Document:

exv10w2

Exhibit 10.2

AMENDMENT NO. 5 TO STOCKHOLDERS AGREEMENT

     THIS AMENDMENT NO. 5 TO STOCKHOLDERS AGREEMENT is entered into effective this 13th day of
February, 2009 (this “Amendment No. 5”), by and among Cardiovascular Systems, Inc., a Minnesota
Corporation (the “Company”) and the Holders and Investors signatory hereto.

RECITALS

     WHEREAS, this Amendment No. 5 amends the Stockholders Agreement, dated July 19, 2006 (the
"Stockholders Agreement”), by and between the Company and the “Holders,” “Investors,” and “Section
5 Holders” set forth on Schedule I thereto, as amended by that certain Amendment No. 1 to
Stockholders Agreement, dated October 3, 2006, by and between the Company, ITX International Equity
Corp. and the Holders and Investors signatory thereto; that certain Amendment No. 2 to Stockholders
Agreement, dated September 19, 2007, by and between the Company, the Series A-1 Convertible
Preferred Stockholders and the Holders and Investors signatory thereto; that certain Amendment No.
3 to Stockholders Agreement, dated December 17, 2007, by and between the Company, the Series B
Convertible Preferred Stockholders and the Holders and Investors signatory thereto; and that
certain Amendment No. 4 to Stockholders Agreement, dated September 12, 2008, by and between the
Company, Silicon Valley Bank and the Holders and Investors signatory thereto;

     WHEREAS, the Company filed a Form 10 registration statement with the U.S. Securities Exchange
Commission (“SEC”) on October 28, 2008 and such registration statement became effective on December
29, 2008;

     WHEREAS, upon the effectiveness of the registration statement, the Company became subject to
the SEC periodic reporting requirements and has a class of equity securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended;

     WHEREAS the existence of the Stockholders Agreement triggers certain SEC reporting
requirements on behalf of the parties thereto and the parties hereto wish to facilitate the making
of any such reports;

     WHEREAS, Holders executing this Amendment No. 5 hold a majority of the Shares subject to the
Stockholders Agreement; and

     WHEREAS, Investors executing this Amendment No. 5 hold a majority in interest of the shares of
Common Stock issued or issuable to the Investors.

     NOW THEREFORE, in consideration of the mutual covenants and agreements contained in this
Amendment No. 5, the sufficiency of which is hereby acknowledged, the parties hereto agree as set
forth below:

1

 

	1.	 	Capitalized terms not defined herein shall have the meanings ascribed to them in the
Stockholders Agreement.

     2. The following is added as Section 24 to the Stockholders Agreement:

“Investors’ Representatives. David L. Martin and Laurence L. Betterley,
acting together or individually, are hereby appointed the representatives of the
Investors and Holders, with full power to execute and file with the SEC and any
stock exchange or similar authority, for and on behalf of the Investors and Holders
in any and all capacities, any and all reports required to be filed under Section 13
of the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder by such Investors and Holders as a group as a consequence of their being
parties to the Stockholders Agreement, including, without limitation, reports on
Schedule 13D or Schedule 13G, and any and all amendments to such reports, with all
exhibits and any other forms or documents as may be necessary in connection with the
filing of such reports with the SEC and any stock exchange or similar authority,
granting unto said representatives full power and authority to do and perform any
and all acts for and on behalf of the Investors and Holders which may be necessary
or desirable to complete, as fully as the Investors and Holders might or could do in
person. This appointment shall expire automatically upon the closing of the
Company’s merger with Responder Merger Sub, Inc., a wholly-owned subsidiary of
Replidyne, Inc. The representatives shall provide Maverick a reasonable opportunity
to review and comment upon such Schedule 13D or Schedule 13G and each amendment
thereto prior to filing.”

	3.	 	This Amendment No. 5 may be executed in any number of original or facsimile
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one agreement. Any
counterpart or other signature to this Amendment No. 5 that is delivered by facsimile shall
be deemed for all purposes as constituting good and valid execution and delivery by such
party of this Amendment No. 5.

	4.	 	Except as set forth herein, all other terms and conditions of the Stockholders
Agreement remain the same.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

2

 

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 5 to Stockholders
Agreement effective the date first written above.

	 	 	 	 	 
	 	COMPANY

CARDIOVASCULAR SYSTEMS, INC.

 	 
	 	By:  	/s/ Laurence Betterley
 	 
	 	 	Name:  	Laurence Betterley 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 5 to Stockholders
Agreement effective the date first written above.

	 	 	 	 	 	 	 
	 	 	 HOLDERS	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Gary M. Petrucci	 	 
	 	 	 	 	 
	 	 	Gary M. Petrucci	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Michael J. Kallok	 	 
	 	 	 	 	 
	 	 	Michael J. Kallok	 	 
	 
	 	 	 	 	 	 
	 	 	GDN HOLDINGS, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Glen D. Nelson	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Glen D. Nelson	 	 
	 

	 	 	 	Title: Member	 	 
	 
	 	 	 	 	 	 
	 	 	GEOFFREY O. HARTZLER REV TRUST DTD 1/8/97, AS AMENDED	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Geoffrey O. Hartlzer	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Geoffrey O. Hartzler	 	 
	 

	 	 	 	Title: Trustee	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Geoffrey O. Hartlzer	 	 
	 	 	 	 	 
	 	 	Geoffrey O. Hartzler	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Roger J. Howe	 	 
	 	 	 	 	 
	 	 	Roger J. Howe, Ph. D.	 	 

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 5 to Stockholders
Agreement effective the date first written above.

	 	 	 	 	 	 	 
	 	 	INVESTORS	 	 
	 
	 	 	 	 	 	 
	 	 	EASTON HUNT CAPITAL PARTNERS, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	EHC GP, L.P. its General Partner	 	 
	 

	 	By:
	 	EHC GP, Inc., its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard P. Schneider	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Richard P. Schneider	 	 
	 

	 	 	 	Title: Vice President & Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	EASTON CAPITAL PARTNERS, LP	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	ECP GP, LLC	 	 
	 

	 	By:
	 	ECP GP, Inc., its Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard P. Schneider	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Richard P. Schneider	 	 
	 

	 	 	 	Title: Vice President & Secretary	 	 

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 5 to Stockholders
Agreement effective the date first written above.

	 	 	 	 	 	 	 
	 	 	INVESTORS	 	 
	 
	 	 	 	 	 	 
	 	 	MAVERICK FUND, L.D.C.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Maverick Capital, Ltd.	 	 
	 

	 	 	 	Its Investment Advisor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John T. McCafferty	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: John T. McCafferty	 	 
	 

	 	 	 	Title: Limited Partner and General Counsel	 	 
	 
	 	 	 	 	 	 
	 	 	MAVERICK FUND USA, LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Maverick Capital, Ltd.	 	 
	 

	 	 	 	Its Investment Advisor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John T. McCafferty	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: John T. McCafferty	 	 
	 

	 	 	 	Title: Limited Partner and General Counsel	 	 
	 
	 	 	 	 	 	 
	 	 	MAVERICK FUND II, LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Maverick Capital, Ltd.	 	 
	 

	 	 	 	Its Investment Advisor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John T. McCafferty	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: John T. McCafferty	 	 
	 

	 	 	 	Title: Limited Partner and General Counsel	 	 

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 5 to Stockholders
Agreement effective the date first written above.

	 	 	 	 	 
	 	INVESTORS

MITSUI & CO. VENTURE PARTNERS II, L.P.

 	 
	 	By:  	Mitsui & Co. Venture Partners, Inc.
 	 
	 	 	Its General Partner 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	/s/ Taro Inaba
 	 
	 	 	Name:  	Taro Inaba 	 
	 	 	Title:  	President & CEO 	 

 

 

	 	 	 	 	 

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 5 to Stockholders
Agreement effective the date first written above.

	 	 	 	 	 
	 	INVESTORS

ITX INTERNATIONAL EQUITY CORP.

 	 
	 	By:  	/s/ Takehito Jimbo
 	 
	 	 	Name:  	Takehito Jimbo 	 
	 	 	Title:  	President & CEO 	 

 

 

	 	 	 	 	 

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 5 to Stockholders
Agreement effective the date first written above.

	 	 	 	 	 
	 	INVESTORS

WHITEBOX HEDGED HIGH YIELD PARTNERS, LP

 	 
	 	By:  	/s/ Jonathan Wood
 	 
	 	 	Name:  	Jonathan Wood 	 
	 	 	Title:  	Director & COO 	 
	 
	 	WHITEBOX COMBINED PARTNERS, LP

 	 
	 	By:  	/s/ Jonathan Wood
 	 
	 	 	Name:  	Jonathan Wood 	 
	 	 	Title:  	Director & COOEX-10.1

Exhibit 10.1

Form No. DMB 234 (Rev. 1/96)

AUTHORITY: Act 431 of 1984

COMPLETION: Required

PENALTY: Contract will not be executed unless form is filed

STATE OF MICHIGAN

DEPARTMENT OF MANAGEMENT AND BUDGET

PURCHASING OPERATIONS

P.O. BOX 30026, LANSING, MI 48909

OR

530 W. ALLEGAN, LANSING, MI 48933

CONTRACT NO.  071B9200147 

between

THE STATE OF MICHIGAN

and

	 	 	 
	NAME & ADDRESS OF CONTRACTOR

	 	TELEPHONE (615) 376-1377
	 

	 	Larry Pomeroy
	 
	Prison Health Services, Inc.

	 	CONTRACTOR NUMBER/MAIL CODE
	105 Westpark Drive, Suite 200

	 	(2) 23-2108853 (004)
	 
	Brentwood, TN 37027

	 	BUYER/CA (517) 373-8530
	LHPomeroy@asgr.com

	 	Rebecca Nevai

Contract Compliance Inspector: Lia Gulick (517)241-9902

Prisoner Health Care Services — On-site and Offsite — Statewide

	 	 	 	 	 	 	 
	CONTRACT PERIOD:

	 	From: February 10, 2009
	 	To: March 31, 2012	 	 
	 
	TERMS

	 	SHIPMENT        	 	 	 	 
	See Contract Section 1.061
	 	            N/A	 	 
	F.O.B.

	 	SHIPPED FROM	 	 	 	 
	N/A

	 	 	 	            N/A	 	 
	 
	MINIMUM DELIVERY REQUIREMENTS

	 	 	 	 	 	 
	N/A
	 	 	 	 	 	 
	 
	MISCELLANEOUS INFORMATION:

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Current Authorized Spend Limit:	 	 $325,594,397.00

 

	 	 	 
	FOR THE CONTRACTOR:
	 	FOR THE STATE:
	 	 	 
	Prison Health Services, Inc.	 	/s/ Elise A. Lancaster
	 
	 	 
	Firm Name
	 	Signature
	/s/ Lawrence H. Pomeroy	 	Elise A. Lancaster, Director
	 
	 	 
	Authorized Agent Signature
	 	Name/Title
	Lawrence H. Pomeroy	 	Purchasing Operations
	 
	 	 
	Authorized Agent (Print or Type)
	 	Division
	February 10, 2009	 	February 10, 2009
	 
	 	 
	Date
	 	Date

 

STATE OF MICHIGAN

Department of Management and Budget

Purchasing Operations

Contract Number # 071B9200147

Prisoner Health Care Services

Buyer Name: Rebecca Nevai

Telephone Number: 517-373-8530

E-Mail Address: nevair@michigan.gov

2

 

			
	TABLE OF CONTENTS
	 	CONTRACT NO. 071B9200147 

Table of Contents

	 	 	 	 	 
	DEFINITIONS
	 	 	7	 
	 
	Article 1 — Statement of Work (SOW)
	 	 	10	 
	1.010 Project Identification
	 	 	10	 
	1.011 Project Request
	 	 	10	 
	1.012 Background
	 	 	10	 
	1.020 Scope of Work and Deliverables
	 	 	11	 
	1.021 In Scope
	 	 	11	 
	1.022 Work and Deliverable
	 	 	14	 
	1.030 Roles and Responsibilities
	 	 	34	 
	1.031 Contractor Staff, Roles, and Responsibilities
	 	 	34	 
	1.040 Project Plan
	 	 	36	 
	1.041 Project Plan Management
	 	 	36	 
	1.042 Reports
	 	 	36	 
	1.050 Acceptance
	 	 	37	 
	1.051 Criteria
	 	 	37	 
	1.052 Final Acceptance — DELETED — NOT APPLICABLE
	 	 	37	 
	1.060 Proposal Pricing
	 	 	38	 
	1.061 Proposal Pricing
	 	 	38	 
	1.062 Price Term
	 	 	38	 
	1.063 Tax Excluded from Price
	 	 	38	 
	1.070 Additional Requirements
	 	 	39	 
	1.071 Additional Terms and Conditions specific to this Contract
	 	 	39	 
	 
	Article 2, Terms and Conditions
	 	 	40	 
	2.000 Contract Structure and Term
	 	 	40	 
	2.001 Contract Term
	 	 	40	 
	2.002 Options to Renew
	 	 	40	 
	2.003 Legal Effect
	 	 	40	 
	2.004 Attachments & Exhibits
	 	 	40	 
	2.005 Ordering
	 	 	40	 
	2.006 Order of Precedence
	 	 	40	 
	2.007 Headings
	 	 	40	 
	2.008 Form, Function & Utility
	 	 	41	 
	2.009 Reformation and Severability
	 	 	41	 
	2.010 Consents and Approvals
	 	 	41	 
	2.011 No Waiver of Default
	 	 	41	 
	2.012 Survival
	 	 	41	 
	2.020 Contract Administration
	 	 	41	 
	2.021 Issuing Office
	 	 	41	 
	2.022 Contract Compliance Inspector (CCI)
	 	 	41	 
	2.023 Project Manager
	 	 	42	 
	2.024 Change Requests
	 	 	42	 
	2.025 Notices
	 	 	42	 
	2.026 Binding Commitments
	 	 	43	 
	2.027 Relationship of the Parties
	 	 	43	 
	2.028 Covenant of Good Faith
	 	 	43	 
	2.029 Assignments
	 	 	43	 
	2.030 General Provisions
	 	 	43	 
	2.031 Media Releases
	 	 	43	 
	2.032 Contract Distribution
	 	 	43	 
	2.033 Permits
	 	 	43	 
	2.034 Website Incorporation
	 	 	44	 
	2.035 Future Bidding Preclusion
	 	 	44	 
	2.036 Freedom of Information
	 	 	44	 
	2.037 Disaster Recovery
	 	 	44	 

3

 

			
	TABLE OF CONTENTS
	 	CONTRACT N0. 071B9200147

	 	 	 	 	 
	2.040 Financial Provisions
	 	 	44	 
	2.041 Fixed Prices for Services/Deliverables
	 	 	44	 
	2.042 Adjustments for Reductions in Scope of Services/Deliverables
	 	 	44	 
	2.043 Services/Deliverables Covered
	 	 	44	 
	2.044 Invoicing and Payment — In General
	 	 	44	 
	2.045 Pro-ration
	 	 	45	 
	2.046 Antitrust Assignment
	 	 	45	 
	2.047 Final Payment
	 	 	45	 
	2.048 Electronic Payment Requirement
	 	 	45	 
	2.050 Taxes
	 	 	45	 
	2.051 Employment Taxes
	 	 	45	 
	2.052 Sales and Use Taxes
	 	 	45	 
	2.060 Contract Management
	 	 	46	 
	2.061 Contractor Personnel Qualifications
	 	 	46	 
	2.062 Contractor Key Personnel
	 	 	46	 
	2.063 Re-assignment of Personnel at the State’s Request
	 	 	46	 
	2.064 Contractor Personnel Location
	 	 	46	 
	2.065 Contractor Identification
	 	 	46	 
	2.066 Cooperation with Third Parties
	 	 	48	 
	2.067 Contractor Return of State Equipment/Resources
	 	 	48	 
	2.068 Contract Management Responsibilities
	 	 	48	 
	2.070 Subcontracting by Contractor
	 	 	48	 
	2.071 Contractor Full Responsibility
	 	 	48	 
	2.072 State Consent to Delegation
	 	 	48	 
	2.073 Subcontractor Bound to Contract
	 	 	48	 
	2.074 Flow Down
	 	 	49	 
	2.075 Competitive Selection
	 	 	49	 
	2.080 State Responsibilities
	 	 	49	 
	2.081 Equipment
	 	 	49	 
	2.082 Facilities
	 	 	49	 
	2.090 Security
	 	 	49	 
	2.091 Background Checks
	 	 	49	 
	2.092 Security Breach Notification
	 	 	49	 
	2.100 Confidentiality
	 	 	50	 
	2.101 Confidentiality
	 	 	50	 
	2.102 Protection and Destruction of Confidential Information
	 	 	50	 
	2.103 Exclusions
	 	 	50	 
	2.104 No Implied Rights
	 	 	50	 
	2.105 Respective Obligations
	 	 	50	 
	2.110 Records and Inspections
	 	 	51	 
	2.111 Inspection of Work Performed
	 	 	51	 
	2.112 Examination of Records
	 	 	51	 
	2.113 Retention of Records
	 	 	51	 
	2.114 Audit Resolution
	 	 	51	 
	2.115 Errors
	 	 	51	 
	2.120 Warranties
	 	 	51	 
	2.121 Warranties and Representations
	 	 	51	 
	2.122 Warranty of Merchantability
	 	 	53	 
	2.123 Warranty of Fitness for a Particular Purpose
	 	 	53	 
	2.124 Warranty of Title
	 	 	53	 
	2.125 Equipment Warranty
	 	 	53	 
	2.126 Equipment to be New
	 	 	53	 
	2.127 Prohibited Products
	 	 	54	 
	2.128 Consequences For Breach
	 	 	54	 
	2.130 Insurance
	 	 	54	 
	2.131 Liability Insurance
	 	 	54	 
	2.132 Subcontractor Insurance Coverage
	 	 	55	 
	2.133 Certificates of Insurance and Other Requirements
	 	 	56	 

4

 

			
	TABLE OF CONTENTS
	 	CONTRACT N0. 071B9200147

	 	 	 	 	 
	2.140 Indemnification
	 	 	56	 
	2.141 General Indemnification
	 	 	56	 
	2.142 Code Indemnification
	 	 	56	 
	2.143 Employee Indemnification
	 	 	56	 
	2.144 Patent/Copyright Infringement Indemnification
	 	 	56	 
	2.145 Continuation of Indemnification Obligations
	 	 	57	 
	2.146 Indemnification Procedures
	 	 	57	 
	2.150 Termination/Cancellation
	 	 	58	 
	2.151 Notice and Right to Cure
	 	 	58	 
	2.152 Termination for Cause
	 	 	58	 
	2.153 Termination for Convenience
	 	 	58	 
	2.154 Termination for Non-Appropriation
	 	 	58	 
	2.155 Termination for Criminal Conviction
	 	 	59	 
	2.156 Termination for Approvals Rescinded
	 	 	59	 
	2.157 Rights and Obligations upon Termination
	 	 	59	 
	2.158 Reservation of Rights
	 	 	59	 
	2.160 Deleted — Not Applicable
	 	 	59	 
	2.170 Transition Responsibilities
	 	 	60	 
	2.171 Contractor Transition Responsibilities
	 	 	60	 
	2.172 Contractor Personnel Transition
	 	 	60	 
	2.173 Contractor Information Transition
	 	 	60	 
	2.174 Contractor Software Transition
	 	 	60	 
	2.175 Transition Payments
	 	 	60	 
	2.176 State Transition Responsibilities
	 	 	60	 
	2.180 Stop Work
	 	 	60	 
	2.181 Stop Work Orders
	 	 	60	 
	2.182 Cancellation or Expiration of Stop Work Order
	 	 	61	 
	2.183 Allowance of Contractor Costs
	 	 	61	 
	2.190 Dispute Resolution
	 	 	61	 
	2.191 In General
	 	 	61	 
	2.192 Informal Dispute Resolution
	 	 	61	 
	2.193 Injunctive Relief
	 	 	62	 
	2.194 Continued Performance
	 	 	62	 
	2.200 Federal and State Contract Requirements
	 	 	62	 
	2.201 Nondiscrimination
	 	 	62	 
	2.202 Unfair Labor Practices
	 	 	62	 
	2.203 Workplace Safety and Discriminatory Harassment
	 	 	62	 
	2.210 Governing Law
	 	 	62	 
	2.211 Governing Law
	 	 	62	 
	2.212 Compliance with Laws
	 	 	62	 
	2.213 Jurisdiction
	 	 	62	 
	2.220 Limitation of Liability
	 	 	63	 
	2.221 Limitation of Liability
	 	 	63	 
	2.230 Disclosure Responsibilities
	 	 	63	 
	2.231 Disclosure of Litigation
	 	 	63	 
	2.232 Call Center Disclosure
	 	 	63	 
	2.233 Bankruptcy
	 	 	64	 
	2.240 Performance
	 	 	64	 
	2.241 Time of Performance
	 	 	64	 
	2.243 Liquidated Damages
	 	 	65	 
	2.244 Excusable Failure
	 	 	65	 

5

 

			
	TABLE OF CONTENTS
	 	CONTRACT N0. 071B9200147

	 	 	 	 	 
	2.250 Approval of Deliverables
	 	 	66	 
	2.251 Delivery Responsibilities
	 	 	66	 
	2.252 Delivery of Deliverables
	 	 	66	 
	2.253 Testing
	 	 	66	 
	2.254 Approval of Deliverables, In General
	 	 	67	 
	2.255 Process For Approval of Written Deliverables
	 	 	67	 
	2.256 Process for Approval of Services
	 	 	68	 
	2.257 Process for Approval of Physical Deliverables
	 	 	68	 
	2.258 Final Acceptance
	 	 	68	 
	2.260 Ownership
	 	 	68	 
	2.261 Ownership of Work Product by State
	 	 	68	 
	2.262 Vesting of Rights
	 	 	68	 
	2.263 Rights in Data
	 	 	68	 
	2.264 Ownership of Materials
	 	 	69	 
	2.270 State Standards
	 	 	69	 
	2.271 Existing Technology Standards
	 	 	69	 
	2.272 Acceptable Use Policy
	 	 	69	 
	2.280 Extended Purchasing
	 	 	69	 
	2.281 MIDEAL — DELETED — NOT APPLICABLE
	 	 	69	 
	2.290 Environmental Provision
	 	 	69	 
	2.291 Environmental Provision
	 	 	69	 

CONTRACT ATTACHMENTS

Attachment A            Pricing Sheet

Attachment B            Service Level Agreements

CONTRACT APPENDICES

Appendix A            Contractor Organizational Chart

Appendix B            Required Reports

Appendix C            Contractor Quality Assurance Plan

Appendix D            Utilization Management Program and Pre-authorization Review Process

Appendix E            Claims Processing Process

Appendix F            Risk Share Reconciliation Methodology

Appendix G            Aetna Performance Guarantees

6

 

			
	DEFINITIONS
	 	CONTRACT N0. 071B9200147

DEFINITIONS

“24x7x365” means 24 hours a day, seven days a week, and 365 days a year (including the 366th day in
a leap year).

“Actual Costs” means allowable expenses incurred by Contractor in the performance of services under
this contract and its management fee for the provision of such services, all of which are more
fully described in Appendix F.

“Additional Service” means any Services/Deliverables within the scope of the Contract, but not
specifically provided under any Statement of Work, that once added will result in the need to
provide the Contractor with additional consideration.

“Audit Period” has the meaning given in Section 2.112.

“Business Day,” whether capitalized or not, shall mean any day other than a Saturday, Sunday or
State-recognized legal holiday (as identified in the Collective Bargaining Agreement for State
employees) from 8:00am EST through 5:00pm EST unless otherwise stated.

“Blanket Purchase Order” is an alternate term for Contract and is used in the State’s computer
system.

“Business Critical” means any function identified in any Statement of Work as Business Critical.

“Chronic Failure” is defined in any applicable Service Level Agreements.

“Days” means calendar days unless otherwise specified.

“Deleted — Not Applicable” means that section is not applicable or included in this Contract.
This is used as a placeholder to maintain consistent numbering.

“Deliverable” means physical goods and/or commodities as required or identified by a Statement of
Work.

“DMB” means the Michigan Department of Management and Budget.

“Durable Medical Equipment (DME)” DME is patient specific medical equipment that is intended to be
used on a continual basis throughout incarceration and including parole or discharge (usually by
the patient, or by the caregiver for the patient).

“Environmentally preferable products” means a product or service that has a lesser or reduced
effect on human health and the environment when compared with competing products or services that
serve the same purpose. Such products or services may include, but are not limited to, those which
contain recycled content, minimize waste, conserve energy or water, and reduce the amount of toxics
either disposed of or consumed.

“Excusable Failure” has the meaning given in Section 2.244.

“Hazardous material” means any material defined as hazardous under the latest version of federal
Emergency Planning and Community Right-to-Know Act of 1986 (including revisions adopted during the
term of the Contract).

“Incident” means any interruption in Services.

“ITB” is a generic term used to describe an Invitation to Bid. The ITB serves as the document for
transmitting the RFP to potential bidders.

“Key Personnel” means any Personnel designated in Section 1.031 as Key Personnel.

“Medical Practitioner (MP)” is responsible for the on-site primary medical care to prisoners. The
medical practitioner can be any of the following: family practice physician, emergency medicine
physician, general practice physician, or an internal medicine physician. With written approval
from the MDOC Chief Medical Officer, a medical practitioner may also include other physician
specialists, nurse practitioner, or physician assistant.

“New Work” means any Services/Deliverables outside the scope of the Contract and not specifically
provided under any Statement of Work, that once added will result in the need to provide the
Contractor with additional consideration.

7

 

			
	DEFINITIONS
	 	CONTRACT N0. 071B9200147

“Ozone-depleting substance” means any substance the Environmental Protection Agency designates in
40 CFR part 82 as: (1) Class I, including, but not limited to, chlorofluorocarbons, halons, carbon
tetrachloride, and methyl chloroform; or (2) Class II, including, but not limited to,
hydrochlorofluorocarbons.

“Panic Values” means a lab value that is clearly abnormal that is directly related to the
seriousness of the patient’s illness.

“Post-Consumer Waste” means any product generated by a business or consumer which has served its
intended end use, and which has been separated or diverted from solid waste for the purpose of
recycling into a usable commodity or product, and which does not include post-industrial waste.

“Post-Industrial Waste” means industrial by-products which would otherwise go to disposal and
wastes generated after completion of a manufacturing process, but does not include internally
generated scrap commonly returned to industrial or manufacturing processes.

“PPPM” means per prisoner per month

“Recycling” means the series of activities by which materials that are no longer useful to the
generator are collected, sorted, processed, and converted into raw materials and used in the
production of new products. This definition excludes the use of these materials as a fuel
substitute or for energy production.

“Reuse” means using a product or component of municipal solid waste in its original form more than
once.

“RFP” means a Request for Proposal designed to solicit proposals for services.

“Risk Share Cap” or “Risk Share Maximum Cap” means the maximum PPPM amount that MDOC will be
responsible to pay to Contractor for services under this contract.

“Risk Share Target” means the PPPM amount, as set forth in Attachment A, that will serve as the
attachment point for the sharing of savings / costs between the MDOC and the Contractor.

“Services” means any function performed for the benefit of the State.

“Specialty Network” means a network of hospitals and ancillary care clinics that will provide
medical services to prisoners.

“Specialty Provider” is a group of physicians that provide specialized services to prisoners via
on-site, off-site, and telemedicine.

“Source reduction” means any practice that reduces the amount of any hazardous substance,
pollutant, or contaminant entering any waste stream or otherwise released into the environment
prior to recycling, energy recovery, treatment, or disposal.

“State Location” means any physical location where the State performs work. State Location may
include state-owned, leased, or rented space.

“Sub-contractor”, For the purposes of this Contract, a subcontractor is any entity providing
services other than the prime contractor’s employees: including but not limited to, independent
contractors, vendor partners, specialty providers, hospitals, provider network, claims processing
provider, or laboratory or courier services; regardless of how the prime contractor and entity term
their relationship.

“Unauthorized Removal” means the Contractor’s removal of Key Personnel without the prior written
consent of the State.

“Waste prevention” means source reduction and reuse, but not recycling.

8

 

			
	DEFINITIONS
	 	CONTRACT N0. 071B9200147

“Waste reduction”, or “pollution prevention” means the practice of minimizing the generation of
waste at the source and, when wastes cannot be prevented, utilizing environmentally sound on-site
or off-site reuse and recycling. The term includes equipment or technology modifications, process
or procedure modifications, product reformulation or redesign, and raw material substitutions.
Waste treatment, control, management, and disposal are not considered pollution prevention, per the
definitions under Part 143, Waste Minimization, of the Natural Resources and Environmental
Protection Act (NREPA), 1994 PA 451, as amended.

“Work in Progress” means a Deliverable that has been partially prepared, but has not been presented
to the State for Approval.

“Work Product” refers to any data compilations, reports, and other media, materials, or other
objects or works of authorship created or produced by the Contractor as a result of an in
furtherance of performing the services required by this Contract.

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	TERMS AND CONDITIONS
	 	CONTRACT N0. 071B9200147

Article 1 — Statement of Work (SOW)

1.010 Project Identification

1.011 Project Request

This Contract is for the Michigan Department of Corrections (MDOC), to provide prisoner health care
services, which includes all MDOC correctional facilities, camps, Special Alternative Incarceration
(SAI), and Re-entry Centers. Prisoners on tether and Region Correction Centers are not part of
this Contract. Federal prisoners housed in Michigan correctional facilities are included in this
Contract.

The Contractor must work in partnership with the State and the State’s other contractors to provide
medically necessary prisoner health care while continually improving quality of care,
accessibility, timeliness, and cost effectiveness.

1.012 Background

A. General

	 	1.	 	MDOC arranges for and administers medically necessary health care to an average of
50,000 prisoners (including prisoners from other jurisdictions including but not
limited to federal prisoners) annually at correctional facilities, camps, and Re-Entry
centers (current facilities listed at www.MICHIGAN.GOV/CORRECTIONS). The MDOC
operates Duane L Waters Health Center (DWH) in Jackson, MI which has 112 in patient
beds, and houses Levels I-V prisoners whose medical needs cannot be met at other
correctional facilities within the state. DWH provides acute, medical, long term care,
and surgical procedures that are non-invasive or use conscious sedation. DWH also has
the responsibility for C-Unit, which involves a program to care for 64 extended-care
patients who do not require hospitalization at DWH, but whose needs could not be met
in general population. DWH currently has a procedure suite with two procedure rooms,
on-site emergency room staffed 24 hours, 7 days a week with MDOC RNs, EMTs and
Parademics and specialty clinics.
	 
	 	2.	 	The prisoners from other jurisdictions are included in the MDOC population count, and
the Contractor must be responsible to provide the same services to, and will receive
the same PPPM payments for these prisoners.
	 
	 	3.	 	The MDOC will be going tobacco free in February of 2009.

B. Health Care Standards

	 	1.	 	Health care services are provided to prisoners using a standard of medically necessary care imposed by court decisions, legislation, accepted correctional and health care
standards, and MDOC policies and procedures. MDOC is working toward accreditation
from the National Commission on Correctional Health Care (NCCHC) utilizing the NCCHC
standards of care and NCQA standards as the MDOC’s acceptable standards for providing
health care services to MDOC prisoners. See www.ncchc.org and www.ncqa.org for more
information.
	 
	 	2.	 	As of 1-23-09, all facilities except for the Michigan Reformatory and the Huron Valley
Complex, including Camp White Lake and Camp Valley are ACA accredited. MDOC will be
actively seeking accreditation for the Michigan Reformatory and the Huron Valley
complex facilities.
	 
	 	3.	 	The MDOC has not yet made a formal decision regarding when to apply for NCCHC
accreditation.
	 
	 	4.	 	The MDOC will be financially responsible for fees associated with the actual NCCHC
accreditation. The Contractor will be financially responsible for meeting the NCCHC
clinical standards.

C. Consent Decree

	 	1.	 	As of 2-3-09, MDOC is under federal (Hadix) consent decree at Egeler Reception and
Guidance Center, dialysis unit at Ryan Correctional Facility, Duane Waters Health
Center and C-Unit. The MDOC has been and continues addressing and resolving the issues
necessary to close the consent decree. Federal court-appointed experts monitor MDOC’s
compliance with the consent decree.

D. Audit/Review Findings

	 	1.	 	In December 2007 the National Commission on Correctional Healthcare (NCCHC) issued
an independent report titled A Comprehensive Assessment of the Michigan Department of
Corrections Health Care System. The report cited 54 recommendations for improving the
delivery of health care services to prisoners.

10

 

			
	TERMS AND CONDITIONS
	 	CONTRACT N0. 071B9200147

E. Electronic Medical Record

	 	1.	 	The MDOC has recently entered into a contract with NextGen to convert MDOC’s current
EMR from Serapis to NextGen version 5.2. By May 1, 2009, it is anticipated that the
conversion/upgrade to NextGen 5.2 will be completed at all facilities. Each facility
must convert over as NextGen becomes available, and current EMR Serapis will be used
until that time.
	 
	 	2.	 	In the event the NextGen 5.2 System is not fully operational by May 1, 2009, the
parties must review and agree upon the impact on services and deliverables under the contract
and must enter into a Contract Change Notice as appropriate.

F. Data Warehouse

	 	1.	 	Once the data warehouse is operational, the Contractor will transmit HIPAA compliant
transaction data in the form of an 837 to MDOC via their data warehouse no less than
monthly, including all data from the beginning of the Contract. By April 1, 2009,
MDOC will be able to validate the 837 transfer capability of the Contractor. MDOC may
not have an operating data warehouse for an estimated six months.

G. Third Party Reviewer

	 	1.	 	The MDOC will be contracting with a third party reviewer who will assist MDOC in
assessments of services provided under this Contract, including but not limited to
trends and utilization management, as well as assisting in the review and enforcement
of the Service Level Agreements, and in the Risk Share reconciliations. The
Contractor agrees to provide all requested information to the third party reviewer,
copying the MDOC Contract Compliance Inspector (CCI). The Contractor does not have
any financial responsibility for the payment of the third party reviewer.

1.020 Scope of Work and Deliverables

1.021 In Scope

A. General

The Contractor must be responsible for the completion of all work set out in the Contract.
The State may employ all reasonable means to ensure that the work is progressing and being
performed in compliance with the Contract.

MDOC seeks to engage in a contract that provides high quality medically necessary care to the
prisoner population, ensuring continuity of health care in a cost effective manner. This
includes, but is not limited to:

	 	1.	 	Diagnosis and treatment of chronic conditions to reduce unplanned
episodes of care and specifically reduce unplanned emergency services.
	 
	 	2.	 	Operation of a health care delivery system that enables MDOC to control
and predict the cost of prisoner health care.
	 
	 	3.	 	Provision of specialty care delivery at correctional facilities that
maximizes the use of telemedicine.
	 
	 	4.	 	Reduction of preventable hospitalizations of prisoners.
	 
	 	5.	 	Maximum use of electronic systems including HIPAA compliant electronic
claims payment and encounter reporting, electronic medical records utilization and
telemedicine.
	 
	 	6.	 	Provide medically necessary care to prisoners meeting the MDOC goals of
reducing costs, improving prisoner access to care, documenting evidence-based
quality of care, maintaining security issues to the community and continuously
improving quality utilizing NCCHC and NCQA standards of care in service delivery.
	 
	 	7.	 	Develop and maintain a system to provide on-site primary care. Therefore,
the Contractor is expected to employ or contract with Medical Practitioners (MPs)
who possess a medical degree from an accredited school of medicine with
full-licensure experience in the practice of medicine or osteopathic medicine and
surgery.
	 
	 	8.	 	Developing and maintaining a hospital and ancillary care network (on-site
and off-site), Specialty network and on-site and off-site services include, but are
not limited to; prosthetics and orthotics, optometry, physical and occupational
therapy, on-site and off-site specialty consultants and services. On-site dialysis
services are currently provided at Ryan Correctional Facility in Detroit, MI, for
males and Scott Correctional Facility for females, changing to Huron Valley in 2009.
Specialty Services available at Duane Waters Health Center (DWH) are only available
to prisoners that are within a 60 mile radius of DWH unless written approval is
received from MDOC.

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	TERMS AND CONDITIONS
	 	CONTRACT N0. 071B9200147

	 	9.	 	Developing a system for review, pre-authorization processing of requests
for service, utilization management, and claims processing. Utilization Management
will involve the use of NCCHC and NCQA standards of care to determine acceptable
diagnostic and treatment pathways for major categories of medical conditions with
the approval of MDOC.
	 
	 	10.	 	The Contractor is required to provide services that include, but are not
limited to the services, as stated in the 1.022 Work and Deliverable section.
	 
	 	11.	 	The Contractor will provide necessary medically necessary services within a timely
manner as identified in the Contract and SLA’s. The Contractor will need to determine
and supply the number of on-site and off-site providers that are needed to fulfill the
obligation.
	 
	 	12.	 	Items supplied by the MDOC:

	 	a.	 	The State will provide office space, a computer, printer, copier, fax and general
office and medical supplies at the correctional facilities for the on-site medical
practitioners, consistent with community physicians offices. Sharing of copiers
and printers is required within the health care clinics.
	 
	 	b.	 	Each facility has work space for the on-site MP. Some facilities have more
space than others. As the Contractor determines the appropriate staffing needs,
the MDOC will work with them to ensure space is available. At some facilities,
where multiple providers are assigned, it may mean that additional shifts are
necessary. As of 2-3-09, there are two facilities (JCS-Cotton and JCF-Cooper
Street) where the MDOC has requested MPs to work in multiple shifts due to the
workload and the number of exam rooms available to MPs.
	 
	 	c.	 	X-ray capabilities vary by facility.
	 
	 	d.	 	Telephone line costs inside the MDOC Correctional Facilities are the responsibility
of the MDOC, with the exception of personal and non-MDOC business phone calls
made by the Contractor staff.
	 
	 	e.	 	Laboratory and phlebotomy supplies for general medical supplies are provided at the
MDOC expense, with the exception of dialysis supplies, which are the Contractor’s
responsibility in the scope of this contract. See Section 1.022 V for reference to
dialysis supplies.
	 
	 	f.	 	MDOC has civil servant staff dictation services available for use by only providers
at DWH, at no cost to the Contractor.

	 	13.	 	Internet access is not available inside an MDOC Correctional Facility

B. MDOC Security Measures

	 	1.	 	The Contractor, their staff, sub-contractors, provider network and vendor
partners must follow MDOC security procedures which may require the use of armed
custody officers. All services (primary and specialty) provided inside MDOC
facilities including DWH require compliance with the following procedures:

	 	a.	 	Obtainment of a successful Law Enforcement Information Network (LEIN)
security clearance in advance of their visit for personnel who will be working on
site at correctional facilities.
	 
	 	b.	 	Required entry into correctional facilities.
	 
	 	c.	 	Direct contact with prisoners.
	 
	 	d.	 	Possible contact with parolees.
	 
	 	e.	 	Development of a program that subjects all Contractor employees, sub-
contractors, and independent contractors filling full or part-time primary care
positions to pre-employment and for cause alcohol and drug testing. Drugs tested
must include all controlled substances as identified in Article 7 of the Michigan
Public Health Code, 1978 Public Act 368, as amended, being MCL 333.7101 et seq.

	 	2.	 	The Contractor must ensure the security and safety of these activities.
This must include, but is not limited to, performance of security background checks
(in addition to those performed by the MDOC) on all personnel assigned to work
inside State of Michigan facilities, declaration of the process and components of
background checks, name of the company that performs the security checks, use of
uniforms and ID badges, etc. If security background checks are performed on staff,
the Contractor must indicate the name of the company that performs the check as well
as provide a document stating that each employee has satisfactorily completed a
security check and is suitable for assignment to State facilities. Upon request by
the State, the Contractor must provide the results of all security background
checks. Contractor security background check of personnel must include, but is not
limited to, credential verification, licensure verification, Medical School, Board
Certification, practice history, CME credits, past insurance verification, claims
history and the National Data Bank Report. The Contractor is financially
responsible for any costs associated with background checks they perform.

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	TERMS AND CONDITIONS
	 	CONTRACT N0. 071B9200147

	 	3.	 	The Contractor, their staff, sub-contractors, provider network and vendor
partners must comply with the security access requirements of each individual State
correctional facility. The State will issue State ID badges to the Contractor’s
personnel working on-site at correctional facilities.

	 	4.	 	The State will also perform security background checks that may include
but is not limited to a LEIN criminal background check. The LEIN background check
process normally takes three to five days to complete for new on-site staff. The
Contractor will be required to provide to the State a list of all Contractor staff,
sub-contractors, and/or provider network staff that will work on-site services at
State of Michigan correctional facilities, including name and date of birth. Social
security number or driver license number may also be required.

C. Mental Health Services

MDOC has contracted with the Michigan Department of Community Health (DCH) to provide the
following mental health services:

	 	1.	 	Inpatient Services

	 	a.	 	Acute Care for seriously mentally ill prisoners with acute symptoms
of psychosis or high suicide risk.
	 
	 	b.	 	Rehabilitation Treatment Services (Sub-Acute Care)

	 	2.	 	Crisis Stabilization Program
	 
	 	3.	 	Residential Treatment Program
	 
	 	4.	 	Outpatient Mental Health Services

NOTE: Laboratory Services related to Mental Health Services are in the scope of this contract.

D. Staffing

	 	1.	 	MDOC utilizes civil servants for all health care positions with the exception of Medical
Practitioners, On-site or Off-site Specialty Care Providers, and staffing for the on-site
dialysis units.
	 
	 	2.	 	Some civil servant health care staff are covered by collective bargaining units.
	 
	 	3.	 	MDOC will provide dietitians and social workers when medically necessary.
	 
	 	4.	 	MDOC will be sharing on-site civil servant support staff with the Contractor, for such
positions as medical assistants, medical record examiner, general office assistant,
and secretary. The Contractor will use MDOC current and expanding civil servant
categories.

	 	a.	 	MDOC and the Contractor will jointly train the civil servants that are providing
these essential support functions to ensure the civil servants understand the needs of
the Contractor staff, and that the Contractor’s expectations will be consistently
met.
	 
	 	b.	 	MDOC agrees to develop a dedicated communication path for the Contractor staff
at each facility, with the on-site MDOC Health Unit Manager (HUM). During the
beginning of the Contract, the Contractor may request regular meetings at their
desired frequency, and as the contract proceeds, may meet with the HUM on a less
frequent regular basis, or as needed, as the Contractor deems warranted. The
Contractor and the HUM will review contractor and civil servant performance,
communication paths, and any needs for re-training or performance coaching at
their facility; as well as collaborating in the development of civil servant
performance criteria, with a corrective action plan when outcomes are not
consistently met.
	 
	 	c.	 	MDOC will ensure that all support staff duties for the Contractor are covered by
the MDOC civil servants, and will make adjustments to the actual position
descriptions as needed.

E. Out of Scope

The following items are currently the responsibility of the MDOC and are not currently part
of this Contract:

	 	1.	 	Removal of chemical, biological, or hazardous waste.
	 
	 	2.	 	Transfer of prisoners is at the discretion of MDOC. Transfers for
medical reasons will be approved by the MDOC Regional Medical Officer (RMO).
	 
	 	3.	 	Mental Health Services, currently contracted through DCH.
	 
	 	4.	 	Lost, stolen, or damaged patient specific medical equipment or goods are
not the responsibility of the Contractor.
	 
	 	5.	 	Pharmaceutical Acquisition and Delivery

	 	a.	 	Pharmaceuticals, pharmaceutical costs and pharmaceutical
delivery are currently out of the scope of this Contract, except for dialysis
related pharmaceuticals. The State has existing contract(s). The current
contract(s) will be made available to the Contractor.
	 
	 	b.	 	The MDOC Pharmaceutical Formulary will be maintained and
approved by the MDOC. The Contractor will have input on the formulary through
discussions with the MDOC Chief Medical Officer, and representation on the
Medical Services Advisory Committee (MSAC).

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	TERMS AND CONDITIONS
	 	CONTRACT N0. 071B9200147

	 	6.	 	Maintenance and support of the data warehouse that collects, analyzes,
integrates, and reports data.
	 
	 	7.	 	Provision and maintenance and support of an electronic medical record
system is out of scope, however the Contractor must, utilizing MDOC civil servant
support staff, be responsible for ensuring data is input into this system. NOTE:
Any costs associated with remote access to the EMR will be the responsibility of the
Contractor.
	 
	 	8.	 	Non-emergent transportation.
	 
	 	9.	 	All security costs for emergency and non-emergency transportation.
	 
	 	10.	 	MDCH is responsible for providing mental health competency assessments.
	 
	 	11.	 	MDOC will be responsible for any MDOC approved infrastructure and
security equipment associated with the construction of secure units at local
hospitals.
	 
	 	12.	 	Substance abuse and detoxification programs.
	 
	 	13.	 	The cost of eye glasses is the responsibility of MDOC.

F. State Roles and Responsibilities

The following roles and responsibilities have been identified as currently those of the
MDOC or MDCH:

	 	1.	 	Notify the Contractor of changes in the services defined as medically
necessary. MDOC does not have a formal list of services deemed medically necessary,
however, MDOC reviews all doctor recommendations for medical necessity. Soft tissue
transplants may be deemed medically necessary, but solid organ transplants and sex
change operations are not currently approved. MDOC will continue to review
medically necessary services jointly with the Contractor.
	 
	 	2.	 	Maintain a Medical Services Advisory Committee (MSAC) to collaborate with
the Contractor on quality improvements.
	 
	 	3.	 	MDOC staff is responsible for the onsite lab draws. MDOC is financially responsible
for the staff cost and the lab supplies.
	 
	 	4.	 	Collaborate with the Contractor on quality improvement activities, and other
activities which impact the health care provided to prisoners.
	 
	 	5.	 	Participate with Contractor in the design, data collection, and evaluation of
system-wide programs to improve access, quality and performance.
	 
	 	6.	 	Provide MDOC training on MDOC policy and the EMR to the contracted on-site staff for
the new employee training. The Contractor is responsible for ensuring arrangements
are made with the MDOC trainers in advance and to ensure the on-site staff attends and
completes the training.
	 
	 	7.	 	MDOC will provide security staff at their cost.
	 
	 	8.	 	Current State of Michigan Civil Servant employed by the MDOC will be retained in their
current positions and will be supervised by MDOC Management. Registered Nurses,
Licensed Practical Nurses, and Medical Records are located at all ambulatory clinics
and DWH. Pharmacist Assistants will be located at most ambulatory clinics that will
coordinate receiving of Pharmaceuticals for the MDOC.
	 
	 	9.	 	Current MDOC Employee Discipline Policy 02.03.100 and Corrective Action for
Performance Problems Policy 02.03.130 are available from the MDOC CCI, for the
Contractor.
	 
	 	10.	 	The MDOC civil servant staff are responsible for the scheduling of routine and urgent
on-site provider appointments and off-site specialty appointments, in coordination
with the Contractor.
	 
	 	11.	 	The MDOC will provide necessary security and MDOC civil servant staff to assure
Contractor has maximum availability for the use of infirmary beds.

1.022 Work and Deliverable

Contractor must provide Deliverables/Services and staff, and otherwise do all things necessary for
or incidental to the performance of work, as set forth below:

A. Delivery Model

	 	1.	 	The Contractor is solely responsible for arranging and administering on-site
medically necessary services to prisoners. Services must be arranged and administered
by a Medical Practitioner with full licensure. A Medical Practitioner may be any of the
following: family practice physician, emergency medicine physician, general practice
physician, or an internal medicine physician. When appropriate for a facility and
approved in writing by the MDOC Chief Medical Officer (CMO), other physician
specialists, nurse practitioner, or physician assistants may be utilized with
supervision by a licensed physician. The CMO will only need to provide written approval
for lower level practitioners. The delivery system must include a sufficient number of
medical practitioners with the training, experience, and specialization to furnish
services (preventive, chronic and acute care) to all prisoners, using NCCHC and NCQA
standards of care. In addition, MPs are required to immediately respond to medical
emergencies while on-site. Also see Attachment B Service Level Agreements (SLAs).

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	TERMS AND CONDITIONS
	 	CONTRACT N0. 071B9200147

	 	2.	 	The Contractor must create and maintain their documented delivery model of on-site
primary care, including compliance with NCCHC and NCQA standards of care, to be submitted to the
MDOC CCI.
	 
	 	3.	 	The Contractor must designate a Medical Practitioner as the lead healthcare provider at
each correctional facility with full credentials and licensing within their field, as well as
training, experience, and specialization to furnish services. The Contractor may also
utilize Nurse Practitioners/Physicians Assistants with supervision by a licensed
physician. The Contractor must provide a full-time healthcare recruiter, located in
Michigan, to ensure coverage of all MP positions. In addition, the Contractor will
supply regional managers to monitor staffing, performance levels, and specialty clinic
coverage.
	 
	 	4.	 	The Contractor must maintain a health care delivery system of sufficient size and
resources, to be developed and maintained, to provide quality care that accommodates the needs of
the prisoners within each facility.
	 
	 	5.	 	The Contractor is expected to continually incorporate best practice management of
chronic and acute care conditions into the primary care setting. These methodologies include
but are not limited to:

	 	a.	 	Contractor’s Disease Management Manual
	 
	 	b.	 	A multi-tiered review and approval process of off-site service requests.
	 
	 	c.	 	Expanding Telemedicine Usage
	 
	 	d.	 	Regional Medical Directors performing periodic peer reviews.
	 
	 	e.	 	Continuous Quality Improvement
	 
	 	f.	 	Infection Control Program
	 
	 	g.	 	Training and Education for related MDOC and Contractor Staff
	 
	 	h.	 	Utilization Management Program
	 
	 	i.	 	Health Information Exchange Program
	 
	 	j.	 	Predictive Modeling Tools

	 	6.	 	The Contractor will focus on providing as many services on-site as reasonably possible.
The Contractor will also focus on continued improvements in the provision of on-site services
and management of off-site services.

B. Preventive, Chronic, and Acute Care

	 	1.	 	The Contractor will be responsible for providing on-site primary health care
services to MDOC prisoners including; preventive, chronic and acute care using HEDIS
measurement criteria. Please see current MDOC policies and procedures for a description
of On-site Primary Care Services/Criteria. Please also see Attachment B Service Level
Agreements (SLAs) for MDOC expectations for preventive, chronic, and acute care. Visit
www.ncqa.org for more information about HEDIS measurement criteria.
	 
	 	2.	 	The Contractor must provide Medical Practitioner (MP) on-site preventive and
primary health care services in accordance with the National Commission on Correctional
Health Care Standards for health services in prisons (current edition) MDOC policies,
procedures, standards of care, ACA medical services standards, and prevailing community
standards. In addition to the above, the Contractor’s MP staff will provide clinical
oversight and support to the MDOC nursing staff clinic operations. As part of the
medical encounter, the Medical Practitioner will:

	 	a.	 	Develop a relationship with the patient.
	 
	 	b.	 	Gather data (medical history, systems inquiry and physical examination,
combined with laboratory and imaging studies),
	 
	 	c.	 	Analyze and synthesize that data.
	 
	 	d.	 	Then the provider will:

	 	i.	 	Develop a treatment plan in conjunction with all disciplines (further
testing, therapy, watchful observation, referral, follow up
	 
	 	ii.	 	Treat the patient accordingly
	 
	 	iii.	 	Assess the progress of treatment and alter/manage the plan as
necessary.

	 	3.	 	At a minimum, the following chronic clinics will be provided by Contractor:

	 	a.	 	Asthma
	 
	 	b.	 	Diabetes
	 
	 	c.	 	Hyperlipidemia
	 
	 	d.	 	HIV Disease
	 
	 	e.	 	Coronary Artery Disease
	 
	 	f.	 	Hypertension
	 
	 	g.	 	Siezure Disorder

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	TERMS AND CONDITIONS
	 	CONTRACT N0. 071B9200147

	 	h.	 	Latent TB Infection & TB
	 
	 	i.	 	Warafin Therapy
	 
	 	j.	 	The Contractor will add any clinics requested or required my
MDOC.

	 	4.	 	Documentation in the MDOC electronic medical record must be completed by the end
of the business day on the day of the encounter.

C. Facility Staffing

	 	1.	 	On-site MPs may be any of the following: family practice physician, emergency
medicine physician, general practice physician, or an internal medicine physician. When
appropriate for a facility and approved in writing by the MDOC Chief Medical Officer
(CMO), other physician specialists, nurse practitioner, or physician assistants may be
utilized with supervision by a licensed physician. There must be coverage for at least
one full time medical practitioner for each correctional facility. Coverage for the
camps and re-entry centers may not require full time Medical Practitioner staffing.
	 
	 	2.	 	The Contractor must designate a Medical Practitioner as the lead healthcare provider at
each correctional facility with full credentials and licensing within their field, as well as
training, experience, and specialization to furnish services. The Contractor may also
utilize Nurse Practitioners/Physicians Assistants with supervision by a licensed
physician. The Contractor must provide a full-time healthcare recruiter, located in
Michigan, to ensure coverage of all MP positions. In addition, the Contractor will
supply regional managers to monitor staffing, performance levels, and specialty clinic
coverage
	 
	 	3.	 	Following the allowable contract start up grace period in Article 2, if SLAs are
not met, the Contractor will provide a written plan of corrective action in accordance
with Attachment B which must include an agreed upon cure period.. If after the cure
period the SLA is still not met, the MDOC may hire additional providers to achieve
compliance with the SLAs. The Contractor will be responsible for all costs incurred by
the MDOC to fill the vacancy (including salary and recruiting costs) until such time
that the Contractor is able to fill the position on a permanent basis. This includes
the cost of the MP and all administrative costs. MDOC will deduct these costs from
Contractor monthly invoices.
	 
	 	4.	 	Must recruit, train, fully staff, and supervise sufficient on-site MPs for all
MDOC correctional facilities including staffing the Duane L. Waters Health Center (DWH)
inpatient, outpatient and emergency room. MPs will be required to use the MDOC
automated time keeping system.
	 
	 	5.	 	Copies of Contractor, staff, independent contractor, sub-contractor or vendor
partner provider network liability insurance must be provided to the State upon request.
	 
	 	6.	 	The MDOC currently has two physician civil servant positions. Once is located at
Ryan and the other at Huron Valley. MDOC will continue to maintain those two civil
servant positions at the respective facilities. In the event that either of the civil
servant physician positions become vacant, the MDOC may move the civil servant position
to another facility due to operational need. Currently, there are not any plans for
changing the locations of the positions. If the MDOC moves one of the civil servant
positions to another institution, the Contractor would be required to backfill at the
facility with the vacancy. There is not an expectation that this would be an additional
position but rather a relocation of a position to another facility.
	 
	 	7.	 	MP must provide supervision, consultation and work review for each mid-level MP. Telemedicine may be utilized for the MP supervision if available at the facility as a
short term solution (less than 90 days) with prior written approval from the MDOC CCI in
the following situations: when a physician vacancy or absence does not allow for the
on-site direct supervision, unanticipated absences for illness or injury, or inclement
weather. Inclement weather must be defined as the closure of the public school nearest
the facility due to weather conditions. Camps and facilities that do not have
telemedicine require a mechanism of on-site supervision for mid level MPs. Supervision
must be eight hours per week for full time mid-level MPs. The Contractor will further
supervise through chart review and countersignature of mid-level orders, as well as
conducting patient care conferences between the physician and the mid-level to assure
compliance to all treatment guidelines.
	 
	 	8.	 	Medical Practitioner (MP) responsibilities are not limited to but will include:

	 	a.	 	Provision of the required coverage hours in the MDOC facility and
on-call.
	 
	 	b.	 	Medical Practitioner Sick Call
	 
	 	c.	 	Actively participates in and ensures compliance with the Contractor’s
utilization management program.
	 
	 	d.	 	Oversees and monitors the care provided to hospitalized patients and
reports daily to the Contractor’s RMD. Contractor will provide weekly updates to the MDOC CMO.
	 
	 	e.	 	Reviews requests for specialty consultations prior to forwarding to the
Regional Medical Director.
	 
	 	f.	 	Ensures re-credentialing for clinicians is done at least every three
years.

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	 	CONTRACT N0. 071B9200147

	 	g.	 	Monitors compliance with physician extender supervision rules and
regulations specific to state requirements.
	 
	 	h.	 	Performs site-specific clinical review based on needs assessments
identified by monitoring clinical programs.
	 
	 	i.	 	Performs and monitors peer review activities in accordance with the
Contractor’s policy addressing peer review.
	 
	 	j.	 	Assists in the ongoing monitoring of systems, processes and outcomes
related to the chronic care program.
	 
	 	k.	 	Ensures that the operation of the on-site infirmary (if applicable) is in
compliance with Contractor standards and that the scope of care provided is appropriate for the
staffing and resources available.
	 
	 	l.	 	Assists in monitoring the sick call process to ensure timely patient
access to medically necessary services.
	 
	 	m.	 	Ensures that established suicide prevention programs are implemented to
identify, refer and treat patients who are at risk for suicide.
	 
	 	n.	 	Ensures that intoxication and withdrawal guidelines are implemented to
identify and treat prisoners who are intoxicated or undergoing withdrawal.
	 
	 	o.	 	Ensures that the site implements and maintains the PHS QI program.

D. Licensing

	 	1.	 	The MPs must hold current unrestricted licenses in the State of Michigan
appropriate to their scope of practice. MPs must have and maintain the following
licenses throughout the contract period:

	 	a.	 	Physicians — (1) State of Michigan license to practice as Medical Doctor
or practice Osteopathic Medicine, (2) DEA license, (3) Drug Control license for each
location he/she will be assigned from State of Michigan, and (4) Pharmacy CS-3.
	 
	 	b.	 	Nurse practitioners — (1) State of Michigan, RN license, (2) Nurse
Practitioner License, and (3) DEA license.
	 
	 	c.	 	Physicians Assistant — (1) State of Michigan Physicians Assistant, and
(3) DEA license.
	 
	 	d.	 	Physicians/Hospitalists at DWH must also have Advanced Cardiac Life
Support (ACLS) certification.
	 
	 	e.	 	Copies of Contractor, staff, independent contractor, sub-contractor or
vendor partner provider network liability insurance must be provided to the State,
upon request.
	 
	 	f.	 	The Contractor must ensure that all providers rendering services to
prisoners are licensed by the State of Michigan and are qualified to perform their
services throughout the duration of the Contract. Copies of the current licenses
will be forwarded to the MDOC CCI.
	 
	 	g.	 	The Contractor must have written credentialing and three year
re-credentialing policies and procedures.

	 	2.	 	The Contractor will be responsible to ensure that applicable providers have a DEA
license to dispense pharmaceuticals from the Prescribing Box.
	 
	 	3.	 	The Contractor’s health care practitioners credentialing process includes:

	 	a.	 	The Contractor Credentialing Program completes primary source verification of
each practitioner’s medical education, licensure, DEA certification, malpractice
history, and liability insurance coverage. Health care practitioners are
re-credentialed every three years to ensure that qualifications are current and
the privileges extended to the health care practitioner are appropriate.
	 
	 	b.	 	Re-credentialing — Accepted applicants are required to report any adverse event
or disciplinary action that might affect their ability to practice medicine.
Every three years, the process, called re-credentialing, is repeated to ensure
continued compliance with Contractor’s standards.

	 	4.	 	The Contractor’s credentialing program must meet the standards established by the
NCQA, URAC, and also meets NCCHC P-C-01 Standard on credentialing and must ensure that health
care practitioners providing on-site service have the credentials required to practice
within their field. All Health care practitioners (employees and independent
contractors) who provide on-site services where required to complete the credentialing
program, prior to rendering services on-site.
	 
	 	5.	 	The Contractor will re-credential health care practitioners (employees and
independent contractors) every three years. The re-credentialing process will ensure that:

	 	a.	 	The Contractor’s Regional Designee (RD) will ensure the
provider’s credentials are current, active and unexpired at all times. The Contractor’s Regional
Medical Director (RMD) will be notified of any concerns or changes.

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	 	CONTRACT N0. 071B9200147

	 	b.	 	Peer reviews are due one year after the date of hire and
yearly thereafter. These will be performed by the RMD or designee and forwarded to the Contractor’s
Credentials Coordinator. At the time of the re-credentialing, a Peer Review
Summary form will be completed by the RMD and forwarded with the packet.
	 
	 	c.	 	At least 30 days prior to the third anniversary of the
hire date, the RD will forward a completed Re-credentialing Packet to the Credentials Coordinator. The Packet
will contain the following:

	 	•	 	Re-credentialing questionnaire
	 
	 	•	 	Narrative section
	 
	 	•	 	Release of Liability Form
	 
	 	•	 	Medical Practitioner Request for Privileges (Adult and Juvenile)
	 
	 	•	 	Re-credentialing Peer Review Summary
	 
	 	•	 	Checklist of Necessary Items for Re-credentialing

	 	d.	 	The Credentials Coordinator will review the packet,
obtain any missing documentation, and present the file to the Credentials Committee for approval
or other action.
	 
	 	e.	 	The RD, RMD and the provider will be notified of the
Credentials Committee action, with the MDOC CCI to be copied.
	 
	 	f.	 	The Aetna provider network credentialing /
re-credentialing policies and procedures are consistent with NCQA and URAC, as well as state and federal
requirements. The following items are considered in the credentialing process:

	 	i)	 	Licensure and/or certification verified through state
licensing boards in geographical areas where network providers will care
for our members
	 
	 	ii)	 	Board certifications (when applicable)
	 
	 	iii)	 	Loss of/limitation of hospital admitting privileges (when applicable)
	 
	 	iv)	 	Current professional liability coverage

	 	§ 	 	Drug Enforcement Agency (DEA) and state controlled-drug substance
registration, when applicable, through verification by the U.S.
Department of Commerce National Technical Information Service (when
applicable)
	 
	 	§ 	 	Disciplinary history or adverse actions related to licensure and DEA
registration, which we query through state licensing boards and the
National Practitioner Databank (NPDB)
	 
	 	§ 	 	Malpractice insurance claim history to examine any possible trends
and to look for evidence that might suggest any probable substandard
professional performance in the future
	 
	 	§ 	 	Mental and physical health to determine if the provider’s history
might suggest any probable substandard professional performance in the
future
	 
	 	§ 	 	Participation in government programs such as Medicare, Medicaid
	 
	 	§ 	 	Professional education and training through verification by the
American Medical Association (AMA) Masterfile, American Osteopathic
Association (AOA) and specialty board or specific residency/training
program (highest level of education, depending on provider type)
	 
	 	§ 	 	Work history

	 	v)	 	The Aetna Regional Credentialing and Performance committee (CPC) reviews the credentialing file. This peer review process includes the
determination of professional competence and conduct. Between
credentialing/re-credentialing cycles, the CPC may review a provider if
adverse actions have been reported.
	 
	 	vi)	 	Providers are re-credentialed using the Aetna standard credentialing process every two or three years depending upon individual state requirements.
During re-credentialing, the regional CPC reviews performance data for
participating PCPs, Ob/Gyns and other high-volume specialists.
	 
	 	vii)	 	Additionally, state board sanctions lists, Office of Personnel Management reports that list providers debarred from participating plans, and lists
from the OIG are reviewed within 30 days of their publication to identify
any providers in our networks.

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	 	CONTRACT N0. 071B9200147

E. Training

   Mandatory Training prior to working on-site for MPs/Specialists:

	 	1.	 	The Contractor will be responsible for providing the following training to all
staff/sub contractors. Each correctional facility has a training room that is used for
providing mandatory training to MDOC staff and facility contractors. Coordination for
use of the training room will need to be made through the facility Human Resources
Developer. Contractor Training and Orientation must include, but is not limited to:

	 	a.	 	Security Orientation
	 
	 	b.	 	Utilization Management
	 
	 	c.	 	Off-site Services
	 
	 	d.	 	Pharmaceutical Utilization, MDOC Formulary, and Off-Formulary
Process
	 
	 	e.	 	Credentialing
	 
	 	f.	 	Scope of Services, and Service Level Agreements
	 
	 	g.	 	Supervisory Agreements
	 
	 	h.	 	Management and Administration of Health Care
	 
	 	i.	 	Quality Improvement Program
	 
	 	j.	 	Training and Education
	 
	 	k.	 	Productivity Standards

	 	2.	 	Training must be scheduled in multiple sessions to prevent coverage shortages at
facilities. This does not preclude the Contractor from having an annual statewide
provider conference.
	 
	 	3.	 	MDOC will approve all training in advance.
	 
	 	4.	 	MDOC will provide MDOC specific training modules.
	 
	 	5.	 	MDOC requires five business days advance written notice to the MDOC CCI of all
training, and reserves the right to attend any training session.
	 
	 	6.	 	Training files must be maintained on each MP/Specialist. Training records must
be sent to MDOC training division when training is complete.
	 
	 	7.	 	The Contractor is responsible for arranging the following new on-site MPs and
specialists training with the MDOC facility training staff. The Contractor is also
responsible for ensuring their employee attends and completes the mandatory training.
This training includes:

	 	a.	 	40 hour new employee training for on-site MP utilizing MDOC
approved training modules, prior to the MP being allowed into a MDOC
correctional facility.
	 
	 	b.	 	20 hours of new employee training for specialists that work
inside the facility independently of nursing support, prior to the specialist
being allowed into a correctional facility.
	 
	 	c.	 	8 hours National Corrections Training Program on HIV

	 	8.	 	Mandatory On-going Training for MPs/Specialists

	 	a.	 	Training on updated and new policies within 30 days of the
effective date of the new policy, as needed.
	 
	 	b.	 	Written sign off to attest on site MPs/Specialists received
information on policy and procedure changes.
	 
	 	c.	 	16 hours of annual update training detailed by MDOC in multiple
sessions.
	 
	 	d.	 	40 hours of CPE clinical related training, annually (the
required 40 hours of CPE annual clinical training are required to fulfill certified CME requirements)
	 
	 	e.	 	Updates on HIV training, as necessary.
	 
	 	f.	 	The Contractor has established a Category 2 Continuing Medical
Education (CME) Program for licensed health care providers. The Category 1 CME
Reimbursement Program provides reimbursement (up to $1,500) for expenses
associated with provider’s participation in educational programs and specific
professional expenses that are incurred throughout the year. The Contractor’s
CME Program is consistent with Internal Revenue Service rules and regulations
regarding reimbursement of business related expenses.
	 
	 	g.	 	The Contractor ensures that licensed employees are credentialed
(when applicable), certified in CPR/AED, have access to Continuing Education
Units (CEU) and Category 2 CME’s. The Contractor maintains a Continuing
Education Program to update provider’s skills, present new medical findings,
and assist with re-licensure requirements.

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	 	CONTRACT N0. 071B9200147

F. Physician Prescribing Box

	 	1.	 	MPs must be required to maintain and utilize a Michigan Drug Control License for a prescribing box at each correctional facility to reduce unnecessary runs to the local
pharmacy. Prescribing boxes are not required at camps, SAI, and Re-Entry Centers. It is
expected that the MP will delegate the authority to use the box to other qualified
medical personnel, such as MDOC nursing staff, at their discretion, consistent with the
laws of Michigan.
	 
	 	2.	 	The prescribing boxes are provided by the MDOC. The Contractor will be responsible for ensuring the providers have a DEA license to dispense the pharmaceuticals.
	 
	 	3.	 	If for any reason there is a temporary MP vacancy at a facility, the Contractor must immediately designate another MP to be responsible to ensure the prescribing box is
accessible and delegate the authority to use the prescribing box to other qualified
medical personnel, such as MDOC nursing staff, at their discretion, consistent with the
laws of Michigan. The Contractor will provide a designated “back up” MP for each
facility in anticipation and preparation for filling a temporary vacancy or absence.

G. Coverage Hours/On Call Coverage

	 	1.	 	Coverage Hours 

The Contractor must provide the following on-site MP coverage at each MDOC correctional
facility and Duane Waters Health Center:

	 	a.	 	Appropriate staffing to support availability to see prisoners for
eight hours per day, between the hours of 6:00 a.m. to 9:00 p.m., Monday through
Saturday, excluding State holidays. The Contractor must stagger MP hours as
needed to provide the necessary Monday through Saturday coverage. The Contractor
must be responsible for ensuring appropriate staffing to meet the needs of the
facility, including segregation rounds for facilities with segregation units.
	 
	 	b.	 	The Contractor must ensure dialysis medical coverage is staffed
from 6:00 am to 11:00 p.m. six days a week. The Contractor must provide coverage
by contracted medical staff. The MDOC will re-evaluate the needed hours as
additional chairs have been added, although MDOC anticipates continuing the
coverage hours stated in the contract. The Contractor must ensure the required
dialysis coverage is provided.
	 
	 	c.	 	Weekly MP staffing schedules by facility, including dialysis and
DWH, must be approved by the MDOC Contract Compliance Inspector (CCI) two weeks
in advance. Short notice schedule changes present additional challenges for the
scheduling staff, custody, and the prisoner, and should be limited to emergencies
only. The MDOC understands that last minute emergencies occur and will work with
the Contractor to ensure facilities are properly notified. The Contractor will
develop staffing schedules in a monthly format for each week within the month
detailed by position and shift for each site. The next month’s proposed staffing
schedule will be submitted to the CCI at least two weeks prior to the beginning
of the service month. In addition, weekly updates/changes to the monthly
staffing schedule will be provided to the CCI in compliance with the two week
time frame
	 
	 	d.	 	MP staffing for the emergency room at DWH.
	 
	 	e.	 	MPs must immediately respond to on-site medical emergencies if
requested by health care or correctional custody staff.
	 
	 	f.	 	The DWH ER room requires 24x7x365 coverage. Contractor staffing at
DWH must provide coverage seven days per week. The DWH ER will provide access to
a physician to answer questions to MDOC staff state-wide during nights, weekends,
and holidays.

	 	2.	 	On Call Coverage

	 	a.	 	MDOC staff requires access to a MP for questions related to urgency
of care during evening, nights, weekends and holidays at facilities where on call
services are not provided.
	 
	 	b.	 	The Contractor must also provide on call MP services for sites
without on call capabilities in case they need to utilize those services.
	 
	 	c.	 	On call services will be required for Coldwater, Saginaw, Muskegon,
Ionia, St. Louis, Huron Valley, Jackson, and Kinross. Additional sites may be
added by mutual agreement of MDOC and the Contractor allowing 60 days for
implementation
	 
	 	d.	 	Telephone response to on call contacts must be returned within 30
minutes of the request. If required to respond to the facility the MP must be
on-site within one hour.
	 
	 	e.	 	The documentation must be entered into the EMR as verbal orders by
the nurse on-site and signed off and approved by the MP on their next regularly
scheduled work day.
	 
	 	f.	 	MP hours will be staggered to provide the necessary Monday through
Saturday coverage.
	 
	 	g.	 	The required number of hours per day will be coordinated through
the on-site facility support and security staff.

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	 	CONTRACT N0. 071B9200147

	 	h.	 	The Contractor will ensure coverage for dialysis services.
	 
	 	i.	 	The Contractor will provide monthly proposed on call staffing
matrices to the MDOC CCI that include DWH and dialysis services.

H. Short Term Provider Coverage

	 	1.	 	The Contractor must provide a minimum of 24 hours weekly for vacancies and short term coverage (including sick and vacation time). Short term coverage must not exceed 90
days per provider, per contract year.
	 
	 	2.	 	The Contractor will assure that all services are provided through careful and
consistent management of staffing required to provide services under the contract. Appropriate
levels of backfill hours have been budgeted for each staffing position to ensure coverage
and budget resources to cover for paid leave (e.g. holiday, vacation, sick, etc.) as well
as unplanned absences.

I. Productivity/Monitoring

MDOC health care staff schedules the routine, transfer, and follow up visits for the MP.
Urgent and emergent requests are either added to the schedule or verbally communicated to the
MP by health care staff. See MDOC’s current policies and procedures.

	 	1.	 	Routine sick calls must be seen within five business days of the
verbal or written request from the prisoner or an MDOC employee.
	 
	 	2.	 	Urgent care needs must be seen within two business days of the
verbal or written request from an MDOC employee.
	 
	 	3.	 	Emergent care must be seen within one hour of notification of a
need to be seen by verbal request either by an MDOC employee or the prisoner.
	 
	 	4.	 	Chronic care requests must be seen within five business days from
the requested follow-up date.
	 
	 	5.	 	Non-urgent specialty consults that are not seen by the off-site
specialist within 120% of the timeframe identified by the MP must be immediately
(no later than one business day) re-evaluated by the MP.
	 
	 	6.	 	All urgent specialty consults not seen by the off-site specialist
within five business days must be re-evaluated by the MP within one business day.
	 
	 	7.	 	MPs are responsible to assess the prisoner’s ability to consent to
medical services. If the prisoner is able to consent but refuses medical
services, the MP must document the refusal. If the prisoner is unable to consent
to medical services they must begin the guardianship paperwork. See
www.MICHIGAN.GOV/CORRECTIONS or the MDOC CCI current MDOC Policies and
Procedures.
	 
	 	8.	 	All of the above reviews and services will need to be documented in
the EMR within one business day of the encounter.
	 
	 	9.	 	The Contractor must establish criteria for monitoring appointment
scheduling for routine and urgent care and for monitoring waiting times for
individual prisoners at each facility.
	 
	 	10.	 	The Contractor and MDOC must jointly develop procedures for and
perform a quarterly review of productivity standards by practitioner, taking into
account varying issues that may have an impact, such as periodic bed counts,
limits to prisoner movement, facility lockdowns, inability to mix security
levels, and canceled appointments due to unexpected movement due to court cases.
By utilizing provider productivity reports, the Contractor and MDOC must analyze
and determine overall productivity to identify any variances, and implement
corrective measures. Utilizing Encounter Forms, the Contractor working with and
utilizing MDOC civil servant staff will prepare a series of productivity reports
to document all direct and indirect patient encounters; tracking provider,
patient, purpose of encounter, diagnosis code and length of encounter. The
Contractor managers analyze these reports to determine overall productivity and
to identify any variances. All variances are reviewed to determine if they are
the result of productivity or operational issues. In both cases, corrective
measures are implemented by the parties.. Copies of the productivity reports and
any related corrective actions must be submitted to the MDOC CCI.
	 
	 	11.	 	Until such time as NextGen 5.2 becomes fully operational, the
Contractor and MDOC will develop and implement a manual system to produce
necessary productivity reports. The MDOC civil servant staff are responsible for
the scheduling of routine and urgent on-site provider appointments and off-site
specialty appointments, in coordination with the Contractor. The Contractor must
monitor wait times. In performance of their respective functions, both parties
may utilize the Aetna Appointment Scheduling Center which provides accelerated
scheduling of specialists and hospital procedures via a 3-tiered approach, with
dedicated staff, hours of operation mirroring the clinic(s). The Contractor
staff will be afforded access to the Aetna specialty network of providers and
facilities via an 800 phone number, internet or fax.

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	 	CONTRACT N0. 071B9200147

	 	12.	 	The EPM section of the EMR will allow review and monitoring of the
MP/specialist schedules.

J. Segregation Requirements

	 	1.	 	MP rounds are required in segregation units every two weeks. Prisoners housed in
segregation units more than 30 days, regardless of medical status, must be evaluated
monthly by a MP.
	 
	 	2.	 	The Contractor must meet MDOC standards on specified segregation rounds and
documentation time frames. Those services will include acute sick call services,
chronic care services and education. Those services will be delivered as appropriate
within the segregated units.
	 
	 	3.	 	Documentation of rounds and evaluation must be entered in MDOC’s Electronic
Medical Record (EMR) by the close of business on the same day as the encounter.
	 
	 	4.	 	The face to face evaluations need to be documented in the EMR according to the
requirements of the Contract. The normal rounding requirement will be documented by
signing the Health Care Segregation Rounding form.

K. MP Intake Screening

	 	1.	 	The MP prisoner intake screening must occur within five calendar days after
prisoner intake screening by MDOC nursing staff at the MDOC male and female intake
facilities.
	 
	 	2.	 	MPs must conduct the prisoner intake screenings per current MDOC Policies and
Procedures 03.04.100.
	 
	 	3.	 	MPs must, per MDOC’s current Acuity Level Determination Process, assign prisoner
acuity level at time of the intake screening. The acuity level must be documented in
the EMR on the same day as the day of the intake screening.
	 
	 	4.	 	Prisoners with current medications must have their medications renewed by MPs on
the day they arrive at a correctional facility reception center. MDOC nursing staff
will notify MP of the need to renew medications prior to 5:00 p.m. on the date of
arrival. Prisoners arriving at intake with current medications must have the medication
renewed by the MP before 7:00 p.m. on the same day the prisoner arrives at intake.
	 
	 	5.	 	Sexually Transmitted Disease clinical evaluation must be conducted in accordance
to MDOC Operating Procedure 03.04.110D.
	 
	 	6.	 	All of the above services must be documented in the EMR within one business day
of the encounter.

L. Performance Improvement Plan (Mentoring/Progressive Discipline)

	 	1.	 	The Contractor must have written policies and procedures in place for MP
performance improvement. These policies include a mentoring program, progressive
discipline and/or a performance improvement plan and peer review process. The
Contractor must also have a standardized peer review program to facilitate the
evaluation of physicians who provide service. The peer review must be designed to
evaluate both the appropriateness of care provided by the physician and compliance with
the requirements of their position description.

	 	2.	 	The Provider Mentoring Program must include the following escalating steps:

	 	a.	 	Informal counseling of MP
	 
	 	b.	 	Documented MP re-education and or continuing education
	 
	 	c.	 	Peer review of the MPs services for 30 days
	 
	 	d.	 	Oversight of the MP for 30 days by Contractor’s Regional
Medical Director or designee responsible for supervision on the MPs
	 
	 	e.	 	Termination of MP

	 	3.	 	MPs are entered into the mentoring program by either the MDOC or the Contractor.
When the same MP has a re-occurrence of the same or similar issue, they will be
re-entered into the mentoring program at the next escalating step.
	 
	 	4.	 	Within five days of entering the mentoring program, the Contractor will assess
the possible deficiencies and provide a written MP Mentoring Plan to the MDOC. The
Mentoring Plan must include:

	 	a.	 	Identify of the deficiencies or areas for improvement for the
MP.
	 
	 	b.	 	The level of on-site supervision required, with a frequency
at least weekly.
	 
	 	c.	 	Specify whether the MP has received re-education, informal
counseling, or a MP mentoring plan previously and provide the issue and
resolution.
	 
	 	d.	 	Specify the related MP mentoring program step to be
completed.
	 
	 	e.	 	Close the individual MP Mentoring Plan only after the
Contractor adds documentation of completed steps and resolution, upon mutual
agreement with the MDOC.
	 
	 	f.	 	Complete all weekly MP supervision reviews on-site, and not
via telemedicine during the time an MP is in the Mentoring Program.

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	 	CONTRACT N0. 071B9200147

	 	5.	 	MDOC has established a complaint process to address civil servant staff and
contractor performance concerns. The process includes attempts to resolve issues at the
facility level with escalation to the region and finally to the Central Office and with
the Contractor’s management team. MDOC policies also address concerns about civil
servant staff performance. Employee Discipline Policy 02.03.100 and Corrective Action
for Performance Problems Policy 02.03.130. Current MDOC Policies and Procedures are
available from the MDOC CCI.

M. Coordination of Care for Mental Health Services with the Michigan Department of Community Health

Some prisoners may need mental health services provided by the Department of Community Health
(DCH). The Contractor is not responsible for the direct delivery of specified mental health
services, however, they must establish and maintain written standard operating procedures
describing their working relationship and communication pathways with DCH. The Contractor
will be responsible for the following:

	 	1.	 	The target population is addressed in MDOC Policy Directive
04.06.180, 04.06.182, 04.06.183, and 04.16.115. Current DCH and MDOC policies and
procedures may be requested from the MDOC CCI.
	 
	 	2.	 	The MP must examine and medically clear the prisoner of any medical
conditions prior to transfer to DCH mental health inpatient units, crisis
stabilization program (CSP), or residential treatment program (RTP). and indicate
that the medical condition can be treated by MDOC Ambulatory Care. The MP must
rule out health care reasons for a prisoner’s problems with mental status i.e.,
diabetes, seizures, heat exhaustion prior to completion of the referral forms to
DCH.
	 
	 	3.	 	All health care is provided by MPs, including those within the
mental health services unit. Services to be provided on-site at the Huron Valley
in-patient units include:

	 	a.	 	Completion of health physical with 24 hours of admission to
any inpatient services
	 
	 	b.	 	Prescribing of non-psychiatric medications and ordering
medical labs
	 
	 	c.	 	Arrangement of off site medical care
	 
	 	d.	 	Performance of medical rounds
	 
	 	e.	 	Receipt and review of written medical requests from prisoners
	 
	 	f.	 	Determination of prisoner’s ability to consent to medical
services
	 
	 	g.	 	Consideration and pursuit of guardianship when prisoner
refuses medical services
	 
	 	h.	 	Response to grievances and appeals for non-mental health
treatment issues
	 
	 	i.	 	Compliance with related policies. Current DCH and MDOC
program information, policies and procedures may be requested from the MDOC
CCI.
	 
	 	j.	 	Compliance with MDOC operating procedures in the event a MP
disagrees with a mental health provider’s decision not to admit a prisoner
into treatment. See MDOC Procedure 04.06.180C for information on referrals to
mental health.
	 
	 	k.	 	Laboratory Services related to mental health services are in
the Contractor’s scope of this Contract.

	 	4.	 	The Contractor’s on-site staff will coordinate with MDOC civil servant staff in
communicating and coordinating with facility Mental Health Services.
	 
	 	5.	 	Documentation in the MDOC EMR for all services must be completed by the close of
business on the day of the encounter.

N. Electronic Medical Record (EMR)

The MDOC has recently entered into a contract with NextGen to convert MDOC’s current
MDOC’s EMR from Serapis to NextGen version 5.2. By May 1, 2009 it is anticipated that the
conversion/upgrade to NextGen 5.2 will be completed at all facilities. Each facility must
convert over as NextGen becomes available, and current EMR Serapis will be used until that
time.

	 	1.	 	The Contractor, working with and utilizing MDOC civil servant
staff, is responsible for ensuring the entry of all health data from their
on-site MP to be entered in MDOC’s EMR by the end of business on the day of the
encounter. This includes entry for encounters, diagnostic testing, and lab
results ordered by the MP.

	 	2.	 	The Contractor is responsible for the entry of all health data from
their network of specialists and/or consultants to be entered into the MDOC’s EMR
by the end of the next business day following the day of contact for out-patient
service providers.

	 	3.	 	For in-patient services data must be entered into the MDOC EMR
within 14 calendar days after in-patient discharge.

	 	4.	 	The NextGen EMR has the capability of allowing scanned documents to
be entered into the EMR, but will not have voice recognition capability.

	 	5.	 	MPs not meeting a minimum threshold of 80% compliance for 30
consecutive days will be referred to the Provider Mentoring Program in Section
1.022 L.

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	TERMS AND CONDITIONS
	 	CONTRACT N0. 071B9200147

	 	6.	 	The Contractor may elect to use a transcription service approved by
the MDOC and DIT to document in the EMR. Any and all costs associated with this
service will be the responsibility of the Contractor including the remote access
fee. Access to the EMR would be via secure ID which has a one time fee and a
monthly fee. Currently the fee is $50 for the token and $20 per month. Rates
are subject to change and actual costs will be paid by the Contractor. (There is
an MDOC civil servant dictation service available to the DWH providers only, at
no cost to the Contractor.)

	 	7.	 	If the Contractor requests remote access for any staff all costs
including monthly fees will be the responsibility of the Contractor.

	 	8.	 	The MDOC currently has purchased 180 (concurrent) MP EMR licenses
for medical practitioner/vendor use. Contractor requests for additional licenses
will be approved at the discretion of the MDOC with proper justification.
Justification needs to include the purpose and the benefit of the request. For
requests not approved by the MDOC the Contractor would be responsible to pay MDOC
for the license and maintenance costs. Licenses must be purchased in increments
of five. The current license cost from NextGen is $10,000 with an annual
maintenance cost of $2,000. Rates are subject to change, and actual costs will
be paid by the Contractor, if licenses are requested.

	 	9.	 	When prisoners arrive at an intake center, the prisoner medical record is
initiated, or re-initiated. The MDOC nurses begin the documentation for the paper and electronic
files. Some of the intake documentation is maintained in the paper file, along
with some other information.
	 
	 	10.	 	A paper medical file is still maintained for each prisoner, including such items
as labs and x-ray records, in addition to the EMR records. There are parts of the medical
record that are still paper for the dialysis patients. There are some forms and
information coming from community hospitals.
	 
	 	11.	 	The historical paper medical records will not be incorporated into the electronic
record, but will be maintained in the clinical offices.

O. Telemedicine Utilization

	 	1.	 	The Contractor is responsible to maximize the usage of telemedicine. MDOC
expects the delivery of services via telemedicine whenever possible in order to minimize
both direct medical and related transportation and security costs to the State.
Telemedicine will be available at all MDOC Correctional Facilities and three Camps
(White Lake, Cusino, and Lehman). The cost of the on-site telemedicine equipment is
paid by the MDOC. Telemedicine is currently in all correctional facilities.

	 	2.	 	The Contractor will provide quarterly reports to MDOC that will compare
telemedicine capabilities and actual usage, identifying areas where telemedicine could
be expanded. MDOC and the Contractor will work together to increase telemedicine usage
in both on-site and off-site networks.

	 	3.	 	Telemedicine specialties may include but are not limited to:

	 	a.	 	Cardiology
	 
	 	b.	 	Endocrinology
	 
	 	c.	 	Ear, Nose, and Throat
	 
	 	d.	 	Emergency Room
	 
	 	e.	 	Intestinal
	 
	 	f.	 	Hematology
	 
	 	g.	 	Internal medicine
	 
	 	h.	 	Neurology
	 
	 	i.	 	Neurosurgery
	 
	 	j.	 	Orthopedics
	 
	 	k.	 	Pulmonary
	 
	 	l.	 	Renal
	 
	 	m.	 	Surgery
	 
	 	n.	 	Urology

	 
	 	o.	 	Infectious disease

	 	4.	 	MDOC facility telemedicine equipment is Polycom HDX8000 Series equipment. All
telemedicine equipment is mobile. Information about the Polycom equipment is available
at www.polycom.com. The MDOC equipment includes:

	 	a.	 	HDX8002Xl Based Styleview telehealth cart which includes an
Eagle Eye camera, 23” LCD display, no power system, and a utility shelf
	 
	 	b.	 	Ear, nose, and throat (ENT) Scope
	 
	 	c.	 	Genera Examination Camera

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	TERMS AND CONDITIONS
	 	CONTRACT N0. 071B9200147

	 	d.	 	Camera and Illumination National Television System Committee
(NTSC)
	 
	 	e.	 	Otoscope
	 
	 	f.	 	30mm coupler

	 	5.	 	The Contractor must ensure their specialty networks and hospitals have compatible
telemedicine capabilities. The cost of the telemedicine equipment outside of the MDOC
correctional facilities will be borne by the Contractor and/or their provider network.
Remote access is available via a secure ID token.
	 
	 	6.	 	The Contractor will establish a schedule of telemedicine clinics within geographic regions.
The Contractor will hold an initial series of educational conferences/conference calls with
the provider network and fully describe the internal telemedicine capabilities at each
facility. The Contractor will also work proactively with the provider network to
determine which specialists are willing to work with existing or new installations of
telemedicine equipment in order to provide clinic services. This education will be
ongoing throughout the term of the contract to continually develop and expand the
telemedicine network.
	 
	 	7.	 	Equipment needed to link into the MDOC telemedicine equipment includes;

	 	a.	 	Video conferencing unit. Software applications that run
through a computer and web cam will not work with the system. See
www.polycom.com for desktop solutions.
	 
	 	b.	 	IP connection with a minimum line speed of 384kbps.

	 	8.	 	The State’s third party reviewer will review the Contractor’s performance and utilization
of telemedicine on an on-going basis making recommendations for opportunities for increased
telemedicine usage.
	 
	 	9.	 	Telemedicine scheduling will be a done by MDOC staff for on-site MP requests for
telemedicine visits. Telemedicine appointments will be included on the MPs daily schedule.
	 
	 	10.	 	MDOC staff will work in conjunction with the specialty services scheduler to arrange for
specialty telemedicine visits. MDOC staff will ensure prisoners arrive at the
telemedicine visit on time via a prisoner call out for services.
	 
	 	11.	 	The Contractor is responsible for ensuring documentation of all telemedicine encounters
(either on-site or specialty) in the MDOC EMR by the close of business on the day of the
encounter. The documentation must note that the encounter was via telemedicine.
	 
	 	12.	 	As of 2-3-09, the MDOC has both ISDN and IP connectivity between sites, but is in the
process of migrating from ISDN to IP only. IP and ISDN video calls from outside the
State network will be handled by MDOC’s bridge and firewall. The Contractor must be
responsible for the connectivity costs.
	 
	 	13.	 	Off network ISDN calls are managed through the bridge. Off network IP calls can be passed
through the State firewall and ReadiManager as long as the video call is not being
initiated from a desk top or lap top computer. MDOC’s video network is currently based
on a Polycom platform utilizing standards based video technology.

P. Quality Assurance Plan

	 	1.	 	The Contractor must maintain and continuously update a written Quality Assurance
(QA) Plan which assures that prisoners receive medically necessary care under this
contract in accordance with NCCHC and NCQA standards of care. The Contractor will
review, potentially revise, and receive final approval on their plan from MDOC Quality
Administrator. The Quality Assurance plan must be submitted to the MDOC Quality
Administrator for approval within 60 days of contract signing.

	 	2.	 	The QA Plan must describe in detail the methods that will be used to monitor
system performance, including a detailing of performance measures and the processes
which they measure. The QA Plan must include benchmarking and reporting of Michigan’s
prisoner health care system against key national general population health indicators
and against performance of prisoner health care systems in other states. The QA Plan
must describe a system capable of identifying opportunities to improve the provision of
health care services and to improve outcomes for Michigan prisoners. The QA Plan must
include, at a minimum:

	 	a.	 	Performance goals and objectives
	 
	 	b.	 	Lines of authority and accountability
	 
	 	c.	 	Data responsibilities
	 
	 	d.	 	Evaluation tools
	 
	 	e.	 	Performance improvement activities
	 
	 	f.	 	Incorporation of the findings of MDOC site reviews, external
quality reviews, statewide focused studies, recommendations from the Medical
Services Advisory Committee (MSAC), and audit findings

	 	3.	 	The Contractor must conduct an annual effectiveness review of the program. This
review must include analysis of whether there have been improvements in the quality of
health care services.

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	 	CONTRACT NO. 071B9200147 

	 	4.	 	The Contractor must participate in state-wide continuous improvement projects
that cover clinical and non-clinical areas. The MDOC Quality Administrator will work
with the Contractor to mutually select priority areas for improvement projects.
	 
	 	5.	 	One or more representatives from the Contractor will work with the MDOC Quality
Administrator and the MDOC Health Care Quality Improvement Team to review the prisoner
health care system performance data and make recommendations for change on an on-going
basis.
	 
	 	6.	 	The Contractor must maintain the personnel resources to provide consultant
services by a physician for analysis and consultation with the MDOC Chief Medical
Officer on oral and injectable medication prescribing practices and treatment
alternatives. The Contractor’s Medical Director would be an acceptable consultant for
the CMO to utilize.
	 
	 	7.	 	The Contractor will provide a Quality Improvement Director that will review data
and make recommendations through routinely scheduled meetings.
	 
	 	8.	 	See Appendix C for the Contractor’s Quality Assurance Plan. The Contractor must
review the Plan on a regular basis, and submit revisions to the CCI, to be accepted
through issuance of an official contract change notice.

  Q.  Pharmaceutical Utilization

The MDOC has current pharmaceutical contracts for the acquisition and delivery of
pharmaceuticals to correctional facilities. The Contractor will be required to:

	 	1.	 	Order pharmaceuticals from the MDOC pharmacy contract utilizing the
MDOC NextGen EMR. The following exception applies to dialysis related
pharmaceuticals. The Contractor is not required to get these injectables from
the State contract(s) if they can obtain them at a lower cost than the State
contract(s). The Contractor will submit alternative purchase plans to the CCI
for approval prior to purchase.
	 
	 	2.	 	Ensure MPs prescribe and administer medications as medically
necessary within their course of treatment of a prisoner in compliance with the
current MDOC Formulary.
	 
	 	3.	 	Ensure prescribing practices and pharmaceutical utilization meet
the MDOC’s expectations that at least 85% of orders be generic.
	 
	 	4.	 	Utilizing reports provided by the MDOC pharmacy provider,
Contractor will provide utilization reports to MDOC that review of MP prescribing
practices and utilization patterns.
	 
	 	5.	 	Comply with the MDOC Formulary, and Off-Formulary prescribing
process is required.
	 
	 	6.	 	Establish an off-formulary approval process and a feedback
mechanism to the MDOC CMO in the event a non-formulary medication is ordered
without the appropriate use of a non-formulary request form. This feed back
system must be such that the continuity of prisoner care is not compromised or
unduly disturbed with respect to expediting the medication order. The MDOC CMO
or designee approves the non-formulary medications. In no event, should the
process prohibit the continuation of a critical non-formulary medication to a
prisoner.
	 
	 	7.	 	Participate in the MDOC Pharmacy and Therapeutics Committee, and
review with the MDOC CMO the approved formulary ensuring the formulary will
foster a safe, appropriate, and effective drug therapy. It will accomplish the
following:

	 	a.	 	Promote cost containment/effectiveness without increased
risk of adverse consequences or therapeutic misadventures.
	 
	 	b.	 	Promote rational and objective drug therapy.
	 
	 	c.	 	Promote appropriate generic drug utilization and use of
bioequivalent drugs.
	 
	 	d.	 	On-going review and utilization of the current MDOC
Formulary.

  R.  Durable Medical Equipment

The Contractor is responsible for ordering and purchasing durable medical equipment (DME) and
supplies that are specifically designed for an individual, based on medical need. The
Contractor is responsible to provide patient-specific prosthetics and orthotics that cannot
be re-used by other prisoners. In addition, the Contractor is also responsible for the
following:

	 	1.	 	Repair and replace due to wear from normal usage, or if the
prisoner’s medical condition changes such that a different item is need to
address the prisoner’s medical need.
	 
	 	2.	 	Provide specialty and/or technical support necessary to properly
provide and maintain the items.
	 
	 	3.	 	Establish a procedure for ordering and delivery of prosthetics and
orthotics within 10 days of the visit identifying the need for the equipment.

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

	 	4.	 	MDOC maintains an ample supply of non-patient specific canes,
crutches, walkers, splints, wheelchairs, and braces for use by prisoners at each
facility. These are available for use at no cost to the Contractor. Any
medically necessary patient specific wheelchairs are the Contractor’s
responsibility in the scope of the Contract.
	 
	 	5.	 	Ensure documentation of the DME be completed in the EMR by the
close of business on the day of the encounter.
	 
	 	6.	 	Ensure multiple sites are available throughout the state to custom
fit prosthetics and orthotics to reduce transportation costs, with at least one
being in each MDOC region. See www.MICHIGAN.GOV/CORRECTIONS for MDOC regions.
	 
	 	7.	 	Patient-specific DME remains with the prisoner upon parole or
discharge.

  S. Data Management

	 	1.	 	The Contractor is responsible for submitting an electronic HIPAA compliant encounter
submission (837) monthly to the data warehouse, upon it becoming operational. The 837
may also be required to be submitted to MDOC, and/or an independent third party
reviewer.
	 
	 	2.	 	The Michigan Department of Community Health (DCH) web site has all of the HIPAA
manuals and companion guides for the 837. Go to www.michigan.gov/dch, and then click
on “Providers,” then click on “HIPPA,” then click on “Encounter Data Submission.”
The specific data fields will be updated for the MDOC encounter data submissions.
	 
	 	3.	 	The MDOC requires submission of HIPAA compliant encounter data using the
transaction format specified as the National Electronics Data Interchange Transaction
Set Health Care Encounter/Claim, ASC X12N837 Version 4010A1. Depending on the type of
service provided, encounter transactions may need to be submitted using either the
Institutional (X096), Dental (X097) or Professional (X098) Industry Identifier of the
837 Encounter Transaction
	 
	 	4.	 	The State owns all data statistics, claims and encounter data, and reserves the right
to request any and all of the data at any time. The State also reserves the right to
require the Contractor to transfer the data to a third party upon MDOC request, at no
additional cost to MDOC.
	 
	 	5.	 	The Contractor will formally submit data on a monthly basis and will provide access
through Level D reporting, which is an ad hoc query tool which includes a click-and drop
query writing application for virtually complete access and selection of claims data.
This functionality is included in our proposal at no additional cost.
	 
	 	6.	 	The Contractor will provide all of their proposed software or on-line tools at no
additional cost, including software upgrades, patches, and training for MDOC staff: The MDOC
will have unlimited licenses to use all levels of Aetna reporting. There will be no
restrictions on the number of users who may access the system, beyond any internal
limitation MDOC may choose to place.
	 
	 	7.	 	The Contractor can install a private circuit that terminates at the State
VendorNet router and firewall. This will allow MDOC sites to traverse the State’s network and go out
through the VendorNet router to the Contractor’s site to access the vendor’s
application and to obtain Contractor provided 837 reports. The MDOC’s intent is for
the Contractor to send a data file with their 837 data separately to the data
warehouse. The 837 file from the Contractor will include more information than that
which will be entered into NextGen as a result of a site visit. The additional
information on the file from the Contractor to MDOC’s data warehouse will include
things like amounts paid, etc. Comparing the 837 file of off-site claims paid by
Contractor, with the NextGen generated 837 for off-site visits entered into the
NextGen EMR, will be one of the ways that MDOC double check to ensure that data is
valid and that the Contractor is in fact documenting all of the visits in NextGen that
are needed. Next Gen will capture the necessary data to provide an 837 report for
on-site services.

  T. Network of On-site and Off-site Specialists/Consultants

The Contractor must provide a network of on-site and off-site specialists and/or consultants
necessary to meet the service needs of MDOC prisoners, and utilize telemedicine when
appropriate. This network must be developed in such a way to reduce MDOC costs, improve
access, document evidence-based quality of care, maintain security issues to the community,
and continuously improve quality of care. The network must include qualified providers in
sufficient numbers and locations to provide required access to services.

	 	1.	 	The DWH on-site specialists are only available for facilities
within 60 miles of Jackson, unless the services are being provided via
telemedicine, or with written approval from MDOC CCI where specialty services are
not available to the broader community in various geographic areas. The
currently available on-site specialty services at DWH are available from the MDOC
CCI. Telemedicine is generally available for these specialties.
	 
	 	2.	 	The provider network rendering services must be based on executed
contracts.

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

	 	3.	 	The Contractor must ensure compliance with NCCHC and NCQA standards
of care for the delivery of health care services to prisoners.
	 
	 	4.	 	Copies of Contractor, staff, independent contractor, sub-contractor
or vendor partner provider network liability insurance must be provided to the
State upon request.
	 
	 	5.	 	Working with and utilizing MDOC civil servant staff, the Contractor
is responsible for scheduling on-site specialty clinics at DWH and coordinating
with MDOC staff for the scheduling of off-site specialty appointments.
	 
	 	6.	 	The Contractor will begin recruitment efforts of alternative
specialist resources when wait times exceed 30 days for specialty services,
unless the situation is resolved via other means.
	 
	 	7.	 	Notification to MDOC’s CCI within seven calendar days of any
changes in the composition of the provider network. If, at any time, a specialty
is not readily available through either a local provider or telemedicine, the
Contractor’s State Medical Director will notify the MDOC Medical Director within
one week for off-site providers.
	 
	 	8.	 	A corrective action plan must be provided to the MDOC CCI within
three business days for changes in the provider network composition that MDOC
determines negatively affect prisoners access to medically necessary services.
	 
	 	9.	 	Ensure continuity of treatment in the event a provider’s
participation terminates during the course of a prisoner’s treatment by that
provider.
	 
	 	10.	 	The MDOC CCI may request specialty provider participation in
quality improvement and utilization review activities.
	 
	 	11.	 	The Contractor must disclose to MDOC information on provider
incentive plans when compensation arrangements exist where payment for designated
health services furnished to a prisoner on the basis of a physician referral
would otherwise be denied.
	 
	 	12.	 	Off-site specialty services must be provided in accordance with
MDOC security procedures, which may require the use of armed custody officers.
MDOC security policies and procedures will be made available to the Contractor.
	 
	 	13.	 	See Appendix C for the Contractor’s Quality Assurance Plan. The
Contractor must review the Plan on a regular basis, and submit revisions to the
CCI, to be accepted through issuance of an official contract change notice.
	 
	 	14.	 	See Appendix G for Aetna’s related Performance Guarantee.

  U.  Timeliness of Care for Off-site Consultations/Services

The Contractor is responsible for ensuring prisoners have access to medically necessary
services in a timely manner. MDOC defines “access to medically necessary services in a
timely manner” by the following standards:

	 	1.	 	The initial specialist consult is to occur within the timeframe
specified by the MP.
	 
	 	2.	 	Urgent specialty consults are to be seen within five business days
unless the MP indicates a shorter timeframe. If community standards and access
to care is greater than five business days, these will be addressed on a case by
case basis, with the Contractor providing prompt written notification to the CCI.
	 
	 	3.	 	All follow-up consultations need to be completed within the time
specified by the MP.
	 
	 	4.	 	Documentation of the initial and follow-up specialty consults must
be in the MDOC EMR within five business days of completion of the routine
consults. The documentation into the EMR is the responsibility of the
Contractor.
	 
	 	5.	 	Documentation of urgent consults must be entered into the EMR by
the close of business on the same day as the consult occurred. The documentation
into the EMR is the responsibility of the Contractor.
	 
	 	6.	 	MDOC will provide the Contractor with weekly waiting list
information by facility.

  V.  Dialysis Services

	 	1.	 	The on-site dialysis unit is located at Ryan Correctional Facility in Detroit,
MI, for males, and at Scott Correctional Facility for females. There are currently 16
dialysis chairs at Ryan, and one at Scott. All male prisoners requiring dialysis are
transferred to Ryan Correctional Facility unless they are in an in-patient setting, and
the females are transferred to the Scott Correctional Facility. The MDOC anticipates
that in May of 2009, the women’s facility, including dialysis unit, will be moved to the
Huron Valley
	 
	 	2.	 	The Contractor must provide the staff necessary to ensure the prisoners receive
timely access to care, including dialysis services. The Contractor will need to
determine the number of staff needed for all current dialysis units, including Huron
Valley.

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

	 	3.	 	The Contractor must provide dialysis related services including but not limited
to:

	 	a.	 	Provide nephrologists and support services delivered at the
MDOC dialysis unit. Service delivery must include nephrology nursing staff,
solutions, equipment, dialysis chairs, supplies used on the unit, and
pharmaceuticals injected at the time of dialysis treatment. MDOC pays for
utilities at the Ryan facility (heat, electricity, sewer, and tap water).
	 
	 	b.	 	Provide a mechanism for inpatient management of dialysis
prisoners.
	 
	 	c.	 	Provide on-site primary care of dialysis patients.
	 
	 	d.	 	Maintain documentation of prisoner treatment records including,
but not limited to nephrology treatment notes, orders for laboratory and medications in the MDOC EMR
on a weekly basis. A computer and work area will be provided by MDOC for on-site
nephrologists.
	 
	 	e.	 	Dialysis laboratory and phlebotomy supplies.
	 
	 	f.	 	Copies of Contractor, staff, independent contractor,
sub-contractor or vendor partner provider network liability insurance must be provided to the State upon
request.
	 
	 	g.	 	The contractor is responsible to supply dialysis related
pharmaceuticals, and their cost.
	 
	 	h.	 	Documentation for primary care will be in the EMR on the day of
the encounter.

	 	4.	 	The MDOC will provide and be financially responsible for pharmaceuticals used for
non-dialysis purposes while a prisoner is being dialyzed.
	 
	 	5.	 	The Contractor is responsible for providing any medically necessary off-site
dialysis services, and is financially responsible for off-site services, no matter what
the cause.

  W.  Physical, Occupational, and Speech Therapy Service

	 	1.	 	The Contractor will provide two FTEs at DWH to perform the majority of physical
therapy (PT), occupational therapy (OT), and speech therapy (ST). The remaining
services will be provided off-site through the Aetna provider network, at all times
ensuring service in each of the MDOC regions.
	 
	 	2.	 	Contractor must provide delivery of necessary physical, occupational, and speech
therapy services throughout the state. Services are not required at each facility but
need to be geographically linked to MDOC facilities with no less than three locations,
with one being in each MDOC region. See www.MICHIGAN.GOV/CORRECTIONS for the region
breakdown. The Contractor must provide written notice regarding any changes to the
service locations to the MDOC CCI 30 business days in advance of the change.
	 
	 	3.	 	Therapy services must be documented in the MDOC EMR within five business days of
the date of service.

  X.  Hospice

	 	1.	 	The Contractor is expected to coordinate community hospice services on-site to
prisoners within each of the correctional facilities and at DWH, utilizing local hospice
organizations for each facility; or, alternatively, utilize its end of life program
called CHOICES.
	 
	 	2.	 	The Contractor must have established procedures, developed in collaboration with
MDOC, to determine when community based hospice, versus the CHOICES program is utilized.
The current version of these procedures must be submitted to the MDOC CCI.
	 
	 	3.	 	The MP will be required to interact with the hospice worker and/or CHOICES on an
on-going basis.
	 
	 	4.	 	Working with and utilizing MDOC civil servants, the Contractor is responsible for
documenting the hospice and/or CHOICES visit in the MDOC EMR by the close of business on
the day of the encounter.

  Y.  Optometry

	 	1.	 	Optometry services are to be provided on-site. MDOC facilities that do not have
on-site optometry equipment will utilize the optometry services at the next closest MDOC
correctional facility. See MDOC Policy 04.06.165 Optometry Services.
	 
	 	2.	 	At facilities that have on-site optometry equipment, MDOC provides an exam room,
and optometry equipment consistent with a community optometry office. The Contractor is
responsible for performing eye exams. Services must be provided by a Michigan licensed
optometrist.
	 
	 	3.	 	The Contractor may utilize telemedicine for routine monitoring of glaucoma,
visual field testing, migraine management and other ocular conditions.
	 
	 	4.	 	Working with and utilizing MDOC civil servants, the Contractor must ensure that
optometry services, including telemedicine encounters, are documented in the MDOC EMR
Optometry Template by the close of business on the day of the encounter. Because
services are rendered on-site, the optometrist may complete the entry.

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	 	CONTRACT NO. 071B9200147 

  Z.   Emergency Medical Transport Services

	 	1.	 	The Contractor must provide emergency ambulance services to prisoners from each
MDOC correctional facility.
	 
	 	2.	 	Contracting for these services must be done in such a way as to assure that
response time and level of transport services is comparable to community standards
National Council on Quality Assurance (NCQA) and when possible within 30 miles of the
MDOC correctional facility. For rural areas, if the Contractor is unable to provide
service within 30 miles they may request a written exemption from the MDOC CCI.
	 
	 	3.	 	The MDOC owns an ambulance and an indoor mini-ambulance, operating to support the
Jackson area facilities. The operating costs associated with the ambulances are the
responsibility of MDOC. The indoor ambulance operates at DWH. The other ambulance is
used to transport prisoners primarily within the Jackson area. Occasionally, it may be
used to transport a prisoner within a 100 mile radius for the purpose of transport
between correctional facilities, to and from a hospital, or assisted living center. The
ambulance is dispatched at the request of the MPs or MDOC staff.
	 
	 	4.	 	MDOC security policies and procedures will be available to the Contractor.
	 
	 	5.	 	The Contractor must have contracted all negotiated ambulance services 30 days
prior to the Services Go Live date, submitting all contract information to the MDOC CCI.
Any changes in ambulance service will be reported to the MDOC CCI within one week.

  AA.  Community Based Hospital and Urgent Care Centers

	 	1.	 	The Contractor must ensure hospital services and/or urgent care is available
at the closest location to the correctional facility and whenever possible within 30
minutes or 30 miles travel. Exceptions to this standard may be granted if the
Contractor documents that no other hospital/urgent care center provider is accessible
within the 30 minutes or 30 miles travel time, and the MDOC CCI pre-approval is
granted in writing.
	 
	 	2.	 	Community hospitals utilized must be licensed by the State of Michigan and
accredited by the Joint Commission on Accreditation of Health Organizations (JCAHO).
If a hospital is not accredited, it must be in good standing with Medicare.
	 
	 	3.	 	Emergency room services are available 24 hours a day, seven days a week.
	 
	 	4.	 	In-patient care must be provided in accordance with MDOC security procedures,
which may require the use of armed custody officers. MDOC security policies and
procedures will be available to the Contractor.
	 
	 	5.	 	A current master list of hospitals and urgent care centers utilized for each
correction facility must be submitted to the MDOC CCI. Any changes in hospital and
urgent care center services will be reported to the MDOC CCI within one week.

  BB.  Secure Unit

	 	1.	 	The Contractor must work with the MDOC to establish and maintain secure unit
beds at licensed and accredited community hospitals.
	 
	 	2.	 	The MDOC currently utilizes a secure unit at Allegiance Hospital in Jackson.
The Contractor will ensure a contract is negotiated with the existing secure unit at
Allegiance Hospital in Jackson. The MDOC would like to expand the number of secure
units available throughout the state. Areas of interest include, but are not limited
to; the Upper Peninsula, Detroit, Ionia, Coldwater, Ypsilanti, Muskegon, Grand Rapids
and St. Louis.
	 
	 	3.	 	MDOC provides the security staff personnel for the secure unit, and pays the
cost of the staff, including any additional secure units.
	 
	 	4.	 	The MDOC will work with the Contractor and the hospital(s) to design the
secure unit. The MDOC will approve the plans for the secure unit. Infrastructure
changes and security equipment will be paid for by the MDOC. The hospital cannot
remove any infrastructure paid for by the MDOC without written approval from the MDOC
CCI.
	 
	 	5.	 	The negotiated secure unit rate must be disclosed and agreed upon in writing
by the MDOC prior to the start of construction.
	 
	 	6.	 	The units must have written procedures in place to address the following:

	 	a.	 	An outpatient holding area adjacent to the secure unit
such that security staff may be shared with the secure unit.
	 
	 	b.	 	Secure Unit Inpatient Hospital Services.
	 
	 	c.	 	Secure Unit Inpatient Physician/Specialty Services.
	 
	 	d.	 	Secure Unit Outpatient Hospital Services.
	 
	 	e.	 	Secure Unit Outpatient Physician/Specialty Services.
	 
	 	f.	 	Secure Unit Hospital Intensive Care Services.
	 
	 	g.	 	Secure Unit Hospital Emergency Room Hospital Care.
	 
	 	h.	 	Secure Unit Hospital Emergency Room Physician Services.
	 
	 	i.	 	All Secure Unit Hospital necessary ancillary/support
services.

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

	 	7.	 	To facilitate the provision of prisoner health care, the MDOC Regional Health
Administrator (RHA)/designee must function as the MDOC Secure Unit Coordinator to
oversee the prisoner health care operations within the Secure Unit and to facilitate
communications.
	 
	 	8.	 	The Contractor must ensure that the hospital Secure Unit conforms to MDOC
security standards. MDOC security policies and procedures will be available to the
Contractor and the secure unit hospital(s).
	 
	 	9.	 	Secure unit staff must meet with representatives of the Contractor and the
MDOC bi-monthly or as needed (at the discretion of the MDOC Regional Health
Administrator (RHA) or their designee) to discuss utilization and quality management
of the unit and to work toward resolving any problems with communication, admission,
discharge, escort, or transportation.
	 
	 	10.	 	See Appendix G for Aetna’s related Performance Guarantee.

  CC.  Diagnostic Testing Centers

	 	1.	 	The Contractor must develop and maintain a network of participating hospitals
and/or diagnostic centers to meet the needs of MDOC prisoners for specialized
diagnostic testing services.
	 
	 	2.	 	The Contractor must provide ancillary/support services for all medically
necessary diagnostic evaluation/testing required to provide medically necessary care
to prisoners. MDOC staff will provide the on-site nursing services (i.e. lab draws
and x-ray imaging etc.). All components of off-site diagnostic testing are the
responsibility of the Contractor. ( i.e. interpretation, processing, etc).
	 
	 	3.	 	Testing Centers are not required to be located at each facility but need to
be geographically linked to MDOC facilities with no less than three locations, with
one being in each MDOC region. See www.MICHIGAN.GOV/CORRECTIONS for the MDOC region
breakdown. The Contractor must provide written notice regarding any changes to the
service locations to the MDOC CCI 30 business days in advance of the change.
	 
	 	4.	 	Diagnostic Testing Services must include, but are not limited to:

	 	a.	 	Community purchased imaging services
	 
	 	b.	 	Electromyography (EMG) services
	 
	 	c.	 	Audiology services
	 
	 	d.	 	Respiratory therapy services
	 
	 	e.	 	Electrocardiogram (EKG) interpretation services
	 
	 	f.	 	Pulmonary function testing interpretation services
	 
	 	g.	 	Cardiac stress testing.

	 	5.	 	Testing which leads to a diagnosis of life, limb, vision threatening, or
other serious medical condition must be communicated by phone to the appropriate
facility medical staff immediately upon discovery (on the same day as the results are
available).
	 
	 	6.	 	The Contractor must develop and maintain a network of participating
specialists to interpret outpatient diagnostic testing performed at MDOC facilities.
	 
	 	7.	 	The Contractor must provide a courier service for the transport of x-ray
images, samples and diagnostic data, serving all MDOC facilities state-wide. NOTE:
MDOC is working to change current x-ray equipment to include computerized imaging that
will allow for images to be burned to CDs and also be transmitted via email for
expedited interpretation. The MDOC is considering this equipment for the St. Louis,
Kinross, Coldwater, Huron Valley, Jackson, and Ionia facilities. It is not known at
this time if the computerized imaging will be in place at the start of this Contract
	 
	 	8.	 	A mutually agreed upon pickup and delivery schedule will be arranged with the
Contractor, that will convey facility needs, as not every site may require daily
visits. Once the schedule is final, schedule changes must be requested in writing to
the MDOC CCI in advance of any change.
	 
	 	9.	 	A toll free number must be provided for the facilities to contact the courier
service, including to arrange a pick up outside of the normal courier schedule in the
event an emergent service is needed.
	 
	 	10.	 	The MDOC has x-ray capabilities at several locations. MDOC civil servants
perform all on-site x-rays.
	 
	 	11.	 	Working with and utilizing MDOC civil servant staff, the Contractor is
responsible to ensure next business day test results entry into the EMR within one day
of the receipt of results.
	 
	 	12.	 	Laboratory Services related to Mental Health Services are in the scope of
this contract.

  DD.  Outpatient Laboratory Diagnostic Testing

The Contractor is responsible to provide a source for outpatient laboratory diagnostic
testing for orders placed by the MP. On-site lab draws are performed by MDOC civil servant
staff. The laboratory diagnostic testing services include:

	 	1.	 	A mutually agreed upon pickup and delivery schedule will be
arranged with the Contractor, that will convey facility needs, as not every site
may require daily visits. Once the schedule is final, schedule changes must be
requested in writing to the MDOC CCI in advance of any change.

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	 	CONTRACT NO. 071B9200147 

	 	2.	 	A toll free number must be provided for the facilities to contact
the courier service to arrange a pick up, including to arrange a pick up outside
of the normal courier schedule in the event an emergent service is needed.
	 
	 	3.	 	Testing which leads to a diagnosis of life, limb, vision
threatening, or other serious medical condition must be communicated by phone to
the facility nurses station immediately (on the same day as the results are
available) upon discovery.
	 
	 	4.	 	Provision of next business day results on all laboratory testing
done on a daily basis, via the electronic submission into the EMR on the day the
results are available.
	 
	 	5.	 	Provision of consulting pathology services as needed for clinical
and anatomic laboratory services.
	 
	 	6.	 	A required phone call from the laboratory to the correctional
facility nurse station housing the prisoner if the lab results represent “panic
values” within two (2) hours of the laboratory identifying the abnormal result.
Outside of normal health care working hours at the facility “panic values” must
be provided to the MP who is available for emergencies and the RN at the clinic.
	 
	 	7.	 	Stat Laboratory Testing as ordered by the MP must be picked up
within one (1) hour of the request and results must be delivered within two hours
of pickup or make arrangements with local hospital laboratories to perform
emergency laboratory studies. MDOC CCI will provide current Stat Lab List to the
Contractor.
	 
	 	8.	 	Special laboratory testing results being reported within the next
business day, upon completion of the test and must be submitted electronically in
the EMR on the day the results are available.
	 
	 	9.	 	Maintenance of a log of prisoners with critical values that include
the prisoner name and number, date and time of the value, the MDOC staff person
the value was communicated to and the name of the laboratory employee reporting
the value. The log must be submitted monthly to the Health Unit Manager (HUM)
via email or fax.
	 
	 	10.	 	Maintenance of a log of specimens received and monthly report of
the number of specimens by type. i.e. blood, urine, etc. The log must be
submitted monthly to the MDOC HUM via email or fax. The logs must be submitted
to each facility.
	 
	 	11.	 	Automated lab ordering and reporting through the MDOC NextGen EMR.
	 
	 	12.	 	Laboratory testing results must be submitted electronically into
the EMR by either the laboratory or the Contractor, working with and utilizing
MDOC civil servants, on the day the results are available.
	 
	 	13.	 	Laboratory providers must submit laboratory value claims tape to
the Contractor for the facility for which the laboratory test was ordered.
	 
	 	14.	 	Laboratory Services related to Mental Health Services are in the scope of this Contract.
	 
	 	15.	 	The Contractor must maintain a Lab Formulary that ensures provision of necessary lab work via the most effective and cost efficient means. The Contractor will
utilize the Lab Formulary to better control lab costs, and will conduct routine
diagnostic tests within MDOC facilities to the extent possible, given the
availability of equipment. The Contractor must submit the current copy of the Lab
Formulary to the MDOC CCI.

  EE. Utilization Management

The Contractor is responsible to assess, perform and provide utilization management for all
services. Utilization management services must include, but are not limited to:

	 	1.	 	Use of NCCHC and NCQA standards of care in the delivery of health
care services to prisoners
	 
	 	2.	 	Develop diagnostic and treatment pathways for major categories of
medical condition, with the MDOC Chief Medical Officer (CMO). Pathway changes
must be jointly written and will be granted final approval by the MDOC CMO.
	 
	 	3.	 	Have written policies with review of medical decision criteria and
procedures that conform to managed health care industry standards and processes.
	 
	 	4.	 	Establish timeframes for standard and expedited authorization
decisions.
	 
	 	5.	 	Review utilization patterns of on-site MPs. The topics to review
include but are not limited to:

	 	a.	 	Medication prescribing practices
	 
	 	b.	 	Provider referral patterns
	 
	 	c.	 	Hospital utilization
	 
	 	d.	 	Inpatient case management and discharge planning
	 
	 	e.	 	Laboratory and Diagnostic Testing

	 	6.	 	Establish a formal utilization review committee that includes the
Medical Director, MDOC Quality Assurance, and the MDOC Chief Medical Officer.
	 
	 	7.	 	Ensure sufficient resources to regularly review the effectiveness
of the utilization review process and to make changes to the process as needed.

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	 	CONTRACT NO. 071B9200147 

	 	8.	 	Ensure that compensation to the individuals or any applicable
sub-contractor that conduct utilization management activities is not structured
so as to provide incentives for the individual or sub-contractor to deny, limit,
or discontinue medically necessary services to any prisoner.
	 
	 	9.	 	Conduct an annual review and reporting of utilization review
activities and outcomes/interventions from the review.
	 
	 	10.	 	Integrate Contractor utilization management activities with the
MDOC Quality Assurance Program.
	 
	 	11.	 	See Appendix D for the Contractor’s Utilization Management Program.
The Contractor must review the Plan on a regular basis, and submit revisions to
the CCI, to be accepted through issuance of an official contract change notice.

  FF. Pre-authorization Review Process

The Contractor’s authorization policy must establish timeframes for standard and expedited
authorization decisions for both primary and specialty care. These timeframes may not
exceed 14 calendar days from date of receipt for standard authorization decisions and three
business days from date of receipt for expedited authorization decisions. These timeframes
may be extended up to 14 additional calendar days for standard and up to three calendar
days for urgent if requested and approved by the MDOC.

	 	1.	 	The authorization review types include:

	 	a.	 	Pre-authorization for non-urgent and urgent/expedited
services
	 
	 	b.	 	Concurrent/urgent for situations whereby a prisoner is
receiving specialty services and concurrently requires urgent referral to a
secondary service.
	 
	 	c.	 	Authorization continuance for situations whereby a prisoner
is receiving specialty physician services and requires authorization of
additional specialty care visits and/or follow-up services.

	 	2.	 	Establish and use a written Prior Approval Policy and procedure for
utilization management purposes. Such policies and procedures may not be used to
avoid providing medically necessary services within the coverage established
under the Contract. The prior approval policy and revisions must be pre-approved
by MDOC CMO.
	 
	 	3.	 	The Prior Approval Policy must ensure that the review criteria for
authorization decisions are applied consistently and require that the reviewer
consult with the requesting MP or specialty provider when appropriate.
	 
	 	4.	 	The policy must also require that utilization management decisions
be made by a health care professional who has appropriate clinical expertise and
licensure regarding the service under review.
	 
	 	5.	 	For purposes of this section, an electronic prior approval policy
and procedure mechanism that captures, stores and makes available for subsequent
retrieval, and data analysis meets the requirements for a “written” system.
	 
	 	6.	 	See Appendix D for the Contractor’s Pre-authorization Review Process. The
Contractor must review the Process on a regular basis, and submit revisions to the
CCI, to be accepted through issuance of an official contract change notice.

  GG. Claims Processing

	 	1.	 	The Contractor must maintain a pre-payment claims review system for
authorized services that assures compliance with nationally recognized billing
standards (State of Michigan prompt payment laws and the Center for Medicare and
Medicaid rules). The Contractor must adhere to these laws, all changes to the
standards used for billing will require prior approval from MDOC CCI.
	 
	 	2.	 	The Contractor must be capable of receiving electronic (837) and paper claims
according to Michigan Uniform Billing requirements. The Contractor must also be
capable of providing 837 level encounter data to MDOC for all services provided or
purchased by the Contractor within or outside of the provider network.
	 
	 	3.	 	Off-shore processing is not allowed for claims processing, The Contractor
must disclose the current location (city, state) of all claims processing, and
immediately disclose in writing to the MDOC CCI any changes in location throughout the
Contract period. If claims processing is switched to off-shore during the contract
period, it may be viewed as a breach of contract, and the contract may be canceled.

	 	a.	 	The Contractor will provide claims processing through sub-contractor Aetna, at
their New Albany, OH service center at the start of the contract. Some functions
may transition to Michigan location(s) over the contract period.

	 	4.	 	See Appendix E for the Contractor’s Claims Processing Process. The
Contractor must review the Process on a regular basis, and submit revisions to the
CCI, to be accepted through issuance of an official contract change notice.

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

     1.030 Roles and Responsibilities

1.031 Contractor Staff, Roles, and Responsibilities

     A. General Requirements

	 	1.	 	The Contractor will utilize a multi-tiered administrative and clinical
management approach to this Contract.
	 
	 	2.	 	Contractor must create and maintain a customized, project-specific
organizational chart with reporting structures, names, and positions, including
proposed provider network and sub-contractors. Advance written notice of any
changes are required, and are recognized after official contract change notice
updating Appendix A.
	 
	 	3.	 	Contractor must provide up to date job descriptions for relevant
positions to the CCI.
	 
	 	4.	 	The Contractor has responsibility for the actions of the MPs and
nephrologists however, the MDOC Chief Medical Officer (CMO) and/or Regional Medical
Officers (RMO) will have clinical guidance and the ability to remove or restrict
practices of the MPs at MDOC facilities. The Contractor must file current staffing
matrices, by facility, regional office, and statewide, to the CCI.
	 
	 	5.	 	The Contractor must be organized in a manner that facilitates efficient
and economic delivery of services, employ managers with sufficient experience and
expertise in health care management, and employ or contract with skilled clinicians
for medical management activities.
	 
	 	6.	 	The Contractor must not employ persons who are currently suspended or
terminated from its provider network or in the conduct of the Contractor’s affairs.
Must not employ, or hold any contracts or arrangements with, any individuals who
have been suspended, debarred, or otherwise excluded from federal programs such as
Medicaid. This prohibition includes all individuals responsible for the conduct of
the Contractor’s’ affairs, or their immediate families, or any legal entity in which
they or their families have a financial interest of five percent or more of the
equity of the entity.
	 
	 	7.	 	The Contractor must maintain and continuously execute a credentialing program that
requires its professional staff to maintain current licensure, certification, or
registration as required by state and federal law. Health care practitioners
(employee and subcontractor) who provide on-site services at the MDOC facilities will
be required to complete the credentialing process. Network providers will be required
to complete their applicable credentialing process
	 
	 	8.	 	Key Personnel
	 
	 	 	 	The Contractor will develop and maintain a staffing plan that is relevant for the
services being provided. Below is a listing of the positions that are required (either
through direct employment or sub-contracts), dedicated full-time to this Contract:

	 	a.	 	Medical Director
	 
	 	 	 	The Contractor’s Medical Director must be a Michigan-licensed physician (MD or DO)
and must be actively involved in all major clinical program components of the
Contractor’s plan including review of medical care provided, medical professional
aspects of provider contracts, and other areas of responsibility as may be
designated by the Contractor. The Medical Director must ensure medical decisions,
including after hours consultation are addressed within five business days. The
Medical Director must be responsible for managing the Contractor’s Quality
Assurance and Performance Improvement Program. The Medical Director must ensure
compliance with state and local reporting laws on communicable diseases. The
Medical Director must serve on the Medical Services Advisory Committee (MSAC). This
job function must be located in Michigan and is designated Key Personnel. This
position must be staffed at the start of the transition period.
	 
	 	 	 	The Contractor’s State Medical Director will be responsible for the management of
all on-site clinical care, peer review and related protocol development and
implementation. The Contractor’s State Medical Director will be on-site as needed
for provider training, utilization management, peer review and other issues
necessary to assure the delivery of appropriate medical care.
	 
	 	 	 	The Contractor’s designated State Medical Director is pending MDOC approval, and
the personnel will be accepted via official contract change notice.
	 
	 	b.	 	Provider Services Director
	 
	 	 	 	The Contractor must provide an individual responsible for coordinating
communications between the Contractor’s and its subcontractors and other providers.
Contractor staff must provide resolution services to specialty providers within
five business days. This job function must be located in Michigan and is designated
as Key Personnel and must be staffed at the start of the transition period.

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	 	CONTRACT NO. 071B9200147 

	 	 	 	The Contractor’s Provider Services Director responsibilities will include
management of the relationships with hospitals, physicians and providers who are a
part of Aetna’s Michigan network. The Contractor’s Provider Services Director is
also responsible to manage a team who will work together to meet and exceed the
network’s financial targets and service measures.
	 
	 	 	 	The Contractor’s designated Provider Services Director is pending MDOC approval,
and the personnel will be accepted via official contract change notice.
	 
	 	c.	 	Quality Improvement and Utilization Director
	 
	 	 	 	The Contractor must provide a Quality Improvement and Utilization Director who is a
Michigan licensed physician, or Michigan licensed registered nurse, or another
licensed clinician as approved by MDOC based on the plan’s ability to demonstrate
that the clinician possesses the training and education necessary to meet the
requirements for quality improvement/utilization review activities required in the
contract. The Contractor may provide a Quality Improvement Director and Utilization
Director as separate positions. The Utilization Director will be a member of the
Pain Management Committee. These job functions must be located in Michigan and are
designated as Key Personnel and must be staffed at the start of the transition
period.
	 
	 	 	 	The Contractor’s designated Quality Improvement and Utilization Director is pending
MDOC approval, and the personnel will be accepted via official contract change
notice.
	 
	 	d.	 	Project Manager
	 
	 	 	 	This job function must be located in Michigan and is designated as Key Personnel
and must be staffed at the start of the transition period.
	 
	 	 	 	The Contractor’s Project Manager will be responsible for the management and overall
direction of healthcare delivery services and management accountability provided to
the MDOC. He will also be responsible for the integration of corporate support
functions for site-level applicability and, as the MDOC’s liason, he will work
closely with the MDOC and the facility administrations to ensure the healthcare
program meets the goals and expectations of the MDOC.
	 
	 	 	 	The Contractor’s designated Project Manager is pending MDOC approval, and the
personnel will be accepted via official contract change notice.
	 
	 	e.	 	The Contractor must follow the procedures listed in Section 2.062
to remove or change Key Personnel. Penalties will be charged to the Contractor
if the procedures are not followed.
	 
	 	f.	 	All Key Personnel must be in place and hold all applicable
credentials in good standing three weeks in advance of Contract Start Date-Actual
Services Rendered, unless otherwise stated.

	 	9.	 	Sub-Contracts
	 
	 	 	 	The Contractor must establish written contracts with sub-contractors, specialty
network, nephrologists, dialysis support staff, and on-site MPs within 30 days of
Contract “Start Up Transition Phase” start date. The MDOC CCI must be given a list of
any sub-contracts not finalized 35 days from contract “Start Up Transition Phase”
start date. The State may rescind the contract if the written contracts are not in
place 35 days after the contract “Start Up Transition Phase” start date.
	 
	 	10.	 	Meetings
	 
	 	 	 	The Contractor’s Regional Vice President and State Medical Director or designees must
participate in the following monthly meetings. The meetings will be held in Lansing
and participation may be via video conferencing. This meeting list is not all
inclusive but a listing of the current meetings.

	 	a.	 	Joint Contractor and MDOC meeting
	 
	 	b.	 	Quality Assurance
	 
	 	c.	 	Pain Management Committee
	 
	 	d.	 	Nursing Advisory Committee

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

	 	e.	 	Medical Services Advisory Committee
	 
	 	f.	 	Infectious Disease Control Committee
	 
	 	g.	 	Morbidity/Mortality Review Committee

     1.040 Project Plan

1.041 Project Plan Management

	 	A.	 	START UP PLAN

	 	1.	 	The Contractor has provided a high level start up plan to the MDOC CCI for the Start Up
Transition Period. Within 10 calendar days of the Contract award, the Contractor must
submit a revised, expanded, detailed narrative of their Start Up Transition Plan to
the MDOC CCI. The Contractor must continue to revise the Start Up Plan and submit to
the MDOC CCI on no less than a monthly basis until all items have been successfully
implemented, per the MDOC CCI’s input on progression of, or acceptance of each item.
	 
	 	2.	 	The Contractor’s Start Up Plan must ensure they work in partnership with the MDOC, all
sub-contractors, all specialty service providers, and current MDOC health care
providers to deliver uninterrupted clinical and administrative services that ensure
the continuity of care to the prison population, including infrastructure of systems,
staffing and providers. The Contractor must be responsible for a customized plan of
action to ensure a seamless transition in all aspects of contracted services. To
accomplish this, the Contractor activities must include, but are not limited to, the
following:

	 	a.	 	Conduct regular, scheduled communication with key MDOC and subcontractor
personnel and specialty service providers
	 
	 	b.	 	Deployment of contract and transition management teams
	 
	 	c.	 	Recruitment initiatives designed to retain incumbent personnel (when
applicable)
	 
	 	d.	 	Implementation of comprehensive orientation and in-service training programs
	 
	 	e.	 	Completion of inventories on equipment, supplies, and medications
	 
	 	f.	 	Finalizing network development activities
	 
	 	g.	 	Implementation of the Contractor’s Implementation and Checklist (in addition
to the MDOC Start Up Plan activities) and Transition Tasks
	 
	 	h.	 	Post Implementation Review
	 
	 	i.	 	Jointly review and finalize civil servant job descriptions providing support
to Contractor.
	 
	 	j.	 	Jointly review all contract attachments and appendices, and adjust if needed.

	 	B.	 	Post-Implementation Review – The Contractor will conduct a post-implementation survey
process to provide an internal evaluation and assessment of the program implementation
approximately 90 days after the Services “Go Live” start date. The post-implementation
survey will include items relative to all important start up activities and compliance with
key contract provisions, and mutually agreed by the MDOC CCI and the Contractor. The
Contractor’s survey team will visit each geographic region and review accomplishments,
opportunities for improvement and compliance with the start up / transition checklist and
key contract provisions. Survey results will be submitted to the MDOC CCI.

1.042 Reports

	 	A.	 	Reports will be submitted in a non-pdf electronic format, such as
Excel, via email to the MDOC CCI referenced in Section 2.022. The Contractor may also
use Aetna’s Integrated Informatics software, including universal claims files, and
e.PSM on-line reporting interface, including Levels A through D, at the discretion of
the MDOC CCI. Access and use of Contractor / Atena’s software is provided at no
additional charge, and must provide equivalent of all reports required in Appendix B.
	 
	 	B.	 	See Appendix B for a list of required reports. The State reserves the right
to amend the list of required reports throughout the Contract period.
	 
	 	C.	 	Reports must be provided at no cost to the State.
	 
	 	D.	 	Failure to submit reports within the time frames identified in Appendix B may
be considered a breach of contract, and may result in the cancellation of the
Contract.
	 
	 	E.	 	Provide all data and/or reports requested by the State’s third party
reviewer, the and/or the State. The Contractor must ensure that contracts with
sub-contractors and/or provider network preserves the State’s right to access of all
related data, and must ensure that the State and/or its contractors has access to data
in order to complete their reviews.

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

	 	F.	 	The Contractor must obtain the State’s written approval prior to publishing
or making formal public presentations of statistical or analytical material based on
its prisoners.

     1.050 Acceptance

1.051 Criteria

The following criteria will be used by the State to determine Acceptance of the Services or
Deliverables provided under this SOW:

	 	A.	 	Acceptance Criteria for Start Up Project Plan Milestones.
	 
	 	 	 	The MDOC will consider the Start Up Project Plan milestones accomplished upon MDOC acceptance
and written approval of each individual milestone. The Contractor must submit to the MDOC
CCI their revised, detailed Start Up Project Plan, including timing of milestones, no later
than 10 days after the “Start Up / Transition” contract start date. The MDOC CCI will have
10 days to review and may make changes and recommendations to the Plan, including timing of
milestones. The Contractor will then have one week to finalize the Plan. The final Plan
must be approved by the MDOC CCI within 30 days prior to the “Services Rendered” contract
start date. The Start Up Project Plan Milestones include the following. The Contractor will
submit detailed, final versions of the following, for MDOC approval.

	 	1.	 	Medical Practitioners – the Contractor will have accomplished this
milestone when they provide the medical practitioner mix and level for each
correctional facility including appropriate coverage for camps, SAI, and Re-Entry
centers.
	 
	 	2.	 	Specialty Provider Network – the Contractor will have accomplished this
milestone when they have identified the specialty networks including,
specialists/consultants, hospitals and urgent care centers, and therapy services for
each correctional facility, camp, SAI, and Re-Entry center by written contract or
Letter of Intent.
	 
	 	3.	 	Disclosure of locations for DME, Claims processing, Lab, and Diagnostic
Testing- the Contractor will have accomplished this milestone when they have
identified the location of the regional sites for DME, Lab, and Diagnostic Testing
and the location for claims processing.
	 
	 	4.	 	Pickup and delivery schedules for Lab and Diagnostic Tests-the Contractor
will have accomplished this milestone when the pickup and delivery schedules are
finalized by location and the toll free number is provided.
	 
	 	5.	 	Monitoring of wait times to see MPs and specialists — the Contractor will
have accomplished this milestone when they provide their plan for monitoring wait
times.
	 
	 	6.	 	Performance Improvement Plan — the Contractor will have accomplished this
milestone when they provide their performance improvement plan.
	 
	 	7.	 	Quality Assurance — the Contractor will have accomplished this milestone
when they provide their written quality assurance plan.
	 
	 	8.	 	Pre-authorization Process — the Contractor will have accomplished this
milestone when they have provided the pre-authorization process for MP referrals to
the specialty networks.
	 
	 	9.	 	Encounter Data Submission — the Contractor will have accomplished this
milestone when they have successfully transmitted test 837 data to the MDOC passing
the MDOC acceptance.
	 
	 	10.	 	Risk Share Reconciliation Methodology – The Contractor and MDOC will
completely itemize, and mutually agree upon all costs and methodologies used in
calculating the risk sharing, below, at, and above the target, and to the cap. The
documented Risk Share Methodology must include all costs, criteria, measurement
tools and methodology used to calculate annual contract costs, and determine risk
share target and cap costs/ prior to the Services Go Live Contract start date.
Completed documentation will be submitted to MDOC’s third party reviewer to utilize
in their work. See Appendix F for the Risk Share Reconciliation Methodology. The
Contractor must review the document on a regular basis, and submit revisions to the
CCI, to be accepted through issuance of an official contract change notice.

	 	B.	 	Acceptance Criteria for Contract Services

	 	1.	 	On-going contract services are subject to the acceptance criteria in
various sections of the contract document:

	 	a.	 	Service Level Agreements in Attachment B
	 
	 	b.	 	Key Personnel in Section 1.031 A and 2.062
	 
	 	c.	 	Timely and Correct Reports in Section 1.032 and Appendix B

1.052 Final Acceptance – DELETED – NOT APPLICABLE

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

     1.060 Proposal Pricing

1.061 Proposal Pricing

	 	A.	 	Compensation

	 	1.	 	Compensation is based on Per Prisoner Per Month (PPPM) and risk sharing
as stated in Attachment A. PPPM base monthly payment will be pre-paid on the
first business day of each month, for that month, using the previous month’s census
report. The prisoner arrival and departure adjustments will occur at the end of
the month. At the end of the month, MDOC will true up the census, and any over or
under payment in that month’s prepaid amount will be added or subtracted to the
following month’s prepaid PPPM base monthly payment. For the last month of the
contract, any credit will be rendered to MDOC by check, within 30 days.
	 
	 	2.	 	Example of PPPM calculation:

Risk Share PPPM rate $175

Population estimate used in the billing in Number One above — 50,000

Beginning of the month pre-payment calculation and monthly base pre-payment

$175 * 50,000 = $8,750,000

In the current month there was a net decrease in population of 1,000. The
true-up and adjusted payment at the end of that month would be:

Adjusted payment calculation

$176.25 * 49,000 = $8,636,250

Beginning of the month pre-payment $8,750,000, less

Adjusted payment for that month     $8,636,250

True-up Credit of $113,750 to be applied to the following month’s pre-payment.

	 	3.	 	The PPPM and possible risk sharing payments in Attachment A will be the
State’s only payments to the Contractor. The submission of a HIPAA compliant 837
encounter transactions (i.e. CPT, ICD-9-CM and HCPC) will be required.
	 
	 	4.	 	The Contractor does not offer prompt payment discounts.

	 	B.	 	Service Level Agreements

	 	1.	 	Contract Service Level Agreements (SLA) and their related possible
credits must be evaluated and assessed as stated in Appendix B. The State reserves
the right to request that any SLA credits be rendered by check, or applied to future
invoice(s) as a credit.

	 	C.	 	This is a Risk Sharing Contract. Risk Share Targets, Risk Share Maximum Caps,
and the risk sharing rates are in Attachment A. Risk Share Reconciliation Methodology
will be based on the process in Appendix F.
	 
	 	D.	 	General Compensation Factors

	 	1.	 	Any other costs of doing business not addressed by this Contract are
considered an incidental expense applicable to the Contractor and must be absorbed
by the Contractor.
	 
	 	2.	 	The Contractor must meet the HIPAA and MDOC guidelines and requirements
for electronic billing capacity and must require its providers to meet the same
standard as a condition of payment.
	 
	 	3.	 	The Contractor MPs, specialists, etc. may not bill prisoners for the
difference between the provider’s charge and the Contractor payment for covered
services. The MPs, specialists, etc. will not seek nor accept additional or
supplemental payment from the prisoner, his/her family, or representative, in
addition to the amount paid by the Contractor.

1.062 Price Term

Firm Fixed Price – Prices quoted in Attachment A are the maximum for the base contract period
stated in Section 2.001, subject to risk sharing and population adjustment tables, also in
Attachment A.

1.063 Tax Excluded from Price

(a) Sales Tax: For purchases made directly by the State, the State is exempt from State and Local
Sales Tax. Prices must not include the taxes. Exemption Certificates for State Sales Tax will be
furnished upon request.

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

(b) Federal Excise Tax: The State may be exempt from Federal Excise Tax, or the taxes may be
reimbursable, if articles purchased under any resulting Contract are used for the State’s exclusive
use. Certificates showing exclusive use for the purposes of substantiating a tax-free, or
tax-reimbursable sale will be sent upon request. If a sale is tax exempt or tax reimbursable under
the Internal Revenue Code, prices must not include the Federal Excise Tax.

1.064 Holdback – DELETED – NOT APPLICABLE

1.070 Additional Requirements

1.071  Additional Terms and Conditions specific to this Contract

	 	A.	 	The State reserves the right to also purchase services specified in this Contract
from third parties with no prior notice. The State does not have specific plans to purchase
from third parties, but reserves the right, per risk mitigation strategies, to ensure
quality and continuity of medically necessary care.
	 
	 	B.	 	The Contractor must comply with all federal, state and local laws, regulations,
Michigan Professional Services Corporation Act, and relevant Michigan Attorney General Opinions,
NCQA and NCCHC standards, as well as DCH and MDOC Policy Directives, Director’s Office
Memorandums, and Operating Procedures. Current versions all DCH and MDOC documents
above can be requested from the CCI.
	 
	 	C.	 	The Contractor must have a program that subjects all employees, independent contractors,
vendor partners, and sub-contractors filling full or part-time positions to
pre-employment and for cause alcohol and drug testing. Drug testing must screen for all
controlled substances as identified in Article 7 of the Michigan Public Health Code,
1978 Public Act 368, as amended, being MCL 333.7101 et seq.
	 
	 	D.	 	The Contractor must execute any necessary Business Associate Agreements
and flow down this requirement to all related independent contractors, sub-contractors,
and vendor partners.
	 
	 	E.	 	Any additional Contractor computers networked to the State systems, to comply
with security policies, must be purchased or leased from the State, and assume all hosting
and licensing costs. Costs will be billed back to the Contractor.

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

Article 2, Terms and Conditions

     2.000 Contract Structure and Term

2.001 Contract Term

This Contract is for a period of three years, and 7 weeks, beginning February 10, 2009 through
March 31, 2012. All outstanding Purchase Orders must also expire upon the termination
(cancellation for any of the reasons listed in Section 2.150) of the Contract, unless otherwise
extended under the Contract. Absent an early termination for any reason, Purchase Orders issued
but not expired, by the end of the Contract’s stated term, will remain in effect for the balance of
the fiscal year for which they were issued.

2.002 Options to Renew

This Contract may be renewed in writing by mutual agreement of the parties not less than 30 days
before its expiration. The Contract may be renewed for up to four (4) additional one (1) year
periods.

2.003 Legal Effect

Contractor shall show acceptance of this Contract by signing two copies of the Contract and
returning them to the Contract Administrator. The Contractor shall not proceed with the
performance of the work to be done under the Contract, including the purchase of necessary
materials, until both parties have signed the Contract to show acceptance of its terms, and the
Contractor receives a contract release/purchase order that authorizes and defines specific
performance requirements.

Except as otherwise agreed in writing by the parties, the State assumes no liability for costs
incurred by Contractor or payment under this Contract, until Contractor is notified in writing that
this Contract (or Change Order) has been approved by the State Administrative Board (if required),
approved and signed by all the parties, and a Purchase Order against the Contract has been issued.

2.004 Attachments & Exhibits

All Attachments and Exhibits affixed to any and all Statement(s) of Work, or appended to or
referencing this Contract, are incorporated in their entirety and form part of this Contract.

2.005 Ordering

The State will issue a written Purchase Order, Blanket Purchase Order, Direct Voucher or
Procurement Card Order, which must be approved by the Contract Administrator or the Contract
Administrator’s designee, to order any Services/Deliverables under this Contract. All orders are
subject to the terms and conditions of this Contract. No additional terms and conditions contained
on either a Purchase Order or Blanket Purchase Order apply unless they are also specifically
contained in that Purchase Order’s or Blanket Purchase Order’s accompanying Statement of Work.
Exact quantities to be purchased are unknown, however, the Contractor will be required to furnish
all such materials and services as may be ordered during the Contract period. Quantities
specified, if any, are estimates based on prior purchases, and the State is not obligated to
purchase in these or any other quantities.

2.006 Order of Precedence

(a) The Contract, including any Statements of Work and Exhibits, to the extent not contrary to the
Contract, each of which is incorporated for all purposes, constitutes the entire agreement between
the parties with respect to the subject matter and supersedes all prior agreements, whether written
or oral, with respect to the subject matter and as additional terms and conditions on the purchase
order must apply as limited by Section 2.005.

(b) In the event of any inconsistency between the terms of the Contract and a Statement of Work,
the terms of the Statement of Work will take precedence (as to that Statement of Work only);
provided, however, that a Statement of Work may not modify or amend the terms of the Contract,
which may be modified or amended only by a formal Contract amendment.

2.007 Headings

Captions and headings used in the Contract are for information and organization purposes. Captions
and headings, including inaccurate references, do not, in any way, define or limit the requirements
or terms and conditions of the Contract.

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

2.008 Form, Function & Utility

If the Contract is for use of more than one State agency and if the Deliverable/Service does not
the meet the form, function, and utility required by that State agency, that agency may, subject to
State purchasing policies, procure the Deliverable/Service from another source.

2.009 Reformation and Severability

Each provision of the Contract is severable from all other provisions of the Contract and, if one
or more of the provisions of the Contract is declared invalid, the remaining provisions of the
Contract remain in full force and effect.

2.010 Consents and Approvals

Except as expressly provided otherwise in the Contract, if either party requires the consent or
approval of the other party for the taking of any action under the Contract, the consent or
approval must be in writing and must not be unreasonably withheld or delayed.

2.011 No Waiver of Default

If a party fails to insist upon strict adherence to any term of the Contract then the party has not
waived the right to later insist upon strict adherence to that term, or any other term, of the
Contract.

2.012 Survival

Any provisions of the Contract that impose continuing obligations on the parties, including without
limitation the parties’ respective warranty, indemnity and confidentiality obligations, survive the
expiration or termination of the Contract for any reason. Specific references to survival in the
Contract are solely for identification purposes and not meant to limit or prevent the survival of
any other section.

     2.020 Contract Administration

2.021 Issuing Office

This Contract is issued by the Department of Management and Budget, Purchasing Operations and the
Department of Corrections (collectively, including all other relevant State of Michigan departments
and agencies, the “State”). Purchasing Operations is the sole point of contact in the State with
regard to all procurement and contractual matters relating to the Contract. Purchasing
Operations is the only State office authorized to change, modify, amend, alter or clarify the
prices, specifications, terms and conditions of this Contract. The Contractor Administrator
within Purchasing Operations for this Contract is:

Rebecca Nevai, Buyer Specialist

Purchasing Operations

Department of Management and Budget

Mason Bldg, 2nd Floor

PO Box 30026

Lansing, MI 48909

Email: nevair@michigan.gov

Phone: 517-373-8530

2.022 Contract Compliance Inspector (CCI)

After DMB-Purchasing Operations receives the properly executed Contract, it is anticipated that the
Director of Purchasing Operations, in consultation with the Department of Corrections will direct
the person named below, or any other person so designated, to monitor and coordinate the activities
for the Contract on a day-to-day basis during its term. However, monitoring of this Contract
implies no authority to change, modify, clarify, amend, or otherwise alter the prices, terms,
conditions and specifications of the Contract as that authority is retained by DMB Purchasing
Operations. The Contract Compliance Inspector for this Contract is:

Lia Gulick, Financial Services Administrator

Bureau of Fiscal Management

Michigan Department of Corrections

Grandview Plaza

P.O. Box 30003

Lansing, MI 48909

517-241-9902 Email: gulickll@michigan.gov

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

2.023 Project Manager

The following individual will oversee the project:

Duncan P. Howard, Administrator of Operations

Bureau of Health Care Services

Michigan Department of Corrections

Grandview Plaza

P.O. Box 30003

Lansing, MI 48909

517-373-3437

Howardd3@michigan.gov

2.024 Change Requests

During the course of ordinary business, it may become necessary for the State to discontinue
certain business practices or create Additional Services/Deliverables.  The State reserves the
right, by giving Contractor written notice of a change request within a reasonable time, to request
any changes to the requirements and specifications of the Contract and the work to be performed by
the Contractor under the Contract.  In such an event, the Contractor must provide a detailed
outline of all work to be done, including tasks necessary to accomplish the services/deliverables,
timeframes, listing of key personnel assigned, estimated hours for each individual per task, and a
complete and detailed proposal to implement the change.

The State may accept a Contractor’s proposal for change, reject it, or reach another agreement with
Contractor.  Should the parties agree on carrying out a change, a written Contract Change Notice
must be prepared and issued under this Contract, describing the change and its effects on the
Services and any affected components of this Contract (a “Contract Change Notice”). No proposed
Change may be performed until the proposed Change has been specified in a duly executed Contract
Change Notice issued by the Department of Management and Budget, Purchasing Operations.  If the
Contractor fails to notify the State before beginning to work on the requested activities, then the
Contractor waives any right to assert any claim for additional compensation or time for performing
the requested activities. 

If the State requests or directs the Contractor to perform any activities that Contractor believes
constitute a change to the Statement of Work, the Contractor must notify the State that it believes
the requested activities are a change before beginning to work on the requested activities.  If the
Contractor fails to notify the State before beginning to work on the requested activities, then the
Contractor waives any right to assert any claim for additional compensation or time for performing
the requested activities. If the Contractor commences performing work outside the scope of this
Contract and then ceases performing that work, the Contractor must, at the request of the State,
retract any out-of-scope work that would adversely affect the Contract.

2.025 Notices

Any notice given to a party under the Contract must be deemed effective, if addressed to the party
as addressed below, upon: (i) delivery, if hand delivered; (ii) receipt of a confirmed
transmission by facsimile if a copy of the notice is sent by another means specified in this
Section; (iii) the third Business Day after being sent by U.S. mail, postage pre-paid, return
receipt requested; or (iv) the next Business Day after being sent by a nationally recognized
overnight express courier with a reliable tracking system.

State:

State of Michigan

Purchasing Operations

Attention: Rebecca Nevai

PO Box 30026

530 West Allegan

Lansing, Michigan 48909

	 	 	 	 	 
	 

	 	Contractor:	 	 
	 

	 	Prison Health Services, Inc.
	 	cc: Prison Health Services, Inc.
	 

	 	105 Westpark Drive, Suite 200
	 	105 Westpark Drive, Suite 200
	 

	 	Brentwood, TN 37027
	 	Brentwood, TN 37027
	 

	 	Phone 800-729-0069
	 	Phone: 800-729-0069
	 

	 	Attn: Lawrence Pomeroy, President, State Corrections
	 	Attn: Scott King, General Counsel

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

Either party may change its address where notices are to be sent by giving notice according to this
Section.

2.026 Binding Commitments

Representatives of Contractor must have the authority to make binding commitments on Contractor’s
behalf within the bounds set forth in this Contract. Contractor may change the representatives
from time to time upon written notice.

2.027 Relationship of the Parties

The relationship between the State and Contractor is that of client and independent contractor. No
agent, employee, or servant of Contractor or any of its Subcontractors must be or must be deemed to
be an employee, agent or servant of the State for any reason. Contractor will be solely and
entirely responsible for its acts and the acts of its agents, employees, servants and
Subcontractors during the performance of the Contract.

2.028 Covenant of Good Faith

Each party must act reasonably and in good faith. Unless stated otherwise in the Contract, the
parties will not unreasonably delay, condition or withhold the giving of any consent, decision or
approval that is either requested or reasonably required of them in order for the other party to
perform its responsibilities under the Contract.

2.029 Assignments

(a) Neither party may assign the Contract, or assign or delegate any of its duties or obligations
under the Contract, to any other party (whether by operation of law or otherwise), without the
prior written consent of the other party; provided, however, that the State may assign the Contract
to any other State agency, department, division or department without the prior consent of
Contractor and Contractor may assign the Contract to an affiliate so long as the affiliate is
adequately capitalized and can provide adequate assurances that the affiliate can perform the
Contract. The State may withhold consent from proposed assignments, subcontracts, or novations
when the transfer of responsibility would operate to decrease the State’s likelihood of receiving
performance on the Contract or the State’s ability to recover damages.

(b) Contractor may not, without the prior written approval of the State, assign its right to
receive payments due under the Contract. If the State permits an assignment, the Contractor is not
relieved of its responsibility to perform any of its contractual duties, and the requirement under
the Contract that all payments must be made to one entity continues.

(c) If the Contractor intends to assign the contract or any of the Contractor’s rights or duties
under the Contract, the Contractor must notify the State in writing at least 90 days before the
assignment. The Contractor also must provide the State with adequate information about the
assignee within a reasonable amount of time before the assignment for the State to determine
whether to approve the assignment.

     2.030 General Provisions

2.031 Media Releases

News releases (including promotional literature and commercial advertisements) pertaining to the
RFP and Contract or project to which it relates shall not be made without prior written State
approval, and then only in accordance with the explicit written instructions from the State. No
results of the activities associated with the RFP and Contract are to be released without prior
written approval of the State and then only to persons designated.

The only exception shall be where federal law requires a press release as the only
method of compliance, and, in addition, the State has not provided a response to the
Contractor’s request after two business days. The Contractor must submit the proposed news release
in writing at least two business days prior to the date of disclosure, for State comment, revision,
and approval.

2.032 Contract Distribution

Purchasing Operations retains the sole right of Contract distribution to all State agencies and
local units of government unless other arrangements are authorized by Purchasing Operations.

2.033 Permits

Contractor must obtain and pay any associated costs for all required governmental permits, licenses
and approvals for the delivery, installation and performance of the Services. The State must pay
for all costs and expenses incurred in obtaining and maintaining any necessary easements or right
of way.

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

2.034 Website Incorporation

The State is not bound by any content on the Contractor’s website, even if the Contractor’s
documentation specifically referenced that content and attempts to incorporate it into any other
communication, unless the State has actual knowledge of the content and has expressly agreed to be
bound by it in a writing that has been manually signed by an authorized representative of the
State.

2.035 Future Bidding Preclusion

Contractor acknowledges that, to the extent this Contract involves the creation, research,
investigation or generation of a future RFP, it may be precluded from bidding on the subsequent
RFP. The State reserves the right to disqualify any bidder if the State determines that the bidder
has used its position (whether as an incumbent Contractor, or as a Contractor hired to assist with
the RFP development, or as a Vendor offering free assistance) to gain a competitive advantage on
the RFP.

2.036 Freedom of Information

All information in any proposal submitted to the State by Contractor and this Contract is subject
to the provisions of the Michigan Freedom of Information Act, 1976 Public Act No. 442, as amended,
MCL 15.231, et seq (the “FOIA”).

2.037 Disaster Recovery

Contractor and the State recognize that the State provides essential services in times of natural
or man-made disasters. Therefore, except as so mandated by Federal disaster response requirements,
Contractor personnel dedicated to providing Services/Deliverables under this Contract will provide
the State with priority service for repair and work around in the event of a natural or man-made
disaster.

     2.040 Financial Provisions

2.041 Fixed Prices for Services/Deliverables

Each Statement of Work or Purchase Order issued under this Contract shall specify (or indicate by
reference to the appropriate Contract Exhibit) the firm, fixed prices for all
Services/Deliverables, and the associated payment milestones and payment amounts. The State may
make progress payments to the Contractor when requested as work progresses, but not more frequently
than monthly, in amounts approved by the Contract Administrator, after negotiation. Contractor must
show verification of measurable progress at the time of requesting progress payments.

2.042 Adjustments for Reductions in Scope of Services/Deliverables

If the scope of the Services/Deliverables under any Statement of Work issued under this Contract is
subsequently reduced by the State, the parties shall negotiate an equitable reduction in
Contractor’s charges under such Statement of Work commensurate with the reduction in scope.

2.043 Services/Deliverables Covered

For all Services/Deliverables to be provided by Contractor (and its Subcontractors, if any) under
this Contract, the State shall not be obligated to pay any amounts in addition to the charges
specified in this Contract.

2.044 Invoicing and Payment – In General

(a) Each Contractor invoice will show details as to charges by Service/Deliverable component and
location at a level of detail reasonably necessary to satisfy the State’s accounting and
charge-back requirements. Invoices for Services performed on a time and materials basis will show,
for each individual, the number of hours of Services performed during the billing period, the
billable skill/labor category for such person and the applicable hourly billing rate. Prompt
payment by the State is contingent on the Contractor’s invoices showing the amount owed by the
State minus any holdback amount to be retained by the State in accordance with Section 1.064.

(b) Correct invoices will be due and payable by the State, in accordance with the State’s standard
payment procedure as specified in 1984 Public Act No. 279, MCL 17.51 et seq., provided the State
determines that the invoice was properly rendered.

(c) Contract Payment Schedule

	 	1.	 	Deleted – Not Applicable

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	TERMS AND CONDITIONS
	 	CONTRACT NO. 071B9200147 

	 	2.	 	Approval and payment of requests.

	 	a)	 	The Contractor shall not be entitled to payment of a request for performance-based
payment prior to successful accomplishment of the event or performance criterion for
which payment is requested. The Contract Administrator shall determine whether the
event or performance criterion for which payment is requested has been successfully
accomplished in accordance with the terms of the Contract. The Contract
Administrator may, at any time, require the Contractor to substantiate the successful
performance of any event or performance criterion, which has been or is represented
as being payable.
	 
	 	b)	 	A payment under this performance-based payment clause is a contract financing
payment under the Quick Payment Terms in Section 1.061 of this Contract.
	 
	 	c)	 	The approval by the Contract Administrator of a request for performance-based
payment does not constitute an acceptance by the State and does not excuse the
Contractor from performance of obligations under this Contract.

2.045 Pro-ration

To the extent there are any Services that are to be paid for on a monthly basis, the cost of such
Services shall be pro-rated for any partial month.

2.046 Antitrust Assignment

The Contractor assigns to the State any claim for overcharges resulting from antitrust violations
to the extent that those violations concern materials or services supplied by third parties to the
Contractor, toward fulfillment of this Contract.

2.047 Final Payment

The making of final payment by the State to Contractor does not constitute a waiver by either party
of any rights or other claims as to the other party’s continuing obligations under the Contract,
nor will it constitute a waiver of any claims by one party against the other arising from unsettled
claims or failure by a party to comply with this Contract, including claims for Services and
Deliverables not reasonably known until after acceptance to be defective or substandard.
Contractor’s acceptance of final payment by the State under this Contract shall constitute a waiver
of all claims by Contractor against the State for payment under this Contract, other than those
claims previously filed in writing on a timely basis and still unsettled.

2.048 Electronic Payment Requirement

Electronic transfer of funds is required for payments on State Contracts. Contractors are required
to register with the State electronically at http://www.cpexpress.state.mi.us. As stated in Public
Act 431 of 1984, all contracts that the State enters into for the purchase of goods and services
shall provide that payment will be made by electronic fund transfer (EFT).

     2.050 Taxes

2.051 Employment Taxes

Contractors are expected to collect and pay all applicable federal, state, and local employment
taxes, including the taxes.

2.052 Sales and Use Taxes

Contractors are required to be registered and to remit sales and use taxes on taxable sales of
tangible personal property or services delivered into the State. Contractors that lack sufficient
presence in Michigan to be required to register and pay tax must do so as a volunteer. This
requirement extends to: (1) all members of any controlled group as defined in § 1563(a) of the
Internal Revenue Code and applicable regulations of which the company is a member, and (2) all
organizations under common control as defined in § 414(c) of the Internal Revenue Code and
applicable regulations of which the company is a member that make sales at retail for delivery into
the State are registered with the State for the collection and remittance of sales and use taxes.
In applying treasury regulations defining “two or more trades or businesses under common control”
the term “organization” means sole proprietorship, a partnership (as defined in § 701(a)(2) of the
Internal Revenue Code), a trust, an estate, a corporation, or a limited liability company.

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     2.060 Contract Management

2.061 Contractor Personnel Qualifications

All persons assigned by Contractor to the performance of Services under this Contract must be
employees of Contractor or its majority-owned (directly or indirectly, at any tier) subsidiaries
(or a State-approved Subcontractor) and must be fully qualified to perform the work assigned to
them. Contractor must include a similar provision in any subcontract entered into with a
Subcontractor. For the purposes of this Contract, independent contractors engaged by Contractor
solely in a staff augmentation role must be treated by the State as if they were employees of
Contractor for this Contract only; however, the State understands that the relationship between
Contractor and Subcontractor is an independent contractor relationship.

2.062 Contractor Key Personnel

(a) The Contractor must provide the Contract Compliance Inspector with the names of the Key
Personnel.

(b) Key Personnel must be dedicated as defined in the Statement of Work to the Project for its
duration in the applicable Statement of Work with respect to other individuals designated as Key
Personnel for that Statement of Work.

(c) The State will have the right to recommend and approve in writing the initial assignment, as
well as any proposed reassignment or replacement, of any Key Personnel. Before assigning an
individual to any Key Personnel position, Contractor will notify the State of the proposed
assignment, will introduce the individual to the appropriate State representatives, and will
provide the State with a resume and any other information about the individual reasonably requested
by the State. The State reserves the right to interview the individual before granting written
approval. In the event the State finds a proposed individual unacceptable, the State will provide
a written explanation including reasonable detail outlining the reasons for the rejection.

(d) Contractor must not remove any Key Personnel from their assigned roles on the Contract without
the prior written consent of the State. The Contractor’s removal of Key Personnel without the
prior written consent of the State is an unauthorized removal (“Unauthorized Removal”).
Unauthorized Removals does not include replacing Key Personnel for reasons beyond the reasonable
control of Contractor, including illness, disability, leave of absence, personal emergency
circumstances, resignation or for cause termination of the Key Personnel’s employment.
Unauthorized Removals does not include replacing Key Personnel because of promotions or other job
movements allowed by Contractor personnel policies or Collective Bargaining Agreement(s) as long as
the State receives prior written notice before shadowing occurs and Contractor provides 30 days of
shadowing unless parties agree to a different time period. The Contractor with the State must
review any Key Personnel replacements, and appropriate transition planning will be established.
Any Unauthorized Removal may be considered by the State to be a material breach of the Contract, in
respect of which the State may elect to exercise its termination and cancellation rights.

(e) The Contractor must notify the Contract Compliance Inspector and the Contract Administrator at
least 10 business days before redeploying non-Key Personnel, who are dedicated to primarily to the
Project, to other projects. If the State does not object to the redeployment by its scheduled
date, the Contractor may then redeploy the non-Key Personnel.

2.063 Re-assignment of Personnel at the State’s Request

The State reserves the right to require the removal from the Project of Contractor personnel found,
in the judgment of the State, to be unacceptable. The State’s request must be written with
reasonable detail outlining the reasons for the removal request. Additionally, the State’s request
must be based on legitimate, good-faith reasons. Replacement personnel for the removed person must
be fully qualified for the position. If the State exercises this right, and the Contractor cannot
immediately replace the removed personnel, the State agrees to an equitable adjustment in schedule
or other terms that may be affected by the State’s required removal. If any incident with removed
personnel results in delay not reasonably anticipatable under the circumstances and which is
attributable to the State, the applicable SLAs for the affected Service will not be counted for a
time as agreed to by the parties.

2.064 Contractor Personnel Location

All staff assigned by Contractor to work on the Contract will perform their duties either primarily
at Contractor’s offices and facilities or at State facilities. Without limiting the generality of
the foregoing, Key Personnel will, at a minimum, spend at least the amount of time on-site at State
facilities as indicated in the applicable Statement of Work. Subject to availability, selected
Contractor personnel may be assigned office space to be shared with State personnel.

2.065 Contractor Identification

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Contractor employees must be clearly identifiable while on State property by wearing a State-issued
badge, as required. Contractor employees are required to clearly identify themselves and the
company they work for whenever making contact with State personnel by telephone or other means.

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2.066 Cooperation with Third Parties

Contractor agrees to cause its personnel and the personnel of any Subcontractors to cooperate with
the State and its agents and other contractors including the State’s Quality Assurance personnel.
As reasonably requested by the State in writing, the Contractor will provide to the State’s agents
and other contractors reasonable access to Contractor’s Project personnel, systems and facilities
to the extent the access relates to activities specifically associated with this Contract and will
not interfere or jeopardize the safety or operation of the systems or facilities. The State
acknowledges that Contractor’s time schedule for the Contract is very specific and agrees not to
unnecessarily or unreasonably interfere with, delay or otherwise impeded Contractor’s performance
under this Contract with the requests for access.

2.067 Contractor Return of State Equipment/Resources

The Contractor must return to the State any State-furnished equipment, facilities and other
resources when no longer required for the Contract in the same condition as when provided by the
State, reasonable wear and tear excepted.

2.068 Contract Management Responsibilities

The Contractor will be required to assume responsibility for all contractual activities, whether or
not that Contractor performs them. Further, the State will consider the Contractor to be the sole
point of contact with regard to contractual matters, including payment of any and all charges
resulting from the anticipated Contract. If any part of the work is to be subcontracted, the
Contract must include a list of Subcontractors, including firm name and address, contact person and
a complete description of work to be subcontracted. The State reserves the right to approve
Subcontractors and to require the Contractor to replace Subcontractors found to be unacceptable.
The Contractor is totally responsible for adherence by the Subcontractor to all provisions of the
Contract. Any change in Subcontractors must be approved by the State, in writing, prior to such
change.

     2.070 Subcontracting by Contractor 

2.071 Contractor Full Responsibility

Contractor shall have full responsibility for the successful performance and completion of all of
the Services and Deliverables. The State will consider Contractor to be the sole point of contact
with regard to all contractual matters under this Contract, including payment of any and all
charges for Services and Deliverables.

2.072 State Consent to Delegation

Contractor shall not delegate any duties under this Contract to a Subcontractor unless the
Department of Management and Budget, Purchasing Operations has given written consent to such
delegation. The State shall have the right of prior written approval of all Subcontractors and to
require Contractor to replace any Subcontractors found, in the reasonable judgment of the State, to
be unacceptable. The State’s request shall be written with reasonable detail outlining the reasons
for the removal request. Additionally, the State’s request shall be based on legitimate,
good-faith reasons. Replacement Subcontractor(s) for the removed Subcontractor shall be fully
qualified for the position. If the State exercises this right, and the Contractor cannot
immediately replace the removed Subcontractor, the State will agree to an equitable adjustment in
schedule or other terms that may be affected by the State’s required removal. If any such incident
with a removed Subcontractor results in delay not reasonable anticipatable under the circumstances
and which is attributable to the State, the applicable SLA for the affected Work will not be
counted for a time agreed upon by the parties.

2.073 Subcontractor Bound to Contract

In any subcontracts entered into by Contractor for the performance of the Services, Contractor
shall require the Subcontractor, to the extent of the Services to be performed by the
Subcontractor, to be bound to Contractor by the terms of this Contract and to assume toward
Contractor all of the obligations and responsibilities that Contractor, by this Contract, assumes
toward the State. The State reserves the right to receive copies of and review all subcontracts,
although Contractor may delete or mask any proprietary information, including pricing, contained in
such contracts before providing them to the State. The management of any Subcontractor will be the
responsibility of Contractor, and Contractor shall remain responsible for the performance of its
Subcontractors to the same extent as if Contractor had not subcontracted such performance.
Contractor shall make all payments to Subcontractors or suppliers of Contractor. Except as
otherwise agreed in writing by the State and Contractor, the State will not be obligated to direct
payments for the Services other than to Contractor. The State’s written approval of any
Subcontractor engaged by Contractor to perform any obligation under this Contract shall not relieve
Contractor of any obligations or performance required under this Contract.

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2.074 Flow Down

Except where specifically approved in writing by the State on a case-by-case basis, Contractor
shall flow down the obligations in Sections 1.071, 2.031, 2.060, 2.100, 2.110, 2.120, 2.130, 2.200
in all of its agreements with any Subcontractors.

2.075 Competitive Selection

The Contractor shall select subcontractors (including suppliers) on a competitive basis to the
maximum practical extent consistent with the objectives and requirements of the Contract.

     2.080 State Responsibilities 

2.081 Equipment

The State will provide only the equipment and resources identified in the Statements of Work and
other Contract Exhibits.

2.082 Facilities

The State must designate space as long as it is available and as provided in the Statement of Work,
to house the Contractor’s personnel whom the parties agree will perform the Services/Deliverables
at State facilities (collectively, the “State Facilities”). The Contractor must have reasonable
access to, and, unless agreed otherwise by the parties in writing, must observe and comply with all
rules and regulations relating to each of the State Facilities (including hours of operation) used
by the Contractor in the course of providing the Services. Contractor agrees that it will not,
without the prior written consent of the State, use any State Facilities or access any State
information systems provided for the Contractor’s use, or to which the Contractor otherwise gains
access in the course of performing the Services, for any purpose other than providing the Services
to the State.

     2.090 Security

2.091 Background Checks

On a case-by-case basis, the State may investigate the Contractor’s personnel before they may have
access to State facilities and systems. The scope of the background check is at the discretion of
the State and the results will be used to determine Contractor personnel eligibility for working
within State facilities and systems. The investigations will include Michigan State Police
Background checks (ICHAT) and may include the National Crime Information Center (NCIC) Finger
Prints. Proposed Contractor personnel may be required to complete and submit an RI-8 Fingerprint
Card for the NCIC Finger Print Check. Any request for background checks will be initiated by the
State and will be reasonably related to the type of work requested.

All Contractor personnel will also be expected to comply with the State’s security and acceptable
use policies for State IT equipment and resources. See http://www.michigan.gov/dit. Furthermore,
Contractor personnel will be expected to agree to the State’s security and acceptable use policies
before the Contractor personnel will be accepted as a resource to perform work for the State. It
is expected the Contractor will present these documents to the prospective employee before the
Contractor presents the individual to the State as a proposed resource. Contractor staff will be
expected to comply with all Physical Security procedures in place within the facilities where they
are working.

2.092 Security Breach Notification

If the Contractor breaches this Section, the Contractor must (i) promptly cure any deficiencies and
(ii) comply with any applicable federal and state laws and regulations pertaining to unauthorized
disclosures. Contractor and the State will cooperate to mitigate, to the extent practicable, the
effects of any breach, intrusion, or unauthorized use or disclosure. Contractor must report to the
State in writing any use or disclosure of Confidential Information, whether suspected or actual,
other than as provided for by the Contract within 10 days of becoming aware of the use or
disclosure or the shorter time period as is reasonable under the circumstances.

2.093 PCI Data Security Requirements – DELETED – NOT APPLICABLE

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     2.100 Confidentiality

2.101 Confidentiality

Contractor and the State each acknowledge that the other possesses and will continue to possess
confidential information that has been developed or received by it. As used in this Section,
“Confidential Information” of Contractor must mean all non-public proprietary information of
Contractor (other than Confidential Information of the State as defined below) which is marked
confidential, restricted, proprietary or with a similar designation. “Confidential Information” of
the State must mean any information which is retained in confidence by the State (or otherwise
required to be held in confidence by the State under applicable federal, state and local laws and
regulations) or which, in the case of tangible materials provided to Contractor by the State under
its performance under this Contract, is marked as confidential, proprietary or with a similar
designation by the State. “Confidential Information” excludes any information (including this
Contract) that is publicly available under the Michigan FOIA.

2.102 Protection and Destruction of Confidential Information

The State and Contractor will each use at least the same degree of care to prevent disclosing to
third parties the Confidential Information of the other as it employs to avoid unauthorized
disclosure, publication or dissemination of its own confidential information of like character, but
in no event less than reasonable care. Neither Contractor nor the State will (i) make any use of
the Confidential Information of the other except as contemplated by this Contract, (ii) acquire any
right in or assert any lien against the Confidential Information of the other, or (iii) if
requested to do so, refuse for any reason to promptly return the other party’s Confidential
Information to the other party. Each party will limit disclosure of the other party’s Confidential
Information to employees and Subcontractors who must have access to fulfill the purposes of this
Contract. Disclosure to, and use by, a Subcontractor is permissible where (A) use of a
Subcontractor is authorized under this Contract, (B) the disclosure is necessary or otherwise
naturally occurs in connection with work that is within the Subcontractor’s scope of
responsibility, and (C) Contractor obligates the Subcontractor in a written Contract to maintain
the State’s Confidential Information in confidence. At the State’s request, any employee of
Contractor and of any Subcontractor having access or continued access to the State’s Confidential
Information may be required to execute an acknowledgment that the employee has been advised of
Contractor’s and the Subcontractor’s obligations under this Section and of the employee’s
obligation to Contractor or Subcontractor, as the case may be, to protect the Confidential
Information from unauthorized use or disclosure.

Promptly upon termination or cancellation of the Contract for any reason, Contractor must certify
to the State that Contractor has destroyed all State Confidential Information.

2.103 Exclusions

Notwithstanding the foregoing, the provisions of Section 2.100 will not apply to any particular
information which the State or Contractor can demonstrate (i) was, at the time of disclosure to it,
in the public domain; (ii) after disclosure to it, is published or otherwise becomes part of the
public domain through no fault of the receiving party; (iii) was in the possession of the receiving
party at the time of disclosure to it without an obligation of confidentiality; (iv) was received
after disclosure to it from a third party who had a lawful right to disclose the information to it
without any obligation to restrict its further disclosure; or (v) was independently developed by
the receiving party without reference to Confidential Information of the furnishing party.
Further, the provisions of Section 2.100 will not apply to any particular Confidential Information
to the extent the receiving party is required by law to disclose the Confidential Information,
provided that the receiving party (i) promptly provides the furnishing party with notice of the
legal request, and (ii) assists the furnishing party in resisting or limiting the scope of the
disclosure as reasonably requested by the furnishing party.

2.104 No Implied Rights

Nothing contained in this Section must be construed as obligating a party to disclose any
particular Confidential Information to the other party, or as granting to or conferring on a party,
expressly or impliedly, any right or license to the Confidential Information of the other party.

2.105 Respective Obligations

The parties’ respective obligations under this Section must survive the termination or expiration
of this Contract for any reason.

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2.110 Records and Inspections

2.111 Inspection of Work Performed

The State’s authorized representatives must at all reasonable times and with 10 days prior written
request, have the right to enter Contractor’s premises, or any other places, where the Services are
being performed, and must have access, upon reasonable request, to interim drafts of Deliverables
or work-in-progress. Upon 10 Days prior written notice and at all reasonable times, the State’s
representatives must be allowed to inspect, monitor, or otherwise evaluate the work being performed
and to the extent that the access will not reasonably interfere or jeopardize the safety or
operation of the systems or facilities. Contractor must provide all reasonable facilities and
assistance for the State’s representatives.

2.112 Examination of Records

For seven years after the Contractor provides any work under this Contract (the “Audit Period”),
the State may examine and copy any of Contractor’s books, records, documents and papers pertinent
to establishing Contractor’s compliance with the Contract and with applicable laws and rules. The
State must notify the Contractor 20 days before examining the Contractor’s books and records. The
State does not have the right to review any information deemed confidential by the Contractor to
the extent access would require the confidential information to become publicly available. This
provision also applies to the books, records, accounts, documents and papers, in print or
electronic form, of any parent, affiliated or subsidiary organization of Contractor, or any
Subcontractor of Contractor performing services in connection with the Contract.

2.113 Retention of Records

Contractor must maintain at least until the end of the Audit Period all pertinent financial and
accounting records (including time sheets and payroll records, and information pertaining to the
Contract and to the Services, equipment, and commodities provided under the Contract) pertaining to
the Contract according to generally accepted accounting principles and other procedures specified
in this Section. Financial and accounting records must be made available, upon request, to the
State at any time during the Audit Period. If an audit, litigation, or other action involving
Contractor’s records is initiated before the end of the Audit Period, the records must be retained
until all issues arising out of the audit, litigation, or other action are resolved or until the
end of the Audit Period, whichever is later.

2.114 Audit Resolution

If necessary, the Contractor and the State will meet to review each audit report promptly after
issuance. The Contractor will respond to each audit report in writing within 30 days from receipt
of the report, unless a shorter response time is specified in the report. The Contractor and the
State must develop, agree upon and monitor an action plan to promptly address and resolve any
deficiencies, concerns, and/or recommendations in the audit report.

2.115 Errors

(a) If the audit demonstrates any errors in the documents provided to the State, then the amount in
error must be reflected as a credit or debit on the next invoice and in subsequent invoices until
the amount is paid or refunded in full. However, a credit or debit may not be carried for more
than four invoices. If a balance remains after four invoices, then the remaining amount will be
due as a payment or refund within 45 days of the last quarterly invoice that the balance appeared
on or termination of the Contract, whichever is earlier.

(b) In addition to other available remedies, the difference between the payment received and the
correct payment amount is greater than 10%, then the Contractor must pay all of the reasonable
costs of the audit.

2.120 Warranties

2.121 Warranties and Representations

The Contractor represents and warrants:

(a) All services shall be rendered per all federal, state, and local laws and regulations, NCQA and
NCCHC standards, as well as DCH and MDOC Policy Directives, Director’s Office Memorandums, and
Operating Procedures. Please contact the MDOC CCI for current DCH and MDOC policies, procedures,
directives and memorandums.

(b) It is capable in all respects of fulfilling and must fulfill all of its obligations under this
Contract. The performance of all obligations under this Contract must be provided in a timely,
professional, and workman-like manner and must meet the performance and operational standards
required under this Contract.

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(c) The Contract Appendices, Attachments and Exhibits identify the equipment and software and
services necessary for the Deliverable(s) to perform and Services to operate in compliance with the
Contract’s requirements and other standards of performance.

(d) It is the lawful owner or licensee of any Deliverable licensed or sold to the State by
Contractor or developed by Contractor under this Contract, and Contractor has all of the rights
necessary to convey to the State the ownership rights or licensed use, as applicable, of any and
all Deliverables. None of the Deliverables provided by Contractor to the State under this
Contract, nor their use by the State, will infringe the patent, copyright, trade secret, or other
proprietary rights of any third party.

(e) If, under this Contract, Contractor procures any equipment, software or other Deliverable for
the State (including equipment, software and other Deliverables manufactured, re-marketed or
otherwise sold by Contractor under Contractor’s name), then in addition to Contractor’s other
responsibilities with respect to the items in this Contract, Contractor must assign or otherwise
transfer to the State or its designees, or afford the State the benefits of, any manufacturer’s
warranty for the Deliverable.

(f) The contract signatory has the power and authority, including any necessary corporate
authorizations, necessary to enter into this Contract, on behalf of Contractor.

(g) It is qualified and registered to transact business in all locations where required.

(h) Neither the Contractor nor any Affiliates, nor any employee of either, has, must have, or must
acquire, any contractual, financial, business, or other interest, direct or indirect, that would
conflict in any manner or degree with Contractor’s performance of its duties and responsibilities
to the State under this Contract or otherwise create an appearance of impropriety with respect to
the award or performance of this Agreement. Contractor must notify the State about the nature of
the conflict or appearance of impropriety within two days of learning about it.

(i) Neither Contractor nor any Affiliates, nor any employee of either has accepted or must accept
anything of value based on an understanding that the actions of the Contractor or Affiliates or
employee on behalf of the State would be influenced. Contractor must not attempt to influence any
State employee by the direct or indirect offer of anything of value.

(j) Neither Contractor nor any Affiliates, nor any employee of either has paid or agreed to pay any
person, other than bona fide employees and consultants working solely for Contractor or the
Affiliate, any fee, commission, percentage, brokerage fee, gift, or any other consideration,
contingent upon or resulting from the award or making of this Contract.

(k) The prices proposed by Contractor were arrived at independently, without consultation,
communication, or agreement with any other bidder for the purpose of restricting competition; the
prices quoted were not knowingly disclosed by Contractor to any other bidder; and no attempt was
made by Contractor to induce any other person to submit or not submit a proposal for the purpose of
restricting competition.

(l) All financial statements, reports, and other information furnished by Contractor to the State
as part of its response to the RFP or otherwise in connection with the award of this Contract
fairly and accurately represent the business, properties, financial condition, and results of
operations of Contractor as of the respective dates, or for the respective periods, covered by the
financial statements, reports, other information. Since the respective dates or periods covered by
the financial statements, reports, or other information, there have been no material adverse change
in the business, properties, financial condition, or results of operations of Contractor.

(m) All written information furnished to the State by or for the Contractor in connection with this
Contract, including its bid, is true, accurate, and complete, and contains no untrue statement of
material fact or omits any material fact necessary to make the information not misleading.

(n) It is not in material default or breach of any other contract or agreement that it may have
with the State or any of its departments, commissions, boards, or agencies. Contractor further
represents and warrants that it has not been a party to any contract with the State or any of its
departments that was terminated by the State or the department within the previous five years for
the reason that Contractor failed to perform or otherwise breached an obligation of the Contract.

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(o) If any of the certifications, representations, or disclosures made in the Contractor’s original
bid response change after contract award, the Contractor is required to report those changes
immediately to the Department of Management and Budget, Purchasing Operations.

2.122 Warranty of Merchantability

Goods provided by Contractor under this agreement shall be merchantable. All goods provided under
this Contract shall be of good quality within the description given by the State, shall be fit for
their ordinary purpose, shall be adequately contained and packaged within the description given by
the State, shall conform to the agreed upon specifications, and shall conform to the affirmations
of fact made by the Contractor or on the container or label.

2.123 Warranty of Fitness for a Particular Purpose

When the Contractor has reason to know or knows any particular purpose for which the goods are
required, and the State is relying on the Contractor’s skill or judgment to select or furnish
suitable goods, there is a warranty that the goods are fit for such purpose.

2.124 Warranty of Title

Contractor shall, in providing goods to the State, convey good title in those goods, whose transfer
is right and lawful. All goods provided by Contractor shall be delivered free from any security
interest, lien, or encumbrance of which the State, at the time of contracting, has no knowledge.
Goods provided by Contractor, under this Contract, shall be delivered free of any rightful claim of
any third person by of infringement or the like.

2.125 Equipment Warranty

To the extent Contractor is responsible under this Contract for maintaining equipment/system(s),
Contractor represents and warrants that it will maintain the equipment/system(s) in good operating
condition and will undertake all repairs and preventive maintenance according to the applicable
manufacturer’s recommendations for the period specified in this Contract.

The Contractor represents and warrants that the equipment/system(s) are in good operating condition
and operate and perform to the requirements and other standards of performance contained in this
Contract, when installed, at the time of Final Acceptance by the State, and for a period of one
year commencing upon the first day following Final Acceptance.

Within 10 business days of notification from the State, the Contractor must adjust, repair or
replace all equipment that is defective or not performing in compliance with the Contract. The
Contractor must assume all costs for replacing parts or units and their installation including
transportation and delivery fees, if any.

The Contractor must provide a toll-free telephone number to allow the State to report equipment
failures and problems to be remedied by the Contractor.

The Contractor agrees that all warranty service it provides under this Contract must be performed
by Original Equipment Manufacturer (OEM) trained, certified and authorized technicians.

The Contractor is the sole point of contact for warranty service. The Contractor warrants that it
will pass through to the State any warranties obtained or available from the original equipment
manufacturer, including any replacement, upgraded, or additional equipment warranties.

All warranty work must be performed on the State of Michigan worksite(s).

2.126 Equipment to be New

If applicable, all equipment provided under this Contract by Contractor shall be new where
Contractor has knowledge regarding whether the equipment is new or assembled from new or
serviceable used parts that are like new in performance or has the option of selecting one or the
other. Equipment that is assembled from new or serviceable used parts that are like new in
performance is acceptable where Contractor does not have knowledge or the ability to select one or
other, unless specifically agreed otherwise in writing by the State.

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2.127 Prohibited Products

The State will not accept salvage, distressed, outdated or discontinued merchandise. Shipping of
such merchandise to any State agency, as a result of an order placed against the Contract, shall be
considered default by the Contractor of the terms and conditions of the Contract and may result in
cancellation of the Contract by the State. The brand and product number offered for all items
shall remain consistent for the term of the Contract, unless Purchasing Operations has approved a
change order pursuant to Section 2.024.

2.128 Consequences For Breach

In addition to any remedies available in law, if the Contractor breaches any of the warranties
contained in this section, the breach may be considered as a default in the performance of a
material obligation of this Contract.

2.130 Insurance 

2.131 Liability Insurance

The Contractor must provide proof of the minimum levels of insurance coverage as indicated below.
The insurance must protect the State from claims which may arise out of or result from the
Contractor’s performance of services under the terms of this Contract, whether the services are
performed by the Contractor, or by any subcontractor, or by anyone directly or indirectly employed
by any of them, or by anyone for whose acts they may be liable.

The Contractor waives all rights against the State of Michigan, its departments, divisions,
agencies, offices, commissions, officers, employees and agents for recovery of damages to the
extent these damages are covered by the insurance policies the Contractor is required to maintain
under this Contract.

All insurance coverage’s provided relative to this Contract/Purchase Order are PRIMARY and
NON-CONTRIBUTING to any comparable liability insurance (including self-insurances) carried by the
State.

The insurance must be written for not less than any minimum coverage specified in this Contract or
required by law, whichever is greater.

The insurers selected by Contractor must have an A.M. Best rating of A or better, or as otherwise
approved in writing by the State, or if the ratings are no longer available, with a comparable
rating from a recognized insurance rating agency. All policies of insurance required in this
Contract must be issued by companies that have been approved to do business in the State.

See www.michigan.gov/dleg.

Where specific limits are shown, they are the minimum acceptable limits. If Contractor’s policy
contains higher limits, the State must be entitled to coverage to the extent of the higher limits.

The Contractor is required to pay for and provide the type and amount of insurance checked þ
below:

þ      1.      Commercial General Liability with the following minimum coverage:

$2,000,000 General Aggregate Limit other than Products/Completed Operations

$2,000,000 Products/Completed Operations Aggregate Limit

$1,000,000 Personal & Advertising Injury Limit

$1,000,000 Each Occurrence Limit

The Contractor must list the State of Michigan, its departments, divisions, agencies, offices,
commissions, officers, employees and agents as ADDITIONAL INSUREDS on the Commercial General
Liability certificate. The Contractor also agrees to provide evidence that insurance policies
contain a waiver of subrogation by the insurance company.

þ      2.      If a motor vehicle is used to provide services or products under this
Contract, the
Contractor must have vehicle liability insurance on any auto including owned, hired and non-owned
vehicles used in Contractor’s business for bodily injury and property damage as required by law.

The Contractor must list the State of Michigan, its departments, divisions, agencies, offices,
commissions, officers, employees and agents as ADDITIONAL INSUREDS on the vehicle liability
certificate. The Contractor also agrees to provide evidence that insurance policies contain a
waiver of subrogation by the insurance company.

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þ      3.      Workers’ compensation coverage must be provided according to
applicable laws governing
the employees and employers work activities in the state of the Contractor’s domicile. If the
applicable coverage is provided by a self-insurer, proof must be provided of approved self-insured
authority by the jurisdiction of domicile. For employees working outside of the state of
qualification, Contractor must provide appropriate certificates of insurance proving mandated
coverage levels for the jurisdictions where the employees’ activities occur.

Any certificates of insurance received must also provide a list of states where the coverage is
applicable.

The Contractor also agrees to provide evidence that insurance policies contain a waiver of
subrogation by the insurance company. This provision must not be applicable where prohibited or
limited by the laws of the jurisdiction in which the work is to be performed.

þ      4.      Employers liability insurance with the following minimum limits:

$100,000 each accident

$100,000 each employee by disease

$500,000 aggregate disease

þ      5.      Employee Fidelity, including Computer Crimes, insurance naming the
State as a loss
payee, providing coverage for direct loss to the State and any legal liability of the State arising
out of or related to fraudulent or dishonest acts committed by the employees of Contractor or its
Subcontractors, acting alone or in collusion with others, in a minimum amount of one million
dollars ($1,000,000.00) with a maximum deductible of fifty thousand dollars ($50,000.00).

þ      6.      Umbrella or Excess Liability Insurance in a minimum amount of ten
million dollars
($10,000,000.00), which must apply, at a minimum, to the insurance required in Subsection 1
(Commercial General Liability) above.

þ      7.      Professional Liability (Errors and Omissions) Insurance with the
following minimum
coverage: one million dollars ($1,000,000.00) each occurrence and three million dollars
($3,000,000.00) annual aggregate.

 ̈      8.      Fire and Personal Property Insurance covering against any loss or
damage to the office
space used by Contractor for any reason under this Contract, and the equipment, software and other
contents of the office space, including without limitation, those contents used by Contractor to
provide the Services to the State, up to its replacement value, where the office space and its
contents are under the care, custody and control of Contractor. The policy must cover all risks of
direct physical loss or damage, including without limitation, flood and earthquake coverage and
coverage for computer hardware and software. The State must be endorsed on the policy as a loss
payee as its interests appear.

2.132 Subcontractor Insurance Coverage

Except where the State has approved in writing a Contractor subcontract with
 other insurance
provisions, Contractor must require all of its Subcontractors under this Contract to purchase and
maintain the insurance coverage as described in this Section for the Contractor in connection with
the performance of work by those Subcontractors. Alternatively, Contractor may include any
Subcontractors under Contractor’s insurance on the coverage required in this Section.
Subcontractor(s) must fully comply with the insurance coverage required in this Section. Failure
of Subcontractor(s) to comply with insurance requirements does not limit Contractor’s liability or
responsibility.

As of 1-23-09, the State accepts the following insurance levels for Aetna:

	 	 	 	 	 
	General Aggregate
	 	$	2,000,000.00	 
	Products-Comp/OP AGG
	 	$	2,000,000.00	 
	Personal & Adv. Injury
	 	$	2,000,000.00	 
	Each Occurrence
	 	$	2,000,000.00	 
	Fire Damage (Any one fire)
	 	$	1,000,000.00	 
	Med Exp (Any one person)
	 	$	5,000.00	 
	Worker’s Comp Each Accident
	 	$	100,000.00	 
	Worker’s Comp Disease Policy Limit
	 	$	100,000.00	 
	Worker’s Comp Disease Each Employee
	 	$	100,000.00	 

As of 1-23-09, the State accepts the following insurance levels for network providers:

All network providers will follow Aetna policy regarding requirements for liability limits in
the State of Michigan. To be a participating provider their professional liability must meet minimum
requirements and be an active policy. Minimum requirements for physicians are
$100,000/$300,000.

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2.133 Certificates of Insurance and Other Requirements

Contractor must furnish to DMB-Purchasing Operations, certificate(s) of insurance verifying
insurance coverage or providing satisfactory evidence of self-insurance as required in this Section
(the “Certificates”). The Certificate must be on the standard “accord” form or equivalent. THE
CONTRACT OR PURCHASE ORDER NO. MUST BE SHOWN ON THE CERTIFICATE OF INSURANCE TO ASSURE CORRECT
FILING. All Certificate(s) are to be prepared and submitted by the Insurance Provider. All
Certificate(s) must contain a provision indicating that coverages afforded under the policies WILL
NOT BE CANCELLED, MATERIALLY CHANGED, OR NOT RENEWED without 30 days prior written notice, except
for 10 days for non-payment of premium, having been given to the Director of Purchasing Operations,
Department of Management and Budget. The notice must include the Contract or Purchase Order number
affected. Before the Contract is signed, and not less than 20 days before the insurance expiration
date every year thereafter, the Contractor must provide evidence that the State and its agents,
officers and employees are listed as additional insureds under each commercial general liability
and commercial automobile liability policy. In the event the State approves the representation of
the State by the insurer’s attorney, the attorney may be required to be designated as a Special
Assistant Attorney General by the Attorney General of the State of Michigan.

The Contractor must maintain all required insurance coverage throughout the term of the Contract
and any extensions and, in the case of claims-made Commercial General Liability policies, must
secure tail coverage for at least three years following the expiration or termination for any
reason of this Contract. The minimum limits of coverage specified above are not intended, and must
not be construed, to limit any liability or indemnity of Contractor under this Contract to any
indemnified party or other persons. Contractor is responsible for all deductibles with regard to
the insurance. If the Contractor fails to pay any premium for required insurance as specified in
this Contract, or if any insurer cancels or significantly reduces any required insurance as
specified in this Contract without the State’s written consent, then the State may, after the State
has given the Contractor at least 30 days written notice, pay the premium or procure similar
insurance coverage from another company or companies. The State may deduct any part of the cost
from any payment due the Contractor, or the Contractor must pay that cost upon demand by the State.

2.140 Indemnification

2.141 General Indemnification

To the extent permitted by law, the Contractor must indemnify, defend and hold harmless the State
from liability, including all claims and losses, and all related costs and expenses (including
reasonable attorneys’ fees and costs of investigation, litigation, settlement, judgments, interest
and penalties), accruing or resulting to any person, firm or corporation that may be injured or
damaged by the Contractor in the performance of this Contract and that are attributable to the
negligence or tortious acts of the Contractor or any of its Subcontractors, or by anyone else for
whose acts any of them may be liable.

2.142 Code Indemnification

To the extent permitted by law, the Contractor shall indemnify, defend and hold harmless the State
from any claim, loss, or expense arising from Contractor’s breach of the No Surreptitious Code
Warranty.

2.143 Employee Indemnification

In any claims against the State of Michigan, its departments, divisions, agencies, sections,
commissions, officers, employees and agents, by any employee of the Contractor or any of its
Subcontractors, the indemnification obligation under the Contract must not be limited in any way by
the amount or type of damages, compensation or benefits payable by or for the Contractor or any of
its Subcontractors under worker’s disability compensation acts, disability benefit acts or other
employee benefit acts. This indemnification clause is intended to be comprehensive. Any overlap
in provisions, or the fact that greater specificity is provided as to some categories of risk, is
not intended to limit the scope of indemnification under any other provisions.

2.144 Patent/Copyright Infringement Indemnification

To the extent permitted by law, the Contractor must indemnify, defend and hold harmless the State
from and against all losses, liabilities, damages (including taxes), and all related costs and
expenses (including reasonable attorneys’ fees and costs of investigation, litigation, settlement,
judgments, interest and penalties) incurred in connection with any action or proceeding threatened
or brought against the State to the extent that the action or proceeding is based on a claim that
any piece of equipment, software, commodity or service supplied by the Contractor or its
subcontractors, or the operation of the equipment, software, commodity or service, or the use or
reproduction of any documentation provided with the equipment, software, commodity or service
infringes any United States patent, copyright, trademark or trade secret of any person or entity,
which is enforceable under the laws of the United States.

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In addition, should the equipment, software, commodity, or service, or its operation, become or in
the State’s or Contractor’s opinion be likely to become the subject of a claim of infringement, the
Contractor must at the Contractor’s sole expense (i) procure for the State the right to continue
using the equipment, software, commodity or service or, if the option is not reasonably available
to the Contractor, (ii) replace or modify to the State’s satisfaction the same with equipment,
software, commodity or service of equivalent function and performance so that it becomes
non-infringing, or, if the option is not reasonably available to Contractor, (iii) accept its
return by the State with appropriate credits to the State against the Contractor’s charges and
reimburse the State for any losses or costs incurred as a consequence of the State ceasing its use
and returning it.

Notwithstanding the foregoing, the Contractor has no obligation to indemnify or defend the State
for, or to pay any costs, damages or attorneys’ fees related to, any claim based upon (i) equipment
developed based on written specifications of the State; (ii) use of the equipment in a
configuration other than implemented or approved in writing by the Contractor, including, but not
limited to, any modification of the equipment by the State; or (iii) the combination, operation, or
use of the equipment with equipment or software not supplied by the Contractor under this Contract.

2.145 Continuation of Indemnification Obligations

The Contractor’s duty to indemnify under this Section continues in full force and effect,
notwithstanding the expiration or early cancellation of the Contract, with respect to any claims
based on facts or conditions that occurred before expiration or cancellation.

2.146 Indemnification Procedures

The procedures set forth below must apply to all indemnity obligations under this Contract.

(a) After the State receives notice of the action or proceeding involving a claim for which it will
seek indemnification, the State must promptly notify Contractor of the claim in writing and take or
assist Contractor in taking, as the case may be, any reasonable action to avoid the imposition of a
default judgment against Contractor. No failure to notify the Contractor relieves the Contractor
of its indemnification obligations except to the extent that the Contractor can prove damages
attributable to the failure. Within 10 days following receipt of written notice from the State
relating to any claim, the Contractor must notify the State in writing whether Contractor agrees to
assume control of the defense and settlement of that claim (a “Notice of Election”). After
notifying Contractor of a claim and before the State receiving Contractor’s Notice of Election, the
State is entitled to defend against the claim, at the Contractor’s expense, and the Contractor will
be responsible for any reasonable costs incurred by the State in defending against the claim during
that period.

(b) If Contractor delivers a Notice of Election relating to any claim: (i) the State is entitled
to participate in the defense of the claim and to employ counsel at its own expense to assist in
the handling of the claim and to monitor and advise the State about the status and progress of the
defense; (ii) the Contractor must, at the request of the State, demonstrate to the reasonable
satisfaction of the State, the Contractor’s financial ability to carry out its defense and
indemnity obligations under this Contract; (iii) the Contractor must periodically advise the State
about the status and progress of the defense and must obtain the prior written approval of the
State before entering into any settlement of the claim or ceasing to defend against the claim and
(iv) to the extent that any principles of Michigan governmental or public law may be involved or
challenged, the State has the right, at its own expense, to control the defense of that portion of
the claim involving the principles of Michigan governmental or public law. But the State may
retain control of the defense and settlement of a claim by notifying the Contractor in writing
within 10 days after the State’s receipt of Contractor’s information requested by the State under
clause (ii) of this paragraph if the State determines that the Contractor has failed to demonstrate
to the reasonable satisfaction of the State the Contractor’s financial ability to carry out its
defense and indemnity obligations under this Section. Any litigation activity on behalf of the
State, or any of its subdivisions under this Section, must be coordinated with the Department of
Attorney General. In the event the insurer’s attorney represents the State under this Section, the
insurer’s attorney may be required to be designated as a Special Assistant Attorney General by the
Attorney General of the State of Michigan.

(c) If Contractor does not deliver a Notice of Election relating to any claim of which it is
notified by the State as provided above, the State may defend the claim in the manner as it may
deem appropriate, at the cost and expense of Contractor. If it is determined that the claim was
one against which Contractor was required to indemnify the State, upon request of the State,
Contractor must promptly reimburse the State for all the reasonable costs and expenses.

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2.150 Termination/Cancellation 

2.151 Notice and Right to Cure

If the Contractor breaches the Contract, and the State in its sole discretion determines that the
breach is curable, then the State will provide the Contractor with written notice of the breach and
a time period (not less than 30 days) to cure the Breach. The notice of breach and opportunity to
cure is inapplicable for successive or repeated breaches or if the State determines in its sole
discretion that the breach poses a serious and imminent threat to the health or safety of any
person or the imminent loss, damage, or destruction of any real or tangible personal property.

2.152 Termination for Cause

(a) The State may terminate this Contract, for cause, by notifying the Contractor in writing, if
the Contractor (i) breaches any of its material duties or obligations under this Contract
(including a Chronic Failure to meet any particular SLA), or (ii) fails to cure a breach within the
time period specified in the written notice of breach provided by the State

(b) If this Contract is terminated for cause, the Contractor must pay all costs incurred by the
State in terminating this Contract, including but not limited to, State administrative costs,
reasonable attorneys’ fees and court costs, and any reasonable additional costs the State may incur
to procure the Services/Deliverables required by this Contract from other sources. Re-procurement
costs are not consequential, indirect or incidental damages, and cannot be excluded by any other
terms otherwise included in this Contract, provided the costs are not in excess of 50% more than
the prices for the Service/Deliverables provided under this Contract.

(c) If the State chooses to partially terminate this Contract for cause, charges payable under this
Contract will be equitably adjusted to reflect those Services/Deliverables that are terminated and
the State must pay for all Services/Deliverables for which Final Acceptance has been granted
provided up to the termination date. Services and related provisions of this Contract that are
terminated for cause must cease on the effective date of the termination.

(d) If the State terminates this Contract for cause under this Section, and it is determined, for
any reason, that Contractor was not in breach of contract under the provisions of this section,
that termination for cause must be deemed to have been a termination for convenience, effective as
of the same date, and the rights and obligations of the parties must be limited to that otherwise
provided in this Contract for a termination for convenience.

2.153 Termination for Convenience

The State may terminate this Contract for its convenience, in whole or part, if the State
determines that a termination is in the State’s best interest. Reasons for the termination must be
left to the sole discretion of the State and may include, but not necessarily be limited to (a) the
State no longer needs the Services or products specified in the Contract, (b) relocation of office,
program changes, changes in laws, rules, or regulations make implementation of the Services no
longer practical or feasible, (c) unacceptable prices for Additional Services or New Work requested
by the State, or (d) falsification or misrepresentation, by inclusion or non-inclusion, of
information material to a response to any RFP issued by the State. The State may terminate this
Contract for its convenience, in whole or in part, by giving Contractor written notice at least 30
days before the date of termination. If the State chooses to terminate this Contract in part, the
charges payable under this Contract must be equitably adjusted to reflect those
Services/Deliverables that are terminated. Services and related provisions of this Contract that
are terminated for cause must cease on the effective date of the termination.

2.154 Termination for Non-Appropriation

(a) Contractor acknowledges that, if this Contract extends for several fiscal years, continuation
of this Contract is subject to appropriation or availability of funds for this Contract. If funds
to enable the State to effect continued payment under this Contract are not appropriated or
otherwise made available, the State must terminate this Contract and all affected Statements of
Work, in whole or in part, at the end of the last period for which funds have been appropriated or
otherwise made available by giving written notice of termination to Contractor. The State must
give Contractor at least 30 days advance written notice of termination for non-appropriation or
unavailability (or the time as is available if the State receives notice of the final decision less
than 30 days before the funding cutoff).

(b) If funding for the Contract is reduced by law, or funds to pay Contractor for the agreed-to
level of the Services or production of Deliverables to be provided by Contractor are not
appropriated or otherwise unavailable, the State may, upon 30 days written notice to Contractor,
reduce the level of the Services or the change the production of Deliverables in the manner and for
the periods of time as the State may elect. The charges payable under this Contract will be
equitably adjusted to reflect any equipment, services or commodities not provided by reason of the
reduction.

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(c) If the State terminates this Contract, eliminates certain Deliverables, or reduces the level of
Services to be provided by Contractor under this Section, the State must pay Contractor for all
Work-in-Process performed through the effective date of the termination or reduction in level, as
the case may be and as determined by the State, to the extent funds are available. This Section
will not preclude Contractor from reducing or stopping Services/Deliverables or raising against the
State in a court of competent jurisdiction, any claim for a shortfall in payment for Services
performed or Deliverables finally accepted before the effective date of termination.

2.155 Termination for Criminal Conviction

The State may terminate this Contract immediately and without further liability or penalty in the
event Contractor, an officer of Contractor, or an owner of a 25% or greater share of Contractor is
convicted of a criminal offense related to a State, public or private Contract or subcontract.

2.156 Termination for Approvals Rescinded

The State may terminate this Contract if any final administrative or judicial decision or
adjudication disapproves a previously approved request for purchase of personal services under
Constitution 1963, Article 11, § 5, and Civil Service Rule 7-1. In that case, the State will pay
the Contractor for only the work completed to that point under the Contract. Termination may be in
whole or in part and may be immediate as of the date of the written notice to Contractor or may be
effective as of the date stated in the written notice.

2.157 Rights and Obligations upon Termination

(a) If the State terminates this Contract for any reason, the Contractor must (a) stop all work as
specified in the notice of termination, (b) take any action that may be necessary, or that the
State may direct, for preservation and protection of Deliverables or other property derived or
resulting from this Contract that may be in Contractor’s possession, (c) return all materials and
property provided directly or indirectly to Contractor by any entity, agent or employee of the
State, (d) transfer title in, and deliver to, the State, unless otherwise directed, all
Deliverables intended to be transferred to the State at the termination of the Contract and which
are resulting from the Contract (which must be provided to the State on an “As-Is” basis except to
the extent the amounts paid by the State in respect of the items included compensation to
Contractor for the provision of warranty services in respect of the materials), and (e) take any
action to mitigate and limit any potential damages, or requests for Contractor adjustment or
termination settlement costs, to the maximum practical extent, including terminating or limiting as
otherwise applicable those subcontracts and outstanding orders for material and supplies resulting
from the terminated Contract.

(b) If the State terminates this Contract before its expiration for its own convenience, the State
must pay Contractor for all charges due for Services provided before the date of termination and,
if applicable, as a separate item of payment under this Contract, for Work In Process, on a
percentage of completion basis at the level of completion determined by the State. All completed
or partially completed Deliverables prepared by Contractor under this Contract, at the option of
the State, becomes the State’s property, and Contractor is entitled to receive equitable fair
compensation for the Deliverables. Regardless of the basis for the termination, the State is not
obligated to pay, or otherwise compensate, Contractor for any lost expected future profits, costs
or expenses incurred with respect to Services not actually performed for the State.

(c) Upon a good faith termination, the State may assume, at its option, any subcontracts and
agreements for services and deliverables provided under this Contract, and may further pursue
completion of the Services/Deliverables under this Contract by replacement contract or otherwise as
the State may in its sole judgment deem expedient.

2.158 Reservation of Rights

Any termination of this Contract or any Statement of Work issued under it by a party must be with
full reservation of, and without prejudice to, any rights or remedies otherwise available to the
party with respect to any claims arising before or as a result of the termination.

2.160 Deleted — Not Applicable

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2.170 Transition Responsibilities

2.171 Contractor Transition Responsibilities

If the State terminates this Contract, for convenience or cause, or if the Contract is otherwise
dissolved, voided, rescinded, nullified, expires or rendered unenforceable, the Contractor agrees
to comply with direction provided by the State to assist in the orderly transition of equipment,
services, software, leases, etc. to the State or a third party designated by the State. If this
Contract expires or terminates, the Contractor agrees to make all reasonable efforts to effect an
orderly transition of services within a reasonable period of time that in no event will exceed 185
days. These efforts must include, but are not limited to, those listed in Sections 2.171, 2.172,
2.173, 2.174, and 2.175.

2.172 Contractor Personnel Transition

The Contractor must work with the State, or a specified third party, to develop a transition plan
setting forth the specific tasks and schedule to be accomplished by the parties, to effect an
orderly transition. The Contractor must allow as many personnel as practicable to remain on the
job to help the State, or a specified third party, maintain the continuity and consistency of the
services required by this Contract. In addition, during or following the transition period, in the
event the State requires the Services of the Contractor’s subcontractors or vendors, as necessary
to meet its needs, Contractor agrees to reasonably, and with good-faith, work with the State to use
the Services of Contractor’s subcontractors or vendors. Contractor will notify all of Contractor’s
subcontractors of procedures to be followed during transition.

2.173 Contractor Information Transition

The Contractor agrees to provide reasonable detailed specifications for all Services/Deliverables
needed by the State, or specified third party, to properly provide the Services/Deliverables
required under this Contract. The Contractor will provide the State with asset management data
generated from the inception of this Contract through the date on which this Contractor is
terminated in a comma-delineated format unless otherwise requested by the State. The Contractor
will deliver to the State any remaining owed reports and documentation still in Contractor’s
possession subject to appropriate payment by the State.

2.174 Contractor Software Transition

The Contractor must reasonably assist the State in the acquisition of any Contractor software
required to perform the Services/use the Deliverables under this Contract. This must include any
documentation being used by the Contractor to perform the Services under this Contract. If the
State transfers any software licenses to the Contractor, those licenses must, upon expiration of
the Contract, transfer back to the State at their current revision level. Upon notification by the
State, Contractor may be required to freeze all non-critical changes to Deliverables/Services.

2.175 Transition Payments

If the transition results from a termination for any reason, reimbursement must be governed by the
termination provisions of this Contract. If the transition results from expiration, the Contractor
will be reimbursed for all reasonable transition costs (i.e. costs incurred within the agreed
period after contract expiration that result from transition operations) at the rates agreed upon
by the State. The Contractor will prepare an accurate accounting from which the State and
Contractor may reconcile all outstanding accounts.

2.176 State Transition Responsibilities

In the event that this Contract is terminated, dissolved, voided, rescinded, nullified, or
otherwise rendered unenforceable, the State agrees to perform the following obligations, and any
others upon which the State and the Contractor agree:

(a) Reconciling all accounts between the State and the Contractor;

(b) Completing any pending post-project reviews.

2.180 Stop Work

2.181 Stop Work Orders

The State may, at any time, by written stop work order to Contractor, require that Contractor stop
all, or any part, of the work called for by the Contract for a period of up to 90 calendar days
after the stop work order is delivered to Contractor, and for any further period to which the
parties may agree. The stop work order must be identified as a stop work order and must indicate
that it is issued under this Section 2.180. Upon receipt of the stop work order, Contractor must
immediately comply with its terms and take all reasonable steps to minimize incurring costs
allocable to the work covered by the stop work order during the period of work stoppage. Within
the period of the stop work order, the State must either: (a) cancel the stop work order; or (b)
terminate the work covered by the stop work order as provided in Section 2.150.

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2.182 Cancellation or Expiration of Stop Work Order

The Contractor must resume work if the State cancels a Stop Work Order or if it expires. The
parties will agree upon an equitable adjustment in the delivery schedule, the Contract price, or
both, and the Contract must be modified, in writing, accordingly, if: (a) the stop work order
results in an increase in the time required for, or in Contractor’s costs properly allocable to,
the performance of any part of the Contract; and (b) Contractor asserts its right to an equitable
adjustment within 30 calendar days after the end of the period of work stoppage; provided that, if
the State decides the facts justify the action, the State may receive and act upon a Contractor
proposal submitted at any time before final payment under the Contract. Any adjustment will
conform to the requirements of Section 2.024.

2.183 Allowance of Contractor Costs

If the stop work order is not canceled and the work covered by the stop work order is terminated
for reasons other than material breach, the termination must be deemed to be a termination for
convenience under Section 2.150, and the State will pay reasonable costs resulting from the stop
work order in arriving at the termination settlement. For the avoidance of doubt, the State is not
be liable to Contractor for loss of profits because of a stop work order issued under this Section
2.180.

2.190 Dispute Resolution

2.191 In General

Any claim, counterclaim, or dispute between the State and Contractor arising out of or relating to
the Contract or any Statement of Work must be resolved as follows. For all Contractor claims
seeking an increase in the amounts payable to Contractor under the Contract, or the time for
Contractor’s performance, Contractor must submit a letter, together with all data supporting the
claims, executed by Contractor’s Contract Administrator or the Contract Administrator’s designee
certifying that (a) the claim is made in good faith, (b) the amount claimed accurately reflects the
adjustments in the amounts payable to Contractor or the time for Contractor’s performance for which
Contractor believes the State is liable and covers all costs of every type to which Contractor is
entitled from the occurrence of the claimed event, and (c) the claim and the supporting data are
current and complete to Contractor’s best knowledge and belief.

2.192 Informal Dispute Resolution

(a) All disputes between the parties must be resolved under the Contract Management procedures in
this Contract. If the parties are unable to resolve any disputes after compliance with the
processes, the parties must meet with the Director of Purchasing Operations, DMB, or designee, for
the purpose of attempting to resolve the dispute without the need for formal legal proceedings, as
follows:

(i) The representatives of Contractor and the State must meet as often as the parties
reasonably deem necessary to gather and furnish to each other all information with respect to
the matter in issue which the parties believe to be appropriate and germane in connection
with its resolution. The representatives must discuss the problem and negotiate in good
faith in an effort to resolve the dispute without the necessity of any formal proceeding.

(ii) During the course of negotiations, all reasonable requests made by one party to another
for non-privileged information reasonably related to the Contract will be honored in order
that each of the parties may be fully advised of the other’s position.

(iii) The specific format for the discussions will be left to the discretion of the
designated State and Contractor representatives, but may include the preparation of agreed
upon statements of fact or written statements of position.

(iv) Following the completion of this process within 60 calendar days, the Director of
Purchasing Operations, DMB, or designee, must issue a written opinion regarding the issue(s)
in dispute within 30 calendar days. The opinion regarding the dispute must be considered the
State’s final action and the exhaustion of administrative remedies.

(b) This Section will not be construed to prevent either party from instituting, and a party is
authorized to institute, formal proceedings earlier to avoid the expiration of any applicable
limitations period, to preserve a superior position with respect to other creditors, or under
Section 2.193.

(c) The State will not mediate disputes between the Contractor and any other entity, except state
agencies, concerning responsibility for performance of work under the Contract.

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2.193 Injunctive Relief

The only circumstance in which disputes between the State and Contractor will not be subject to the
provisions of Section 2.192 is where a party makes a good faith determination that a breach of the
terms of the Contract by the other party is the that the damages to the party resulting from the
breach will be so immediate, so large or severe and so incapable of adequate redress after the fact
that a temporary restraining order or other immediate injunctive relief is the only adequate
remedy.

2.194 Continued Performance

Each party agrees to continue performing its obligations under the Contract while a dispute is
being resolved except to the extent the issue in dispute precludes performance (dispute over
payment must not be deemed to preclude performance) and without limiting either party’s right to
terminate the Contract as provided in Section 2.150, as the case may be.

2.200 Federal and State Contract Requirements

2.201 Nondiscrimination

In the performance of the Contract, Contractor agrees not to discriminate against any employee or
applicant for employment, with respect to his or her hire, tenure, terms, conditions or privileges
of employment, or any matter directly or indirectly related to employment, because of race, color,
religion, national origin, ancestry, age, sex, height, weight, marital status, physical or mental
disability. Contractor further agrees that every subcontract entered into for the performance of
this Contract or any purchase order resulting from this Contract will contain a provision requiring
non-discrimination in employment, as specified here, binding upon each Subcontractor. This
covenant is required under the Elliot Larsen Civil Rights Act, 1976 PA 453, MCL 37.2101, et seq.,
and the Persons with Disabilities Civil Rights Act, 1976 PA 220, MCL 37.1101, et seq., and any
breach of this provision may be regarded as a material breach of the Contract.

2.202 Unfair Labor Practices

Under 1980 PA 278, MCL 423.321, et seq., the State must not award a Contract or subcontract to an
employer whose name appears in the current register of employers failing to correct an unfair labor
practice compiled under Section 2 of the Act. This information is compiled by the United States
National Labor Relations Board. A Contractor of the State, in relation to the Contract, must not
enter into a contract with a Subcontractor, manufacturer, or supplier whose name appears in this
register. Under Section 4 of 1980 PA 278, MCL 423.324, the State may void any Contract if, after
award of the Contract, the name of Contractor as an employer or the name of the Subcontractor,
manufacturer or supplier of Contractor appears in the register.

2.203 Workplace Safety and Discriminatory Harassment

In performing Services for the State, the Contractor must comply with the Department of Civil
Services Rule 2-20 regarding Workplace Safety and Rule 1-8.3 regarding Discriminatory Harassment.
In addition, the Contractor must comply with Civil Service regulations and any applicable agency
rules provided to the Contractor. For Civil Service Rules, see
http://www.mi.gov/mdcs/0,1607,7-147-6877—,00.html.

2.210 Governing Law

2.211 Governing Law

The Contract must in all respects be governed by, and construed according to, the substantive laws
of the State of Michigan without regard to any Michigan choice of law rules that would apply the
substantive law of any other jurisdiction to the extent not inconsistent with, or pre-empted by
federal law.

2.212 Compliance with Laws

Contractor shall comply with all applicable state, federal and local laws and ordinances in
providing the Services/Deliverables.

2.213 Jurisdiction

Any dispute arising from the Contract must be resolved in the State of Michigan. With respect to
any claim between the parties, Contractor consents to venue in Ingham County, Michigan, and
irrevocably waives any objections it may have to the jurisdiction on the grounds of lack of
personal jurisdiction of the court or the laying of venue of the court or on the basis of forum non
conveniens or otherwise. Contractor agrees to appoint agents in the State of Michigan to receive
service of process.

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2.220 Limitation of Liability 

2.221 Limitation of Liability

Neither the Contractor nor the State is liable to each other, regardless of the form of action, for
consequential, incidental, indirect, or special damages. This limitation of liability does not
apply to claims for infringement of United States patent, copyright, trademark or trade secrets; to
claims for personal injury or damage to property caused by the gross negligence or willful
misconduct of the Contractor; to claims covered by other specific provisions of this Contract
calling for liquidated damages; or to court costs or attorney’s fees awarded by a court in addition
to damages after litigation based on this Contract.

2.230 Disclosure Responsibilities 

2.231 Disclosure of Litigation

(a) Disclosure. Contractor must disclose any material criminal litigation, investigations or
proceedings involving the Contractor (and each Subcontractor) or any of its officers or directors
or any litigation, investigations or proceedings under the Sarbanes-Oxley Act. In addition, each
Contractor (and each Subcontractor) must notify the State of any material civil litigation,
arbitration or proceeding which arises during the term of the Contract and extensions, to which
Contractor (or, to the extent Contractor is aware, any Subcontractor) is a party, and which
involves: (i) disputes that might reasonably be expected to adversely affect the viability or
financial stability of Contractor or any Subcontractor; or (ii) a claim or written allegation of
fraud against Contractor or, to the extent Contractor is aware, any Subcontractor by a governmental
or public entity arising out of their business dealings with governmental or public entities. The
Contractor must disclose in writing to the Contract Administrator any litigation, investigation,
arbitration or other proceeding (collectively, “Proceeding”) within 30 days of its occurrence.
Details of settlements which are prevented from disclosure by the terms of the settlement may be
annotated. Information provided to the State from Contractor’s publicly filed documents
referencing its material litigation will be deemed to satisfy the requirements of this Section.

(b) Assurances. If any Proceeding disclosed to the State under this Section, or of which the State
otherwise becomes aware, during the term of this Contract would cause a reasonable party to be
concerned about:

(i) the ability of Contractor (or a Subcontractor) to continue to perform this Contract
according to its terms and conditions, or

(ii) whether Contractor (or a Subcontractor) in performing Services for the State is engaged
in conduct which is similar in nature to conduct alleged in the Proceeding, which conduct
would constitute a breach of this Contract or a violation of Michigan law, regulations or
public policy, then the Contractor must provide the State all reasonable assurances requested
by the State to demonstrate that:

(a) Contractor and its Subcontractors will be able to continue to perform this
Contract and any Statements of Work according to its terms and conditions, and

(b) Contractor and its Subcontractors have not and will not engage in conduct in
performing the Services which is similar in nature to the conduct alleged in the
Proceeding.

(c) Contractor must make the following notifications in writing:

(1) Within 30 days of Contractor becoming aware that a change in its ownership or officers
has occurred, or is certain to occur, or a change that could result in changes in the
valuation of its capitalized assets in the accounting records, Contractor must notify DMB
Purchasing Operations.

(2) Contractor must also notify DMB Purchasing Operations within 30 days whenever changes to
asset valuations or any other cost changes have occurred or are certain to occur as a result
of a change in ownership or officers.

(3) Contractor must also notify DMB Purchasing Operations within 30 days whenever changes to
company affiliations occur.

2.232 Call Center Disclosure

Contractor and/or all Subcontractors involved in the performance of this Contract providing call or
contact center services to the State must disclose the location of its call or contact center
services to inbound callers. Failure to disclose this information is a material breach of this
Contract.

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2.233 Bankruptcy

The State may, without prejudice to any other right or remedy, terminate this Contract, in whole or
in part, and, at its option, may take possession of the “Work in Process” and finish the Works in
Process by whatever appropriate method the State may deem expedient if:

     (a) the Contractor files for protection under the bankruptcy laws;

     (b) an involuntary petition is filed against the Contractor and not removed within 30 days;

     (c) the Contractor becomes insolvent or if a receiver is appointed due to the Contractor’s
insolvency;

     (d) the Contractor makes a general assignment for the benefit of creditors; or

          (e) the Contractor or its affiliates are unable to provide reasonable assurances that the
Contractor or its affiliates can deliver the services under this Contract.

Contractor will fix appropriate notices or labels on the Work in Process to indicate ownership by
the State. To the extent reasonably possible, materials and Work in Process must be stored
separately from other stock and marked conspicuously with labels indicating ownership by the State.

2.240 Performance 

2.241 Time of Performance

(a) Contractor must use commercially reasonable efforts to provide the resources necessary to
complete all Services and Deliverables according to the time schedules contained in the Statements
of Work and other Exhibits governing the work, and with professional quality.

(b) Without limiting the generality of Section 2.241(a), Contractor must notify the State in a
timely manner upon becoming aware of any circumstances that may reasonably be expected to
jeopardize the timely and successful completion of any Deliverables/Services on the scheduled due
dates in the latest State-approved delivery schedule and must inform the State of the projected
actual delivery date.

(c) If the Contractor believes that a delay in performance by the State has caused or will cause
the Contractor to be unable to perform its obligations according to specified Contract time
periods, the Contractor must notify the State in a timely manner and must use commercially
reasonable efforts to perform its obligations according to the Contract time periods
notwithstanding the State’s failure. Contractor will not be in default for a delay in performance
to the extent the delay is caused by the State.

2.242 Service Level Agreements (SLAs)

(a) SLAs will be completed with the following operational considerations:

(i) SLAs will not be calculated for individual Incidents where any event of Excusable Failure
has been determined; Incident means any interruption in Services.

(ii) SLAs will not be calculated for individual Incidents where loss of service is planned
and where the State has received prior notification or coordination.

(iii) SLAs will not apply if the applicable Incident could have been prevented through
planning proposed by Contractor and not implemented at the request of the State. To invoke
this consideration, complete documentation relevant to the denied planning proposal must be
presented to substantiate the proposal.

(iv) Time period measurements will be based on the time Incidents are received by the
Contractor and the time that the State receives notification of resolution based on 24x7x365
time period, except that the time period measurement will be suspended based on the
following:

1. Time period(s) will not apply where Contractor does not have access to a physical
State Location and where access to the State Location is necessary for problem
identification and resolution.

2. Time period(s) will not apply where Contractor needs to obtain timely and accurate
information or appropriate feedback and is unable to obtain timely and accurate
information or appropriate feedback from the State.

(b) Chronic Failure for any Service(s) will be defined as three unscheduled outage(s) or
interruption(s) on any individual Service for the same reason or cause or if the same reason or
cause was reasonably discoverable in the first instance over a rolling 30 day period. Chronic
Failure will result in the State’s option to terminate the effected individual Service(s) and
procure them from a different vendor for the chronic location(s) with Contractor to pay the
difference in charges for up to three additional months. The termination of the Service will not
affect any tiered pricing levels.

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(c) Root Cause Analysis will be performed on any Business Critical outage(s) or outage(s) on
Services when requested by the Contract Administrator. Contractor will provide its analysis within
two weeks of outage(s) and provide a recommendation for resolution.

(d) All decimals must be rounded to two decimal places with five and greater rounding up and four
and less rounding down unless otherwise specified.

(e) SLAs will not be in effect during the Start Up Transition period. The SLAs will also not be in
effect during a grace period of the first 180 days after the Services Rendered start date of
Contract Year One.

(f) The maximum level of SLA credits that can be assessed per contract year is limited as follows:

	 	 	 	 	 	 	 	 	 
	 

	 	i)
	 	Contract Year One
	 	$	500,000.00	 
	 

	 	ii)
	 	Contract Year Two
	 	$	750,000.00	 
	 

	 	iii)
	 	Contract Year Three
	 	$	1,000,000.00	 
	 	 	iv)	 	Maximum limit on SLA credits for subsequent option years will be negotiated as
part of that contract option year.

2.243 Liquidated Damages

It is acknowledged that an Unauthorized Removal will interfere with the timely and proper
completion of the Contract, to the loss and damage of the State, and that it would be impracticable
and extremely difficult to fix the actual damage sustained by the State as a result of any
Unauthorized Removal. Therefore, Contractor and the State agree that in the case of any
Unauthorized Removal in respect of which the State does not elect to exercise its rights under
Section 2.152, the State may assess liquidated damages against Contractor as specified below.

For the Unauthorized Removal of any Key Personnel designated in the applicable Statement of Work,
the liquidated damages amount is $25,000.00 per individual if the Contractor identifies a
replacement approved by the State under Section 2.060 and assigns the replacement to the Project to
shadow the Key Personnel who is leaving for a period of at least 30 days before the Key Personnel’s
removal.

If Contractor fails to assign a replacement to shadow the removed Key Personnel for at least 30
days, in addition to the $25,000.00 liquidated damages for an Unauthorized Removal, Contractor must
pay the amount of $833.33 per day for each day of the 30 day shadow period that the replacement Key
Personnel does not shadow the removed Key Personnel, up to $25,000.00 maximum per individual. The
total liquidated damages that may be assessed per Unauthorized Removal and failure to provide 30
days of shadowing must not exceed $50,000.00 per individual.

2.244 Excusable Failure

Neither party will be liable for any default, damage or delay in the performance of its obligations
under the Contract to the extent the default, damage or delay is caused by government regulations
or requirements (executive, legislative, judicial, military or otherwise), power failure,
electrical surges or current fluctuations, lightning, earthquake, war, water or other forces of
nature or acts of God, delays or failures of transportation, equipment shortages, suppliers’
failures, or acts or omissions of common carriers, fire; riots, civil disorders; strikes or other
labor disputes, embargoes; injunctions (provided the injunction was not issued as a result of any
fault or negligence of the party seeking to have its default or delay excused); or any other cause
beyond the reasonable control of a party; provided the non-performing party and its Subcontractors
are without fault in causing the default or delay, and the default or delay could not have been
prevented by reasonable precautions and cannot reasonably be circumvented by the non-performing
party through the use of alternate sources, workaround plans or other means, including disaster
recovery plans.

If a party does not perform its contractual obligations for any of the reasons listed above, the
non-performing party will be excused from any further performance of its affected obligation(s) for
as long as the circumstances prevail. But the party must use commercially reasonable efforts to
recommence performance whenever and to whatever extent possible without delay. A party must
promptly notify the other party in writing immediately after the excusable failure occurs, and also
when it abates or ends.

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If any of the above-enumerated circumstances substantially prevent, hinder, or delay the
Contractor’s performance of the Services/provision of Deliverables for more than 10 Business Days,
and the State determines that performance is not likely to be resumed within a period of time that
is satisfactory to the State in its reasonable discretion, then at the State’s option: (a) the
State may procure the affected Services/Deliverables from an alternate source, and the State is not
be liable for payment for the unperformed Services/ Deliverables not provided under the Contract
for so long as the delay in performance continues; (b) the State may terminate any portion of the
Contract so affected and the charges payable will be equitably adjusted to reflect those
Services/Deliverables terminated; or (c) the State may terminate the affected Statement of Work
without liability to Contractor as of a date specified by the State in a written notice of
termination to the Contractor, except to the extent that the State must pay for
Services/Deliverables provided through the date of termination.

The Contractor will not have the right to any additional payments from the State as a result of any
Excusable Failure occurrence or to payments for Services not rendered/Deliverables not provided as
a result of the Excusable Failure condition. Defaults or delays in performance by Contractor which
are caused by acts or omissions of its Subcontractors will not relieve Contractor of its
obligations under the Contract except to the extent that a Subcontractor is itself subject to an
Excusable Failure condition described above and Contractor cannot reasonably circumvent the effect
of the Subcontractor’s default or delay in performance through the use of alternate sources,
workaround plans or other means.

2.250 Approval of Deliverables 

2.251 Delivery Responsibilities

Unless otherwise specified by the State within an individual order, the following must be
applicable to all orders issued under this Contract.

(a) Shipment responsibilities — Services performed/Deliverables provided under this Contract must
be delivered “F.O.B. Destination, within Government Premises.” The Contractor must have complete
responsibility for providing all Services/Deliverables to all site(s) unless otherwise stated.
Actual delivery dates will be specified on the individual purchase order.

(b) Delivery locations — Services will be performed/Deliverables will be provided at every State of
Michigan location within Michigan unless otherwise stated in the SOW. Specific locations will be
provided by the State or upon issuance of individual purchase orders.

(c) Damage Disputes — At the time of delivery to State Locations, the State must examine all
packages. The quantity of packages delivered must be recorded and any obvious visible or suspected
damage must be noted at time of delivery using the shipper’s delivery document(s) and appropriate
procedures to record the damage.
Where there is no obvious or suspected damage, all deliveries to a State Location must be opened by
the State and the contents inspected for possible internal damage not visible externally within 14
days of receipt. Any damage must be reported to the Contractor within five days of inspection

2.252 Delivery of Deliverables

Where applicable, the Statements of Work/POs contain lists of the Deliverables to be prepared and
delivered by Contractor including, for each Deliverable, the scheduled delivery date and a
designation of whether the Deliverable is a document (“Written Deliverable”), a good (“Physical
Deliverable”) or a Service. All Deliverables must be completed and delivered for State review and
written approval and, where applicable, installed according to the State-approved delivery schedule
and any other applicable terms and conditions of the Contract.

2.253 Testing

(a) Before delivering any of the above-mentioned Statement of Work Physical Deliverables or
Services to the State, Contractor will first perform all required quality assurance activities to
verify that the Physical Deliverable or Service is complete and conforms with its specifications
listed in the applicable Statement of Work or Purchase Order. Before delivering a Physical
Deliverable or Service to the State, Contractor must certify to the State that (1) it has performed
the quality assurance activities, (2) it has performed any applicable testing, (3) it has corrected
all material deficiencies discovered during the quality assurance activities and testing, (4) the
Deliverable or Service is in a suitable state of readiness for the State’s review and approval, and
(5) the Deliverable/Service has all Critical Security patches/updates applied.

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(b) If a Deliverable includes installation at a State Location, then Contractor must (1) perform
any applicable testing, (2) correct all material deficiencies discovered during the quality
assurance activities and testing, and (3) inform the State that the Deliverable is in a suitable
state of readiness for the State’s review and approval. To the extent that testing occurs at State
Locations, the State is entitled to observe or otherwise participate in testing.

2.254 Approval of Deliverables, In General

(a) All Deliverables (Physical Deliverables and Written Deliverables) and Services require formal
written approval by the State, according to the following procedures. Formal approval by the State
requires the State to confirm in writing that the Deliverable meets its specifications. Formal
approval may include the successful completion of Testing as applicable in Section 2.253, to be led
by the State with the support and assistance of Contractor. The approval process will be
facilitated by ongoing consultation between the parties, inspection of interim and intermediate
Deliverables and collaboration on key decisions.

(b) The State’s obligation to comply with any State Review Period is conditioned on the timely
delivery of Deliverables/Services being reviewed.

(c) Before commencement of its review or testing of a Deliverable/Service, the State may inspect
the Deliverable/Service to confirm that all components of the Deliverable/Service have been
delivered without material deficiencies. If the State determines that the Deliverable/Service has
material deficiencies, the State may refuse delivery of the Deliverable/Service without performing
any further inspection or testing of the Deliverable/Service. Otherwise, the review period will be
deemed to have started on the day the State receives the Deliverable or the Service begins, and the
State and Contractor agree that the Deliverable/Service is ready for use and, where applicable,
certification by Contractor according to Section 2.253.

(d) The State will approve in writing a Deliverable/Service after confirming that it conforms to
and performs according to its specifications without material deficiency. The State may, but is
not be required to, conditionally approve in writing a Deliverable/Service that contains material
deficiencies if the State elects to permit Contractor to rectify them post-approval. In any case,
Contractor will be responsible for working diligently to correct within a reasonable time at
Contractor’s expense all deficiencies in the Deliverable/Service that remain outstanding at the
time of State approval.

(e) If, after three opportunities (the original and two repeat efforts), the Contractor is unable
to correct all deficiencies preventing Final Acceptance of a Deliverable/Service, the State may:
(i) demand that the Contractor cure the failure and give the Contractor additional time to cure the
failure at the sole expense of the Contractor; or (ii) keep the Contract in force and do, either
itself or through other parties, whatever the Contractor has failed to do, and recover the
difference between the cost to cure the deficiency and the contract price plus an additional sum
equal to 10% of the cost to cure the deficiency to cover the State’s general expenses provided the
State can furnish proof of the general expenses; or (iii) terminate the particular Statement of
Work for default, either in whole or in part by notice to Contractor provided Contractor is unable
to cure the breach. Notwithstanding the foregoing, the State cannot use, as a basis for exercising
its termination rights under this Section, deficiencies discovered in a repeat State Review Period
that could reasonably have been discovered during a prior State Review Period.

(f) The State, at any time and in its reasonable discretion, may halt the testing or approval
process if the process reveals deficiencies in or problems with a Deliverable/Service in a
sufficient quantity or of a sufficient severity that renders continuing the process unproductive or
unworkable. If that happens, the State may stop using the Service or return the applicable
Deliverable to Contractor for correction and re-delivery before resuming the testing or approval
process.

2.255 Process For Approval of Written Deliverables

The State Review Period for Written Deliverables will be the number of days set forth in the
applicable Statement of Work following delivery of the final version of the Deliverable (and if the
Statement of Work does not state the State Review Period, it is by default five Business Days for
Written Deliverables of 100 pages or less and 10 Business Days for Written Deliverables of more
than 100 pages). The duration of the State Review Periods will be doubled if the State has not had
an opportunity to review an interim draft of the Written Deliverable before its submission to the
State. The State agrees to notify Contractor in writing by the end of the State Review Period
either stating that the Deliverable is approved in the form delivered by Contractor or describing
any deficiencies that must be corrected before approval of the Deliverable (or at the State’s
election, after approval of the Deliverable). If the State notifies the Contractor about
deficiencies, the Contractor will correct the described deficiencies and within 30 Business Days
resubmit the Deliverable in a form that shows all revisions made to the original version delivered
to the State.

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Contractor’s correction efforts will be made at no additional charge. Upon receipt of a corrected
Deliverable from Contractor, the State will have a reasonable additional period of time, not to
exceed the length of the original State Review Period, to review the corrected Deliverable to
confirm that the identified deficiencies have been corrected.

2.256 Process for Approval of Services

The State Review Period for approval of Services is governed by the applicable Statement of Work
(and if the Statement of Work does not state the State Review Period, it is by default 30 Business
Days for Services). The State agrees to notify the Contractor in writing by the end of the State
Review Period either stating that the Service is approved in the form delivered by the Contractor
or describing any deficiencies that must be corrected before approval of the Services (or at the
State’s election, after approval of the Service). If the State delivers to the Contractor a notice
of deficiencies, the Contractor will correct the described deficiencies and within 30 Business Days
resubmit the Service in a form that shows all revisions made to the original version delivered to
the State. The Contractor’s correction efforts will be made at no additional charge. Upon
implementation of a corrected Service from Contractor, the State will have a reasonable additional
period of time, not to exceed the length of the original State Review Period, to review the
corrected Service for conformity and that the identified deficiencies have been corrected.

2.257 Process for Approval of Physical Deliverables

The State Review Period for approval of Physical Deliverables is governed by the applicable
Statement of Work (and if the Statement of Work does not state the State Review Period, it is by
default 30 continuous Business Days for a Physical Deliverable). The State agrees to notify the
Contractor in writing by the end of the State Review Period either stating that the Deliverable is
approved in the form delivered by the Contractor or describing any deficiencies that must be
corrected before approval of the Deliverable (or at the State’s election, after approval of the
Deliverable). If the State delivers to the Contractor a notice of deficiencies, the Contractor
will correct the described deficiencies and within 30 Business Days resubmit the Deliverable in a
form that shows all revisions made to the original version delivered to the State. The
Contractor’s correction efforts will be made at no additional charge. Upon receipt of a corrected
Deliverable from the Contractor, the State will have a reasonable additional period of time, not to
exceed the length of the original State Review Period, to review the corrected Deliverable to
confirm that the identified deficiencies have been corrected.

2.258 Final Acceptance

Unless otherwise stated in the Article 1, Statement of Work or Purchase Order, “Final Acceptance”
of each Deliverable must occur when each Deliverable/Service has been approved by the State
following the State Review Periods identified in Sections 2.251-2.257. Payment will be made for
Deliverables installed and accepted. Upon acceptance of a Service, the State will pay for all
Services provided during the State Review Period that conformed to the acceptance criteria.

2.260 Ownership 

2.261 Ownership of Work Product by State

The State owns all Deliverables as they are works made for hire by the Contractor for the State.
The State owns all United States and international copyrights, trademarks, patents or other
proprietary rights in the Deliverables.

2.262 Vesting of Rights

With the sole exception of any preexisting licensed works identified in the SOW, the Contractor
assigns, and upon creation of each Deliverable automatically assigns, to the State, ownership of
all United States and international copyrights, trademarks, patents, or other proprietary rights in
each and every Deliverable, whether or not registered by the Contractor, insofar as any the
Deliverable, by operation of law, may not be considered work made for hire by the Contractor for
the State. From time to time upon the State’s request, the Contractor must confirm the assignment
by execution and delivery of the assignments, confirmations of assignment, or other written
instruments as the State may request. The State may obtain and hold in its own name all copyright,
trademark, and patent registrations and other evidence of rights that may be available for
Deliverables.

2.263 Rights in Data

(a) The State is the owner of all data made available by the State to the Contractor or its agents,
Subcontractors or representatives under the Contract. The Contractor will not use the State’s data
for any purpose other than providing the Services, nor will any part of the State’s data be
disclosed, sold, assigned, leased or otherwise disposed of to the general public or to specific
third parties or commercially exploited by or on behalf of the Contractor. No employees of the
Contractor, other than those on a strictly need-to-know basis, have access to the State’s data.
Contractor will not possess or assert any lien or other right against the State’s data.

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Without limiting the generality of this Section, the Contractor must only use personally
identifiable information as strictly necessary to provide the Services and must disclose the
information only to its employees who have a strict need-to-know the information. The Contractor
must comply at all times with all laws and regulations applicable to the personally identifiable
information.

(b) The State is the owner of all State-specific data under the Contract. The State may use the
data provided by the Contractor for any purpose. The State will not possess or assert any lien or
other right against the Contractor’s data. Without limiting the generality of this Section, the
State may use personally identifiable information only as strictly necessary to utilize the
Services and must disclose the information only to its employees who have a strict need to know the
information, except as provided by law. The State must comply at all times with all laws and
regulations applicable to the personally identifiable information. Other material developed and
provided to the State remains the State’s sole and exclusive property.

2.264 Ownership of Materials

The State and the Contractor will continue to own their respective proprietary technologies
developed before entering into the Contract. Any hardware bought through the Contractor by the
State, and paid for by the State, will be owned by the State. Any software licensed through the
Contractor and sold to the State, will be licensed directly to the State.

2.270 State Standards

2.271 Existing Technology Standards

The Contractor will adhere to all existing standards as described within the comprehensive listing
of the State’s existing technology standards at http://www.michigan.gov/dit.

2.272 Acceptable Use Policy

To the extent that Contractor has access to the State computer system, Contractor must comply with
the State’s Acceptable Use Policy, see http://www.michigan.gov/ditservice. All Contractor
employees must be required, in writing, to agree to the State’s Acceptable Use Policy before
accessing the State system. The State reserves the right to terminate Contractor’s access to the
State system if a violation occurs.

2.273 Systems Changes

Contractor is not responsible for and not authorized to make changes to any State systems without
written authorization from the Project Manager. Any changes Contractor makes to State systems with
the State’s approval must be done according to applicable State procedures, including security,
access and configuration management procedures.

2.280 Extended Purchasing

2.281 MIDEAL — DELETED — NOT APPLICABLE

2.282 State Employee Purchases — DELETED — NOT APPLICABLE

2.290 Environmental Provision

2.291 Environmental Provision

Energy Efficiency Purchasing Policy — The State seeks wherever possible to purchase energy
efficient products. This includes giving preference to U.S. Environmental Protection Agency (EPA)
certified ‘Energy Star’ products for any category of products for which EPA has established Energy
Star certification. For other purchases, the State may include energy efficiency as one of the
priority factors to consider when choosing among comparable products.

Environmental Purchasing Policy — The State of Michigan is committed to encouraging the use of
products and services that impact the environment less than competing products. The State is
accomplishing this by including environmental considerations in purchasing decisions, while
remaining fiscally responsible, to promote practices that improve worker health, conserve natural
resources, and prevent pollution. Environmental components that are to be considered include:
recycled content and recyclability; energy efficiency; and the presence of undesirable materials in
the products, especially those toxic chemicals which are persistent and bioaccumulative.

69

 

 
	 	 	 	 	 
	TERMS AND CONDITIONS

	 	CONTRACT NO. 071B9200147
	 	

The Contractor should be able to supply products containing recycled and environmentally preferable
materials that meet performance requirements and is encouraged to offer such products throughout
the duration of this Contract. Information on any relevant third party certification (such as Green
Seal, Energy Star, etc.) should also be provided.

Hazardous Materials:

For the purposes of this Section, “Hazardous Materials” is a generic term used to describe
asbestos, ACBMs, PCBs, petroleum products, construction materials including paint thinners,
solvents, gasoline, oil, and any other material the manufacture, use, treatment, storage,
transportation or disposal of which is regulated by the federal, state or local laws governing the
protection of the public health, natural resources or the environment. This includes, but is not
limited to, materials the as batteries and circuit packs, and other materials that are regulated as
(1) “Hazardous Materials” under the Hazardous Materials Transportation Act, (2) “chemical hazards”
under the Occupational Safety and Health Administration standards, (3) “chemical substances or
mixtures” under the Toxic Substances Control Act, (4) “pesticides” under the Federal Insecticide
Fungicide and Rodenticide Act, and (5) “hazardous wastes” as defined or listed under the Resource
Conservation and Recovery Act.

(a) The Contractor must use, handle, store, dispose of, process, transport and transfer any
material considered a Hazardous Material according to all federal, State and local laws. The State
must provide a safe and suitable environment for performance of Contractor’s Work. Before the
commencement of Work, the State must advise the Contractor of the presence at the work site of any
Hazardous Material to the extent that the State is aware of the Hazardous Material. If the
Contractor encounters material re3asonably believed to be a Hazardous Material and which may
present a substantial danger, the Contractor must immediately stop all affected Work, notify the
State in writing about the conditions encountered, and take appropriate health and safety
precautions.

(b) Upon receipt of a written notice, the State will investigate the conditions. If (a) the
material is a Hazardous Material that may present a substantial danger, and (b) the Hazardous
Material was not brought to the site by the Contractor, or does not result in whole or in part from
any violation by the Contractor of any laws covering the use, handling, storage, disposal of,
processing, transport and transfer of Hazardous Materials, the State must order a suspension of
Work in writing. The State must proceed to have the Hazardous Material removed or rendered
harmless. In the alternative, the State must terminate the affected Work for the State’s
convenience.

(c) Once the Hazardous Material has been removed or rendered harmless by the State, the Contractor
must resume Work as directed in writing by the State. Any determination by the Michigan Department
of Community Health or the Michigan Department of Environmental Quality that the Hazardous Material
has either been removed or rendered harmless is binding upon the State and Contractor for the
purposes of resuming the Work. If any incident with Hazardous Material results in delay not
reasonable anticipatable under the circumstances and which is attributable to the State, the
applicable SLAs for the affected Work will not be counted in Section 2.242 for a time as mutually
agreed by the parties.

(d) If the Hazardous Material was brought to the site by the Contractor, or results in whole or in
part from any violation by the Contractor of any laws covering the use, handling, storage, disposal
of, processing, transport and transfer of Hazardous Material, or from any other act or omission
within the control of the Contractor, the Contractor must bear its proportionate share of the delay
and costs involved in cleaning up the site and removing and rendering harmless the Hazardous
Material according to Applicable Laws to the condition approved by applicable regulatory
agency(ies).

Michigan has a Consumer Products Rule pertaining to labeling of certain products containing
volatile organic compounds. For specific details visit
http://www.michigan.gov/deq/0,1607,7-135-3310-4108-173523—,00.html

Refrigeration and Air Conditioning:

The Contractor shall comply with the applicable requirements of Sections 608 and 609 of the Clean
Air Act (42 U.S.C. 7671g and 7671h) as each or both apply to this Contract.

Environmental Performance:

Waste Reduction Program — Contractor shall establish a program to promote cost-effective waste
reduction in all operations and facilities covered by this Contract. The Contractor’s programs
shall comply with applicable Federal, State, and local requirements, specifically including Section
6002 of the Resource Conservation and Recovery Act (42 U.S.C. 6962, et seq.).

70

 

Attachment A, Price Proposal

A. Risk Sharing Based Per Prisoner Per Month (PPPM) Fee, Adjusted for Changing Populations

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
		 	 	 	 	 	 	 	 	 	 	 	 
		 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Year One	 	Year Two	 	Year Three
	 	 	Risk	 	Risk Share	 	Risk	 	Risk Share	 	Risk	 	Risk Share
	 	 	Share	 	Maximum	 	Share	 	Maximum	 	Share	 	Maximum
	Population for Billing Purposes	 	Target	 	Cap	 	Target	 	Cap	 	Target	 	Cap
	50,000 and Greater
	 	$	175.00	 	 	$	196.24	 	 	$	182.00	 	 	$	200.16	 	 	$	189.29	 	 	$	204.15	 
	49,000 to 49,999
	 	$	176.25	 	 	$	197.49	 	 	$	183.25	 	 	$	201.41	 	 	$	190.55	 	 	$	205.41	 
	48,000 to 48,999
	 	$	177.55	 	 	$	198.79	 	 	$	184.60	 	 	$	202.76	 	 	$	192.00	 	 	$	206.86	 
	47,000 to 47,999
	 	$	178.95	 	 	$	200.19	 	 	$	186.00	 	 	$	204.16	 	 	$	193.40	 	 	$	208.26	 

 

			
	*	 	Note that the inflationary increase of the target rate is 4% for future contract
years, while the inflationary increase for the cap is limited to 2% for future contract
years.
	 
	**	 	Note: The adjusted PPPM does not go into effect for shifted populations, such as
when a facility may close, and the population is moved to other facilities.

B. Risk Sharing Percentages Below the Target

	 	1.	 	Should the Actual Costs be below the Risk Share Target, the MDOC must receive 85%
of the amount between the Risk Share Target and the Actual Cost, and the Contractor must
receive the remaining 15%.

C. Risk Sharing Percentages Between the Target and the Cap.

	 	1.	 	Should the Actual Costs be up to, and including 9.0% above the Risk Share Target,
for this Tier the Contractor will absorb 15% of the difference between the Actual Costs
and the Risk Share Target, and the MDOC will absorb the remaining 85%.
	 
	 	2.	 	Should the actual costs be more than 9.0% above the target, up to the Risk Share
Maximum Cap, for this Tier the Contractor will absorb 30% of the excess costs, and the
MDOC will absorb 70%.
	 
	 	3.	 	Should the Risk Share Maximum Cap be reached, the Contractor must be responsible
for all costs above the Cap.

D. Medical Assistant Temporary Staff — Hourly Rate

     The Contract Year One hourly rate for the Contractor to provide temporary medical assistants is
$29.33.

E. Risk Share Assessment Methodology

	 	1.	 	See Appendix F for the detail of the Risk Share Assessment Methodology

F. Aetna Performance Guarantees

	 	1.	 	See Appendix G for the detail of the Aetna Performance Guarantees.

71

 

Attachment B — Service Level Agreements

	 	 	 	 	 
	INTRODUCTION
	 	 	73	 
	 

	MDOC SERVICE LEVEL AGREEMENTS (SLAs) OVERVIEW>>>
	 	 	73-75	 
	 

	SLA OUTCOME MEASURES AND PERFORMANCE INDICATORS:
	 	 	 	 
	 

	RECEIVING SCREENING
	 	 	76	 
	 

	HEALTH ASSESSMENT
	 	 	77	 
	 

	CHRONIC CARE CLINICS
	 	 	78	 
	 

	INFECTION CONTROL MANAGEMENT
	 	 	79	 
	 

	MEDICAL PROVIDER APPOINTMENT
	 	 	80	 
	 

	SPECIALTY SERVICES
	 	 	81	 
	 

	CREDENTIALING
	 	 	83	 
	 

	EMERGENCY / DISASTER PLAN
	 	 	84	 
	 

	ENCOUNTER DATA SUBMISSION
	 	 	85	 
	 

	TRAINING AND EDUCATION
	 	 	86	 
	 

	DISCHARGE PLANNING
	 	 	87	 
	 

	CONTINUOUS QUALITY IMPROVEMENT (CQI)
	 	 	88	 
	 

	SUMMARY OF SLA CREDITS
	 	 	89	 
	 

	SAMPLE COMPONENT AUDIT SCHEDULE
	 	 	92	 

72

 

INTRODUCTION

The Michigan Department of Corrections (MDOC) and the Contractor will work in collaboration to
develop a detailed plan which provides both a clearly defined process and measurable outcomes for
successful monitoring and resolution of performance issues, or Service Level Agreements (SLAs).
These SLAs will be annually reviewed and customized in partnership with the MDOC, reflecting the
specific issues, indicators, updates, operating characteristics and requirements which are unique
to this project while incorporating consistent “best practices” and industry standards.

AUDIT PROCESS

Utilizing the current standards published by the National Commission on Correctional Health Care
(NCCHC) as its foundation, a list of twelve core medical performance component SLAs have been
identified, to be reviewed and audited annually. Three of these SLAs will be audited each quarter.
Any SLA that falls below acceptable thresholds will automatically be audited again in the next
quarter to gauge progress and assure satisfactory recovery. A sample Quarterly Audit Schedule is
included at the back of this document.

An audit team consisting of the, MDOC staff designated by the Bureau of Healthcare Leadership team,
and the Contractor’s MP or designee will perform audits on the performance of Contractor services.
Each audit will be scheduled in advance, and may include the Contractor’s Regional Manager as
necessary. The Contractor and the MDOC will provide the audit team access to all medical/mental
health/pharmacy/dental records, logbooks, staffing charts, time reports, prisoner grievances, and
other requested documents as required to assess Contractor/MDOC performance. Such activities may be
conducted in institution’s clinic but will be conducted in a manner so as not to disrupt the
routine provision of prisoner healthcare. When necessary, MDOC custody and/or administrative
records will be utilized to establish facts or corroborate other information. All audits are
designed and performed in accordance with the following standards:

	 	•	 	The current healthcare Contract
	 
	 	•	 	American Correctional Association Standards (ACA)
	 
	 	•	 	National Commission on Correctional Health Care Standards (NCCHC)
	 
	 	•	 	State of Michigan Rules and Regulations
	 
	 	•	 	Michigan Department of Corrections Policies, Procedure, Formulary, and Medical Services
Advisory Committee Guidelines

General requirements applicable to all prisoners will be assessed via a data review of a
statistically appropriate sample, mutually agreed upon by the Contractor and the MDOC of the
prisoners’ concurrent health records at each institution. Other requirements relevant to a segment
of the prisoner population may be monitored by a higher percentage (up to 100%) of the records of a
sub-population (i.e., Special Needs or Chronic Care roster, pregnant prisoners, etc.).

The MDOC reserves the right to have the audit validated by their third party reviewer. Penalties
will be assessed after the third party reviewer validates compliance for areas where the third
party is requested and verification by the Chief Medical Officer (CMO) for areas not needing the
third party reviewer. The third party reviewer, as part of their review, will evaluate any related
MDOC staffing vacancies or other factors beyond the Contractor’s control to determine if they had a
significant impact upon the Contractor’s ability to meet the SLA, and shall take that into
consideration when determining the Contractor’s SLA compliance. The third party reviewer will
also, as part of their review, accept and evaluate additional information provided by the
Contractor, within the timelines of their review process.

73

 

TRANSITION PERIOD

Recognizing the complexity inherent in transitioning a new healthcare provider into an existing
correctional system, the amount of change required in clinical and administrative operations and
the need for the parties to agree upon a clear process and set of measures, an initial transition
period during which the parties put the components of the monitoring system in place, a “grace
period: of 180 days after the Contract Services “Go Live” date is allowed, prior to the
implementation of specific SLA Credits.

This does not mean that the performance monitoring process does not occur or is put on hold;
rather, this time period allows the parties to put in place and test-run the monitoring/audit and
corrective action processes and to make adjustments as needed.

COMPLETION OF AUDIT

At the conclusion of an audit, the team will share the preliminary results with the respective MDOC
and Contractor Regional Management staff. An exit interview shall be held with Site Senior Medical
Practitioner, Regional Managers and warden and/or designee regarding the audit results, wherein the
team shall provide final documents necessary for review.

Copies of completed audit documents will be provided to the Contractor’s Project Manager, MDOC
third party reviewer, and the MDOC designee. Necessary corrective action plans will be initiated by
the Contractor and/or MDOC HUM and communicated to the MDOC Chief Medical Officer, the HUM and the
Contractor’s Project Manager.

The Contractor may request review and reconsideration in the findings via appeal to the MDOC Chief
Medical Officer. The Contractor must specifically address each disputed finding and justification
for appealing such. The MDOC Chief Medical Officer will render a final decision on the appeal to
Contractor within 30 days of receipt.

CORRECTIVE ACTION PROCESS

Detailed Corrective Plans (CAP) will be developed and submitted to the MDOC CCI within 15 days to
address deficiencies when compliance thresholds are not met.

CAPs will be provided in a standardized format throughout the MDOC project and will specify the
following information:

	 	•	 	Compliance Criteria
	 
	 	•	 	Percent of Compliance
	 
	 	•	 	Specific description of deficiency
	 
	 	•	 	Time frame for corrective action
	 
	 	•	 	Owner responsible for corrective action
	 
	 	•	 	Completion Date

CAPs will be maintained on-site and will be reviewed and discussed as part of regularly scheduled
health unit meetings.

Documentation to support completion of corrective action will be provided to the HUM and the
Contractor’s Regional Manager.

THRESHOLD COMPLIANCE

For each element reviewed, an adjustment to compensation has been specified in the case of
non-compliance. MDOC shall withhold the monetary amount from the Contractor’s compensation for
substandard performance in the designated SLA areas. The Contractor will be notified in writing and
the appropriate deduction will be made in the next monthly payment following the expiration of the
appeal deadline.

74

 

The Contractor will implement a phased-in or tiered level of threshold compliance be utilized in
the initial stages of the audit process, allowing the corrective actions and operational
improvements to be implemented which will impact successive performance results. The thresholds
will be summed in aggregate for each indicator, however an additional penalty will be assessed for
each facility that falls below 70% in the first assessment period and below 80% in subsequent
assessment periods.

For example, the first assessment non-compliance threshold for each indicator may be placed at 75%,
with a Tier One penalty of $2000 each for non-compliance. For the initial non-compliance threshold
on any SLA credit will be assessed at the Tier One Level. Beginning with the second assessment, the
non-compliance threshold will be 85%, with a Tier Two penalty of $3000 each for non-compliance and
the intent to work towards 90-95% compliance. For the first 180 days of this process, for each
indicator, no SLA Credits will be assessed until the second indicator of non-compliance, at which
time the Tier Two penalty amount of $3000 will apply.

SLAs that are determined to fall below the compliance percentage will be re-evaluated during the
next quarterly audit. In the event they continue to fall below the threshold, the penalty amount
shall be double the original assessment.

The SLA Outcome Measures and Performance Guarantees outlines areas that are subject to adjustment
to the Contractor’s compensation. Objective performance criteria are subject to change at the
discretion of the MDOC in consultation with the Contractor. The Contractor shall be given a 180-day
notice to prepare for any new or changed criterion. Audits will begin 180 days from the effective
date of the contract with adjustments to compensation beginning 180 days from that date.

The Contractor anticipates meeting the contract requirements proposed by the MDOC as outlined in a
resulting contract, and will use the above SLAs in any case of non-compliance.

DEVELOPMENT OF ADDITIONAL SLAs

MDOC and the Contractor shall consider development of additional SLAs as appropriate which may
address areas such as:

	 	 	 	w Medical Records
	 
	 	 	 	w No-Show Follow-Up
	 
	 	 	 	w Use of Informed Consent
	 
	 	 	 	w Policies & Procedures
	 
	 	 	 	w Meetings & Reports
	 
	 	 	 	w Grievance Tracking
	 
	 	 	 	w Environmental Health & Safety
	 
	 	 	 	w Medical Waste
	 
	 	 	 	w Special Confinement
	 
	 	 	 	w Site Orientation
	 
	 	 	 	w Transfer Screenings
	 
	 	 	 	w Mental Health — Use of Restraints

75

 

SLA: RECEIVING SCREENING

Definition and Purpose of Auditing This Criterion

As per ACA / NCCHC standards, MDOC policy and procedures, and the contract, an initial receiving
screen shall be made on each new admission as soon as feasible, within 24 hours of their arrival at
designated intake facilities.

Elements of the Criterion

At any reception unit (new admissions) immediately upon receipt of a prisoner, a health care staff
member will perform a brief health screening to ensure timely continuity of care. This screening
will be composed of a review of all available medical records, and a brief interview of the
prisoner will be done to ensure attention to any obvious acute or contagious conditions requiring
care and any medications that must be provided or continued.

Indicators/Methodology/Acceptable Standard

1) Indicator: The receiving screening shall note the existence of any obvious acute or
contagious conditions requiring immediate referral for emergent or urgent care.

Methodology:

a. Review the medical record and county transfer forms.

b. Document on the appropriate encounter form in the medical record any obvious contagious
conditions that may require care and any medications that must be provided or continued.

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

2) Indicator: When a newly admitted prisoner arrives on medication, there shall be a
referral to a provider for continuity of care.

Methodology:

a. Review the prisoner’s medical record and the Physician’s/NP Orders.

b. If the prisoner was on medication when he/she arrived, there shall be a referral to a
provider documented in the medical record.

c. Continuation of medications as required is documented.

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

76

 

SLA: HEALTH ASSESSMENT

Definition and Purpose of Auditing This Criterion

As per the ACA / NCCHC standards and MDOC policy and procedures, an Initial Assessment by the
provider is required upon admission of all prisoners. The Initial Assessment shall include history
and hands on physical examination (including breast, rectal and testicular exams as indicated by
the patient’s gender, age, and risk factors), review of all receiving screen and lab results, and
initiation of therapy and immunizations when appropriate.

Elements of the Criterion

All new admissions at any reception facility will undergo health appraisals to include history and
physical examinations as well as appropriate admission testing as designated by policy.

Indicators/Methodology/Acceptable Standard

1) Indicator: Admission Testing shall be completed as required by MDOC policies.

Methodology: Review the Medical Record.

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

2) Indicator: Initial Health Assessment is completed by provider upon admission, but in no
case beyond 14 days post admission, in accordance with ACA / NCCHC Standards and MDOC policy and
procedures.

Methodology: Review the Medical Record for completion of appropriate forms.

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

77

 

SLA: CHRONIC CARE CLINICS

Definition and Purpose of Auditing This Criterion

In accordance with ACA / NCCHC standards and MDOC policies, prisoners with special medical
conditions requiring medication for indefinite time frames shall be evaluated for a Chronic Care
Clinic (CCC).

Elements of the Criterion

For CCC prisoners the following elements are reviewed: maintenance medication renewals, follow-up
appointment, and referrals.

Indicators/Methodology/Acceptable Standard

Indicators:

	 	1.	 	All prisoners who have been diagnosed with chronic hypertension, cardiac disease,
neurologic disease including seizure disorder or other diagnosis resulting in a disability,
endocrine disease including diabetes and thyroid disease, infectious disease including HIV
and Hepatitis C, pulmonary disease including asthma and COPD, and gastrointestional
disease will be evaluated by a Medical Provider every six months if in good control, every
three months if in fair control, and every month if in poor control.
	 
	 	2.	 	The MP evaluation will consist of a documented history and review of systems and
symptoms, appropriate physical exam for system involved, diagnosis update as necessary, and
treatment plan to include medication, appropriate diagnostic testing, referral to
specialists, follow-up MP appointments entered into the scheduling component, and
education. This evaluation will be documented in the EMR at the time of the visit.
	 
	 	3.	 	Medication prescriptions will include medication, dosage, number of 30 day refills and
expiration date. All chronic care medications (except short term medication such as
antibiotics) for each prisoner will be on the same schedule and expire on the same date,
and may be written in the EMR for a period of up to one year.
	 
	 	4.	 	The MP will indicate the date of the next MP appointment based on the degree of control
of the least controlled chronic care diagnosis. This date will be entered by the MP into
the scheduling component of the EMR.

Methodology: Review the prisoner’s medical record for chronic clinic visits.

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

78

 

SLA: Infection Control Management

Definition and Purpose of Auditing This Criterion

As per the current Contract, ACA / NCCHC Standards and MDOC Policies/Procedures, MDOC is
responsible for maintaining infection control.

Elements of the Criterion

TB skin tests (PPD) will be given annually to prisoners. Prisoners with a documented past positive
PPD will be exempt from the annual PPD, but must be informed about the symptoms of TB and evaluated
annually for pulmonary symptoms suggestive of TB by a nurse/physician. The annual encounter must be
documented on the appropriate medical record encounter form (flow sheet). A medical staff member
will counsel any prisoner who refused TB testing. This counseling will be documented on the
appropriate medical record encounter form. If he/she continues to refuse,the institution’s CQI/
Infectious Diseases Coordinator shall be notified. A healthcare staff member will counsel the
prisoner. Documentation of the refusal and the notification of the TB Coordinator will be made on
the TB Screening Refusal form. If he/she continues to refuse, the prisoner will be referred to the
MDOC QA Staff for action.

Indicators/Methodology/Acceptable Standard

Indicators:

	 	1.	 	MP evaluates all prisoners who have been referred due to positive TB test or signs of
active TB, draining wounds, physical sign that has the potential for being chicken pox,
herpes zoster, mumps or any other infectious disease that could result in the need for
quarantine the same day.
	 
	 	2.	 	The MP evaluation will consist of a documented history and review of systems and
symptoms, appropriate physical exam for system involved, diagnosis update as necessary, and
treatment plan to include medication, appropriate diagnostic testing, referral to
specialists, follow-up MP appointments entered into the scheduling component, and
education. This evaluation will be documented in the EMR at the time of the visit.

Methodology:

Review the prisoner’s medical record for documentation on the immunization record. Review
employee personnel record for proper documentation on immunization form.

Acceptable Standard: Threshold 100% (TB)

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

79

 

SLA: MEDICAL PROVIDER APPOINTMENT

Definition and Purpose of auditing this Criterion:

As per the current Contract and ACA / NCCHC standards, daily sick call shall be conducted at each
correctional facility by a Contractor MP.

Elements of the Criterion

The prisoner sick call request will be screened and assessed for non-emergent health problems by
qualified MDOC healthcare staff within 24 hours of receipt of request for healthcare on the proper
form. Sick call will be available Monday through Saturday (excluding holidays). The prisoner’s
request will be triaged by MDOC healthcare staff within 24 hours and prisoner will be seen by a
Contractor MP within 24 hours of the triage.

Indicators/Methodology/Acceptable Standard

Indicators:

	 	1.	 	MP evaluates all routine nursing referrals within five business days.
	 
	 	2.	 	MP evaluates all urgent nursing referrals within one business day.
	 
	 	3.	 	MP evaluates all emergent nursing referrals the same day.
	 
	 	4.	 	The MP evaluation will consist of a documented history and review of systems and
symptoms, appropriate physical exam for system involved, diagnosis update as necessary, and
treatment plan to include medication, appropriate diagnostic testing, referral to
specialists, and education. This evaluation will be documented in the EMR at the time of
the visit.
	 
	 	5.	 	The MP will review all diagnostic tests within two days of receipt at the facility or
EMR and document in the EMR any further recommended tests or changes in the treatment plan.

Methodology:

1. Review sick call documents to determine which prisoners were referred to the MP.

2. Review prisoner’s medical record to determine if referral was completed in accordance with
policy.

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

80

 

SLA: SPECIALTY SERVICES / CONSULTATIONS

Definition and Purpose of Auditing This Criterion:

As per the contract, ACA / NCCHC Standards and current Policy, the Contractor shall make referral
arrangements with Michigan licensed and Board Certified specialty physicians for the treatment of
those prisoners with health care problems that extend beyond the primary care specialty clinics
provided on-site.

Elements of the Criterion:

The Contractor will arrange for specialty care as medically needed. The consultation request will
be a part of the prisoner’s medical record. Documentation of all requests will be noted on the
appropriate forms. Requests for specialty care will be maintained and tracked in the NextGen EMR at
each institution, as well as in the prisoner’s medical record. All specialty consults will be
approved or denied by the Contractor within seven working days upon receiving request for
consultation. When possible, specialty care will be delivered at the prisoner’s parent institution
or regional facility. In no case shall a visit to a specialist be delayed for more than 30 days
from the date of request. Urgent specialty referrals will be handled within five working days.

The primary MP will review the consultation recommendation and document his/her response to the
consultant’s recommendations in the prisoner’s medical record within three days.

Indicators/Methodology/Acceptable Standard

Indicators:

	 	1.	 	All initial visits to a specialist shall occur within 30 days of the MP’s request.
	 
	 	2.	 	All follow-up visits to a specialist shall occur based on the recommendations of the
specialist.
	 
	 	3.	 	All prisoners who are not seen by the specialist within 30 days, shall be re-evaluated
by the MP every 30 days to determine if the medical condition is resolved, stable, or has
worsened. If the medical condition has worsened, the Medical Provider shall take action to
meet the medical needs of the prisoner in a timely manner.
	 
	 	4.	 	The MP evaluation will consist of a documented history and review of systems and
symptoms, appropriate physical exam for system involved, diagnosis update as necessary, and
treatment plan to include medication, appropriate diagnostic testing, referral to
specialists, follow-up MP visits entered into the scheduling component and education. This
evaluation will be documented in the EMR at the time of the visit.
	 
	 	5.	 	The MP will document all requests on the appropriate EMR screen.
	 
	 	6.	 	The MP will review all specialty care consultations within two business days of receipt
at the facility and document findings and further treatment plan in the EMR.

Methodology:

a. Review the prisoner’s medical record and the consult log to determine the date on which a
specialty consult was completed.

b. Documentation of all requests will be noted on the appropriate medical record encounter
form.

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

Indicator: Regarding Specialty Care/Consultation findings/recommendations, the provider
will review the consultant recommendations and document those findings in the medical record of the
respective prisoner.

81

 

Methodology:

a. Review the prisoner’s medical record for documentation of consultant’s findings /
recommendations

b. Review medical record for documentation by provider within three days of receipt of consultation
results.

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

82

 

SLA: CREDENTIALING

Definition and Purpose of Auditing This Criterion

As per the contract, ACA / NCCHC Standards and MDOC Policies/Procedures, the Contractor is
responsible for ensuring all health care personnel are appropriately licensed, registered or
certified in the state of Michigan to practice their respective discipline.

Elements of the Criterion

All health care will be performed as directed by personnel authorized to give such orders. Nurse
Practitioners and PA’s may practice within the limits of their training and applicable laws. All
physicians will be licensed to practice medicine in the state of Michigan; non-physician health
care personnel will be licensed, registered or certified in their respective discipline. All
licensed professionals will maintain an unrestricted license.

Indicators/Methodology/Acceptable Standard

Indicators:

All physicians, consulting physicians, nurse practitioners, physicians assistants, and allied
health personnel have on file at the institution documentation of a current unrestricted license or
certification to practice their respective discipline.

Methodology: Audit site personnel and credentialing files

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

83

 

SLA: EMERGENCY / DISASTER PLAN

Definition and Purpose of Auditing This Criterion

As per the contract, ACA / NCCHC Standards and MDOC Policies/Procedures, MDOC is responsible for
the development and implementation of an emergency/disaster plan to provide for the delivery of
health services in the event of a man-made or naturally occurring disaster. Disaster plan is to be
finalized within 60 days of contract award.

Elements of the Criterion

A medical emergency/disaster plan to provide for the delivery of health services which includes the
following key elements is in place:

	 	1.	 	Evacuation of infirmary patients
	 
	 	2.	 	Triage of casualties
	 
	 	3.	 	Use of emergency vehicles
	 
	 	4.	 	Periodic training of health services staff
	 
	 	5.	 	Practice drills which are coordinated with facility practice drills
	 
	 	6.	 	Key health care staff/health care professional recall roster
	 
	 	7.	 	Copy of plan furnished institutional warden/superintendent

Indicators/Methodology/Acceptable Standard

Indicators:

	 	1.	 	Emergency/disaster plan is developed and in place
	 
	 	2.	 	Emergency/disaster plan contains provision for all the key elements
	 
	 	3.	 	Plan is practiced at least annually in conjunction with facility drills
	 
	 	4.	 	Health services training records reflect periodic training on plan
	 
	 	5.	 	Current recall roster is in place
	 
	 	6.	 	Copy of emergency/disaster plan has been provided to the institutional
warden/supervision
	 
	 	7.	 	The MP will participate in facility emergency mobilizations.

Methodology:

Review emergency/disaster plan and related documentation attesting to availability of the
following:

	 	1.	 	Plan contains all key elements
	 
	 	2.	 	Plan has been practiced annually in conjunction with facility drills
	 
	 	3.	 	Health services training records reflect annual training on the plan
	 
	 	4.	 	Current recall roster is in place
	 
	 	5.	 	Copy of the plan has been provided to the warden/superintendent

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

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SLA: Electronic Claims/Encounter Submission

Definition and Purpose of Auditing This Criterion:

The purpose of this element is to ensure that the MDOC receives complete data related to prisoner
encounters to all the MDOC to effectively monitor the contract, review and trend costs.

Elements of the Criterion:

Acceptable monthly encounter data containing detail for each patient encounter provided by the
Contractor directly and by all providers receiving payment from the Contractor for services to
prisoners within 90 days of the date of service. The data must be submitted electronically into
the MDOC data warehouse.

Indicators:

	 	1.	 	The Contractor records are submitted by the 12th of the following month via
electronic media in HIPAA compliant format.
	 
	 	2.	 	Submission includes all patient encounters for both on-site and off-site services.
	 
	 	3.	 	The Contractor’s data passes all required data quality edits prior to acceptance into
the data warehouse. Data not accepted into the warehouse will not be used in any analysis
of compliance with service level agreements or deliverables.
	 
	 	4.	 	MDOC will not accept incomplete encounter data for inclusion into the MDOC data
warehouse and subsequent calculations.
	 
	 	5.	 	Stored data will be subject to regular and on-going quality checks as developed by the
MDOC.

Methodology:

	 	1.	 	The data will be electronically submitted to the data warehouse by the 12th
day of the following month.
	 
	 	2.	 	MDOC will provide feedback to the contractor for data that is not accepted.
	 
	 	3.	 	Contractor will correct and resubmit data until they receive acceptance by the MDOC.
	 
	 	4.	 	The assessment of the standard will occur with the first monthly attempt to submit the
date. The penalties will not be assessed for the first six months.

Acceptable Standard: Threshold 98%

Amount for failing to meet indicator: $10,000

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SLA: TRAINING AND EDUCATION

Definition and Purpose of Auditing This Criterion

As per the contract, ACA / NCCHC Standards and MDOC Policies/Procedures, the Contractor is
responsible for the provision of Medical Practitioner professional continuing education in
accordance with state of Michigan licensure requirements.

Elements of the Criterion

Each site Lead MP will be responsible for overseeing and approving training in the delivery of
health care to enable Contractor employees to respond to health-related situations. Such
in-service training will include but not be limited to response to emergency medical situations.
In-service training will be conducted at least monthly and will be mandatory for Contractor allied
health care personnel. MDOC Nursing staff may and Contractor allied health care personnel will
participate in the Contractor’s Monthly CEU Program which provides for twelve continuing education
credits annually. An approved Medical Library containing a variety of standard medical
publications will be available.

Indicators/Methodology/Acceptable Standard

Indicators:

	 	1.	 	Audit of Contractor employee training records and attendance rosters for attendance at
monthly in-service health related training.
	 
	 	2.	 	Audit of Contractor employee personnel records for participation in the Contractor’
Monthly CEU program.
	 
	 	3.	 	MPs attend MDOC mandatory annual training.
	 
	 	4.	 	MPs attend additional MDOC training as mutually agreed upon by MDOC and the Contractor.

Methodology:

Review of Contractor employee training records and attendance rosters for in-service training.
Review of Contractor employee personnel records for participation in CEU program.

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

86

 

SLA: DISCHARGE PLANNING

Definition and Purpose of Auditing This Criterion

As per the contract, ACA / NCCHC Standards and MDOC Policies/Procedures, MDOC is responsible of
providing sufficient medications and arranging for necessary follow-up health services before the
prisoner’s release to the community.

Elements of the Criterion

Upon notification of a prisoner’s imminent release, MDOC medical staff will review prisoner’s
medical record to determine if discharge planning is needed. If the prisoner is receiving
medication, Contractor medical staff will prescribe a sufficient supply of current medications be
provided upon release, to last until the prisoner can be seen by a community health care provider.
If the prisoner has critical medical or mental health needs, MDOC medical staff will make the
appropriate arrangements or referrals for follow-up services with community providers.

Indicators/Methodology/Acceptable Standard

Indicators:

	 	1.	 	Prisoners receiving medications upon release should have a sufficient supply of the
current medications to last until the prisoner can be seen by a community health care
provider.
	 
	 	2.	 	Prisoners with critical medical or mental health needs should have a referral for
follow up services with a community health provider.
	 
	 	3.	 	MPs write medication orders for discharge medications prior to prisoner parole or
discharge.

Methodology:

Review of medical records of released prisoners

Acceptable Standard: Threshold 85%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

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SLA: CONTINUOUS QUALITY IMPROVEMENT (CQI)

Definition and Purpose of Auditing This Criterion

As per the contract, ACA / NCCHC Standards and MDOC Policies/Procedures, within six months of
contract award the Contractor is responsible for the provision of a Continuous Quality
Improvement/Quality Assurance program to evaluate the health care provided to prisoners assigned to
both on site and off site facilities for quality, appropriateness and continuity of care. CQI
program includes provisions for independent CQI activities conducted by the MDOC.

Elements of the Criterion

The continuous quality improvement/quality assurance program will be system wide and will
incorporate a quality management program to provide for the following elements:

	 	1.	 	Continuous Quality Improvement
	 
	 	2.	 	Infection Control
	 
	 	3.	 	Peer Review
	 
	 	4.	 	Risk Management

Indicators/Methodology/Acceptable Standard

Indicators:

A Continuous Quality Improvement/Quality Assurance Committee as been appointed and meets at least
quarterly. The site’s Lead MP is the chairperson of the committee. Minutes of meetings will be
prepared, maintained and available for review. CQI meeting agenda will include but not be limited
to discussion of institutional CQI activities and documentation; Infection Control monitoring;
status of provider Peer Review Program; Risk Management issues and development of action plans to
correct deficiencies noted during the conduct of Quality Assurance Activities.

Methodology:

	 	1.	 	Review minutes of Continuous Quality Improvement/Quality Assurance Committee for key
elements of the program (Continuous Quality Improvement, Infection Control, Peer Review and
Risk Management).
	 
	 	2.	 	Audit documentation of CQI chart reviews and activities as well as the timely
implementation of action plans relating to deficiencies noted in the chart reviews.
	 
	 	3.	 	Review documentation of infection control activities. Audit instances of reportable
infections/diseases for compliance with appropriate statutes.
	 
	 	4.	 	Audit peer review activities. Peer reviews should be conducted on all physicians,
nurse practitioners, and physicians assistants no less than annually. Reviews should
include audits of the following: chart reviews, special needs prisoners’ treatment plans,
off site consultations, specialty referrals, emergencies and hospitalizations.
	 
	 	5.	 	Review mortality and morbidity reports and related documentation for appropriateness
and compliance with applicable Michigan state laws. Review institutional critical incident
reports relating to health services activities as well as corrective actions taken for
those determined to demonstrate deficiencies.

Acceptable Standard: Threshold 90%

Amount for failing to meet indicator: Tier One: $2000 Tier Two: $3000

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SUMMARY OF SLA CREDITS

Following is a summary of the indicators and compensation adjustment amounts for Objective
Performance Criteria. This listing does not represent the complete description or the Contractor’s
responsibility for the stated criteria; details are provided in the Performance Criteria and
Critical Indicators section of this Manual. The amounts indicated are the adjustment (deduction) to
compensation amounts that may be assessed to the Contractor as SLA Credits for substandard

performance by failing to meet indicator in the audit areas.

Basis for imposing damages/adjustments to compensation:

	 	 	 	 	 
	 

	 	ACA/NCCHC Accred
	 	Requirement for accreditation by the ACA and NCCHC
	 

	 	MDOC Policies
	 	Required per MDOC and institutional policies
	 

	 	Contract
	 	Written agreement between parties

89

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	ACA/	 	 	 	 	 	 	 	 	 	 
	NCCHC	 	MDOC	 	 	 	 	 	 	 	 
	Accred	 	Policies	 	Contract	 	Criteria	 	Indicators Update	 	Amount
	X

	 	X
	 	X
	 	Receiving Screening
	 	1. Note acute or contagious conditions
	 	$	2,000/$3000	 
	X

	 	X
	 	X
	 	 	 	2. Refer prisoners on medication to provider
for continuity of care
	 	$	2,000	 
	 
	X

	 	X
	 	X
	 	Health
	 	1. Admission testing as required within 14 days
	 	$	2,000	 
	X

	 	X
	 	X
	 	Assessment
	 	2. Initial health assessment is timely and
complies with ACA standards
	 	$	2,000	 
	 
	X

	 	X
	 	X
	 	Chronic Care Clinics
	 	1. CCC prisoners are scheduled for follow-up
appointments
	 	$	2,000	 
	 
	X

	 	X
	 	X
	 	Infection Control
	 	1. Annual tuberculin screening of prisoners
	 	$	2,000	 
	 

	 	 	 	 	 	Management
	 	2. Annual tuberculin screening of employees
	 	$	2,000	 
	 
	X

	 	X
	 	X
	 	Medical Provider

	 	1.    MP evaluates all routine nursing referrals
within five business days. 

	 	$	2,000	 
	X

	 	X
	 	X
	 	Appointment	 	2.    MP evaluates all urgent nursing referrals
within one business day.

	 	$	2,000	 
	 

	 	 	 	 	 	 	 	3.    MP evaluates all emergent nursing referrals
the same day.
	 	 	 	 
	 

	 	 	 	 	 	 	 	4.    The MP evaluation will consist of a
documented history and review of systems and
symptoms, appropriate physical exam for system
involved, diagnosis update as necessary, and
treatment plan to include medication,
appropriate diagnostic testing, referral to
specialists, and education. This evaluation
will be documented in the EMR at the time of
the visit.

	 	$

$	2,000

2,000	 
	 

	 	 	 	 	 	 	 	5.    The MP will review all diagnostic tests
within two days of receipt at the facility or
EMR and document in the EMR any further
recommended tests or changes in the treatment
plan.
	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	$	2,000	 
	X

	 	X
	 	X
	 	Specialty Service
	 	1. Timely visits to a specialist
	 	$	2,000	 
	X

	 	X
	 	X
	 	 	 	2. Provider review and documentation of
consultant recommendations
	 	$	2,000	 
	X

	 	X
	 	X
	 	Credentialing
	 	1. All health care providers will have on file
an unrestricted license to practice their
respective discipline.
	 	$	2,000	 
	X

	 	X
	 	X
	 	Emergency/Disaster

	 	1.    Emergency disaster plan developed and
implemented

	 	$	2,000	 
	X

	 	X
	 	X
	 	Plan	 	2.    Emergency/disaster plan contains provision
for all key elements

	 	$	2,000	 
	X

	 	X
	 	X
	 	 	 	3.    Plan is practiced at least annually in
conjunction with MDOC drills

	 	 	 	 
	X

	 	X
	 	X
	 	 	 	4.    Health services training records reflect
periodic training on plan

	 	$	2,000	 
	X

	 	X
	 	X
	 	 	 	5.    Current recall roster is in place
	 	 	 	 
	X

	 	X
	 	X
	 	 	 	6.    Copy of plan provided to the institutional
warden/supervision

	 	$	2,000	 
	 

	 	 	 	 	 	 	 	 	 	$	2,000	 

90

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	ACA/	 	 	 	 	 	 	 	 	 	 
	NCCHC	 	MDOC	 	 	 	 	 	 	 	 
	Accred	 	Policies	 	Contract	 	Criteria	 	Indicators Update	 	Amount
	X

	 	X
	 	X
	 	Electronic Claims

Encounter

Submission
	 	1.    The Contractor records are submitted by the
12th of the following month via
electronic media in HIPAA compliant format.

	 	$	10,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	2.    Submission includes all patient encounters
for both on-site and off-site services.

	 	$	10,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	3.    The Contractor’s data passes all required
data quality edits prior to acceptance into
the data warehouse. Data not accepted into
the warehouse will not be used in any analysis
of compliance with service level agreements or
deliverables.

	 	$	10,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	4.    MDOC will not accept incomplete encounter
data for inclusion into the MDOC data
warehouse and subsequent calculations.
	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	5.    Stored data will be subject to regular and
on-going quality checks as developed by the
MDOC.

	 	$	10,000	 
	 

	 	 	 	 	 	 	 	 	 	$	10,000	 
	X

	 	X
	 	X
	 	Training & Education
	 	1.    Audit of employee training records and
attendance rosters for attendance at monthly
in-service health related training.

	 	$	2,000	 
	 

	 	 	 	 	 	 	 	2.    Audit of employee personnel records for
participation in the Contractor’s Monthly CEU
program.

	 	$	2,000	 
	 

	 	 	 	 	 	 	 	3.    Evaluate Job Training for Correctional
Officers Health Services Program of
Instruction for key element contents.

	 	$	2,000	 
	 

	 	 	 	 	 	 	 	4.    Review attendance rosters of Correctional
Officer Health Services Training

	 	$	2,000	 
	x

	 	x
	 	x
	 	Discharge Planning
	 	1.    Sufficient supply of meds is provided to
prisoners upon release to last until
appointment with community provider

	 	$	2,000	 
	 

	 	 	 	 	 	 	 	2.    Prisoners with critical medical/mental
health needs should have referral for
follow-up with community provider

	 	$	2,000	 
	X

	 	X
	 	X
	 	Continuous Quality

Improvement (CQI)
	 	1.    CQI Committee is appointed and meets at
least quarterly, documenting minutes and
reviewing designated issues to be on each
agenda.

	 	$	2,000	 

91

 

PROPOSED SCHEDULE FOR QUARTERLY AUDITS

	 	 	 	 	 
	 	 	QTR	 	AUDIT ELEMENTS
	 
	 	 	 	 
	 

	 	1ST QUARTER
	 	Receiving Screening

Health Assessment

Chronic Care Clinics
	 
	 	 	 	 
	 

	 	2ND QUARTER
	 	Infection Control

Medical Provider Appointment

Specialty Services
	 
	 	 	 	 
	 

	 	3RD QUARTER
	 	Credentialing

Emergency/Disaster

Encounter Data
	 
	 	 	 	 
	 

	 	4TH QUARTER
	 	Training & Education

Discharge Planning

Continuous Quality

Improvement (CQI)

92

 

APPENDIX A

PHS President

State Correctior

93

 

APPENDIX B

REQUIRED REPORTS

	A.	 	To measure the Contractor’s accomplishments in the areas of access to care, utilization,
medical outcomes, prisoner satisfaction, and to provide sufficient information to track
expenditures and calculate future capitation rates the Contractor must provide the MDOC with
uniform data and information as specified by MDOC.

	B.	 	The Contractor must submit the following additional reports as specified in this section.
Any changes in the reporting requirements will be communicated to the Contractor at least 30
calendar days before they are effective unless state or federal law requires otherwise.

	C.	 	The Contractor must provide sufficient financial reporting to meet the intent of the State in
monitoring the contracts. The Contractor must meet with MDOC Bureau of Fiscal Management
representatives to develop and review the financial reporting requirements. The needs of the
MDOC may vary over time. The Contractor must assure that the reports submitted to the
Department are final and accurate. All financial reports submitted are subject to audit and
must reconcile to the financial statement and/or invoice submitted to the MDOC for the final
settlement of the contract year.

	D.	 	The Contractor must also report each individual contract year independently of each other.
Once the contract year is settled and closed, all prior year payments in the subsequent
contract years must be reported separately in a manner such that the closed and settled prior
year records are not changed or affected. Contract year will be reconciled per methodology in
Appendix F.

	E.	 	The Contractor must provide all data and/or reports requested by the State’s third party
auditor.

	F.	 	The Contractor must obtain MDOC’s written approval prior to publishing or making formal
public presentations of statistical or analytical material based on its prisoners other than
as required by this contract, statute or regulations.

	G.	 	The following reports will be submitted within ten business days after the end of the month,
unless otherwise required, such as driven by legislative reporting.

	 	1.	 	Critical Lab Results Summary Report I
	 
	 	2.	 	Report of Clinical Coverage by Facility
	 
	 	3.	 	MP Utilization Report including back logs, wait times, outlier reports, and productivity
	 
	 	4.	 	Quarterly telemedicine utilization reports documenting usage
	 
	 	5.	 	Quality Improvement Project Management Reports
	 
	 	6.	 	Secure Unit Occupancy Report
	 
	 	7.	 	Quality Assurance Report (Quarterly)
	 
	 	8.	 	Off Formulary Drug Utilization Report
	 
	 	9.	 	Specialty Utilization Referral Report
	 
	 	10.	 	Prosthetics, Physical Therapy, Occupational Therapy and Related Services Utilization
Report
	 
	 	11.	 	Dialysis Utilization Report
	 
	 	12.	 	Diagnostic Testing and Laboratory Utilization Report
	 
	 	13.	 	Emergency Room Utilization Report
	 
	 	14.	 	Inpatient Utilization Report
	 
	 	15.	 	Provider prescription practices against the MDOC formulary
	 
	 	16.	 	Annual Facility Audit Report (this is added as part of the SLAs)
	 
	 	17.	 	AETNA Reports Levels A through D

94

 

	 	18.	 	Other reports to be agreed upon by Contractor(s) and MDOC (the MDOC would
like to add a couple of additional reports; High Cost Cases, and Benchmarks against
other state contracts

	H.	 	Encounter Data Submission

	 	1.	 	The Contractor must submit encounter data containing detail for each patient
encounter reflecting services provided by the Contractor by month, on or before the
12th calendar day of the following month. Encounter records will be submitted
monthly via electronic media in a format as specified by MDOC to the MDOC data warehouse.
	 
	 	2.	 	Submitted encounter data will be subject to quality data edits prior to acceptance
into MDOC’s data warehouse. The Contractor’s data must pass all required data quality
edits in order to be accepted into MDOC’s data warehouse. Any data that is not accepted
into the MDOC data warehouse will not be used in any analysis, including, but not limited
to, rate calculations, DRG calculations, and risk score calculations. MDOC will not
allow Contractor to submit incomplete encounter data for inclusion into the MDOC data
warehouse and subsequent calculations.
	 
	 	3.	 	Stored encounter data will be subject to regular and ongoing quality checks as
developed by MDOC. MDOC will give the Contractor(s) a minimum of 30 calendar days notice
prior to the implementation of new quality data edits; however, MDOC may implement
informational edits without 30 calendar days notice. The Contractor’s submission of
encounter data must meet timeliness and completeness requirements as specified by MDOC.
The Contractor must participate in regular data quality assessments conducted as a
component of ongoing encounter data on-site activity.

	I.	 	Financial and Claims Reporting
	 
	 	 	Contractor must provide to MDOC monthly statements that provide information regarding paid
claims, aging of unpaid claims, and denied claims in the format specified by MDOC by month, on
or before the 15th calendar day of the following month. The MDOC may also require
monthly financial statements from Contractor.
	 
	J.	 	Litigation Reports
	 
	 	 	Contractor must submit annual litigation reports in a format established by MDOC, providing
detail for all civil litigation to which the Contractor or their subcontractor(s) are party.
	 
	K.	 	Data Certification Report
	 
	 	 	The Contractor’s CEO must submit a MDOC Data Certification form to MDOC that requires the
Contractor to attest to the accuracy, completeness, and truthfulness of any and all data and
documents submitted to the MDOC as required by the Contract.

95

 

	L.	 	Quality Assurance and Performance Improvement Assessment
	 
	 	 	The Contractor must perform and document an annual assessment of their QAPI program. This
assessment should include a description of any program completed and all ongoing QI activities
for the applicable year, an evaluation of the overall effectiveness of the program, and an
annual work plan. This work plan must be approved by the MDOC. The initial plan must be
submitted within 60 days of contract award, and then annually 60 days prior to the beginning of
the new contract year. The plan and updates must be approved by the MDOC Quality
Administrator. MDOC may also request other reports or improvement plans addressing specific
contract performance issues identified through site visit reviews, EQRs, focused studies, or
other monitoring activities conducted by MDOC.
	 
	M.	 	The Contractor must cooperate with MDOC in carrying out validation of data provided by the
Contractor by making available electronic medical records and a sample of its data and data
collection protocols. The Contractor must develop and implement corrective action plans to
correct data validity problems as identified by the MDOC.
	 
	N.	 	The State reserves the right to amend the Required Report list.

96

 

APPENDIX C

Continuous Quality Assurance Plan

The Contractor, PHS, in partnership with their sub-contactor Aetna, agrees to Contract requirements
for the Michigan Department of Corrections (MDOC) Quality Assurance Plan and will execute
Contractor’s and MDOC quality assurance programs for on-site and off-site services at the MDOC
facilities to ensure the safety of patients, health care staff, correctional colleagues and the
community. The Contractor’s Quality Assurance Plan may be updated and revised in conjunction and
consultation with the MDOC Quality Administrator and the MDOC CCI. Also, as noted in the Staffing
Plans, the Contractor will provide a Quality Improvement Director that will liaison with the MDOC
Quality Administrator and the MDOC Bureau of Health Care Leadership Team to review data and make
recommendations through routinely scheduled meetings. Committees in this plan will be joint MDOC
and Contractor committees. The MDOC Bureau of Health Care Services Leadership team will identify
the MDOC participants. MDOC Quality Assurance will approve all Quality Assurance Plan submissions
and revisions within 60 days of contract services start date, and then annually.

Continuous Quality Improvement (CQI) Program – On-site

The Contractor’s Continuous Quality Improvement Program based on the full participation and
cooperation of MDOC Civil Services Health Care staff, as well as MDOC Dental and Mental Health
subcontractor staff in the PHS CQI process. The Contractor’s CQI Program is dedicated to the
safety of patients, health care staff, correctional colleagues and the community. The Contractor’s
CQI program will fulfill national correctional healthcare standards while adapting to specific
state agency requirements and offers a systematic approach to monitoring, measuring and evaluating
Contractor services. Additionally, the Contractor’s CQI program is conducted in accordance with The
Federal Patient Safety & Quality Improvement Act of 2005 and applicable State Peer Review Laws. As
such, these CQI reviews are deemed confidential and privileged under state and federal law. By
continually critiquing the provision of services and implementing corrective action as appropriate,
the Contractor will facilitate adherence to recognized healthcare standards and improvements to
quality of care. The Contractor’s CQI program is based on concepts and practices outlined in
reports issued by the Institute of Medicine (IOM). It efficiently and effectively monitors
correctional health care services provided at Contractor’s facilities using the following
framework:

Six Integrated Components of CQI

Each component of the CQI plan will be reported in the quarterly quality assurance report.

1. Credentialing

The Contractor’s Credentialing Program is designed, implemented, and monitored to assure that
qualified, well trained, experienced, ethical and competent licensed providers are selected.
Initial practitioner applications for employment and annual PEER review evaluations are audited by
the Contractor’s Credentialing Committee to assure continued competency of our providers. URAC is a
nationally recognized nonprofit organization which promotes healthcare quality by accrediting
healthcare organizations. The Contractor has achieved URAC certification. With this
certification, the credentialing department confirms its commitment to quality and accountability.

97

 

2. Training and Education

The Contractor’s Training and Education Program will have an extensive scope of service. Programs
such as monthly continuing education self-study packets and emergency preparedness drills are
designed to meet the requirements of national correctional accrediting bodies.
The Contractor’s Training and Education department monitors the results of the site-based Quality
Improvement (QI) Program and develops educational programs and tools based upon identified needs.
Active participation in the Contractor’s Patient Safety Committee and QI committees also
contributes to the identification of site-specific needs. These needs are reviewed and educational
programs are developed as a result. This method benefits not only the individual site, but all
other sites that have similar needs or challenges. This is the motivating force behind our Training
and Education program. All Contractor sites will have access to all materials and educational
tools for clinical staff, correctional staff and patients via a number of avenues including the
customized website, MyPHS. This service is available to the Contractor’s administrative staff
located at the Michigan Regional Office on a 24/7 basis and contains the complete library of
resources provided by Contractor’s Training and Education program. Necessary information will be
disseminated to the site staff as needed. Entries include policy and procedure templates,
standardized forms, educational tools and programs for clinical staff, correctional staff,
prisoners and prisoner patients.

3. Utilization Management (UM)

The mission of the Contractor’s UM department is to provide appropriate care in the most cost
effective manner and setting. Ensuring that prisoners get appropriate services delivered by
qualified providers, within an appropriate timeframe, improves quality and assures efficient
utilization of resources and optimized utilization of on-site services. The Contractor’s UM
department will actively participate in the identification, tracking and trending of inpatient
sentinel events. The Contractor entered into a long-term agreement with McKesson Health Solutions
to use InterQual, a nationally recognized set of decision support tools, to evaluate medical
necessity and appropriate level of care for all imaging studies, outpatient procedures and elective
surgeries. This agreement allows the Contractor to provide consistent delivery of care across all
populations while providing impartial best practice parameters based on an individual prisoner’s
presentation. InterQual review is now offered as part of the Contractor’s UM program and is managed
by the Contractor’s State and Regional Medical Directors and by Certified Professionals in
Utilization Management and Utilization Review.

4. Infection Control

The purpose of the Contractor Infection Control Program is to establish principles and standards
for surveillance, prevention, diagnosis and effective treatment of communicable diseases within
correctional facilities. The Contractor works in concert with the MDOC and the local health
department in developing a community approach to infection control. The Contractor’s Infection
Control Program reflects standards of infection control in health services established by OSHA, the
NCCHC and ACA. The Contractor will incorporate their infection control program into the MDOC
Policies related to infection control (Control of Communicable Diseases).

Routine monitoring of general infection control principles, tuberculosis screening, identification
and management, biohazardous waste disposal, and blood borne pathogens safety is part of the
Contractor’s CQI Program. The Contractor’s CQI Program tracks each facility’s compliance with our
Infection Control Program.

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The Contractor’s Infection Control Program includes an Exposure Control Plan that describes staff
actions to be taken to prevent or minimize exposure to pathogens. The Contractor’s Exposure
Control Plan includes a Post-Exposure Prophylaxis (PEP) Kit which can be used for emergency
situations where exposure to potentially infectious agents has occurred and access to offsite care
is delayed (typically due to inclement weather, such as hurricanes and snowstorms). The PEP Kit
includes a decision tree of steps to assist in determining the type and risk of exposure, and a
plan of action for each type of exposure. The Contractor must incorporate their exposure control
plan into the MDOC Exposure control plan.

5. Disease Management

Disease Management is the concept of improving quality of care for individuals with chronic disease
conditions by preventing or minimizing the effects of a disease, or chronic condition, through
integrative care. Disease Management refers to the processes and people concerned with improving or
maintaining health in populations. Disease Management encompasses the treatment of common chronic
illnesses, and the reduction of future complications associated with those diseases.

The Contractor’s Disease Management program focuses on conditions such as Coronary Heart Disease,
Kidney Failure, Hypertension, Heart Failure, Diabetes, Asthma, Cancer, Depression, as well as other
common ailments. The underlying premise of Disease Management is that when the right tools,
experts, and equipment are applied to a population; resources can be provided more efficiently. The
objective is to ease the disease path, rather than cure disease. Improving quality of life and
activities of daily living are first and foremost. Improving cost is also an essential component

Some examples of tools used in Contractor’s Disease Management Program include web-based assessment
tools, clinical guidelines, health risk assessments, best practices, formularies, and numerous
other strategies, systems and protocols.

Specific Contractor disease management tools include, but are not limited to:

	§	 	Contractor’s Disease Management Manual – This manual, available on MyPHS, includes
Disease Monographs, Clinical Guidelines, Disease Monitoring Tools, Patient Education
Information, Correctional Officer Training Information and a Corrections Specific
Laboratory Formulary.
	 
	§	 	Contractor’s Mental Health Pharmacy Resource Manual
	 
	§	 	Contractor’s Pharmacy Resource Manual – The 2008 Pharmacy Resource Manual currently
consists of 11 Treatment Guidelines, 9 Medication Monographs, 7 Medication Conversion
Tables, Immunizations Schedule Recommendations and the Medication Formulary.
	 
	§	 	CHOICES: The Contractor’s Palliative Care and End of Life Program – This program is
highlighted by an Interdisciplinary Care Plan and includes Educational tools,
Assessment forms, and Psychosocial, Spiritual and Nursing Aspects of Palliative Care
assessment forms.
	 
	§	 	HIV and HCV Disease Monographs – These two disease management monographs focuses on the
primary care clinicians involvement in the management of these complex disease
entities.

6. Quality Improvement (QI)

The Contractor’s Quality Improvement process will examine negative as well as positive events to
improve the level of care. The Institute of Medicine (IOM) defines quality as:  The degree to
which health services for individuals and populations increase the likelihood of desired health
outcomes and are consistent with current professional knowledge. The Contractor’s QI program
approaches improvements by making systems more supportive. Instead of focusing on an individual
involved when a problem occurs, the Contractor will examine how to prevent recurrences of the
problem by fixing systems. The Contractor’s QI program is not just limited to problem areas, but
also addresses areas with good outcomes with the goal of making them even better. Best Practices
which are identified are shared with other Contractor facilities.

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Program Management

The Contractor’s Chief Medical Officer and Senior Vice President of Clinical Affairs, administers
the CQI program and serves as the CQI Committee Chairperson. The CQI Committee, which meets at
least once a month, is responsible for the development, implementation and oversight of the
Contractor’s CQI Program.

Members of the multi-disciplinary committee:

	§	 	Chief Medical Officer
	 
	§	 	President and CEO
	 
	§	 	Director of Quality Improvement
	 
	§	 	Vice President of Utilization Management
	 
	§	 	Vice President of Clinical Programs and Applications
	 
	§	 	General Counsel
	 
	§	 	Designated Regional Medical Directors on a rotational basis
	 
	§	 	Risk Management personnel

Positive reinforcement for the efforts and strategies that have been developed over the past five
years are identified in the above referenced article:

	§	 	Preexisting decision support
	 
	§	 	Patient Education
	 
	§	 	Change Management
	 
	§	 	Package of QI tools
	 
	§	 	Training in QI
	 
	§	 	Both doing and improving the work

Site Level QI Program

The Contractor has an established Site Level Quality Improvement Program (Site Level QI) that
monitors the healthcare delivery systems and processes at each site with the goal of measuring and
improving the health care delivered in the facility. All Contactor facilities are required to
participate in the program and it is anticipated that State Civil Servant, Dental and Mental Health
subcontractors, as well as local facility security staff will actively participate as required by
NCCHC standards. The Contractor will work with the Quality Assurance Office and the Bureau of
Health Care Services to form teams and get them functioning.

The objectives of the Site Level QI Program are:

	§	 	To ensure timely treatment and continuity-of-care;
	 
	§	 	To ensure compliance with national standards and contract requirements;
	 
	§	 	To ensure continuity of care for patients with special health care needs;
	 
	§	 	To develop and implement action plans when opportunities for improvement are identified;
	 
	§	 	To monitor the cost effectiveness of the health care services delivered;
	 
	§	 	To develop, record and collate QI data to enhance health care systems;
	 
	§	 	To support Contractor Clinical Initiatives.

Committee

The Contractor has designed its Site Level QI Program to emphasize the importance of a
site-specific quality improvement process guided by a multidisciplinary committee. This committee,
which is chaired by the site medical director, includes representation and/or input from each
health care discipline (medical, mental health, dental, pharmacy and nursing) and the MDOC Health
Unit Manager (HUM). The Contractor will work with Quality Assurance office and the Bureau of
Healthcare Services to establish the committee members.

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The multidisciplinary QI committee, which meets at least quarterly, or as stipulated by NCCHC
standards, identifies and addresses clinical and correctional issues. Issues such as off-site
transports, sick call schedules, intake flow, infection control, collaboration with community
providers for additional services, training and education requirements are a few of the day-to-day
challenges of operating a correctional facility, which, when addressed in a codified program, can
define positive results. Reports and recommendations from the committee will be forwarded to
MDOC’s Bureau of Healthcare Services Leadership Team and the Contractor’s management team for
consideration.

Annual Review

An annual review, performed by the Contractor’s designated staff and participants identified by the
MDOC Bureau of Healthcare Services and Quality Assurance on a rotational basis, of:

	§	 	access to care,
	 
	§	 	receiving screening,
	 
	§	 	health assessment,
	 
	§	 	continuity of care (sick call, chronic disease management, discharge planning),
	 
	§	 	infirmary care,
	 
	§	 	nursing care,
	 
	§	 	pharmacy services,
	 
	§	 	diagnostic services,
	 
	§	 	mental health care (including substance abuse, as appropriate),
	 
	§	 	dental care,
	 
	§	 	emergency care and hospitalizations,
	 
	§	 	policies and procedures,
	 
	§	 	all deaths,
	 
	§	 	sentinel events,
	 
	§	 	critiques of disaster drills,
	 
	§	 	environmental inspection,
	 
	§	 	prisoner grievances and
	 
	§	 	infection control.

Summary Review

An annual summary review of the site specific QI program is done to ensure:

	§	 	Completion of a minimum of one process quality improvement study per year.
	 
	§	 	Completion of a minimum of one outcome quality improvement study per year.
	 
	§	 	Implementation of corrective actions to solve identified problems.
	 
	§	 	Compliance with the responding and review of all mortality and non-mortality sentinel events.
	 
	§	 	Copies of site level QI meeting minutes are on file.

Requirements

With requirements for NCCHC and ACA accreditation interwoven throughout, compliance with the
Contractor Site Level QI Program plays a significant role in ensuring compliance for accreditation
by both the NCCHC and the ACA.

Four Essential Components of Site Level CQI

The four program components are as follows:

	1.	 	Sentinel Event Reporting
	 
	2.	 	Peer Review Program
	 
	3.	 	Process Quality Improvement Study
	 
	4.	 	Outcome Quality Improvement Study

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1. Site Level Sentinel Event Reporting

The QI program addresses both mortality and non-mortality sentinel events.  Sentinel events are
defined as an unexpected occurrence involving death or serious physical or psychological injury, or
the risk thereof.  Serious injury includes loss of limb or function.  The phrase “or risk thereof”
includes any process variation for which a recurrence would carry a significant chance of serious
adverse outcome.  Sentinel Events are reviewed by the Contractor’s Patient Safety Committee and the
MDOC Bureau of Healthcare Services Leadership team in accordance with the Federal Patient & Quality
Improvement Act of 2005 and as such are considered confidential.

The Sentinel events designated for automatic review include:

	§	 	Mortalities
	 
	§	 	Hospitalizations for any of the following diagnoses:   

	 	 	 	- Diabetic Ketoacidosis (DKA)
	 
	 	 	 	- Medication Error
	 
	 	 	 	- Heat Related Illness
	 
	 	 	 	- Ruptured Appendix
	 
	 	 	 	- Status Asthmaticus
	 
	 	 	 	- Suicide Attempt
	 
	 	 	 	- Other diagnosis as agreed upon by the MDOC CMO, QA, and the Contractor.

Sentinel Event Reviews are also performed upon events if an adverse serious adverse patient outcome
occurred. By concentrating on events rather than errors, the Contractor focuses on a broader range
of factors and reduces the inclination to attribute an event to a single cause or responsible
party. In the Contractor Site Level QI Program, the “pathophysiology” of adverse events is
investigated using a Root Cause Analysis. This process helps to identify true causes and
contributing factors or conditions. Corrective action plans are developed based upon an analysis of
the Patient Safety Committee’s findings.

A specific Review Form for each sentinel event has been developed, tested, deployed and refined
(the process itself is subject to QI principles) using specific case review data to identify the
most common areas that generate avoidable adverse outcomes. This data is used to update the QI
program, to focus the Contractor’s educational efforts and to improve processes of care. This data
will be reported on hard copy forms from the site level to the Contractor’s QI Director at the
Regional Office.

Mortalities

The joint MDOC/Contractor Patient Safety Committee (comprised of participants identified by MDOC
Bureau of Healthcare Services Leadership team and Contractor Administration) conducts Mortality
Reviews on all prisoner patients who expire while in custody at correctional institutions where
Contractor is responsible for providing health care. This includes patients who expire while housed
in alternative locations such as hospitals and nursing homes.  The Contractor Patient Safety
Committee also reviews the mortalities of prisoner patients who expire shortly after release from
custody. This includes, but is not limited to, prisoner patients who are released from custody and
expire while still in the hospital. 

The Mortality Review evaluates the health care services provided, focusing on opportunities to
improve systems and the quality of care. It also identifies variations in the systems and processes
established to provide care and identify opportunities for improvement in these areas.

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Mortality Review be initiated by the site Medical Director the first day at the facility
following the death. The completed Contractor Mortality Review form is then sent to the
Regional Medical Director, Contractor/MDOC Patient Safety Committee, and the MDOC CMO.
Significant findings from Patient Safety Committee Mortality Reviews are communicated to the
medical leadership of the facility and MDOC Central Office.  The Contractor Patient Safety
Committee makes recommendations for plans of action when opportunities for improvement are
identified.   Mortality Reviews conducted by the Contractor Patient Safety Committee are part
of the Contractor Corporate QI Program.   

Medication Errors

The Contractor uses the medication error index established by the National Coordinating Council for
Medication Error Reporting and Prevention. Medication errors are reported to the Site Level QI
Committee. Medication errors designated for review in the QI Program include:

	§	 	E – An error occurred that may have contributed to or resulted in temporary harm to the patient and required
intervention.
	 
	§	 	F – An error occurred that may have contributed to or resulted in temporary harm to the patient and required initial or
prolonged hospitalization.
	 
	§	 	G – An error that may have contributed to or resulted in permanent patient harm.
	 
	§	 	H – An error occurred that required intervention necessary to sustain life.
	 
	§	 	I – An error occurred that may have contributed to or resulted in the patient’s death.

The Contractor will make the following available to the MDOC and it is anticipated that MDOC
nursing and medication administration staff will participate in the reporting of such events.

Medication Safety Program

The Contractor Medication Safety Program is designed to assist sites in the development and
implementation of safe medication practices. The medication error component of the program is
based on the program established by the National Coordination Council for Medication Error and
Prevention (NCC MERP). The Contractor Medication Safety Program addresses the following areas.

	§	 	Pharmacy and Therapeutics – The Contractor in conjunction with
MDOC has an established Pharmacy and Therapeutics (P&T) committee
responsible for reviewing pharmaceutical utilization practices to
ensure that medications are used appropriately. The Contractor’s
internal P&T committee is multidisciplinary and includes pharmacy
representation from Maxor Correctional Pharmacy Services (Maxor
CPS). Through the formulary review process the Contractor’s
internal P&T committee evaluates medication therapy based on
efficacy, safety and cost parameters. The Site Level QI committee
addresses site-specific P&T issues. The MDOC P&T committee
includes its current health care and pharmaceutical contractors.
	 
	§	 	Education – The Contractor anticipates that staff education
related to pharmaceuticals and medication systems is provided to
MDOC nursing staff during the orientation process and reviewed at
least annually.
	 
	§	 	The PHS QI Resource Manual includes information on various aspects
of the Medication Safety Program that can be used to facilitate
the education process.
	 
	§	 	Medication Refusals –Prisoners have the right to refuse prescribed
therapies, including medications; therefore, MDOC facilities have
established policies and procedures that address refusals of
treatment and medications so that such refusals can be
appropriately discouraged, which should include nurse counseling
during the medication round and referral to the Medical
Practitioner as necessary.

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	§	 	Verbal Orders – Verbal orders are reviewed and countersigned by a
physician in accordance with applicable state laws within 72
hours.
	 
	§	 	Site-Specific QI Activities – In addition to the requirements
outlined in the Contractor’s policy, the Contractor’s Medication
Safety Program requires each contract site to establish and
maintain a site-specific program addressing medication safety. The
Contractor’s Regional Managers will work with the MDOC HUM to
establish these site specific procedures.
	 
	§	 	Psychotropic Medication Reviews – As a function of the Medication
Safety Program, the Contractor performs periodic quality
improvement reviews on patients prescribed psychotropic
medications. The purpose of the review is to evaluate the
appropriateness of psychotropic medication therapy as supported by
information documented in the prisoner’s medical record.
Recommendations will be shared with the MDOC HUM and the Mental
Health providers.
	 
	§	 	Continuing Education – A CEU on Preventing Medication Errors is
part of the Contractor’s 30-day clinical staff orientation
program.

2. Peer Review Program

The Contractor has established a standardized peer review process to facilitate the evaluation of
physicians who provide service in contracted facilities. The peer review is designed to evaluate
both the appropriateness of the care provided by the physician and compliance with the requirements
of their position description. The Peer Review Program is under the authority of the Contractor’s
Chief Medical Officer/Senior Vice President of Clinical Services, and includes standardized forms
for evaluating administrative responsibilities, provided in physician sick call, chronic care, and
the infirmary setting. Peer Review is also used as part of the Contractor’s re-credentialing
process. The Contractor’s State Medical Director will provide direction and leadership for the
Peer Review Program and chart review process. The Regional Medical Directors, or other appropriate
physician designee, will perform peer review for the Site Medical Director, while the Site Medical
Director is responsible for performing peer review for staff physicians. Benchmarking, the process
of providing a practitioner with feedback regarding their performance relative to that of their
peers, is an important part of Peer Review.

3. Site Level Process Quality Improvement Study

Contractor facilities with an average daily population (ADP) greater than 500 are required to
complete at least one Site Level Process Quality Improvement Study annually. This study examines
the efficiency of the health care delivery process at the facility. Completed studies are discussed
at the monthly Site Level QI Committee meeting. The MDOC Quality Administrator will approve all
studies.

To identify a process that may benefit from a Process Improvement Study, the Contractor reviews a
variety of sources including the Contractor’s Web-based QI screens, accreditation audits, and
information from QI committee meetings.

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4. Site Level Outcome Quality Improvement Study

Contractor facilities with an ADP greater than 500 are also required to complete at least one Site
Level Outcome Quality Improvement Study annually in accordance with NCCHC Standards. The study
requires the input and cooperation of the local MDOC HUM and all necessary health and mental health
staff. This study examines the efficiency of the health care delivery process at the facility.
Completed studies are discussed at the monthly Site Level QI Committee meeting.
Outcome quality improvement studies examine whether expected outcomes of patient care were
achieved. An example of such a study would be measuring the effectiveness of the chronic disease
program in achieving control of the patient’s disease. Each facility receives a copy of the
Contractor’s QI Program Manual, which includes a sample QI plan, committee meeting agenda and a
variety of monitoring forms designed to review systems and processes related to medical, mental
health and dental care. The Quality Administrator and the Contractor’s Director of QI will review
and approve all Quality Screen Tools and Studies.

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Aetna Quality Management (QM) Program – Off-site

The Contractor’s sub-contractor, Aetna, contractually requires providers to comply with their
current quality management (QM) and utilization management policies and procedures. In addition,
participating physicians serve on regional Quality Advisory committees, including an MDOC
representative, to review and offer advice on clinical quality programs, guidelines, studies,
indicators, and communications. Aetna also provides input to the QM program, annual work plan, and
annual QM program evaluation.

Provider Quality

Aetna continuously profiles provider performance as part of the quality management process.
Aetna’s claim databases allow network managers and local medical directors to analyze trends in
provider utilization (both over and under-utilization), with the intent of educating to improve
performance, and locate opportunities for improving the delivery of medical services. Aetna
combines utilization and unit-cost metrics of performance with clinical effectiveness measures of
performance.

Individual Practitioner Performance

The Aetna credentialing/recredentialing process is designed to evaluate the qualifications of
individual practitioners who participate with Aetna. This is done prior to a practitioner joining
the network and then ongoing on a periodic two or three-year cycle, as required by regulatory
agencies and accrediting organizations.

Aetna systematically monitors clinical care and service activities that are applicable to a large
portion of the membership. Specific issues related to member complaints, potential quality of care
concerns, or other issues of professional competence and conduct that adversely affect or could
adversely affect the health or welfare of a member, may be considered by a peer review committee at
any time between recredentialing cycles. These are formally monitored at least every six months
between recredentialing cycles for practitioner-specific trends. Potential quality of care
concerns are investigated and referred to the peer review committee for action as indicated.

Aetna supports the use of nationally recognized metrics and currently have several programs for
measuring and rewarding individual practitioner performance. These include Performance Networks
(Aexcel) and pay-for-performance programs. Aetna utilizes metrics from various nationally
recognized organizations such as the National Quality Forum (NQF), National Committee for Quality
Assurance (NCQA), Centers for Medicare & Medicaid Services (CMS) and Agency for Healthcare Research
and Quality (AHRQ). Aetna is also involved in collaborative work with CMS, AHRQ, specialty
societies, America’s Health Insurance Plans, and the Ambulatory Quality Alliance to further
identify consistent reporting metrics and guidelines.

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Pay-For-Performance Program

Aetna’s national pay-for-performance program includes a performance-based component of compensation
that gives physicians and hospitals the opportunity to earn reward payments based on recognized
clinical effectiveness and efficiency measures. Measures are based, as much as possible, on
externally validated measures such as those endorsed by the National Quality Forum, Ambulatory
Quality Alliance, National Committee for Quality Assurance, the Centers for Medicare and Medicaid
Services (CMS), as well as from Bridges to Excellence, The Leapfrog Group and Care Focused
Purchasing.

Episode Treatment Groups

Aetna Integrated Informatics utilizes Symmetry Health Data Systems’ Episode Treatment Groups
software to stratify providers by efficiency and uses Episode Treatment Groups software for both
their broad network and Performance Network. The Aetna data warehouse contains the claims data
that Aetna analyzes with this efficiency software tool. Aetna Integrated Informatics uses industry
accepted clinical practices guidelines to create clinical effectiveness measures (e.g., NCQA
guidelines for beta blocker use after a heart attack, HEDIS measures for breast cancer screening
and cervical cancer screening, and AHRQ’s inpatient safety measures in an adverse event rate).

When measuring the actual performance of individual provider offices, Aetna first adjusts for
prisoner differences, such as age, gender, region, plan type, and illness severity. Otherwise, the
performance of some providers who care for a sicker population might appear below average when
calculating the scores. Aetna can profile physician performance and generate reports that include
rates use by service (utilization), as well as associated patient outcomes. Examples of services
that they profile:

	 	§	 	Physician office visits
	 
	 	§	 	Inpatient
	 
	 	§	 	Outpatient
	 
	 	§	 	Emergency room
	 
	 	§	 	Aggregate pharmacy
	 
	 	§	 	Disease-specific services
	 
	 	§	 	Procedure-specific services
	 
	 	§	 	Diagnostic imaging
	 
	 	§	 	Laboratory tests

Aetna can compare treatment continuums for similar cases or conditions to determine the more
effective courses of care and those physicians responsible for implementing the more and less
effective treatments, based on outcomes. This analytical approach applies to care delivered to
prisoners in all Aetna medical plans; unlike an approach of tracking PCP or specialist referral
rates, which would not consider care delivered to prisoners in our many plans that do not require
referrals and which Aetna therefore does not typically implement.

Results from Episode Treatment Groups analyses are used internally; however, at the network level,
medical directors or provider relations staff may share results with providers on a one-on-one,
as-needed basis.

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Claims Data Analysis

Network managers and local medical directors, MDOC, and their third party reviewer have access to
claims data that help them analyze trends in provider utilization (under and over), review CPT code
patterns by physician and identify providers who might require performance improvement. Each
region has an assigned medical director to assist in the review of claims as needed. Aetna medical
directors review those claims that merit in-depth analysis. Medical directors have access to
specialists for consultation and peer/specialty matched reviews when indicated.

Clinical Information Lists

Selected Members’ Clinical Information lists were developed by Aetna Integrated Informatics to
provide PCPs with actionable information for reviewing members’ treatment and compliance with
treatment. PCPs may access the lists on our secure website for physicians, hospitals and other
health care professionals at www.aetna.com/provider. Based on widely accepted standards of
treatment, the lists profile patients in a practice that have asthma, diabetes, or cardiac
conditions, and who may benefit from an adjustment to their therapy or review for medication
compliance. The lists also identify members with potential drug interactions or polypharmacy that
may affect their health.

Network Level Quality

Aetna annually evaluates administrative data for HEDIS-like measures, with data reported in
aggregate by region and nationally. Results are compared to previous performance and goals to
assist in development of improvement plans.

Medical Network Trend Operating Report

Aetna’s approach is to rigorously evaluate medical costs and identify opportunities to manage
medical cost and trend. The overall approach is called MENTOR (Medical Network Trend Operating
Report), and it looks at medical costs from both medical cost categories and medical condition
perspectives. Aetna analyzes medical costs by product on regional and local-market levels and
compare costs from one year to the next. Local-market unit costs and utilization results are
reviewed by medical cost categories such as ambulatory care, hospitalizations, emergency room
visits and pharmacy costs. Aetna evaluates each market’s actual results against plan by the
medical cost categories. If a variance is identified, the market develops corrective action plans.

Aetna also analyzes medical costs by condition across the continuum of care and across markets.
This end-to-end analysis also seeks to identify opportunities to better manage medical costs and
improve health outcomes. Conditions with the greatest potential for positively impacting costs and
improving outcomes are selected for analysis.

Internal Clinical Quality

Aetna has an ongoing process of monitoring internal quality at least annually. Aetna regularly
conducts internal mock accreditation reviews, patient management inter-rater reliability audits,
and reviews of denial and appeal processing. The Aetna Quality Management (QM) program focuses on
ongoing assessment and improvement of clinical care and services. Aetna prepares an annual QM
program evaluation, which provides a comprehensive summary of completed and ongoing quality
improvement activities performed under the scope of our QM program, which enables Aetna to plan
activities for future years.

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Hospital Quality

Aetna relies on The Joint Commission review of the hospital. If the hospital is Joint
Commission-accredited, it meets our standards. If certain quality issues arise from the hospital,
Aetna has the right to suspend or terminate the arrangement or to immediately terminate the
agreement if a hospital loses its Joint Commission accreditation. Hospitals undergo a Joint
Commission accreditation review every three years.

If the hospital is not Joint Commission accredited, it must be accredited by the American
Osteopathic Association (AOA) or an accrediting entity deemed appropriate by Aetna policy, business
participation requirements and/or regulatory standards. If a hospital is not accredited, Aetna
requires that it is in good standing with Medicare and state licensing authorities.

Quality of Care Concerns

Aetna monitors potential quality of care concerns and identifies them for review and action on a
case-by-case basis. These potential quality of care concerns include, but are not limited to,
unexpected outcome/adverse events, surgery-related events, mental health/substance abuse concerns,
delay of care/service, extension of length of facility stay, and member-reported events. These are
tracked in the region where the provider practices.

Aetna tracks 21 indicators as potential quality of care concerns and review trended information.
Aggregate reports of quality of care concerns are presented to the regional Quality Oversight
committees.

Inpatient Performance Measurement System

Aetna Integrated Informatics has created the In-patient Performance Measurement System (IPMS),
which compares hospital and provider performance in the inpatient setting to case-mix adjusted
averages. IPMS is Aetna’s system to apply clinical logic to adjust for the severity of illness
within the hospitalized population and to provide indicators to evaluate performance associated
with adverse events and length of stay. This information is also included in Aetna’s Navigator
Hospital Comparison Tool on Aetna Navigator, the Aetna secure member website.

Aetna tracks adverse events through population-based trending analysis, as well as on an individual
patient level. Through proactive analysis, for instance, Aetna has found hospitals with high
nosocomial (hospital-acquired) infection rates. Aetna was able to bring these high rates to the
hospitals’ attention, and they reduced the infection rate through programmatic efforts.

Aetna Integrated Informatics has approximately 30 criteria for evaluating adverse events in the
inpatient setting, including:

	 	§	 	Sepsis
	 
	 	§	 	Meningitis
	 
	 	§	 	Skin Infection
	 
	 	§	 	Wound disruption
	 
	 	§	 	Coagulation complication
	 
	 	§	 	Hemorrhage

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	 	§	 	Pneumonia
	 
	 	§	 	Transfusion reaction
	 
	 	§	 	Embolism/Thrombosis
	 
	 	§	 	Postoperative decubitus ulcer
	 
	 	§	 	Ulcer or gastrointestinal bleeding
	 
	 	§	 	Surgical complication
	 
	 	§	 	Urinary complication
	 
	 	§	 	Respiratory complication
	 
	 	§	 	Fluid or electrolyte complication
	 
	 	§	 	Gastrointestinal complication
	 
	 	§	 	Anesthesia complication
	 
	 	§	 	Renal complication
	 
	 	§	 	Neurologic complication
	 
	 	§	 	Acute myocardial infarction
	 
	 	§	 	Cardiac arrest
	 
	 	§	 	Other cardiac complication
	 
	 	§	 	Birth canal injury
	 
	 	§	 	Other medical complication
	 
	 	§	 	Other infection complication

Aetna Integrated Informatics also tracks unplanned readmission rates, unexpected returns to surgery
during the same hospitalization, and medication errors.

Security Procedures

The Contractor and Aetna will assure compliance with MDOC Security Procedures for the above. The
Contractor staff and sub-contractors will work with the off-site providers in cooperation with
local facility security staff to assure all requirements are met.

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APPENDIX D

Utilization Management Program and Pre-Authorization Review Process

Contractor Utilization Management Program Summary

The Contractor Utilization Management (UM) Program effectively manages the provision of services to
avoid unnecessary off-site travel while ensuring that necessary consultations and off-site services
are provided. The Contractor UM Program is designed to provide value through hospital diversion
whenever medically appropriate and through the selection of providers with skills that increase
available on-site procedures and specialties. The Contractor’s commitment is to provide the right
care, at the right place, at the right time. The Quality Administrator will approve all studies.

The Contractor UM Program addresses the mechanisms that facilitate timely and appropriate
consultations, specialty referrals, and out-patient/in-patient hospitalizations. The success of
the UM Program is measured by outcome data, which demonstrates cost-effective, medically necessary
evidenced based health care for offenders.

The major components of the Contractor’s Utilization Management Program include:

	§	 	A credentialing program for professional staff that is accredited by Utilization Review
Accreditation Council (URAC).
	 
	§	 	Utilization of a Credentialing Verification Organization (CVO) that conducts primary source
verification and queries the National Practitioners Data Bank.
	 
	§	 	Pre-authorization with prospective review of inpatient care, continued stay review,
discharge planning and retrospective review and analysis.
	 
	§	 	Authorization of off-site care in the areas of specialty consultation, radiologic services
and outpatient surgery.
	 
	§	 	An automated system with available fields that allow for specific information codes that
provides customized reports for the client.
	 
	§	 	A Referral Review Tracking Log to monitor requests for off-site services from the time they
are requested from the on-site physician, all the way to when the on-site physician reviews
the results of the requested services. This log is monitored weekly by the on-site physician,
and monthly by the Regional Medical Director.
	 
	§	 	A Provider file for the authorization process for identifying preferred (contracted)
providers
	 
	§	 	A Daily census for all inpatient admissions for continuous on-line monitoring of care.
	 
	§	 	Events analysis
	 
	§	 	A panel of physician specialists for consultations in complicated cases.
	 
	§	 	A panel of physicians and case managers

Clinical Criteria for Utilization Management Cases

The Contractor has entered into a long-term agreement with McKesson Health Solutions to use
InterQual a nationally recognized set of decision support tools to evaluate medical necessity and
appropriate level of care for all our imaging studies, outpatient procedures and elective
surgeries. This agreement allows the Contractor to provide consistent delivery of care across all
populations while providing impartial best practice parameters based on an individual prisoner’s
presentation. InterQual review is now offered as part of our Utilization Management Program and is
managed by the Contractor’s Medical Directors and Certified Professionals. The Contractor uses
InterQual to review and document medical necessity for radiological procedures and one-day
surgeries. This criteria set is used by mature, well-managed health care systems in the commercial
market. It is important to note that the Contractor does not provide its physicians with any form
of bonus or financial incentive related to the level of services or medical treatment provided.

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The Contractor demonstrates value for clients while ensuring “best clinical outcome standards” for
prisoners.

The Contractor reviews and updates the UM manual annually. UM criteria are updated continuously
through the Contractor’s decision support system. InterQual updates its criteria-based web-enabled
utilization management product annually.

Provider Access to UM Criteria

Providers have four ways to access UM criteria:

	§	 	Direct communication with the Contractor’s Regional Medical Director
	 
	§	 	UM Manual
	 
	§	 	Disease Management Monographs
	 
	§	 	Clinical Evidence Summaries from InterQual

The Aetna External Review

Aetna offers an external review program, at no additional cost to MDOC, that offers the Contractor
and MDOC the opportunity to have certain coverage treatment plans reviewed by independent physician
reviewers.

The Aetna National External Review Unit refers the request to an independent review organization
(IRO) who chooses an appropriate independent reviewer (or reviewers if necessary or required by
applicable law) to examine the case. After all necessary information is submitted, external
reviews are generally decided within 30 days. The IRO is responsible for choosing a physician who
is board certified in the area of medical specialty at issue in the case.

Aetna has contracted with the following independent review organizations: IMEDECS and MCMC, LLC.
Both IROs use board-certified physician reviewers, are URAC accredited, and, when applicable, take
an evidence-based approach when reviewing coverage decisions. This service may be of assistance in
litigation disputes for the Contractor or MDOC.

Clinical Policy Bulletins

Aetna supports the development and use of clinical guidelines and clinical protocols to improve the
quality of medical care. Aetna’s process has been designed to adopt appropriate relevant
guidelines for the provision of preventive, acute, chronic and behavioral health services.

Aetna has adopted clinical preventive services recommendations from federal agencies and medical
professional organizations. These include the U.S. Preventive Services Task Force (USPSTF) and the
Centers for Disease Control and Prevention (CDC). In the absence of a definitive recommendation
from these sources, Aetna recognizes recommendations from other nationally recognized sources such
as the American Cancer Society (ACS), National Cancer Institute (NCI), American College of
Obstetricians and Gynecologists (ACOG), American College of Physicians, American Diabetes
Association, and American Academy of Pediatrics.

In addition, Aetna has mechanisms in place to evaluate the appropriate use of new medical
technologies. Aetna Clinical Policy Bulletins (CPBs) express their views regarding the
experimental and investigational status, cosmetic status, and medical necessity of medical and
behavioral health technologies (e.g., medical and surgical procedures, devices, pharmaceuticals,
biological products) that may be eligible for coverage.

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For this Contract, Aetna must direct the CPBs to only the Contractor’s and MDOC’s Medical
Directors, and may not distribute them directly to the MP’s until after they have been considered
and approved for distribution at the MSAC meetings. CPBs apply to all Aetna medical benefit plans
and are used in conjunction with the terms of the member’s benefit plan and other Aetna-recognized
criteria to determine health care coverage for members. CPBs are based on evidence in
peer-reviewed published medical literature, technology assessments and structured evidence reviews,
evidence-based consensus statements, expert opinions of health care providers, and evidence-based
guidelines from nationally recognized professional health care organizations and government public
health agencies.

Both new and revised CPB drafts undergo a comprehensive review process. This includes review by
Aetna’s Clinical Policy Council and external practicing clinicians, and approval by Aetna’s Chief
Medical Officer or his/her designee. Aetna’s goals for the CPBs are to make significant new
advances available to the Contractor and the MDOC as soon as appropriate, and to prevent unproved,
ineffective and obsolete technologies from receiving coverage.

Contractor Pre-Authorization Review Process

The Contractor, and its sub-contractor Aetna will collaborate in the Utilization Review (UR)
process.

The Contractor’s Medical Practicioners (MPs) performing UM functions will be licensed, credentialed
practitioners providing competent correctional health care services. The Contractor’s Michigan
State Medical Director will be directly responsible for prospective, concurrent and retrospective
review processes. Prospective training of clinicians in the system and process is ongoing and
focused.

Prospective review is performed for all non-emergent specialty services. Retrospective review is
performed benchmarking utilization in five categories, including hospitalizations, ER and ambulance
use, specialty office visits, specialty radiological procedures and one-day surgeries/procedures.
The Contractor’s State Medical Director will be supported by the Contractor’s Chief Medical
Officer, a Specialty Panel and 15 of the Contractor’s other Regional Medical Directors from various
other clients and locations.

Review of Medically Necessary Services

The Contractor hires Medical Practitioners with the knowledge and skill to diagnose and treat many
medical conditions within the confines of the correctional setting. Appropriate utilization of
diagnostic services and outpatient referrals is the responsibility of the Medical Practitioner
under the supervision of the Contractor’s Regional Medical Director. When services that have been
shown to produce the same or better outcomes when managed on-site or are considered to be
inappropriate, unnecessary or totally elective are requested, review by the Contractor’s Regional
Medical Director is required prior to authorization. This review process assures that all
appropriate services are reviewed and approved by a physician to assure that our patients receive
quality efficient health care in a timely manner. The MDOC CMO will make the final determination
regarding medically necessary services.

The Contractor uses a multi-tiered physician review process for non-emergent outpatient referral
requests. The on-site Medical Practitioner initiates a request and forwards it to Contractor’s
Regional Medical Director. If the Contractor’s Regional Medical Director concurs with the Medical
Practitioner, the service is authorized and the appointment is scheduled. In those instances
where, in the opinion of the Contractor’s Regional Medical Director, an alternative treatment plan
would be more appropriate, he/she confers with the on-site Medical Practitioner to establish the
most effective plan of care.

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The MDOC will have yet another level of UM Review in the State with the Contractor’s State Medical
Director. The Contractor’s State Medical Director will review all cases not resolved by the
Regional Medical Directors. The MDOC CMO will have final authority related to unresolved cases,
consistent with MDOC policies and procedures.

Process for Determining the Appropriate Place of Service

The Contractor’s Regional Medical Director or physician-level designee reviews all off-site
specialty physician visits, outpatient surgeries, and non-emergent admissions to the hospital
within five working days. Pre-certification of any off-site service is based upon two primary
factors: medical necessity and on-site facility capabilities. The Contractor’s managed care model
is built on the premise that the most effective management of medical care is provided by the
primary care physician on-site — a concept that the commercial HMO market espouses. For the
corrections field, the Contractor takes this model one step further and delivers the care on-site,
which delivers to prisoners medically necessary and clinically appropriate health care on-site.
The Contractor recognizes that prisoners do at times require off-site care. The Contractor’s
pre-certification process provides the mechanism for oversight of the medical appropriateness of
off- site care.

Aetna Concurrent Review

Concurrent review is an integral part of the utilization review program. The Contractor’s
sub-contractor, Aetna will use their electronic Total Utilization Management System (eTUMS) to
record, monitor and track concurrent review and discharge planning activity for inpatient
admissions.

The in-patient concurrent review process includes:

	 	§	 	Obtaining necessary information from appropriate facility staff, practitioners and
providers regarding the clinical status, progress and care being provided to prisoners
	 
	 	§	 	Assessing the clinical condition of prisoners and the ongoing provision of medical
services and treatments to determine benefit coverage
	 
	 	§	 	Notifying practitioners and providers of coverage determinations in the appropriate
manner and within the appropriate time frame
	 
	 	§	 	Identifying continuing care needs early in the inpatient stay to facilitate discharge
to the appropriate setting
	 
	 	§	 	Identifying prisoners for referral to covered specialty programs

Aetna has assigned a Single Point of Contact in Patient Management to coordinate the discharge
planning nurses working with Michigan hospitals for daily consolidated communication with the
Contractor’s Michigan Regional medical teams and documentation in the Appointment Center tracking
logs.

In performing concurrent review, Aetna’s in-patient care coordinator obtains information from
discussions with the hospital utilization review department, the attending physician, and/or the
hospital discharge planning team and compares this information to their nationally adopted
guidelines, as well as the Contractor’s medical guidelines and the security needs of MDOC.
Inpatient care coordinators consider the unique characteristics of each prisoner when using the
guidelines.

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As a standard practice, Aetna’s in-patient care coordinator makes telephone contact with the
attending Contractor on-site physician and/or the hospital’s utilization review department to
determine whether a continued in-patient stay is covered and to gather information for assessing
the prisoner’s discharge plans. In the vast majority of cases, telephone contact is an effective
means of communication with the physician or hospital for determining the acuity of the prisoner’s
condition and whether the services the prisoner is receiving are being rendered at the appropriate
level of care.

Milliman Guidelines for UR

The Aetna utilization review staff use evidence-based clinical guidelines from nationally
recognized authorities in conjunction with regional criteria and the terms of the member’s benefit
plan to guide utilization management decisions involving precertification, concurrent review,
discharge planning and retrospective review. Aetna staff consult guidelines from the following
sources: Milliman Care GuidelinesÒ (Seattle, WA: Milliman USA); internally
developed Clinical Policy Bulletins; national and local Medicare coverage policies, other Aetna
recognized criteria; and applicable state and federal guidelines. Aetna’s Oral and Maxillofacial
Surgery (OMS) unit uses the American Association of Oral and Maxillofacial Surgeons (AAOMS)
Parameters and Pathways 2000: Clinical Practice Guidelines for Oral and Maxillofacial Surgery
(ParPath 01) version 3.0 to guide utilization management decisions for oral and maxillofacial
surgery services.

Aetna reviews outpatient procedures using the same criteria or guidelines as inpatient procedures.
Decisions are made by licensed and experienced clinicians and professionals based on the above
criteria as well as the individual needs of the prisoner.

The Contractor’s utilization management criteria are reviewed annually for recommendations by Aetna
regional Quality Advisory Committee. Criteria are reviewed by the regional Quality Oversight
Committees for adoption.

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APPENDIX E

Claims Processing Process

The Contractor must provide claims processing, and will do so in partnership with their
subcontractor Aetna.

Following is an overview of the Aetna Claims Processing System, as well as Aetna Claims Accuracy
and Performance.

Aetna Claims Process

Claim Submission

The Aetna system allows all provider claims, including Coordination of Benefits claims, to be
submitted electronically. Claims can be transmitted directly to us through an Aetna-approved
vendor; the Aetna secure provider website; the Aetna direct-connect website,
www.aetnaedi.com; or via any number of clearinghouses.

When providers submit claims electronically, the Aetna claim processors receive system generated
edit alerts letting them know there are electronic claims in the system that need to be processed.

Paper claims addressed to Aetna claim P.O. boxes are routed to one of the Aetna imaging suppliers,
which perform the functions to open, date stamp, sort, and prep incoming mail.

Claims System and Workflow

Aetna uses a customized version of the Dun & Bradstreet system ClaimFacts®, which Aetna
calls Automatic Claim Adjudication System (ACAS). ACAS is a rules-based system that allows for
improved online availability, increased automatic adjudication, and scalability to handle projected
claim volume increases.

ACAS is an online, real-time system. It supports both automated and manual claims processing and
contains components for electronic claim intake, workflow management and imaging systems; as well
as our plan, member, provider, quality management and utilization management databases.

In accordance with Aetna’s First Claim Resolution Proactive Call program, processors will attempt
to contact the provider for any missing information (e.g., accident details, diagnosis, etc.). The
First Claim Resolution initiative substantially reduces the need to pend claims and avoids the
paperwork and delays associated with resubmission.

Ensuring Prompt Payment

In 2008 (as of 3/31/08), 90% of all claims received in Aetna’s New Albany, OH service center were
processed within 5.2 days of receipt. Provider EOBs and checks are aged and bulked in a schedule
allowing delivery within 24 days of the claim received date. The majority are sent on either a
weekly or biweekly schedule, and on a consistent day of the week determined by state location of
the provider.

Physicians

Aetna’s standard physician contract states that payment for services will be made within 30 days
(or less if required by applicable law or regulation) of actual receipt by Aetna of a clean claim.

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Hospitals

Aetna’s standard hospital contract states that payment for services will be made within 45 days (or
less if required by applicable law or regulation) of actual receipt by Aetna of a clean claim.

First Claim Resolution

Aetna has instituted a strategic initiative, First Claim Resolution. First Claim Resolution means
that wherever possible, Aetna rapidly resolves a claim from the first time it is submitted,
avoiding the rework, delays, and customer dissatisfaction associated with multiple submissions.
First Claim Resolution objectives are to process claims accurately the first time, improve customer
satisfaction through improved service delivery, and focus resources on regional and national
capabilities to support First Claim Resolution.

In support of the First Claim Resolution Program, Aetna implemented the Proactive Calls process.
For claims that are missing information (e.g., accident details, diagnosis, other coverage
information, etc.) processors will make proactive calls (attempt to contact the provider) for the
additional information.
To identify and resolve aged claims, Aetna’s claims system automatically produces a daily report of
internally pended claims. Supervisors use this report to monitor the progress of pending
situations.

Claim Accuracy Measures and Performance

Aetna uses the following categories to measure claim accuracy:

	 	§	 	Financial accuracy is measured by the dollar amount of claims paid accurately divided
by the total dollars paid. Aetna considers each underpayment and overpayment an error;
Aetna does not offset one by the other.
	 
	 	§	 	Payment incidence accuracy is measured by the number of correct payments divided by the
total number of payments audited.
	 
	 	§	 	Overall accuracy is defined as the number of claims with no errors (financial and
non-financial) divided by the total number of claims audited.
	 
	 	§	 	Coding accuracy is defined as any error in coding claim data, which does not
necessarily generate a payment error but adversely impacts data management reports.
Coding accuracy is determined by dividing the number of correct coding entries by the
total number of coding entries audited. Each coding entry represents a correct or
incorrect entry as compared with the total number of coding entries included within the
claim being audited.
	 
	 	§	 	Procedural accuracy measures the quality of overall claim handling procedures. Aetna
calculates procedural accuracy by taking the total number of procedures audited minus the
procedural errors, divided by the total number of procedures audited.

The following table represents Aetna claim accuracy goals and performance for their New Albany
Service Center, as of 3/31/08.

	 	 	 	 	 	 	 	 	 
	Measure	 	Goal	 	Actual Performance
	Financial Accuracy
	 	 	99	%	 	 	99.74	%
	Overall Accuracy
	 	 	95	%	 	 	99.36	%
	Payment Incidence Accuracy
	 	 	96	%	 	 	99.84	%
	Procedural Accuracy
	 	Not applicable.	 	 	99.98	%
	Coding Accuracy
	 	Not applicable.	 	 	99.99	%

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Claim Cost Control Measures

Aetna uses the following automatic system controls to judge the appropriateness of treatment and
charges, automatic and processor-driven.

	 	§	 	Review of confinements to compare the current claim to the precertification decisions
of the nurse and physician consultants. Discrepancies and noncertified confinements are
flagged and electronically referred to patient management staff for evaluation. The
patient management staff will use the same criteria in evaluating these confinements as
used in the pre-certification and concurrent review processes.
	 
	 	§	 	Review of services subject to Aetna’s out-patient precertification program. The system
presents a notice to the processor regarding approved authorizations. Discrepancies and
noncertified procedures are electronically referred to the patient management staff for
evaluation. The patient management staff will use the same criteria in evaluating these
procedures as that used in the precertification process.
	 
	 	§	 	Identification of providers participating in the Aetna networks with retrieval of
negotiated rates for automatic calculation of benefits (when applicable to the plan
design).
	 
	 	§	 	Reasonable and customary (R&C) controls for non-network providers (when applicable to
the plan design). Aetna’s R&C program covers surgery, surgical assistance, general
anesthesia, medical services (e.g., exams), X-rays, laboratory procedures, chiropractic
services, psychiatric or psychological services and vision care.
	 
	 	§	 	ClaimCheck software to detect unbundled, upcoded, and fragmented provider bills. Aetna
uses ClaimCheck to address claims in a broad range of services: surgical, surgical
assistance, medical (e.g., office care) and diagnostic services (e.g., X-ray, lab).
	 
	 	§	 	ClaimCheck software evaluates a claim containing multiple procedure codes (CPT and
HCPCS) on one date and alerts the processor to potential unbundling. ClaimCheck further
evaluates the claim and recommends the correct procedure coding and multiple surgery
percentages. ClaimCheck also recognizes potential cosmetic procedures, gender and age
discrepancies, obsolete codes and possible duplicates.

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	 	§	 	Treatment guides reviewing procedures to signal validity conflicts (e.g., gynecological
services for a male patient) and necessary treatment reviews (e.g., rhytidectomy which may
be cosmetic).
	 
	 	§	 	Duplicate bill edits comparing the types of service and service dates of new expenses
to the service codes and dates of previously processed expenses.

Also included in the Aetna automatic system controls is Aetna Standard Table, a claim system tool
that supports the Aetna Clinical Policy Bulletins (CPBs) across all products, claim processing
platforms, and can include any customer, benefit plan and state exceptions. Based on the CPT/HCPCS
and ICD-9 codes presented on a claim, the tool will automatically allow, deny or pend for review by
the Aetna Clinical Claim Review staff.

Aetna also utilize procedural, processor driven controls. While these are manual controls,
providers exhibiting a pattern contrary to the following guidelines may automatically be flagged in
the claims system for special handling.

Fraud and Abuse Program

Aetna subscribes to a zero tolerance policy on health care fraud. As a founding member of the
National Health Care Antifraud Association (NICAA), Aetna has been an industry leader in the fight
against health care fraud for many years.
Our Special Investigations Unit (SIU), comprised of 100 full-time employees, is responsible for the
Aetna health care fraud and abuse program.

The Aetna fraud program consists of:

	 	§	 	Identification – The Aetna SIU provides a national training program for our claim
processors. Most personnel in the Aetna customer service centers are trained to identify
potential fraudulent claims activity, and will refer suspect claims to the Special
Investigations unit for further investigation. The SIU maintains staff (fraud analysts)
attached to each claim processing service center throughout the country.
	 
	 	§	 	Investigation – The Aetna investigators use various techniques for performing
comprehensive reviews; including a complete review of present and prior billing practices
and the use of provider profiling computer systems.
	 
	 	§	 	Prosecution – Aetna refers suspected cases to law enforcement agencies and State
Insurance Fraud Bureaus (as required by law) for investigation and possible prosecution.
Aetna aggressively pursue full recovery of money lost due to fraud. Aetna addresses the
issue directly with the suspect provider, and will file civil action using outside
counsel, if necessary.

Provider

SIU uses the Fraud and Abuse Management System (FAMS) tool, which examines provider treatment and
billing behavior to identify potential fraud. Providers are profiled by peer group, specialty,
product, geography, etc. Profiles are typically based on 12 months of detail claims. FAMS has
identified approximately 300 cases per year. FAMS is the primary proactive detection tool used by
Aetna’s SIU and Aetna is recognized as the industry leader in the use of FAMS by IBM (the creator
and owner of FAMS).

The claims system also employs automated claim review software to identify and adjust for
unbundling of services and duplicate claim billings. Additional software, known as the Aetna
Standard Table (AST) is also used to identify diagnoses and procedures designated as inappropriate
according to Aetna clinical policy.

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The Aetna SIU is also made aware of cases of potential fraud through industry and law enforcement
contacts, state departments of insurance, medical review boards, the Aetna toll-free fraud hotline,
referrals from claim processors, e-mail from the Aetna public Internet mailbox and from members
responding to the toll-free number printed on the Aetna EOBs.
When fraud is suspected, a case is created and assigned to an SIU investigator. When the
investigator has substantiated an allegation of fraud, a flag is placed on the provider’s file
which triggers an edit informing claim processors that the provider is under investigation or
review for a specific billing impropriety.

Customer/Employee/Member

Aetna has a strong rapport with various law enforcement groups and receive frequent referrals from
them. Aetna also has a toll-free hotline that can be used by anyone. Aetna provides that
telephone number on business envelopes, health care spending account updates and EOBs.

Claims Personnel

Processors and other claim personnel are well informed about our fraud program. Continued fraud
education is a critical deterrent. Aetna claim personnel are aware of the sophistication of the
program and the extreme penalties for such activity.

Aetna internal controls include the following:

	 	§	 	Password and procedural limitations within the claims system
	 
	 	§	 	Security edits built into the claims system
	 
	 	§	 	A daily review of randomly selected claim files of every processor and individual with
access to the processing system
	 
	 	§	 	A toll-free compliance alert line which provides employees 7 day, 24 hour access to
report known or suspected acts of employee misconduct
	 
	 	§	 	Confirmation letters to randomly selected payees
	 
	 	§	 	An automated check auditing system for each bank-cleared check

Internal investigations involving employees, agents or vendors are the responsibility of the
Investigative Services Unit, located in Hartford, CT.

Provider Appeals Process

To initiate an appeal, providers may call the Provider Service Center where a provider service
representative begins the review process, or the provider may send a written appeal to Aetna.
Practitioners/providers have 180 days from receiving an initial benefit decision to submit a
request for review of a claim determination (unless state regulations or the provider contract
allow for more time).

A Claims Performance Guarantee from Aetna for the Contractor and the MDOC has been included in
Appendix G.

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APPENDIX F

Risk Share Reconciliation Methodology

The Contractor will maintain financial records and prepare financial statements specific to this
contract with the MDOC. The Contractor will charge to its contract with the MDOC all costs and
expenses associated with providing services described under this contract, consistent with its
accounting practices as applied to this and its other contracts. These charges are primarily
direct expenses (e.g. staffing and benefits, contracted providers, ancillary services, off-site
costs, etc.) but also include allocations for such matters as self-insurance plans consistent with
the allocation of overall plan expenses between all of its client contracts participating in the
respective plans.

The Contractor will use United States generally accepted accounting principles when preparing its
contract specific financial statements which require the use of accrual accounting. Accordingly,
financial statements prepared during the term of this contract and provided to MDOC will be
prepared using the accrual basis of accounting. Accrual basis accounting requires recording some
transactions using estimates which are adjusted to actual cost as the transactions are settled
(e.g. the cost of off-site care is initially recorded at an estimate, then adjusted to actual when
the claims are adjudicated).

The risk-sharing reconciliations prepared during the term of this contract will be prepared using
the contract specific financial statements except that instead of using the off-site services
expense calculated under the accrual method, the reconciliations will use the amount paid by the
Contractor for off-site services through the date of the invoice (e.g. – for the reconciliation
prepared for the quarter ending June and to be delivered to the MDOC by July 30th, the
reconciliation will reflect cash payments through approximately July 30th).

The Contractor will prepare preliminary contract year financial statements and the preliminary
contract year reconciliation of the Actual Costs as compared to the Risk Share Target
(collectively, the “Preliminary Financials”) as of 91 days of each contract year-end which will be
provided to the MDOC within 120 days of the contract year-end. This reconciliation period will
allow for most transactions that had been recorded using an estimated amount to be settled with any
corresponding adjustments reflected in Preliminary Financials.

MDOC and the Contractor recognize that 1) providers of off-site services have up to 365 days to
submit claims or 2) resolution of questions or disputes concerning a claim could occur beyond 91
days following the end of the contract year and therefore claims could be paid beyond the
preparation of the Preliminary Financials. Accordingly, the Contractor will prepare final contract
year financial statements and the final contract year reconciliation (collectively, the “Final
Financials”) as of 183 days of each contract year-end which will be provided to the MDOC within 198
days of the contract year-end. The only change that will occur from the Preliminary Financials to
the Final Financials will be to reflect the payment of any claims for off-site services that
occurred between the date of the Preliminary Financials and the Final Financials. Additionally at
the time it provides the Final Financials, the Contractor will provide the MDOC with an estimate of
outstanding claims for off-site services for the contract year which have not yet been paid by the
Contractor as of the date of the Final Financials. Any claims that are paid subsequent to 183 days
following the end of the contract year will be charged to the contract year in which they are paid.
The Contractor will prepare a report identifying for the MDOC claims charged to a contract year
subsequent to the contract year in which the services were provided.

MDOC’s third party reviewer may examine the Contractor’s Final Financials for each contract year,
including supporting documentation and records to independently verify the Actual Costs and its
calculation of any risk sharing amounts.

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Following are the captions that are currently reflected in the Contractor’s financial statements
and a brief description of each category:

SALARIES & BENEFITS

This category will include the costs of personnel assigned to the MDOC contract, including
those employed by professional corporations which are sub-contractors under the contract
and those located in the Regional Office. It will include their salaries and benefits,
including health insurance and workers compensation insurance which are currently
self-insured plans, the estimated cost of which the Contractor allocates across all
contracts participating in the plans. Lines items within this category are as follows:

Salaries

Fringe Benefits

Temporary Services

Temporary Services — Prof Corps

Salaries — Prof Corps

Fringe Benefits — Prof Corps

PROFESSIONAL SERVICES

This category will include the professional fees of contracted providers (not employed by
the Contractor or its sub-contractors) who provide services to the MDOC on either on-site.
Line items within this category are as follows:

Physician Fees

Subcontractors — Prof Corps

HOSPITALIZATION

This category will include the costs of off-site hospitalization services provided to the
MDOC prisoners. Line items within this category are as follows:

Hospitalization

ER and Ambulance

OUTPATIENT SERVICES

This category will include the costs of off-site outpatient services provided to the MDOC
prisoners. Outpatient Physician represents office visits. Outpatient One Day represents
one day surgery including professional fees. Line items within this category are as
follows:

Outpatient Physician

Outpatient Dialysis

Outpatient One Day

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AETNA NETWORK ACCESS FEE

This category represents the PPPM fee paid to Aetna for development of and access to its
provider network, resources of its Appointment Scheduling System and for claim
adjudication. This will include all fees paid to Aetna along with any refund of those fees
under the guarantees described in Appendix G.

DIAGNOSTIC SERVICES

This category will include the costs of diagnostic services provided to the MDOC prisoners.
Outpatient X-Ray represents diagnostic services provided on an off-site basis. X-Ray
On-Site represents the costs, if any, of providing x-ray services on-site. Line items
within this category are as follows:

Outpatient X-Ray

X-Ray-On-Site

Lab-On-Site

PHARMACEUTICALS

This category will include the costs of dialysis medications provided to the MDOC
prisoners. Line items within this category are as follows:

Pharmaceuticals

Pharmaceutical Returns/Credits

SUPPLIES

This category will include the costs of any supplies not provided by the MDOC but which are
necessary for the provision of care to the MDOC prisoners, if any. Line items within this
category are as follows:

Medical Supplies

OTHER

This category will include expenses incurred by the Contractor associated directly with the
contract with the MDOC, provision of services to its prisoners and employment of
individuals assigned to the contract to provide those services. This category will not
include any costs, including any allocations of costs, which are not directly related to
this contract and the services provided there under. Line items within this category are
as follows:

132

 

Administrative Expense

Telephone Expense

Classified Ads

Equipment

Travel

Legal Fees (does not include expenses

associated with professional liability claims)

Background Checks

Inservice Educ.

Dues and Subscriptions

Other Expense — Prof Corps

MANAGEMENT FEE

This category will include the Contractor’s fee for management of services under the
contract, which covers such required contract costs and support services as clinical
service initiatives, provider credentialing and peer reviews, provider training and
education support, human resource and benefit management, payroll and accounts payable
processing, accounting and reporting support, executive management and information
technology and support, which are not provided by individuals assigned directly to the
contract.

This fee will be calculated based on the population at a fixed PPPM amount as set forth in
the following table. The amounts set forth below are a component of and not in addition to
the PPPM set forth in Attachment A.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Population	 	Year 1	 	Year 2	 	Year 3
	 
	50,000 and above
	 	$	22.97	 	 	$	23.89	 	 	$	24.84	 
	49,000 to 49,999
	 	$	23.42	 	 	$	24.36	 	 	$	25.33	 
	48,000 to 48,999
	 	$	23.89	 	 	$	24.85	 	 	$	25.84	 
	47,000 to 47,999
	 	$	24.43	 	 	$	25.41	 	 	$	26.42	 
	 

TOTAL OPERATING EXPENSES

This category will be a sum of the above items and will represent the Actual Costs under
the contract.

The Contractor recognizes that expenses it incurs for professional liability claims and income
taxes cannot be charged to the contract under Michigan law and therefore they are not included
above and will not be charged to the contract.

A standard format of the financial statements is presented on the last page of this appendix.

133

 

The reconciliation of the Actual Costs to the Risk Share Target will be prepared quarterly within
30 days of quarter-end and will be prepared on a contract year-to-date basis. The reconciliation
will result in either a credit due to the MDOC or an invoice to the MDOC. A credit issued to the
MDOC can be used at its discretion. An invoice issued to the MDOC will be due within 30 days of
the invoice date.

Reconciliations will be in the following form. For demonstrative purposes, two examples are also
presented in the form. As they are for demonstrative purposes, the form and examples are not a
part of this contract and therefore are not binding on the parties to the contract.

Assumptions made in the first example – 1) it is the reconciliation for the second quarter of the
first year of the contract, 2) Actual Costs are assumed to be less than the target rate and 3) the
Contractor had credited MDOC $2,000,000 through the first quarter of the contract as a result of
the risk share reconciliation.

Calculation of Risk Share Target and Risk Share Cap

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Risk Share	 	 	 	 	 	 	Risk Share	 	 	 	 
	 	 	 	 	 	 	Target	 	 	Risk Share	 	 	Cap	 	 	Risk Share	 
	Month	 	Population(1)	 	 	PPPM(2)	 	 	Target - $	 	 	PPPM(2)	 	 	Cap - $	 
	April
	 	 	49,328	 	 	$	176.25	 	 	$	8,694,060	 	 	$	197.49	 	 	$	9,741,787	 
	May
	 	 	50,132	 	 	$	175.00	 	 	$	8,773,100	 	 	$	196.24	 	 	$	9,837,904	 
	June
	 	 	48,533	 	 	$	177.55	 	 	$	8,617,034	 	 	$	198.79	 	 	$	9,647,875	 
	July
	 	 	49,501	 	 	$	176.25	 	 	$	8,724,551	 	 	$	197.49	 	 	$	9,775,952	 
	August
	 	 	49,433	 	 	$	176.25	 	 	$	8,712,566	 	 	$	197.49	 	 	$	9,762,523	 
	September
	 	 	50,325	 	 	$	175.00	 	 	$	8,806,875	 	 	$	196.24	 	 	$	9,875,778	 
	October
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	November
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	December
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	January
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	February
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	March
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	 	 	 	 	 	 	 	$	52,328,186	 	 	 	 	 	 	$	58,641,819	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

134

 

	 	 	 	 	       
	Actual Costs(3)
	 	$	49,000,000	 
	Less Off-Site Costs – Accrual Basis
	 	$	(25,000,000	)
	Plus Off-Site Costs – Cash Basis
	 	$	24,500,000	 
	 
	 	 	 
	Modified Actual Costs
	 	$	48,500,000	 
	 
	 	 	 
	Difference
	 	$	(3,828,186	)
	 
	 	 	 

	 	 	 	 	 	 	 	 	 	 	    	 	 
	MDOC Portion of Difference:	 	 	 	 	 	 	 	 
	Tier 1
	 	$	(3,828,186	)(4)	 	 	85	%	 	$	(3,253,958	)
	Tier 2
	 	 	 	 (4)	 	 	70	%	 	$	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	 	 	 	 	 	 	 	$	(3,253,958	)
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Previously Billed / (Credited)	 	 	 	 	 	$	(2,000,000	) (5)
	 
	 	 	 	 	 	 	 	 	 	 	 
	Current Billing / (Credit)	 	 	 	 	 	$	(1,253,958	) (6)
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Cost to MDOC — YTD	 	 	 	 	 	$	49,074,228 	(7)
	Risk Share Cap — YTD	 	 	 	 	 	$	58,641,819	 

In the reconciliation,

	 	1.	 	The population would be as determined in accordance with Section X.xx of the
contract.
	 
	 	2.	 	The Risk Share Target and Risk Share Cap PPPM would be as set forth in Attachment A
of the contract.
	 
	 	3.	 	The Actual Costs would be as set forth in the contract year-to-date financial
statements for the applicable month.
	 
	 	4.	 	Tier 1 costs represent up to 9% of the Risk Share Target — $. If the Difference is a
credit, the entire difference will be reflected in Tier 1.
	 
	 	5.	 	Previously Billed / (Credited) represents the total amount either billed or credited
to MDOC in the previous quarters of this contract year as a result of the risk sharing
reconciliation.
	 
	 	6.	 	The Current Billing / (Credit) is the amount to be billed or credited in accordance
with Attachment A for the current quarter.
	 
	 	7.	 	The Total Cost to MDOC – YTD is the sum of the amounts billed / (credited): 1) as
base amounts pursuant to Section 1.061.A.1; 2) as adjustments for differences in estimated
and actual population pursuant to Section 1.061.A.1; and 3) as risk sharing amounts
pursuant to this reconciliation.

135

 

Assumptions made in the second example – 1) it is the reconciliation for the second quarter of the
first year of the contract, 2) Actual Costs are assumed to be at a high enough level to demonstrate
the use of both tiers of the pricing structure and 3) the MDOC had reimbursed $1,600,000 to the
Contractor through the first quarter of the contract as a result of the risk share reconciliation.

Calculation of Risk Share Target and Risk Share Cap

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Risk Share	 	 	 	 	 	 	Risk Share	 	 	 	 
	 	 	 	 	 	 	Target	 	 	Risk Share	 	 	Cap	 	 	Risk Share	 
	Month	 	Population(1)	 	 	PPPM(2)	 	 	Target - $	 	 	PPPM(2)	 	 	Cap - $	 
	April
	 	 	49,328	 	 	$	176.25	 	 	$	8,694,060	 	 	$	197.49	 	 	$	9,741,787	 
	May
	 	 	50,132	 	 	$	175.00	 	 	$	8,773,100	 	 	$	196.24	 	 	$	9,837,904	 
	June
	 	 	48,533	 	 	$	177.55	 	 	$	8,617,034	 	 	$	198.79	 	 	$	9,647,875	 
	July
	 	 	49,501	 	 	$	176.25	 	 	$	8,724,551	 	 	$	197.49	 	 	$	9,775,952	 
	August
	 	 	49,433	 	 	$	176.25	 	 	$	8,712,566	 	 	$	197.49	 	 	$	9,762,523	 
	September
	 	 	50,325	 	 	$	175.00	 	 	$	8,806,875	 	 	$	196.24	 	 	$	9,875,778	 
	October
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	November
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	December
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	January
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	February
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	March
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	 	 	 	 	 	 	 	$	52,328,186	 	 	 	 	 	 	$	58,641,819	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	     
	Actual Costs(3)
	 	$	59,000,000	 
	Less Off-Site Costs – Accrual Basis
	 	$	(35,000,000	)
	 
	 	 	 
	Plus Off-Site Costs – Cash Basis
	 	$	34,000,000	 
	 
	 	 	 
	Modified Actual Costs
	 	$	58,000,000	 
	 
	 	 	 
	Difference
	 	$	5,671,814	 
	 
	 	 	 

	 	 	 	 	 	 	 	 	 	 	    	 	 
	MDOC Portion of Difference:	 	 	 	 	 	 	 	 
	Tier 1
	 	$	4,709,537	 (4)	 	 	85	%	 	$	4,003,106	 
	Tier 2
	 	$	962,277	 (5)	 	 	70	%	 	$	673,594       	 (6)
	 
	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	 	 	 	 	 	 	 	$	4,676,700	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Previously Billed / (Credited)	 	$	1,600,000 	 (7)
	 
	 	 	 	 	 	 	 	 	 	 	 
	Current Billing / (Credit)	 	$	3,076,700 	 (8)
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Cost to MDOC YTD	 	$	57,004,886 	 (9)
	Risk Share Cap YTD	 	$	58,641,819	 

136

 

In the reconciliation,

	 	1.	 	The population would be as determined in accordance with Section X.xx of the
contract.
	 
	 	2.	 	The Risk Share Target and Risk Share Cap PPPM would be as set forth in Attachment A
of the contract.
	 
	 	3.	 	The Actual Costs would be as set forth in the contract year-to-date financial
statements for the applicable month.
	 
	 	4.	 	Tier 1 costs represent up to 9% of the Risk Share Target — $.
	 
	 	5.	 	Tier 2 costs represent the difference between the Difference and the Risk Share
Target — $ plus the Tier 1 costs. If the Difference is a credit, the entire difference
will be reflected in Tier 1.
	 
	 	6.	 	The MDOC portion under Tier 2 is limited to an amount that will result in the Total
Cost to the MDOC – YTD being no more than the Risk Share Cap – YTD.
	 
	 	7.	 	Previously Billed / (Credited) represents the total amount either billed or credited
to MDOC in the previous quarters of this contract year as a result of the risk sharing
reconciliation.
	 
	 	8.	 	The Current Billing / (Credit) is the amount to be billed or credited in accordance
with Attachment A for the current quarter.
	 
	 	9.	 	The Total Cost to MDOC – YTD is the sum of the amounts billed / (credited): 1) as
base amounts pursuant to Section 1.061.A.1; 2) as adjustments for differences in estimated
and actual population pursuant to Section 1.061.A.1; and 3) as risk sharing amounts
pursuant to this reconciliation.

137

 

Example financial statement row format:

	 	 	 	 	 
	 	 	Month or year to	 
	 	 	date period	 
	SALARIES & BENEFITS
	 	 	 	 
	Salaries
	 	$	1	 
	Fringe Benefits
	 	 	1	 
	Temporary Services
	 	 	1	 
	Temporary Services — Prof Corps
	 	 	1	 
	Salaries — Prof Corps
	 	 	1	 
	Fringe Benefits — Prof Corps
	 	 	1	 
	 
	 	 	 
	Salaries & Benefits total
	 	 	6	 
	 
	 	 	 
	 
	 	 	 	 
	PROFESSIONAL SERVICES
	 	 	 	 
	Physician Fees
	 	 	1	 
	Dentist Fees
	 	 	1	 
	Psychiatric Fees
	 	 	1	 
	Subcontractors — Prof Corps
	 	 	1	 
	 
	 	 	 
	Professional Services Total
	 	 	4	 
	 
	 	 	 
	 
	 	 	 	 
	HOSPITALIZATION
	 	 	 	 
	Hospitalization
	 	 	1	 
	ER and Ambulance
	 	 	1	 
	 
	 	 	 
	Hospitalization Total
	 	 	2	 
	 
	 	 	 
	 
	 	 	 	 
	OUTPATIENT SERVICES
	 	 	 	 
	Outpatient Physician
	 	 	1	 
	Outpatient Dialysis
	 	 	1	 
	Outpatient One Day
	 	 	1	 
	 
	 	 	 
	Outpatient Services Total
	 	 	3	 
	 
	 	 	 
	 
	 	 	 	 
	AETNA NETWORK ACCESS FEE
	 	 	1	 
	 
	 	 	 
	 
	 	 	 	 
	DIAGNOSTIC SERVICES
	 	 	 	 
	Outpatient X-Ray
	 	 	1	 
	X-Ray-On-Site
	 	 	1	 
	Lab-On-Site
	 	 	1	 
	 
	 	 	 
	Diagnostic Services Total
	 	 	3	 
	 
	 	 	 
	 
	PHARMACY
	 	 	 	 
	Pharmacy
	 	 	1	 
	Pharmacy Returns/Credits
	 	 	1	 
	 
	 	 	 
	Pharmary Total
	 	 	2	 
	 
	 	 	 
	 
	 	 	 	 
	SUPPLIES
	 	 	 	 
	Dental Supplies
	 	 	1	 
	Medical Supplies
	 	 	1	 
	 
	 	 	 
	Supplies Total
	 	 	2	 
	 
	 	 	 
	 
	 	 	 	 
	OTHER
	 	 	 	 
	Administrative Expense
	 	 	1	 
	Telephone Expense
	 	 	1	 
	Classified Ads
	 	 	1	 
	Equipment
	 	 	1	 
	Travel
	 	 	1	 
	Legal Fees
	 	 	1	 
	Background Checks
	 	 	1	 
	Inservice Educ.
	 	 	1	 
	Dues and Subscriptions
	 	 	1	 
	Other Expense — Prof Corps
	 	 	1	 
	 
	 	 	 
	Other Total
	 	 	10	 
	 
	 	 	 
	 
	 	 	 	 
	MANAGEMENT FEE
	 	 	1	 
	 
	 	 	 
	 
	TOTAL OPERATING EXPENSES
	 	$	34	 
	 
	 	 	 

 

			
	Note> The numerical data above is intended only for the
illustration of how the financial statement rows will accumulate to
subtotals and the grand total.

138

 

APPENDIX G

AETNA PERFORMANCE GUARANTEES

The guarantees provided herein are stated as a percentage of the network access fee being charged
by Aetna for its services under this contract. The fee is on a PPPM basis and is $9.50 for the
first year of the contract. This PPPM is included, and is not in addition to, the PPPM in
Attachment A. The Contractor will notify the MDOC CCI 30 days in advance of any change to the
network access fee.

Medical PPO Discount Savings Guarantee from Aetna for the Contractor and the MDOC: (see 1.022 T
Network of On-site and Off-site Specialists/Consultants)

	 	a.	 	Medical Discount Guarantee:
	 
	 	 	 	Aetna will guarantee the discount savings that result from negotiated arrangements with
providers participating in our PPO. These savings (the “Cumulative Target Discount”) will
be calculated on an aggregate basis, taking the service type (hospital inpatient, hospital
outpatient, physician/other) discounts based upon billed eligible expenses by network.
	 
	 	b.	 	Definition: The Cumulative Target Discount would become a firm aggregate target
discount at the end of the first contract year once the actual enrollment by network and
by product are known. For subsequent contract years, this Cumulative Target Discount will
be calculated based on the previous year’s weighting by population by region and services
utilized. This discount weighting will be blended based upon the total network billed
eligible expenses prior to discount for each of the service types, and prior to
application of plan design and member cost sharing (co-pays and deductibles). Aetna will
calculate the actual in-network discount by comparing the providers’ non-negotiated fee to
the negotiated fee within the PPO networks by way of the following equation:

{Provider Discounts (Hospital and Physician) in dollars} /
{Total In-Network (Hosp. and Phys.) Eligible Benefits Billed1 (before
discount)}

This measurement will be reported using data from Aetna’s Integrated
Informatics data warehouse

	 	c.	 	Reconciliation: On an annual basis after the end of each contract year, the total
aggregated discount savings expected (based on
actual enrollment by network and by product, and billed eligible charges by service type)
will be compared to the total aggregated discount savings achieved.
	 
	 	d.	 	Penalty: There will be a risk free corridor of 3.0 percentage points less than the
target discount. If the actual discount percentage is below this risk free corridor, Aetna
will decrease network access fee. The network access fee will be decreased by an amount
equal to 2% for each 1% of discount savings that the actual discount falls below the risk
free corridor. The maximum penalty will be 10% of the network access fee.
	 
	 	e.	 	Assumptions:

	 	i)	 	In no event will fees be adjusted by more than 15% due to results of
the discount guarantee and all service based performance
guarantees combined.
	 
	 	ii)	 	This guarantee only applies to the in-network medical claims and
Aetna direct-contracted networks and will remain in force during the
contract period.
	 
	 	iii)	 	The final guarantee reconciliation will be based upon policy year
incurred claims, including three months of claim runoff.

 

			
	1	 	excludes duplicate or other ineligible/denied claims,
or claims paid by coordination of benefits where Aetna was not primary
(including Medicare); includes network claim amounts billed above reasonable &
customary levels.

139

 

	 	iv)	 	Any non-facility billed charges (excluding ineligible and not covered
charges) at a level equal to the negotiated rates, along with some
charges where the contract allows us to pay the lesser of the billed
amount or the contractual rates will be excluded from this guarantee.
	 
	 	v)	 	This guarantee only applies to medical fees and excludes pharmacy.
	 
	 	vi)	 	This guarantee requires that at least 80% of claims paid are in-
network claims.

This guarantee assumes that there will be no substantial changes (i.e. including
but not limited to the addition of a new participating hospital, termination of
participating hospital) in the Aetna PPO network that services the Central/Western
MI area, which could potentially affect the financial discounts expected in place.

The following table is presented for purposes of illustrating the calculation of the Cumulative
Target Discount. As it does not reflect the actual population mix or the actual discounts, the
amounts contained in the illustration are not binding on the parties to the contract or their
sub-contractors.

Medical PPO Discount Savings Guarantee

Illustrative Calculation of Composite Target Discount

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Illustrative	 	 
	Illustrative Inpatient Hospital Discount	 	Illustrative Outpatient Hospital	 	Physician/Other Discount	 	Illustrative Composite
	(1)	 	Discount(1)	 	(1)(3)	 	Target Discount(2)
	28.9%

	 	 	27.7	%	 	 	31.1	%	 	 	30.0	%

 

			
	(1)	 	These discounts are illustrative only. They do not reflect the actual population or
discounts provided.
	 
	(2)	 	This composite target is illustrative only. The final guaranteed
target will depend on the actual enrollment by network and claim service mix known
at the end of the guarantee period.
	 
	(3)	 	Our non-facility discounts exclude the impact of claims where the
provider is billing at the contracted rates, along with some situations where the
contract allows us to pay the lesser of the billed amount or the contracted rate.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Network	 	 	 	 	Rating	 	 	 	 	 	Inmates	 	 	Hospital	 	 	Hospital	 	 	Physician/	 
	ID	 	 	Network Name	 	Area ID	 	 	Rating Area	 	 	Within	 	 	Inpatient	 	 	Outpatient	 	 	Other (3)	 
	 	421	 	 	Eastern MI MC
	 	 	363	 	 	Eastern Michigan	 	 	7000	 	 	 	35.00	%	 	 	25.00	%	 	 	25.00	%
	 	615	 	 	Cent/West MI MC
	 	 	339	 	 	Central/Western MI	 	 	30000	 	 	 	30.00	%	 	 	27.00	%	 	 	30.00	%
	 	3286	 	 	Northern MI MC
	 	 	378	 	 	Michigan - Upper Peninsula	 	 	10000	 	 	 	25.00	%	 	 	30.00	%	 	 	35.00	%
	 	3286	 	 	Northern MI MC
	 	 	379	 	 	North Michigan	 	 	4000	 	 	 	20.00	%	 	 	32.00	%	 	 	40.00	%

140

 

Aetna Provider Outreach Performance Partnership Guarantee (see 1.022 BB Secure Unit) for the
Contractor and the MDOC to arrange and facilitate meetings generating new venues and solutions to
lower the overall medical care cost for prisoners. This includes new thought leadership, as well as
sensitivity to the shortcomings identified in prior audit reviews:

	a.	 	Guarantee: Aetna will facilitate meetings with the Contractor on-site management team
and the Michigan Department of Corrections (MDOC) management team to attempt to recruit
providers and to add secure units in the critically needed areas. Aetna will review the
incumbent on-site clinicians to identify any that may be in Aetna’s network for fee
renegotiation.
	 
	b.	 	Definition: Aetna will guarantee our efforts to set up meetings with the appropriate
providers that are:

	 	i)	 	Identified sites for outreach using the incumbent’s data based on
In-patient stays and unusually long Average Length of Stays (ALOS). The
Contractor, working with MDOC will prioritize the order of the outreach program
for Aetna Network Personnel.
	 
	 	ii)	 	Aetna and the Contractor will draft a new mission message
in their outreach to hospitals, skilled nursing facilities and other
providers. Using the Contractor’s other nationwide examples, and any Michigan
examples, Aetna will package a brief with realistic information on the value of
adding this clientele for particular providers. One of the critical components
to be stressed will be transparency. The MDOC will benefit directly from all
new arrangements.
	 
	 	iii)	 	Hospitals, and MD/DO Specialty types, including but not limited to
Cardiologists, Gastroenterologists, Orthopedists, Otolaryngologists, OB/GYNs and Surgeons.
	 
	 	iv)	 	Providers incurring significant utilization (incidence and/or claim dollars)
to ensure that we are targeting the providers that will most impact the
members in this transition;

	c.	 	Aetna cannot guarantee that the physicians and/or hospitals will add a secure unit, or
agree to become the onsite specialists, only that we will attempt to recruit by: reaching out
to local network contacts first to determine the feasibility of this level of change, then by
contacting the provider to set up meetings to create a higher interest in the Michigan
Department of Correction offsite health care needs and/or to initiate the negotiation process.

MDOC, Contractor and Aetna will establish a list of priorities and actions to be undertaken by
Aetna on a quarterly basis. This will provide all parties the opportunity to ensure that Aetna
has an accurate listing and have mutually agreed upon the basis for our recruitment efforts
and performance guarantee measurement. This same team will draft the briefing materials for
the outreach meetings for final approval by Michigan Department of Corrections. Aetna’s
network management resources will contact the providers for recruitment via phone to establish
presentation times. The networks will track their contact with providers and the status of
recruitment. Aetna will also track community brainstorming ideas that may arise from these
meetings, leading to different solutions than expected. The Contractor, MDOC and Aetna will
provide follow-up information to questions posed at these meetings. If the provider is not
interested in researching the possibility of this arrangement with MDOC, Aetna will not make
further recruitment attempts. The network will continue to attempt to contact all critical
providers until an agreement has been signed, outreach has been exhausted or the provider is
not interested for a specific reason. Aetna’s Account Management and Network Management staff,
along with the Contractor, will provide updates on the status of recruitment in a Monthly
Status Report to Michigan Department of Corrections.

141

 

	d.	 	Penalty and Measurement Criteria: Up to 5% of our network access fees shall be at risk
based on our efforts to facilitate the recruitment of critical providers and to add secure
units for MDOC off-site health care patients. Contractor, Aetna and MDOC will assess the
results of the effort quarterly using a pass / fail system based on the goals established for
the quarter.

Claims Performance Guarantee for claims processed by Aetna for the Contractor and the MDOC (see
Appendix E)

Claim Administration Turnaround Time

Guarantee: Aetna will guarantee that the claim turnaround time during the guarantee period will not
exceed 14 calendar days for 90.0% of the processed claims on a cumulative basis each year.

Definition: Aetna measures turnaround time from the claimant’s viewpoint; that is, from the date
the claim is received in the service center to the date that it is processed (paid, denied, or
pended). Weekends and holidays are included in turnaround time.

Penalty and Measurement Criteria: If the cumulative year turnaround time (TAT) exceeds the day
guarantee as stated above, Aetna will reduce its compensation by an amount equal to 0.4% of the
guarantee period network access fees for each full day that Turnaround Time exceeds 14 calendar
days for 90.0% of all claims. There will be a maximum reduction of 2.0% of the guarantee period
network access fees.
A computer generated turnaround time report for MDOC’s specific claims will be provided on a
quarterly basis. The guarantee will be measured on an annual basis.

Financial Accuracy Guarantee: Aetna will guarantee that the guarantee period dollar accuracy of the
claim payment dollars will be 98.0% or higher.

Definition: Financial accuracy is measured by the dollar amount of claims paid accurately divided
by the total dollars paid. Aetna considers each underpayment and overpayment an error; Aetna does
not offset one by the other.

Penalty and Measurement Criteria: Aetna will reduce its compensation by an amount equal to 0.33% of
the guarantee period network access fees for each 1.0% that financial accuracy drops below 98.0%.
There will be a maximum reduction of 2.0% of the guarantee period network access fees.
Aetna’s audit results for the unit(s) processing MDOC’s claims will be used. The results for these
guarantees will be calculated using industry accepted stratified audit methodologies. The
guarantee will be measured on an annual basis.

Total Claim Accuracy Guarantee: Aetna will guarantee that the guarantee period overall accuracy of
the claim payments will not be less than 94.0% or higher.

Definition: Total claim accuracy is measured as the number of claims with no errors (financial and
non-financial) divided by the total number of claims audited.

Penalty and Measurement Criteria: Aetna will reduce its compensation by 0.33% of the guarantee
period network access fees for each 1.0% that total claim accuracy drops below 94.0%. There will
be a maximum reduction of 2.0% of the guarantee period network access fees.

Aetna’s audit results for the unit(s) processing MDOC’s claims will be used. The results for these
guarantees will be calculated using industry accepted stratified audit methodologies. The
guarantee will be measured on an annual basis.

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