HHSC with a summary of
all recent external audit reports, including findings and corrective actions, relating to

the MCO’s proposed systems, including any SAS70 audits that have been conducted in the past three
(3) years. The MCO must promptly make additional information on the detail of such system audits
available to HHSC upon request.

In addition, HHSC will provide to the MCO a test plan that will outline the activities that need
to be performed by the MCO prior to the Operational Start Date(s). The MCO must be prepared to
assure and demonstrate system readiness. The MCO must execute system readiness test cycles to
include all external data interfaces, including those with the MCO’s Pharmacy Benefits Manager
(PBM) and other Material Subcontractors.

HHSC, or its agents, may independently test whether the MCO’s MIS has the capacity to administer
the STAR, STAR+PLUS, and/or CHIP business. This Readiness Review may include a desk review and/or
an onsite review. HHSC may request additional documentation to support the provision of STAR,
STAR+PLUS, and/or CHIP MCO Services. Based in part on the MCO’s assurances of systems readiness,
information contained in the Proposal, additional documentation submitted by the MCO, and any
review conducted by HHSC or its agents, HHSC will assess the MCO’s understanding of its
responsibilities and the MCO’s capability to assume the MIS functions required under the
Contract.

7.2.8 Operations Readiness

The MCO must clearly define and document the policies and procedures that will be followed
to support day-to-day business activities related to the provision of STAR, STAR+PLUS, and/or
CHIP MCO Services, including coordination with Subcontractors and HHSC’s contractors. The MCO
will be responsible for developing and documenting its approach to quality assurance.

7.2.8.1 Readiness Review

Readiness Review includes all plans to be implemented in one or more Service Areas on the

anticipated Operational Start Date(s). At a minimum, the MCO must, for each MCO Program:

	 	1.	 	Develop new, or revise existing, operations procedures and associated
documentation to support the MCO’s proposed approach to conducting operations
activities in compliance with the contracted Scope of Work.	 

	 	2.	 	Submit a listing of all contracted and credentialed Providers, in an
HHSC-approved format, including a description of additional contracting and
credentialing activities scheduled to be completed before the Operational Start Date.
A listing of all contracted and credentialed providers to be included in the first
Provider Directory must be submitted to HHSC 90 days prior to the first enrollment kit
mail out, or as otherwise directed by HHSC.	 

	 	3.	 	Inform all Network Providers about the information required to submit a claim:
(1) at least 30 days prior to the Operational Start Date, and (2) as a provision within
the Network Provider agreement.	 

	 	4.	 	Prepare and implement a Member Services staff training curriculum and a
Provider training curriculum.	 

	 	5.	 	Prepare a Coordination Plan documenting how the MCO will coordinate its business
activities with those activities performed by HHSC’s contractors, the MCO’s PBM and
other Material Subcontractors, if any. The Coordination Plan will include
identification of coordinated activities and protocols for the Transition Phase.	 

	 	6.	 	Develop and submit the following draft materials: Member Handbook, Provider
Manual, Provider Directory, and Member Identification Card for HHSC’s. The materials
must at a minimum meet the requirements specified in Section 8.1.5, “Member Services”
and include the Critical Elements defined in Uniform Managed Care Manual Chapter 3,
“Critical Elements.”	 

	 	7.	 	Develop and submit the MCO’s proposed Member Complaint and Appeals processes for
STAR, STAR+PLUS, and CHIP, as applicable to the MCO.	 

	 	8.	 	Provide sufficient copies of the final Provider Directory to the HHSC
Administrative Services Contractor in sufficient time to meet the enrollment
schedule.	 

	 	9.	 	Demonstrate toll-free telephone systems and reporting capabilities for the
Member Services Hotline, the Behavioral Health Hotline, and the Provider Services
Hotline.	 

	 	10.	 	Submit a written plan for providing pharmacy services, including proposed
policies and procedures for:	 

	 	•	 	 routinely updating formulary data following receipt of HHSC’s daily
files (no less frequently than weekly, and off-cycle upon HHSC’s request);	 

	 	•	 	prior authorization of drugs, including how HHSC’s preferred drug lists (PDLs)
will be incorporated into prior authorization systems and processes. The MCO must
adopt HHSC’s prior authorization policies unless HHSC grants a written exception,
and HHSC’s approval is required for all Clinical Edit policies;	 

	 	•	 	implementing drug utilization review;

	 	•	 	overriding standard drug utilization review criteria and clinical edits when
Medically Necessary based on the individual Member’s circumstances (e.g, overriding
quantity limitations, drug-drug interactions, refill too soon, etc.);	 

	 	•	 	call center operations, including how the MCO will ensure that staff for all
appropriate hotlines are trained to respond to prior authorization inquiries and
other inquiries regarding pharmacy services, and	 

	 	•	 	monitoring the PBM Subcontractor.

The plan must also include a written description of the assurances and procedures that
must be put in place under the proposed PBM Subcontract, such as an independent audit,
to ensure no conflicts of interest exist and ensure the confidentiality of proprietary
information.

Additionally, the MCO must include a written attestation by the PBM Subcontractor in the
plan stating, in the three (3) years preceding the Contract’s Effective Date, the PBM
Subcontractor has not been: (1) convicted of an offense involving a material
misrepresentation or any act of fraud or of another violation of state or federal
criminal law; (2) adjudicated to have committed a breach of contract, or (3) assessed a
penalty or fine of $500,000 or more in a state or federal administrative proceeding. If
the PMB Subcontractor cannot affirmatively attest to any of these items, then it must
provide a comprehensive description of the matter and all related corrective actions.

	 	11.	 	Between the date of Contract award and the Operational Start date, the MCO must
identify a list of Pharmacy Providers with whom the MCO’s PBM has successfully
contracted and credentialed for inclusion in the first Provider Directory. These
providers should be listed by name and address with an indicator for pharmacies that
are open 24- hours.	 

	 	12.	 	No later than 30 days after the Contract Effective Date, new MCOs must develop
and incumbent MCOs must update their written Fraud and Abuse Compliance Plans. See
Section 8.1.19, “Fraud and Abuse” for the requirements of the plan, including new
requirements for special investigation units. As part of the Fraud and Abuse
Compliance Plan, the MCO must:	 

	 	•	 	Designate executive and essential personnel to attend mandatory training in
fraud and abuse detection, prevention and reporting. Executive and essential fraud
and abuse personnel means MCO staff persons who: (1) are directly involved in the
decision-making and administration of the fraud and abuse detection program within
the MCO, and (2) who supervise staff in the following areas: data collection,
Provider enrollment or disenrollment, Encounter Data, claims processing,
Utilization Review, Appeals or Grievances, quality assurance and marketing. The
training will be conducted by the Office of Inspector General, Health and Human
Services Commission, and will be provided free of charge. The MCO must schedule and
complete training no later than 90 days after the Contract’s Effective Date.	 

	 	•	 	Designate an officer or director within the organization responsible for
carrying out the provisions of the Fraud and Abuse Compliance Plan.	 

	 	•	 	For STAR+PLUS MCOs, complete hiring and training of Service Coordination staff
no later than 45 days prior to the Operational Start Date.	 

If this function is subcontracted to another entity, the Subcontractor also
meets all the requirements in this section and the Fraud and Abuse section as stated
in Section 8, “Operations Phase Requirements.”

	 	13.	 	The MCO must submit a copy of each Material Subcontract in accordance with
the timeframes identified in Attachment A, “Uniform Managed Care Contract Terms and
Conditions,” Section 4.08, “Subcontractors.”	 

	 	14.	 	No later than ten (10) days after the Contract Effective Date, the MCO must
submit documentation demonstrating that it has secured all required insurance, in
accordance with TDI requirements and Section 8, “Operations Phase Requirements,” and
Attachment A, “Uniform Managed Care Contract Terms and Conditions,” Article 17.	 

During the Readiness Review, HHSC may request additional information, including more detailed
or updated information regarding the MCO’s operating procedures and documentation. HHSC will
assess the MCO’s understanding of its responsibilities and the MCO’s capability to assume the
functions required under the Contract, based in part on the MCO’s assurances of operational
readiness, information contained in the Proposal, and in Transition Phase documentation
submitted by the MCO.

7.2.8.2 Value-Added Services

The MCO must use HHSC’s template for submitting proposed Value-added Services. (See Uniform
Managed Care Manual Chapter 4.4) Once approved by HHSC, this document is incorporated by
reference into the Contract.

During the Transition Phase, HHSC will offer a one-time opportunity for the MCO to propose two
(2) additional Value-added Services to its list of current, approved Value-added Services HHSC
will establish the requirements and the timeframes for submitting the two (2) additional
proposed Value-added Services.

During this HHSC-designated opportunity, the MCO may propose either to add new Value- added
Services or to enhance its approved Value-added Services. The MCO may propose two (2)
additional Value-added Services per MCO Program, which will be effective on the Operational
Start Date. The services do not have to be the same for each Program. The Contract will be
amended to include any additional Value-added Services approved by HHSC.

The MCO does not have to add Value-added Services during the HHSC-designated opportunity, but
this will be the only time during the Transition Phase for the MCO to add Value-added Services.
At no time during the Transition Phase will the MCO be allowed to delete, limit or restrict any
of its approved Value-added Services.

7.2.9 Assurance of System and Operational Readiness

In addition to successfully providing the Deliverables described in the preceding
sections, the MCO must assure HHSC that all processes, MIS systems, and staffed functions are
ready and able to successfully assume responsibilities for operations prior to the Operational
Start Date. In particular, the MCO must assure that Key MCO Personnel, Member Services staff,
Provider Services staff, and MIS staff are hired and trained, MIS systems and interfaces are in
place and functioning properly, communications procedures are in place, Provider Manuals have
been distributed, and that Provider training sessions have occurred according to an
HHSC-approved schedule.

7.2.10 TDI and Centers for Medicare and Medicaid Services (CMS)

Licensure, Certification or Approval

The MCO must receive TDI licensure, certification or approval (as applicable) for all zip
codes in the awarded Service Areas no later than 60 days after HHSC executes the Contract. In
addition, HHSC encourages STAR+PLUS MCO to contract with the CMS to provide a Medicare
Advantage Special Needs Plan for Dual Eligibles in the most populous counties in the STAR+PLUS
Service Area(s) no later than January 1, 2013.

7.2.11 Post-Transition

The MCO will work with HHSC, Providers, and Members to promptly identify and resolve
problems identified after the Operational Start Date and to communicate to HHSC, Providers,
and Members, as applicable, the steps the MCO is taking to resolve the problems.

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	STATUS1
	 	DOCUMENT

REVISION2
	 	EFFECTIVE DATE

	 	DESCRIPTION3

	 
	 	 	 	 	 	 
	 	 

	Baseline
	 	 	n/a	 	 	September 1, 2011
	 	Initial version of Attachment B-1, RFP Section 8,

“Operations Phase Requirements.”

	 
	 	 	 	 	 	 
	 	 

	Revision
	 	 	2.1	 	 	March 1, 2012
	 	Section 8.1.1.1 is modified to change the

timeframes for PIPs from SFY to calendar year and to

revise the due dates.

Section 8.1.3 is modified to clarify PCP

requirement’s application (does not apply to CHIP

Perinates (unborn children) and add a requirement

regarding timely access to Network Providers, as

required by 42 CFR §438.206(c)(1)(ii).

Section 8.1.3.2 is modified to add pharmacy access

requirements effective 9/1/12. These standards are

derived from Medicare Part D access standards, and

the standards currently being met in the

fee-forservice program.

Section 8.1.4 is modified to require MCOs to enter

into network provider agreements with any willing

State Hospital and to clarify requirements for

contracting with specialty pharmacies.

Section 8.1.5.5 is modified to require the MCOs to

include a link to financial literacy information on

the OCCC web page as required by HB 2615.

Section 8.1.8 is modified to add prior authorizations

by pharmacists.

Section 8.1.17 is modified to remove the requirement

to submit an accounting policy manual.

Section 8.1.17.1 “Financial Disclosure Report” is

renamed “MCO Disclosure Statement” and the

submission date is updated.

Section 8.1.18.1 is modified to require MCOs to

submit pharmacy encounter data no later than 25

calendar days after the date of adjudication.

Section 8.1.18.4 is modified to clarify claims

transaction formats for pharmacy claims.

Section 8.1.18.5 is modified to require MCOs to

maintain a mechanism to receive claims in addition to

the HHSC claims portal.

Section 8.1.19 is modified to require MCOs to

designate a primary and secondary contact for all OIG

requests and to outline the process and

timeframes for responding to the OIG, to change the

60 day timeline for submitting the annual plan to 90

days, and to require MCOs to ensure their

subcontractors receiving or making annual Medicaid

payments of at least $5 million comply with

1902(a)(68)(A) of the Social Security Act.

Section 8.1.20.2 is modified to add DUR reporting

requirements.

Section 8.1.21 is revised to delete MCO developed

PDLs and to clarify the reimbursement process.

Section 8.1.21.1 is revised to clarify legal

references and Clinical Edit requirements, and to add

requirements regarding 340B drugs.

Section 8.1.21.4 is modified to add requirements for

the rebate dispute resolution process.

Section 8.1.21.5 is modified to clarify that HHSC

will provide up to 1 year of medication history to

the MCOs for new Members with previous Medicaid

eligibility.

Section 8.1.21.9 is modified to clarify requirements

for contracting with specialty pharmacies.

Section 8.1.21.10 is deleted in its entirety.

Section 8.1.23.1 is modified that copayment amounts

are capped at the MCO’s cost and that CHIP copayments

do not apply to preventive services or

pregnancy-related services.

Section 8.1.24 is modified to clarify that MCOs must

notify Medicaid and CHIP Providers of availability of

vaccines through Texas Vaccines for Children Program

and work with HHSC and Providers to improve the

reporting of immunizations to the statewide ImmTrac

Registry.

Section 8.2.2.3.4 is modified to require MCOs to use

standard Texas Health Steps language in their Member

Materials as provided in the UMCM.

Section 8.2.2.8 is amended to clarify the

requirements regarding non-capitated dental services

and to add “Texas Health Steps environmental lead

investigation (ELI)”. Remainder of list is

renumbered.

Section 8.2.4.2 is modified to add a reference to

Gov’t Code §533.005(a)(19).

Section 8.2.8 is modified to add the phrase “unless

an exception applies under federal law” to the first

sentence.

Section 8.2.13 is modified to specify that MCOs may

be required to provide other wrap-around services at

a date to be determined by HHSC.

Section 8.3.2 is modified to require the MCO to

consider the availability of the PACE program when

considering whether to refer a member to a nursing

facility or other long-term care facility.

Section 8.3.7.1 is modified to clarify the MA Dual

SNP requirements.

Section 8.4.3 is modified to correct a

cross-reference.

	 
	 	 	 	 	 	 
	 	 

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

Table of Contents

8. OPERATIONS PHASE REQUIREMENTS

8.1 General Scope of Work

8.1.1 Administration and Contract Management

8.1.2 Covered Services

8.1.3 Access to Care

8.1.4 Provider Network

8.1.5 Member Services

8.1.6 Marketing and Prohibited Practices

8.1.7 Quality Assessment and Performance Improvement

8.1.8 Utilization Management

8.1.9 Early Childhood Intervention (ECI)

8.1.10 Special Supplemental Nutrition Program for Women, Infants, and Children

(WIC) — Specific Requirements

8.1.11 Coordination with Texas Department of Family and Protective Services

8.1.12 Services for People with Special Health Care Needs

8.1.13 Service Management for Certain Populations

8.1.14 Disease Management (DM)/Health Home Services

8.1.15 Behavioral Health (BH) Network and Services

8.1.16 Financial Requirements for Covered Services

8.1.17 Accounting and Financial Reporting Requirements

8.1.18 Management Information System Requirements

8.1.19 Fraud and Abuse

8.1.20 General Reporting Requirements

8.1.21 Pharmacy Services

8.1.22 Federally Qualified Health Centers (FQHCs) and Rural Health Clinics

(RH Cs)

8.1.23 Payment by Members

8.1.24 Immunizations

8.1.25 Dental Coverage

8.2 Additional Medicaid MCO Scope of Work

8.2.1 Continuity of Care and Out-of-Network Providers

8.2.2 Provisions Related to Covered Services for Medicaid Members

8.2.3 Medicaid Significant Traditional Providers

8.2.4 Provider Complaints and Appeals

8.2.5 Member Rights and Responsibilities

8.2.6 Medicaid Member Complaint and Appeal System

8.2.7 Additional Medicaid Behavioral Health Provisions

8.2.8 Third Party Liability and Recovery and Coordination of Benefits

8.2.9 Coordination with Public Health Entities

	 	8.2.10	 	Coordination with Other State Health and Human Services (HHS) Programs 8-104	 

8.2.11 Advance Directives

8.2.12 SSI Members

8.2.13 Medicaid Wrap-Around Services

8.2.14 Medical Transportation

8.3 Additional STAR+PLUS Scope of Work

8.3.1 Covered Community-Based Long-Term Services and Supports

8.3.2 Service Coordination

8.3.3 STAR+PLUS Assessment Instruments

8.3.4 1915(c) Nursing Facility Waiver Service Eligibility

8.3.5 Consumer Directed Services Options

8.3.6 Community Based Long-term Services and Supports Providers

8.3.7 Additional Requirements Regarding Dual Eligibles

8.4 Additional CHIP Scope of Work

8.4.1 CHIP Provider Complaint and Appeals

8.4.2 CHIP Member Complaint and Appeal Process

8.4.3 Third Party Liability and Recovery, and Coordination of Benefits

8.4.4 Perinatal Services for Traditional CHIP Members8. OPERATIONS PHASE REQUIREMENTS

This Section describes Scope of Work requirements for the Operations Phase of the
Contract.

Section 8.1 includes the general Scope of Work that applies to all MCO Programs (STAR,
STAR+PLUS, and CHIP).

Section 8.2 includes the additional Medicaid Scope of Work that applies only to the STAR and
STAR+PLUS MCOs.

Section 8.3 includes the additional Scope of Work that applies only to STAR+PLUS MCOs.

Section 8.4 includes the additional CHIP Scope of Work that applies only to CHIP MCOs.

The CHIP Perinatal Program is a CHIP subprogram. CHIP Program requirements apply to the CHIP
Perinatal Program, unless the Contract otherwise indicates.

Additional information regarding the STAR, STAR+PLUS, and CHIP Program requirements, such as
reporting timeframes and formats is included in Attachment A, “Uniform Managed Care Contract
Terms and Conditions,” and the Uniform Managed Care Manual. HHSC reserves the right to modify
these documents as it deems necessary using the procedures set forth in the Attachment A,
“Uniform Managed Care Contract Terms and Conditions.”

8.1 General Scope of Work

In each MCO Program and Service Area, HHSC will select MCOs to provide Health Care Services
and prescription drug benefits to Members. The MCO must have approval from the Texas Department of
Insurance (TDI) to operate as an HMO, ANHC, and/or an EPO in all zip codes in the respective
Service Area(s).

Coverage for benefits will be available to enrolled Members effective on the Operational Start
Date. The Operational Start Date is March 1, 2012, for all MCO Programs and Service Areas.

8.1.1 Administration and Contract Management

The MCO must comply, to the satisfaction of HHSC, with: (1) all provisions set forth in
this Contract, and (2) all applicable provisions of state and federal laws, rules,

regulations, and waiver agreements with the Centers for Medicare and Medicaid
Services (CMS).

8.1.1.1 Performance Evaluation

Beginning in SFY 2013, by May 15th each year, HHSC will establish two (2) overarching
goals and negotiate a third goal suggested by the MCO for the following calendar year. The MCO
must identify and propose annual MCO Performance Improvement Projects (PIPs) relating to the
overarching goals for the following calendar year no later than August 21st each year.
The MCO is required to provide three (3) PIPs per MCO Program. At least one (1) PIP must be
related to an overarching goal established by HHSC (see Uniform Managed Care Manual Chapter
10.2.7, “MMC/CHIP Performance Improvement Project Overarching Goals”). Once finalized, the
overarching goals and HHSC-approved PIPs are incorporated into the Contract. If HHSC and the MCO
cannot agree on the overarching goal or PIPs, HHSC will unilaterally select them.

PIPs will follow CMS protocol, as described below. The purpose of health care quality PIPs is
to assess and improve processes, and thereby outcomes, of care. In order for such projects to
achieve real improvements in care and for interested parties to have confidence in the
reported improvements, PIPs must be designed, conducted, and reported in a methodologically
sound manner.

MCOs must use the following ten (10) step CMS protocol when conducting PIPs:

1. select the study topic(s);

2. define the study question(s);

3. select the study indicator(s);

4. use a representative and generalizable study population;

5. use sound sampling techniques (if sampling is used);

6. collect reliable data;

7. implement intervention and improvement strategies;

8. analyze data and interpret study results;

9. plan for “real” improvement; and

10. achieve sustained improvement.

(See Uniform Managed Care Manual Chapter 10.2.4, “Performance Improvement Project Submission
Instructions” and 10.2.5, “Performance Improvement Project Template”).

The MCO must participate in semi-annual Contract Status Meetings (CSMs) with HHSC for the primary
purpose of reviewing progress toward the achievement of annual PIPs and Contract requirements.
HHSC may request additional CSMs as it deems necessary to address areas of noncompliance. HHSC
will provide the MCO with reasonable advance notice of additional CSMs, generally at least five
(5) Business Days.

The MCO must provide to HHSC, no later than 14 Business Days prior to each semiannual
CSM, an electronic report detailing the MCO’s progress toward meeting the annual PIPs and
identifing any other areas of noncompliance.

HHSC will track MCO performance on PIPs. It will also track other key facets of MCO
performance through the use of a Performance Indicator Dashboard (see Uniform Managed Care
Manual Chapter 10.1). HHSC will compile the Performance Indicator Dashboard based on MCO
submissions, data from the External Quality Review Organization (EQRO), and other data
available to HHSC. HHSC will share the Performance Indicator Dashboard with the MCO on a
quarterly basis.

8.1.1.2 Additional Readiness Reviews and Monitoring Efforts

During the Operations Phase, HHSC may conduct desk and/or onsite reviews as part of its normal
Contract monitoring efforts. Additionally, an MCO that chooses to make a change to any
operational system or undergo any major transition may be subject to an additional Readiness
Review(s). HHSC will determine whether the proposed changes will require a desk review and/or an
onsite review. The MCO is responsible for all reasonable travel costs incurred by HHSC or its
authorized agent for onsite reviews conducted as part of Readiness Review or HHSC’s normal
Contract monitoring efforts. For purposes of this section, “reasonable travel costs” include
airfare, lodging, meals, car rental and fuel, taxi, mileage, parking and other incidental travel
expenses incurred by HHSC or its authorized agent in connection with the onsite reviews. This
provision does not limit HHSC’s ability to collect other costs as damages in accordance with
Attachment A, Section 12.02(e), “Damages.”

Refer to Section 7, “Transition Phase Requirements,” and Section 8.1.18, “Management Information
System Requirements,” for additional information regarding MCO Readiness Reviews. Refer to
Attachment A, “Uniform Managed Care Contract Terms and Conditions,” Section 4.08(c) for
information regarding Readiness Reviews of the M CO’s Material Subcontractors.

8.1.2 Covered Services

The MCO is responsible for authorizing, arranging, coordinating, and providing Covered
Services in accordance with the requirements of the Contract. The MCO must provide Medically
Necessary Covered Services to all Members beginning on the Member’s date of enrollment regardless
of pre-existing conditions, prior diagnosis and/or receipt of any prior Health Care Services.
STAR+PLUS MCOs must also provide Functionally Necessary Community Long-term Services and Supports
to all Members beginning on the Member’s date of enrollment regardless of pre-existing
conditions, prior diagnosis and/or receipt of any prior Health Care Services. The MCO must not
impose any preexisting condition limitations or exclusions or require Evidence of Insurability to
provide coverage to any Member.

The MCO must provide full coverage for Medically Necessary Covered Services to all
Members and, for STAR+PLUS Members, Functionally Necessary Community Longterm Services and
Supports, without regard to the Member’s:

1. previous coverage, if any, or the reason for termination of such coverage;

2. health status;

3. confinement in a health care facility; or

4. for any other reason.

The MCO must not practice discriminatory selection, or encourage segregation among the total
group of eligible Members by excluding, seeking to exclude, or otherwise discriminating against
any group or class of individuals.

Covered Services for all Medicaid MCO Members are listed in Attachments B-2, “STAR Covered
Services,” and B-2.2, “STAR+PLUS Covered Services.” Medicaid MCOs are responsible for providing
all services and benefits available to clients of the Medicaid Fee-for-Service Program to the
MCO’s Medicaid Members, with the exception of NonCapitated Services (Section 8.2.2.8). Medicaid
MCOs must provide the services and benefits described in the most recent Texas Medicaid Provider
Procedures Manual and any updates to the Manual provided through Texas Medicaid Bulletins. A
description of CHIP Covered Services and exclusions is provided in Attachment B-2.1, “CHIP Covered
Services.” Covered Services are subject to change due to changes in federal and state law; changes
in Medicaid, CHIP or CHIP Perinatal Program policy; and changes in medical practice, clinical
protocols, or technology.

8.1.2.1 Value-added Services

MCOs may propose additional services for coverage. These are referred to as “Value- added
Services.” Value-added Services may be actual Health Care Services, benefits, or positive
incentives that HHSC determines will promote healthy lifestyles and improved health outcomes among
Members. Value-added Services that promote healthy lifestyles should target specific weight loss,
smoking cessation, or other programs approved by HHSC. Temporary phones, cell phones, additional
transportation benefits, and extra home health services may be Value-added Services, if approved by
HHSC. Best practice approaches to delivering Covered Services are not considered Value-added
Services.

The MCO generally must offer Value-added Services to all MCO Program Members in a Service Area.
For Medicaid Acute Care services, the MCO may distinguish between the Dual Eligible and non-Dual
Eligible populations. The MCO is not required to offer the same Value-added Services to CHIP
Perinate Members as traditional CHIP Members and CHIP Perinate Newborn Members. Value-added
Services do not need to be consistent across more than one (1) MCO Program or across more than
one (1) Service Area. Value-added Services that are approved by HHSC during the contracting
process will be included in the Contract’s scope of services.

Any Value-added Services that a MCO elects to provide must be provided at no additional
cost to HHSC. The costs of Value-added Services are not reportable as allowable medical or
administrative expenses, and therefore are not factored into the rate setting process. In
addition, the MCO must not pass on the cost of the Value-added Services to Providers. The MCO must
specify the conditions and parameters regarding the delivery of the Value-Added Services in the
MCO’s Marketing Materials and Member Handbook, and must clearly describe any limitations or
conditions specific to the Value- added Services.

During the Operations Phase, Value-added Services can be added or removed only by written
amendment of the Contract. MCOs will be given the opportunity to add or enhance Value-added
Services twice per State Fiscal Year, with changes to be effective September 1 and March 1. MCOs
will also be given the opportunity to delete or reduce Value-added Services once per State Fiscal
Year, with changes to be effective September 1. HHSC may allow additional modifications to
Value-added Services if Covered Services are amended by HHSC during a State Fiscal Year. This
approach allows HHSC to coordinate biannual revisions to HHSC’s MCO Comparison Charts for Members.
A MCO’s request to add, enhance, delete, or reduce a Value-added Service must be submitted to HHSC
by April 1 of each year to be effective September 1 for the following contract period. A second
request to add or enhance Value-added Services must be submitted to HHSC by October 1 each year to
be effective March 1. (See Uniform Managed Care Manual Chapter 4.5 “Physical and Behavioral Health
Value- Added Services Template.”)

A MCO’s request to add a Value-added Service must:

	 	a.	 	define and describe the proposed Value-added Service;

	 	b.	 	specify the Service Areas and MCO Programs for the proposed
Value- added Service;	 

	 	c.	 	identify the category or group of Members eligible to receive
the Value- added Service if it is a type of service that is not appropriate
for all mandatory Members;	 

	 	d.	 	note any limits or restrictions that apply to the Value-added
Service;

	 	e.	 	identify the Providers responsible for providing the Value-added
Service;

	 	f.	 	Describe how the MCO will identify the Value-added
Service in administrative data (Encounter Data);	 

	 	g.	 	propose how and when the MCO will notify Providers and Members
about the availability of such Value-added Service;

	 	h.	 	describe how a Member may obtain or access the Value-added
Service; and	 

	 	i.	 	include a statement that the MCO will provide such Value-added
Service for at least 12 months from the September 1 effective date.	 

A MCO cannot include a Value-added Service in any material distributed to Members or
prospective Members until the Parties have amended the Contract to include that Value-
added Service. If a Value-added Service is deleted by amendment, the MCO must notify each
Member that the service is no longer available through the MCO. The MCO mustalso
revise all materials distributed to prospective Members to reflect the change in
Value-added Services.

8.1.2.2 Case-by-Case Added Services

Except as provided below, the MCO may offer additional benefits that are outside the scope of
services to individual Members on a case-by-case basis. Case-by-case services may be based on
Medical Necessity, cost-effectiveness, the wishes of the Member/Member’s family, the potential
for improved health status of the Member, and for STAR+PLUS Members based on Functional
Necessity.

Section 8.1.2.2, “Case-by-Case Added Services,” does not apply to the CHIP Perinate Members
(unborn children).

8.1.3 Access to Care

All Covered Services must be available to Members on a timely basis in accordance the
Contract’s requirements and medically appropriate guidelines, and consistent with generally
accepted practice parameters. The MCO must comply with the access requirements as established by
the Texas Department of Insurance (TDI) for all MCOs doing business in Texas, except as otherwise
required by this Contract. Medicaid MCOs must be responsive to the possibility of increased
Members due to the phase-out of the PCCM model in Service Areas where HHSC has determined that
adequate MCO coverage exists.

The MCO must provide coverage for Emergency Services to Members 24 hours a day and seven (7)
days a week, without regard to prior authorization or the Emergency Service provider’s
contractual relationship with the MCO. The MCO’s policy and procedures, Covered Services, claims
adjudication methodology, and reimbursement performance for Emergency Services must comply with
all applicable state and federal laws and regulations, whether the provider is Network or
Out-of-Network. A MCO is not responsible for payment for unauthorized non-emergency services
provided to a Member by Out-of-Network providers.

The MCO must also have a toll-free emergency and crisis Behavioral Health Services Hotline
available 24 hours a day, seven (7) days a week. The Behavioral Health Services Hotline must meet
the requirements described in Section 8.1.15.3. For Medicaid Members, a MCO must provide coverage
for Emergency Services in compliance with 42 C.F.R. §438.114, and as described in more detail in
Section 8.2.2.1. The MCO may arrange Emergency Services and crisis Behavioral Health Services
through mobile crisis teams.

For CHIP Members, Emergency Covered Services, including emergency Behavioral Health Services,
must be provided in accordance with the requirements of the Texas Insurance Code and TDI
regulations.

MCO must require, and make best efforts to ensure, that PCPs are accessible to STAR,
STAR+PLUS, CHIP, and CHIP Perinate Newborn Members 24 hours a day, seven (7) days a week and that
its Network Primary Care Providers (PCPs) have after-hours telephone availability that is
consistent with Section 8.1.4. The MCO must ensure that Network Providers offer office hours to
Members that are at least equal to those offered to the MCO’s commercial lines of business or
Medicaid fee-for-service participants, if the provider accepts only Medicaid patients.

CHIP MCOs are not required to establish PCP Networks for CHIP Perinates (Unborn Child).

The MCO must provide that if Medically Necessary Covered Services are not available through
Network Providers, the MCO must, upon the request of a Network Provider, allow a referral to a
non-network physician or provider within the time appropriate to the circumstances relating to the
delivery of the services and the condition of the patient, but in no event to exceed five (5)
Business Days after receipt of reasonably requested documentation. The MCO must fully reimburse
the non-network provider in accordance with the Out-of-Network methodology for Medicaid as defined
by HHSC in 1 T.A.C. §353.4, and for CHIP, at the usual and customary rate defined by TDI in 28
T.A.C. Section 11.506.

The Member will not be responsible for any payment for Medically Necessary Covered Services,
including Functionally Necessary Covered Services, other than:

(1) HHSC-specified copayments for CHIP Members, where applicable;

(2) HHSC-specified copayments for Medicaid Members, where applicable (if HHSC
implements Medicaid cost sharing after the Effective Date of the Contract); and

(3) STAR+PLUS Members who qualify for 1915(c) Nursing Facility Waiver services and
enter a 24-hour setting will be required to pay the provider of care room and board costs
and any income in excess of the personal needs allowance, as established by HHSC. If the
MCO provides Members who do not qualify for the 19 15(c) Nursing Facility Waiver services
in a 24-hour setting as an alternative to nursing facility or Hospitalization, the Member
will be required to pay the provider of care room and board costs and any income in excess
of the personal needs allowance, as established by HHSC.

8.1.3.1 Waiting Times for Appointments

Through its Provider Network composition and management, the MCO must ensure that appointments for
the following types of Covered Services are provided within the following timeframes. In all cases
below, “day” is defined as a calendar day.

	 	1.	 	Emergency Services must be provided upon Member presentation at the service
delivery site, including at non-network and out-of-area facilities;	 

	 	2.	 	urgent care, including urgent specialty care, must be provided within 24 hours of
request.	 

	 	3.	 	routine primary care must be provided within 14 days of request;

	 	4.	 	initial outpatient behavioral health visits must be provided within 14 days
of request;	 

	 	5.	 	routine specialty care referrals must be provided within 30 days of request;

	 	6.	 	pre-natal care must be provided within 14 days of request, except for high-risk
pregnancies or new Members in the third trimester, for whom an appointment must be
offered within five (5) days, or immediately, if an emergency exists;	 

	 	7.	 	preventive health services for adults must be offered to a Member within 90 days of
request; and	 

	 	8.	 	preventive health services for children, including well-child checkups should be
offered to CHIP Members in accordance with the American Academy of Pediatrics (AAP)
periodicity schedule. Medicaid MCOs should utilize the Texas Health Steps periodicity
schedule. For a New Member birth through age 20, overdue or upcoming well-child
checkups, including Texas Health Steps medical checkups, should be offered as soon as
practicable, but in no case later than 14 days of enrollment for newborns, and no later
than 90 days of enrollment for all other eligible child Members. The Texas Health Steps
annual medical checkup for an Existing Member age 36 months and older is due on the
child’s birthday. The annual medical checkup is considered timely if it occurs no later
than 364 calendar days after the child’s birthday. For purposes of this requirement, the
terms “New Member” and “Existing Member” are defined in Chapter 12.4 of the Uniform
Managed Care Manual.	 

8.1.3.2 Access to Network Providers

The MCO’s Network must have PCPs in sufficient numbers, and with sufficient capacity, to provide
timely access to regular and preventive pediatric care, and Texas Health Steps services to all
child Members in Medicaid, and in accordance with the waiting times for appointments in Section
8.1.3.1.

PCP Access: At a minimum, the MCO must ensure that all Members have access to an age-appropriate
PCP in the Provider Network with an Open Panel within 30 miles of the Member’s residence. For the
purposes of assessing compliance with this requirement, an internist who provides primary care to
adults only is not considered an age- appropriate PCP choice for a Member birth through age 20,
and a pediatrician is not considered an age-appropriate choice for a Member age 21 and over.
Note: This provision does not apply to CHIP Perinates, but it does apply to CHIP Perinate
Newborns.

OB/GYN Access: STAR, STAR+PLUS and CHIP Program Networks: with the following exception, STAR,
STAR+PLUS and CHIP MCOs must ensure that all female Members have access to an OB/GYN in the
Provider Network within 75 miles of the Member’s residence. CHIP MCOs must ensure that CHIP
Perinate Members (unborn children) in

rural areas have access to Network OB/GYNs within 125 miles of the Member’s
residence.

If an OB/GYN is acting as the Member’s PCP, the MCO must follow the access requirements
for the PCP (within 30 miles of the Member’s residence).

The MCO must allow female Members to select an OB/GYN within its Provider Network. A female
Member who selects an OB/GYN must be allowed direct access to the OB/GYN’s Health Care Services
without a referral from the Member’s PCP or a prior authorization. The MCO must allow pregnant
Member who is past the 24th week of pregnancy to remain under the Member’s current
OB/GYN care though the Member’s post-partum checkup, even if the OB/GYN provider is, or becomes,
Out-of-Network.

Outpatient Behavioral Health Service Provider Access: At a minimum, the MCO must ensure that all
Members have access to a covered outpatient Behavioral Health Service Provider in the Network
within 75 miles of the Member’s residence. Outpatient Behavioral Health Service Providers must
include Masters and Doctorate-level trained practitioners practicing independently or at community
mental health centers, other clinics or at outpatient Hospital departments. A Qualified Mental
Health Provider – Community Services (QMHP-CS) is defined by the Texas Department of State Health
Services (DSHS) in Title 25 T.A.C. §412.303(48). QMHP-CSs must be providers working through a
DSHS-contracted Local Mental Health Authority or a separate DSHScontracted entity. QMHP-CSs must
be supervised by a licensed mental health professional or physician and provide services in
accordance with DSHS standards. Those services include individual and group skills training (which
can be components of interventions such as day treatment and in-home services), patient and family
education, and crisis services.

Other Specialist Physician Access: At a minimum, the MCO must ensure that all Members have access
to a Network specialist physician for all covered services within 75 miles of the Member’s
residence for common medical specialties. For adult Members, common medical specialties must
include general surgery, cardiology, orthopedics, urology, and ophthalmology. For child Members,
common medical specialties must include orthopedics and otolaryngology. In addition, all Members
must be allowed to: 1) select a Network ophthalmologist or therapeutic optometrist to provide eye
Health Care Services, other than surgery, and 2) have access without a PCP referral to eye Health
Care Services from a Network specialist who is an ophthalmologist or therapeutic optometrist for
non-surgical services.

Hospital Access: The MCO must ensure that all Members have access to an Acute Care Hospital in
the Provider Network within 30 miles of the Member’s residence. For MCOs participating in the
CHIP Program, exceptions to this access standard must be approved by HHSC on a case-by-case
basis for Perinate Members (unborn children). MCOs participating in the Medicaid Rural Service
Area may also request exceptions on a case-by-case basis.

Pharmacy Access: Effective March 1, 2012, the MCO must meet the following minimum
requirements. The MCO must ensure that all Members have access to at least one (1) Network
Pharmacy within 15 miles of the Member’s residence, and access to at least one (1) pharmacy with
24-hour coverage within 75 miles of the Member’s residence. MCOs may request exceptions to this
requirement on a case-by-case basis.

Effective September 1, 2012, additional standards apply. For purposes of this requirement
only, the terms urban, suburban, and rural counties have the following meaning:

Urban – Counties that have been designated as metropolitan by the Office of
Management and Budget (OMB), and that contain the most populated city within a metropolitan
area, also known as Metropolitan Statistical Area. HHSC Strategic Decision Support (SDS)
classifies these counties as Metro Central City counties. A county meets the definition of
metropolitan if it has a central city, or pair of twin cities in it, with a minimum
population of 50,000.

Suburban – Counties that have been designated as metropolitan by the OMB, and that
are adjacent (share a boundary) to a Metro Central City county. The SDS classifies these
counties as Metro Suburban counties.

Rural – Non-metropolitan counties of the state, regardless of whether they are
adjacent or non-adjacent to a metropolitan county.

For counties included in the Medicaid Rural Service Area, the following standard applies to STAR
effective September 1, 2012:

	•	 	In urban counties, at least 75 percent of Members must have access to a Network
Pharmacy within two (2) miles of the Member’s residence;	 

	•	 	In suburban counties, at least 55 percent of Members must have access to a Network
Pharmacy within 5 miles of the Member’s residence; and

	•	 	In rural counties, at least 90 percent of Members must have access to a Network
Pharmacy within 15 miles of the Member’s residence.	 

For all other counties and Programs, the following standard applies effective September 1, 2012:

	•	 	In urban counties, at least 80 percent of Members must have access to a Network
Pharmacy within two (2) miles of the Members’ residence;	 

	•	 	In suburban counties, at least 75 percent of Members must have access to a Network
Pharmacy within five (5) miles of the Member’s residence; and

	•	 	In rural counties, at least 90 percent of Members must have access to a Network
Pharmacy within 15 miles of the Member’s residence.	 

Note: MCOs may request exceptions to these requirements on a case-by-case basis. Mail order
pharmacies, including specialty pharmacies that only mail prescriptions, willnot be included
when calculating these percentages. However, MCOs will be required to report on the number of
prescriptions filled and number of clients served through mail order/specialty pharmacies by MCO
Program and Service Area.

All other Covered Services, except for services provided in the Member’s residence: At a minimum,
the MCO must ensure that all Members have access to at least one (1) Network Provider for each of
the remaining Covered Services described in Attachments B-2, “STAR Covered Services,” B-2.1 “CHIP
Covered Services,” and B2.2, “STAR+PLUS Covered Services,” within 75 miles of the Member’s
residence. This access requirement includes, but is not limited to, specialists, specialty
Hospitals, psychiatric Hospitals, diagnostic and therapeutic services, and single or limited
service health care physicians or Providers, as applicable to the MCO Program.

The MCO is not precluded from making arrangements with physicians or providers outside the MCO’s
Service Area for Members to receive a higher level of skill or specialty than the level available
within the Service Area, including but not limited to, treatment of cancer, burns, and cardiac
diseases. HHSC may consider exceptions to the above access-related requirements when an MCO has
established, through utilization data provided to HHSC, that a normal pattern for securing Health
Care Services within an area does not meet these standards, or when an MCO is providing care of a
higher skill level or specialty than the level which is available within the Service Area.

8.1.3.3 Monitoring Access

The MCO is required to systematically and regularly verify that Covered Services furnished by
Network Providers are available and accessible to Members in compliance with the standards
described in Sections 8.1.3.1 and 8.1.3.2, and for Covered Services furnished by PCPs, the
standards described in Section 8.1.4.2.

The MCO must enforce access and other Network standards required by the Contract and take
appropriate action with noncompliant Providers.

8.1.4 Provider Network

The MCO must enter into written contracts with properly credentialed Providers as
described in this Section. The Provider contracts must comply with the Uniform Managed Care
Manual’s requirements, and include reasonable administrative and professional terms.

The MCO must maintain a Provider Network sufficient to provide all Members with access to the
full range of Covered Services required under the Contract. The MCO must ensure its Providers
and Subcontractors meet all current and future state and federal eligibility criteria,
reporting requirements, and any other applicable rules and/or regulations related to the
Contract.

The Provider Network must be responsive to the linguistic, cultural, and other unique
needs of any minority, elderly, or disabled individuals, or other special populations served
by the MCO. This includes the capacity to communicate with Members in languages other than
English, when necessary, as well as with those who are deaf or hearing impaired.

The MCO must seek to obtain the participation in its Provider Network of qualified providers
currently serving the Medicaid and CHIP Members in the MCO’s proposed Service Area(s). Medicaid
MCOs utilizing Out-of-Network providers to render services to their Members must not exceed the
utilization standards established in 1 T.A.C. §353.4. HHSC may modify this requirement for
Medicaid MCOs that demonstrate good cause for noncompliance, as set forth in §353.4(e)(3).

The MCO must seek participation in the Provider Network from the following types of entities
that may serve American Indian and Alaskan Native children:

	 	1.	 	health clinics operated by a federally-recognized tribe in the Service Area;

	 	2.	 	Federally Qualified Health Centers (FQHC) operated by a federally-recognized
tribe in the Service Area; and	 

	 	3.	 	Urban Indian organizations in the Service Area.

All Providers: Except as provided in Section 8.1 .4.10, all Providers must be licensed in the
State of Texas to provide the Covered Services for which the MCO is contracting with the
Provider, and not be under sanction or exclusion from the Medicaid program. All Acute Care
Providers serving Medicaid Members must be enrolled as Medicaid providers and have a Texas
Provider Identification Number (TPIN). All Pharmacy Providers must be enrolled with HHSC’s Vendor
Drug Program. Long-term Services and Supports Providers are not required to have a TPIN but must
have a LTSS Provider number. Providers must also have a National Provider Identifier (NPI) in
accordance with the timelines established in 45 C.F.R. Part 162, Subpart D.

Inpatient Hospital and medical services: The MCO must ensure access to Acute Care Hospitals and
Specialty Hospitals in the MCO’s Network. Covered Services provided by such Hospitals must be
available and accessible 24 hours per day, seven (7) days per week. The MCO must enter into a
Network Provider Agreement with any willing State Hospital that meets the MCO’s credentialing
requirements and agrees to the MCO’s contract rates and terms.

Children’s Hospitals/Hospitals with specialized pediatric services: The MCO must ensure Members
access to Hospitals designated as Children’s Hospitals by Medicare and Hospitals with specialized
pediatric services, such as teaching Hospitals and Hospitals with designated children’s wings.
Covered Services provided by such Hospitals must be available and accessible 24 hours per day,
seven (7) days per week. If the MCO does not have a designated Children’s Hospital and/or
Hospital with specialized pediatric services in proximity to the Member’s residence in its
Network, the MCO must enter into written arrangements for services with Out-of-Network Hospitals.
Provider Directories, Member Materials, and Marketing Materials must clearly distinguish between
Hospitals designated as Children’s Hospitals and Hospitals that have designated children’s units.

Trauma: The MCO must ensure Members access to Texas Department of State Health Services
(TDSHS)-designated Level I and Level II trauma centers within the State, or Hospitals meeting
the equivalent level of trauma care in the MCO’s Service Area or in close proximity to such
Service Area. The MCO must make written Out-of-Network reimbursement arrangements with the
DSHS-designated Level I and Level II trauma centers or Hospitals meeting equivalent levels of
trauma care if the MCO does not include such a trauma center in its Network.

Transplant centers: The MCO must ensure Member access to HHSC-designated transplant centers or
centers meeting equivalent levels of care. A list of HHSCdesignated transplant centers can be
found in the Procurement Library. If the MCO’s Network does not include a designated transplant
center or center meeting equivalent levels of care in proximity to the Member’s residence, the
MCO must make written arrangements with Out-of-Network providers for such care.

Hemophilia centers: The MCO must ensure Member access to hemophilia centers supported by the
Centers for Disease Control (CDC). A list of these hemophilia centers can be found at
http://www.cdc.gov/ncbddd/hemophilia/HTC.html. If the MCO’s Network does not include
CDC-supported hemophilia centers in proximity to the Member’s residence, the MCO must make
written arrangements with Out-of-Network providers for such care.

Physician services: The MCO must ensure that Primary Care Providers are available and accessible
24 hours per day, seven (7) days per week, within the Provider Network. The MCO must contract
with a sufficient number of participating physicians and specialists within each Service Area to
comply with Section 8.1.3’s access requirements and meet Members’ needs for all Covered Services.

The MCO must ensure that an adequate number of participating physicians have admitting privileges
at one (1) or more participating Acute Care Hospitals in the Provider Network to ensure that
necessary admissions are made. In no case may there be less than one Network PCP with admitting
privileges available and accessible 24 hours per day, seven (7) days per week for each Acute Care
Hospital in the Provider Network.

The MCO must ensure that an adequate number of participating specialty physicians have
admitting privileges at one or more participating Hospitals in the MCO’s Provider Network to
ensure necessary admissions are made. The MCO must require that all physicians who admit to
Hospitals maintain Hospital access for their patients through appropriate call coverage.

Urgent Care Clinics: The MCO must ensure that Urgent Care Clinics, including multi- specialty
clinics serving in this capacity, are included within the Provider Network.

Laboratory services: The MCO must ensure that Network reference laboratory services are of
sufficient size and scope to meet Members’ non-emergency and emergency needs and the access
requirements in Section 8.1.3. Reference laboratory specimen procurement services must
facilitate the provision of clinical diagnostic services for physicians, Providers, and Members
through the use of convenient reference satellite labs in each Service Area, strategically
located specimen collection areas in each Service Area, and the use of a courier system under
the management of the reference lab. For Medicaid Members, Texas Health Steps requires
Providers to use the DSHS Laboratory Services for specimens obtained as part of a Texas Health
Steps medical checkup, including Texas Health Steps newborn screens; blood lead testing;
hemoglobin electrophoresis; and total hemoglobin tests that are processed at the Austin
Laboratory; and Pap Smear, gonorrhea and chlamydia screening processed at the Women’s Health
Laboratories in San Antonio. Providers may submit specimens for glucose, cholesterol, HDL,
lipid profile, HIV and RPR to the DSHS Laboratory or to a laboratory of the provider’s choice.
Hematocrit may be performed at the provider’s clinic if the provider needs an immediate result
for anemia screening. Providers should refer to the Texas Health Steps Online Provider Training
Modules referencing specimen collection on the DSHS website and the Texas Medicaid Provider
Procedures Manual, Section 6.3.2.6.1 Laboratory Services for the most current information and
any updates.

Pharmacy Providers: The MCO must ensure that all Pharmacy Network Providers are licensed with the
Texas State Board of Pharmacy. These Providers must not be under sanction or exclusion from the
Medicaid and/or CHIP Programs. The MCO must enter into a Network Provider Agreement with any
willing pharmacy provider that meets the MCO’s credentialing requirements and agrees to the MCO’s
contract rates and terms. However, the MCO may enter into selective contracts for specialty
pharmacy services with one or more pharmacy provider, subject to the following conditions. These
arrangements must comply with Texas Government Code §533.005(a)(23)(G). Furthermore, if the
selective contracts for specialty pharmacy services conflict with final rules promulgated by
HHSC, then the MCO must terminate the contracts or amend them to comply with the rules.

Diagnostic imaging: The MCO must ensure that diagnostic imaging services are available and
accessible to all Members in each Service Area in accordance with the access standards in Section
8.1.3. The MCO must ensure that diagnostic imaging procedures that require the injection or
ingestion of radiopaque chemicals are performed only under the direction of physicians qualified
to perform those procedures.

Home health services: All Members living within the MCO’s Service Area must have access to at
least one (1) Network Provider of home health Covered Services. (These services are provided
as part of the Acute Care Covered Services, not the Community Long Term Services and
Supports.)

Community Long Term Services and Supports: All Members living within a STAR+PLUS MCO’s
Service Area must have access to Medically Necessary and Functionally Necessary Covered
Services.

Ambulance providers: The MCO must enter into a Network Provider Agreement with any willing
ambulance provider that meets the MCO’s credentialing requirements and agrees to the MCO’s
contract rates and terms.

8.1.4.1 Provider Contract Requirements

The MCO is prohibited from requiring a provider or provider group to enter into an
exclusive contracting arrangement with the MCO as a condition for Network participation.

The MCO’s contract with health care Providers must be in writing, must be in compliance with
applicable federal and state laws and regulations, and must include minimum requirements
specified in Attachment A, “Uniform Managed Care Contract Terms and Conditions,” and Uniform
Managed Care Manual Chapter 8.1 “Provider Contract Checklist.”

As described in Section 7, the MCO must submit model Provider contracts to HHSC for review during
Readiness Review. The MCO must resubmit the model Provider contracts any time it makes
substantive modifications to such agreements. HHSC retains the right to reject or require changes
to any Provider contract that does not comply with MCO Program requirements or the HHSC-MCO
Contract.

8.1.4.2 Primary Care Providers

The MCO’s PCP Network may include Providers from any of the following practice areas: General
Practice; Family Practice; Internal Medicine; Pediatrics; Obstetrics/Gynecology (OB/GYN);
Advanced Practice Nurses (APNs) and Physician Assistants (PAs) (when APNs and PAs are
practicing under the supervision of a physician specializing in Family Practice, Internal
Medicine, Pediatrics or Obstetrics/Gynecology who also qualifies as a PCP under this contract);
Federally Qualified Health Centers (FQHCs), Rural Health Clinics (RHCs), and similar community
clinics; and specialist physicians who are willing to provide a Medical Home to selected
Members with special needs and conditions. Section 533.005(a)(13) of the Texas Government Code
requires the MCO to use APNs practicing under the supervision of a physician as PCPs in its
Provider Network for STAR and STAR+PLUS.

An internist or other Provider who provides primary care to adults only is not considered an
age-appropriate PCP choice for a Member birth through age 20. An internist or other Provider
who provides primary care to adults and children may be a PCP for children if:

	 	1.	 	the Provider assumes all MCO PCP responsibilities for such child Members in a
specific age range from birth through age 20,	 

	 	2.	 	the Provider has a history of practicing as a PCP for the specified age range,
as evidenced by the Provider’s primary care practice including an established patient
population within the specified age range, and	 

	 	3.	 	the Provider has admitting privileges to a local Hospital that includes
admissions to pediatric units.	 

A pediatrician is not considered an age-appropriate choice for a Member age 21 and over.

The PCP for a Member with disabilities, Special Health Care Needs, or Chronic or Complex
Conditions may be a specialist physician who agrees to provide PCP services to the Member. The
specialty physician must agree to perform all PCP duties required in the Contract, and PCP duties
must be within the scope of the specialist’s license. Any interested person may initiate the
request through the MCO for a specialist to serve as a PCP for a Member with disabilities,
Special Health Care Needs, or Chronic or Complex Conditions. The MCO must handle such requests in
accordance with 28 T.A.C. Part 1, Chapter 11, Subchapter J.

PCPs who provide Covered Services for STAR and CHIP newborns must either have admitting
privileges at a Hospital that is part of the MCO’s Provider Network, or make referral
arrangements with a Provider who has admitting privileges to a Network Hospital. STAR+PLUS PCPs
must either have admitting privileges at a Network Hospital, or make referral arrangements with
a Provider who has admitting privileges to a Network Hospital.

The MCO must require, through contract provisions, that PCPs are accessible to Members 24 hours
a day, seven (7) days a week. The MCO is encouraged to enter into Network Provider agreements
with sites that offer primary care services during evening and weekend hours. The following are
acceptable and unacceptable telephone arrangements for contacting PCPs after their normal
business hours.

Acceptable after-hours coverage:

	 	1.	 	the office telephone is answered after-hours by an answering service that meets
language requirements of the Major Population Groups and that can contact the PCP or
another designated medical practitioner. All calls answered by an answering service
must be returned within 30 minutes;	 

	 	2.	 	the office telephone is answered after normal business hours by a recording in
the language of each of the Major Population Groups served, directing the patient to
call another number to reach the PCP or another provider designated by the PCP.
Someone must be available to answer the designated provider’s telephone. Another
recording is not acceptable; and	 

	 	3.	 	the office telephone is transferred after office hours to another location
where someone will answer the telephone and be able to contact the PCP, or another
designated medical provider, who can return the call within 30 minutes.	 

Unacceptable after-hours coverage:

1. the office telephone is only answered during office hours;

	 	2.	 	the office telephone is answered after-hours by a recording that tells
patients to leave a message;	 

	 	3.	 	the office telephone is answered after-hours by a recording that directs
patients to go to an Emergency Room for any services needed; and	 

	 	4.	 	returning after-hours calls outside of 30 minutes.

The CHIP MCOs must require PCPs, through contract provisions, to provide children birth through
age 20 with preventive services in accordance with the AAP recommendations. Medicaid MCOs must
require PCPs, through contract provisions, to provide children birth through age 20 with
preventive services in accordance with the Texas Health Steps periodicity schedule. The MCO must
require PCPs, through contract provisions, to provide adults with preventive services in
accordance with the U.S. Preventive Services Task Force requirements. The MCO must make best
efforts to ensure that PCPs follow these periodicity requirements for children and adult
Members. Best efforts must include, but not be limited to, Provider education, Provider
profiling, monitoring, and feedback activities.

The MCO must require PCPs, through contract provisions, to assess the medical needs of Members
for referral to specialty care providers and provide referrals as needed. PCPs must coordinate
Members’ care with specialty care providers after referral. The MCO must make best efforts to
ensure that PCPs assess Member needs for referrals and make such referrals. Best efforts must
include, but not be limited to, Provider education activities and review of Provider referral
patterns.

8.1.4.3 PCP Notification

The MCO must furnish each PCP with a current list of Members enrolled or assigned to that
Provider no later than five (5) Business Days after the MCO receives the Enrollment File from the
HHSC Administrative Services Contractor each month. The MCO may offer and provide such enrollment
information in alternative formats, such as through access to a secure Internet site, when such
format is acceptable to the PCP.

8.1.4.4 Provider Credentialing and Re-credentialing

The MCO must review, approve and periodically recertify the credentials of all participating
physician Providers and all other licensed Providers who participate in the MCO’s Network. The
MCO may subcontract with another entity to which it delegates such credentialing activities if
such delegated credentialing is maintained in accordance with the National Committee for
Quality Assurance (NCQA) delegated credentialing requirements and any comparable requirements
defined by HHSC.

At a minimum, the scope and structure of a MCO’s credentialing and re-credentialing processes
must be consistent with recognized MCO industry standards, such as those provided by NCQA, and
relevant state and federal regulations including 28 T.A.C. §§11 .1902, relating to provider
credentialing and notice. Medicaid MCOs must also comply with 42 C.F.R. §438.12 and 42 C.F.R.
§438.214(b). The initial credentialing

process, including application and verification of information, must be completed before the
effective date of the Provider’s initial Network Provider agreement. The recredentialing process
must occur at least every three (3) years.

The MCO may not discriminate for the participation, reimbursement, or indemnification of any
provider who is acting within the scope of his or her license or certification under applicable
State law, solely on the basis of that license or certification. Additionally, if the MCO
declines to include individual or groups of providers in its Network, it must give the affected
providers written notice of the reasons for its decision.

The re-credentialing process must take into consideration Provider performance data
including, but not be limited to, Member Complaints and Appeals, quality of care, and
utilization management.

MCOs must comply with the requirements of Texas Insurance Code Chapter 1452, Subchapter C,
regarding expedited credentialing and payment of physicians who have joined medical groups
that are already contracted with the MCO.

8.1.4.5 Board Certification Status

The MCO must maintain a policy with respect to board certification for PCPs and specialty
physicians that encourages participation of board certified PCPs and specialty physicians in the
Provider Network. The MCO must make information on the percentage of board-certified PCPs in the
Provider Network and the percentage of board-certified specialty physicians, by specialty,
available to HHSC upon request.

8.1.4.6 Provider Relations Including Manual, Materials and Training

The MCO must maintain a provider relations presence in each Service Area or, for the Medicaid
Rural Service Area, in regions as approved by HHSC.

The MCO must prepare and issue Provider Manual(s) to all Network Providers, including any
necessary specialty manuals (e.g., behavioral health). For newly contracted Providers, the MCO
must issue copies of the Provider Manual(s) no later than five (5) Business Days after inclusion
in the Network. The Provider Manual must contain sections relating to special requirements of the
MCO Program(s) and the enrolled populations in compliance with the requirements of this Contract,
including Uniform Managed Care Manual Chapter 3.3.

HHSC or its designee must approve the Provider Manual, and any substantive revisions to the
Provider Manual, prior to publication and distribution to Providers. The Provider Manual must
contain the critical elements defined in Uniform Managed Care Manual Chapter 3, “Critical
Elements.” HHSC’s initial review of the Provider Manual is part of the Operational Readiness
Review described in Section 7, “Transition Phase

Requirements.”

The MCO must provide training to all Providers and their staff regarding the requirements of the
Contract and special needs of Members. The MCO’s STAR, STAR+PLUS, CHIP and/or CHIP Perinatal
Program training must be completed within 30 days of placing a newly contracted Provider on active
status. The MCO must provide ongoing training to new and existing Providers as required by the MCO,
or as required by HHSC to comply with the Contract. The MCO must maintain and make available upon
request enrollment or attendance rosters dated and signed by each attendee, or other written
evidence of training of each Provider and his or her staff.

The MCO must establish ongoing Provider training that includes, but is not limited to, the
following issues:

	 	1.	 	Covered Services and the Provider’s responsibilities for providing and/or
coordinating such services. Special emphasis must be placed on areas that vary from
commercial coverage rules (e.g., Early Childhood Intervention services, therapies and
DME/Medical Supplies); pharmacy services and processes, including information
regarding outpatient drug benefits, HHSC’s drug formulary, preferred drugs, prior
authorization processes, and 72 hour emergency supplies of prescription drugs; and for
Medicaid, making referrals and coordination with Non-capitated Services;	 

	 	2.	 	relevant requirements of the Contract;

	 	3.	 	The MCO’s quality assurance and performance improvement program and the
Provider’s role in such a program;	 

	 	4.	 	the MCO’s policies and procedures, especially regarding Network and
Out-ofNetwork referrals;	 

	 	5.	 	Member cost-sharing obligations, benefit limitations, Value-added Services, and
prohibitions on balance-billing Members for Covered Services;	 

	 	6.	 	Cultural Competency Training;

	 	7.	 	Texas Health Steps benefits, periodicity, and required elements of a checkup;

	 	8.	 	Medical Transportation Program services available to Medicaid members such as
rides to services by bus, taxi, van, airfare, etc., gas money, mileage
reimbursement, and meals and lodging when away from home;	 

	 	9.	 	the importance of updating contact information to ensure accurate Provider
Directories and the Medicaid Online Provider Lookup;	 

	 	10.	 	information about the MCO’s process for acceleration of Texas Health Steps
services for Children of Migrant Farm Workers;	 

	 	11.	 	missed appointment referrals and assistance provided by the Texas Health Steps
Outreach and Informing Unit;	 

	 	12.	 	For STAR in the Medicaid Rural Service Area, the process for continuing up to
six (6) months of Community-based Long Term Care Services for Members receiving
those services as of the Operational Start Date, including provider billing
practices for these services and whom to contact at the MCO for assistance with this
process;	 

	 	13.	 	administrative issues such as claims filing and services available to Members;
and	 

	 	14.	 	requirements of the Frew v. Suehs Consent Decree and Corrective Action
Orders.	 

Provider Materials must comply with state and federal laws; Attachment A, “Uniform Managed Care
Contract Terms and Conditions;” and Uniform Managed Care Manual Chapter 3, “Critical Elements.”
The MCO must make available any provider materials to HHSC upon request.

8.1.4.7 Provider Hotline

The MCO must operate a toll-free telephone line for Provider inquiries from 8 a.m. to 5 p.m.
local time for the Service Area, Monday through Friday, except for State-approved holidays. The
State-approved holiday schedule is updated annually and can be found at
http://sao.hr.state.tx.us/compensation/holidays.html. The Provider Hotline must be
staffed with personnel who are knowledgeable about Covered Services, each applicable MCO Program,
and for Medicaid, about Non-capitated Services.

The MCO must ensure that after regular business hours the line is answered by an automated system
with the capability to provide callers with operating hours information and instructions on how
to verify enrollment for a Member with an Urgent Condition or an Emergency Medical Condition. The
MCO must have a process in place to handle after- hours inquiries from Providers seeking to
verify enrollment for a Member with an Urgent Condition or an Emergency Medical Condition,
provided, however, that the MCO and its Providers must not require such verification prior to
providing Emergency Services.

The MCO must ensure that the Provider Hotline meets the following minimum performance
requirements for all MCO Programs and Service Areas:

	 	1.	 	99% of calls are answered by the fourth ring or an automated call pick-up system
is used;	 

	 	2.	 	no more than one percent (1%) of incoming calls receive a busy signal;

	 	3.	 	the average hold time is two (2) minutes or less; and

	 	4.	 	the call abandonment rate is seven percent (7%) or less.

The MCO must conduct ongoing call quality assurance to ensure these standards are met. The
Provider Hotline may serve multiple MCO Programs if Hotline staff is knowledgeable about all
of the MCO’s Programs. The Provider Hotline may serve multiple Service Areas if the Hotline
staff is knowledgeable about all Service Areas, including the Provider Network in each Service
Area.

The MCO must monitor Provider Hotline performance and submit reports summarizing call center
performance as required by Section 8.1.20. If the MCO subcontracts with a Behavioral Health
Organization (BHO) that is responsible for Provider Hotline functions related to Behavioral
Health Services, the BHO’s Provider Hotline must meet the

requirements in Section 8.1.4.7.

If HHSC determines that it is necessary to conduct onsite monitoring of the MCO’s Provider Hotline
functions, the MCO is responsible for all reasonable travel costs incurred by HHSC or its
authorized agent(s) relating to such monitoring. For purposes of this section, “reasonable travel
costs” include airfare, lodging, meals, car rental and fuel, taxi, mileage, parking and other
incidental travel expenses incurred by HHSC or its authorized agent in connection with the onsite
monitoring.

8.1.4.8 Provider Reimbursement

The MCO must pay for all Medically Necessary Covered Services provided to all Members for whom
the MCO is paid a capitation. A STAR+PLUS MCO must also pay for all Functionally Necessary
Covered Services provided to all Members for whom the MCO is paid a capitation. The MCO must
ensure that claims payment is timely and accurate as described in Section 8.1.18.5. The MCO must
require tax identification numbers from all participating Providers. The MCO is required to do
back-up withholding from all payments to Providers who fail to give tax identification numbers or
who give incorrect numbers.

Provider payments must comply with the requirements of Section 6505 of PPACA, entitled
“Prohibition on Payments to Institutions or Entities Located Outside of the United States.”

Provider payment must comply with the requirements of Section 2702 of PPACA, entitled
“Payment Adjustment for Health Acquired Conditions.”

8.1.4.8.1 Provider Preventable Conditions

STAR and STAR+PLUS MCOs must identify Present on Admission (POA) indicators as required in the
Uniform Managed Care Manual, and STAR and STAR+PLUS MCOs must reduce or deny payments for
Provider Preventable Conditions that were not POA using a methodology approved by HHSC in the
Uniform Managed Care Manual.

8.1.4.8.2 Provider Incentives

The MCO will conduct a pilot “gain sharing” program, subject to HHSC’s approval. The program will
focus on collaborating with Network physicians and Hospitals in order to allow them to share a
portion of the MCO’s savings resulting from reducing inappropriate utilization of services,
including inappropriate admissions and readmissions. The program will include mechanisms whereby
the MCO will provide incentive payments to Hospitals and physicians for quality care. The program
will include quality metrics required for incentives, recruitment strategies of providers, and a
proposed structure for payment.

8.1.4.9 Termination of Provider Contracts

Unless prohibited or limited by applicable law, the MCO must make a good faith effort to give
written notice of termination of a Network Provider, within 15 calendar days after receipt or
issuance of the termination notice, to each Member who receives his or her primary care from, or
who is seen on a regular basis by, the Network Provider. The MCO must send notice to: (1) all
Members in a PCP’s panel, and (2) all Members who have had two or more visits with the Network
Provider for home-based or office-based care in the past 12 months. The MCO must notify HHSC of
provider terminations in accordance with UMCM Chapter 5.4.1.1, “Provider Termination Report.”

The MCO’s process for terminating CHIP Provider contracts must comply with the Texas Insurance
Code and TDI regulations.

8.1.4.10 Out-of-State Providers

Providers that have a primary office location outside of the State of Texas but are
enrolled as a Texas Medicaid Provider may be included in the MCO’s Medicaid Network(s).

Providers that have a primary office location outside of the State of Texas may be
included in the MCO’s CHIP Network.

Providers that have a primary office location outside the State of Texas are required to be
licensed in either the State of Texas or the state in which they practice.

8.1.5 Member Services

The MCO must maintain a Member Services Department to assist Members and their family
members or guardians in obtaining Covered Services for Members. The MCO must maintain
employment standards and requirements (e.g., education, training, and experience) for Member
Services Department staff and provide a sufficient number of staff for the Member Services
Department to meet the requirements of this Section.

8.1.5.1 Member Materials

The MCO must design, print and distribute Member identification (ID) cards and a Member Handbook
to Members. Within five (5) Business Days following the receipt of an Enrollment File from the
HHSC Administrative Services Contractor, the MCO must mail a Member’s ID card and Member Handbook
to the Case Head or Account Name for each new Member. When the Case Head or Account Name
represents two (2) or more new Members, the MCO is only required to send one (1) Member Handbook.
The MCO is responsible for mailing materials only to those households for whom valid address data
are contained in the Enrollment File.

The MCO must design, print and deliver Provider Directories to the HHSC Administrative Services
Contractor as described in Section 8.1.5.4.

Member Materials must be at or below a 6th grade reading level as measured by the appropriate
score on the Flesch reading ease test. Member Materials must be available in English, Spanish,
and the languages of other Major Population Groups. HHSC will provide the MCO with reasonable
notice when the enrolled population reaches the 10% threshold for a Major Population Group in
the MCO’s Service Area. All Member Materials must be available in a format accessible to the
visually impaired, which may include large print, Braille, and audiotapes.

The MCO must submit member materials to HHSC for approval prior to use or mailing. HHSC will
identify any required changes to the Member materials within 15 Business Days. If HHSC has not
responded to a request for review by the fifteenth Business Day, the Contractor may proceed to
use the submitted materials. HHSC reserves the right to require discontinuation of any Member
materials that violate the terms of this Contract, including but not limited to Marketing
Policies and Procedures as described in Uniform Managed Care Manual Chapter 4.3, “Uniform Managed
Care Marketing Policies and Procedures.”

If the MCO distributes HHSC-approved Member Materials groups of Members or all Members (i.e.,
“mass communications,”) it also must post a copy of the materials on its website.

8.1.5.2 Member Identification (ID) Card

All Member ID cards must, at a minimum, include the following information:

	 	1.	 	the Member’s name;

2. the Member’s Medicaid or CHIP Program number;

3. the effective date of the PCP assignment (excluding CHIP Perinates);

	 	4.	 	the PCP’s name, address (optional for all products), and telephone number (not
required for Dual Eligible STAR+PLUS Members or for CHIP Perinates);	 

	 	5.	 	the name of the MCO;

	 	6.	 	the 24-hour, seven (7) day a week toll-free Member services telephone number
and BH Hotline number operated by the MCO; and	 

	 	7.	 	any other critical elements identified in Uniform Managed Care Manual Chapter 3,
“Critical Elements.”	 

The MCO must reissue the Member ID card if a Member reports a lost card or name change, if
the Member requests a new PCP, or for any other reason that results in a change to the
information disclosed on the ID card.

8.1.5.3 Member Handbook

HHSC must approve the Member Handbook, and any substantive revisions, prior to publication and
distribution. As described in Section 7, “Transition Phase Requirements,” the MCO must develop
and submit to HHSC the draft Member Handbook for approval during the Readiness Review and must
submit a final Member Handbook incorporating changes required by HHSC prior to the Operational
Start Date.

The Member Handbook for each applicable MCO Program must, at a minimum, meet the Member
materials requirements specified by Section 8.1.5.1 and must include critical elements in
Uniform Managed Care Manual Chapter 3, “Critical Elements.” CHIP MCOs must issue Member
Handbooks to both CHIP Perinates and CHIP Perinate Newborns. The Member Handbook for CHIP
Perinate Newborns may be the same as that used for CHIP.

The MCO must produce a revised Member Handbook, or an insert informing Members of changes to
Covered Services, upon HHSC notification and at least 30 days prior to the effective date of
such change in Covered Services. In addition to modifying the Member Materials for new
Members, the MCO must notify all existing Members of the Covered Services change during the
timeframe specified in this subsection.

8.1.5.4 Provider Directory

The Provider Directory for each MCO Program, and any substantive revisions, must be approved by
HHSC prior to publication and distribution, with the exception of PCP information changes or
clerical corrections. The MCO is responsible for submitting draft Provider Directory updates to
HHSC for prior review and approval.

As described in Section 7, “Transition Phase Requirements,” during Readiness Review the MCO must
develop and submit to HHSC the draft Provider Directory template for approval and must submit a
final Provider Directory incorporating changes required by HHSC prior to the Operational Start
Date. Such draft and final Provider Directories must be submitted according to the deadlines
established in Section 7, “Transition Phase Requirements.”

The Provider Directory for each applicable MCO Program must, at a minimum, meet the Member
Materials requirements specified by Section 8.1.5.1 above and must include critical elements in
Uniform Managed Care Manual Chapter 3. The Provider Directory must include only Network
Providers credentialed by the MCO in accordance with Section 8.1.4.4. If the MCO contracts with
limited Provider Networks, the Provider Directory must comply with the requirements of 28 T.A.C.
§11 .1 600(b)(1 1), relating to the disclosure and notice of limited Provider Networks.

At a minimum, the MCO must update the Provider Directory on a quarterly basis. The MCO must make
such updates available to existing Members on request, and must provide such updates to the HHSC
Administrative Services Contractor at the beginning of each State Fiscal Quarter. Weight limits
for the Provider Directories are included in Uniform Managed Care Manual Chapter 3.1, “MMC
Provider Directory” and Chapter 3.2, “CHIP Provider Directory”. HHSC will require MCOs that
exceed the weight limits to compensate HHSC for postage fees in excess of the weight limits.

The MCO must send the most recent Provider Directory, including any updates, to Members upon
request. The MCO must, at least annually, include written and verbal offers of such Provider
Directory in its Member outreach efforts and education materials.

8.1.5.5 Internet Website

The MCO must develop and maintain, consistent with HHSC standards and Section 843.2015 of the
Texas Insurance Code and other applicable state laws, a website to provide general information
about the MCO’s Program(s), its Provider Network, its customer services, and its Complaints and
Appeals process. The website must contain a link to financial literacy information on the Office
of Consumer Credit Commissioner’s webpage. The MCO may develop a page within its existing website
to meet the requirements of this section.

The MCO must maintain a Provider Directory for each applicable MCO Program on its website. The
MCO must ensure that Members have access to the most current and accurate information concerning
the MCO’s Network Provider participation. To comply with this requirement, at least twice per
month the MCO must update Network Provider information in either: (1) its online Provider
Directory, or (2) its online Provider search functionality, if applicable. The online Provider
Directory or online Provider search functionality must designate PCPs with open versus closed
panels. The online Provider Directory or online Provider search functionality must also identify
Providers that provide Long-Term Services and Supports (LTSS). The MCO must list Home Health
Ancillary providers on its website, with an indicator for pediatric services if provided.

The MCO’s website must comply with HHSC’s Marketing Policies and Procedures, as set forth in
Uniform Managed Care Manual Chapter 4.3, “Uniform Managed Care Marketing Policies and
Procedures,” for each applicable MCO Program.

The website’s MCO Program content must be:

	 	1.	 	written in English, Spanish, and the languages of any other Major Population
Groups in the Service Area. HHSC will provide the MCO with reasonable notice when the
population reaches the 10 percent threshold for a Major Population Group;	 

	 	2.	 	culturally appropriate;

	 	3.	 	written for understanding at the 6th grade reading level; and

	 	4.	 	be geared to the health needs of the enrolled MCO Program population.

To minimize download and “wait times,” the website must avoid tools or techniques that require
significant memory or disk resources or require special intervention on the customer side to
install plug-ins or additional software. Use of proprietary items that would require a specific
browser is not allowed. HHSC strongly encourages the use of tools that take advantage of
efficient data access methods and reduce the load on the server or bandwidth.

8.1.5.6 Member Hotline

The MCO must operate a toll-free hotline that Members can call 24 hours a day, seven (7) days a
week. The Member Hotline must be staffed with personnel who are knowledgeable about its MCO
Program(s) and Covered Services between the hours of 8:00 a.m. to 5:00 p.m. local time for the
Service Area, Monday through Friday, excluding state-approved holidays. The State-approved
holiday schedule is updated annually and can be found at
http://sao.hr.state.tx.us/compensation/holidays.html.

The MCO must ensure that after hours, on weekends, and on holidays the Member Services Hotline
is answered by an automated system with the capability to provide callers with operating hours
and instructions on what to do in cases of emergency. All recordings must be in English,
Spanish, and the languages of other Major Population Groups in the Service Area. A voice
mailbox must be available after hours for callers to leave messages. The MCO’s Member Services
representatives must return calls received by the automated system from Members or their
representatives on the next Business Day.

If the Member Hotline does not have a voice-activated menu system, the MCO must have a menu
system that will accommodate Members who cannot access the system through other physical
means, such as pushing a button.

The MCO must ensure that its Member Service representatives treat all callers with dignity
and respect the callers’ need for privacy. At a minimum, the MCO’s Member Service
representatives must be:

	 	1.	 	knowledgeable about Covered Services;

2. able to answer non-technical questions about the role of the PCP, as applicable;

	 	3.	 	able to answer non-clinical questions about referrals or the process for
receiving authorization for procedures or services;	 

	 	4.	 	able to give information about Providers in a particular area;

	 	5.	 	knowledgeable about Fraud, Abuse, and Waste and the requirements to report any
conduct that, if substantiated, may constitute Fraud, Abuse, or Waste;	 

	 	6.	 	trained regarding Cultural Competency;

	 	7.	 	trained regarding the process used to confirm the status of persons with
Special Health Care Needs;	 

	 	8.	 	for Medicaid Members, able to answer non-clinical questions about accessing
Non-capitated Services.	 

	 	9.	 	for Medicaid Members, trained regarding: a) the emergency prescription process
and what steps to take to immediately address problems when pharmacies do not provide
a 72-hour supply of emergency medicines; and b) DME processes for obtaining services
and how to address common problems.	 

	 	10.	 	for CHIP Members, able to give correct cost-sharing information relating to
premiums, co-pays or deductibles, as applicable. (Cost-sharing does not apply to CHIP
Perinates (unborn child), CHIP Perinate Newborns, and some Members in the traditional
CHIP Program. See Uniform Managed Care Manual Chapter 6.3, for additional information
regarding CHIP cost-sharing; and	 

	 	11.	 	hotlines must meet Cultural Competency requirements and must appropriately handle
calls from non-English speaking (and particularly, Spanish-speaking) callers, as well
as calls from individuals who are deaf or hard-of-hearing. To meet these requirements,
the MCO must employ bilingual Spanish-speaking Member Services representatives and must
secure the services of other contractors as	 

necessary to meet these requirements. The MCO must provide such oral
interpretation services to all Hotline callers free of charge.

The MCO must process all incoming Member correspondence and telephone inquiries in a timely and
responsive manner. The MCO cannot impose maximum call duration limits and must allow calls to be
of sufficient length to ensure adequate information is provided to the Member. The MCO must
ensure that the toll-free Member Hotline meets the following minimum performance requirements for
all MCO Programs and Service Areas:

	 	1.	 	99% of calls are answered by the fourth ring or an automated call
pick-up system;	 

	 	2.	 	no more than one percent (1%) of incoming calls receive a busy signal;

	 	3.	 	at least 80% of calls must be answered by Hotline staff within 30 seconds;
measured from the time the call is placed in queue after selecting an option;	 

	 	4.	 	the call abandonment rate is seven percent (7%) or less; and

	 	5.	 	the average hold time is two (2) minutes or less.

The MCO must conduct ongoing quality assurance to ensure these standards are met.

The Member Services Hotline may serve multiple MCO Programs if Hotline staff is knowledgeable
about all of the MCO’s Medicaid and/or CHIP Programs. The Member Services Hotline may serve
multiple Service Areas if the Hotline staff is knowledgeable about all Service Areas, including
the Provider Network in each Service Area.

The MCO must monitor its performance regarding HHSC Member Hotline standards and submit
performance reports summarizing call center performance for the Member Hotline as indicated in
Section 8.1.20 and Uniform Managed Care Manual Chapter 5.4.3, “Hotline Reports.”

If HHSC determines that it is necessary to conduct onsite monitoring of the MCO’s Member Hotline
functions, the MCO is responsible for all reasonable travel costs incurred by HHSC or its
authorized agent(s) relating to such monitoring. For purposes of this section, “reasonable travel
costs” include airfare, lodging, meals, car rental and fuel, taxi, mileage, parking and other
incidental travel expenses incurred by HHSC or its authorized agent in connection with the onsite
monitoring.

8.1.5.6.1 Nurseline

If the MCO provides a 24-hour nurse hotline, it must train hotline staff about: a)
emergency prescription process and what steps to take to immediately address Medicaid
Members’ problems when pharmacies do not provide a 72-hour supply of

emergency medicines; and b) DME processes for obtaining services and how to address common
problems. The 24-hour Nurse Hotline will attempt to respond immediately to problems concerning
emergency medicines by means at its disposal, including explaining the rules to Medicaid Members
so that they understand their rights and, if need be, by offering to contact the pharmacy that is
refusing to fill the prescription to explain the 72-hour supply policy and DME processes.

8.1.5.7 Member Education

The MCO must, at a minimum, develop and implement health education initiatives that educate
Members about:

1. how the MCO system operates, including the role of the PCP;

	 	2.	 	Covered Services, limitations and any Value-added Services offered by the
MCO;	 

3. the value of screening and preventive care, and

4. how to obtain Covered Services, including:

	 	a.	 	Emergency Services;

b. accessing OB/GYN and specialty care;

c. Behavioral Health Services;

d. Disease Management programs;

	 	e.	 	Service Coordination, treatment for pregnant women, Members with
Special Health Care Needs, including Children with Special Health Care Needs;
and other special populations;	 

	 	f.	 	Early Childhood Intervention (ECI) Services;

	 	g.	 	screening and preventive services, including well-child care (Texas
Health Steps medical checkups for Medicaid Members);	 

	 	h.	 	for CHIP Members, Member copayments responsibilities (note that
copayments to do not apply to CHIP Perinates (unborn child) and CHIP Perinate
Newborn Members);	 

	 	i.	 	for Medicaid Members, Member copayment responsibilities (if HHSC
implements Medicaid cost sharing after the Effective Date of the Contract);	 

	 	j.	 	suicide prevention;

	 	k.	 	identification and health education related to Obesity;

	 	l.	 	obtaining 72 hour supplies of emergency prescriptions from Network
pharmacies;	 

	 	m.	 	Case Management for Children and Pregnant Women (CPW); and

5. Medical Transportation Program for Medicaid Members.

The MCO must provide a range of health promotion and wellness information and activities for
Members in formats that meet the needs of all Members. The MCO must propose, implement, and
assess innovative Member education strategies for wellness care and immunization, as well as
general health promotion and prevention. The MCO must conduct wellness promotion programs to
improve the health status of its Members. The MCO may cooperatively conduct health education
classes with one or more of the contracted MCOs in the Service Area. The MCO must work with its
Providers to integrate health education, wellness, and prevention training into each Member’s
care.

The MCO also must provide condition and disease-specific information and educational materials
to Members, including information on its Service Management and Disease Management programs as
described in Sections 8.1.13 and 8.1.14. Condition- and disease-specific information must be
oriented to various groups of Members, such as children, the elderly, persons with disabilities
and non-English speaking Members, as appropriate to the MCO’s Medicaid or CHIP Programs.

8.1.5.8 Cultural Competency Plan

The MCO must have a comprehensive written Cultural Competency Plan describing how it will ensure
culturally competent services, and provide Linguistic Access and Disability- related Access. The
Cultural Competency Plan must describe how the individuals and systems within the MCO will
effectively provide services to people of all cultures, races, ethnic backgrounds, and religions
as well as those with disabilities in a manner that recognizes, values, affirms, and respects the
worth of the individuals and protects and preserves the dignity of each. As described in Section
7, “Transition Phase Requirements,” the MCO must submit the Cultural Competency Plan to HHSC
during Readiness Review. During the Operations Phase, the MCO must submit modifications and
amendments to the Plan to HHSC no later than 30 days prior to implementation of a change. The MCO
must also make the Plan available to its Network Providers.

8.1.5.9 Member Complaint and Appeal Process

The MCO must develop, implement and maintain a system for tracking, resolving, and reporting
Member Complaints regarding its services, processes, procedures, and staff. The MCO must ensure
that Member Complaints are resolved within 30 calendar days after receipt. The MCO is subject to
remedies, including liquidated damages, if at least 98 percent of Member Complaints are not
resolved within 30 days of the MCO’s receipt. Please see Attachment A, “Uniform Managed Care
Contract Terms and Conditions,” and Attachment B-3, “Deliverables/Liquidated Damages Matrix.”

The MCO must develop, implement and maintain a system for tracking, resolving, and reporting
Member Appeals regarding the denial or limited authorization of a requested service, including
the type or level of service and the denial, in whole or in part, of payment for service. Within
this process, the MCO must respond fully and completely to each Appeal and establish a tracking
mechanism to document the status and final disposition of each Appeal.

The MCO must ensure that Member Appeals are resolved within 30 calendar days, unless the MCO
can document that the Member requested an extension or the MCO shows there is a need for
additional information and the delay is in the Member’s interest. The MCO is subject to
liquidated damages if at least 98 percent of Member Appeals are not resolved within 30 days of
the MCO’s receipt. Please see Attachment A, “Uniform Managed Care Contract Terms and
Conditions,” and Attachment B-3, “Deliverables/Liquidated Damages Matrix.”

Medicaid MCOs must follow the Member Complaint and Appeal Process described in Section 8.2.7.
CHIP MCOs must comply with the CHIP Complaint and Appeal Process described in Sections 8.4.3.

8.1.6 Marketing and Prohibited Practices

The MCO and its Subcontractors must adhere to the Marketing Policies and Procedures as set
forth in Uniform Managed Care Manual Chapter 4.3, “Uniform Managed Care Marketing Policies and
Procedures.”

8.1.7 Quality Assessment and Performance Improvement

The MCO must provide for the delivery of quality care with the primary goal of improving the
health status of Members and, where the Member’s condition is not amenable to improvement,
maintain the Member’s current health status by implementing measures to prevent any further
decline in condition or deterioration of health status. The MCO must work in collaboration with
Providers to actively improve the quality of care provided to Members, consistent with the
Quality Improvement Goals and all other requirements of the Contract. The MCO must provide
mechanisms for Members and Providers to offer input into the MCO’s quality improvement
activities.

8.1.7.1 QAPI Program Overview

The MCO must develop, maintain, and operate a Quality Assessment and Performance Improvement
(QAPI) Program consistent with the Contract and TDI requirements, including 28 T.A.C. §11.1901
(a)(5) and §11.1902. Medicaid MCOs must also meet the requirements of 42 C.F.R. §438.240.

The MCO must have on file with HHSC an approved plan describing its QAPI Program, including how
the MCO will accomplish the activities required by this section. The MCO must submit a QAPI
Program Annual Summary in a format and timeframe specified by HHSC or its designee. The MCO
must keep participating physicians and other Network Providers informed about the QAPI Program
and related activities. The MCO must

include in Provider contracts a requirement securing cooperation with the QAPI.

The MCO must approach all clinical and non-clinical aspects of quality assessment and
performance improvement based on principles of Continuous Quality Improvement (CQI)/Total
Quality Management (TQM) and must:

	 	1.	 	evaluate performance using objective quality indicators;

2. foster data-driven decision-making;

3. recognize that opportunities for improvement are unlimited;

4. solicit Member and Provider input on performance and QAPI activities;

	 	5.	 	support continuous ongoing measurement of clinical and non-clinical
effectiveness and Member satisfaction;	 

	 	6.	 	support programmatic improvements of clinical and non-clinical processes based on
findings from ongoing measurements; and	 

	 	7.	 	support re-measurement of effectiveness and Member satisfaction, and
continued development and implementation of improvement interventions as
appropriate.	 

8.1.7.2 QAPI Program Structure

The MCO must maintain a well-defined QAPI structure that includes a planned systematic approach
to improving clinical and non-clinical processes and outcomes. The MCO must designate a senior
executive responsible for the QAPI Program and the Medical Director must have substantial
involvement in QAPI Program activities. At a minimum, the MCO must ensure that the QAPI Program
structure:

	 	1.	 	is organization-wide, with clear lines of accountability within the organization;

	 	2.	 	includes a set of functions, roles, and responsibilities for the oversight of
QAPI activities that are clearly defined and assigned to appropriate individuals,
including physicians, other clinicians, and non-clinicians;	 

	 	3.	 	includes annual objectives and/or goals for planned projects or activities
including clinical and non-clinical programs or initiatives and measurement
activities; and	 

	 	4.	 	evaluates the effectiveness of clinical and non-clinical initiatives.

8.1.7.3 Clinical Indicators

The MCO must engage in the collection of clinical indicator data. The MCO must use such clinical
indicator data in the development, assessment, and modification of its QAPI Program.

8.1.7.4 QAPI Program Subcontracting

If the MCO subcontracts any of the essential functions or reporting requirements contained
within the QAPI Program to another entity, the MCO must maintain detailed files documenting
work performed by the Subcontractor. The file must be available for review by HHSC or its
designee upon request.

8.1.7.5 Behavioral Health Integration into QAPI Program

The MCO must integrate behavioral health into its QAPI Program and include a systematic and
ongoing process for monitoring, evaluating, and improving the quality and appropriateness of
Behavioral Health Services provided to Members. Except for the Members identified below, the MCO
must collect data, and monitor and evaluate for improvements to physical health outcomes
resulting from behavioral health integration into the Member’s overall care.

STAR Members in the Dallas Service Area receive Behavioral Health Services through the
NorthSTAR Program, and Behavioral Health Services are not a covered benefit for CHIP Perinates
(unborn children).

8.1.7.6 Clinical Practice Guidelines

The MCO must adopt not less than two (2) evidence-based clinical practice guidelines for each
applicable MCO Program. Such practice guidelines must be based on valid and reliable clinical
evidence, consider the needs of the MCO’s Members, be adopted in consultation with Network
Providers, and be reviewed and updated periodically, as appropriate. The MCO must develop
practice guidelines based on the health needs and opportunities for improvement identified as
part of the QAPI Program.

The MCO may coordinate the development of clinical practice guidelines with other HHSC MCOs
in a Service Area to avoid providers receiving conflicting practice guidelines from
different MCOs.

The MCO must disseminate the practice guidelines to all affected Providers and, upon request,
to Members and potential Members.

The MCO must take steps to encourage adoption of the guidelines, and to measure compliance with
the guidelines, until such point that 90% or more of the Providers are consistently in
compliance, based on MCO measurement findings. The MCO must employ substantive Provider
motivational incentive strategies, such as financial and nonfinancial incentives, to improve
Provider compliance with clinical practice guidelines. The MCO’s decisions regarding utilization
management, Member education, coverage of services, and other areas included in the practice
guidelines must be consistent with the MCO’s clinical practice guidelines.

8.1.7.7 Provider Profiling

The MCO must conduct PCP and other Provider profiling activities at least annually. As part of
its QAPI Program, the MCO must describe the methodology it uses to identify which and how many
Providers to profile and to identify measures to use for profiling such Providers.

Provider profiling activities must include, without limitation:

	 	1.	 	developing PCP and Provider-specific reports that include a multi-dimensional
assessment of a PCP or Provider’s performance using clinical, administrative, and
Member satisfaction indicators of care that are accurate, measurable, and relevant
to the enrolled population;	 

	 	2.	 	establishing PCP, Provider, group, Service Area or regional Benchmarks for
areas profiled, where applicable, including STAR, STAR+PLUS, and CHIP
Program-specific Benchmarks, where appropriate; and	 

	 	3.	 	providing feedback to individual PCPs and Providers regarding the results of their
performance and the overall performance of the Provider Network.

8.1.7.8 Network Management
The MCO must:

	 	1.	 	use the results of its Provider profiling activities to identify areas of
improvement for individual PCPs and Providers, and/or groups of Providers;	 

	 	2.	 	establish Provider-specific quality improvement goals for priority areas in
which a Provider or Providers do not meet established MCO standards or improvement
goals;	 

	 	3.	 	develop and implement incentives, which may include financial and non-financial
incentives, to motivate Providers to improve performance on profiled measures; and	 

	 	4.	 	at least annually, measure and report to HHSC on the Provider Network and
individual Providers’ progress, or lack of progress, towards such improvement goals.	 

If the MCO implements a physician incentive plan, the plan must comply with the requirements of
42 C.F.R. §438.6(h), §422.208 and §422.210. The MCO cannot make payments under a physician
incentive plan if the payments are designed to induce providers to reduce or limit Medically
Necessary Covered Services to Members.

If the physician incentive plan places a physician or physician group at a substantial
financial risk for services not provided by the physician or physician group, the MCO must
ensure adequate stop-loss protection and conduct and submit annual Member surveys no later
than five (5) Business Days after the MCO finalizes the survey results (refer to 42 C.F.R.
§422.208 for information concerning “substantial financial risk” and “stop-loss protection”).

The MCO must make information regarding physician incentive plans available to Members
upon request, in accordance with the Uniform Managed Care Manual’s requirements. The MCO
must provide the following information to the Member:

	 	1.	 	whether the Member’s PCP or other Providers are participating in the
MCO’s physician incentive plan;	 

	 	2.	 	whether the MCO uses a physician incentive plan that affects the
use of referral services;	 

	 	3.	 	the type of incentive arrangement; and

	 	4.	 	whether stop-loss protection is provided.

No later than five (5) Business Days prior to implementing or modifying a physician
incentive plan, the MCO must provide the following information to HHSC:

	 	1.	 	Whether the physician incentive plan covers services that are not furnished by
a physician or physician group. The MCO is only required to report on items 2-4 below
if the physician incentive plan covers services that are not furnished by a physician
or physician group.	 

	 	2.	 	The type of incentive arrangement (e.g., withhold, bonus, capitation);

	 	3.	 	The percent of withhold or bonus (if applicable);

4. The panel size, and if patients are pooled, the method used (HHSC approval is
required for the method used); and

If the physician or physician group is at substantial financial risk, the MCO must report proof
that the physician or group has adequate stop-loss coverage, including the amount and type of
stop-loss coverage.

8.1.7.9 Collaboration with the EQRO

The MCO will collaborate with HHSC’s external quality review organization (EQRO) to develop
studies, surveys, or other analytical approaches that will be carried out by the EQRO. The
purpose of the studies, surveys, or other analytical approaches is to assess the quality of care
and service provided to Members and to identify opportunities for MCO improvement. To facilitate
this process, the MCO will supply claims data to the EQRO in a format identified by HHSC in
consultation with MCOs, and will supply medical records for focused clinical reviews conducted by
the EQRO. The MCO must also work collaboratively with HHSC and the EQRO to annually measure
selected HEDIS measures that require chart reviews. During the first year of operations, HHSC
anticipates that the selected measures will include, at a minimum, well-child visits and
immunizations, appropriate use of asthma medications, measures related to Members with diabetes,
and control of high blood pressure.

8.1.8 Utilization Management

The MCO must have a written utilization management (UM) program description, which
includes, at a minimum:

	 	1.	 	procedures to evaluate the need for Medically Necessary Covered Services;

	 	2.	 	the clinical review criteria used, the information sources, the process used
to review and approve the provision of Covered Services;	 

	 	3.	 	the method for periodically reviewing and amending the UM clinical review
criteria; and	 

	 	4.	 	the staff position functionally responsible for the day-to-day management of
the UM function.	 

The MCO must make best efforts to obtain all necessary information, including pertinent clinical
information, and consult with the treating physician as appropriate in making UM determinations.
When making UM determinations, the MCO must comply with the requirements of 42 C.F.R. §456.111
(Hospitals) and 42 CFR §456.211 (Mental Hospitals), as applicable.

The MCO must issue coverage determinations, including adverse determinations, according to
the following timelines:

	 	1.	 	within three (3) Business Days after receipt of the request for authorization
of services;	 

	 	2.	 	within one (1) Business Day for concurrent Hospitalization decisions; and

	 	3.	 	within one (1) hour for post-stabilization or life-threatening conditions, except
that for Emergency Medical Conditions and Emergency Behavioral Health Conditions, the
MCO must not require prior authorization.	 

The MCO’s UM Program must include written policies and procedures to ensure:

	 	1.	 	consistent application of review criteria that are compatible with Members’
needs and situations;	 

	 	2.	 	determinations to deny or limit services are made by physicians under the
direction of the Medical Director;	 

	 	3.	 	at the HMO’s discretion, pharmacy prior authorization determinations may be
made by pharmacists, subject to the limitations described in Attachment A, Section
4.04, “Medical Director;”	 

	 	4.	 	appropriate personnel are available to respond to utilization review inquiries
8:00 a.m. to 5:00 p.m., Monday through Friday, with a telephone system capable of
accepting utilization review inquiries after normal business hours. The MCO must
respond to calls within one (1) Business Day;	 

	 	5.	 	confidentiality of clinical information; and

	 	6.	 	quality is not adversely impacted by financial and
reimbursement-related processes and decisions.	 

For MCOs with preauthorization or concurrent review programs, qualified medical
professionals must supervise preauthorization and concurrent review decisions.

The MCO UM Program must include polices and procedures to:

	 	1.	 	routinely assess the effectiveness and the efficiency of the UM Program;

	 	2.	 	evaluate the appropriate use of medical technologies, including
medical procedures, drugs and devices;	 

	 	3.	 	target areas of suspected inappropriate service utilization;

	 	4.	 	detect over- and under-utilization;

	 	5.	 	routinely generate Provider profiles regarding utilization patterns and
compliance with utilization review criteria and policies;	 

	 	6.	 	compare Member and Provider utilization with norms for comparable individuals;

	 	7.	 	routinely monitor inpatient admissions, emergency room use, ancillary, and
outof-area services;	 

	 	8.	 	ensure that when Members are receiving Behavioral Health Services from the Local
Mental Health Authority, the MCO is using the same UM guidelines as those prescribed
for use by Local Mental Health Authorities by MHMR which are published at:

http://www.mhmr.state.tx.us/centraloffice/behavioralhealthservices/RDMClinGuide.html; and
	 

	 	9.	 	refer suspected cases of Network Provider, Out-of-Network provider, or Member
Fraud, Abuse, or Waste to the Office of Inspector General (OIG) as required by Section
8.1.19.	 

8.1.9 Early Childhood Intervention (ECI)

The MCO must ensure that Network Providers are educated regarding the federal laws on child
find (e.g., 20 U.S.C. §1435 (a)(5); 34 C.F.R. §303.321(d)) and require Network Providers to
identify and refer any Member birth through 35 months of age suspected of having a developmental
disability or delay, or who is at risk of delay, to the designated ECI program for screening and
assessment within two (2) Business Days from the day the Provider identifies the Member. The MCO
must use written educational materials developed or approved by the Department of Assistive and
Rehabilitative Services – Division for Early Childhood Intervention Services for these “child
find” activities. Eligibility for ECI services will be determined by the local ECI program using
the criteria contained in 40 T.A.C. § 108.25.

Note that, beginning on Operational Start Date, ECI Providers must submit claims for all
physical, occupational, speech, and language therapy to the MCO.

ECI Targeted Case Management services are Non-capitated Services, as described in Section
8.2.2.8.

The MCO must contract with qualified ECI Providers to provide ECI Covered Services to Members
birth through 35 months of age who have been determined eligible for ECI services. The MCO must
permit Members to self refer to local ECI Service Providers without requiring a referral from the
Member’s PCP. The MCO’s policies and procedures, including its Provider Manual, must include
written policies and procedures for allowing such self-referral to ECI providers.

The MCO will implement the Individual Family Service Plan (IFSP) and other services, including
ongoing case management and other Covered Services required by the Member’s IFSP. Ongoing case
management does not include ECI Targeted Case Management services. The IFSP is an agreement
developed by the interdisciplinary team that consists of the MCO, ECI Case Manager/Service
Coordinator, the Member/family, and other professionals who participated in the Member’s
evaluation or are providing direct services to the Member. The interdisciplinary team may include
the Member’s Primary Care Physician (PCP) with parental consent. The IFSP identifies the Member’s
present level of development based on assessment, describes the services to be provided to the
child to meet the needs of the child and the family, and identifies the person or persons
responsible for each service required by the plan. The IFSP must be maintained by the MCO and,
with parental consent, provided to the PCP to enhance coordination of the plan of care. The IFSP
may be included in the Member’s medical record.

The ECI program includes covering medical diagnostic procedures and providing medical records
required to perform developmental assessments and developing the IFSP within the 45-day
timeline established in federal rule (34 C.F.R. §303.342(a)). The MCO must require compliance
with these requirements through Provider contract provisions. The MCO must not withhold
authorization for the provision of such medicaldiagnostic procedures. The MCO must promptly
provide relevant medical records available as needed.

The MCO must require, through contract provisions, that all Medically Necessary health and
Behavioral Health Services contained in the Member’s IFSP are provided to the Member in the
amount, duration, scope and service setting established by the IFSP. The MCO must allow services
to be provided by an Out-of-Network provider if a Network Provider is not available to provide
the services in the amount, duration, scope and service setting as required by the IFSP. The MCO
cannot create unnecessary barriers for the Member to obtain IFSP services, including requiring
prior authorization for the ECI assessment.

8.1.10 Special Supplemental Nutrition Program for Women,

Infants, and Children (WIC) — Specific Requirements

The MCO must, by contract, require its Providers to coordinate with the Special
Supplemental Nutrition Program for Women, Infants, and Children (WIC) to provide medical
information necessary for WIC eligibility determinations, such as height, weight, hematocrit or
hemoglobin. The MCO must make referrals to WIC for Members who are potentially eligible for WIC.
The MCO may use the nutrition education provided by WIC to satisfy certain health education
requirements of the Contract.

8.1.11 Coordination with Texas Department of Family and

Protective Services

The MCO must cooperate and coordinate with the Texas Department of Family and Protective
Services (TDFPS) for the care of a child who is receiving services from or has been placed in the
conservatorship of TDFPS.

The MCO must comply with all provisions related to Covered Services, including
Behavioral Health Services, in the following documents:

	 	1.	 	a court order (Order) entered by a Court of Continuing Jurisdiction placing a
child under the protective custody of TDFPS;	 

	 	2.	 	a TDFPS Service Plan entered by a Court of Continuing Jurisdiction placing a

child under the protective custody of TDFPS; and

	 	3.	 	a TDFPS Service Plan voluntarily entered into by the parents or person having
legal custody of a Member and TDFPS.	 

The MCO cannot deny, reduce, or controvert the Medical Necessity of any health or Behavioral
Health Services included in the above-referenced Orders of TDFPS Service Plans. The MCO may
participate in the preparation of the medical and behavioral care plan prior to TDFPS
submitting the health care plan to the Court. Any modification or termination of court-ordered
services must be presented and approved by the court having jurisdiction over the matter.

A Member or the parent or guardian whose rights are subject to an Order or TDFPS Service Plan
cannot use the MCO’s Complaint or Appeal processes, or the HHSC Fair Hearing process to Appeal
the necessity of the Covered Services.

The MCO must include information in its Provider Manuals and training materials
regarding:

	 	1.	 	providing medical records to TDFPS;

	 	2.	 	scheduling medical and Behavioral Health Services appointments within 14 days
unless requested earlier by TDFPS; and	 

	 	3.	 	recognition of abuse and neglect, and appropriate referral to TDFPS.

The MCO must continue to provide all Covered Services to a Member receiving services from, or in
the protective custody of, TDFPS until the Member has been (1) disenrolled from the MCO due to
loss of Medicaid managed care eligibility; or (2) enrolled in STAR Health, HHSC’s managed care
program for children in foster care.

8.1.12 Services for People with Special Health Care Needs

8.1.12.1 Identification

The MCO must develop and maintain a system and procedures for identifying Members with Special
Health Care Needs (MSHCN), including people with disabilities or chronic or complex medical and
behavioral health conditions and Children with Special Health Care Needs (CSHCN).1

The MCO must contact Members pre-screened by the HHSC Administrative Services Contractor as MSHCN
to determine whether they meet the MCO’s MSHCN assessment criteria, and to determine whether the
Member requires special services described in this section. The MCO must implement mechanisms to
assess each Member that has been prescreened by the Administrative Services Contractor, or
identified by the MCO as having special health care needs, in order to identify ongoing special
conditions requiring a course of treatment or regular care monitoring. The MCO’s assessment
mechanisms must use appropriate health care professionals.

The MCO must provide information to the HHSC Administrative Services Contractor that identifies
Members who the MCO has assessed to be MSHCN, including any Members pre-screened by the HHSC
Administrative Services Contractor and confirmed by the MCO as a MSHCN. The information must be
provided in a format and on a timeline as determined by HHSC. The information must be updated
with newly identified MSHCN by

1 CSHCN is a term often used to refer to a services program for children with special
health care needs administered by DSHS, and described in 25 TAC §38.1. Although children served
through this DSHS program may also be served by Medicaid or CHIP, the reference to “CSHCN” in
this Contract does not refer to children served through the DSHS program.

the 10th day of each month. In the event that a MSHCN changes MCOs, the MCO must provide the
receiving MCO information concerning the results of the MCO’s identification and assessment of
that Member’s needs to prevent duplication of those activities.

8.1.12.2 Access to Care and Service Management

Once identified, the MCO must have effective systems to ensure the provision of Covered
Services to meet the special preventive, primary Acute Care, and specialty health care needs
appropriate for treatment of a Member’s condition(s). All STAR+PLUS Members are considered
to be MSHCN.

The MCO must provide access to identified PCPs and specialty care Providers with experience
serving MSHCN. Such Providers must be board-qualified or board-eligible in their specialty. The
MCO may request exceptions from HHSC for approval of traditional providers who are not
board-qualified or board-eligible but who otherwise meet the MCO’s credential ing requirements.

For services to CSHCN, the MCO must have Network PCPs and specialty care Providers that have
demonstrated experience with CSHCN in pediatric specialty centers such as children’s Hospitals,
teaching Hospitals, and tertiary care centers.

The MCO is responsible for working with MSHCN, their health care providers, their families and,
if applicable, legal guardians to develop a seamless package of care in which primary, Acute
Care, and specialty service needs are met through a Service Plan that is understandable to the
Member, and his or her representatives.

The Service Plan includes, but is not limited to, the following:

1. the Member’s history;

2. summary of current medical and social needs and concerns;

3. short and long term needs and goals;

4. a list of services required, their frequency, and

5. a description of who will provide the services.

The Service Plan should incorporate as a component of the plan the Individual Family Service Plan
(IFSP) for members in the Early Childhood Intervention (ECI) Program. The Service Plan may include
information regarding non-covered services, such as NonCapitated Services (see below), community
and other resources, and information on how to access affordable, integrated housing.

The MCO is responsible for providing Service Management, developing a Service Plan, and ensuring
MSHCN, including CSHCN, have access to treatment by a

multidisciplinary team when the Member’s PCP determines the treatment is Medically Necessary, or
to avoid separate and fragmented evaluations and service plans. The team must include both
physician and non-physician providers that the PCP determines are necessary for the
comprehensive treatment of the Member. The team must:

	 	1.	 	participate in Hospital discharge planning;

2. participate in pre-admission Hospital planning for non-emergency

Hospitalizations;

	 	3.	 	develop specialty care and support service recommendations to be incorporated
into the Service Plan; and	 

	 	4.	 	provide information to the Member, or when applicable, the Member’s
representatives concerning the specialty care recommendations.	 

MSHCN, their families, legal guardians, or their health providers may request Service
Management from the MCO. The MCO must make an assessment of whether Service Management is
needed and furnish Service Management when appropriate. The MCO may also recommend to an MSHCN,
CSHCN, or their families or legal guardians that Service Management be furnished if the MCO
determines that Service Management would benefit the Member.

The MCO must provide information and education in its Member Handbook and Provider Manual about
the care and treatment available in the MCO’s plan for Members with Special Health Care Needs,
including the availability of Service Management.

The MCO must have a mechanism in place to allow Members with Special Health Care Needs to have
direct access to a specialist as appropriate for the Member’s condition and identified needs,
such as a standing referral to a specialty physician. The MCO must also provide MSHCN with access
to non-primary care physician specialists as PCPs, as required by 28 T.A.C. §11.900, and Section
8.1.4.2, “Primary Care Providers.”

The MCO must implement a systematic process to coordinate Non-capitated Services, and enlist
the involvement of community organizations that may not be providing Covered Services but are
otherwise important to the health and wellbeing of Members. The MCO also must make a best
effort to establish relationships with State and local programs and community organizations,
such as those listed below, in order to make referrals for MSHCN and other Members who need
community services:

	 	1.	 	Community Resource Coordination Groups (CRCGs);

2. Early Childhood Intervention (ECI) Program;

3. local school districts (Special Education);

	 	4.	 	Health and Human Services Commission’s Medical Transportation Program
(MTP);	 

	 	5.	 	Texas Department of Assistive and Rehabilitative Services (DARS) Blind
Children’s Vocational Discovery and Development Program;	 

	 	6.	 	Texas Department of State Health (DSHS) services, including community mental
health programs, Title V Maternal and Child Health, Children with Special Health Care
Needs (CSHCN) Programs;	 

	 	7.	 	other state and local agencies and programs such as food stamps, and the
Women, Infants, and Children’s (WIC) Program, and Case Management for Children
and Pregnant Women (CPW); and	 

	 	8.	 	civic and religious organizations and consumer and advocacy groups, such as
United Cerebral Palsy, which also work on behalf of the MSHCN population.	 

8.1.13 Service Management for Certain Populations

The MCO must have service management programs and procedures for the following
populations, as applicable to the MCO:

1. high-cost catastrophic cases;

2. women with high-risk pregnancies (STAR and STAR+PLUS Programs only);

3. individuals with mental illness and co-occurring substance abuse; and

4. Farmworker Children (FWC) (STAR and STAR+PLUS Programs only).

8.1.14 Disease Management (DM)/Health Home Services

The MCO must provide or arrange the provision of comprehensive DM/Health Home Services
consistent with state statutes and regulations and federal law. Such DM/Health Home Services must
be part of person-based approach and holistically address the needs of persons with multiple
chronic conditions or a single serious and persistent mental health condition. The MCO must
develop and implement DM/Health Home Services for Members with chronic conditions that are often
prevalent in MCO Program Members. Chronic conditions include, but are not limited to: a mental
health condition; substance use disorder; asthma; diabetes; heart disease; and being overweight,
as evidenced by having a Body Mass Index (BMI) over 25. HHSC will not identify individual Members
with chronic conditions. The MCO must implement policies and procedures to ensure that the MCO
identifies and enrolls Members that require DM/Health Home Services in a program to provide such
services. Members eligible for the DM/Health Home Services program must have: (1) at least two
(2) chronic conditions, (2) one (1) chronic condition and be at risk for having a second chronic
condition, (3) have a serious and persistent mental health condition. The disease
management/Health Home requirements will not apply to Dual Eligible Members. The MCO must develop
and maintain screening and evaluation procedures for the early detection, prevention, treatment,
or referral of participants at risk for or diagnosed with the chronic conditions identified above
or in Uniform Managed Care Manual Chapter 9.1. The MCO must ensure that all Members enrolled into
a DM/Health Home Services program have the opportunity to opt out of these services within 30
days while still maintaining access to all other Covered Services.

For all new Members not previously enrolled in the MCO and who require DM/Health Home Services,
the MCO must evaluate and ensure continuity of care with any previous DM/Health Home Services in
accordance with the requirements in Uniform Managed Care Manual Chapter 9.1.

The DM/Health Home Services program(s) must include:

1. patient self-management education;

2. Provider education;

3. evidence-based models and minimum standards of care;

4. standardized protocols and participation criteria;

	 	5.	 	Provider-directed or Provider-supervised care;

6. a mechanism to incentivize Providers for provision of timely and quality care;

7. implementation of interventions that address the continuum of care;

8. mechanisms to modify or change interventions that are not proven effective;

	 	9.	 	mechanisms to monitor the impact of the DM/Health Home Program over time,
including both the clinical and the financial impact.	 

	 	10.	 	comprehensive care management;

	 	11.	 	care coordination and health promotion;

	 	12.	 	comprehensive traditional care, including appropriate follow-up, from inpatient
to other settings;	 

	 	13.	 	patient and family support (including authorized representatives);

	 	14.	 	referral to community and social support services, if relevant, and;

	 	15.	 	use of health information technology to link services, as
feasible and appropriate.	 

The DM/Health Home Services program must include a Designated Provider to serve as the Health
Home. The Designated Provider must meet the qualifications for such an entity as established by
the U.S. Secretary of Health and Human Services. The Designated Provider may be a provider
operating with a team of health professionals, or a health team selected by the Member.

HHSC encourages MCOs to develop provider incentive programs for Designated Providers who
meet the requirements for patient-centered medical homes found in Texas Government Code
§533.0029.

The MCO must maintain a system to track and monitor all DM/Health Home Services participants for
clinical, utilization, and cost measures. The MCO must require Designated Providers to submit
reports to the MCO regarding the quality of Health Home Services delivered according to measures
developed by the U.S. Secretary of Health and Human Services. These reports must in turn be
delivered to HHSC annually.

The MCO must provide designated staff to implement and maintain DM Programs and to assist
participating Members in accessing DM/Health Home Services. The MCO must educate Members and
Providers about the MCO’s DM/Health Home Services programs and activities. Additional
requirements related to the MCO’s DM/Health Home Service programs and activities are found in
Uniform Managed Care Manual Chapter 9.1, “Disease Management Requirements for STAR, CHIP and
STAR+PLUS.”

8.1.14.1 DM/Health Home Services and Participating Providers At a minimum,
the MCO must:

	 	1.	 	implement a system for Providers to request specific DM/Health Home
interventions;	 

	 	2.	 	give Providers information, including differences between recommended
prevention and treatment and actual care received by Members enrolled in a	 

DM/Health Home Services program, and information concerning such Members’ adherence to a
service plan; and

	 	3.	 	for Members enrolled in a DM/Health Home Services program, provide reports on
changes in a Member’s health status to his or her PCP.

	 	 	 	 	 
	8.1.14.2 MCO DM/Health Home Services Evaluation
	HHSC or its EQRO will evaluate the MCO’s DM/Health Home Services program.
		8.1.15		 	Behavioral Health (BH) Network and Services

The requirements in this subsection pertain to all MCOs except: (1) the STAR MCOs in the
Dallas Service Area, whose Members receive Behavioral Health Services through the NorthSTAR
Program, and (2) the CHIP Perinatal Program MCOs with respect to their Perinate Members (unborn
children).

The MCO must provide, or arrange to have provided, to Members all Medically Necessary Behavioral
Health (BH) Services as described in Attachments B-2, “STAR Covered Services,” B-2.1, “CHIP
Covered Services,” and B-2.2, “STAR+PLUS Covered Services,” All BH Services must comply with the
access standards included in Section 8.1.3. For Medicaid MCOs, BH Services are described in more
detail in the Texas Medicaid Provider Procedures Manual and the Texas Medicaid Bulletins. When
assessing Members for BH Services, the MCO and its Network Behavioral Health Service Providers
must use the DSM-IV multi-axial classification. HHSC may require use of other assessment
instrument/outcome measures in addition to the DSM-IV. Providers must document DSM-IV and
assessment/outcome information in the Member’s medical record.

8.1.15.1 BH Provider Network

The MCO must maintain a Behavioral Health Services Provider Network that includes psychiatrists,
psychologists, and other Behavioral Health Service Providers. To ensure accessibility and
availability of qualified Providers to all Members in the Service Area, the Provider Network
must include Behavioral Health Service Providers with experience serving special populations
among the MCO Program(s)’ enrolled population, including, as applicable, children and
adolescents, persons with disabilities, the elderly, and cultural or linguistic minorities.

8.1.15.2 Member Education and Self-referral for Behavioral Health Services

The MCO must maintain a Member education process to help Members know where and how to obtain
Behavioral Health Services.

The MCO must permit Members to self refer to any Network Behavioral Health Services Provider
without a referral from the Member’s PCP. The MCOs’ policies and procedures, including its
Provider Manual, must include written policies and procedures for allowing such self-referral to
Behavioral Health Services.

The MCO must permit Members to participate in the selection of the appropriate
behavioral health providers, and must provide the Member with information on accessible
Network Providers with relevant experience.

8.1.15.3 Behavioral Health Services Hotline

This Section includes Member Hotline requirements. Requirements for Provider Hotlines are found
in Section 8.1.4.7.

The MCO must have an emergency and crisis Behavioral Health Services Hotline staffed by trained
personnel 24 hours a day, seven (7) days a week, toll-free throughout the Service Area. Crisis
hotline staff must include or have access to qualified Behavioral Health Services professionals
to assess Behavioral Health emergencies. Emergency and crisis Behavioral Health Services may be
arranged through mobile crisis teams. It is not acceptable for an emergency intake line to be
answered by an answering machine.

The MCO must operate a toll-free hotline as described in Section 8.1.5.6 to handle Behavioral
Health-related calls. The MCO may operate one hotline to handle emergency and crisis calls and
routine Member calls. The MCO cannot impose maximum call duration limits and must allow calls to
be of sufficient length to ensure adequate information is provided to the Member. Hotline
services must meet Cultural Competency requirements and provide linguistic access to all Members,
including the interpretive services required for effective communication.

The Behavioral Health Services Hotline may serve multiple MCO Programs if the Hotline staff is
knowledgeable about all of the MCO Programs. The Behavioral Health Services Hotline may serve
multiple Service Areas if the Hotline staff is knowledgeable about all such Service Areas,
including the Behavioral Health Provider Network in each Service Area. The MCO must ensure that
the toll-free Behavioral Health Services Hotline meets the following minimum performance
requirements for all MCO Programs and Service Areas:

	 	1.	 	99% of calls are answered by the fourth ring or an automated call
pick-up system;	 

	 	2.	 	no incoming calls receive a busy signal;

	 	3.	 	at least 80% of calls must be answered by toll-free line staff within 30
seconds measured from the time the call is placed in queue after selecting an
option;	 

	 	4.	 	the call abandonment rate is seven percent (7%) or less; and

	 	5.	 	the average hold time is two (2) minutes or less.

The MCO must conduct ongoing quality assurance to ensure these standards are met. The MCO must
monitor the MCO’s performance against the Behavioral Health Services Hotline standards and submit
performance reports summarizing call center performance as indicated in Section 8.1.20 and the
Uniform Managed Care Manual.

As a component of quality monitoring, HHSC may require the MCO to implement a system where
callers are given the option of participating in an automated survey at the end of a call.

If HHSC determines that it is necessary to conduct onsite monitoring of the MCO’s Behavioral
Health Services Hotline functions, the MCO is responsible for all reasonable travel costs
incurred by HHSC or its authorized agent(s) relating to such monitoring. For purposes of this
section, “reasonable travel costs” include airfare, lodging, meals, car rental and fuel, taxi,
mileage, parking and other incidental travel expenses incurred by HHSC or its authorized agent in
connection with the onsite monitoring.

8.1.15.4 Coordination between the BH Provider and the PCP

The MCO must require, through Provider contract provisions, that PCPs have screening and
evaluation procedures for the detection and treatment of, or referral for, any known or
suspected Behavioral Health problems and disorders. PCPs may provide any clinically appropriate
Behavioral Health Services within the scope of their practice.

The MCO must provide training to Network PCPs on how to screen for and identify behavioral
health disorders, the MCO’s referral process for Behavioral Health Services, and clinical
coordination requirements for such services. The MCO must include training on coordination and
quality of care such as behavioral health screening techniques for PCPs and new models of
behavioral health interventions.

The MCO must develop and disseminate policies regarding clinical coordination between Behavioral
Health Service Providers and PCPs. The MCO must require that Behavioral Health Service Providers
refer Members with known or suspected and untreated physical health problems or disorders to
their PCP for examination and treatment, with the Member’s or the Member’s legal guardian’s
consent. Behavioral Health Providers may only provide physical Health Care Services if they are
licensed to do so. This requirement must be specified in all Provider Manuals.

The MCO must require that behavioral health Providers send initial and quarterly (or more
frequently if clinically indicated) summary reports of a Members’ behavioral health status to
the PCP, with the Member’s or the Member’s legal guardian’s consent. This requirement must be
specified in all Provider Manuals.

8.1.15.5 Follow-up after Hospitalization for Behavioral Health Services

The MCO must require, through Provider contract provisions, that all Members receiving inpatient
psychiatric services are scheduled for outpatient follow-up and/or continuing treatment prior to
discharge. The outpatient treatment must occur within seven (7) days from the date of discharge.
The MCO must ensure that Behavioral Health Service Providers contact Members who have missed
appointments within 24 hours to reschedule appointments.

8.1.15.6 Chemical Dependency

The MCO must comply with 28 T.A.C. §3.8001 et seq., regarding utilization review for Chemical
Dependency Treatment. Chemical Dependency Treatment must comply with the standards set forth in
28 T.A.C. Part 1, Chapter 3, Subchapter HH.

8.1.15.7 Court-Ordered Services

“Court-Ordered Commitment” means a commitment of a Member to a psychiatric facility for
treatment that is ordered by a court of law pursuant to the Texas Health and Safety Code, Title
VII, Subtitle C.

The MCO must provide inpatient psychiatric services to Members birth through age 20, up to the
annual limit, who have been ordered to receive the services by a court of competent jurisdiction
under the provisions of Chapters 573 and 574 of the Texas Health and Safety Code, relating to
Court-Ordered Commitments to psychiatric facilities. The MCO is not obligated to cover placements
as a condition of probation, authorized by the Texas Family Code.

The MCO cannot deny, reduce or controvert the Medical Necessity of inpatient psychiatric
services provided pursuant to a Court-ordered Commitment for Members birth through age 20. Any
modification or termination of services must be presented to the court with jurisdiction over
the matter for determination.

A Member who has been ordered to receive treatment under the provisions of Chapter 573 or 574
of the Texas Health and Safety Code can only Appeal the commitment through the court system.

8.1.15.8 Local Mental Health Authority (LMHA)

The MCO must coordinate with the Local Mental Health Authority (LMHA) and state psychiatric
facility regarding admission and discharge planning, treatment objectives and projected length of
stay for Members committed by a court of law to the state psychiatric facility.

Medicaid MCOs are required to comply with additional Behavioral Health Services requirements
relating to coordination with the LMHA and care for special populations. These Medicaid MCO
requirements are described in Section 8.2.8.

8.1.16 Financial Requirements for Covered Services

The MCO must pay for or reimburse Providers for all Medically Necessary Covered Services
provided to all Members. STAR+PLUS MCOs must also provide Functionally Necessary Community
Long-term Services and Supports to Members. The MCO is not liable for cost incurred in
connection with health care rendered prior to the date of the Member’s Effective Date of
Coverage in that MCO.

Coverage under Medicaid and CHIP is secondary to all other insurance coverage. A Member may
receive collateral health benefits under a different type of insurance such as workers
compensation or personal injury protection under an automobile policy. If a Member is entitled to
coverage for specific services payable under another insurance plan and the MCO paid for such
Covered Services, the MCO may obtain reimbursement from the responsible insurance entity not to
exceed 100% of the value of Covered Services paid. See Sections 8.2.9 and 8.4.5 for additional
information regarding coordination of benefits and recoveries from third parties.

8.1.17 Accounting and Financial Reporting Requirements

The MCO’s accounting records and supporting information related to all aspects of the
Contract must be accumulated in accordance with Federal Acquisition Regulations (“FAR”),
Generally Accepted Accounting Principles (GAAP), Attachment A, “Uniform Managed Care Contract
Terms and Conditions,” and the cost principles contained in the Cost Principles Document in
Uniform Managed Care Manual Chapter 6.1. HHSC will not recognize or pay services that cannot be
properly substantiated by the MCO and verified by HHSC.

The MCO must:

	 	1.	 	maintain accounting records for each applicable MCO Program separate and
apart from other corporate accounting records;	 

	 	2.	 	maintain records for all claims payments, refunds and adjustment payments to
providers, Capitation Payments, interest income and payments for administrative
services or functions and must maintain separate records for medical and administrative
fees, charges, and payments;	 

	 	3.	 	ensure and provide access to HHSC and/or its auditors or agents to the detailed
records and supporting documentation for all costs incurred by the MCO. The MCO must
ensure such access to its Subcontractors, including Affiliates, for any costs billed to
or passed to the MCO with respect to an MCO Program; and	 

	 	4.	 	maintain an accounting system that provides an audit trail containing
sufficient financial documentation to allow for the reconciliation of billings,
reports, and financial statements with all general ledger accounts.	 

The MCO agrees to pay for all reasonable costs incurred by HHSC to perform an
examination, review or audit of the MCO’s books relating to this Contract.

8.1.17.1 Financial Reporting Requirements

HHSC will require the MCO to provide financial reports by MCO Program and by Service Area to
support Contract monitoring as well as State and Federal reporting requirements. All financial
information and reports submitted by the MCO become the property of HHSC. HHSC may, at its
discretion, release such information and reports to the public at any time and without notice to
the MCO. In accordance with state and federal laws regarding Member confidentiality, HHSC will
not release any Member- identifying information contained in such reports.

CHIP Perinatal Program data will be integrated into the CHIP Program financial reports. Except
for the Financial Statistical Report, no separate CHIP Perinatal Program reports are required.
For all other CHIP financial reports, where appropriate, HHSC will designate specific
attributes within the CHIP Program financial reports that CHIP MCOs must complete to allow HHSC
to extract financial data particular to the CHIP Perinatal Program.

Any data submitted with respect to the required financial reports or filings that is in PDF (or
similar file format such as TIF) must be generated in a text-searchable format.

Due dates, content, and formats for the following deliverables and reports may be
referenced herein or in Uniform Managed Care Manual Chapter 5.0 “Consolidated Deliverables
Matrix.”

	(a)	 	Financial-Statistical Report (FSR) – The MCO must file four (4) quarterly and two (2)
annual Financial-Statistical Reports (FSR) for each complete State Fiscal Year, in	 

the format and timeframe specified by HHSC. HHSC will include FSR format and directions in
Uniform Managed Care Manual Chapter 5.3.1. The MCO must incorporate financial and
statistical data of delegated networks (e.g., IPAs, ANHCs, Limited Provider Networks), if
any, in its FSR Reports. The FSR is one (1) of the primary financial reports used by HHSC
to monitor Contract financial results. It is a

modified (HHSC-defined) form of an income statement, with some other elements added. Not
all expenses incurred may be included on the FSR.

All amounts reported in the FSRs must be reported in accordance with Uniform Managed
Care Manual Chapter 6.1, “Cost Principles for Expenses.” Each FSR

must provide amounts by month, with a year-to-date total (based on the SFY, or other Contract
period as designated by HHSC). Each successive FSR will show the most current amounts for
each month in the SFY; thus, a given month’s amount may change in future FSRs as more claims
run-out is experienced for the month. Quarterly FSRs are generally due 30 days after the end
of each State Fiscal Quarter. The MCO must transmit these reports electronically, in a locked
MS Excel file.

After the 4th Quarter FSR, the first annual FSR for a given SFY (the “90-day
FSR”) must reflect claims run-out and accruals through the 90th calendar day
after the end of the Contract Year. This report must be filed on or before the 1
20th calendar day after the end of the Contract Period. If the MCO has made a
pre-tax profit in excess

of the thresholds as established in the Contract with respect to the Experience
Rebate, then a payment for any amounts to be refunded to HHSC is due in conjunction with
filing the 90-day FSR. The second annual report for a given SFY (the “334-day FSR”) must
reflect data completed through the 334th calendar day after the end of the
Contract Period, and must be filed on or before the 365th calendar day following
the end of the Contract Period. The 334-day FSR is routinely audited by HHSC and/or its
independent auditors.

HHSC will post all or part of an FSR on the HHSC website.

As set forth above, CHIP MCOs are required to submit separate FSRs for the CHIP Perinatal
Program, in accordance with Uniform Managed Care Manual Chapters 5.3.1.7 and 5.3.1.8.

	 	(b)	 	Delivery Supplemental Payment (DSP) Report — The MCO must submit a monthly DSP Report in
accordance with Uniform Managed Care Manual Chapter 5.3.5. The Report must include only
unduplicated deliveries and only deliveries for which the MCO has made a payment to either
a Hospital or other provider.	 

	 	(c)	 	Claims Lag Report — The MCO must submit a Claims Lag Report on a quarterly basis, by the
last day of the month following the reporting period. The report must disclose the amount of
incurred claims each month and the amount paid each month, on a contract-to-date basis. The
report must be submitted in accordance with Uniform Managed Care Manual Chapter 5.6.2.

	 	(d)	 	Third Party Liability and Recovery (TPL/TPR) Report – The MCO must file TPL/TPR Reports
in accordance with Uniform Managed Care Manual Chapter 5.3.4. MCOs must submit TPL/TPR
reports quarterly, by MCO Program and Service Area. TPL/TPR reports must include total
dollars costs avoided, and total dollars recovered from third party payers through the
MCO’s coordination of benefits and subrogation efforts during the Quarter.	 

	 	(e)	 	Report of Legal and Other Proceedings and Related Events - The MCO must comply with the
Uniform Managed Care Manual Chapter 5.8, regarding the disclosure of certain matters
involving either the MCO, its Affiliates, and/or its Material Subcontractors. Reports are
due both on an as-occurs basis and annually each August 31st . The as-occurs
report is due no later than 30 days after the event that triggered the notification
requirement.	 

	 	(f)	 	Audit Reports — The MCO must comply with the Uniform Managed Care Manual Chapter
5.3.11 regarding notification and/or submission of certain internal and external audit
reports.	 

(g) Affiliate Report – The MCO must submit an Affiliate Report on an as-occurs basis and
annually by August 31st of each year in accordance with the Uniform Managed Care
Manual. The “as-occurs” update is due within 30 days of the event thattriggered the
change. Note that “Affiliate” is a defined term (see Attachment A, “Uniform Managed Care
Contract Terms and Conditions”).

(h) MCO Disclosure Statement — The MCO must file:

	 	1.	 	an updated MCO Disclosure Statement by September 1st of each Contract
Year; and	 

	 	2.	 	a “change notification” abbreviated version of the report, no later than 30
days after any of the following events:	 

	 	a.	 	entering into, renewing, modifying, or terminating a
relationship with an affiliated party;	 

	 	b.	 	after any change in control, ownership, or affiliations; or,

	 	c.	 	after any material change in, or need for addition to, the
information previously disclosed.	 

The MCO Disclosure Statement will include, at a minimum, a listing of the MCO’s control,
ownership, and any affiliations, and information regarding Affiliate transactions. This
report will replace, and be in lieu of, the former “Section 1318 Financial Disclosure
Report” and the “Form CMS 1513,” and will disclose the same information, plus other
information as may be required by HHSC and/or CMS

Program Integrity requirements. Minor quarterly adjustments in stock holdings for
publicly-traded corporations are excluded from the reporting requirements. The reporting
format is included in the Uniform Managed Care Manual.

	(i)	 	TDI Filings – The MCO must provide HHSC with a copy of the following information no later
than 30 calendar days after the MCO’s submission to TDI:	 

	 	1.	 	the “Health Annual Statement” and the “Annual Audited Financial Report”
including all schedules, attachments, exhibits, supplements, management
discussion, supplemental filings, etc., and any other annual financial filings
(including any filings that may take the place of the above-named annual
financial filings, and any financial filings that occur less frequently than on
a quarterly basis);	 

	 	2.	 	the annual figures for controlled risk-based capital; and

	 	3.	 	the quarterly financial statements.

Additionally, if the MCO is a foreign carrier (i.e., domiciled in another state), copies of
any filings with the National Association of Insurance Commissioners (NAIC), as well

as the financial statements filed with the state insurance department in its state of
domicile, must be submitted to HHSC no later than 30 calendar days after submission to
NAIC or the state of domicile.

Notwithstanding the 30 calendar day deadlines described above, the MCO must notify HHSC if
it cannot provide the most recent Annual Statements by March 31st each year,
and the Annual Audited Financial Report by June 30th each year. The notice
should include an expected submission date.

	(j)	 	Registration Statement (also known as the “Form B”) – With the following
exceptions, MCOs must submit a complete state insurance department registration
statement, also known as Form B, and all annual and other amendments to this	 

form, and any other related or similar information filed by the MCO with the insurance
regulatory authority of its domiciliary jurisdiction. The exceptions to this requirement are
those MCOs that are either (i) part of a County Hospital District or other

governmental entity, or (ii) a stand-alone entity with no parent or other Affiliates. If
the MCO is excepted from the TDI Form B filing requirement, the MCO must demonstrate this
and explain the nature of the exemption.

The Form B is filed in three (3) forms: (i) the initial registration; (ii) the annual
amendment; and (iii) the every-five-years complete restatement of registration. For
purposes herein, the MCO must submit:

	 	1.	 	the complete registration restatement that was due to TDI by
approximately May 2010;	 

	 	2.	 	each annual registration amendment form (which is due to TDI within 120
days of the end of the MCO’s parent’s fiscal year), commencing with the most recent
one that the MCO has filed after May 2010;

	 	3.	 	future complete five-year registration re-statements (the first of
which will be due to TDI by approximately May 2015); and	 

	 	4.	 	any other registration statement amendments or re-statements that may
be submitted to TDI, per TDI regulations.	 

If the MCO was not yet subject to TDI requirements with respect to the May 2010
registration re-statement, it must submit its initial registration

If the MCO anticipates that the registration statement annual amendment form will be

filed at some other date than approximately 120 days after the end of the parent’s fiscal
year, then the MCO must notify HHSC of the anticipated filing date.

All registration statement submission items herein are due to HHSC by the later of: (i) 30
calendar days after the MCO’s submission of the item to TDI, or (ii) the date identified
in this section.

	(k)	 	TDI Examination Report — The MCO must furnish HHSC with a full and complete copy of any
examination report issued by TDI, including the financial, market conduct, target exam,
quality of care components, and corrective action plans and responses. The MCO must
submit this information to HHSC no later than 30 calendar days after the MCO receives the
final version of the examination report from TDI.	 

The MCO must furnish HHSC with a copy of any similar examination report issued by a state
insurance department in any other states where the MCO operates a

Medicaid, CHIP, or other managed care product. These reports are also due no later

than 30 calendar days after the MCO receives the final version of the examination report.

Each September 1st, the MCO must notify HHSC of the anticipated date of the next
issuance of a state department of insurance financial examination report, unless the last
submitted financial examination report is less than two (2) years old. This annual

notification should include a list of any other states in which the MCO is potentially
subject to such examination reports, or a statement that there are no other states.

	 	(l)	 	Employee Bonus and/or Incentive Payment Plan – If a MCO intends to include Employee Bonus
or Incentive Payments as allowable administrative expenses, the MCO must furnish a written
Employee Bonus and/or Incentive Payments Plan to HHSC. The written plan must include a
description of the MCO’s criteria for establishing bonus and/or incentive payments, the
methodology to calculate bonus and/or incentive payments, and the timing of bonus and/or
incentive payments. The Bonus and/or Incentive Payment Plan and description must be
submitted during the Transition Phase, no later than 30 days after the Effective Date of
the Contract. If the MCO substantively revises the Employee Bonus and/or Incentive Payment
Plan, the MCO must submit the revised plan to HHSC at least 30 days in advance of its
effective date.	 

HHSC reserves the right to disallow all or part of a plan that it deems inappropriate. Any
such payments are subject to audit, and must comply with Uniform Managed Care Manual
Chapter 6.1, “Cost Principles for Expenses.”

	 	(m)	 	Filings with other entities, and other existing financial reports – The MCO must submit
an electronic copy of the following reports or filings pertaining to the MCO, or its
parent, or its parent’s parent:	 

	 	1.	 	SEC Form 10-K. For publicly-traded (stock-exchange-listed) for-profit
corporations, submit the most-recent annual SEC Form 10K filing.	 

	 	2.	 	IRS Form 990. For nonprofit entities, submit the most recent annual IRS Form
990 filing, complete with any and all attachments or schedules. If a nonprofit
entity is exempt from the IRS 990 filing requirement, demonstrate this and explain
the nature of the exemption.	 

	 	3.	 	If the MCO is a nonprofit entity that is a component or subsidiary of a County
Hospital District, or otherwise an entity of a government, then submit the annual
financial statements as prepared under the relevant rules or statutes governing annual
financial reporting and disclosure for the MCO and/or its parent, including all
attachments, schedules, and supplements.	 

	 	4.	 	Annual Report. The MCO must submit this report if it is different than or
supplementary to the audited financial statements or Form 10-K required herein, and if
it is distributed to either shareholders, customers, employees, owner(s), parent, bank
or creditor(s), donors, the community, or to any regulatory body or constituents, or
is otherwise externally distributed or posted.	 

	 	5.	 	Bond or debt rating analysis. If the MCO or its ultimate parent has been the
subject of any bond rating analysis, ratings affirmation, write-up, or related report,
such as by AM Best, Fitch Ratings, Moody’s, Standard & Poor, etc., submit the most
recent complete detailed report from each rating entity that has produced such a
report.	 

All of the above such reports or filings are due to HHSC no later than 30 calendar days after
such report is filed or otherwise initially distributed. Each report should include all
exhibits, attachments, notes, supplemental data, management letters, auditor letters, etc.,
and any updates, revisions, clarifications, or supplemental filings.

If the reporting entity has a regular required due date for any of the above reports, and
receives an extension on the filing deadline, then the MCO should notify HHSC of any such
extension and the estimated revised filing date.

8.1.18 Management Information System Requirements

The MCO must maintain a Management Information System (MIS) that supports all functions of
the MCO’s processes and procedures for the flow and use of MCO data. If the MCO subcontracts a
MIS function, the Subcontractor’s MIS must comply with the requirements of this section.

The MCO must have hardware, software, and a network and communications system with the
capability and capacity to handle and operate all MIS subsystems for the following operational
and administrative areas:

1. Enrollment/Eligibility Subsystem;

2. Provider Subsystem;

3. Encounter/Claims Processing Subsystem;

4. Financial Subsystem;

5. Utilization/Quality Improvement Subsystem;

6. Reporting Subsystem;

7. Interface Subsystem; and

8. TPL/TPR Subsystem, as applicable to each MCO Program.

The MIS must enable the MCO to meet the Contract requirements, including all applicable state
and federal laws, rules, and regulations. The MIS must have the capacity and capability to
capture and utilize various data elements required for MCO administration.

The MCO must have a system that can be adapted to changes in Business Practices/Policies within
the timeframes negotiated by the Parties. The MCO is expected to cover the cost of such systems
modifications over the life of the Contract.

The MCO is required to participate in the HHSC Systems Work Group.

The MCO must provide HHSC written notice of major systems changes and implementations no later
than 180 days prior to the planned change or implementation, including any changes relating to
Material Subcontractors, in accordance with the requirements of this Contract and Attachment A,
“Uniform Managed Care Contract Terms and Conditions.” HHSC retains the right to modify or waive
the notification requirement contingent upon the nature of the request from the MCO.

The MCO must provide HHSC any updates to the MCO’s organizational chart relating to
MIS and the description of MIS responsibilities at least 30 days prior to the
effective date of the change. The MCO must provide HHSC official points of contact
for MIS issues on an ongoing basis.

HHSC, or its agent, may conduct a Systems Readiness Review to validate the MCO’s
ability to meet the MIS requirements as described in Section 7, “Transition
Phase Requirements.” The System Readiness Review may include a desk review
and/or an onsite review and must be conducted for the following events:

	 	1.	 	a new plan is brought into the MCO Program;

	 	2.	 	an existing plan begins business in a new
Service Area or a Service Area expansion;	 

	 	3.	 	an existing plan changes location;

	 	4.	 	an existing plan changes its processing system,
including changes in Material Subcontractors performing MIS or claims
processing functions; and	 

	 	5.	 	an existing plan in one (1) or two (2) HHSC
MCO Programs is initiating a Contract to participate in any
additional MCO Programs.	 

If HHSC determines that it is necessary to conduct an onsite review, the MCO is
responsible for all reasonable travel costs associated with such onsite reviews.
For purposes of this section, “reasonable travel costs” include airfare, lodging,
meals, car rental and fuel, taxi, mileage, parking, and other incidental travel
expenses incurred by HHSC or its authorized agent in connection with the onsite
reviews. This provision does

not limit HHSC’s ability to collect other costs as damages in
accordance with Attachment A, Section 12.02(e), “Damages.”

If for any reason an MCO does not fully meet the MIS requirements, then the MCO
must, upon request by HHSC, either correct such deficiency or submit to HHSC a
Corrective Action Plan and Risk Mitigation Plan to address such deficiency.
Immediately upon identifying a deficiency, HHSC may impose contractual remedies
according to the severity of the deficiency. Refer to Attachment A, “Uniform
Managed Care Contract Terms and Conditions,” Article 12 and Attachment B-3,
“Deliverables/Liquidated Damages Matrix,” for additional information regarding
remedies and damages. Refer to

Section 7, “Transition Phase Requirements,” and Section 8.1.1.2, “Additional
Readiness Reviews and Monitoring Efforts,” for additional information regarding
MCO Readiness Reviews. Refer to Attachment A, “Uniform Managed Care Contract
Terms and Conditions,” Section 4.08(c) for information regarding Readiness
Reviews of the MCO’s Material Subcontractors.

	 	8.1.18.1	 	Encounter Data

The MCO must provide complete Encounter Data for all Covered Services, including
Value-added Services. Encounter Data must follow the format and data elements as
described in the HIPAA-compliant 837 Companion Guides and Encounter Submission
Guidelines. HHSC will specify the method of transmission, the submission schedule,
and any other requirements in Uniform Managed Care Manual Chapter 5.0, “Consolidated
Deliverables Matrix.” The MCO must submit Encounter Data transmissions at least
monthly, and include all Encounter Data and Encounter Data adjustments processed by
the MCO. In addition, Pharmacy Encounter Data must be submitted no later than 25
calendar days after the date of adjudication and include all Encounter Data and
Encounter Data adjustments processed by the MCO. Encounter Data quality validation
must incorporate assessment standards developed jointly by the MCO and HHSC. The MCO
must submit complete and accurate Encounter Data not later than the 30th
calendar day after the last day of the month in which the claim was adjudicated. The
MCO must make original records available for inspection by HHSC for validation
purposes. Encounter Data that does not meet quality standards must be corrected and
returned within a time period specified by HHSC.

For reporting claims processed by the MCO and submitted on Encounter 837 and NCPDP format, the
MCO must use the procedure codes, diagnosis codes, provider identifiers, and other codes as
directed by HHSC. Any exceptions will be considered on a code-by-code basis after HHSC
receives written notice from the MCO requesting an exception.

8.1.18.2 MCO Deliverables related to MIS Requirements

At the beginning of each State Fiscal Year, the MCO must submit the following
documents and corresponding checklists for HHSC’s review and approval:

1. Disaster Recovery Plan;*

2. Business Continuity Plan;* and

3. Security Plan.

• The Business Continuity Plan and the Disaster Recovery Plan may be combined into one document.

Additionally, at the beginning of each State Fiscal Year, if the MCO modifies the
following documents, it must submit the revised documents and corresponding checklists
for HHSC’s review and approval:

1. Joint Interface Plan;

2. Risk Management Plan; and

3. Systems Quality Assurance Plan.

The MCO must submit plans and checklists in accordance with the Uniform Managed Care Manual
Chapter 5.2, “Information Concerning MIS Deliverables;” Chapter 7, “Management Information
Systems;” and Chapter 5.0, “Consolidated Deliverables Matrix.” Additionally, if a Systems
Readiness Review is triggered by one of the events described in Section 8.1.18, the MCO must
submit all of the deliverables identified in this Section 8.1.18.2 in accordance with an
HHSC-approved timeline.

The MCO must follow all applicable Joint Interface Plans (JIPs) and all required file
submissions for HHSC’s Administrative Services Contractor, External Quality Review Organization
(EQRO), and HHSC Medicaid Claims Administrator. The JIPs can be accessed through Uniform
Managed Care Manual Chapter 7.1, “Joint Interface Plans (JIP).”

8.1.18.3 System-wide Functions

The MCO’s MIS system must include key business processing functions and/or features, which must
apply across all subsystems as follows:

	 	1.	 	process electronic data transmission or media to add, delete or modify
membership records with accurate begin and end dates;	 

	 	2.	 	track Covered Services received by Members through the system, and
accurately and fully maintain those Covered Services as HIPAA-compliant
Encounter transactions;	 

	 	3.	 	transmit or transfer Encounter Data transactions on electronic media in the
HIPAA format to the contractor designated by HHSC to receive the Encounter Data;	 

	 	4.	 	maintain a history of changes and adjustments and audit trails for current
and retroactive data;	 

	 	5.	 	maintain procedures and processes for accumulating, archiving, and restoring
data in the event of a system or subsystem failure;	 

	 	6.	 	employ industry standard medical billing taxonomies (procedure codes, diagnosis
codes, NDC codes) to describe services delivered and Encounter transactions produced;

	 	7.	 	accommodate the coordination of benefits;

	 	8.	 	produce standard Explanation of Benefits (EOBs) for providers;

	 	9.	 	Pay financial transactions to Network Providers and Out-of-Network providers in
compliance with federal and state laws, rules and regulations;	 

	 	10.	 	ensure that all financial transactions are auditable according to GAAP guidelines;

	 	11.	 	ensure that Financial Statistical Reports (FSRs) comply with Uniform Managed
Care Manual Chapter 6.1, “Cost Principles for Expenses,” with respect to segregating
costs that are allowable for inclusion in HHSC-designed financial reports;	 

	 	12.	 	relate and extract data elements to produce report formats (provided within
the Uniform Managed Care Manual) or otherwise required by HHSC;	 

	 	13.	 	ensure that written process and procedures manuals document and describe all
manual and automated system procedures and processes for the MIS; and	 

	 	14.	 	maintain and cross-reference all Member-related information with the most
current Medicaid, or CHIP Program Provider number.	 

8.1.18.4 Health Insurance Portability and Accountability Act (HIPAA) Compliance

The MCO’s MIS system must comply with applicable certificate of coverage and data specification
and reporting requirements promulgated pursuant to the Health Insurance Portability and
Accountability Act (HIPAA) of 1996, P.L. 104-191 (August 21, 1996), as amended or modified. The
MCO must comply with HIPAA Electronic Data Interchange (EDI) requirements, including the
HIPAA-compliant format version. MCO’s enrollment files must be in the 834 HIPAA-compliant format.
Eligibility inquiries must be in the 270/271 HIPAA-compliant format, with the exception of
pharmacy services. Pharmacies may submit eligibility inquiries in the NCPDP E1 HIPAA-compliant
format. Claim transactions for pharmacy services must be in the NCPDP B1/B2 HIPAA-compliant
formats; all others must be in the 837/835 HIPAA-compliant format.

The MCO must also be 5010 compliant by January 2012. The following website includes the
final rules for 5010 Compliancy and ICD-10 Compliancy:

www.cms.hhs.gov/TransactionCodeSetsStands/02TransactionsandCodeSetsRegulations.asp
        .

The MCO must provide its Members with a privacy notice as required by HIPAA. The MCO must provide
HHSC with a copy of its privacy notice during Readiness Review and any changes to the notice
prior to distribution.

8.1.18.5 Claims Processing Requirements

The MCO must process and adjudicate all provider claims for Medically Necessary health care
Covered Services that are filed within the timeframes specified in Uniform Managed Care Manual
Chapter 2.0, “Claims Manual,” and pharmacy claims in that are filed in accordance with the
timeframes specified in Uniform Managed Care Manual Chapter 2.2, “Pharmacy Claims Manual.” The
MCO is subject to contractual remedies, including liquidated damages and interest, if the MCO
does not process and adjudicate claims in accordance with the procedures and the timeframes
listed in Uniform Managed Care Manual Chapters 2.0 and 2.2.

The MCO must administer an effective, accurate, and efficient claims payment process in
compliance with federal laws and regulations, applicable state laws and rules, and the Contract,
including Uniform Managed Care Manual Chapters 2.0 and 2.2. In addition, a Medicaid MCO must be
able to accept and process provider claims in compliance with the Texas Medicaid Provider
Procedures Manual and Texas Medicaid Bulletins.

The MCO must maintain an automated claims processing system that registers the date a claim is
received by the MCO the detail of each claim transaction (or action) at the time the transaction
occurs, and has the capability to report each claim transaction by date and type to include
interest payments. The claims system must maintain information at the claim and line detail
level. The claims system must maintain adequate audit trails and report accurate claims
performance measures to HHSC.

The MCO’s claims system must maintain online and archived files. The MCO must keep online
automated claims payment history for the most current 18 months. The MCO must retain other
financial information and records, including all original claims forms, for the time period
established in Attachment A, “Uniform Managed Care Contract Terms and Conditions,” Section 9.01,
“Record Retention and Audit.” All claims data must be easily sorted and produced in formats as
requested by HHSC.

The MCO must offer its Providers/Subcontractors the option of submitting and receiving claims
information through electronic data interchange (EDI) that allows for automated processing and
adjudication of claims. EDI processing must be offered as an alternative to the filing of paper
claims. Electronic claims must use HIPAA-compliant electronic formats.

HHSC reserves the right to require the MCO to receive initial electronic claims through an
HHSC-contracted vendor at a future date. This function will allow Providers to send claims to
one location, which will then identify where the claim should be submitted. The MCO will be
expected to have an interface that allows receipt of these electronic submissions. If HHSC
implements this requirement, then the MCO must maintain a mechanism to receive claims in
addition to the HHSC claims portal. Providers must be able to send claims directly to the MCO or
its Subcontractor.

The MCO must provide a web portal that supports Batch Processing for Network Providers. Batch
Processing is a billing technique that uses a single program loading to process many individual
jobs, tasks, or requests for service. Specifically in managed care, batch billing is a technique
that allows providers to send billing information all at once in a “batch” rather than in
separate individual transactions.

The MCO must make an electronic funds transfer (EFT) payment process (for direct deposit)
available to Network Providers.

The MCO may deny a claim submitted by a provider for failure to file in a timely manner as
provided for in Uniform Managed Care Manual Chapters 2.0 and 2.2. The must not pay any claim
submitted by a provider based on an order or referral that excludes the National Provider
Identifier (NPI) for the ordering or referring provider. The MCO must not pay any claim
submitted by a provider excluded or suspended from the Medicare, Medicaid, or CHIP programs for
Fraud, Abuse, or Waste. The MCO must not pay any claim submitted by a Provider that is on
payment hold under the authority of HHSC or its authorized agent(s), or who has pending accounts
receivable with HHSC.

The MCO’s provider agreement must specify that program violations arising out of performance of
the contract are subject to administrative enforcement by the Health and Human Services
Commission Office of Inspector General (OIG) as specified in 1 Tex. Admin. Code, Chapter 371,
Subchapter G.

The MCO is subject to the requirements related to coordination of benefits for secondary payors
in the Texas Insurance Code Section 843.349(e-f).

The MCO must notify HHSC of major claim system changes in writing no later than 180 days
prior to implementation. The MCO must provide an implementation plan and schedule of proposed
changes. HHSC reserves the right to require a desk or onsite Readiness Review of the changes.

The MCO must make available to Providers claims coding and processing guidelines for the
applicable provider type. Providers must receive 90 days notice prior to the MCO’s implementation
of changes to claims guidelines.

8.1 .18.6 National Correct Coding Initiative

MCOs must comply with the requirements of Section 6507 of the Patient Protection and Affordable
Care Act of 2010 (P.L. 111-148), regarding “Mandatory State Use of National Correct Coding
Initiatives,” including all applicable rules, regulations, and methodologies implemented as a
result of this initiative.

8.1.19 Fraud and Abuse

A MCO is subject to all state and federal laws and regulations relating to Fraud, Abuse,
and Waste in health care and the Medicaid and CHIP programs. The MCO must cooperate and assist
HHSC and any state or federal agency charged with the duty of identifying, investigating,
sanctioning or prosecuting suspected Fraud, Abuse or Waste. In order to facilitate cooperation
with the Office of Inspector General (OIG) at HHSC, the MCO must have staff available for
Special Investigative Unit (SIU) representation located in the state. The MCO must allow access
to premises and provide originals and/or copies of all records and information requested free of
charge to the Inspector General for the Texas Health and Human Services System, HHSC or its
authorized agent(s), the Centers for Medicare and Medicaid Services (CMS), the U.S. Department
of Health and Human Services (DHHS), Federal Bureau of Investigation, the Office of the Attorney
General, TDI, or other units of state government.

Each MCO must designate one primary and one secondary contact person for all HHSC OIG records
requests. HHSC OIG records requests will be sent to the designated MCO contact person(s) in
writing via email, fax or regular mail, and will provide the specifics of the information being
requested (see below). The MCO will respond to the appropriate

HHSC OIG staff member within the timeframe designated in the request. If the MCO is unable to
provide all of the requested information with in the designated timeframe, an extension may be
granted and must be request in writing (email) by the MCO no less than two (2) Business Days
prior to the due date. When a request for data is provided to the MCO, the MCO’s response must
include data for all data fields, as available. If any data field is left blank, an explanation
must accompany the response. The data must be provided in the order and format requested. The MCO
must not include any additional data fields in its response. All requested information
must be accompanied by a notarized Business Records Affidavit unless indicated otherwise in HHSC
OIG’s record request.

The most common requests will include:

> 1099 data and other financial information – five (5) Business Days.

> Claims data for sampling – 15 Business Days.

> Urgent claims data requests – 10 Business Days (with OIG manager’s approval).
> Provider education information – 10 Business Days.

> Files associated with an HMO conducted investigation – 15 Business Day.
> Other time-sensitive requests – as needed.

The MCO must submit a written Fraud and Abuse compliance plan to the HHSC OIG for approval each
year. The plan must be submitted 90 days prior to the start of the State Fiscal Year. (See
Section 7, “Transition Phase Requirements.” for requirements regarding timeframes for submitting
the original plan.) If an MCO has not made any changes to its plan from the previous year, it may
notify the HHSC OIG that: (1) no changes have been made to the previously-approved plan, (2) the
plan will remain in place for the upcoming State Fiscal Year. The notification must be signed and
certified by an officer or director of the MCO that is responsible for carrying out the Fraud and
Abuse compliance plan. Upon receipt of a written request from the HHSC OIG, the MCO must submit
the complete Fraud and Abuse compliance plan.

The MCO is subject to and must meet all requirements in Section 531.1 13 of the Texas
Government Code, Section 533.012 of the Texas Government Code, Title 1 Texas Administrative Code
(TAC), Part 15, Chapter 353, Subchapter F, Rule 353.50 1-353.505, and Title 1 Texas
Administrative Code (TAC), Part 15, Chapter 370, Subchapter F, Rule 370.501-370.505 as well
as all laws specified in Attachment A, Section 7.02. Failure to comply with any requirement of
8.1.19 and 8.1.20.2(c) and (d) subjects the MCO to enforcement pursuant to 1 TEX.
ADMIN. CODE Chapter 371 Subchapter G in addition to any other legal remedy.

Additional Requirements for STAR and STAR+PLUS MCOs:

In accordance with Section 1902(a)(68) of the Social Security Act, STAR and STAR+PLUS MCOs
and their Subcontractors that receive or make annual Medicaid payments of at least $5
million must:

	 	1.	 	Establish written policies for all employees, managers, officers, contractors,
Subcontractors, and agents of the MCO or Subcontractor. The policies must provide
detailed information about the False Claims Act, administrative remedies for false
claims and statements, any state laws about civil or criminal penalties for false
claims, and whistleblower protections under such laws, as described in Section 1
902(a)(68)(A).	 

	 	2.	 	Include as part of such written policies detailed provisions regarding the
MCO’s or Subcontractor’s policies and procedures for detecting and preventing Fraud,
Waste, and Abuse.	 

	 	3.	 	Include in any employee handbook a specific discussion of the laws described in
Section 1902(a)(68)(A), the rights of employees to be protected as	 

whistleblowers, and the MCO’s or Subcontractor’s policies and procedures for
detecting and preventing Fraud, Waste, and Abuse.

8.1.20 General Reporting Requirements

The MCO must provide and must require its Subcontractors to provide:

	 	1.	 	all information required under the Contract, including but not limited to,
the reporting requirements or other information related to the performance of its
responsibilities hereunder as reasonably requested by the HHSC; and	 

	 	2.	 	any information in its possession sufficient to permit HHSC to comply with the
Federal Balanced Budget Act of 1997 or other federal or state laws, rules, and
regulations. All information must be provided in accordance with the timelines,
definitions, formats and instructions as specified by HHSC. Where practicable, HHSC
may consult with MCOs to establish timeframes and formats reasonably acceptable to
both parties.	 

Any deliverable or report in Section 8.1.20 without a specified due date is due quarterly on the
last day of the month following the end of the reporting period. Where the due date states 30
days, the MCO is to provide the deliverable by the last day of the month following the end of the
reporting period. Where the due date states 45 days, the MCO is to provide the deliverable by the
15th day of the second month following the end of the reporting period. (See Uniform Managed Care
Manual Chapter 5.0, “Consolidated Deliverables Matrix.”)

8.1.20.1 Health Plan Employer Data Information System (HEDIS) and Other Statistical
Performance Measures

The MCO must provide to HHSC or its designee all information necessary to analyze the MCO’s
provision of quality care to Members using measures to be determined by HHSC in consultation with
the MCO. Such measures must be consistent with HEDIS or other externally based measures or
measurement sets, and involve collection of information beyond that present in Encounter Data.
The Performance Indicator Dashboards, found in Uniform Managed Care Manual Chapter 10.1 provides
additional information on the role of the MCO and the EQRO in the collection and calculation of
HEDIS, Consumer Assessment of Health Plan Survey (CAHPS), and other performance measures.

8.1.20.2 Reports

The MCO must provide the following reports, in addition to the Financial Reports described in
Section 8.1.17 and the reporting requirements listed elsewhere in the Contract. Uniform Managed
Care Manual Chapter 5.0, “Consolidated Deliverables Matrix,” includes a list of all required
reports, and a description of the format, content, file layout and submission deadlines for each
report.

For the following reports, MCO must integrate CHIP Perinatal Program data into CHIP
Program reports. With the exception of FSR reporting, separate CHIP Perinatal Program reports
generally are not required. Where appropriate, HHSC will designate specific attributes within
the CHIP Program reports that the CHIP MCOs must complete to allow HHSC to extract data
particular to the CHIP Perinatal population.

	 	(a)	 	Claims Summary Report – The MCO must submit quarterly Claims Summary Reports by MCO
Program, Service Area and claim type by the 30th day following the end of the
reporting period unless otherwise specified. Claim Types include facility and/or
professional services for Acute Care, Behavioral Health, Vision, Pharmacy, and Long Term
Services and Supports. Within each claim type, claims data must be reported separately by
applicable claim form. The format for the Claims Summary Report is contained in Uniform
Managed Care Manual Chapter 5.6.1.	 

	 	(b)	 	QAPI Program Annual Summary Report – The MCO must submit a QAPI Program Annual Summary in
a format and timeframe as specified in Uniform Managed Care Manual Chapter 5.7, “Quality
Reports.”	 

	 	(c)	 	Fraudulent Practices Report – Utilizing the HHSC-Office of Inspector General (OIG) fraud
referral form, the MCO’s assigned officer or director must report and refer all possible
acts of Waste, Abuse, or Fraud to the HHSC-OIG within 30 Business Days of receiving the
reports of possible acts of Waste, Abuse, or Fraud from the MCO’s Special Investigative
Unit (SIU). The report and referral must include: an investigative report identifying the
allegation, statutes/regulations violated or considered, and the results of the
investigation; copies of program rules and regulations violated for the time period in
question; copies of any HMO contractual provisions, policies, published HMO program
bulletins, policy notification letters, or provider policy or procedure manuals that apply
to the alleged conduct for the time period in question; the estimated overpayment
identified; a summary of the interviews conducted; the Encounter Data submitted by the
provider for the time in question; and all supporting documentation obtained as the result
of the investigation. This requirement applies to all reports of possible acts of Waste,
Abuse, and Fraud.	 

Additional reports required by the Office of the Inspector General relating to Waste,
Abuse, or Fraud are listed in Uniform Managed Care Manual Chapter 5.5, “Fraud
Deliverable/Report Formats.”

	 	(d)	 	Provider Termination Report: (CHIP, STAR, and STAR+PLUS) – MCO must submit a
quarterly report that identifies any Providers who cease to participate in MCO’s Provider
Network, either voluntarily or involuntarily. The report must be submitted in the format
specified by HHSC, no later than 30 days after the end of the reporting period.	 

	 	(e)	 	PCP Network & Capacity Report: (CHIP only) – For the CHIP Program, MCO must
submit a quarterly report listing all unduplicated PCPs in the MCO’s Provider Network. For
the CHIP Perinatal Program, the Perinate Newborn Members are assigned PCPs that are part of
the CHIP PCP Network. Perinate Members are not assigned PCPs. The report must be submitted
in the format specified by HHSC no later than 30 days after the end of the reporting
quarter.	 

	 	(f)	 	Summary Report of Member Complaints and Appeals – The MCO must submit quarterly Member
Complaints and Appeals reports. The MCO must include in its reports Complaints and
Appeals submitted to its subcontracted risk groups (e.g., IPAs) and any other
Subcontractor that provides Member services. The MCO must submit the Complaint and
Appeals reports electronically on or before 45 days following the end of the State Fiscal
Quarter, using the format specified in Uniform Managed Care Manual Chapter 5.4.2,
“Complaints and Appeals Report.”	 

HHSC may direct the CHIP MCOs to provide segregated Member Complaints and Appeals reports
for the CHIP Perinatal Program on an as-needed basis.

	 	(g)	 	Summary Report of Provider Complaints – The MCO must submit Provider complaints reports
on a quarterly basis. The MCO must include in its reports complaints submitted by providers
to its subcontracted risk groups (e.g., IPAs) and any other Subcontractor that provides
provider services. The complaint reports must be submitted electronically on or before 45
days following the end of the State Fiscal Quarter, using the format specified by HHSC in
the Uniform Managed Care Manual Chapter 5.4.2, “Complaints and Appeals Report.”	 

HHSC may direct the CHIP MCOs to provide segregated Provider Complaints and Appeals
reports for the CHIP Perinatal Program on an as-needed basis.

	 	(h)	 	Hotline Reports – The MCO must submit quarterly status reports of the Member Hotline,
the Behavioral Health Services Hotline, and the Provider Hotline performance compared to
the performance standards set out in Sections 8.1.4.7, 8.1.5.6, and 8.1.15.3, using the
format specified by HHSC in Uniform Managed Care Manual Chapter 5.4.3, “Hotline
Reports.”	 

If the MCO is not meeting a hotline performance standard, HHSC may require the MCO to
submit monthly hotline performance reports and implement corrective actions until the
hotline performance standards are met. If a MCO has a single

hotline serving multiple Service Areas, multiple MCO Programs, or multiple hotline functions,
(i.e. Member, Provider, Behavioral Health Services hotlines), HHSC may request on an annual
basis that the MCO submit certain hotline response information by MCO Program, Service Area,
and hotline function, as applicable to the MCO. HHSC may also request additional hotline
information if a MCO is not meeting a hotline performance standard.

	 	(i)	 	Historically Underutilized Business (HUB) Reports – Upon contract award, the MCO must
attend a post award meeting, which will be scheduled by the HHSC HUB Program Office, to
discuss the development and submission of a HUB Subcontracting Plan (HSP) Progress
Assessment Report (PAR) for the inclusion of HUBs. The MCO must maintain its original HSP
and submit monthly PAR reports documenting the MCO’s good faith effort to comply with the
originally submitted HSP. The report must be in the format included in Uniform Managed
Care Manual Chapter 5.4.4.4 for the HUB monthly reports. The MCO must comply with the HUB
Program’s HSP and PAR requirements for all Subcontractors.	 

	 	(j)	 	Medicaid Managed Care Texas Health Steps Medical Checkups Reports – Medicaid MCOs must
submit reports identifying the number of New Members and Existing Members receiving
Texas Health Steps medical checkups, or refusing to obtain the medical checkups.
Medicaid MCOs must also document and report those Members refusing to obtain the medical
checkups. The documentation must include the reason the Member refused the checkup or
the reason the checkup was not received.	 

The definitions, timeframe, format, and details of the reports are contained and described
in Uniform Managed Care Manual Chapters 12.4, 12.5, 12.6, and 12.13.

	 	(k)	 	Children of Migrant Farm Workers Annual Plan – Medicaid MCOs must submit an
annual plan in the timeframe and format described in Uniform Managed Care Manual
Chapters 12.1 and 12.2 that describes how the MCO will identify and provide accelerated
services to Children of Migrant Farm Workers (FWC).	 

	 	(l)	 	Children of Migrant Farm Workers Annual Report (FWC Annual Report) – Medicaid MCOs must
submit an annual report, in the timeframe and format described in Uniform Managed Care
Manual Chapters 12.1 and 12.3 about the identification of and delivery of services to
Children of Migrant Farm Workers (FWC).	 

	 	(m)	 	Frew Quarterly Monitoring Report — each calendar year quarter, HHSC prepares a report for
the court that addresses the status of the Consent Decree paragraphs of the Frew vs. Suehs
lawsuit. Medicaid MCOs must prepare responses to questions posed by HHSC on the Frew
Quarterly Monitoring Report template. The timeframe, format, and details of the report are
set forth in Uniform Managed Care Manual Chapter 12.

	 	(n)	 	Frew Health Care Provider Training Report – Per the Frew vs. Suehs “Corrective Action
Order: Health Care Provider Training,” HHSC must compile a summary of the training health
care providers receive throughout the year for the October Quarterly Monitoring Report for
the court. Medicaid MCOs must report to HHSC health care provider training conducted
throughout the year to be included in this report. The training report must include, at a
minimum, the number and percent of Medicaid providers that received the training and a
description of feedback on the subject matter and methodology of the training. The
timeframe, format, and details of the report are contained and described in Uniform Managed
Care Manual Chapter 12.	 

	 	(o)	 	Frew Provider Recognition Report – Per the Frew vs. Suehs “Corrective Action Order: Health
Care Provider Training,” HHSC must recognize Medicaid enrolled healthcare providers who
complete Frew and/or Texas Health Steps training. Medicaid MCOs must collect and track
provider training recognition information for all Frew and/or Texas Health Steps trainings
conducted and report the names of those Medicaid enrolled healthcare providers who consent
to being recognized to HHSC quarterly. The timeframe, format, and details of the report are
contained and described in Uniform Managed Care Manual Chapter 12.

(p) Medicaid Disproportionate Share Hospital (DSH) Reports – Medicaid MCOs must file
preliminary and final Medicaid DSH Reports so that HHSC can identify and reimburse
Hospitals that qualify for Medicaid DSH funds. The preliminary and final DSH Reports must
include the data elements and be submitted in the form and format specified by HHSC in
Uniform Managed Care Manual Chapter 5.3.9, “Disproportionate Share Hospital Report.” The
preliminary DSH Reports are due on or before March 1 of the year following the federal
fiscal reporting year. The finalDSH Reports are due no later than April 1 of the
year following the federal fiscal reporting year.

	 	(q)	 	Out-of-Network Utilization Reports – The MCO must file quarterly Out-of Network
Utilization Reports in accordance with Uniform Managed Care Manual Chapter 5.3.8, “Out Of
Network (OON) Utilization Report.” Quarterly reports are due 30 days after the end of each
quarter.	 

	 	(r)	 	Drug Utilization Review (DUR) Reports – MCOs must submit the DUR reports in accordance
with the requirements of HHSC’s Uniform Managed Care Manual.	 

8.1.21 Pharmacy Services

The MCO must provide pharmacy-dispensed prescriptions as a Covered Service.

The MCO must allow Members access to prescribed drugs though formularies and a preferred drug
list (PDL) developed by HHSC. HHSC will maintain separate Medicaid and CHIP formularies, and a
Medicaid PDL. The MCO must administer the PDL in a way that allows access to all non-preferred
drugs that are on the formulary through a structured prior authorization process.

The following information must be submitted to HHSC for review and approval during Readiness
Review, then after the Operational Start Date prior to any changes: pharmacy clinical guidelines;
and prior authorization policies and procedures. In determining whether to approve these
materials, HHSC will review factors such as the clinical efficacy and Members’ needs.

The MCO may include mail-order pharmacies in their Networks, but must not require Members to
use them. Members who opt to use this service may not be charged fees, including postage and
handling fees.

HHSC will provide the MCO daily formulary and PDL files. The MCO must update its formulary and
PDL files, or ensure that its Pharmacy Benefits Manager (PBM) has updated its formulary and
PDL files, at least weekly. At HHSC’s direction, the MCO or PBM must be able perform off-cycle
formulary and PDL file updates. Such updates must be completed within one (1) Business Day.

The MCO must ensure that prescribers have the ability to utilize real time e-prescribing, which
at a minimum will allow for: eligibility confirmation, PDL benefit confirmation, identification
of “alternative” (i.e., preferred) drugs that can be used in place of non- preferred drugs,
medication history, and prescription routing.

The MCO must allow pharmacies to fill prescriptions for covered drugs ordered by any licensed
provider regardless of Network participation.

The MCO will encourage Network pharmacies to also become Medicaid-enrolled durable medical
equipment (DME) providers.

The MCO must educate Network Providers about how to access the Medicaid and CHIP formularies and
the Medicaid PDL on HHSC’s website, and how to use HHSC’s free subscription service for accessing
such information through the internet or hand-held devices.

The MCO is responsible for negotiating reasonable pharmacy provider reimbursement rates,
including individual MCO maximum allowable cost (MAC) rates. The MCO must ensure that, as an
aggregate, rates comply with 42 C.F.R. Part 50, Subpart E, regarding upper payment limits.

The MCO must comply with the requirements of Sections 8.2.1 (Medicaid) and 8.4.3 (CHIP)
regarding payment of out-of-network pharmacy claims.

8.1.21.1 Prior Authorization for Prescription Drugs

The MCO must adopt prior authorization policies and procedures that comply with state and
federal laws, including 42 U.S.C. §1369r-8 and Texas Government Code §531.073 and §533.005.

The MCO must adhere to HHSC’s PDL for Medicaid. Preferred drugs must adjudicate as payable
without prior authorization, unless they are subject to Clinical Edits. HHSC approval is
required for all Clinical Edit policies and any revisions thereto.

HHSC’s Medicaid and CHIP prior authorization policies, and the Medicaid PDL, are available on
HHSC’s website at http://www.txvendordrug.com/index.shtml. HHSC will provide the MCO
written notice of changes to website information, and will identify Clinical Edits that are
mandatory for MCOs on its Vendor Drug Program website.

HHSC’s website includes exception criteria for each drug class included on HHSC’s Medicaid PDL.
These exception criteria describe the circumstances under which a non- preferred drug may be
dispensed without a prior authorization.

The MCO may require that the prescriber’s office request prior authorization as a condition of
coverage or payment for a prescription drug provided that: 1) a decision whether to approve or
deny the prescription is made within 24 hours of the prior authorization request, and 2) if a
Member’s prescription for a medication is not filled when a prescription is presented to the
pharmacist due to a prior authorization requirement, the MCO must instruct the pharmacist to
dispense a 72 hour emergency supply of the prescribed medication if the provider cannot be
reached. The pharmacy may fill consecutive 72 hour supplies if the prescriber remains
unavailable. The MCO must reimburse the pharmacy for dispensing the temporary supply of
medication. The MCO may not charge pharmacies for prior authorization transaction costs or for
any software costs related to processing prior authorizations.

The MCO must provide access to a toll-free call center for prescribers to call to request a prior
authorization for non-preferred drugs or drug that are subject to Clinical Edits. The

MCO must allow prescribers to submit automated prior authorization requests, as well as
requests by phone or fax. If the MCO or its PBM operates a separate call center for prior
authorization requests, the prior authorization call center must meet the provider hotline
performance standards set forth in Section 8.1.4.7, “Provider Hotline.”

The MCO may not require a prior authorization for any drug exempted from prior
authorization requirements by federal law.

For drug products purchased by a pharmacy through the Health Resources Services Administration
(HRSA) 340B discount drug program, the MCO may only impose Clinical Edit prior authorization
requirements. These drugs must be exempted from all PDL prior authorization requirements.

The MCO must notify the prescriber’s office of a prior authorization approval or denial within
24 hours of the prior authorization request. In the event that the MCO cannot make a prior
authorization determination within 24 hours, the MCO 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.

The requirement that the Member be given at least a 72-hour supply for a new medication does not
apply when the dispensing pharmacist determines that the taking of the prescribed medication
would jeopardize the health or safety of the Member. In such event, the MCO must require that its
participating pharmacist make good faith efforts to contact the prescriber.

A provider may appeal prior authorization denials on a Member’s behalf, in accordance with
Sections 8.2.6 (Medicaid) and 8.4.2 (CHIP).

8.1 .21 .2 Coverage Exclusions

In accordance with Section 1927 of the Social Security Act, 42 U.S.C.A. §1396r-8, the MCO must
exclude coverage for any drug marketed by a drug company (or labeler) that does not participate
in the federal drug rebate program. The MCO 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 Medicaid rebates for that product.

8.1 .21 .3 DESI Drugs

The MCO must not provide coverage under any circumstances for drug products that have been
classified as less-than-effective by the Food and Drug Administration (FDA) Drug Efficacy Study
Implementation (DESI).

8.1.21.4 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 Texas Medicaid Program must sign
an agreement with the federal government to provide the pharmacy claims information that is
necessary to return federal rebates to the state.

The MCO is not authorized to negotiate rebates with drug companies for preferred pharmaceutical
products. HHSC or its designee will negotiate rebate agreements. If the MCO or its PBM has an
existing rebate agreement with a manufacturer, all Medicaid and CHIP outpatient drug claims,
including provider-administered drugs, must be exempt from such rebate agreements.

The MCO must implement a process to timely support HHSC’s Medicaid and CHIP rebate dispute
resolution processes.

	 	a.	 	The MCO must allow HHSC or its designee to contact Network pharmacy
Providers to verify information submitted on claims, and upon HHSC’s request,
assist with this process.	 

	 	b.	 	The MCO must establish a single point of contact where the HHSC’s designee
can send information on claims needing correction.	 

	 	c.	 	HHSC will notify the MCO of claims submitted with incorrect information. The
MCO must correct this information on the next scheduled pharmacy encounter data
transmission.	 

8.1.21.5 Drug Utilization Review Program

The MCO must have a process in place to conduct prospective and retrospective utilization review
of prescriptions that is consistent with Medicare Part D drug utilization review standards (see
42 C.F.R. 423.153). Prospective review should take place at the dispensing pharmacy’s
point-of-sale (POS). The prospective review at the POS should compare the prescribed medication
against previous drug history for drug-to-drug, ingredient duplication, therapeutic duplication,
and high dose situations. The MCO’s retrospective review should monitor prescriber and contracted
pharmacies for outlier activities. Retrospective reviews should also determine whether services
were delivered as prescribed and consistent with the MCO’s payment policies and procedures.

Prior to the Operational Start Date, HHSC will transmit a file with up to one year of medication
history for Members with recent Medicaid eligibility, moving from the fee-forservice program.
Outgoing MCOs will transfer this data for members moving to a new MCO.

8.1.21.6 Pharmacy Benefit Manager (PBM)

The MCO must use a PBM to process prescription claims. The PBM must pay claims in accordance with
§843.339 of the Texas Insurance Code. This law requires PBMs to pay clean claims: (1) submitted
electronically no later than 18 days after adjudication, and (2) not electronically submitted no
later than 21 days after adjudication.

The MCO must identify the proposed PBM and the ownership of the proposed PBM. If the PBM is owned
wholly or in part by a retail pharmacy provider, chain drug store or pharmaceutical manufacturer,
the MCO will submit a written description of the assurances and procedures that must be put in
place under the proposed PBM Subcontract, such as an independent audit, to ensure no conflicts of
interest exist and ensure the confidentiality of proprietary information. The MCO must provide a
plan documenting how it will monitor such Subcontractors. These assurances and procedures must be
submitted for HHSC’s review during Readiness Review (see Section 7, “Transition Phase
Requirements”) then prior to initiating any PBM Subcontract after the Operational Start Date.

8.1 .21 .7 Financial Disclosures for Pharmacy Services

The MCO must disclose all financial terms and arrangements for remuneration of any kind that
apply between the MCO and any prescription drug manufacturer or labeler, including, without
limitation, formulary management, drug-switch programs, educational support, claims processing,
pharmacy network fees, data sales fees, and any other fees. Article 9 of Attachment A, “Uniform
Managed Care Contract Terms and Conditions,” provides HHSC with the right to audit such
information at any time. HHSC agrees to maintain the confidentiality of information disclosed by
the MCO pursuant to this section, to the extent that such information is confidential under Texas
or federal law.

8.1 .21 .8 Limitations Regarding Registered Sex Offenders

As of the Effective Date of this Contract, HHSC’s Medicaid and CHIP formularies do not include
sexual performance enhancing medications. If such medications are added to the Medicaid or CHIP
formulary after the Effective Date of this Contract, then MCO must comply with the requirements
of Texas Government Code §531.071. This law prohibits the provision of sexual performance
enhancing medication to persons required to register as sex offenders under Chapter 62, Texas
Code of Criminal Procedure.

8.1 .21 .9 Specialty Drugs

HHSC will adopt rules concerning specialty pharmacy services. Once HHSC adopts these rules, the
MCO must develop policies and procedures for reclassifying prescription drugs from retail to
specialty drugs. The MCO’s policies and procedures must be consistent with HHSC’s rules, and
include processes for notifying Network Pharmacy Providers.

As set forth in Section 8.1.4, the MCO may enter into selective contracts for specialty
pharmacy services prior to HHSC’s adoption of rules concerning specialty pharmacy services,
subject to the following conditions. These arrangements must comply with Texas Government Code
§533.005(a)(23)(G). Furthermore, if these specialty pharmacy services contracts conflict with
final rules promulgated by HHSC, then the MCO must terminate the contracts or amend them to
comply with the rules.

8.1 .21.10 This Section Intentionally Left Blank

8.1.22 Federally Qualified Health Centers (FQHCs) and Rural

Health Clinics (RHCs)

The MCO must make reasonable efforts to include FQHCs and RHCs (freestanding and
Hospital-based) in its Provider Network. If a Member visits an FQHC or RHC (or a Municipal Health
Department’s public clinic for Health Care Services) at a time that is outside of regular
business hours (as defined by HHSC in rules, including weekend days or holidays), the MCO is
obligated to reimburse the FQHC, RHC, or public clinic for Medically Necessary Covered Services.
The MCO must do so at a rate that is equal to the allowable rate for those services as determined
under Section 32.028 of the Human Resources Code. The Member does not need a referral from
his/her PCP.

MCOs are required to pay full encounter rates (as determined by HHSC) directly to FQHCs
and RHCs for Medically Necessary Covered Services.

	 	 	 	 	 
	HHSC cost settlements (or “wrap payments”) no longer apply.
		8.1.23		 	Payment by Members.

Except as provided in Section 8.1.23.1, MCOs, Network Providers, and Out-of-Network
Providers are prohibited from billing or collecting any amount from a Member for Covered
Services.

MCOs must inform Members of their responsibility to pay the costs for non-covered services, and
must require its Network Providers to:

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

	 	2.	 	obtain a signed private pay form from such Members.

8.1 .23.1 Cost Sharing

CHIP Network Providers and Out-of-Network Providers may collect copayments authorized
in the CHIP State Plan from CHIP Members.

CHIP families that meet the enrollment period cost share limit requirement must report it to the
HHSC Administrative Services Contractor. The HHSC Administrative Service Contractor notifies the
MCO that a family’s cost share limit has been reached. Upon

notification from the HHSC Administrative Services Contractor that a family has reached
its cost-sharing limit for the term of coverage, the MCO will generate and mail to the CHIP
Member a new Member ID card within five calendar days, showing that the CHIP Member’s
cost-sharing obligation for that term of coverage has been met. No cost- sharing may be
collected from these CHIP Members for the balance of their term of coverage.

Providers are responsible for collecting all Member copayments at the time of service.
Copayments that families must pay vary according to their income level.

Copayments do not apply, at any income level, to Covered Services that qualify as well- baby and
well-child care services, preventive services, or pregnancy-related services as defined by 42
C.F.R. §457.520 and SSA § 2103(e)(2).

Except for costs associated with unauthorized non-emergency services provided to a Member by
Out-of-Network providers and for non-covered services, the copayments outlined in the CHIP Cost
Sharing Table in Uniform Managed Care Manual Chapter 6.3, “CHIP Cost Sharing,” are the only
amounts that an MCO may impose and a provider may collect from a CHIP-eligible family. As required
by 42 C.F.R. §457.515, this includes, without limitation, Emergency Services that are provided at
an Out-of-Network facility. Cost sharing for such Emergency Services is limited to the copayment
amounts set forth in the CHIP Cost Sharing Table. If the MCO would have paid a lesser amount than
the CHIP copayment in the absence of a CHIP copayment, then the copayment amount will be capped at
the lesser amount.

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

An MCO’s monthly Capitation Payment will not be adjusted for a family’s failure to make its CHIP
premium payment. There is no relationship between HHSC’s Capitation Payment to the MCO for
coverage provided during a month and the family’s payment of its CHIP premium obligation for
that month.

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

As of the Effective Date of the Contract, cost sharing does not apply to Medicaid Members. If
HHSC implements cost-sharing for Medicaid Members after the Effective Date of this Contract, the
requirements of this section will apply, and HHSC will amend the Uniform Managed Care Manual to
include Medicaid Cost Sharing Tables. Except for costs associated with unauthorized non-emergency
services provided to a Member by Out-of-Network providers and for non-covered services, the
Medicaid copayments outlined in the Uniform Managed Care Manual will be the only amounts that an
MCO may impose and a provider may collect from a Medicaid-eligible family.

8.1.24 Immunizations

The MCO must educate Providers on the Immunization Standard Requirements set forth in
Chapter 161, Health and Safety Code; the standards in the Advisory Committee on Immunization
Practices (ACIP) Immunization Schedule; the AAP Periodicity Schedule for CHIP Members; and the
Texas Health Steps Periodicity Schedule for Medicaid Members. The MCO must educate Providers that
Medicaid Members birth through age 20 must be immunized during the Texas Health Steps checkup
according to the ACIP routine immunization schedule. The MCO shall also educate Providers that
the screening provider is responsible for administration of the immunization and should not refer
children to Local Health Departments to receive immunizations.

The MCO must educate Providers about, and require Providers to comply with, the
requirements of Chapter 161, Health and Safety Code, relating to the Texas Immunization
Registry (ImmTrac), to include parental consent on the Vaccine Information Statement.

The MCO must notify Medicaid and CHIP Providers that they may enroll, as applicable, as Texas
Vaccines for Children Providers. In addition, the MCO must work with HHSC and Providers to
improve the reporting of immunizations to the statewide ImmTrac Registry.

8.1.25 Dental Coverage

The MCO is not responsible for reimbursing dental providers for preventive and therapeutic
dental services obtained by Medicaid or CHIP Members, with the exception of the dental services
available to STAR+PLUS Members in the enrolled in the 1915(c) STAR+PLUS Waiver. However,
medical and/or Hospital charges, such as anesthesia, that are necessary in order for Medicaid
or CHIP Members to access standard therapeutic dental services, are Covered Services for
Medicaid or CHIP Members. The MCO must provide access to facilities and physician services that
are necessary to support the dentist who is providing dental services to a Medicaid or CHIP
Member under general anesthesia or intravenous (IV) sedation.

The MCO must inform Network facilities, anesthesiologists, and PCPs what authorization procedures
are required, and how Providers are to be reimbursed for the preoperative evaluations by the PCP
and/or anesthesiologist and for the facility services. For dental-related medical Emergency
Services, the MCO must reimburse Network and Out-of-Network providers in accordance with federal
and state laws, rules, and regulations.

8.2 Additional Medicaid MCO Scope of Work

The following provisions apply to any MCO participating in the STAR or STAR+PLUS MCO
Program.

8.2.1 Continuity of Care and Out-of-Network Providers

The MCO must ensure that the care of newly enrolled Members is not disrupted or interrupted.
The MCO must take special care to provide continuity in the care of newly enrolled Members whose
health or behavioral health condition has been treated by specialty care providers or whose
health could be placed in jeopardy if Medically Necessary Covered Services are disrupted or
interrupted. See Section 8.1.14, “Disease Management/Health Home Services.” for specific
requirements for new Members transferring to the MCO’s Disease Management/Health Home Service
Program.

The MCO is required to ensure that Expansion Service Area clients receiving acute care services
through a prior authorization as of the STAR and STAR+PLUS Operational Start Date receive
continued authorization of those services for the shorter of: 90 calendar days after Operational
Start Date, or (2) until the expiration date of the prior authorization. The MCO is also required
to ensure that Expansion Service Area clients receiving Community-based Long Term Care Services
as of the STAR+PLUS Operational Start Date receive continued authorization of those services for
up to six (6) months after the Operational Start Date, unless a new assessment has been completed
and new authorizations issued as described in Section 8.3.2.4. During transition, an HHSC’s
Administrative Services Contractor or an HHS Agency will provide the MCO with files identifying
clients with prior authorizations for acute care services and clients receiving Community-based
Long Term Care Services. The MCO is required to work with HHSC, its Administrative Services
Contractor, and DADS to ensure that all necessary authorizations are in place within the MCO’s
system(s) for the continuation of Community-based Long Term Care Services and prior authorized
acute care services. The MCO must describe the process it will use to ensure continuation of
these services in its Transition/Implementation Plan for the Expansion Service Areas as noted in
Section 7.3.1.1 Contract Start-Up and Planning. The MCO is also required to ensure that
Community-based Long Term Care Services Providers in the Expansion Service Areas are educated
about and trained regarding the process for continuing such services prior to the Operational
Start Date (see Section 8.3.6.1).

As described in Section 8.1.3.2, the MCO must allow pregnant Members past the 24th
week of pregnancy to remain under the care of the Member’s current OB/GYN through the Member’s
postpartum checkup, even if the provider is Out-of-Network. If a Member wants to change her
OB/GYN to one who is in the Network, she must be allowed to do so if the Provider to whom she
wishes to transfer agrees to accept her in the last

trimester of pregnancy.

The MCO must pay a Member’s existing Out-of-Network providers for Medically Necessary Covered
Services until the Member’s records, clinical information and care can be transferred to a
Network Provider, or until such time as the Member is no longer enrolled in that MCO, whichever
is shorter. Payment to Out-of-Network providers must be made within the time period required
for Network Providers. The MCO must comply with Out-of-Network provider reimbursement rules as
adopted by HHSC.

With the exception of pregnant Members who are past the 24th week of pregnancy, this
Article does not extend the obligation of the MCO to reimburse the Member’s existing
Out-of-Network providers for ongoing care for:

	 	1.	 	more than 90 days after a Member enrolls in the MCO’s Program, or

	 	2.	 	for more than nine (9) months in the case of a Member who, at the time of
enrollment in the MCO, has been diagnosed with and receiving treatment for a
terminal illness and remains enrolled in the MCO.	 

The MCO’s obligation to reimburse the Member’s existing Out-of-Network provider for services
provided to a pregnant Member past the 24th week of pregnancy extends through
delivery of the child, immediate postpartum care, and the follow-up checkup within the first
six (6) weeks of delivery.

If a Member moves out of a Service Area, the MCO must provide or pay Out-of-Network providers in
the new Service Area who provide Medically Necessary Covered Services to Members through the end
of the period for which the MCO received a Capitation Payment for the Member.

If Covered Services are not available within the MCO’s Network, the MCO must provide Members
with timely and adequate access to Out-of-Network services for as long as those services are
necessary and not available in the Network, in accordance with 42 C.F.R. §438.206(b)(4). The MCO
will not be obligated to provide a Member with access to Out-of-Network services if such
services become available from a Network Provider.

The MCO must ensure that each Member has access to a second opinion regarding the use of any
Medically Necessary Covered Service. A Member must be allowed access to a second opinion from a
Network Provider or Out-of-Network provider if a Network Provider is not available, at no cost
to the Member, in accordance with 42 C.F.R. §438.206(b)(3).

8.2.2 Provisions Related to Covered Services for Medicaid

Members

8.2.2.1 Emergency Services

MCO policy and procedures, Covered Services, claims adjudication methodology, and reimbursement
performance for Emergency Services must comply with all applicable state and federal laws, rules,
and regulations including 42 C.F.R. §438.114, whether the provider is Network or Out-of-Network.
MCO policies and procedures must be consistent with the prudent layperson definition of an
Emergency Medical Condition and the claims adjudication processes required under the Contract and
42 C.F.R. §438.114.

The MCO must pay for professional, facility, and ancillary services provided in a Hospital
emergency department that are Medically Necessary to perform the medical screening examination
and stabilization of a Member presenting with an Emergency Medical Condition or an Emergency
Behavioral Health Condition, whether rendered by Network Providers or Out-of-Network providers.

The MCO cannot require prior authorization as a condition for payment for an Emergency Medical
Condition, an Emergency Behavioral Health Condition, or labor and delivery. The MCO cannot limit
what constitutes an Emergency Medical Condition on the basis of lists of diagnoses or symptoms.
The MCO cannot refuse to cover Emergency Services based on the emergency room provider, Hospital,
or fiscal agent not notifying the Member’s PCP or the MCO of the Member’s screening and treatment
within ten (10) calendar days of presentation for Emergency Services. The MCO may not hold the
Member who has an Emergency Medical Condition liable for payment of subsequent screening and
treatment needed to diagnose the specific condition or stabilize the patient. The MCO must accept
the emergency physician or provider’s determination of when the Member is sufficiently stabilized
for transfer or discharge.

A medical screening examination needed to diagnose an Emergency Medical Condition must be
provided in a Hospital based emergency department that meets the requirements of the Emergency
Medical Treatment and Active Labor Act (EMTALA) (42 C.F.R. §§489.20, 489.24 and 438.1
14(b)&(c)). The MCO must pay for the emergency medical screening examination, as required by 42
U.S.C. §1395dd. The MCO must reimburse for both the physician’s services and the Hospital’s
Emergency Services, including the emergency room and its ancillary services.

When the medical screening examination determines that an Emergency Medical Condition exists,
the MCO must pay for Emergency Services performed to stabilize the Member. The emergency
physician must document these services in the Member’s medical record. The MCO must reimburse
for both the physician’s and Hospital’s emergency stabilization services including the
emergency room and its ancillary services.

The MCO must cover and pay for Post-Stabilization Care Services in the amount, duration, and
scope necessary to comply with 42 C.F.R. §438.1 14(b)&(e) and 42 C.F.R. §422.113(c)(iii). The
MCO is financially responsible for post-stabilization care services obtained within or outside
the Network that are not pre-approved by a Provider or other MCO representative, but
administered to maintain, improve, or resolve the Member’s stabilized condition if:

	 	1.	 	the MCO does not respond to a request for pre-approval within one (1) hour;

2. the MCO cannot be contacted; or

	 	3.	 	the MCO representative and the treating physician cannot reach an agreement
concerning the Member’s care and a Network physician is not available for
consultation. In this situation, the MCO must give the treating physician the
opportunity to consult with a Network physician and the treating physician may
continue with care of the patient until an Network physician is reached. The MCO’s
financial responsibility ends as follows: the Network physician with privileges at
the treating Hospital assumes responsibility for the Member’s care; the Network
physician assumes responsibility for the Member’s care through	 

transfer; the MCO representative and the treating physician reach an agreement
concerning the Member’s care; or the Member is discharged.

8.2.2.2 Family Planning — Specific Requirements

The MCO must provide access to confidential family planning services.

The MCO must require, through Provider contract provisions, that Members requesting
contraceptive services or family planning services are also provided counseling and education
about the family planning and family planning services available to Members. The MCO must
develop outreach programs to increase community support for family planning and encourage
Members to use available family planning services.

The MCO must ensure that Members have the right to choose any Medicaid-enrolled family planning
provider, whether the provider chosen by the Member is in or outside the Provider Network. The
MCO must provide Members access to information about available providers of family planning
services and the Member’s right to choose any Medicaid-enrolled family planning provider.

The MCO must provide, at a minimum, the full scope of services available under the Texas
Medicaid program for family planning services. The MCO will reimburse family planning agencies
no less than the Medicaid fee-for service amounts for family planning services, including
Medically Necessary medications, contraceptives, and supplies and will reimburse Out-of-Network
family planning providers in accordance with HHSC’s administrative rules. The MCO cannot require
prior authorization for family planning services whether rendered by a Network or Out-of-Network
provider.

The MCO must provide medically approved methods of contraception to Members, provided that the
methods of contraception are Covered Services. Contraceptive methods must be accompanied by
verbal and written instructions on their correct use. The MCO must establish mechanisms to
ensure all medically approved methods of contraception are made available to the Member,
either directly or by referral to a Subcontractor.

The MCO must develop, implement, monitor, and maintain standards, policies and procedures for
providing information regarding family planning to Providers and Members, specifically regarding
State and federal laws governing Member confidentiality (including minors). Providers and family
planning agencies cannot require parental consent for minors to receive family planning services.
The MCO must require, through contractual provisions, that Subcontractors have mechanisms in
place to ensure Member’s (including minor’s) confidentiality for family planning services.

8.2.2.3 Texas Health Steps (EPSDT)
8.2.2.3.1 Medical Checkups

The MCO must develop effective methods to ensure that children birth through age 20
receive Texas Health Steps services when due and according to the recommendations established by
the Texas Health Steps periodicity schedule for children. The MCO must arrange for Texas Health
Steps services for all eligible Members, except when Members or their representatives knowingly
and voluntarily decline or refuse services after receiving sufficient information to make an
informed decision.

For New Members birth through age 20, overdue or upcoming Texas Health Steps medical checkups
should be offered as soon as practicable, but in no case later than 14 days of enrollment for
newborns, and no later than 90 days of enrollment for all other eligible child Members. A Texas
Health Steps annual medical checkup for an Existing Member age 36 months and older is due
beginning on the child’s birthday and is considered timely if it occurs no later than 364
calendar days after the child’s birthday. For purposes of this requirement, the terms “New
Member” and “Existing Member” are defined in Chapter 12.4 of the Uniform Managed Care Manual.

The MCO must have mechanisms in place to ensure that all newborn Members have an initial newborn
checkup before discharge from the Hospital and in accordance with the Texas Health Steps
periodicity schedule.

8.2.2.3.2 Oral Evaluation and Fluoride Varnish

The MCO must educate Providers on the availability of the Oral Evaluation and Fluoride Varnish
(OEVS) Medicaid benefit that can be rendered and billed by certified Texas Health Steps
providers when performed on the same day as the Texas Health Steps medical checkup. The Provider
education must include information about how to assist a Member with referral to a dentist to
establish a dental home.

8.2.2.3.3 Lab

The MCO must require Providers to send all Texas Health Steps newborn screens to the DSHS
Laboratory Services Section or to a laboratory approved by the department under Section 33.016 of
the Health and Safety Code. Providers must include detailed identifying information for all
screened newborn Members and the Member’s mother to allow DSHS to link the screens performed at
the Hospital with screens performed at the newborn follow up Texas Health Steps medical checkup.

All laboratory specimens collected as a required component of a Texas Health Steps checkup (see
Texas Medicaid Provider Procedures Manual for age-specific requirements) must be submitted to
the DSHS Laboratory Services Section or to a laboratory approved by the department under
Section 33.016 of the Health and Safety Code for analysis. The MCO must educate Providers about
Texas Health Steps Program requirements for submitting laboratory tests to the DSHS Laboratory
Services Section.

8.2.2.3.4 Education/Outreach

The MCO must ensure that Members are provided information and educational materials about
the services available through the Texas Health Steps Program, and how and when they may obtain
the services. The information should tell the Member how they can obtain dental benefits,
services through the Medical Transportation Program, and advocacy assistance from the MCO.
Standard language describing Texas Health Steps services, including medical, dental and case
management services is provided in the UMCM. The MCO should use this language for Member
Materials. Any additions to or deviations from the standard language must be reviewed and
approved by HHSC prior to publication and distribution to Members.

The MCO will encourage Network pharmacies to also become Medicaid-enrolled durable medical
equipment (DME) providers.

The MCO must provide outreach to Members to ensure they receive prompt services and are
effectively informed about available Texas Health Steps services. Each month, the MCO must
retrieve from the HHSC Administrative Services Contractor Bulletin Board System a list of Members
who are due and overdue Texas Health Steps services. Using these lists and its own internally
generated list, the MCO will contact such Members to schedule the service as soon as possible.
The MCO outreach staff must coordinate with Texas Health Steps outreach unit to ensure that
Members have access to the Medical Transportation Program, and that any coordination with other
agencies is maintained.

The MCO must cooperate and coordinate with the State, outreach programs and Texas Health Steps
regional program staff and agents to ensure prompt delivery of services to Children of Migrant
Farm Workers and other migrant populations who may transition into and out of the MCO’s Program
more rapidly and/or unpredictably than the general population.

The MCO must make an effort to coordinate and cooperate with existing community and school-based
health and education programs that offer services to school-aged children in a location that is
both familiar and convenient to the Members. The MCO must make a good faith effort to comply with
Head Start’s requirement that Members participating in

Head Start receive their Texas Health Steps checkup no later than 45 days after
enrolling into either program.

8.2.2.3.5 Training

The MCO must provide appropriate training to all Network Providers and Provider staff in the
Providers’ area of practice regarding the scope of benefits available and the Texas Health Steps
Program. Training must include:

	 	1.	 	Texas Health Steps benefits;

	 	2.	 	the periodicity schedule for Texas Health Steps medical checkups and
immunizations;	 

	 	3.	 	the required elements of Texas Health Steps medical checkups;

	 	4.	 	providing or arranging for all required lab screening tests (including

leadscreening), and Comprehensive Care Program (CCP) services available under the
Texas Health Steps program to Members birth through age 20 years,

	 	5.	 	Medical Transportation services available to Members such as rides to
healthcare service by bus, taxi, van, airfare, etc., gas money, mileage
reimbursement, meals and lodging when away from home;	 

	 	6.	 	importance of updating contact information to ensure accurate Provider
Directories and the Medicaid Online Provider Lookup;	 

	 	7.	 	information about MCO’s process for acceleration of Texas Health Steps
services for Children of Migrant Farm Workers;	 

	 	8.	 	missed appointment referrals and assistance provided by the Texas Health Steps
Outreach and Informing Unit; and	 

	 	9.	 	administrative issues such as claims filing and services available to Members.

MCO must also educate and train Providers regarding the requirements imposed on HHSC and
contracting MCOs under the Consent Decree and Corrective Action Orders entered in Frew v. Suehs,
et. al. Providers should be educated and trained to treat each Texas Health Steps visit as an
opportunity for a comprehensive assessment of the Member.

8.2.2.3.6 Data Validation

The MCO must require all Texas Health Steps Providers to submit claims for services paid (either
on a capitated or fee-for service basis) on the CMS 1500 claim form and use the HIPAA compliant
code set required by HHSC.

Encounter Data will be validated by chart review of a random sample of Texas Health Steps
eligible enrollees against monthly Encounter Data reported by the MCO. HHSC or its designee will
conduct chart reviews to validate that all screens are performed when due and as reported, and
that reported data is accurate and timely. Substantial deviation between reported and charted
Encounter Data could result in the MCO and/or Network Providers being investigated for potential
Fraud, Abuse, or Waste without notice to the MCO or the Provider.

8.2.2.4 Perinatal Services

The MCO’s perinatal Health Care Services must ensure appropriate care is provided to women and
infant Members from the preconception period through the infant’s first year of life. The MCO’s
perinatal health care system must comply with the requirements of the Texas Health and Safety
Code, Chapter 32 (the Maternal and Infant Health Improvement Act) and administrative rules
codified at 25 T.A.C. Chapter 37, Subchapter M.

The MCO must have a perinatal health care system in place that, at a minimum, provides the
following services:

	 	1.	 	pregnancy planning and perinatal health promotion and education for
reproductive-age women;	 

	 	2.	 	perinatal risk assessment of non-pregnant women, pregnant and postpartum
women, and infants up to one year of age;	 

	 	3.	 	access to appropriate levels of care based on risk assessment,
including emergency care;	 

	 	4.	 	transfer and care of pregnant women, newborns, and infants to tertiary care
facilities when necessary;	 

	 	5.	 	availability and accessibility of OB/GYNs, anesthesiologists, and
neonatologists capable of dealing with complicated perinatal problems; and	 

	 	6.	 	availability and accessibility of appropriate outpatient and inpatient
facilities capable of dealing with complicated perinatal problems.	 

The MCO must have a process to expedite scheduling a prenatal appointment for an obstetrical exam
for a Member that meets the eligibility criteria to be designated in the Pregnant Woman Risk Group
no later than two (2) weeks after receiving the daily Enrollment File verifying the Member’s
enrollment into the MCO or has a confirmed diagnosis indicating pregnancy.

The MCO must have procedures in place to contact and assist a pregnant/delivering Member in
selecting a PCP for her baby either before the birth or as soon as the baby is born.

The MCO must provide inpatient care and professional services relating to labor and delivery
for its pregnant/delivering Members for up to 48 hours following an uncomplicated vaginal
delivery and 96 hours following an uncomplicated Caesarian delivery. The MCO must provide
neonatal care for its newborn Members until the time of discharge.

The MCO must Adjudicate provider claims for services provided to a newborn Member in accordance
with HHSC’s claims processing requirements using the proxy ID number or State-issued Medicaid ID
number. The MCO cannot deny claims based on a provider’s non-use of State-issued Medicaid ID
number for a newborn Member. The MCO must accept provider claims for newborn services based on
mother’s name and/or Medicaid ID number with accommodations for multiple births, as specified by
the MCO.

The MCO must notify providers involved in the care of pregnant/delivering women and newborns
(including Out-of-Network providers and Hospitals) of the MCO’s prior authorization
requirements. The MCO cannot require a prior authorization for services provided to a
pregnant/delivering Member or newborn Member for a medical condition that requires Emergency
Services, regardless of when the emergency condition arises.

8.2.2.5 Sexually Transmitted Diseases (STDs) and Human Immunodeficiency Virus (H IV)

The MCO must provide STD services that include STD/HIV prevention, screening, counseling,
diagnosis, and treatment. The MCO is responsible for implementing procedures to ensure
that Members have prompt access to appropriate services for STDs, including HIV. The MCO
must allow Members access to STD services and HIV diagnosis services without prior
authorization or referral by a PCP.

The MCO must comply with Texas Family Code Section 32.003, relating to consent to treatment by
a child. The MCO must provide all Covered Services required to form the basis for a diagnosis
by the Provider as well as the STD/HIV treatment plan.

The MCO must make education available to Providers and Members on the prevention, detection and
effective treatment of STDs, including HIV.

The MCO must require Providers to report all confirmed cases of STDs, including HIV, to the local
or regional health authority according to 25 T.A.C. §§97.131 — 97.134, using the required forms
and procedures for reporting STDs. The MCO must require the Providers to coordinate with the HHSC
regional health authority to ensure that Members with

confirmed cases of syphilis, chancroid, gonorrhea, chlamydia and HIV receive risk
reduction and partner elicitation/notification counseling.

The MCO must have established procedures to make Member records available to public health
agencies with authority to conduct disease investigation, receive confidential Member
information, and provide follow up activities.

The MCO must require that Providers have procedures in place to protect the confidentiality of
Members provided STD/HIV services. These procedures must include, but are not limited to, the
manner in which medical records are to be safeguarded, how employees are to protect medical
information, and under what conditions information can be shared. The MCO must inform and
require its Providers who provide STD/HIV services to comply with all state laws relating to
communicable disease reporting requirements. The MCO must implement policies and procedures to
monitor Provider compliance with confidentiality requirements.

The MCO must have policies and procedures in place regarding obtaining informed consent and
counseling Members provided STD/HIV services.

8.2.2.6 Tuberculosis (TB)

The MCO must provide Members and Providers with education on the prevention, detection and
effective treatment of tuberculosis (TB). The MCO must establish mechanisms to ensure all
procedures required to screen at-risk Members and to form the basis for a diagnosis and proper
prophylaxis and management of TB are available to all Members, except services referenced in
Section 8.2.2.8 as Non-Capitated Services. The MCO must develop policies and procedures to ensure
that Members who may be or are at risk for exposure to TB are screened for TB. An at-risk Member
means a person who is susceptible to TB because of the association with certain risk factors,
behaviors, drug resistance, or environmental conditions. The MCO must consult with the local TB
control program to ensure that all services and treatments are in compliance with the

guidelines recommended by the American Thoracic Society (ATS), the Centers for
Disease Control and Prevention (CDC), and DSHS policies and standards.

The MCO must implement policies and procedures requiring Providers to report all confirmed or
suspected cases of TB to the local TB control program within one (1) Business Day of
identification, using the most recent DSHS forms and procedures for reporting TB. The MCO must
provide access to Member medical records to DSHS and the local TB control program for all
confirmed and suspected TB cases upon request.

The MCO must coordinate with the local TB control program to ensure that all Members with
confirmed or suspected TB have a contact investigation and receive Directly Observed Therapy
(DOT). The MCO must require, through contract provisions, that Providers report to DSHS or the
local TB control program any Member who is noncompliant, drug resistant, or who is or may be
posing a public health threat. The MCO must cooperate with the local TB control program in
enforcing the control measures and quarantine procedures contained in Chapter 81 of the Texas
Health and Safety Code.

The MCO must have a mechanism for coordinating a post-discharge plan for follow-up DOT with the
local TB program. The MCO must coordinate with the DSHS South Texas Hospital and Texas Center
for Infectious Disease for voluntary and court-ordered admission, discharge plans, treatment
objectives and projected length of stay for Members with multi-drug resistant TB.

8.2.2.7 Objection to Provide Certain Services

In accordance with 42 C.F.R. §438.102, the MCO may file an objection based on moral or
religions grounds to providing, reimbursing for, or providing coverage of a Covered Service or
a counseling or referral service related to the Covered Service. The MCO must work with HHSC to
develop a work plan to complete the necessary tasks and determine an appropriate date for
implementation of the requested changes to the requirements related to Covered Services. The
work plan will include timeframes for completing the necessary Contract and waiver amendments,
adjustments to Capitation Rates, identification of the MCO and enrollment materials needing
revision, and notifications to Members.

In order to meet the requirements of this section, no less than 120 days prior to the proposed
effective date of a policy change, the MCO must notify HHSC of grounds for and provide detail
concerning its moral or religious objections and the specific services covered under the
objection.

8.2.2.8 Medicaid Non-capitated Services

The following Texas Medicaid programs, services, or benefits have been excluded from MCO Covered
Services. Medicaid Members are eligible to receive these Non-capitated Services on a
Fee-for-Service basis, or through a Dental MCO (for most dental

services). MCOs should refer to relevant chapters in the Provider Procedures Manual and
the Texas Medicaid Bulletins for more information.

	 	1.	 	Texas Health Steps dental (including orthodontia);

2. Texas Health Steps environmental lead investigation (ELI);

3. Early Childhood Intervention (ECI) case management/service coordination;

4. DSHS Targeted Case Management – coordinated by LMHAs

5. DSHS mental health rehabilitation;

6. Case Management for Children and Pregnant Women (CPW);

7. Texas School Health and Related Services (SHARS);

	 	8.	 	Department of Assistive and Rehabilitative Services Blind Children’s Vocational
Discovery and Development Program;	 

	 	9.	 	tuberculosis services provided by DSHS-approved providers (directly observed
therapy and contact investigation);	 

	 	10.	 	Health and Human Services Commission’s Medical Transportation;

	 	11.	 	DADS hospice services for STAR Members (STAR Members are disenrolled

from their health plan upon enrollment into hospice);

	 	12.	 	for STAR, Personal Care Services for persons birth through age 20 are
Noncapitated Services;	 

	 	13.	 	for STAR+PLUS, nursing facility services are Non-capitated Services; and

	 	14.	 	for Members who are enrolled in STAR or STAR+PLUS during an Inpatient Stay under
one of the exceptions identified in Attachment A, Section 5.06(a)(2), Hospital facility
charges associated with the Inpatient Stay are Non-Capitated Services under the
circumstances described in Attachment A, Section	 

5.06(a)(2).

8.2.2.9 Referrals for Non-capitated Services

Although Medicaid MCOs are not responsible for paying or reimbursing for Noncapitated Services,
MCOs are responsible for educating Members about the availability of Non-capitated Services, and
for providing appropriate referrals for Members to obtain or access these services. The MCO is
responsible for informing Providers that bills for all Non-capitated Services must be submitted to
HHSC’s Claims Administrator for reimbursement.

8.2.2.10 Cooperation with Immunization Registry

The MCO must work with HHSC and health care providers to improve the immunization rate of
Medicaid clients and the reporting of immunization information for inclusion in the Texas
Immunization Registry, called “I mmTrac.”

8.2.2.11 Case Management for Children and Pregnant Women

The MCO must coordinate services with CPW. This coordination includes, but is not limited to,
client education, outreach, case collaboration and referrals to CPW. The MCO is required to
follow referral procedures as outlined by the State. Referrals to CPW are to be based upon
guidelines provided by the State, assessment, plan of care, change in client’s physical,
mental or psychosocial condition or at client’s request.

Annually, all MCO Care Coordination/Case Management Staff must complete the THSteps Online module
titled: Case Management Services in Texas and maintain proof of completion.

8.2.2.12 Children of Migrant Farm Workers (FWC)

The MCO must cooperate and coordinate with the State, outreach programs, and Texas Health Steps
regional program staff and agents to ensure prompt delivery of services, in accordance with the
Contract’s timeframes, to FWC Members and other migrant populations who may transition into and
out of the MCO more rapidly and/or unpredictably than the general population.

The MCO must provide accelerated services to FWC Members. For purposes of this section,
“accelerated services” are services that are provided to FWC Members prior to their leaving Texas
for work in other states. Accelerated services include the provision of preventive Health Care
Services that will be due during the time the FWC Member is out of Texas. The need for accelerated
services must be determined on a case-by-case and according to the FWC Member’s age, periodicity
schedule and health care needs.

The MCO must develop an annual plan identifying the process and methods it will use to
identify/validate FWC and provide accelerated services to such Members in accordance with Chapter
12 of the Uniform Managed Care Manual.

8.2.3 Medicaid Significant Traditional Providers

In the first three (3) operational years of a Medicaid MCO Program, the MCO must offer
Network Provider agreements to all Medicaid Significant Traditional Providers (STPs) identified by
HHSC. Medicaid STPs are defined as pharmacy providers and providers of Acute and Long Term
Services and Supports and, for STAR+PLUS, Community-based Long Term Care providers in a county
that provided a significant level of care to Medicaid clients.

Medicaid STP requirements apply statewide for pharmacy and substance use disorder providers
(SUDs). For STAR MCOs, the STP requirements for other provider types apply only in the Hidalgo,
Jefferson, and Medicaid Rural Service Area(s); and in the following counties: Hudspeth, Carson,
Deaf Smith, Hutchinson, Potter, Randall, Swisher, Austin, Wharton, Matagorda, Bandera, Brooks,
Goliad, Karnes, Kenedy, Live Oak, and Fayette. For STAR+PLUS MCOs, the STP requirements for other
types of providers apply to the Jefferson, El Paso, Lubbock, and Hidalgo Service Areas; as well as
the following counties: Austin, Wharton, Matagorda, Bandera, Brooks, Goliad, Karnes, Kenedy, Live
Oak, and Fayette. The Procurement Library includes a list of Medicaid STPs by Service
Area.The STP requirement will be in place for three (3) years after the Operational Start
Date. During that time, providers who believe they meet the STP requirements may contact HHSC to
request HHSC’s consideration for STP status.

The MCO must give STPs the opportunity to participate in its Network for at least three (3)
years. However, the STP provider must:

	 	1.	 	agree to accept the MCO’s Provider reimbursement rate for the provider type; and	 

	 	2.	 	meet the standard credentialing requirements of the MCO, provided that lack of
board certification or accreditation by the Joint Commission on Accreditation of Health
Care Organizations (JCAHO) is not the sole grounds for exclusion from the Provider
Network.	 

8.2.4 Provider Complaints and Appeals

8.2.4.1 Provider Complaints

MCOs must develop, implement, and maintain a system for tracking and resolving all Medicaid
Provider complaints. Within this process, the MCO must respond fully and completely to each
complaint and establish a tracking mechanism to document the status and final disposition of each
Provider complaint. The MCO must resolve Provider complaints within 30 days from the date the
complaint is received. The HMO is subject to remedies, including liquidated damages, if at least
98 percent of Provider Complaints are not resolved within 30 days of receipt of the Complaint by
the HMO. Please see the Attachment A “Uniform Managed Care Contract Terms & Conditions” and
Attachment B-3, “Deliverables/Liquidated Damages Matrix.”

MCOs must also resolve Provider complaints received by HHSC and referred to the MCOs no later
than the due date indicated on HHSC’s notification form. HHSC will generally provide MCOs ten
(10) Business Days to resolve such complaints. If an MCO cannot resolve a complaint by the due
date indicated on the notification form, it may submit a request to extend the deadline. HHSC
may, in its reasonable discretion, grant a written extension if the MCO demonstrates good cause.

Unless HHSC has granted a written extension as described above, the MCO is subject to
contractual remedies, including liquidated damages if Provider complaints are not resolved by
the timeframes indicated herein.

8.2.4.2 Appeal of Provider Claims

MCOs must develop, implement, and maintain a system for tracking and resolving all Medicaid
Provider appeals related to claims payment. Within this process, the MCO must respond fully and
completely to each Medicaid Provider’s claims payment appeal and establish a tracking mechanism
to document the status and final disposition of each

appeal. The MCO’s process must comply with the requirements of Texas Government Code
§533.005(a)( 19).

MCOs must contract with non-network physicians to resolve claims disputes related to denial on the
basis of Medical Necessity that remain unresolved subsequent to a provider appeal. The
determination of the physician resolving the dispute must be binding on the MCO and a Network
Provider. The physician resolving the dispute must hold the same specialty or a related specialty
as the appealing provider. HHSC reserves the right to amend this process to include an independent
review process established by HHSC for final determination on these disputes.

8.2.5 Member Rights and Responsibilities

In accordance with 42 C.F.R. §438.100, MCOs must maintain written policies and procedures for
informing Members of their rights and responsibilities, and must notify Members of their right to
request a copy of these rights and responsibilities. The Member Handbook must include a notice that
complies with Uniform Managed Care Manual Chapter 3.4.

8.2.6 Medicaid Member Complaint and Appeal System

The MCO must develop, implement, and maintain a Member Complaint and Appeal system that
complies with the requirements in applicable federal and state laws and regulations, including 42
C.F.R. §431.200; 42 C.F.R. Part 438, Subpart F, “Grievance System”; and the provisions of 1 T.A.C.
Chapter 357, relating to Medicaid managed care organizations.

The Complaint and Appeal system must include a Complaint process, an Appeal process, and access to
HHSC’s Fair Hearing System. The procedures must be the same for all Members and must be reviewed
and approved in writing by HHSC or its designee. Modifications and amendments to the Member
Complaint and Appeal system must be submitted for HHSC’s approval at least 30 days prior to the
implementation.

8.2.6.1 Member Complaint Process

The MCO must have written policies and procedures for receiving, tracking, responding to,
reviewing, reporting and resolving Complaints by Members or their authorized representatives.
For purposes of Section 8.2.6 an “authorized representative” is any person or entity acting on
behalf of the Member and with the Member’s written consent. A Provider may be an authorized
representative.

MCOs also must resolve Member Complaints received by HHSC and referred to the MCOs no later than
the due date indicated on HHSC’s notification form. HHSC will provide MCOs up to ten (10)
Business Days to resolve such Complaints, depending on the severity and/or urgency of the
Complaint. HHSC may, in its reasonable discretion, grant a written extension if the MCO
demonstrates good cause.

Unless the HHSC has granted a written extension as described above, the MCO is subject to
contractual remedies, including liquidated damages, if Member Complaints are not resolved by the
timeframes indicated herein.

The MCO must resolve Complaints within 30 days from the date the Complaint is received. The MCO is
subject to remedies, including liquidated damages, if at least 98 percent of Member Complaints are
not resolved within 30 days of receipt of the Complaint by the MCO. Please see the Attachment A,
“Uniform Managed Care Contract Terms and Conditions,” and Attachment B-3, “Deliverables/Liquidated
Damages Matrix.” The Complaint procedure must be the same for all Members. The Member or Member’s
authorized representative may file a Complaint either orally or in writing. The MCO must also
inform Members how to file a Complaint directly with HHSC, once the Member has exhausted the MCO’s
Complaint process.

The MCO must designate an officer of the MCO who has primary responsibility for ensuring that
Complaints are resolved in compliance with written policy and within the required timeframe.
For purposes of Section 8.2.6.2, an “officer” of the MCO means a president, vice president,
secretary, treasurer, or chairperson of the board for a corporation, the sole proprietor, the
managing general partner of a partnership; or a person having similar executive authority in
the organization.

The MCO must have a routine process to detect patterns of Complaints. Management, supervisory,
and quality improvement staff must be involved in developing policy and procedure improvements
to address the Complaints.

The MCO’s Complaint procedures must be provided to Members in writing and through oral
interpretive services. A written description of the MCO’s Complaint procedures must be available
in prevalent non-English languages for Major Population Groups identified by HHSC, at no more than
a 6th grade reading level.

The MCO must include a written description of the Complaint process in the Member Handbook. The
MCO must maintain and publish in the Member Handbook at least one toll-free telephone number with
TeleTypewriter/Telecommunications Device for the Deaf (TTY/TDD) and interpreter capabilities for
making Complaints. The MCO must provide such oral interpretive service to callers free of charge.

The MCO’s process must require that every Complaint received in person, by telephone, or in
writing must be acknowledged and recorded in a written record and logged with the following
details:

1. date;

2. identification of the individual filing the Complaint;

3. identification of the individual recording the Complaint;

4. nature of the Complaint;

5. disposition of the Complaint (i.e., how the MCO resolved the Complaint);

6. corrective action required; and

7. date resolved.

For Complaints that are received in person or by telephone, the MCO must provide Members or their
representatives with written notice of resolution if the Complaint cannot be resolved within one
working day of receipt.

The MCO is prohibited from discriminating or taking punitive action against a Member or his or her
representative for making a Complaint.

If the Member makes a request for disenrollment, the MCO must give the Member information on the
disenrollment process and direct the Member to the HHSC Administrative Services Contractor. If the
request for disenrollment includes a Complaint by the Member, the Complaint will be processed
separately from the disenrollment request, through the Complaint process.

The MCO will cooperate with the HHSC’s Administrative Services Contractor and HHSC or its designee
to resolve all Member Complaints. Such cooperation may include, but is not limited to, providing
information or assistance to internal Complaint committees.

The MCO must provide designated Member Advocates, as described in Section 8.2.6.9, to assist
Members in understanding and using the MCO’s Complaint system. The MCO’s Member Advocates must
assist Members in writing or filing a Complaint and monitoring the Complaint through the MCO’s
Complaint process until the issue is resolved.

8.2.6.2 Medicaid Standard Member Appeal Process

The MCO must develop, implement and maintain an Appeal procedure that complies with state and
federal laws and regulations, including 42 C.F.R.§ 431.200 and 42 C.F.R. Part 438, Subpart F,
“Grievance System.” An Appeal is a disagreement with an MCO Action as defined in Attachment A,
“Uniform Managed Care Contract Terms and Conditions.” The Appeal procedure must be the same for
all Members. When a Member or his or her authorized representative expresses orally or in writing
any dissatisfaction or disagreement with an Action, the MCO must regard the expression of
dissatisfaction as a request to Appeal an Action.

A Member must file a request for an Appeal with the MCO within 30 days from receipt of the notice
of the Action. The MCO is subject to remedies, including liquidated damages, if at least 98
percent of Member Appeals are not resolved within 30 days of receipt of the Appeal by the MCO.
Please see the Attachment A, “Uniform Managed Care Contract Terms and Conditions,” and Attachment
B-3, “Deliverables/Liquidated Damages Matrix.” To ensure continuation of currently authorized
services, however, the Member must file the Appeal on or before the later of: (1) ten (10) days
following the MCO’s mailing of the notice of the Action, or (2) the intended effective date of the
proposed Action. The MCO must designate an officer who has primary responsibility for ensuring
that Appeals are resolved in compliance with written policy and within the 30-day time limit.

The provisions of Chapter 4201, Texas Insurance Code, relating to a Member’s right to
Appeal an Adverse Determination made by the MCO or a utilization review agent to an independent
review organization, do not apply to a Medicaid recipient. Chapter 4201 is preempted by federal
Fair Hearings requirements.

The MCO must have policies and procedures in place outlining the Medical Director’s role in an
Appeal of an Action. The Medical Director must have a significant role in monitoring,
investigating and hearing Appeals. In accordance with 42 C.F.R.§ 438.406, the MCO’s policies and
procedures must require that individuals who make decisions on Appeals are not involved in any
previous level of review or decision-making, and are health care professionals who have the
appropriate clinical expertise in treating the Member’s condition or disease.

The MCO must provide designated Member Advocates, as described in Section 8.2.6.9, to assist
Members in understanding and using the Appeal process. The MCO’s Member Advocates must assist
Members in writing or filing an Appeal and monitoring the Appeal through the MCO’s Appeal process
until the issue is resolved.

The MCO must have a routine process to detect patterns of Appeals. Management, supervisory,
and quality improvement staff must be involved in developing policy and procedure improvements
to address the Appeals.

The MCO’s Appeal procedures must be provided to Members in writing and through oral interpretive
services. A written description of the Appeal procedures must be available in prevalent
non-English languages identified by HHSC, at no more than a 6th grade reading level. The MCO must
include a written description of the Appeals process in the Member Handbook. The MCO must maintain
and publish in the Member Handbook at least one toll-free telephone number with TTY/TDD and
interpreter capabilities for requesting an Appeal of an Action. The MCO must provide such oral
interpretive service to callers free of charge.

The MCO’s process must require that every oral Appeal received must be confirmed by a written,
signed Appeal by the Member or his or her representative, unless the Member or his or her
representative requests an expedited resolution. All Appeals must be recorded in a written record
and logged with the following details:

	 	1.	 	date notice is sent;

2. effective date of the Action;

3. date the Member or his or her representative requested the Appeal;

4. date the Appeal was followed up in writing;

5. identification of the individual filing;

6. nature of the Appeal; and

	 	7.	 	disposition of the Appeal, including a copy of the notice of disposition and the
date it was sent to Member.	 

The MCO must send a letter to the Member within five (5) Business Days acknowledging receipt of
the Appeal request. Except for the resolution of an Expedited Appeal as provided in Section
8.2.6.3, the MCO must complete the entire standard Appeal process within 30 calendar days after
receipt of the initial written or oral request for Appeal. The timeframe for a standard Appeal may
be extended up to 14 calendar days if the Member or his or her representative requests an
extension, or the MCO shows that there is a need for additional information and how the delay is
in the Member’s interest. If the timeframe is extended, the MCO must give the Member written
notice of the reason for delay if the Member had not requested the delay. The MCO must designate
an officer who has primary responsibility for ensuring that Appeals are resolved within these
timeframes and in accordance with the MCO’s written policies.

During the Appeal process, the MCO must provide the Member a reasonable opportunity to present
evidence and any allegations of fact or law in person as well as in writing. The MCO must inform
the Member of the time available for providing this information and that, in the case of an
expedited resolution, limited time will be available.

The MCO must provide the Member and his or her representative opportunity, before and during
the Appeal process, to examine the Member’s case file, including medical records and any other
documents considered during the Appeal process. The MCO must include, as parties to the
Appeal, the Member and his or her representative, including the legal representative of a
deceased Member’s estate.

In accordance with 42 C.F.R.§ 438.420, the MCO must continue the Member’s benefits currently
being received by the Member, including the benefit that is the subject of the Appeal, if all of
the following criteria are met:

	 	1.	 	the Member or his or her representative files the Appeal timely as defined in this
Contract:	 

	 	2.	 	the Appeal involves the termination, suspension, or reduction of a previously
authorized course of treatment;	 

	 	3.	 	the services were ordered by an authorized provider;

	 	4.	 	the original period covered by the original authorization has not expired; and

	 	5.	 	the Member requests an extension of the benefits.

If, at the Member’s request, the MCO continues or reinstates the Member’s benefits while the
Appeal is pending, the benefits must be continued until one of the following occurs:

	 	1.	 	the Member withdraws the Appeal;

	 	2.	 	ten (10) days pass after the MCO mails the notice resolving the Appeal against
the Member, unless the Member, within the 10-day timeframe, has requested a Fair
Hearing with continuation of benefits. In such a case, the benefits will continue
until a Fair Hearing decision can be reached; or	 

	 	3.	 	a State Fair Hearing Officer issues a hearing decision adverse to the Member or the
time period or service limits of a previously authorized service has been met.	 

In accordance with 42 C.F.R.§ 438.420(d), if the final resolution of the Appeal is adverse to the
Member and upholds the MCO’s Action, then to the extent that the services werefurnished to comply
with the Contract, the MCO may recover such costs from the Member.

If the MCO or State Fair Hearing Officer reverses a decision to deny, limit, or delay services
that were not furnished while the Appeal was pending, the MCO must authorize or provide the
disputed services promptly and as expeditiously as the Member’s health condition requires.

If the MCO or State Fair Hearing Officer reverses a decision to deny authorization of services
and the Member received the disputed services while the Appeal was pending, the MCO is
responsible for the payment of services.

The MCO is prohibited from discriminating or taking punitive action against a Member or his or her
representative for making an Appeal.

8.2.6.3 Expedited Medicaid MCO Appeals

In accordance with 42 C.F.R. §438.410, the MCO must establish and maintain an expedited review
process for Appeals. Such expedited process will apply when the MCO determines (for a request from
a Member) or the provider indicates (in making the request on the Member’s behalf or supporting
the Member’s request) that taking the time for a standard resolution could seriously jeopardize
the Member’s life or health. The MCO must follow all Appeal requirements for standard Member
Appeals as set forth in Section 8.2.6.2), except where differences are specifically noted. The MCO
must accept oral or written requests for Expedited Appeals.

Members must exhaust the MCO’s Expedited Appeal process before making a request for an expedited
Fair Hearing. After the MCO receives the request for an Expedited Appeal, it must hear an approved
request for a Member to have an Expedited Appeal and notify the Member of the outcome of the
Expedited Appeal within three (3) Business Days, except that the MCO must complete investigation
and resolution of an Appeal relating to an ongoing emergency or denial of continued
Hospitalization: (1) in accordance with the medical or dental immediacy of the case; and (2) not
later than one (1) Business Day after receiving the Member’s request for Expedited Appeal.

Except for an Appeal relating to an ongoing emergency or denial of continued hospitalization, the
timeframe for notifying the Member of the outcome of the Expedited Appeal may be extended up to 14
calendar days if the Member requests an extension or the MCO shows (to the satisfaction of HHSC,
upon HHSC’s request) that there is a need for additional information and how the delay is in the
Member’s interest. If the timeframe is extended, the MCO must give the Member written notice of
the reason for delay if the Member had not requested the delay.

If the decision is adverse to the Member, the MCO must follow the procedures relating to the
notice in Section 8.2.6.5. The MCO is responsible for notifying the Member of his or her right to
access an expedited Fair Hearing from HHSC. The MCO will be responsible for providing
documentation to HHSC and the Member, indicating how the decision was made, prior to HHSC’s
expedited Fair Hearing.

The MCO is prohibited from discriminating or taking punitive action against a Member or his or her
representative for requesting an Expedited Appeal. The MCO must ensure that punitive action is
neither taken against a provider who requests an expedited resolution or supports a Member’s
request.

If the MCO denies a request for expedited resolution of an Appeal, it must:

	 	1.	 	transfer the Appeal to the timeframe for standard resolution, and

	 	2.	 	make a reasonable effort to give the Member prompt oral notice of the denial,
and follow up within two (2) calendar days with a written notice.	 

8.2.6.4 Access to Fair Hearing for Medicaid Members

The MCO must inform Members that they have the right to access the Fair Hearing process at any
time during the Appeal system provided by the MCO, with the following exception. In the case of
an expedited Fair Hearing process, the MCO must inform the Member that he or she must first
exhaust the MCO’s internal Expedited Appeal process prior to filing an Expedited Fair Hearing
request. The MCO must notify Members that they may be represented by an authorized representative
in the Fair Hearing process.

If a Member requests a Fair Hearing, the MCO will complete the request for Fair Hearing and submit
the form via facsimile to the appropriate Fair Hearings office, within five (5) calendar days of
the Member’s request for a Fair Hearing.

Within five (5) calendar days of notification that the Fair Hearing is set, the MCO will prepare
an evidence packet for submission to the HHSC Fair Hearings staff and send a copy of the packet
to the Member. The evidence packet must comply with HHSC’s Fair Hearings requirements.

8.2.6.5 Notices of Action and Disposition of Appeals for Medicaid Members

The MCO must notify the Member, in accordance with 1 T.A.C. Chapter 357, whenever the MCO takes
an Action. The notice must, at a minimum, include any information required by the Uniform Managed
Care Manual Chapters 3.21 and 3.22 regarding notices of actions and incomplete prior
authorization requests.

8.2.6.6 Timeframe for Notice of Action

In accordance with 42 C.F.R.§ 438.404(c), the MCO must mail a notice of Action within the
following timeframes:

1. for termination, suspension, or reduction of previously authorized Medicaid-

covered services, within the timeframes specified in 42 C.F.R.§§ 431.211, 431.213,
and 431 .214;

2. for denial of payment, at the time of any Action affecting the claim;

	 	3.	 	for standard service authorization decisions that deny or limit services, within
the timeframe specified in 42 C.F.R.§ 438.210(d)(1);	 

	 	4.	 	if the MCO extends the timeframe in accordance with 42 C.F.R. §438.210(d)(1), it
must:	 

	 	a.	 	give the Member written notice of the reason for the decision to
extend the timeframe and inform the Member of the right to file an Appeal if he
or she disagrees with that decision; and

	 	b.	 	issue and carry out its determination as expeditiously as the
Member’s health condition requires and no later than the date the extension
expires;

5. for service authorization decisions not reached within the timeframes specified in

42 C.F.R.§ 438.210(d) (which constitutes a denial and is thus an Adverse Action),
on the date that the timeframes expire; and

	 	6.	 	for expedited service authorization decisions, within the timeframes specified in
42 C.F.R. 438.210(d).	 

8.2.6.7 Notice of Disposition of Appeal

In accordance with 42 C.F.R.§ 438.408(e), the MCO must provide written notice of
disposition of all Appeals including Expedited Appeals. The written resolution notice must
include the results and date of the Appeal resolution. For decisions not wholly in the
Member’s favor, the notice must contain:

	 	1.	 	the right to request a Fair Hearing;

2. how to request a Fair Hearing;

	 	3.	 	The circumstances under which the Member may continue to receive benefits
pending a Fair Hearing;	 

	 	4.	 	how to request the continuation of benefits;

	 	5.	 	if the MCO’s Action is upheld in a Fair Hearing, the Member may be liable for the
cost of any services furnished to the Member while the Appeal is pending; and

	 	6.	 	any other information required by 1 T.A.C. Chapter 357 that relates to a
managed care organization’s notice of disposition of an Appeal.	 

8.2.6.8 Timeframe for Notice of Resolution of Appeals

In accordance with 42 C.F.R.§ 438.408, the MCO must provide written notice of resolution of
Appeals, including Expedited Appeals, as expeditiously as the Member’s health condition requires,
but the notice must not exceed the timeframes provided in this Section for standard Appeals or
Expedited Appeals. For expedited resolution of Appeals, the MCO must make reasonable efforts to
give the Member prompt oral notice of resolution of the Appeal, and follow up with a written
notice within the timeframes set forth in this Section. If the MCO denies a request for expedited
resolution of an Appeal, the MCO must transfer the Appeal to the timeframe for standard resolution
as provided in this Section, make reasonable efforts to give the Member prompt oral notice of the
denial, and follow up within two (2) calendar days with a written notice.

8.2.6.9 Medicaid Member Advocates

The MCO must provide Member Advocates to assist Members. Member Advocates must be physically
located within the Service Area unless an exception is approved by HHSC. Member Advocates must
inform Members of the following:

1. their rights and responsibilities,

2. the Complaint process,

3. the Appeal process,

4. Covered Services available to them, including preventive services, and

5. Non-capitated Services available to them.

Member Advocates must assist Members in writing Complaints and are responsible for monitoring
the Complaint through the MCO’s Complaint process.

Member Advocates are responsible for making recommendations to the MCO’s management on any changes
needed to improve either the care provided or the way care is delivered. Member Advocates are also
responsible for helping or referring Members to community resources that are available to meet
Members’ needs if services are not available from the MCO as Covered Services.

8.2.7 Additional Medicaid Behavioral Health Provisions

8.2.7.1 Local Mental Health Authority (LMHA)

Assessment to determine eligibility for rehabilitative and targeted DSHS case management services
is a function of the LMHA. Covered Services must be provided to Members with severe and persistent
mental illness (SPMI) and severe emotional disturbance (SED), when Medically Necessary, whether or
not they are also receiving Targeted Case Management or rehabilitation services through the LMHA.

The MCO must enter into written agreements with all LMHAs in the Service Area that describe
the process(es) that the MCO and LMHAs will use to coordinate services for Medicaid Members
with SPMI or SED. The agreements will:

	 	1.	 	describe the Behavioral Health Services indicated in detail in the Provider
Procedures Manual and in the Texas Medicaid Bulletin, include the amount, duration,
and scope of basic and Value-added Services, and the MCO’s responsibility to provide
these services;	 

	 	2.	 	describe criteria, protocols, procedures and instrumentation for referral
of Medicaid Members from and to the MCO and the LMHA;	 

	 	3.	 	describe processes and procedures for referring Members with SPMI or SED to the
LMHA for assessment and determination of eligibility for rehabilitation or Targeted
Case Management Services;	 

	 	4.	 	describe how the LMHA and the MCO will coordinate providing Behavioral Health
Services to Members with SPMI or SED;

	 	5.	 	establish clinical consultation procedures between the MCO and LMHA including
consultation to effect referrals and ongoing consultation regarding the Member’s
progress;

	 	6.	 	establish procedures to authorize release and exchange of clinical treatment
records;	 

	 	7.	 	establish procedures for coordination of assessment, intake/triage, utilization
review/utilization management and care for persons with SPMI or SED;	 

	 	8.	 	establish procedures for coordination of inpatient psychiatric services (including
Court- ordered Commitment of Members birth through age 20) in state psychiatric
facilities within the LMHA’s catchment area;	 

	 	9.	 	establish procedures for coordination of emergency and urgent services to
Members;	 

	 	10.	 	establish procedures for coordination of care and transition of care for new
Members who are receiving treatment through the LMHA; and	 

	 	11.	 	establish that, when Members are receiving Behavioral Health Services from the
Local Mental Health Authority, the MCO is using the same UM guidelines as those
prescribed for use by Local Mental Health Authorities by DSHS, published at:	 

http://www.mhmr.state.tx.us/centraloffice/behavioralhealthservices/RDMClinGuide.html.

The MCO must offer licensed practitioners of the healing arts (defined in 25 T.A.C., Part 1,
Chapter 419, Subchapter L), who are part of the Member’s treatment team for rehabilitation
services (the “Treatment Team”) the opportunity to participate in the MCO’s Network. The
practitioner must agree to accept the MCO’s Provider reimbursement rate, meet the credentialing
requirements, and comply with all the terms and conditions of the MCO’s standard Provider
contract.

MCOs must allow Members receiving rehabilitation services to choose the licensed practitioners of
the healing arts who are currently a part of the Member’s Treatment Team. If the Member chooses to
receive these services from Out-of-Network licensed practitioners of the healing arts who are part
of the Member’s Treatment Team, the MCO must reimburse the provider through Out-of-Network
reimbursement arrangements.

Nothing in this section diminishes the potential for the Local Mental Health Authority to seek
best value for rehabilitative services by providing these services under arrangement, where
possible, as specified is 25 T.A.C. §419.455.

8.2.7.2 Substance Abuse Benefit

8.2.7.2.1 Substance Abuse and Dependency Treatment Services

The requirements in this subsection apply to STAR+PLUS MCOs in all Service Areas and to STAR
MCOs in all Service Areas except the Dallas Service Area. Members in the Dallas Service Area
receive Behavioral Health Services through the NorthSTAR Program.

Substance use disorder includes substance abuse and dependence as defined by the current
Diagnostic and Statistical Manual of Mental Disorders (DSM).

8.2.7.2.2 Providers

Providers for the substance abuse and dependency treatment benefit include: Hospitals, chemical
dependency treatment facilities licensed by the Department of State Health Services, and
practitioners of the healing arts.

MCOs must include Significant Traditional Providers (STPs) of these benefits in its Network, and
provide such STPs with expedited credentialing. Medicaid MCOs must enter into provider agreements
with any willing Significant Traditional Provider (STP) of these benefits that meets the Medicaid
enrollment requirements, MCO credentialing requirements and agrees to the MCO’s contract terms and
rates. For purposes of this section, STPs are providers who meet the Medicaid enrollment
requirements and have a contract with the Department of State Health Services (DSHS) to receive
funding for treatment under the Federal Substance Abuse Prevention and Treatment block grant. The
STP requirements described herein apply to all Service Areas, and unlike other STP requirements
are not limited to the first three (3) years of operations.

MCOs must maintain a provider education process to inform substance abuse treatment Providers in
the MCO’s Network on how to refer Members for treatment.

8.2.7.2.3 Care Coordination

MCOs must ensure care coordination is provided to Members with a substance use disorder. MCOs must
work with providers, facilities, and Members to coordinate care for Members with a substance use
disorder and to ensure Members have access to the full continuum of Covered Services (including
without limitation assessment, detoxification, residential treatment, outpatient services, and
medication therapy) as Medically Necessary and appropriate. MCOs must also coordinate services
with the DSHS, DFPS, and their designees for Members requiring Non-Capitated Services.
Non-Capitated Services includes, without limitation, services that are not available for coverage
under the Contract, State Plan or Waiver that are available under the Federal Substance Abuse and
Prevention and Treatment block grant when provided by a DSHS-funded provider or covered by the
DFPS under direct contract with a treatment provider. MCOs must work with DSHS, DFPS, and
providers to ensure payment for Covered Services is available to Out-of-Network Providers who also
provide related Non-capitated Services when the Covered Services are not available through Network
Providers.

	 	8.2.7.3.4	 	Member Education and Self-Referral for Substance Abuse and Dependency
Treatment Services	 

MCOs must maintain a Member education process (including hotlines,
manuals, policies and other Member Materials) to inform Members of
the availability of and access to substance abuse treatment
services, including information on self-referral.

8.2.8 Third Party Liability and Recovery and Coordination

of Benefits

Medicaid coverage is secondary when coordinating benefits with all other insurance coverage,
unless an exception applies under federal law. Coverage provided under Medicaid will pay benefits
for Covered Services that remain unpaid after all other insurance coverage has been paid. For
Network Providers and Out-of Network providers with written reimbursement arrangements with the
MCO, the MCO must pay the unpaid balance for Covered Services up to the agreed rates. For
Out-of-Network providers with no written reimbursement arrangement, the MCO must pay the unpaid
balance for Covered Services in accordance with HHSC’s administrative rules regarding
Out-of-Network payment (1 T.A.C. §353.4).

MCOs are responsible for establishing a plan and process for avoiding or recovering costs for
services that should have been paid through a third party. The plan and process must be in
accordance with state and federal law and regulations. The projected amount of TPR that the MCO is
expected to recover may be factored into the rate setting process.

HHSC will provide the MCO, by Plan code, a monthly Member file (also known as a TPR client file).
The file is an extract of those Medicaid Members who are known or believed to have other
insurance. The file contains any Third Party Recovery (TPR) data that HHSC’s claims administration
agent has on file for individual Medicaid clients, organized by name and client number, and adding
additional relevant information where available, such as the insured’s name/contact information,
type of coverage, the insurance carrier, and the effective dates.

The MCO must provide related reports to HHSC, as stated in Section 8.1.17.2, “Financial
Reporting Requirements.”

After 120 days from the date of adjudication of a claim that is subject to TPR, HHSC has the right
to attempt recovery, independent of any MCO action. HHSC will retain, in full, all funds received
as a result of any state-initiated TPR or subrogation action.

8.2.9 Coordination with Public Health Entities

8.2.9.1 Reimbursed Arrangements with Public Health Entities

The MCO must make a good faith effort to enter into a Subcontract for Covered Services with Public
Health Entities. Possible Covered Services that could be provided by Public Health Entities
include, but are not limited to, the following services:

1. Sexually Transmitted Diseases (STDs) services;

2. confidential HIV testing;

3. immunizations;

4. tuberculosis (TB) care;

5. Family Planning services;

6. Texas Health Steps medical checkups, and

7. prenatal services.

If the MCO is unable to enter into a contract with Public Health Entities, the MCO must document
efforts to contract with Public Health Entities, and make such documentation available to HHSC
upon request.

MCO Contracts with Public Health Entities must specify the scope of responsibilities of each
party, the methodology and agreements regarding billing and reimbursements, reporting
responsibilities, Member and Provider educational responsibilities, and the methodology and
agreements regarding sharing of confidential medical record information between the Public
Health Entity and the MCO or PCP.

The MCO must:

	 	1.	 	identify care managers who will be available to assist public health providers and
PCPs in efficiently referring Members to the public health providers, specialists, and
health-related service providers either within or outside the MCO’s Network; and

	 	2.	 	inform Members that confidential healthcare information will be provided to the
PCP, and educate Members on how to better utilize their PCPs, public health
providers, emergency departments, specialists, and health-related service providers.	 

8.2.9.2 Non-Reimbursed Arrangements with Local Public Health Entities

The MCO must coordinate with Public Health Entities in its Service Area(s) regarding the provision
of essential public Health Care Services. In addition to the requirements listed above in Section
8.2.2, or otherwise required under state law or the Contract, the MCO must meet the following
requirements:

	 	1.	 	report to Public Health Entities regarding communicable diseases and/or
diseases that are preventable by immunization as defined by state law;	 

	 	2.	 	notify the local Public Health Entity of communicable disease outbreaks involving
Members; and

	 	3.	 	educate Members and Providers regarding WIC services available to Members.

To follow-up on suspected or confirmed cases of childhood lead exposure, the MCO must coordinate
with local Public Health Entities that have a child lead program, or with the DSHS Childhood Lead
Poisoning Prevention Program when the local Public Health Entity does not have a child lead
program.

In addition, the MCO must make a good faith effort to establish an effective working
relationship with all state and local public health entities in its Service Area(s) to identify
issues and promote initiatives addressing public health concerns.

8.2.10 Coordination with Other State Health and Human

Services (HHS) Programs

The MCO must coordinate with other state HHS Programs in each Service Area regarding the
provision of essential public Health Care Services. In addition to the requirements listed above
in Section 8.2.2. or otherwise required under state law or the Contract, the MCO must meet the
following requirements:

	 	1.	 	require Providers to use the DSHS Bureau of Laboratories for specimens
obtained as part of a Texas Health Steps medical checkup, as indicated in Section
8.1.4 under Laboratory Services;	 

	 	2.	 	notify Providers of the availability of vaccines through the Texas Vaccines for
Children Program;	 

	 	3.	 	work with HHSC and Providers to improve the reporting of immunizations to the
statewide ImmTrac Registry;	 

	 	4.	 	educate Providers and Members about services available through the Department of
State Health Services (DSHS) Case Management for Children and Pregnant Women (CPW)
program;	 

	 	5.	 	coordinate with CPW for health care needs that are identified by CPW and
referred to the MCO;	 

	 	6.	 	participate, to the extent practicable, in the community-based coalitions with the
Medicaid-funded case management programs in the Department of Assistive and
Rehabilitative Services (DARS), the Department of Aging and Disability Services (DADS),
and DSHS;

	 	7.	 	cooperate with activities required of state and local public health
authorities necessary to conduct the annual population and community based needs
assessment;	 

	 	8.	 	report all blood lead results, coordinate and follow-up on suspected or confirmed
cases of childhood lead exposure with the Childhood Lead Poisoning Prevention Program in
DSHS, and follow the Centers for Disease Control and Prevention guidelines for testing
children for lead and follow-up actions for children with elevated lead levels located
at http://www.dshs.state.tx.us/lead/pdf—files/pb—109       physician—reference.pdf;	 

	 	9.	 	coordinate with Texas Health Steps Outreach Unit;

	 	10.	 	coordination of care protocols for working with Dental Contractors, as well as
protocols for reciprocal referral and communication of data and clinical information
regarding the Member’s Medically Necessary dental Covered Services; and	 

	 	11.	 	develop a coordination plan to share with local entities regarding clients
identified as requiring special needs or assistance during a disaster.

8.2.11 Advance Directives

Federal and state laws require MCOs and providers to maintain written policies and procedures
for informing all adult Members 18 years of age and older about their rights to refuse, withhold
or withdraw medical treatment and mental health treatment through advance directives (see Social
Security Act §1 902(a)(57) and §1 903(m)(1 )(A)). The MCO’s policies and procedures must include
written notification to Members and comply with provisions contained in 42 C.F.R. § 489, Subpart
I, relating to advance directives for all Hospitals, critical access Hospitals, skilled nursing
facilities, home health agencies, providers of home health care, providers of personal care
services and hospices. The MCO’s policies and procedures must comply with state laws and rules
regarding:

1. a Member’s right to self-determination in making health care decisions;

	 	2.	 	the Advance Directives Act, Chapter 166, Texas Health and Safety Code, which
includes:	 

	 	a.	 	a Member’s right to execute an advance written directive to
physicians and family or surrogates, or to make a non-written directive to
administer, withhold or withdraw life-sustaining treatment in the event of a
terminal or irreversible condition;

	 	b.	 	a Member’s right to make written and non-written out-of-Hospital
do-notresuscitate (DNR) orders;	 

	 	c.	 	a Member’s right to execute a Medical Power of Attorney to
appoint an agent to make health care decisions on the Member’s behalf if the
Member becomes incompetent; and	 

3. Chapter 137, Texas Civil Practice and Remedies Code, which includes a

Member’s right to execute a Declaration for Mental Health Treatment in a document
making a declaration of preferences or instructions regarding mental health treatment.

The MCO must maintain written policies for implementing a Member’s advance directive. Those
policies must include a clear and precise statement of limitation if a Provider cannot or will not
implement a Member’s advance directive.

The MCO cannot require a Member to execute or issue an advance directive as a condition of
receiving Health Care Services. The MCO cannot discriminate against a Member based on whether
or not the Member has executed or issued an advance directive.

The MCO’s policies and procedures must require the MCO and Subcontractors to comply with the
requirements of state and federal law relating to advance directives. The MCO must provide
education and training to employees and Members on issues concerning advance directives.

All materials provided to Members regarding advance directives must be written at a
7th — 8th grade reading comprehension level, except where a provision is
required by state or federal law and the provision cannot be reduced or modified to a
7th — 8th grade readinglevel because it is a reference to the law
or is required to be included “as written” in the state or federal law.

The MCO must notify Members of any changes in state or federal laws relating to advance
directives within 90 days from the effective date of the change, unless the law or regulation
contains a specific time requirement for notification.

8.2.12 SSI Members

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

8.2.13 Medicaid Wrap-Around Services

For Dual Eligibles who are eligible for full Medicaid in any STAR+PLUS Service Area, the
MCO may be required to supplement Medicare coverage by providing services, supplies, and
outpatient drugs and biologicals that are available under the Texas Medicaid program. There
are three (3) categories of Medicaid wrap-around services:

	 	1.	 	Medicaid Only Services (i.e. services that do not have a corresponding Medicare
service);	 

	 	2.	 	Medicare Services that become a Medicaid expense due to a benefit limitation on the
Medicare side being met; and

	 	3.	 	Medicare Services that become a Medicaid expense due to coinsurance (True
Cross-over Claims).	 

HHSC will provide advance written notice to the MCOs identifying the types of Medicaid
wrap-around services that will become Covered Services, and the effective date of coverage. HHSC
will make capitation rate adjustments to account for the carve-in of these services.

	 	 	 	 	 
	True cross-over claims will continue to be paid by HHSC’s Administrative Services Contractor.
		8.2.14		 	Medical Transportation

HHSC reserves the right to amend the scope of the Contract to include medical transportation
services (MTP) for Medicaid Members. For additional information regarding the MTP Program, the MCO
should refer to the Nonemergency Medical Transportation (NEMT) Full Risk Broker Services
RFP. MCOs should note that the MTP Program includes numerous Frew v. Suehs requirements,
including enhanced call center performance standards. If MTP services are added to the scope of
the Contract, HHSC will provide advance written notice and conduct appropriate Readiness Review.

8.3 Additional STAR+PLUS Scope of Work

8.3.1 Covered Community-Based Long-Term Services and

Supports

The MCO must ensure that STAR+PLUS Members needing Community Long-term Services and Supports
are identified, and that services are referred and authorized in a timely manner. The MCO must
ensure that Providers of Community Long-term Services and Supports are licensed to deliver the
services they provide. The inclusion of Community Long-term Services and Supports in a managed
care model presents challenges, opportunities and responsibilities.

Community Long-term Services and Supports may be necessary as a preventative service to avoid more
expensive hospitalizations, emergency room visits, or institutionalization. Community Long-term
Services and Supports should also be made available to Members to assure maintenance of the
highest level of functioning possible in the least restrictive setting. A Member’s need for
Community Long-term Services and Supports to assist with the activities of daily living must be
considered as important as needs related to a medical condition. MCOs must provide both Medically
Necessary and Functionally Necessary Covered Services to Community Long-term Services and Supports
Members.

8.3.1.1 Community Based Long-Term Services and Supports Available to All Members

The MCO must enter into written contracts with Providers of Personal Assistance Services and Day
Activity and Health Services (DAHS) to ensure access to these services for all STAR+PLUS Members.
At a minimum, these Providers must meet all of the following state licensure and certification
requirements for providing the services in Attachment B-2.2, “STAR+PLUS Covered Services.”

	 	 	 
	Community-based Long-Term Services and Supports Available to All Members
	Service
	 	Licensure and Certification Requirements

	 
	 	 

	Personal

Attendant

Services/Primary

Home Care
	 	The Provider must be licensed by DADS as a Home and

Community Support Services Agency (HCSSA). The

level of licensure required depends on the type of

service delivered.

NOTE: For primary home care and client managed

attendant care, the agency may have only the

Personal Assistance Services level of licensure.

	 
	 	 

	Day Activity and

Health Services

(DAHS)
	 	The Provider must be licensed by the DADS

Regulatory Division as an adult day care provider.

To provide DAHS, the Provider must provide the

range of services required for DAHS.

	 
	 	 

8.3.1.2 1915(c) STAR+PLUS Waiver Services Available to Qualified Members

The 19 15(c) STAR+PLUS Waivers (SPW) provides Community Long-term Services and Supports to
Medicaid Eligibles who are elderly and to adults with disabilities as a cost- effective
alternative to living in a nursing facility. These Members must be age 21 or older, be a
Medicaid recipient or be otherwise financially eligible for waiver services. To be eligible for
SPW Services, a Member must meet income and resource requirements for Medicaid nursing facility
care, and receive a determination from HHSC on the medical necessity/level of care of the
nursing facility care. The MCO must make available to STAR+PLUS Members who meet these
eligibility requirements the array of services allowable through HHSC’s CMS-approved SPW (see
Attachment B-2.2, “STAR+PLUS Covered Services”).

	 	 	 
	Community-based Long-Term Services and Supports under the 1915(c)
	STAR+PLUS Waiver
	Service
	 	Licensure and Certification Requirements

	 
	 	 

	Personal

Attendant

Services
	 	The Provider must be licensed by DADS as a Home and

Community Support Services Agency (HCSSA). The level of

licensure required depends on the type of service delivered.

For Primary Home Care and Client Managed Attendant Care, the

agency may have only the Personal Assistance Services level

of licensure.

	 	 	 

	Assisted Living

Services
	 	The Provider must be licensed by the Texas Department of

Aging and Disability Services, Long Term Care Regulatory

Division in accordance with 40 T.A.C., Part 1, Chapter 92.

The type of licensure determines what services may be

provided.

	 
	 	 

	Emergency

Response Service

Provider
	 	Licensed by the Texas Department of State Health Services as

a Personal Emergency Response Services Agency under 25

T.A.C., Part 1, Chapter 140, Subchapter B.

	 
	 	 

	Nursing Services
	 	Licensed Registered Nurse by the Texas Board of Nursing under

22 T.A.C., Part 11, Chapter 217.

The registered nurse must comply with the requirements for

delivery of nursing services, which include requirements such

as compliance with the Texas Nurse Practice Act and

delegation of nursing tasks.

The licensed vocational nurse must practice under the

supervision of a registered nurse, licensed to practice in the

State.

	 
	 	 

	Adult Foster Care
	 	Adult foster care homes serving three (3) or fewer

participants must comply with requirements outlined in 40

T.A.C., Part 1, Chapter 48, Subchapter K. Adult foster care

homes serving four (4) participants must be licensed by

DADS as an assisted living facility under 40 T.A.C., Part 1,

Chapter 92.

	 
	 	 

	Dental
	 	Licensed by the Texas State Board of Dental Examiners as a

Dentist under 22 T.A.C., Part 5, Chapter 101.

	 
	 	 

	Respite Care
	 	Licensed by DADS as a Home and Community Support

Services Agency (HCSSA) under 40 T.A.C., Part 1, Chapter 97.

	 
	 	 

	Home Delivered

Meals
	 	Providers must comply with requirement of 40 T.A.C., Part 1,

Chapter 55 for providing home delivered meal services,

which include requirements such as dietary requirements,

food temperature, delivery times, and training of volunteers

and others who deliver meals.

	 
	 	 

	Physical Therapy

(PT) Services
	 	Licensed Physical Therapist through the Texas Board of

Physical Therapy Examiners, Chapter 453 of the Texas

Occupations Code.

	 
	 	 

	Occupational

Therapy (OT)

Services
	 	Licensed Occupational Therapist through the Texas Board of

Occupational Therapy Examiners, Chapter 454 of the Texas

Occupations Code.

	 
	 	 

	Speech, Hearing,

and Language

Therapy Services
	 	Licensed Speech Therapist through the Department of State

Health Services.

	 
	 	 

	Consumer Directed

Services (CDS)
	 	No licensure or certification requirements. The Providers

must complete DADS’ required training. Current CDSAs

contracted by DADS are assumed to have completed the

training.

	 
	 	 

	Transition Assistance

Services (TAS)
	 	The Provider must comply with the requirements for delivery

of TAS, which include requirements such as allowable

purchases, cost limits, and timeframes for delivery. TAS

providers must demonstrate knowledge of, and experience in,

successfully serving individuals who require home and

community-based services

	 
	 	 

	Minor Home

Modification
	 	No licensure or certification requirements.

	 
	 	 

	Adaptive Aids and

Medical Equipment
	 	No licensure or certification requirements.

	 
	 	 

	Medical Supplies
	 	No licensure or certification requirements.

	 
	 	 

8.3.2 Service Coordination

The MCO must furnish a Service Coordinator to all STAR+PLUS Members who request one. The MCO
should also furnish a Service Coordinator to a STAR+PLUS Member when the MCO determines one is
required through an assessment of the Member’s health and support needs. The MCO must ensure that
each STAR+PLUS Member has a qualified PCP who is responsible for overall clinical direction and,
in conjunction with the Service Coordinator, serves as a central point of integration and
coordination of Covered Services, including primary, Acute Care, Long-term Services and Supports,
and Behavioral Health Services.

The Service Coordinator must work as a team with the PCP to coordinate all STAR+PLUS Covered
Services and any applicable Non-capitated Services. This requirement applies whether or not the
PCP is in the MCO’s Network, as some STAR+PLUS Members dually eligible for Medicare may have a
PCP that is not in the MCO’s Provider Network. In order to integrate the Member’s Acute Care and
primary care, and stay abreast of the Member’s needs and condition, the Service Coordinator must
also actively involve and coordinate with the Member’s primary and specialty care providers,
including Behavioral Health Service providers, providers of Non-capitated Services, and Medicare
Advantage health plans for qualified Dual Eligible Members. When considering whether to refer a
Member to a nursing facility or other long-term care facility, the MCO must consider the
availability of the Program of All-Inclusive Care for the Elderly (PACE) for that Member.

The MCO must identify and train Members or their families to coordinate their own care, to the
extent of the Member’s or the family’s capability and willingness to coordinate care.

8.3.2.1 Service Coordinators

The MCO must employ as Service Coordinators persons experienced in meeting the needs of
vulnerable populations who have Chronic or Complex Conditions. Such Service Coordinators are Key
MCO Personnel as described in Attachment A, “Uniform Managed Care Contract Terms and Conditions,”
Section 4.02, and must meet the requirements set forth in Section 4.04.1 of Attachment A.

8.3.2.2 Referral to Community Organizations

The MCO must provide information about and referral to community organizations that may not be
providing STAR+PLUS Covered Services, but are otherwise important to the health and wellbeing of
Members. These organizations include, but are not limited to:

	 	1.	 	state/federal agencies (e.g., those agencies with jurisdiction over aging, public
health, substance abuse, mental health/retardation, rehabilitation, developmental
disabilities, income support, nutritional assistance, family support agencies, etc.);	 

	 	2.	 	social service agencies (e.g., area agencies on aging, residential support
agencies, independent living centers, supported employment agencies, etc.);	 

	 	3.	 	city and county agencies (e.g., welfare departments, housing programs, etc.);

	 	4.	 	civic and religious organizations; and

	 	5.	 	consumer groups, advocates, and councils (e.g., legal aid offices,

consumer/family support groups, permanency planning, etc.).

8.3.2.3 Discharge Planning

The MCO must have a protocol for quickly assessing the needs of Members discharged from a
Hospital or other care or treatment facility.

The MCO’s Service Coordinator must work with the Member’s PCP, the Hospital discharge planner(s),
the attending physician, the Member, and the Member’s family to assess and plan for the Member’s
discharge. When Long-term Services and Supports is needed, the MCO must ensure that the Member’s
discharge plan includes arrangements for receiving community-based care whenever possible. The
MCO must ensure that the Member, the Member’s family, and the Member’s PCP are all well informed
of all service options available to meet the Member’s needs in the community.

8.3.2.4 Transition Plan for New STAR+PLUS Members

The MCO must provide a transition plan for Members enrolled in the STAR+PLUS Program. HHSC,
and/or the previous STAR+PLUS MCO contractor, will provide the MCO with detailed Care Plans,
names of current providers, etc., for newly enrolled Members already receiving Long-term Services
and Supports at the time of enrollment in the MCO. The MCO must ensure that current providers are
paid for Medically Necessary and Functionally Necessary Covered Services that are delivered in
accordance with the Member’s existing treatment/Long-Term Services and Supports plan after the
Member has become enrolled in the MCO and until the transition plan is developed.

The transition planning process must include, but is not limited to, the following:

	 	1.	 	review of existing Long-Term Services and Supports plans prepared by DADS or
another STAR+PLUS MCO;	 

	 	2.	 	preparation of a transition plan that ensures continuous care under the Member’s
existing Care Plan during the transfer into the MCO’s Network while the MCO conducts an
appropriate assessment and development of a new plan, if needed;	 

	 	3.	 	if durable medical equipment or supplies had been ordered prior to enrollment but
have not been received by the time of enrollment, coordination and follow- through to
ensure that the Member receives the necessary supportive equipment and supplies without
undue delay; and	 

	 	4.	 	payment to the existing provider of service under the existing authorization for
up to six (6) months, until the MCO has completed the assessment and Service Plans and
issued new authorizations.	 

Except as provided below, the MCO must review any existing care plan and develop a transition
plan within 30 days of receiving notice of the Member’s enrollment. For all existing care plans
received prior to the Operational Start Date, the MCO will have additional time to complete
this process, not-to-exceed 120 days after the Member’s enrollment. The transition plan will
remain in place until the MCO contacts the Member or the Member’s representative and
coordinates modifications to the Member’s current treatment/Long-Term Services and Supports
plan. The MCO must ensure that the existing services continue and that there are no breaks in
services. For initial implementation of the STAR+PLUS program in a Service Area, the MCO must
honor existing LTSS authorizations for up to six (6) months following the Operational Start
Date, or until the MCO has evaluated and assessed the Member and issued new authorizations.

The Service Plan includes, but is not limited to, the following:

1. the Member’s history;

2. summary of current medical and social needs and concerns;

3. short and long term needs and goals;

4. a list of services required, their frequency, and

5. a description of who will provide such services.

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

The MCO must ensure that the Member or the Member’s representative is involved in the assessment
process and fully informed about options, is included in the development of the Service Plan, and
is in agreement with the plan when completed.

8.3.2.5 Centralized Medical Record and Confidentiality

The Service Coordinator must be responsible for maintaining a centralized record related to
Member contacts, assessments and service authorizations. The MCO must ensure that the
organization of and documentation included in the centralized Member record meets all
applicable professional standards ensuring confidentiality of Member records, referrals, and
documentation of information.

The MCO must have a systematic process for generating or receiving referrals and

sharing confidential medical, treatment, and planning information across providers.

8.3.2.6 Nursing Facilities

Nursing facility care, although a part of the care continuum, presents a challenge for managed
care. Because of the process for becoming eligible for Medicaid assistance in a nursing facility,
there is frequently a significant time gap between entry into the nursing home and determination
of Medicaid eligibility. During this gap, it is likely that the resident will have “nested” in
the facility and many of the community supports are no longer available. To require participation
of all nursing facility residents would result in the MCO maintaining a Member in the nursing
facility without many options for managing their health. For this reason, persons who qualify for
Medicaid as a result of nursing facility residency are not enrolled in STAR+PLUS.

The STAR+PLUS MCO must participate in the Promoting Independence (PI) initiative for such
individuals. PI is a philosophy that aged and disabled individuals remain in the

most integrated setting to receive Long-term Services and Supports. PI is Texas’ response to the
U.S. Supreme Court ruling in Olmstead v. L.C., which requires states to provide community-based
services for persons with disabilities who would otherwise be entitled to institutional
services, when:

	 	1.	 	the state’s treatment professionals determine that such placement is appropriate;

2. the affected persons do not oppose such treatment; and

	 	3.	 	the placement can be reasonably accommodated, taking into account the resources
available to the state and the needs of others who are receiving state supported
disability services.	 

In accordance with legislative direction, the MCO must designate a point of contact to receive
referrals for nursing facility residents who may potentially be able to return to the community
through the use of 19 15(c) Nursing Facility Waiver services. To be eligible for this option, an
individual must reside in a nursing facility until a written plan of care for safely moving the
resident back into a community setting has been developed and approved.

A STAR+PLUS Member who enters a nursing facility will remain a STAR+PLUS Member for a total
of four (4) months. The nursing facility will bill the state directly for covered nursing
facility services delivered while the Member is in the nursing facility. See Section 8.3.2.7
for further information.

The MCO is responsible for the Member at the time of nursing facility entry and must utilize the
Service Coordinator staff to complete an assessment of the Member within 30 days of entry in the
nursing facility, and develop a plan of care to transition the Member back into the community if
possible. If at this initial review, return to the community is possible, the Service
Coordinator will work with the resident and family to return the Member to the community using
1915(c) Waiver Services.

If the initial review does not support a return to the community, the Service Coordinator will
conduct a second assessment 90 days after the initial assessment to determine any changes in the
individual’s condition or circumstances that would allow a return to the community. The Service
Coordinator will develop and implement the transition plan.

The MCO will provide these services as part of the PI initiative. The MCO must maintain the
documentation of the assessments completed and make them available for state review at any time.

It is possible that the STAR+PLUS MCO will be unaware of the Member’s entry into a nursing
facility. It is the responsibility of the nursing facility to review the Member’s Medicaid card
upon entry into the facility and notify the MCO. The nursing facility is also required to notify
HHSC of the entry of a new resident.

8.3.2.7 MCO Four-Month Liability for Nursing Facility Care

A STAR+PLUS Member who enters a nursing facility will remain a STAR+PLUS Member for a total of
four (4) months. The four (4) months do not have to be consecutive. Upon completion of four
months of nursing facility care, the individual will be disenrolled from the STAR+PLUS Program
and the Medicaid Fee-for-Service program will provide Medicaid benefits. A STAR+PLUS Member may
not change MCOs while in a nursing facility.

Tracking the four (4) months of liability is done through a counter system. The four- month
counter starts with the earlier of: (1) the date of the Medicaid admission to the nursing
facility, or (2) on the 21st day of a Medicare stay, if applicable. A partial month counts as
a full month. In other words, the month in which the Medicaid admission occurs or the month on
which the 21st day of the Medicare stay occurs is counted as one (1) of the four (4) months.

The MCO will not be responsible for the cost of care provided in a nursing facility. For
Medicaid-only Members, the MCO is responsible for cost of Covered Services provided outside of
the nursing facility. The MCO will not maintain nursing facilities in its Provider Network, and
will not reimburse the nursing facilities for Covered Services provided in such facilities.
Nursing facilities will use the traditional Fee-for-Service (FFS) system of billing HHSC rather
than billing the MCO.

8.3.2.8 Prioritization Plan

Prior to the 3/1/2012 Operational Start Date of the STAR+PLUS Program in the Expansion Service
Areas, HHSC and DADS will provide the MCO a plan that outlines a priority of populations and
special handling procedures that the MCO must implement to help ensure timely assessments for
potential enrollees and incoming Members as well as continuity of care for incoming Members. The
populations that will be part of the priority list will include but are not limited to Money
Follows the Person (MFP); Medically Dependent Children Program (MDCP), Comprehensive Care
Program -Personal Care Services (CCP-PCS) and Comprehensive Care Program-Private Duty Nursing
(CCPPDN) aging out consumers; Medical Assistance Only (MAO) Interest List consumers; and
Supplemental Security Income (SSI) consumer. HHSC and/or DADS will also provide the MCO with
information concerning Members who will be enrolled through manual processes and will need
expedited access to services.

8.3.3 STAR+PLUS Assessment Instruments

The MCO must have and use functional assessment instruments to identify Members with
significant health problems, Members requiring immediate attention, and Members who need or are
at risk of needing Long-term Services and Supports. The MCO, a Subcontractor, or a Provider may
complete assessment instruments, but the MCO remains responsible for the data recorded.

MCOs must use the DADS Form 2060, as amended or modified, to assess a Member’s need for
Functionally Necessary Personal Attendant Services. The MCO may adapt the form to reflect the
MCO’s name or distribution instructions, but the elements must be the same and instructions for
completion must be followed without amendment.

The DADS Form 2060 must be completed if a need for or a change in Personal Attendant Services
is warranted at the initial contact, at the annual reassessment, and anytime a Member requests
the services or requests a change in services. The DADS Form 2060 must also be completed at any
time the MCO determines the Member requires the services or requires a change in the Personal
Attendant Services that are authorized.

MCOs must use the Texas Medicaid Personal Care Assessment Form (PCAF Form) in lieu of the DADS
Form 2060 for children under the age of 21 when assessing the Member’s need for Functional
Necessary Personal Attendant Services. MCOs may adapt the PCAF Form to reflect the MCO’s name or
distribution instructions, but the elements must be the same and instructions for completion must
be followed without amendment. Reassessments using the PCAF Form must be completed every 12
months and as requested by the Member’s parent or other legal guardian. The PCAF Form must also
be completed at any time the MCO determines the Member may require a change in the number of
authorized Personal Attendant Service hours.

For Members and applicants seeking or needing the 19 15(c) Nursing Facility Waiver services, the
MCOs must use the Community Medical Necessity and Level of Care Assessment Instrument, as amended
or modified, to assess Members and to supply current medical information for Medical Necessity
determinations. The MCO must also complete the Individual Service Plan (ISP), Form 3671 for each
Member receiving

19 15(c) Nursing Facility Waiver Services. The ISP is established for a one-year period. After
the initial ISP is established, the ISP must be completed on an annual basis and the end date or
expiration date does not change. Both of these forms (Community Medical Necessity and Level of
Care Assessment Instrument and Form 3671) must be completed annually at reassessment. The MCO is
responsible for tracking the end dates of the ISP to ensure all Member reassessment activities
have been completed and posted on the LTC online portal prior to the expiration date of the ISP.
Note that the MCO cannot submit its initial Community Medical Necessity and Level of Care
Assessment Instrument earlier than 120 days prior to the expiration date of the ISP. An Initial
Community Medical Necessity and Level of Care determination will expire 120 days after it is
approved by the HHSC Claims Administrator. The MCO cannot submit a renewal of the Community
Medical Necessity and Level of Care Assessment Instrument earlier than 90 days prior to the
expiration date of the ISP. Such renewal will expire 90 days after it is approved by the HHSC
Claims Administrator.

8.3.4 1915(c) Nursing Facility Waiver Service Eligibility

Recipients of 19 15(c) Nursing Facility Waiver services must meet nursing facility criteria
for participation in the waiver and must have a plan of care at initial determination of
eligibility in which the plan’s annualized cost is equal to or less than 200% of the annualized
cost of care if the individual were to enter a nursing facility. If the MCO determines that the
recipient’s cost of care will exceed the 200% limit, the MCO will submit to HHSC’s Health Plan
Operations Unit a request to consider the use of State General Revenue Funds to cover costs over
the 200% allowance, as per HHSC’s policy and procedures related to use of general revenue for
1915(c) Nursing Facility Waiver participants. If HHSC approves the use of State General Revenue
Funds, the MCO will be allowed to provide waiver services as per the Individual Service Plan, and
non-waiver services (services in excess of the 200% allowance) utilizing State General Revenue
Funds. Non-waiver services are not Medicaid Allowable Expenses, and may not be reported as such
on the FSRs. The MCO will submit reports documenting expenses for non-waiver services in an
HHSC-approved format. HHSC will reimburse the MCO for such expenses.

8.3.4.1 For Members

Members can request to be tested for eligibility into the 1915(c) STAR+PLUS Waiver (SPW). The
MCO can also initiate SPW eligibility testing on a STAR+PLUS Member if the MCO determines that
the Member would benefit from the SPW services.

To be eligible for the SPW, the Member must meet risk criteria, Medical Necessity/Level of Care,
the cost of the Individual Service Plan (ISP) cannot exceed 202% of cost of providing the same
services in a nursing facility, and the MCO must be able to demonstrate that that Member has a
minimum of one (1) unmet need for at least one (1) SPW service. The MCO must apply risk criteria
as illustrated in Section 3242.3 of the STAR+PLUS Handbook, “Risk Assessment.”

If the MCO determines that a Member does not meet the risk criteria for SPW eligibility, the
MCO must notify HHSC’s Administrative Services Contractor. The Administrative Services
Contractor will notify the Member that he or she did not meet the eligibility criteria for the
SPW, and the right to Appeal the Adverse Determination.

If the MCO determined that the Member meets risk criteria for SPW eligibility, the MCO must
complete the Community Medical Necessity and Level of Care Assessment Instrument for Medical
Necessity/Level of Care determination, and submit the form to HHSC’s Administrative Services
Contractor. The MCO is also responsible for completing the assessment documentation, and
preparing a 1915(c) STAR+PLUS Waiver ISP for identifying the needed SPW services. The ISP is
submitted to the State to ensure that the total cost does not exceed the 202% cost limit. The
MCO must complete these activities within 45 days of receiving the State’s authorization form
for eligibility testing.

HHSC will notify the Member and the MCO of the eligibility determination, which will be based on
results of the assessments and the information provided by the MCO. If the STAR+PLUS Member is
eligible for SPW services, HHSC will notify the Member of the effective date of eligibility. If
the Member is not eligible for SPW services, HHSC will provide the Member information on right to
Appeal the Adverse Determination. The MCO is responsible for preparing any requested
documentation regarding its assessments and ISPs, and if requested by HHSC, attending the Fair
Hearing. Regardless of the SPW eligibility determination, HHSC will send a copy of the Member
notice to the MCO.

8.3.4.2 For Medical Assistance Only (MAO) Non-Member Applicants

Non-member persons who are not eligible for Medicaid in the community may apply for
participation in the 19 15(c) STAR+PLUS Waiver (SPW) program under the financial and functional
eligibility requirements for MAO. HHSC will inform the non-member applicant that services are
provided through an MCO and allow the applicant to select the MCO. HHSC will provide the
selected MCO an authorization form to initiate pre-enrollment assessment services required under
the SPW for the applicant. The MCO’s initial home visit with the applicant must occur within 14
days of the receipt of the referral. To be eligible for SPW, the applicant must meet financial
eligibility, risk criteria, Medical Necessity/Level of Care, the cost of the Individual Service
Plan (ISP) cannot exceed 202% of cost of providing the same services in a nursing facility, and
the MCO must be able to demonstrate that the applicant has a minimum of one (1) unmet need for
at least one (1) SPW service. The HMO must apply risk criteria as illustrated in Section 3242.3
of the STAR+PLUS Handbook, “Risk Assessment.”

If the MCO determines that the applicant does not meet the risk criteria for SPW

eligibility, the MCO must notify HHSC’s Administrative Services Contractor. The Administrative
Services Contractor will notify the applicant that he or she did not meet the eligibility criteria
for the SPW, and the right to Appeal the Adverse Determination.

If the MCO determined that the applicant meets risk criteria for SPW eligibility, the MCO must
complete the Community Medical Necessity and Level of Care Assessment Instrument for Medical
Necessity/Level of Care determination, and submit the form to HHSC’s Administrative Services
Contractor. The MCO is also responsible for completing the assessment documentation, and
preparing a 1915(c) STAR+PLUS ISP for identifying the needed SPW services. The ISP is submitted
to the State to ensure that the total cost does not exceed the 202% cost ceiling. The MCO must
complete these activities within 45 days of receiving the State’s authorization form for
eligibility testing.

HHSC will notify the applicant and the MCO of the results of its eligibility determination. If the
applicant is eligible, HHSC will notify the applicant and the MCO will be notified of the
effective date of eligibility, which will be the first day of the month following the
determination of eligibility. The MCO must initiate the Individual Service Plan (ISP) on the date
of enrollment.

If the applicant is not eligible, the HHSC notice will provide information on the applicant’s
right to Appeal the Adverse Determination. HHSC will also send notice to the MCO if the applicant
is not eligible for 1915(c) Nursing Facility Waiver services. The MCO is responsible for
preparing any requested documentation regarding its assessments and service plans, and if
requested by HHSC, attending the Fair Hearing.

8.3.4.3 Annual Reassessment

Prior to the end date of the annual ISP, the MCO must initiate an annual reassessment to
determine and validate continued eligibility for 19 15(c) Nursing Facility Waiver services for
each Member receiving such services. The MCO will be expected to complete the same activities
for each annual reassessment as required for the initial eligibility determination.

8.3.5 Consumer Directed Services Options

There are three (3) options available to STAR+PLUS Members desiring to self-direct the
delivery of:

	 	1.	 	Primary Home Care (PHC) (which is available to all STAR+PLUS Members), and

	 	2.	 	Personal Attendant Services (PAS); in-home or out-of-home respite; nursing;
physical therapy (PT); occupational therapy (OT); and/or speech/language therapy
(SLT) for (which are available to Members in the 19 15(c) STAR+PLUS Waivers (SPW)).	 

These three (3) options are: 1) Consumer-Directed; 2) Service Related; and 3) Agency. The
MCO must provide information concerning the three (3) options to all Members: (1) who meet
the functional requirements for PHC Services and the requirements for PAS (the functional
criteria for these services are described in the

Form 2060), (2) who are eligible for in-home or out-of-home respite services in the SPW;
and (3) who are eligible for nursing, PT, OT and/or SLT in the SPW. In

addition to providing information concerning the three (3) options, the MCO must provide
Member orientation in the option selected by the Member. The MCO must provide the
information to any STAR+PLUS Member receiving PHC/PAS and/or in- home or out-of-home
respite:

1. at initial assessment;

2. at annual reassessment or annual contact with the STAR+PLUS Member;

3. at any time when a STAR+PLUS Member receiving

PHC/PAS/Respite/Nu rsing/PT/TO/SLT requests the information; and

4. in the Member Handbook.

The MCO must contract with providers who are able to offer PHC/PAS in-home or outof-home
respite, nursing, PT, TO, and/or SLT and must also educate/train the MCO Network Providers
regarding the three (3) PAS options. Network Providers must meet licensure/certification
requirements as indicated in Attachment B-1, Sections 8.3.11 and 8.3.1.2 of the Uniform
Managed Care Contract.

In all three (3) options, the Service Coordinator and the Member work together in
developing the Individual Service Plan.

A more comprehensive description of Consumer Directed Services is found in the STAR+PLUS
Handbook:

http://www.dads.state.tx.us/handbooks/sph/8000/8000.htm#sec8120

8.3.5.1 Consumer-Directed Option Model

In the Consumer-Directed Model, the Member or the Member’s legal guardian is the employer of
record and retains control over the hiring, management, and termination of an individual
providing PHC/PAS in-home or out-of-home respite; nursing, PT, TO, and/or SLT. The Member is
responsible for assuring that the employee meets the requirements for PHC/PAS; in-home or
out-of-home respite; nursing, PT, TO, and/or SLT, including the criminal history check. The
Member uses a Consumer Directed Services agency (CDSA) to handle the employer-related
administrative functions such as payroll, substitute (back-up), and filing tax-related reports
of PHC/PAS; in-home or out-of-home respite; nursing, PT, TO, and/or SLT.

8.3.5.2 Service Related Option Model

In the Service Related Option Model, the Member or the Member’s legal guardian is actively
involved in choosing their personal attendant, respite provider, nurse, physical therapist,
occupational therapist and/or speech/language therapist but is not the employer of record. The
Home and Community Support Services agency (HCSSA) in the MCO Provider Network is the employer
of record for the personal attendant employee and respite provider. In this model, the Member
selects the personal attendant and/or respite provider from the HCSSA’s personal attendant
employees. The personal attendant’s/respite provider’s schedule is set up based on the Member
input, and the Member manages the PHC/PAS, in-home or out-of-home respite. The Member retains
the right to supervise and train the personal attendant. The Member may request a different
personal attendant and the HCSSA would be expected to honor the request as long as the new
attendant is a Network Provider. The HCSSA establishes the payment rate, benefits, and
provides all administrative functions such as payroll, substitute (back-up), and filing
tax-related reports of PHC/PAS and/or in-home or out-ofhome respite. In this model, the Member
selects the nurse, physical therapist, occupational therapist, and/or speech/language
therapist from the MCO’s Provider Network. The nurse, physical therapist, occupational
therapist, and/or speech/language therapist’s schedule is set up based on the Member’s input,
and the Member manages the nursing, PT, OT, and/or SLT services. The Member retains the right
to supervise and train the nurse, physical therapist, occupational therapist, and/or
speech/language therapist. The Member may request a different nurse, physical therapist,
occupational therapist, and/or speech/language therapist and the MCO must honor the request as
long as the nurse, physical therapist, occupational therapist, and/or speech/language
therapist is a Network Provider. The MCO establishes the payment rate, benefits, and provides
all administrative functions such as payroll, substitute (back-up), and filing tax- related
reports of nursing, PT, OT, and/or SLT services.

8.3.5.3 Agency Model

In the Agency Model, the MCO contracts with a Home and Community Support Services agency (HCSSA)
for the delivery of waiver services. The HCSSA is the employer of record for the personal
attendant, respite provider, nurse, physical therapist, occupational therapist, and speech
language therapist. The HCSSA establishes the payment rate, benefits, and provides all
administrative functions such as payroll, substitute (back-up), and filing tax-related reports of
PHC/PAS and/or in-home or out-of home respite.

8.3.6 Community Based Long-term Services and Supports

Providers

8.3.6.1 Training

The MCO must comply with Section 8.1.4.6 regarding Provider Manual and Provider training specific
to the STAR+PLUS Program. The MCO must train all Community Longterm Services and Supports
Providers regarding the requirements of the Contract and special needs of STAR+PLUS Members. The
MCO must establish ongoing STAR+PLUS Provider training addressing the following issues at a
minimum:

	 	1.	 	Covered Services and the Provider’s responsibilities for providing such
services to STAR+PLUS Members and billing the MCO. The MCO must place special
emphasis on Community Long-term Services and Supports and STAR+PLUS requirements,
policies, and procedures that vary from Medicaid Fee-for-Service and commercial
coverage rules, including payment policies and procedures;	 

	 	2.	 	relevant requirements of the STAR+PLUS Contract, including the role of the
Service Coordinator;	 

	 	3.	 	processes for making referrals and coordinating Non-capitated Services;

	 	4.	 	the MCO’s quality assurance and performance improvement program and the
Provider’s role in such programs; and	 

	 	5.	 	the MCO’s STAR+PLUS policies and procedures, including those relating to
Network and Out-of-Network referrals.	 

	 	6.	 	For STAR+PLUS in the El Paso, Hidalgo and Lubbock Service Areas with an
Operational Start Date of 3/1/2012, the process for continuing up to six (6) months of
Community-based Long Term Care Services for Members receiving those services as of the
Operational Start Date, including provider billing practices for these services and
whom to contact at the MCO for assistance with this process.	 

8.3.6.2 LTSS Provider Billing

Long-term Services and Supports providers serving clients in the traditional Fee-forService
Medicaid program have not been required to utilize the billing systems that most medical
facilities use on a regular basis. For this reason, the MCO must make accommodations to the
claims processing system for such providers to allow for a smooth transition from traditional
Medicaid to STAR+PLUS.

HHSC has developed a standardized method for Long-term Services and Supports billing. All
STAR+PLUS MCOs are required to utilize the standardized method, as found in Uniform Managed Care
Manual Chapters 2.1.1 and 2.1.2.

8.3.6.3 Rate Enhancement Payments for Agencies Providing Attendant Care

All MCOs participating in the STAR+PLUS Program must allow their Long-term Services and Supports
Providers to participate in the STAR+PLUS Attendant Care Enhancement Program.

Uniform Managed Care Manual Chapter 2.1.3, “STAR+PLUS Attendant Care Enhanced Payment
Methodology,” includes the methodology that the STAR+PLUS MCO will use to implement and pay the
enhanced payments, including a description of the timing of the payments. Such methodology must
comply with the requirements in the Uniform Managed Care Manual and the intent of T.A.C. Title
1, Part 15, Chapter 355, Subchapter A, §355.112.

8.3.6.4 STAR+PLUS Handbook

The STAR+PLUS Handbook contains HHSC-approved policies and procedures related to the STAR+PLUS
Program, including policies and procedures relating to the 19 15(b), 1915(c), or 1115 waivers.
The STAR+PLUS Handbook includes additional requirements regarding the STAR+PLUS Program and
guidance for the MCOs, the STAR+PLUS Support Units at DADS, and HHSC staff for administrating and
managing STAR+PLUS Program operations. The STAR+PLUS Handbook is incorporated by reference into
the Contract.

8.3.6.5 Annual Contact with STAR+PLUS Members

The MCO is required to contact each STAR+PLUS Member a minimum of two (2) times per calendar
year. This contact can be written, telephonic, or an onsite visit to the Member’s residence,
depending upon the Member’s level of need. The MCO must document the mechanisms, number and
method of contacts, and outcomes within the MCO’s Service Coordination system.

8.3.7 Additional Requirements Regarding Dual Eligibles

8.3.7.1 Coordination of Services for Dual Eligibles

The STAR+PLUS MCOs must coordinate Medicare and Medicaid services for Dual Eligible recipients.
To facilitate such coordination, the MCO must be contracted with the CMS and operating as a MA
Dual SNP in the most populous counties in the Service Area(s), as identified by HHSC, no later
than January 1, 2013. After January 1, 2013, the MCO must maintain its status as an MA DUAL SNP
contractor throughout the term of the Contract. Failure to do so may result in HHSC’s assessment
of contractual remedies, including Contract termination.

8.3.7.2 MA Dual SNP Agreement

As part of the integrated care initiative for Dual Eligible STAR+PLUS Members, the MCO may
maintain a separate capitation agreement with HHSC whereby the MCO’s MA Dual SNP plan reimburses
Medicare providers for the cost-sharing obligations that the State would otherwise be required to
pay on behalf of qualified STAR+PLUS Dual Eligible Members. The final Texas MA Dual SNP
Agreement, as amended or modified, will be incorporated by reference into the STAR+PLUS Contract
as Attachment B-6, and should be executed on or before January 1, 2013. The MCO will be required
to provide all enrolled STAR+PLUS Dual Eligible Members with the coordinated care and other
services described in the Texas MA Dual SNP Agreement, and any violations of the Texas MA Dual
SNP Agreement with respect to STAR+PLUS Members will also be a violation of the STAR+PLUS
Contract. Note that, for STAR+PLUS Members who are also enrolled in the MA Dual SNP’s Medicare
plan, the Parties may develop alternative methods for verifying Member eligibility and submitting
encounter data. Any modifications to these processes or other requirements identified in the
Texas MA Dual SNP Agreement will be included in the Texas MA Dual SNP Agreement.

8.4 Additional CHIP Scope of Work

	 	 	 	 	 
	The following provisions only apply to MCOs participating in CHIP.
		8.4.1		 	CHIP Provider Complaint and Appeals

CHIP Provider complaints and claims payment appeals are subject to disposition consistent
with the Texas Insurance Code and any applicable TDI regulations. The MCO must resolve Provider
complaints and claims payment appeals within 30 days from the date of receipt.

8.4.2 CHIP Member Complaint and Appeal Process

CHIP Member Complaints and Appeals are subject to disposition consistent with the Texas
Insurance Code and any applicable TDI regulations. HHSC will require the MCO to resolve Member
Complaints and Appeals (that are not elevated to TDI) within 30 days from the date the Member
Complaint or Appeal is received. The MCO is subject to remedies, including liquidated damages, if
at least 98 percent of Member Complaints and Member Appeals are not resolved within 30 days of
receipt of the Complaint or Appeal by the MCO. Please see the Attachment A, “Uniform Managed Care
Contract Terms and Conditions,” Article 12, and Attachment B-3, “Deliverables/Liquidated Damages
Matrix.” Any person, including those dissatisfied with a MCO’s resolution of a Member Complaint
or Appeal, may report an alleged violation to TDI.

8.4.3 Third Party Liability and Recovery, and Coordination

of Benefits

CHIP coverage is secondary when coordinating benefits with all other insurance coverage.
Coverage provided under CHIP will pay benefits for Covered Services that remain unpaid after all
other insurance coverage has been paid. For Network Providers and Out-of Network providers with
written reimbursement arrangements with the MCO, the MCO must pay the unpaid balance for Covered
Services up to the agreed rates. For Out-of-Network providers with no written reimbursement
arrangement, the MCO must pay the unpaid balance for Covered Services in accordance with TDI’s
rules regarding usual and customary payment.

MCOs are responsible for establishing a plan and process for avoiding or recovering costs for
services that should have been paid through a third party. The plan and process must comply with
state and federal law and regulations. If a Member visits an FQHC or RHC (or a Municipal Health
Department’s public clinic for Health Care Services) at a time that is outside of regular
business hours (as defined by HHSC in rules, including weekend days or holidays), the MCO is
obligated to reimburse the FQHC, RHC, or public clinic for Medically Necessary Covered Services.
The MCO must do so at a rate that is equal to the allowable rate for those services as determined
under Section 32.028 of the Human Resources Code. The Member does not need a referral from
his/her PCP.

The MCO must provide related reports to HHSC, as stated in Section 8.1.17.1, Financial Reporting
Requirements.After 120 days from the date of adjudication (on any claim, encounter, or
other Medicaid related payment made by the MCO, wherein the claim, encounter, or payment is
subject to Third Party Recovery), HHSC may attempt recovery, independent of any MCO action. HHSC
will retain, in full, all funds received as a result of any state-initiated recovery or

	 	 	 	 	 
	subrogation action.
		8.4.4		 	Perinatal Services for Traditional CHIP Members

The MCO’s perinatal Health Care Services must ensure appropriate care is provided to women
and infant Members of the MCO from the preconception period through the infant’s first year of
life. The MCO’s perinatal health care system must comply with the requirements of the Texas
Health and Safety Code, Chapter 32 (the Maternal and Infant Health Improvement Act), and
administrative rules codified at 25 T.A.C. Chapter 37, Subchapter M.

The MCO must have a perinatal health care system in place that, at a minimum, provides the
following services:

	 	1.	 	pregnancy planning and perinatal health promotion and education for
reproductive-age women;	 

	 	2.	 	perinatal risk assessment of non-pregnant women, pregnant and postpartum women,
and infants up to one year of age;	 

	 	3.	 	access to appropriate levels of care based on risk assessment, including
emergency care;	 

	 	4.	 	transfer and care of pregnant women, newborns, and infants to tertiary care
facilities when necessary;	 

	 	5.	 	availability and accessibility of OB/GYNs, anesthesiologists, and neonatologists
capable of dealing with complicated perinatal problems; and	 

	 	6.	 	availability and accessibility of appropriate outpatient and inpatient
facilities capable of dealing with complicated perinatal problems.	 

The MCO must have a process to expedite scheduling a prenatal appointment for an obstetrical exam
for a Member with a confirmed diagnosis indicating pregnancy.

The MCO must have procedures in place to contact and assist a pregnant/delivering Member in
selecting a PCP for her baby either before the birth or as soon as the baby is born.

Except as provided in Attachment A, Section 5.06, the MCO must provide inpatient care and
professional services relating to labor and delivery for its pregnant/delivering Members for
up to 48 hours following an uncomplicated vaginal delivery and 96 hours following an
uncomplicated caesarian delivery. The MCO must provide neonatal care for its newborn Members
until the time of discharge.

The MCO must notify providers involved in the care of pregnant/delivering women and newborns
(including Out-of-Network providers and Hospitals) of the MCO’s prior authorization
requirements. The MCO cannot require a prior authorization for services provided to a
pregnant/delivering Member or newborn Member for a medical condition that requires Emergency
Services, regardless of when the emergency condition arises.

28

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	STATUS1
	 	DOCUMENT

REVISION2
	 	EFFECTIVE DATE

	 	DESCRIPTION3

	 
	 	 	 	 	 	 
	 	 

	Baseline
	 	 	n/a	 	 	September 1, 2011
	 	Initial version of

Attachment B-1, RFP

Section 9,

“Turnover

Requirements.”

	 
	 	 	 	 	 	 
	 	 

	Revision
	 	 	2.1	 	 	March 1, 2012
	 	Contract

amendment did not

revise Attachment

B-1, RFP Section 9,

“Turnover

Requirements.”

	 
	 	 	 	 	 	 
	 	 

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

Table of Contents

9. Turnover Requirements

	 	 	 
	9.1

9.2

9.3

9.4
	 	Introduction

Turnover Plan

Transfer of Data

Turnover Services

9.5 Post-Turnover Services 9. Turnover Requirements

9.1 Introduction

This section presents the Turnover Requirements. Turnover is defined as those activities
that the MCO is required to perform prior to or upon termination of the Contract in situations
where the MCO will transition data and documentation acquired under the Contract to HHSC or a
subsequent contractor.

9.2 Turnover Plan

Twelve (12) months after the Effective Date of the Contract, the MCO must provide a
Turnover Plan covering the turnover of the records and information maintained to either HHSC or
a subsequent contractor. The Turnover Plan will be a comprehensive document detailing the
proposed schedule, activities, and resource requirements associated with the turnover tasks.

The Turnover Plan must describe the MCO’s policies and procedures that will assure:

	 	1.	 	The least disruption in the delivery of Covered Services to Members during
the transition to a subsequent contractor.	 

	 	2.	 	Cooperation with HHSC and a subsequent contractor in notifying Members of the
transition, as requested and in the form required or approved by HHSC.	 

	 	3.	 	Cooperation with HHSC and a subsequent contractor in transferring information to
HHSC or a subsequent contractor, as requested and in the form required or approved by
HHSC.	 

The Turnover Plan must be approved by HHSC, and include at a minimum:

	 	1.	 	The MCO’s approach and schedule for the transfer of data and information, as
described above.	 

	 	2.	 	The quality assurance process that the MCO will use to monitor Turnover activities.

	 	3.	 	The MCO’s approach to training HHSC or a subsequent contractor’s staff in the
operation of its business processes.	 

HHSC is not limited or restricted in the ability to require additional information from the MCO
or modify the Turnover Plan as necessary.

9.3 Transfer of Data

The MCO must transfer to HHSC or a subsequent contractor all data and information necessary
to transition operations, including: data and reference tables; data entry software; third-party
software and modifications; documentation relating to software and interfaces; functional business
process flows; and operational information, including correspondence, documentation of ongoing or
outstanding issues, operations support documentation, and operational information regarding
Subcontractors. For purposes of this provision, “documentation” means all operations, technical
and user manuals used in conjunction with the software, Services and Deliverables, in whole or in
part, that HHSC determines are necessary to view and extract

application data in a proper format. The MCO must provide the documentation in the
formats in which such documentation exists at the expiration or termination of the Contract. See
Attachment A, “Uniform Managed Care Contract Terms and Conditions,” Section 15.03, “Ownership
and Licenses” for additional information concerning intellectual property rights.

In addition, the MCO will provide to HHSC the following:

	 	1.	 	Data, information and services necessary and sufficient to enable HHSC to map all
Texas data from the MCO’s system(s) to the replacement system(s) of HHSC or a
successor contractor, including a comprehensive data dictionary as defined by HHSC.	 

	 	2.	 	All necessary data, information and services will be provided in the format
defined by HHSC, and must be HIPAA compliant.	 

	 	3.	 	All of the data, information and services mentioned in this section must be
provided and performed in a manner by the MCO using its best efforts to ensure the
efficient administration of the contract. The data and information must be supplied in
media and format specified by HHSC and according to the schedule approved by HHSC in
the Turnover Plan. The data, information and services provided pursuant to this section
must be provided at no additional cost to HHSC.	 

All relevant data and information must be received and verified by HHSC or a subsequent
contractor. If HHSC determines that data or information are not accurate, complete, nor HIPAA
compliant, HHSC reserves the right to hire an independent contractor to assist HHSC in obtaining
and transferring all the required data and information and to ensure that all the data are HIPAA
compliant. The reasonable cost of providing these services will be the responsibility of the MCO.

9.4 Turnover Services

Six (6) months prior to the end of the Contract Period, including any extensions, the MCO
must revise its Turnover Plan. If HHSC terminates the Contract prior to the expiration of the
Contract Period, then HHSC may require the MCO to submit an updated Turnover Plan sooner than six
(6) months prior to the termination date. In such cases, HHSC’s notice of termination will
include the date the Turnover Plan is due.

9.5 Post-Turnover Services

Thirty (30) days following Turnover of operations, the MCO must provide HHSC with a Turnover
Results Report documenting the completion and results of each step of the Turnover Plan. Turnover
will not be considered complete until this document is approved by HHSC. HHSC may withhold up to
20% of the last month’s Capitation Payment until the Turnover activities are complete and the
Turnover Plan is approved by HHSC.

If the MCO does not provide the required data or information necessary for HHSC or a
subsequent contractor to assume the operational activities successfully, the MCO agrees to
reimburse HHSC for all reasonable costs and expenses, including, but not limited to:

transportation, lodging, and subsistence to carry out inspection, audit, review, analysis,
reproduction and transfer functions at the location(s) of such records; and attorneys’ fees and
costs. This section does not limit HHSC’s ability to impose remedies or damages as set forth in
the Contract.

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	STATUS1
	 	DOCUMENT

REVISION2
	 	EFFECTIVE DATE

	 	DESCRIPTION3

	 
	 	 	 	 	 	 
	 	 

	Baseline
	 	 	n/a	 	 	September 1, 2011
	 	Initial version of Attachment B-2, “STAR

Covered Services.”

	 
	 	 	 	 	 	 
	 	 

	Revision
	 	 	2.1	 	 	March 1, 2012
	 	Attachment B-2 is modified to reinstate the

waiver of the three prescription limit for

adults language and to clarify the waiver of

the $200,000 individual annual limit on

inpatient services.

STAR Covered Services is modified to add

“Cancer screening, diagnostic, and treatment

services” and “Prenatal care services rendered

in a birthing center” as clarification items

and to clarify the requirements for services

provided in

free-standing psychiatric hospitals and

chemical dependency treatment facilities in

lieu of the acute care hospital setting.

	 
	 	 	 	 	 	 
	 	 

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

STAR Covered Services

The following is a non-exhaustive, high-level listing of Acute Care Covered Services
included under the Medicaid STAR Program.

STAR MCOs are responsible for providing a benefit package to Members that includes all Medically
Necessary services covered under the traditional, fee-for-service Medicaid programs except for
Non-capitated Services. Non-capitated Services are listed in Attachment B-1, RFP Section 8.2.2.8.
Non-capitated services are not included in the STAR MCOs’ Capitation Rates; however, STAR MCOs
must coordinate care these Non-capitated Services so that Members have access to a full range of
Medically Necessary Medicaid services, both capitated and noncapitated.

STAR MCOs may also elect to include Value-added Services in their benefit packages, if
approved by HHSC (see UMCM Chapter 4.5 “Physical and Behavioral Health Value-Added Services
Template”).

STAR Program benefits are subject to the same benefit limits and exclusions that apply to the
traditional, fee-for-service Medicaid programs, with the following three (3) exceptions. Adult
STAR Members are provided with three (3) enhanced benefits compared to the traditional,
feefor-service Medicaid coverage:

	 	1	 	waiver of the three (3) prescription per-month limit (note that this waiver
does not apply to STAR members in the Medicaid Rural Service Area who receive
prescription drug benefits through Medicare);

2 waiver of the 30-day spell-of-illness limitation; and

3 waiver of the $200,000 individual annual limit on inpatient services.

For a complete listing of the limitations and exclusions that apply to each Medicaid benefit
category, STAR MCOs should refer to the current Texas Medicaid Provider Procedures Manual and
the bi-monthly Texas Medicaid Bulletin. (These documents can be accessed online at:
http://www.tmhp.com.)

The services listed in this Attachment are subject to modification based on changes in Federal
and State laws, regulations, and policies.

STAR Covered Services include, but are not limited to, Medically Necessary: 

• Ambulance services

• Audiology services, including hearing aids, for adults and children

• Behavioral Health Services*, including:

> Inpatient mental health services for Children (birth through
age 20) > Acute inpatient mental health services for Adults

> Outpatient mental health services

> Psychiatry services

> Counseling services for adults (21 years of age and over)

> Outpatient substance use disorder treatment services including:

o Assessment

o Detoxification services

o Counseling treatment

o Medication assisted therapy

	 	 	 	> Residential substance use disorder treatment services
including: o Detoxification services	 

o Substance use disorder treatment (including room and board)

	 	*	 	These services are not subject to the quantitative treatment limitations that apply under
traditional, fee-for-service Medicaid coverage. The services may be subject to the
MCO’s non-quantitative treatment limitations, provided such limitations comply with
the requirements of the Mental Health Parity and Addiction Equity Act of 2008.

	 	•	 	Birthing services provided by a physician and certified nurse midwife (CNM) in
a licensed birthing center	 

	 	•	 	Birthing services provided by a licensed birthing center

	 	•	 	Cancer screening, diagnostic, and treatment services

	 	•	 	Chiropractic services

	 	•	 	Dialysis

	 	•	 	Durable medical equipment and supplies

	 	•	 	Early Childhood Intervention (ECI) services

	 	•	 	Emergency Services

	 	•	 	Family planning services

	 	•	 	Home health care services

	 	•	 	Hospital services, including inpatient and outpatient

	 	•	 	The MCO may provide inpatient services for acute psychiatric
conditions in a free-standing psychiatric hospital in lieu of an acute care
inpatient hospital setting.	 

	 	•	 	The MCO may provide substance use disorder treatment services in a
chemical dependency treatment facility in lieu of an acute care inpatient
hospital setting.	 

• Laboratory

• Mastectomy, breast reconstruction, and related follow-up procedures, including:

> inpatient services; outpatient services provided at an outpatient hospital and

ambulatory health care center as clinically appropriate; and physician and
professional services provided in an office, inpatient, or outpatient setting
for: o all stages of reconstruction on the breast(s) on which medically
necessary

mastectomy procedure(s) have been performed;

	 	•	 	surgery and reconstruction on the other breast to produce
symmetrical appearance;	 

	 	•	 	treatment of physical complications from the mastectomy and
treatment of lymphedemas; and	 

o prophylactic mastectomy to prevent the development of breast cancer.
> external breast prosthesis for the breast(s) on which medically
necessary mastectomy procedure(s) have been performed.

	 	•	 	Medical checkups and Comprehensive Care Program (CCP) Services for children (birth
through age 20) through the Texas Health Steps Program	 

	 	•	 	Oral evaluation and fluoride varnish in the Medical Home in conjunction with
Texas	 

Health Steps medical checkup for children 6 months through 35 months of age.

	 	•	 	Outpatient drugs and biologicals; including pharmacy-dispensed and provider-
administered outpatient drugs and biologicals	 

	 	•	 	Drugs and biologicals provided in an inpatient setting

	 	•	 	Podiatry

	 	•	 	Prenatal care

	 	•	 	Prenatal care provided by a physician, certified nurse midwife (CNM), nurse
practitioner (NP), clinical nurse specialist (CNS), and physician assistant (PA) in a
licensed birthing center	 

	 	•	 	Primary care services

	 	•	 	Preventive services including an annual adult well check for patients 21 years of age
and over

	 	•	 	Radiology, imaging, and X-rays

	 	•	 	Specialty physician services

	 	•	 	Therapies – physical, occupational and speech

	 	•	 	Transplantation of organs and tissues

	 	•	 	Vision (Includes optometry and glasses. Contact lenses are only covered if they are
medically necessary for vision correction, which can not be accomplished by glasses.)	 

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	STATUS1
	 	DOCUMENT

REVISION2
	 	EFFECTIVE DATE

	 	DESCRIPTION3

	 
	 	 	 	 	 	 
	 	 

	Baseline
	 	 	n/a	 	 	September 1, 2011
	 	Initial version of Attachment B-2.1, “CHIP

Covered Services.”

	 
	 	 	 	 	 	 
	 	 

	Revision
	 	 	2.1	 	 	March 1, 2012
	 	“Birthing Center Services” is added as

a clarification item.

“Services Rendered by a Certified Nurse

Midwife or physician in a licensed birthing

center” is added as a clarification item.

Attachment B-2.1 is modified to clarify Drug

Benefits for CHIP Perinate Members.

CHIP Exclusions from Covered Services is

modified to clarify that over the counter

drugs, contraceptives, and medications

prescribed for weight loss or gain are not

a covered benefit.

CHIP Exclusions from Covered Services for

CHIP Perinates is modified to clarify that

over the counter drugs contraceptives, and

medications prescribed for weight loss or

gain are not a covered benefit.

	 
	 	 	 	 	 	 
	 	 

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

CHIP Covered Services

Covered CHIP services must meet the CHIP definition of Medically
Necessary Covered Services. There is no lifetime maximum on benefits;
however, 12-month period or lifetime

limitations do apply to certain services, as specified in the following chart.
Co-pays apply until a family reaches its specific cost-sharing maximum.

Covered CHIP Perinatal services must meet the definition of Medically Necessary
Covered Services. There is no lifetime maximum on benefits; however, 12-month
enrollment period or lifetime limitations do apply to certain services, as
specified in the following chart. Co-pays do not apply to CHIP Perinatal Members.
CHIP Perinate Newborns are eligible for 12-months continuous coverage, beginning
with the month of enrollment as a CHIP Perinate.

	 	 	 	 	 
	Covered Benefit
	 	CHIP Members and CHIP Perinate Newborn

Members

	 	CHIP Perinate Members (Unborn Child)

	 
	 	 

	 	 
	Inpatient General

Acute and Inpatient

Rehabilitation

Hospital Services
	 	Services include, but are not limited to,

the following:

?? Hospital-provided Physician or Provider

services

?? Semi-private room and board (or private

if medically necessary as certified by

attending)

?? General nursing care

?? Special duty nursing when medically

necessary

?? ICU and services

?? Patient meals and special diets

?? Operating, recovery and other treatment

rooms

	 	For CHIP Perinates in families with

incomes at or below 185% of the Federal

Poverty Level, the facility charges are not

a covered benefit; however, professional

services charges associated with labor with

delivery are a covered benefit.

For CHIP Perinates in families with incomes

above 185% to 200% of the Federal Poverty

Level, benefits are limited to professional

service charges and facility charges associated

with labor with delivery until birth, and

services related to miscarriage or a non-viable

pregnancy.

Services include:
	 	 	?? Anesthesia and administration (facility

technical component)

?? Surgical dressings, trays, casts, splints

?? Drugs, medications and biologicals

?? Blood or blood products that are not

provided free-ofcharge to the patient and

their administration

?? X-rays, imaging and other radiological

tests (facility technical component)

?? Laboratory and pathology services

(facility technical component)

?? Machine diagnostic tests (EEGs, EKGs,

etc.)

?? Oxygen services and inhalation therapy

?? Radiation and chemotherapy

?? Access to DSHS-designated Level III

perinatal centers or Hospitals meeting

equivalent levels of care

	 	?? Operating, recovery and other

treatment rooms

?? Anesthesia and administration

(facility technical component

Medically necessary surgical services are

limited to services that directly relate to

the delivery of the unborn child, and

services related to miscarriage or nonviable

pregnancy (molar pregnancy,

ectopic pregnancy, or a fetus that expired

in utero).

Inpatient services associated with (a)

miscarriage or (b) a non-viable pregnancy

(molar pregnancy, ectopic pregnancy, or

a fetus that expired in utero) are a

covered benefit. Inpatient services

associated with miscarriage or non-viable

pregnancy include, but are not limited to:
	 	 	?? In-network or out-of-network facility

and Physician services for a mother and her

newborn(s) for a minimum of 48 hours

following an uncomplicated

vaginal delivery and 96 hours following an

uncomplicated delivery by caesarian

section.

?? Hospital, physician and related medical

services, such as anesthesia, associated

with dental care

?? Inpatient services associated with (a)

miscarriage or (b) a non-viable pregnancy

(molar pregnancy, ectopic

pregnancy, or a fetus that expired in

utero). Inpatient services associated with

miscarriage or non-viable

pregnancy include, but are not limited to:

	 	?? dilation and curettage (D&C)

procedures;

?? appropriate provider-administered

medications;

?? ultrasounds, and

?? histological examination of tissue

samples.

	 	 	?? dilation and curettage (D&C) procedures;

?? appropriate provider-administered

medications;

?? ultrasounds, and

?? histological examination of tissue

samples.

?? Surgical implants

?? Other artificial aids including surgical

implants

?? Inpatient services for a mastectomy and

breast reconstruction include:

	 	

	 	 	?? all stages of reconstruction on the

affected breast;

?? external breast prosthesis for the

breast(s) on which medically necessary

mastectomy procedure(s) have been performed

?? surgery and reconstruction on the other

breast to produce symmetrical appearance;

and

?? treatment of physical complications from

the mastectomy and treatment of

lymphedemas.

?? Implantable devices are covered under

Inpatient and Outpatient services and do

not count towards the DME

12-month period limit

?? Pre-surgical or post-surgical

orthodontic services for

medically necessary treatment of

craniofacial anomalies requiring surgical

intervention and delivered as part of a

proposed and clearly outlined treatment

plan to treat:

	 	

	 	 	?? cleft lip and/or palate; or

?? severe traumatic skeletal and/or

congenital craniofacial deviations; or

?? severe facial asymmetry secondary to

skeletal defects, congenital syndromal

conditions and/or tumor growth or its

treatment.

	 	

	 
	 	 

	 	 
	Skilled Nursing

Facilities
	 	Services include, but are not limited to,

the following:

	 	Not a covered benefit.

	(Includes

Rehabilitation

Hospitals)
	 	?? Semi-private room and board

?? Regular nursing services

?? Rehabilitation services

?? Medical supplies and use of appliances

and equipment furnished by the facility

	 	

	 
	 	 

	 	

	Outpatient Hospital,

Comprehensive

Outpatient

Rehabilitation

Hospital, Clinic
	 	Services include, but are not limited to,

the following services provided in a

hospital clinic or emergency room, a

clinic or health center, hospital-based

emergency department or an ambulatory

	 	Services include, the following services

provided in a hospital clinic or emergency

room, a clinic or health center, hospital based

emergency department or an ambulatory health

care setting:
	(Including Health

Center) and

Ambulatory Health

Care Center
	 	health care setting:

?? X-ray, imaging, and radiological tests

(technical component)

?? Laboratory and pathology services

(technical component)

?? Machine diagnostic tests

?? Ambulatory surgical facility services

?? Drugs, medications and biologicals

?? Casts, splints, dressings

?? Preventive health services

?? Physical, occupational and speech therapy

?? Renal dialysis

?? Respiratory services

- Radiation and chemotherapy

?? Blood or blood products that are not

	 	?? X-ray, imaging, and radiological tests

(technical component)

?? Laboratory and pathology services

(technical component)

?? Machine diagnostic tests

?? Drugs, medications and biologicals

that are medically necessary prescription and

injection drugs.

?? Outpatient services associated with

(a) miscarriage or (b) a non-viable

pregnancy (molar pregnancy, ectopic pregnancy,

or a fetus that expired inutero). Outpatient

services associated with miscarriage or

nonviable pregnancy include, but are not

limited to:
	 	 	provided free-ofcharge

to the patient and the administration of

these products

?? Outpatient services associated with (a)

miscarriage or (b) a non-viable pregnancy

(molar pregnancy, ectopic

pregnancy, or a fetus that expired in

utero). Outpatient services associated with

miscarriage or non-viable

pregnancy include, but are not limited to:

?? dilation and curettage (D&C) procedures;

?? appropriate provider-administered

medications;

?? ultrasounds, and

?? histological examination of tissue

samples.

?? Facility and related medical services,

such as anesthesia, associated with dental

care, when provided in a licensed

ambulatory surgical facility.

?? Surgical implants

?? Other artificial aids including surgical

implants

	 	?? dilation and curettage (D&C)

procedures;

?? appropriate provideradministered

medications;

?? ultrasounds, and

?? histological examination of

tissue samples. (1) Laboratory and radiological

services are limited to services that directly

relate to ante partum care and/or the delivery

of the covered CHIP Perinate until birth.

(2) Ultrasound of the pregnant uterus is a

covered benefit when medically indicated.

Ultrasound may be indicated for

suspected genetic defects, high-risk

pregnancy, fetal growth retardation,

gestational age confirmation or

miscarriage or non-viable pregnancy.

(3) Amniocentesis, Cordocentesis, Fetal

Intrauterine Transfusion (FIUT) and

Ultrasonic Guidance for Cordocentesis,

FIUT are covered benefits with an

appropriate diagnosis.

(4) Laboratory tests are limited to:
	 	 	?? Outpatient services provided at an

outpatient hospital and ambulatory health

care center for a mastectomy

and breast reconstruction as clinically

appropriate, include:

?? all stages of reconstruction on the

affected breast;

?? external breast prosthesis for the

breast(s) on which medically necessary

mastectomy procedure(s) have been performed

?? surgery and reconstruction on the other

breast to produce symmetrical appearance;

and

?? treatment of physical complications from

the mastectomy and treatment of

lymphedemas.

?? Implantable devices are covered under

Inpatient and Outpatient services and do

not count towards the DME

12-month period limit

?? Pre-surgical or post-surgical

orthodontic services for medically

necessary treatment of craniofacial

anomalies requiring surgical intervention

and delivered

as part of a proposed and clearly outlined

treatment plan to treat:

?? cleft lip and/or palate; or

?? severe traumatic skeletal and/or

congenital craniofacial deviations; or

?? severe facial asymmetry secondary to

skeletal defects, congenital syndromal

conditions and/or tumor growth or its

treatment.

	 	nonstress testing, contraction, stress

testing, hemoglobin or hematocrit

repeated once a trimester and at 32-36

weeks of pregnancy; or complete blood

count (CBC), urinanalysis for protein and

glucose every visit, blood type and RH

antibody screen; repeat antibody screen

for Rh negative women at 28 weeks

followed by RHO immune globulin

administration if indicated; rubella

antibody titer, serology for syphilis,

hepatitis B surface antigen, cervical

cytology, pregnancy test, gonorrhea test,

urine culture, sickle cell test, tuberculosis

(TB) test, human immunodeficiency virus

(HIV) antibody screen, Chlamydia test,

other laboratory tests not specified but

deemed medically necessary, and

multiple marker screens for neural tube

defects (if the client initiates care between

16 and 20 weeks); screen for gestational

diabetes at 24-28 weeks of pregnancy;

other lab tests as indicated by medical

condition of client.

(5) Surgical services associated with (a)

miscarriage or (b) a non-viable pregnancy

(molar pregnancy, ectopic pregnancy, or a fetus

that expired in utero) are a

covered benefit.

	 
	 	 

	 	 
	Physician/Physician

Extender
	 	Services include, but are not limited to,

the following:

	 	Services include, but are not limited to the

following:
	Professional

Services
	 	?? American Academy of Pediatrics

recommended wellchild exams and preventive

health services (including,

but not limited to, vision and hearing

screening and immunizations)

?? Physician office visits, inpatient and

outpatient services

?? Laboratory, x-rays, imaging and

pathology services, including technical

component and/or professional

interpretation

?? Medications, biologicals and materials

administered in Physician’s office

?? Allergy testing, serum and injections

?? Professional component (in/outpatient)

of surgical

	 	?? Medically necessary physician

services are limited to prenatal and

postpartum care and/or the delivery

of the covered unborn child until birth

?? Physician office visits, inpatient and

outpatient services

?? Laboratory, x-rays, imaging and

pathology services including

technical component and /or

professional interpretation

?? Medically necessary medications,

biologicals and materials

administered in Physician’s office

?? Professional component

(in/outpatient) of surgical services,

including:
	 	 	services, including:

?? Surgeons and assistant surgeons for

surgical

procedures including appropriate follow-up

care

?? Administration of anesthesia by

Physician (other

than surgeon) or CRNA

?? Second surgical opinions

?? Same-day surgery performed in a Hospital

without

an over-night stay

?? Invasive diagnostic procedures such as

endoscopic examinations

?? Hospital-based Physician services

(including

Physician-performed technical and

interpretive

components)

?? Physician and professional services for

a mastectomy

and breast reconstruction include:

?? all stages of reconstruction on the

affected breast;

?? external breast prosthesis for the

breast(s) on

which medically necessary mastectomy

procedure(s) have been performed

?? surgery and reconstruction on the other

breast to

produce symmetrical appearance; and

?? treatment of physical complications from

the

mastectomy and treatment of lymphedemas.

?? In-network and out-of-network Physician

services for a

mother and her newborn(s) for a minimum of

48 hours

following an uncomplicated vaginal delivery

and 96

	 	?? Surgeons and assistant

surgeons for surgical procedures

directly related to the labor with

delivery of the covered unborn

child until birth.

?? Administration of anesthesia by

Physician (other than surgeon)

or CRNA

?? Invasive diagnostic procedures

directly related to the labor with

delivery of the unborn child.

?? Surgical services associated

with (a) miscarriage or (b) a nonviable

pregnancy (molar

pregnancy, ectopic pregnancy,

or a fetus that expired in utero.)

?? Hospital-based Physician services

(including Physician performed

technical and interpretive

components)

?? Professional component of the

ultrasound of the pregnant uterus

when medically indicated for

suspected genetic defects, high-risk

pregnancy, fetal growth retardation,

or gestational age confirmation.

?? Professional component of

Amniocentesis, Cordocentesis, Fetal

Intrauterine Transfusion (FIUT) and

Ultrasonic Guidance for

Amniocentesis, Cordocentrsis, and

FIUT.

?? Professional component associated

with (a) miscarriage or (b) a nonviable

pregnancy (molar pregnancy,

ectopic pregnancy, or a fetus that

expired in utero). Professional

services associated with miscarriage or

non-viable pregnancy include, but

are not limited to:
	 	 	hours following an uncomplicated delivery by

caesarian section.

?? Physician services associated with (a)

miscarriage or

(b) a non-viable pregnancy (molar

pregnancy, ectopic

pregnancy, or a fetus that expired in

utero). Physician

services associated with miscarriage or

non-viable

pregnancy include, but are not limited to:

	 	• dilation and curettage (D&C)

procedures;

• appropriate provideradministered

medications;

• ultrasounds, and

• histological examination of

tissue samples.

	 	 	?? dilation and curettage (D&C) procedures;

?? appropriate provider-administered

medications;

?? ultrasounds, and

?? histological examination of tissue

samples.

?? Physician services medically necessary

to support a

dentist providing dental services to a CHIP

member

such as general anesthesia or intravenous

(IV)

sedation.

?? Pre-surgical or post-surgical

orthodontic services for

medically necessary treatment of

craniofacial

anomalies requiring surgical intervention

and delivered

as part of a proposed and clearly outlined

treatment

plan to treat:

	 	

	 	 	?? cleft lip and/or palate; or

?? severe traumatic skeletal and/or

congenital

craniofacial deviations; or

?? severe facial asymmetry secondary to

skeletal

defects, congenital syndromal conditions

and/or tumor growth or its treatment.

	 	

	 
	 	 

	 	 
	Prenatal Care and Pre-

Pregnancy Family

Services and Supplies
	 	Covered, unlimited prenatal care and

medically necessary

care related to diseases, illness, or

	 	Services are limited to an initial visit and

subsequent prenatal (ante partum) care

visits that include:
	 	 	abnormalities related to

the reproductive system, and limitations

and exclusions to

these services are described under

inpatient, outpatient

and physician services.

Primary and preventive health benefits do

not include prepregnancy

family reproductive services and supplies,

or

	 	(1) One (1) visit every four (4) weeks for

the first 28 weeks or pregnancy;

(2) one (1) visit every two (2) to three (3)

weeks from 28 to 36 weeks of pregnancy;

and

(3) one (1) visit per week from 36 weeks

to delivery.

More frequent visits are allowed as

Medically Necessary. Benefits are limited

to:
	 	 	prescription medications prescribed only

for the purpose of

primary and preventive reproductive health

care.

	 	Limit of 20 prenatal visits and two (2)

postpartum visits (maximum within 60

days) without documentation of a

complication of pregnancy. More

frequent visits may be necessary for highrisk

pregnancies. High-risk prenatal visits

are not limited to 20 visits per pregnancy.

Documentation supporting medical

necessity must be maintained in the

physician’s files and is subject to

retrospective review.

Visits after the initial visit must include:
	 	 	
 
	 	?? interim history (problems, marital

status, fetal status);

?? physical examination (weight, blood

pressure, fundalheight, fetal position

and size, fetal heart rate, extremities)

and

?? laboratory tests (urinanalysis for

protein and glucose every visit;

hematocrit or hemoglobin repeated

once a trimester and at 32-36 weeks

of pregnancy; multiple marker screen for fetal

abnormalities offered at 16-

20 weeks of pregnancy; repeat

antibody screen for Rh negative

women at 28 weeks followed by Rho

immune globulin administration if

indicated; screen for gestational

diabetes at 24-28 weeks of

pregnancy; and other lab tests as

indicated by medical condition of

client).
	 
	 	 

	 	 
	Birthing Center

Services
	 	Covers birthing services provided by a

licensed birthing

center. Limited to facility services (e.g.,

labor and delivery)

Limitation: Applies only to CHIP members.

	 	Covers birthing services provided by

a licensed birthing center. Limited to

facility services related to labor with

delivery.

Applies only to CHIP Perinate

Members (unborn child) with incomes

at 186% FPL to 200 % FPL.
	 
	 	 

	 	

	Services Rendered

by a Certified Nurse

Midwife or

physician in a
	 	CHIP Members: Covers prenatal services and

birthing

services rendered in a licensed birthing

center.

	 	Covers prenatal services and birthing

services rendered in a licensed

birthing center. Prenatal services

subject to the following limitations:
	licensed birthing

center
	 	CHIP Perinate Newborn Members: Covers

services

rendered to a newborn immediately following

	 	Services are limited to an initial visit

and subsequent prenatal (ante

partum) care visits that include:
	 	 	delivery.

	 	(1) one (1) visit every four (4) weeks

for the first 28 weeks or

pregnancy;

(2) one (1) visit every two (2) to three

(3) weeks from 28 to 36 weeks of

pregnancy; and

(3) one (1) visit per week from 36

weeks to delivery.

More frequent visits are allowed as

Medically Necessary. Benefits are

limited to:
	 	 	
 
	 	Limit of 20 prenatal visits and two (2)

postpartum visits (maximum within 60

days) without documentation of a

complication of pregnancy. More

frequent visits may be necessary for

high-risk pregnancies. High-risk

prenatal visits are not limited to 20

visits per pregnancy. Documentation

supporting medical necessity must be

maintained and is subject to

retrospective review.

Visits after the initial visit must

include:
	 	 	
 
	 	?? interim history (problems, marital

status, fetal status);

?? physical examination (weight,

blood pressure, fundalheight,

fetal position and size, fetal heart

rate, extremities) and

?? laboratory tests (urinanalysis for

protein and glucose every visit;

hematocrit or hemoglobin

repeated once a trimester and at

32-36 weeks of pregnancy;

multiple marker screen for fetal

abnormalities offered at 16-20

weeks of pregnancy; repeat

antibody screen for Rh negative

women at 28 weeks followed by

Rho immune globulin

administration if indicated; screen

for gestational diabetes at 24-28

weeks of pregnancy; and other

lab tests as indicated by medical

condition of client).
	 
	 	 

	 	 
	Durable Medical

Equipment (DME),

Prosthetic Devices

and

Disposable Medical

Supplies
	 	$20,000 12-month period limit for DME,

prosthetics, devices and disposable medical

supplies (diabetic supplies

and equipment are not counted against this

cap).

Services include DME (equipment which can

withstand

repeated use and is primarily and

customarily used to

serve a medical purpose, generally is not

useful to a

person in the absence of Illness, Injury,

or Disability, and is

appropriate for use in the home), including

devices and

supplies that are medically necessary and

necessary for

one or more activities of daily living and

appropriate to

assist in the treatment of a medical

condition, including:

	 	Not a covered benefit.

	 	 	?? Orthotic braces and orthotics

?? Dental devices

?? Prosthetic devices such as artificial

eyes, limbs,

braces, and external breast prostheses

?? Prosthetic eyeglasses and contact lenses

for the

management of severe ophthalmologic disease

?? Hearing aids

?? Diagnosis-specific disposable medical

supplies,

including diagnosis-specific prescribed

specialty

formula and dietary supplements. (See

Attachment A)

	 	

	 
	 	 

	 	 
	Home and

Community Health

Services
	 	Services that are provided in the home and

community,

including, but not limited to:

	 	Not a covered benefit.

	 	 	?? Home infusion

?? Respiratory therapy

?? Visits for private duty nursing (R.N.,

L.V.N.)

?? Skilled nursing visits as defined for

home health

purposes (may include R.N. or L.V.N.).

?? Home health aide when included as part

of a plan of

care during a period that skilled visits

have been approved.

?? Speech, physical and occupational

therapies.

?? Services are not intended to replace the

CHILD’S

caretaker or to provide relief for the

caretaker

?? Skilled nursing visits are provided on

intermittent level

and not intended to provide 24-hour skilled

nursing

services

?? Services are not intended to replace

24-hour inpatient

or skilled nursing facility services

	 	

	 
	 	 

	 	 
	Inpatient Mental

Health Services
	 	Mental health services, including for

serious mental illness,

furnished in a free-standing psychiatric

hospital, psychiatric

units of general acute care hospitals and

state-operated

facilities, including, but not limited to:

	 	Not a covered benefit.

	 	 	?? Neuropsychological and psychological

testing.

?? When inpatient psychiatric services are

ordered by a

court of competent jurisdiction under the

provisions of

Chapters 573 and 574 of the Texas Health

and Safety

Code, relating to court ordered commitments

to

psychiatric facilities, the court order

serves as binding

determination of medical necessity. Any

modification or

termination of services must be presented

to the court

with jurisdiction over the matter for

determination

?? Does not require PCP referral

	 	

	 
	 	 

	 	 
	Outpatient Mental

Health Services
	 	Mental health services, including for

serious mental illness,

provided on an outpatient basis, including,

but not limited

to:

	 	Not a covered benefit.

	 	 	?? The visits can be furnished in a variety

of communitybased

settings (including school and home-based)

or

in a state-operated facility

• Neuropsychological and psychological

testing

• Medication management

• Rehabilitative day treatments

• Residential treatment services

• Sub-acute outpatient services (partial

hospitalization

or rehabilitative day treatment)

?? Skills training (psycho-educational

skill development)

?? When outpatient psychiatric services are

ordered by a

court of competent jurisdiction under the

provisions of

Chapters 573 and 574 of the Texas Health

and Safety

Code, relating to court ordered commitments

to

psychiatric facilities, the court order

serves as binding

determination of medical necessity. Any

modification or

termination of services must be presented

to the court

with jurisdiction over the matter for

determination

?? A Qualified Mental Health Provider –

Community

Services (QMHP-CS), is defined by the Texas

Department of State Health Services (DSHS)

in Title

25 T.A.C., Part I, Chapter 412, Subchapter

G, Division

1, §412.303(48). QMHP-CSs shall be

providers working through a DSHS-contracted

Local Mental

Health Authority or a separate

DSHS-contracted

entity. QMHP-CSs shall be supervised by a

licensed

mental health professional or physician and

provide

services in accordance with DSHS standards.

Those

services include individual and group

skills training

(which can be components of interventions

such as

day treatment and in-home services),

patient and

family education, and crisis services

?? Does not require PCP referral

	 	

	 
	 	 

	 	 
	Inpatient Substance

Abuse Treatment

Services
	 	Services include, but are not limited to:

?? Inpatient and residential substance

abuse treatment

services including detoxification and

crisis stabilization,

and 24-hour residential rehabilitation

programs

?? Does not require PCP referral

	 	Not a covered benefit.

	 
	 	 

	 	 
	Outpatient

Substance Abuse
	 	Services include, but are not limited to,

the following:

	 	Not a covered benefit.

	Treatment Services
	 	?? Prevention and intervention services

that are provided

by physician and non-physician providers,

such as

screening, assessment and referral for

chemical

dependency disorders.

?? Intensive outpatient services

?? Partial hospitalization

?? Intensive outpatient services is defined

as an

organized non-residential service providing

structured

group and individual therapy, educational

services, and

life skills training which consists of at

least 10 hours

per week for four to 12 weeks, but less

than 24 hours

per day

?? Outpatient treatment service is defined

as consisting of

at least one to two hours per week

providing structured

group and individual therapy, educational

services, and

life skills training

?? Does not require PCP referral

	 	

	 
	 	 

	 	 
	Rehabilitation

Services
	 	Services include, but are not limited to,

the following:

	 	Not a covered benefit.

	 	 	?? Habilitation (the process of supplying a

child with the

means to reach age-appropriate developmental

milestones through therapy or treatment) and

rehabilitation services include, but are

not limited to the

following:

	 	

	 	 	?? Physical, occupational and speech therapy

?? Developmental assessment

	 	

	 
	 	 

	 	 
	Hospice Care

Services
	 	Services include, but are not limited to:

?? Palliative care, including medical and

support services,

for those children who have six (6) months

or less to

live, to keep patients comfortable during

the last weeks

and months before death

?? Treatment services, including treatment

related to the

terminal illness

?? Up to a maximum of 120 days with a 6

month life

expectancy

?? Patients electing hospice services may

cancel this

election at anytime

?? Services apply to the hospice diagnosis

	 	Not a covered benefit.

	 
	 	 

	 	 
	Emergency

Services, including

Emergency

Hospitals,

Physicians, and

Ambulance Services
	 	MCO cannot require authorization as a

condition for

payment for emergency conditions or labor

and delivery.

Covered services include, but are not

limited to, the

following:

?? Emergency services based on prudent lay

person

definition of emergency health condition

?? Hospital emergency department room and

ancillary

services and physician services 24 hours a

day, seven

(7) days a week, both by in-network and

out-of-network

providers

?? Medical screening examination

?? Stabilization services

?? Access to DSHS designated Level 1 and

Level II

trauma centers or hospitals meeting

equivalent levels

of care for emergency services

?? Emergency ground, air and water

transportation

?? Emergency dental services, limited to

fractured or

dislocated jaw, traumatic damage to teeth,

removal of

cysts, and treatment relating to oral

abscess of tooth or

gum origin.

	 	MCO cannot require authorization as a

condition for payment for emergency

conditions related to labor with delivery.

Covered services are limited to those

emergency services that are directly

related to the delivery of the unborn child

until birth.

?? Emergency services based on

prudent lay person definition of

emergency health condition

?? Medical screening examination to

determine emergency when directly

related to the delivery of the covered

unborn child.

?? Stabilization services related to the

labor with delivery of the covered

unborn child.

?? Emergency ground, air and water

transportation for labor and

threatened labor is a covered benefit

?? Emergency ground, air and water

transportation for an emergency

associated with (a) miscarriage or (b)

a non-viable pregnancy (molar

pregnancy, ectopic pregnancy, or a

fetus that expired in utero) is a

covered benefit.

Benefit limits: Post-delivery services or

complications resulting in the need for

emergency services for the mother of the

CHIP Perinate are not a covered benefit.

	 
	 	 

	 	 
	Transplants
	 	Services include, but are not limited to,

the following:

	 	Not a covered benefit.

	 	 	?? Using up-to-date FDA guidelines, all

non-experimental

human organ and tissue transplants and all

forms of

non-experimental corneal, bone marrow and

peripheral

stem cell transplants, including donor

medical

expenses.

	 	

	 
	 	 

	 	 
	Vision Benefit
	 	The health plan may reasonably limit the

cost of the

frames/lenses.

Services include:

	 	Not a covered benefit.

	 	 	?? One (1) examination of the eyes to

determine the need

for and prescription for corrective lenses

per 12-month

period, without authorization

?? One (1) pair of non-prosthetic eyewear

per 12-month

period

	 	

	 
	 	 

	 	 
	Chiropractic

Services
	 	Services do not require physician

prescription and are

limited to spinal subluxation

	 	Not a covered benefit.

	 
	 	 

	 	 
	Tobacco Cessation

Program
	 	Covered up to $100 for a 12-month period

limit for a planapproved

program

?? Health Plan defines plan-approved

program.

?? May be subject to formulary requirements.

	 	Not a covered benefit.

	 
	 	 

	 	 
	Case Management and

Care Coordination

Services
	 	These services include outreach informing,

case management,

care coordination and community referral.

	 	Covered benefit.

	 
	 	 

	 	 
	Drug Benefits
	 	Services include, but are not limited to,

the following:

	 	Services include, but are not limited

to, the following:
	 	 	• Outpatient drugs and biologicals;

including pharmacydispensed

and provider-administered outpatient drugs

and biologicals; and

• Drugs and biologicals provided in an

inpatient setting.

	 	• Outpatient drugs and biologicals;

including pharmacy-dispensed

and provider-administered

outpatient drugs and biologicals;

and

• Drugs and biologicals provided in

an inpatient setting.

Services must be medically

necessary for the unborn child.
	 
	 	 

	 	 
	[Value-added

services]
	 	See RFP Attachment B-2.1

	 	

	 
	 	 

	 	

CHIP EXCLUSIONS FROM COVERED SERVICES

	 	 	 	n Inpatient and outpatient infertility treatments or reproductive services
other than prenatal care, labor and delivery, and care related to disease,
illnesses, or abnormalities related to the reproductive system

	 	 	 	n Contraceptive medications prescribed only for the purpose of primary and
preventive reproductive health care (i.e. cannot be prescribed for family planning)

	 	 	 	n Personal comfort items including but not limited to personal care kits provided
on inpatient admission, telephone, television, newborn infant photographs, meals for
guests of patient, and other articles which are not required for the specific
treatment of sickness or injury

	 	 	 	n Experimental and/or investigational medical, surgical or other health care
procedures or

services which are not generally employed or recognized within the medical community

	 	 	 	n Treatment or evaluations required by third parties including, but not limited to,
those for schools, employment, flight clearance, camps, insurance or court

	 	 	 
	n

n
	 	Private duty nursing services when performed on an inpatient basis or in a skilled nursing facility.

Mechanical organ replacement devices including, but not limited to artificial heart

	 	 	 	n Hospital services and supplies when confinement is solely for diagnostic testing
purposes, unless otherwise pre-authorized by Health Plan

	 	 	 
	n

n

n

n

n
	 	Prostate and mammography screening

Elective surgery to correct vision

Gastric procedures for weight loss

Cosmetic surgery/services solely for cosmetic purposes

Dental devices solely for cosmetic purposes

	 	 	 	n Out-of-network services not authorized by the Health Plan except for emergency
care and physician services for a mother and her newborn(s) for a minimum of 48
hours following an uncomplicated vaginal delivery and 96 hours following an
uncomplicated delivery by caesarian section	 

	 	 	 	n Services, supplies, meal replacements or supplements provided for weight control
or the treatment of obesity, except for the services associated with the treatment
for morbid obesity as part of a treatment plan approved by the Health Plan

	 	 	 
	n

n

n

n
	 	Medications prescribed for weight loss or gain

Acupuncture services, naturopathy and hypnotherapy

Immunizations solely for foreign travel

Routine foot care such as hygienic care

	 	 	 	n Diagnosis and treatment of weak, strained, or flat feet and the cutting or
removal of corns, calluses and toenails (this does not apply to the removal of nail
roots or surgical treatment of conditions underlying corns, calluses or ingrown
toenails)

	 	 	 	n Replacement or repair of prosthetic devices and durable medical equipment due
to misuse, abuse or loss when confirmed by the Member or the vendor	 

	 	 	 
	n

n

n

n
	 	Corrective orthopedic shoes

Convenience items

Over-the-counter medications

Orthotics primarily used for athletic or recreational purposes

	 	 	 	n Custodial care (care that assists a child with the activities of daily living,
such as assistance in walking, getting in and out of bed, bathing, dressing,
feeding, toileting, special diet preparation, and medication supervision that is
usually self-administered or provided by a parent. This care does not require the
continuing attention of trained medical or paramedical personnel.) This exclusion
does not apply to hospice services.

	 	 	 
	n

n
	 	Housekeeping

Public facility services and care for conditions that federal, state, or local law requires be

	 	 	 
	provided in a public facility or care provided while in the custody of legal authorities
	n

n

n

n

n
	 	Services or supplies received from a nurse, which do not require the skill and training of a

nurse

Vision training and vision therapy

Reimbursement for school-based physical therapy, occupational therapy, or speech therapy

services are not covered except when ordered by a Physician/PCP

Donor non-medical expenses

Charges incurred as a donor of an organ when the recipient is not covered under this health plan

	 	 	 
	EXCLUSIONS FROM COVERED SERVICES FOR CHIP PERINATES
	n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n
	 	For CHIP Perinates in families with incomes at or below 185% of the Federal Poverty Level, inpatient

facility charges are not a covered benefit if associated with the initial Perinatal Newborn

admission. “Initial Perinatal Newborn admission” means the hospitalization associated with the birth.

Contraceptive medications prescribed only for the purpose of primary and preventive reproductive

health care (i.e. cannot be prescribed for family planning)

Inpatient and outpatient treatments other than prenatal care, labor with delivery, services related

to (a) miscarriage and (b) a non-viable pregnancy, and postpartum care related to the covered unborn

child until birth.

Inpatient mental health services.

Outpatient mental health services.

Durable medical equipment or other medically related remedial devices.

Disposable medical supplies.

Home and community-based health care services.

Nursing care services.

Dental services.

Inpatient substance abuse treatment services and residential substance abuse treatment services.

Outpatient substance abuse treatment services.

Physical therapy, occupational therapy, and services for individuals with speech, hearing, and

language disorders.

Hospice care.

Skilled nursing facility and rehabilitation hospital services.

Emergency services other than those directly related to the labor with delivery of the covered unborn

child.

Transplant services.

Tobacco Cessation Programs.

Chiropractic Services.

Medical transportation not directly related to labor or threatened labor, miscarriage or nonviable

pregnancy, and/or delivery of the covered unborn child.

Personal comfort items including but not limited to personal care kits provided on inpatient

admission, telephone, television, newborn infant photographs, meals for guests of patient,

and other articles which are not required for the specific treatment related to labor
with delivery or post partum care.

	 	 	n Experimental and/or investigational medical, surgical or other health care procedures or

	 	 	 
	services which are not generally employed or recognized within the medical community
	n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n
	 	Treatment or evaluations required by third parties including, but not limited to, those for

schools, employment, flight clearance, camps, insurance or court

Private duty nursing services when performed on an inpatient basis or in a skilled nursing facility.

Coverage while traveling outside of the United States and U.S. Territories (including Puerto Rico,

U.S. Virgin Islands, Commonwealth of Northern Mariana Islands, Guam, and American Samoa).

Mechanical organ replacement devices including, but not limited to artificial heart

Hospital services and supplies when confinement is solely for diagnostic testing purposes and not a

part of labor with delivery

Prostate and mammography screening

Elective surgery to correct vision

Gastric procedures for weight loss

Cosmetic surgery/services solely for cosmetic purposes

Out-of-network services not authorized by the Health Plan except for emergency care related to the

labor with delivery of the covered unborn child.

Services, supplies, meal replacements or supplements provided for weight control or the treatment

of obesity

Medications prescribed for weight loss or gain

Acupuncture services, naturopathy and hypnotherapy

Immunizations solely for foreign travel

Routine foot care such as hygienic care

Diagnosis and treatment of weak, strained, or flat feet and the cutting or removal of corns,

calluses and toenails (this does not apply to the removal of nail roots or surgical treatment of

conditions underlying corns, calluses or ingrown toenails)

Corrective orthopedic shoes

Convenience items

Over-the-counter medications

Orthotics primarily used for athletic or recreational purposes

Custodial care (care that assists with the activities of daily living, such as assistance in

walking, getting in and out of bed, bathing, dressing, feeding, toileting, special diet

preparation, and medication supervision that is usually self-administered or provided by a

caregiver. This care does not require the continuing attention of trained medical or paramedical

personnel.)

Housekeeping

Public facility services and care for conditions that federal, state, or local law requires be

	 	 	 
	provided in a public facility or care provided while in the custody of legal authorities
	n

n

n

n

n
	 	Services or supplies received from a nurse, which do not require the skill and

training of a nurse

Vision training, vision therapy, or vision services

Reimbursement for school-based physical therapy, occupational therapy, or speech

therapy services are not covered

Donor non-medical expenses

Charges incurred as a donor of an organ

CHIP DME/SUPPLIES

Note: DME/SUPPLIES are not a covered benefit for CHIP Perinate Members (Unborn Child).

	 	 	 	 	 	 	 
	Supplies	 	Covered	 	Excluded	 	Comments/Member Contract Provisions
	Ace Bandages
	 	 	 	X
	 	Exception: If provided by and billed through the clinic or home

care agency it is covered as an incidental supply.

	 
	 	 	 	 
	 	 

	Alcohol, rubbing
	 	 	 	X
	 	Over-the-counter supply.

	 
	 	 	 	 
	 	 

	Alcohol, swabs

(diabetic)
	 	X
	 	 	 	Over-the-counter supply not covered, unless RX provided at time

of dispensing.

	 
	 	 
	 	 	 	 

	Alcohol, swabs
	 	X
	 	 	 	Covered only when received with IV therapy or central line

kits/supplies.

	 
	 	 
	 	 	 	 

	Ana Kit Epinephrine
	 	X
	 	 	 	A self-injection kit used by patients highly allergic to bee

stings.

	 
	 	 
	 	 	 	 

	Arm Sling
	 	X
	 	 	 	Dispensed as part of office visit.

	 
	 	 
	 	 	 	 

	Attends (Diapers)
	 	X
	 	 	 	Coverage limited to children age 4 or over only when

prescribed by a physician and used to provide care for a

covered diagnosis as outlined in a treatment care plan

	 
	 	 
	 	 	 	 

	Bandages
	 	 	 	X
	 	

	 
	 	 	 	 
	 	

	Basal Thermometer
	 	 	 	X
	 	Over-the-counter supply.

	 
	 	 	 	 
	 	 

	Batteries – initial
	 	X
	 	 	 	For covered DME items

	 
	 	 
	 	 	 	 

	Batteries –

replacement
	 	X
	 	 	 	For covered DME when replacement is necessary due to

normal use.

	 
	 	 
	 	 	 	 

	Betadine
	 	 	 	X
	 	See IV therapy supplies.

	 
	 	 	 	 
	 	 

	Books
	 	 	 	X
	 	

	 
	 	 	 	 
	 	

	Clinitest
	 	X
	 	 	 	For monitoring of diabetes.

	 
	 	 
	 	 	 	 

	Colostomy Bags
	 	 	 	 	 	See Ostomy Supplies.

	 
	 	 	 	 	 	 

	Communication

Devices
	 	

	 	X

	 	

	 
	 	 	 	 
	 	

	Contraceptive Jelly
	 	 	 	X
	 	Over-the-counter supply. Contraceptives are not covered

under the plan.

	 
	 	 	 	 
	 	 

	Cranial Head Mold
	 	 	 	X
	 	

	 
	 	 	 	 
	 	

	Dental Devices
	 	X
	 	 	 	Coverage limited to dental devices used for treatment of

craniofacial anomalies requiring surgical intervention.

	 
	 	 
	 	 	 	 

	Diabetic Supplies
	 	X
	 	 	 	Monitor calibrating solution, insulin syringes, needles,

lancets, lancet device, and glucose strips.

	 
	 	 
	 	 	 	 

	Diapers/Incontinent

Briefs/Chux
	 	X
	 	 	 	Coverage limited to children age 4 or over only when

prescribed by a physician and used to provide care for a

covered diagnosis as outlined in a treatment care plan

	 
	 	 
	 	 	 	 

	Diaphragm
	 	 	 	X
	 	Contraceptives are not covered under the plan.

	 
	 	 	 	 
	 	 

	Diastix
	 	X
	 	 	 	For monitoring diabetes.

	 
	 	 
	 	 	 	 

	Diet, Special
	 	 	 	X
	 	

	 
	 	 	 	 
	 	

	Distilled Water
	 	 	 	X
	 	

	 
	 	 	 	 
	 	

	Dressing

Supplies/Central Line
	 	X
	 	 	 	Syringes, needles, Tegaderm, alcohol swabs, Betadine swabs or

ointment, tape. Many times these items are dispensed in a kit when

includes all necessary items for one dressing site change.

	 
	 	 
	 	 	 	 

	Dressing

Supplies/Decubitus
	 	X
	 	 	 	Eligible for coverage only if receiving covered home care for

wound care.

	 
	 	 
	 	 	 	 

	Dressing

Supplies/Peripheral

IV Therapy
	 	X

	 	

	 	Eligible for coverage only if receiving home IV therapy.

	 
	 	 
	 	 	 	 

	Dressing

Supplies/Other
	 	

	 	X

	 	

	 
	 	 	 	 
	 	

	Dust Mask
	 	 	 	X
	 	

	 
	 	 	 	 
	 	

	Ear Molds
	 	X
	 	 	 	Custom made, post inner or middle ear surgery

	 
	 	 
	 	 	 	 

	Electrodes
	 	X
	 	 	 	Eligible for coverage when used with a covered DME.

	 
	 	 
	 	 	 	 

	Enema Supplies
	 	 	 	X
	 	Over-the-counter supply.

	 
	 	 	 	 
	 	 

	Enteral Nutrition

Supplies
	 	X
	 	 	 	Necessary supplies (e.g., bags, tubing, connectors, catheters,

etc.) are eligible for coverage. Enteral nutrition products are not

covered except for those prescribed for hereditary metabolic

disorders, a non-function or disease of the structures that normally

permit food to reach the small bowel, or malabsorption due to

disease

	 
	 	 
	 	 	 	 

	Eye Patches
	 	X
	 	 	 	Covered for patients with amblyopia.

	 
	 	 
	 	 	 	 

	Formula
	 	 	 	X
	 	Exception: Eligible for coverage only for chronic hereditary

metabolic disorders a non-function or disease of the structures that

normally permit food to reach the small bowel; or malabsorption due

to disease (expected to last longer than 60 days when prescribed by

the physician and authorized by plan.) Physician documentation to

justify prescription of formula must include:

	 	 	 	 	 	 	• Identification of a metabolic disorder, dysphagia that

results in a medical need for a liquid diet, presence of a

gastrostomy, or disease resulting in malabsorption that

requires a medically necessary nutritional product

Does not include formula:

	 	 	 	 	 	 	• For members who could be sustained on an age appropriate diet.

• Traditionally used for infant feeding

• In pudding form (except for clients with documented

oropharyngeal motor dysfunction who receive greater

than 50 percent of their daily caloric intake from this

product)

• For the primary diagnosis of failure to thrive, failure to

gain weight, or lack of growth or for infants less than

twelve months of age unless medical necessity is

documented and other criteria, listed above, are met.

Food thickeners, baby food, or other regular grocery products that

can be blenderized and used with an enteral system that are not

medically necessary, are not covered, regardless of whether these

regular food products are taken orally or parenterally.

	 
	 	 	 	 
	 	 

	Gloves
	 	 	 	X
	 	Exception: Central line dressings or wound care provided by

home care agency.

	 
	 	 	 	 
	 	 

	Hydrogen Peroxide
	 	 	 	X
	 	Over-the-counter supply.

	 
	 	 	 	 
	 	 

	Hygiene Items
	 	 	 	X
	 	

	 
	 	 	 	 
	 	

	Incontinent Pads
	 	X
	 	 	 	Coverage limited to children age 4 or over only when

prescribed by a physician and used to provide care for a

covered diagnosis as outlined in a treatment care plan

	 
	 	 
	 	 	 	 

	Insulin Pump

(External) Supplies
	 	X
	 	 	 	Supplies (e.g., infusion sets, syringe reservoir and dressing,

etc.) are eligible for coverage if the pump is a covered item.

	 
	 	 
	 	 	 	 

	Irrigation Sets, Wound

Care
	 	X
	 	 	 	Eligible for coverage when used during covered home care for

wound care.

	 
	 	 
	 	 	 	 

	Irrigation Sets,

Urinary
	 	X
	 	 	 	Eligible for coverage for individual with an indwelling urinary

catheter.

	 
	 	 
	 	 	 	 

	IV Therapy Supplies
	 	X
	 	 	 	Tubing, filter, cassettes, IV pole, alcohol swabs, needles,

syringes and any other related supplies necessary for home IV

therapy.

	 
	 	 
	 	 	 	 

	K-Y Jelly
	 	 	 	X
	 	Over-the-counter supply.

	 
	 	 	 	 
	 	 

	Lancet Device
	 	X
	 	 	 	Limited to one device only.

	 
	 	 
	 	 	 	 

	Lancets
	 	X
	 	 	 	Eligible for individuals with diabetes.

	 
	 	 
	 	 	 	 

	Med Ejector
	 	X
	 	

	 	

	 
	 	 
	 	

	 	

	Needles and

Syringes/Diabetic
	 	

	 	

	 	See Diabetic Supplies

	 
	 	 	 	 	 	 

	Needles and

Syringes/IV and

Central Line
	 	

	 	

	 	See IV Therapy and Dressing Supplies/Central Line.

	 
	 	 	 	 	 	 

	Needles and

Syringes/Other
	 	X
	 	 	 	Eligible for coverage if a covered IM or SubQ medication is

being administered at home.

	 
	 	 
	 	 	 	 

	Normal Saline
	 	 	 	 	 	See Saline, Normal

	 
	 	 	 	 	 	 

	Novopen
	 	X
	 	

	 	

	 
	 	 
	 	

	 	

	Ostomy Supplies
	 	X
	 	 	 	Items eligible for coverage include: belt, pouch, bags, wafer,

face plate, insert, barrier, filter, gasket, plug, irrigation

kit/sleeve, tape, skin prep, adhesives, drain sets, adhesive

remover, and pouch deodorant.

Items not eligible for coverage include: scissors, room

deodorants, cleaners, rubber gloves, gauze, pouch covers,

soaps, and lotions.

	 
	 	 
	 	 	 	 

	Parenteral

Nutrition/Supplies
	 	X
	 	 	 	Necessary supplies (e.g., tubing, filters, connectors, etc.) are

eligible for coverage when the Health Plan has authorized the

parenteral nutrition.

	 
	 	 
	 	 	 	 

	Saline, Normal
	 	X
	 	 	 	Eligible for coverage:

	 	 	 	 	 	 	a) when used to dilute medications for nebulizer treatments;

b) as part of covered home care for wound care;

c) for indwelling urinary catheter irrigation.

	 
	 	 
	 	 	 	 

	Stump Sleeve
	 	X
	 	

	 	

	 
	 	 
	 	

	 	

	Stump Socks
	 	X
	 	

	 	

	 
	 	 
	 	

	 	

	Suction Catheters
	 	X
	 	

	 	

	 
	 	 
	 	

	 	

	Syringes
	 	 	 	 	 	See Needles/Syringes.

	 
	 	 	 	 	 	 

	Tape
	 	 	 	 	 	See Dressing Supplies, Ostomy Supplies, IV Therapy

Supplies.

	 
	 	 	 	 	 	 

	Tracheostomy

Supplies
	 	X
	 	 	 	Cannulas, Tubes, Ties, Holders, Cleaning Kits, etc. are

eligible for coverage.

	 
	 	 
	 	 	 	 

	Under Pads
	 	 	 	 	 	See Diapers/Incontinent Briefs/Chux.

	 
	 	 	 	 	 	 

	Unna Boot
	 	X
	 	 	 	Eligible for coverage when part of wound care in the home

setting. Incidental charge when applied during office visit.

	 
	 	 
	 	 	 	 

	Urinary, External

Catheter & Supplies
	 	 	 	X
	 	Exception: Covered when used by incontinent male where

injury to the urethra prohibits use of an indwelling catheter

ordered by the PCP and approved by the plan

	 
	 	 	 	 
	 	 

	Urinary, Indwelling

Catheter & Supplies
	 	X
	 	 	 	Cover catheter, drainage bag with tubing, insertion tray,

irrigation set and normal saline if needed.

	 
	 	 
	 	 	 	 

	Urinary, Intermittent
	 	X
	 	 	 	Cover supplies needed for intermittent or straight

catherization.

	 
	 	 
	 	 	 	 

	Urine Test Kit
	 	X
	 	 	 	When determined to be medically necessary.

	 
	 	 
	 	 	 	 

	Urostomy supplies
	 	 	 	 	 	See Ostomy Supplies.

	 
	 	 	 	 	 	 

29

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	STATUS1
	 	DOCUMENT

REVISION2
	 	EFFECTIVE DATE

	 	DESCRIPTION3

	 
	 	 	 	 	 	 
	 	 

	Baseline
	 	 	n/a	 	 	September 1, 2011
	 	Initial version of Attachment B-2.2, “STAR+PLUS

Covered Services.”

	 
	 	 	 	 	 	 
	 	 

	Revision
	 	 	2.1	 	 	March 1, 2012
	 	Attachment B-2.2 is modified to reinstate the

waiver of the three prescription limit for adults

language and to add the waiver of the $200,000

individual annual limit on inpatient services.

STAR+PLUS Covered Services is modified to

clarify the requirements regarding services

provided in free-standing psychiatric hospitals

and

chemical dependency treatment facilities in lieu

of

the acute care hospital setting.

Services included under the HMO capitation

payment is modified to clarify the requirements

for

“Prenatal care services rendered in a birthing

center.”

	 
	 	 	 	 	 	 
	 	 

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

STAR+PLUS Covered Services

Acute Care Services

The following is a non-exhaustive, high-level listing of Acute Care Covered Services included under
the Medicaid STAR+PLUS Program.

STAR+PLUS MCOs are responsible for providing a benefit package to Members that includes all
Medically Necessary services covered under the traditional, fee-for-service Medicaid programs
except for Non-capitated Services. Non-capitated Services are listed in Attachment B-1, RFP Section
8.2.2.8. Non-capitated Services are not included in the STAR+PLUS MCOs’ Capitation Rates; however,
STAR+PLUS MCOs must coordinate care for Members for these Non-capitated Services so that Members
have access to a full range of Medically Necessary Medicaid services, both capitated and
non-capitated.

STAR+PLUS MCOs may also elect to include Value-added Services in their benefit packages, if
approved by HHSC (see UMCM Chapter 4.5 “Physical and Behavioral Health Value-Added Services
Template”).

STAR+PLUS Program benefits are subject to the same benefit limits and exclusions that apply to the
traditional, fee-for-service Medicaid programs, with the following three (3) exceptions. Adult
STAR+PLUS Members are provided with three (3) enhanced benefits compared to the traditional,
fee-for-service Medicaid coverage:

	 	1.	 	waiver of the three (3) prescription per month limit, for members not covered
by Medicare;

	 	2.	 	waiver of the 30-day spell-of-illness limit; and

	 	3.	 	waiver of the $200,000 individual annual limit on inpatient services.

For a complete listing of the limitations and exclusions that apply to each Medicaid benefit
category, STAR+PLUS MCOs should refer to the current Texas Medicaid Provider Procedures Manual and
the bi-monthly Texas Medicaid Bulletin. (These documents can be accessed online at:
http://www.tmhp.com.)

The services listed in this Attachment are subject to modification based changes in Federal and
State laws, regulations, and policies.

Services included under the MCO capitation payment

• Ambulance services

• Audiology services, including hearing aids, for adults and children

• Behavioral Health Services*, including:

	 	•	 	Inpatient mental health services for Adults and Children. The MCO may provide these
services in a free-standing psychiatric hospital in lieu of an acute care inpatient
hospital setting.

o Outpatient mental health services for Adults and Children

o Psychiatry services

o Counseling services for adults (21 years of age and over)

o Substance use disorder treatment services, including

o Outpatient services, including:

• Assessment

• Detoxification services

• Counseling treatment

• Medication assisted therapy o Residential services, which may be
provided in a chemical dependency

treatment facility in lieu of an acute care inpatient hospital setting, including

• Detoxification services

• Substance use disorder treatment (including room and board)

	 	*	 	These services are not subject to the quantitative treatment limitations that apply under
traditional, fee-for-service Medicaid coverage. The services may be subject to the
MCO’s non-quantitative treatment limitations, provided such limitations comply with
the requirements of the Mental Health Parity and Addiction Equity Act of 2008.

	 	•	 	Prenatal care provided by a physician, certified nurse midwife (CNM), nurse
practitioner (NP), clinical nurse specialist (CNS), and physician assistant (PA) in a
licensed birthing center	 

	 	•	 	Birthing services provided by a physician and CNM in a licensed birthing center

	 	•	 	Birthing services provided by a licensed birthing center

	 	•	 	Cancer screening, diagnostic, and treatment services

	 	•	 	Chiropractic services

	 	•	 	Dialysis

	 	•	 	Durable medical equipment and supplies

	 	•	 	Early Childhood Intervention (ECI) services

	 	•	 	Emergency Services

	 	•	 	Family planning services

	 	•	 	Home health care services

	 	•	 	Hospital services, inpatient and outpatient

	 	•	 	Laboratory

	 	•	 	Mastectomy, breast reconstruction, and related follow-up procedures, including:

	 	•	 	outpatient services provided at an outpatient hospital and ambulatory health
care center as clinically appropriate; and physician and professional services
provided in an office, inpatient, or outpatient setting for:	 

	 	•	 	all stages of reconstruction on the breast(s) on which
medically necessary mastectomy procedure(s) have been performed;	 

	 	•	 	surgery and reconstruction on the other breast to produce
symmetrical appearance;	 

	 	•	 	treatment of physical complications from the mastectomy and
treatment of lymphedemas; and	 

o prophylactic mastectomy to prevent the development of breast cancer.

	 	•	 	external breast prosthesis for the breast(s) on which medically
necessary mastectomy procedure(s) have been performed.	 

	 	•	 	Medical checkups and Comprehensive Care Program (CCP) Services for children (birth
through age 20) through the Texas Health Steps Program

	 	•	 	Oral evaluation and fluoride varnish in the Medical Home in conjunction
with Texas Health Steps medical checkup for children six (6) months through 35 months
of age.	 

	 	•	 	Optometry, glasses, and contact lenses, if medically necessary

	 	•	 	Outpatient drugs and biologicals; including pharmacy-dispensed and provider-
administered outpatient drugs and biologicals	 

	 	•	 	Drugs and biologicals provided in an inpatient setting

	 	•	 	Podiatry

	 	•	 	Prenatal care

	 	•	 	Primary care services

	 	•	 	Preventive services including an annual adult well check for patients 21 years of age
and over

	 	•	 	Radiology, imaging, and X-rays

	 	•	 	Specialty physician services

	 	•	 	Therapies – physical, occupational and speech

	 	•	 	Transplantation of organs and tissues

	 	•	 	Vision

Community Based Long Term Care Services

The following is a non-exhaustive, high-level listing of Community Based Long Term Care Covered
Services included under the STAR+PLUS Medicaid managed care program.

•  Community Based Long Term Care Services for all Members 

o Personal Attendant Services – All Members of a STAR+PLUS MCO may receive

medically and functionally necessary Personal Attendant Services (PAS).

o Day Activity and Health Services – All Members of a STAR+PLUS MCO may receive

medically and functionally necessary Day Activity and Health Care Services (DAHS).

	 	•	 	 19 15(c) STAR+PLUS Waiver Services for those Members who qualify for such
services The state provides an enriched array of services to clients who would
otherwise qualify for nursing facility care through a Home and Community Based Medicaid
Waiver. In traditional Medicaid, this is known as the Community Based Alternatives (CBA)
waiver. The STAR+PLUS MCO must also provide medically necessary services that are available
to clients through the CBA waiver in traditional Medicaid to those clients that meet the
functional and financial eligibility for the 1915 (c) Nursing Facility Waiver Services.

	 	•	 	Personal Attendant Services (including the three (3) service delivery
options: Self- Directed; Agency Model, Self-Directed; and Agency Model)

o In-Home or Out-of-Home Respite Services

o Nursing Services (in home)

o Emergency Response Services (Emergency call button)

o Home Delivered Meals

o Minor Home Modifications

o Adaptive Aids and Medical Equipment

o Medical Supplies not available under the Texas Medicaid State Plan/1915(b) Waiver o
Physical Therapy, Occupational Therapy, Speech Therapy

o Adult Foster Care

o Assisted Living

	 	•	 	Transition Assistance Services (These services are limited to a maximum of
$2,500.00. If the MCO determines that no other resources are available to pay for the
basic services/items needed to assist a Member, who is leaving a nursing facility, with
setting up a household, the MCO may authorize up to $2,500.00 for Transition Assistance
Services (TAS). The $2,500.00 TAS benefit is part of the expense ceiling when
determining the Total Annual Individual Service Plan (ISP) Cost.)

DOCUMENT HISTORY LOG

	 	 	 	 	 	 	 	 	 
	STATUS1
	 	DOCUMENT

REVISION2
	 	EFFECTIVE DATE

	 	DESCRIPTION3

	 
	 	 	 	 	 	 
	 	 

	Baseline
	 	 	n/a	 	 	September 1, 2011
	 	Initial version of

Attachment B-3,

“Deliverables/Liquidated

Damages Matrix.”

	 
	 	 	 	 	 	 
	 	 

	Revision
	 	 	2.1	 	 	March 1, 2012
	 	Contract amendment

did not revise

Attachment B-3,

“Deliverables/Liquidated

Damages Matrix.”

	 
	 	 	 	 	 	 
	 	 

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

Deliverables/Liquidated Damages Matrix

	 	 	 	 	 	 	 	 	 	 	 	 	 
		#		 	Service/

Component1
	 	Performance Standard2

	 	Measurement

Period3
	 	Measurement

Assessment4
	 	Liquidated Damages

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	1	 	 	General Requirement:

Failure to Perform an

Administrative Service

Contract Attachment A,

“Uniform Managed Care

Contract Terms and

Conditions”,

Contract Attachment B-1,

RFP §§ 6, 7, 8 and 9
	 	The MCO fails to timely perform

an

MCO Administrative Service that

is

not otherwise associated with a

performance standard in this

matrix

and, in the determination of

HHSC,

such failure either: (1)

results in

actual harm to a Member or

places

a Member at risk of imminent

harm,

or (2) materially affects HHSC’s

ability to administer the

Program(s).

	 	Ongoing

	 	Each incident of

noncompliance

per MCO

Program and SA.

	 	HHSC may assess up to $5,000.00

per calendar day for each incident of

non-compliance per MCO Program

and SA.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	

	 	2	 	 	General Requirement:

Failure to Provide a

Covered Service

Contract Attachment A,

“Uniform Managed Care

Contract Terms and

Conditions”,

Contract Attachment B-1,

RFP §§ 6, 7, 8 and 9
	 	The MCO fails to timely provide

a

MCO Covered Service that is not

otherwise associated with a

performance standard in this

matrix

and, in the determination of

HHSC,

such failure results in actual

harm to

a Member or places a Member at

risk of imminent harm.

	 	Ongoing

	 	Each calendar day of

non-compliance

	 	HHSC may assess up to $7,500.00

per day for each incident of noncompliance.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	

	 	3	 	 	Contract Attachment

A,

“Uniform Managed Care

Contract Terms and

Conditions”, Section 4.08

Subcontractors
	 	(i) three (3) Business Days

after receiving notice from a

Material Subcontractor of its

intent

to terminate a Subcontract;

(ii) 180 calendar days prior to

the termination date of a

Material

Subcontract for MIS systems

operation or reporting;

(iii) 90 calendar days prior to

the termination date of a

Material

Subcontract for non-MIS MCO

Administrative Services; and

(iv) 30 calendar days prior to

the termination date of any

other

Material Subcontract.

	 	Transition,

Measured

Quarterly during

the Operations

Period

	 	Each calendar day of

non-compliance, per

MCO Program, per SA.

	 	HHSC may assess up to $5,000 per

calendar day of non-compliance.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	4	 	 	Contract Attachment

B-1,

RFP §§ 6, 7, 8 and 9

Uniform Managed Care

Manual
	 	All reports and deliverables as

specified in Sections 6, 7, 8

and 9

of Attachment B-1, must be

submitted according to the

timeframes and requirements

stated

in the Contract (including all

attachments) and the Uniform

Managed Care Manual. (Specific

Reports or deliverables listed

separately in this matrix are

subject

to the specified liquidated

damages.)

	 	Transition Period,

Quarterly during

Operations Period

	 	Each calendar day of

non-compliance, per

MCO Program, per SA.

	 	HHSC may assess up to $250 per

calendar day if the report/deliverable

is late, inaccurate, or incomplete.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	5	 	 	Contract Attachment

B-1,

RFP §7.2 Transition

Phase Schedule

Contract Attachment B-1,

RFP §7.2.1 Contract

Start-

Up and Planning

Contract Attachment B-1,

RFP §8.1 General Scope
	 	The MCO must be operational no

later than the agreed upon

Operations Start Date. HHSC, or

its agent, will determine when

the

MCO is considered to be

operational based on the

requirements in Section 7 and 8

of

Attachment B-1.

	 	Operations Start

Date

	 	Each calendar day of

non-compliance, per

MCO Program, per

Service Area (SA).

	 	HHSC may assess up to $10,000 per

calendar day for each day beyond the

Operations Start date that the MCO is

not operational until the day that the

MCO is operational, including all

systems.

	 	 	 	 	 
	 	 

	 	 
	 	 	 	 
	 	6	 	 	Contract Attachment

B-1,

RFP §7.2.5 System

Readiness Review
	 	The MCO must submit to HHSC or

to the designated Readiness

Review Contractor the following

plans for review, no later than

120

days prior to Operational Start

Date:

	 	Transition Period

	 	Each calendar day of

non-compliance, per

report, per MCO

Program, and per SA.

	 	HHSC may assess up to $1,000 per

calendar day for each day a

deliverable is late, inaccurate or

incomplete.

	 	 	 	 	 	 	• Joint Interface Plan;

• Disaster Recovery Plan;

• Business Continuity Plan;

• Risk Management Plan;

and

• Systems Quality Assurance

Plan.

	 	

	 	

	 	

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	7	 	 	Contract Attachment

B-1,

RFP §7.2.7 Operations

Readiness
	 	Final versions of the Provider

Directory must be submitted to

the

Administrative Services

Contractor

no later than 95 days prior to

the

Operational Start Date.

	 	Transition Period

	 	Each calendar day of

non-compliance, per

directory, per MCO

Program and per SA.

	 	HHSC may assess up to $1,000 per

calendar day for each day the

directory is late, inaccurate or

incomplete.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	8	 	 	Attachment B-1, RFP

Sections 7.2.8.1 and

8.1.19
	 	The MCO must submit or comply

with the requirements of the

HHSCapproved

Fraud and Abuse Compliance Plan.

	 	Transition,

Operations, and

Turnover

	 	Each incident of

noncompliance, per

MCO Program

	 	HHSC may assess up to $250 per

calendar day for each incident of

noncompliance, per MCO Program.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	9	 	 	Contract Attachment

B-1,

RFP §8.1.4 Provider

Network

UMCM Chapter 5.38 Out

of Network Utilization

Report
	 	(1) No more than 15 percent of

an

MCO’s total hospital

admissions, by

service delivery area, may

occur in

out-of-network facilities.

(2) No more than 20 percent of

an

MCO’s total emergency room

visits,

by service delivery area, may

occur

in out-of-network facilities

(3) No more than 20 percent of

total dollars billed to an MCO

for

“other outpatient services” may

be

billed by out-of-network

providers.

	 	Measured

Quarterly beginning

March 1, 2010.

	 	Per incident of

noncompliance,

per

Medicaid MCO, per

Service Area.

	 	HHSC may assess up to $25,000

per quarter, per standard, per

Medicaid MCO, per Service Area.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	10	 	 	Contract Attachment
	 	A. The MCO must operate a

	 	Operations and
	 	A. Each incident of
	 	HHSC may assess:
	 	 	 	 	B-1,

RFP §8.1.4.7 Provider

Hotline
	 	tollfree

Provider telephone hotline

for Provider inquiries from 8

AM – 5 PM, local time for the

Service Area, Monday through

Friday, excluding Stateapproved

holidays.

B. Performance Standards:

1. Call pickup rate – At least

99% of calls are answered on

or before the fourth ring or an

automated call pick up system

is used.

2. Call abandonment rate—

Call abandonment rate is seven

percent (7%) or less.

C. Average hold time is two (2)

minutes or less

	 	Turnover
	 	non-compliance

per MCO Program

and SA.

B. Each percentage

point below the

standard for 1 and

each percentage

point above the

standard for 2 per

MCO Program and

SA.

C. Per month, for

each

30 second time

increment, or

portion thereof, by

which the average

hold time exceeds

the maximum

acceptable hold

time.
	 	A. Per MCO Program and SA, up to

$100.00 for each hour or portion

thereof that appropriately staffed

toll-free lines are not operational.

If the MCO’s failure to meet the

performance standard is caused

by a Force Majeure Event, HHSC

will not assess liquidated

damages unless the MCO fails to

implement its Disaster Recovery

Plan.

B. Up to $100.00 per MCO Program

and SA for each percentage point

for each standard that the MCO

fails to meet the requirements for a

monthly reporting period for any

MCO operated toll-free lines.

C. Up to $100.00 may be assessed

for each 30 second time

increment, or portion thereof, by

which the MCO’s average hold

time exceeds the maximum

acceptable hold time.
	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	11	 	 	Contract Attachment
	 	A. The MCO must operate a

	 	Ongoing during
	 	A. Each incident of
	 	HHSC may assess:
	 	 	 	 	B-1,

RFP §8.1.5.6 Member

Services Hotline
	 	tollfree

hotline that Members can

call 24 hours a day, seven (7)

days a week.

B. Performance Standards.

1. Call pickup rate—At least

99% of calls are answered on

or before the forth ring or an

automated call pick up system

is used.

2. Call hold rate—At least

80% of calls must be answered

by toll-free line staff within

30

seconds

3. Call abandonment rate—

Call abandonment rate is

seven percent (7%) or less.

C. Average hold time is two (2)

minutes or less.

	 	Operations and

Turnover
	 	non-compliance

per. MCO Program

and SA.

B. Each percentage

point below the

standard for 1 and

2 and each

percentage point

above the standard

for 3 per MCO

Program and SA.

C. Per month, for

each

30 second time

increment, or

portion thereof, by

which the average

hold time exceeds

the maximum

acceptable hold

time.
	 	A. Per MCO Program and SA, up to

$100.00 for each hour or portion

thereof that toll-free lines are not

operational. If the MCO’s failure

to meet the performance

standard is caused by a Force

Majeure Event, HHSC will not

assess liquidated damages

unless the MCO fails to

implement its Disaster Recovery

Plan.

B. Per MCO Program and SA, up to

$100.00 for each percentage

point for each standard that the

MCO fails to meet the

requirements for a monthly

reporting period for any MCO

operated toll-free lines.

C. Up to $100.00 may be assessed

for each 30 second time

increment, or portion thereof, by which

the MCO’s average hold

time exceeds the maximum

acceptable hold time.
	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	12	 	 	Contract Attachment

B-1,

RFP §8.1.5.9 Member

Complaint and Appeal

Process

Contract Attachment B-1,

RFP §8.2.7.1 Member

Complaint Process

Contract Attachment B-1,

RFP §8.4.3 CHIP Member

Complaint and Appeal

Process

Contract Attachment B-1,

RFP §8.2.4.1 Provider

Complaints
	 	The MCO must resolve at least

98% of Member and Provider

Complaints within 30 calendar

days

from the date the Complaint is

received by the MCO.

	 	Measured

Quarterly during

the Operations

Period

	 	Per reporting

period,

per MCO Program, per

SA.

	 	HHSC may assess up to $250 per

reporting period if the MCO fails to

meet the performance standard.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	13	 	 	Contract Attachment

B-1,

RFP §8.1.5.9 Member

Complaint and Appeal

Process

Contract Attachment B-1,

RFP §8.2.7.2 Medicaid

Standard Member Appeal

Process

Contract Attachment B-1,

RFP § 8.4.3 CHIP

Member Complaint and

Appeal Process
	 	The MCO must resolve at least

98% of Member Appeals within 30

calendar days from the date the

Appeal is filed with the MCO.

	 	Measured

Quarterly during

the Operations

Period

	 	Per reporting

period,

per MCO Program, per

SA.

	 	HHSC may assess up to $500 per

reporting period if the MCO fails to

meet the performance standard

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	14	 	 	Contract Attachment

B-1,

RFP §8.1.6 Marketing &

Prohibited Practices

Uniform Managed Care

Manual Chapter 4.3
	 	The MCO may not engage in

prohibited marketing practices.

	 	Transition,

Measured

Quarterly during

the Operations

Period

	 	Per incident of

noncompliance

	 	HHSC may assess up to $1,000 per

incident of non-compliance.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	15	 	 	Contract Attachment
	 	A. The MCO must have an

	 	Operations and
	 	A. Each incident of
	 	HHSC may assess:
	 	 	 	 	B-1,

RFP §8.1.15.3 Behavioral

Health Services Hotline
	 	emergency and crisis

Behavioral Health services

Hotline available 24 hours a

day, seven (7) days a week,

toll-free throughout the Service

Area(s).

B. Crisis hotline staff must

include

or have access to qualified

Behavioral Health Services

professionals to assess

behavioral health emergencies.

C. The MCO must ensure that the

toll-free Behavioral Health

Services Hotline meets the

following minimum

performance requirements for

the MCO Program:

1. Call pickup rate: 99% of

calls are answered by the

fourth ring or an automated call

pick-up system:

2. Call hold rate: At least 80%

of calls must be answered by

toll-free line staff within 30

seconds.

3. Call abandonment rate: The

call abandonment rate is seven

percent (7%) or less.

D. Average hold time is

two (2)

minutes or less.

	 	Turnover

	 	non-compliance per

MCO Program and

SA.

B. Each incident of

non-compliance per

MCO Program and

SA.

C. Per MCO Program,

and SA, per month,

each percentage

point below the

standard for 1 and

2 and each

percentage point

above the standard

for 3.

D. Per month, for

each

30 second time

increment, or

portion thereof, by

which the average

hold time exceeds

the maximum

acceptable hold

time.

	 	A. Up to $100.00 for each hour or

portion thereof that appropriately

staffed toll-free lines are not

operational If the MCO’s failure

to meet the performance

standard is caused by a Force

Majeure Event, HHSC will not

assess liquidated damages

unless the MCO fails to

implement its Disaster Recovery

Plan.

B. Up to $100.00 per incident for

each occurrence that HHSC

identifies through its recurring

monitoring processes that tollfree

line staff were not qualified

or did not have access to

qualified professionals to assess

behavioral health emergencies.

C. Up to $100.00 for each

percentage point for each

standard that the MCO fails to meet the

requirements for a

monthly reporting period for any

MCO operated toll-free lines.

D. Up to $100.00 may be assessed

for each 30 second time

increment, or portion thereof, by

which the MCO’s average hold

time exceeds the maximum

acceptable hold time.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	16	 	 	Contract Attachment

B-1,

RFP §8.1.17.1 Financial

Reporting Requirements

Uniform Managed Care

Manual Chapter 5.0
	 	Financial Statistical Reports

(FSR):

For each MCO Program and SA,

the MCO must file quarterly and

annual FSRs. Quarterly reports

are

due no later than 30 days after

the

conclusion of each State Fiscal

Quarter (SFQ). The first annual

report is due no later than 120

days

after the end of each Contract

Year

and the second annual report is

due

no later than 365 days after

the end

of each Contract Year.

	 	Quarterly during

the Operations

Period

	 	Per calendar day of

non-compliance, per

MCO Program, per SA.

	 	HHSC may assess up to $1,000 per

calendar day a quarterly or annual

report is late, inaccurate or

incomplete.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	17	 	 	Contract Attachment

B-1,

RFP §8.1.17.1 Financial

Reporting Requirements:

Uniform Managed Care

Manual Chapter 5.0
	 	Medicaid Disproportionate Share

Hospital (DSH) Reports: The

Medicaid MCO must submit, on an

annual basis, preliminary and

final

DSH Reports. The Preliminary

report is due no later than

June 1st

after each reporting year,

and the

final report is due no later

than July 1st after

each reporting year. This

standard does not apply to CHIP

or

CHIP Perinatal Programs. Any

claims added after July

1st shall

include supporting claim

documentation for HHSC

validation.

	 	Measured during

4th

Quarter of the

Operations Period

(6/1–8/31)

	 	Per calendar day of

non-compliance, per

MCO Program, per SA.

	 	HHSC may assess up to $1,000 per

calendar day, per program, per

service area, for each day the report

is late, incorrect, inaccurate or

incomplete.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	18	 	 	Contract Attachment

B-1,

RFP §8.1.18 Management

Information System (MIS)

Requirements
	 	The MCO’s MIS must be able to

resume operations within 72

hours

of employing its Disaster

Recovery

Plan.

	 	Measured

Quarterly during

the Operations

Period

	 	Per calendar day of

non-compliance, per

MCO Program, per SA.

	 	HHSC may assess up to $5,000 per

calendar day of non-compliance

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	19	 	 	Contract Attachment

B-1,

RFP §8.1.18.1 Encounter

Data
	 	The MCO must submit Encounter

Data transmissions and include

all

Encounter Data and Encounter

Data adjustments processed by

the

MCO on a monthly basis, not

later

than the 30th calendar day

after the

last day of the month in which

the

claim(s) are adjudicated.

Additionally, the MCO will be

subject to liquidated damages

if the

Quarterly Encounter

Reconciliation

Report (which reconciles the

yearto-

date paid claims reported in the

Financial Statistical Report

(FSR) to

the appropriate paid dollars

reported in the Texas Encounter

Data (TED) Warehouse) includes

more than a two percent (2%)

variance (i.e., less than a 98%

match).

	 	Measured

Quarterly during

Operations Period

	 	Per incident of

noncompliance,

per MCO

Program, per Service

Area (SA)

	 	HHSC may assess up to $2,500 per

Quarter, per Program, per SA if the

MCO fails to submit monthly

encounter data. HHSC may assess

up to $5,000 per quarter, per

Program, per SA for each additional

quarter that the MCO fails to submit

monthly Encounter Data.

Additionally, HHSC may assess up to

$2,500 per Quarter, per Program, per

SA if the MCO falls below the 98%

match standard. HHSC may assess

up to $5,000 per Quarter, per

Program, per SA for each additional

Quarter that the MCO falls below the

98% match standard.

	 	 	 	 	 
	 	
 
	 	 
	 	 
	 	 
	 	20	 	 	Contract Attachment

B-1,

RFP §8.1.18.3 System-

Wide Functions
	 	The MCO’s MIS system must meet

all requirements in Section

8.1.18.3

of Attachment B-1.

	 	Measured

Quarterly during

the Operations

Period
	 	Per calendar day of

non-compliance, per

MCO Program, per SA.

	 	HHSC may assess up to $5,000 per

calendar day of non-compliance.

	 	 	 	 	 
	 	
 
	 	 
	 	 
	 	 
	 	21	 	 	Contract Attachment

B-1,

RFP §8.1.18.5 Claims

Processing Requirements

Uniform Managed Care

Manual Chapter 2.0
	 	The MCO must adjudicate all

provider Clean Claims within 30

days of receipt by the MCO. The

MCO must pay providers interest

at

an 18% per annum, calculated

daily

for the full period in which

the Clean

Claim remains unadjudicated

beyond the 30-day claims

processing deadline. Interest

owed

the provider must be paid on the

same date that the claim is

adjudicated.

	 	Measured

Quarterly during

the Operations

Period

	 	Per incident of

noncompliance.

	 	HHSC may assess up to $1,000 per

claim if the MCO fails to timely pay

interest.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	22	 	 	Contract Attachment

B-1,

RFP §8.1.18.5 Claims

Processing Requirements

Uniform Managed Care

Manual Chapter 2.0
	 	The MCO must comply with the

claims processing requirements

and

standards as described in

Section

8.1.18.5 of Attachment B-1 and

in

Chapter 2 of the Uniform Managed

Care Manual.

	 	Measured

Quarterly during

the Operations

Period
	 	Per quarterly

reporting

period, per MCO

Program, per Service

Area, per claim

type.
	 	HHSC may assess liquidated

damages of up to $5,000 for the first

quarter that an MCO’s Claims

Performance percentages by claim

type, by Program, and by service

area, fall below the performance

standards. HHSC may assess up to

$25,000 per quarter for each

additional quarter that the Claims

Performance percentages by claim

type, by Program, and by service

area, fall below the performance standards.
	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	23	 	 	Attachment B-1, RFP

Section 8.1.19
	 	The MCO must respond to Office

of

Inspector General request for

information in the manner and

format requested.

	 	Transition,

Operations, and

Turnover

	 	Each calendar day of

noncompliance, per

MCO Program.

	 	HHSC may assess up to $250 per

calendar day, per MCO Program, that

the report is late, inaccurate, or

incomplete.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	24	 	 	Attachment B-1, RFP

Section 8.1.20.2, UMCM

Chapter 5.5
	 	The MCO must submit a Fraudulent

Practices Report to the HHSC-OIG

within 30 Business Days of

receiving a report of possible

Waste, Abuse, or Fraud from the

MCO’s Special Investigative Unit

(SIU).

The MCO must submit quarterly

SIU Reports.

	 	Transition,

Operations, and

Turnover

	 	Each calendar day of

noncompliance, per

MCO Program.

	 	HHSC may assess up to $250 per

calendar day, per MCO Program, that

the report is late, inaccurate, or

incomplete.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	25	 	 	Attachment B-1, RFP

§8.1.20.2 Reports

Attachment B-1, RFP

§8.2.5.1 Provider

Complaints

Attachment B-1, RFP

§8.2.7.1 Member

Complaint Process
	 	The MCO fails to submit a timely

response to an HHSC Member or

Provider Complaint received by

HHSC and referred to the MCO by

the specified due date. The MCO

response must be submitted

according to the timeframes and

requirements stated within the

MCO

Notification Correspondence

(letter,

email, etc).

	 	Measured on a

Quarterly Basis

	 	Each incident of

noncompliance

per MCO

Program and SA

	 	HHSC may assess up to $250 per

calendar day for each day beyond the

due date specified within the MCO

Notification Correspondence.

	 	 	 	 	 
	 	
 
	 	 
	 	 
	 	 
	 	26	 	 	Contract Attachment

B-1,

RFP §8.1.20.2 Reports

Uniform Managed Care

Manual Chapters 2.0 and

5.0
	 	Claims Summary Report:

The MCO must submit quarterly,

Claims Summary Reports to HHSC

by MCO Program, by Service Area,

and by claim type, by the

30th day

following the reporting period

unless

otherwise specified.

	 	Measured

Quarterly during

the Operations

Period

	 	Per calendar day of

non-compliance, per

MCO Program, per

Service Area, per

claim

type.

	 	HHSC may assess up to $1,000 per

calendar day the report is late,

inaccurate, or incomplete.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	27	 	 	Contract Attachment

B-1,

RFP §8.1.20.2 Reports;

Uniform Managed Care

Manual Chapter 12 Frew
	 	(a) Medicaid Managed Care Texas

Health Steps Medical Checkups

Reports – The MCO must submit

quarterly reports of the number

of New Members and annual

reports of the number of New

Members and Existing Members

that receive timely Texas

Health Steps (THSteps) medical

checkups or

refuse to obtain medical

checkups.

(b) Children of Migrant Farm

Workers Annual Plan and

Children of Migrant Farm

Workers Annual Report – The MCO

must submit an

annual plan that describes how

the

MCO will identify and provide

accelerated services to

Children of

Migrant Farm Workers and an

annual report that summarizes

the MCO’s migrant efforts as

stated in its annual plan.

(c) Frew Quarterly Monitoring

Report – The MCO must submit

each quarter responses to

questions on this report’s

template addressing the status

of Frew Consent Decree

paragraphs.

(d) Frew Health Care Provider

Training Report – The MCO must

submit an annual report of

health

care provider training

conducted throughout the year

on Texas Health Steps and Frew

that

includes the number of Medicaid

providers that received

training and

feedback received on the subject

matter and methodology of the

training.

(e) Frew Provider Recognition

Report – The MCO must submit a

quarterly report of Medicaid

enrolled

healthcare providers who

attended

the MCO’s Frew and/or Texas

Health Steps trainings and

consented to being recognized as

having attended training on the

HHSC website.

	 	(a) Annually and

Quarterly

(b) Annually

(c) Quarterly

(d) Annually

(e) Quarterly

	 	(a) Per calendar

day of

non-compliance per

Program.

(b) Plan: Per

calendar

day of

non-compliance.

Report: Per calendar

day of

non-compliance

per Program and

Service Area.

(c) Per calendar

day of

non-compliance per

MCO.

(d) Per calendar

day of

non-compliance per

MCO.

(e) Per calendar

day of

non-compliance per

MCO.

	 	HHSC may assess up to $1,000 per

calendar day for the first

measurement period the reports are

late, inaccurate, or incomplete.

HHSC may assess up to $5,000 per

calendar day for each consecutive

measurement period that a

subsequent report is submitted late,

inaccurate, or incomplete.

In addition, HHSC may assess up to

$2,500 per calendar day for any

report resubmissions that are late,

inaccurate, or incomplete within each

measurement period.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	28	 	 	Contract Attachment

B-1,

RFP §8.3.3 STAR+PLUS

Assessment Instruments

Attachment B-1, RFP

§8.3.4.1 For Members

Attachment B-1, RFP
	 	The Community Medical Necessity

and Level of Care (MN LOC)

Assessment Instrument must be

completed and electronically

submitted via the TMHP portal in

the specified format within 45

days:

	 	Operations,

Turnover

	 	Per calendar day of

non-compliance, per

Service Area.

	 	HHSC may assess up to $500 per

calendar day per Service Area, for

each day a report is late, inaccurate

or incomplete.

	 	 	 	 	§8.3.4.2 For Medical

Assistance Only (MAO)

Non-Member Applicants
	 	1) from the date of referral

for 1915(c) Waiver services for

MAO applicants; 2) from the date

of the Member’s request for

1915(c)

Waiver services for current

Members requesting an upgrade;

or

3) prior to the annual ISP

expiration

date for all Members receiving

1915(c) Waiver services as

specified in Section 8.3.3.

	 	

	 	

	 	

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	29	 	 	Contract Attachment

B-1,

RFP §9.3 Transfer of

Data
	 	The MCO must transfer all data

regarding the provision of

Covered

Services to Members to HHSC or a

new MCO, at the sole discretion

of

HHSC and as directed by HHSC.

All transferred data must comply

with the Contract requirements,

including HIPAA.

	 	Measured at Time

of Transfer of Data

and ongoing after

the Transfer of

Data until

satisfactorily

completed

	 	Per incident of

noncompliance

(failure to

provide data and/or

failure to provide

data

in required

format), per

MCO Program, per SA.

	 	HHSC may assess up to $10,000 per

calendar day the data is late,

inaccurate or incomplete.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	30	 	 	Contract Attachment

B-1,

RFP §9.4 Turnover

Services
	 	Six (6) months prior to the end

of

the contract period or any

extension

thereof, the MCO must propose a

Turnover Plan covering the

possible

turnover of the records and

information maintained to

either the

State (HHSC) or a successor MCO.

	 	Measured at Six (6)

Months prior to the

end of the contract

period or any

extension thereof

and ongoing until

satisfactorily

completed

	 	Each calendar day of

non-compliance, per

MCO Program, per SA.

	 	HHSC may assess up to $1,000 per

calendar day the Plan is late,

inaccurate, or incomplete.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 
	 	31	 	 	Contract Attachment

B-1,

RFP §9.5 Post-Turnover

Services
	 	The MCO must provide the State

(HHSC) with a Turnover Results

report documenting the

completion

and results of each step of the

Turnover Plan 30 days after the

Turnover of Operations.

	 	Measured 30 days

after the Turnover

of Operations

	 	Each calendar day of

non-compliance, per

MCO program, per SA.

	 	HHSC may assess up to $250 per

calendar day the report is late,

inaccurate or incomplete.

	 	 	 	 	 
	 	 

	 	 
	 	 
	 	 

1 Derived from the Contract or HHSC’s Uniform Managed Care Manual.

2 Standard specified in the Contract. Note: Where the due date states 30
days, the HMO is to provide the deliverable by the last day of the month following the
end of the reporting period. Where the due date states 45 days, the HMO is to provide
the deliverable by the 15th day of the second month following the end of the reporting
period.

3 Period during which HHSC will evaluate service for purposes of tailored remedies.

4 Measure against which HHSC will apply remedies.

STAR Service Areas – Attachment B-4

30

CHIP Service Areas – Attachment B-4.1

31

STAR+PLUS Service Areas = Attachment B-4.2

32

Medicaid Rural Service Area (MRSA) Regions – Attachment B-4.3

33

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