Document:

Exhibit
10.189

 

AMENDMENT NUMBER 1 TO

Professional Capitation Medical
Group/IPA Services Agreement

 

This Amendment Number 1
to Professional Capitation Medical Group/IPA Services Agreement (the
“Amendment”) is entered into effective as of January 1, 2002 by and
between PACIFICARE OF CALIFORNIA, a California corporation (“PacifiCare”), and
Gateway Physicians Medical Associates, Inc. (“Medical Group”), with respect to
the following facts:

 

The parties have
previously entered into that certain Professional Capitation Medical Group/IPA
Services Agreement dated January 1, 2001 (the “Agreement”).

 

Definitions utilized in
this Amendment shall have the same meaning set forth in the Agreement. Except
as specifically amended by this Amendment, the Agreement shall continue in full
force and effect.

 

NOW, THEREFORE, in
consideration of the foregoing, the parties hereto agree as follows:

 

1.                                       Section 1.15,
Insolvent, is hereby amended in its entirety, to read as follows:

 

1.15                           Insolvent
or the condition of Insolvency means that Medical Group or any management
company providing material management services to Medical Group (i) ceases or
fails to be solvent, or generally fails to pay, or admits in writing its
inability to pay its debts as they become due, subject to applicable grace
periods, if any, whether at stated maturity or otherwise; (ii) fails to
maintain the financial reserves specifically required either by this Agreement
or State and Federal Law or otherwise agreed to in writing by the parties;
(iii) voluntarily ceases to conduct its business in the ordinary course; (iv)
commences any Insolvency proceeding with respect to itself; (v) takes any
action to effectuate or authorize an Insolvency proceeding; (vi) lacks the
financial resources to fulfill Medical Group’s obligations pursuant to this
Agreement.  No Insolvency shall be
deemed to exist if such conditions are solely the result of PacifiCare’s
failure to pay Medical Group amounts that are currently due and payable by
PacifiCare after consideration of PacifiCare’s withhold, recoupment, offset and
other rights pursuant to this Agreement.

 

2                                          Section 2.6, Medical Records, is hereby
amended in its entirety, to read as follows:

 

2.6                                 Medical
Records. Medical Group and its Participating Providers shall maintain all
patient medical records relating to Covered Services provided to Members, in
such form and containing such information as required by the QI Program,
Accreditation Organizations and State and

 

*** Confidential
Information omitted and filed separately with the Securities and Exchange
Commission.

 

1

 

Federal Law.  Medical records
shall be maintained in a manner that is current, detailed, organized and
permits effective patient care and quality review by Medical Group and
PacifiCare pursuant to the QI Program. Medical records shall be maintained in a
form and physical location which is accessible to Medical Group’s Participating
Providers, PacifiCare, Government Agencies and Accreditation Organizations.
Upon request and within the time frame requested, Medical Group and its
Participating Providers shall provide to PacifiCare copies of Member medical
records for purposes of conducting quality assurance, case management and
utilization reviews, credentialing and peer review, claims processing,
verification and payment, resolving Member grievances and appeals and other
activities reasonably necessary for the proper administration of the Managed
Care Plans consistent with State and Federal Law, If Medical Group or its Participating
Providers do not provide copies of Member medical records to PacifiCare within
the time frame requested, Medical Group and its Participating Providers shall
allow PacifiCare immediate access to such medical records for onsite copying.
Medical Group will be responsible for the cost of copying each request for
medical records which is thirty (30) pages or less. PacifiCare shall be
responsible for the cost of copying each request for medical records which is
greater than thirty (30) pages. Medical Group and its Participating Providers
shall maintain the confidentiality of all Member medical records and treatment
information in accordance with State and Federal Law. Medical records shall be
retained by Medical Group and its Participating Providers for at least six (6)
years following the provision of Covered Services and as required by State and
Federal Law. The provisions of this Section shall survive termination of
this Agreement for the period of time required by State and Federal Law.

 

3                                          Section 2.8.2,
Security Reserve, is hereby amended in its entirely to read as follows:

 

2.8.2                        Security Reserve/Letter of Credit.

 

(a)                                  As a material condition to PacifiCare’s
obligations pursuant to this Agreement, Medical Group shall, upon the
occurrence of a Triggering Event as defined below, obtain for the benefit of
PacifiCare a Letter of Credit to secure Medical Group’s performance under this
Agreement (“Letter of Credit”).

 

(b)                                 The initial amount of the Letter of Credit
shall be in the minimum amount of Four Hundred and Twenty Thousand Dollars
($420,000), which amount shall be adjusted by increasing the face amount of the
Letter of Credit (an “Adjusted Letter of Credit”) as determined by throughout
the term of this Agreement (but not more often than quarterly) to equal the
required percentage of Medical Group’s

 

2

 

aggregate, monthly Capitation Payments for the three calendar months
preceding the date of the applicable adjustment multiplied by *** (the “Letter
of Credit Funding Amount”). PacifiCare shall provide Medical Group with thirty
(30) days written notice of any requirement to establish or adjust the Letter
of Credit Funding Amount. Should PacifiCare modify the method of calculating
the “Letter of Credit Funding Amount”, PacifiCare shall provide Medical Group
with a thirty (30) day written notice of such modification.  As used in the balance of this Section,
“Letter of Credit” shall refer to any initial Letter of Credit and any
subsequent Adjusted Letter of Credit.

 

(c)                                  Within 30 days of the Triggering Event, as
defined in this subsection, Medical Group and PacifiCare shall meet and confer
to determine if there are alternatives including but not limited to
establishing a Letter of Credit and the amount of such Letter of Credit. A
Triggering Event, for purposes of this Section shall mean any of the
following: (a) Medical Group’s failure to comply with its reporting obligations
under Title 28, Section 1300.75.4.2 (the “Financial Solvency
Regulations”), or (b) Medical Group’s failure to provide a copy of the required
report to PacifiCare at the time it is submitted to the Department of Managed
Health Care; or (c) Medical Group’s failure to maintain a positive level of
working capital, calculated in a manner consistent with generally accepted
accounting principles as contemplated by the Financial Solvency Board.

 

(d)                                 All the terms and conditions of the Letter of
Credit shall be subject to PacifiCare’s prior written approval. Medical Group
shall be responsible for any cost, expense, or administrative fee in connection
with the establishment and maintenance of the Letter of Credit. Without
limiting the foregoing, the Letter of Credit shall provide that PacifiCare may
draw on the Letter of Credit by certifying to the issuer of the Letter of
Credit (the “Issuer”) that (1) Medical Group is in default under this
Agreement, and has failed to cure such default following thirty (30) days
written notice from PacifiCare; or (2) Medical Group is Insolvent; or (3)
PacifiCare has not received notice from the Issuer of the Letter of Credit that
the Letter of Credit is being renewed for the period required by this
Agreement.

 

(e)                                  The Letter of Credit, when required to be in
place as provided above, shall remain in full force and effect throughout the
entire Term of this Agreement and until Medical Group satisfies all its
financial obligations under this Agreement (“the Letter of Credit Term”). The
Letter of Credit shall be for a minimum of a six (6) month term.  PacifiCare acknowledges and agrees that the
Letter of Credit may not be issued at any one time that would be for the entire
Letter of Credit

 

3

 

Term on the condition that Medical Group agree to the following. Should
the Issuer fail to provide notice to PacifiCare at least thirty (30) days prior
to the expiration of the Letter of Credit that the Issuer will be renewing the
Letter of Credit for at least a six (6) month period or should Medical Group
otherwise fail to obtain a replacement Letter of Credit for the Letter of
Credit Term from an issuer acceptable to PacifiCare by a date fourteen (14)
days prior to the expiration date of the Letter of Credit, such failure shall
constitute a material breach of this Agreement and PacifiCare shall be entitled
to draw the entire amount of the Letter o Credit and hold such funds as a
security deposit to pay Medical Group’s obligations under this Agreement. The
proceeds of the Letter of Credit (the “Security Deposit”) shall be the property
of PacifiCare. PacifiCare shall use the Security Deposit solely to pay Medical
Group’s obligations under the Agreement, PacifiCare shall pay Medical Group the
amount of any unused portion of the Security Deposit after all of Medical
Group’s financial obligations have been satisfied and this Agreement has been
terminated.

 

(f)                                    Upon the occurrence of a Triggering Event,
until such time as Medical Group establishes the Letter of Credit required by
this Section, PacifiCare shall begin deducting one (1) percent of Medical Group’s
monthly Capitation Payment for the purpose of establishing a security deport
(also a “Security Deposit” hereunder) equal to the Letter of Credit Funding
Amount. The Security Deposit shall be the property of PacifiCare. PacifiCare
shall pay Medical Group the Security Deposit upon the earlier of (i)
PacifiCare’s receipt of the fully-funded Letter of Credit, or (ii) all of
Medical Group’s financial obligations have been satisfied and this Agreement
has been terminated.

 

4.                                       Section 2.13, Subsection (iii),
PacifiCare Rights in the Event of Insolvency of Medical Group is hereby
deleted.

 

5.                                       Section 5.4.1, Incentive Program
Withhold, is hereby amended in its entirety to be read as follows:

 

5.4.1                        Incentive Program Withhold. PacifiCare shall
establish a withhold from Medical Group’s monthly Capitation Payment for the
purposes of offsetting potential deficits for the CHIP and SHIP programs
defined in Attachment A and C of this Amendment.

 

The monthly incentive withhold shall be One Dollar ($1.00) per Member
per Month for the PacifiCare Commercial Health Plan and Six Dollars ($6.00) per
Member per Month for the Secure Horizons Health Plan.

 

4

 

6.                                       Section 5.4.2,
Incentive Program Settlements, shall be amended in its entirety to read as
follows:

 

5.4.2                        Incentive Program Settlements. PacifiCare
shall conduct combined settlements for all of the incentive programs for
Managed Care Plans applicable to Medical Group. Surpluses and deficits under
each of the incentive programs shall be aggregated and offset against one
another.  PacifiCare will conduct an
estimated calculation after six (6) months (the “Interim Calculation”) and a
final calculation annually (the “Final Calculation”) based on the calendar
year.  Payments under the combined
incentive programs will be due from the owing party within thirty (30) days
following the end of the six (9) months for the Interim Calculation and within
one hundred and eighty (180) days following the end of the calendar year for
the Final Calculation. For the Interim Calculation, the payment due will be
limited to seventy-five percent (75%) of the calculated amount due to account
for incurred but not received claims. To the extent a Medical Group deficit has
been earned forward from a prior settlement period, thus deficit shall be
offset against amounts due to Medical Group hereunder.  Medical Group shall have thirty (30) days
from the date of written notice to audit and submit any revisions to the incentive
program settlement to PacifiCare. Any submitted revisions must be approved by
PacifiCare and such approval shall not be unreasonably withheld.  PacifiCare shall then have thirty (30) days
to make any necessary adjustment to the calculation and return the itemized
calculation to Medical Group. Such calculation shall be considered the final
calculation unless Medical Group and PacifiCare agree to extend the calculation
process. Any amounts owing shall be paid to the appropriate party within thirty
(30) days of the release of the final itemized calculation. In the event that
claims for providers were incurred during the calendar year in question but
were not paid until after the final calculation, such costs shall be carried
forward and applied to the subsequent calendar year’s incentive program as an
expense for that calendar year.

 

7.                                       Section 5.7, Cost of Care is hereby
amended in its entirety to read as follows:

 

5.7                                 Cost of Care. Certain provisions of this
Agreement require that Medical Group provide or arrange health care services
which are not covered by Capitation Payments at Cost of Care and certain
provisions of this Agreement require than Covered Services be valued at Cost of
Care.  For purposes of this Agreement,
“Cost of Care” shall be calculated using the lesser of billed charges, Medical
Group’s cost for the services, or in accordance with the PacifiCare Fee
Schedule. The PacifiCare Fee Schedule shall be based upon the following;
(i) for professional services that are included under the Medicare RBRVS Fee
Schedule, reimbursement shall be one hundred and ten percent of

 

5

 

Medicare’s geographically adjusted fee schedule according to the
Medicare payment locality the provider resides in; (ii) for all other health
care services (other than inpatient and outpatient Hospital Services) that are
not included in the RBRVS but included in a Medicare Fee Schedule,
reimbursement shall be one hundred and ten percent (110%) of the Medicare rate
for the current period as released by HCFA by December of the preceding
year; (iii) for inpatient and outpatient Hospital Services, the Cost of Care
shall be the actual amounts paid by PacifiCare; (iv) for any other Covered
Services that do not fall within any of the above specific categories (other than
inpatient and outpatient Hospital Services), reimbursement shall be the lesser
of fifty percent (50%) of billed charges or amount determined under
PacifiCare’s Fee Schedule.

 

8.                                       Section 5.11, Recoupment Rights is
hereby amended in its entirety to read as follows:

 

5.11                           Recoupment Rights. Except as may otherwise be
specifically provided in this Agreement, PacifiCare shall have the right to
immediately recoup any and all amounts owed by Medical Group to PacifiCare
against amounts, including Capitation Payments, owed by PacifiCare to Medical
Group. Before exercising such right, PacifiCare shall provide Medical Group
with at least thirty (30) days’ prior written notice specifying the amount to
be recouped, and if PacifiCare receives payment of such amount from Medical
Group or notification from Medical Group that Medical Group disputes the amount
owed, prior to the expiration of such thirty (30) day period, such amount shall
not be recouped. Upon receipt of notice that Medical Group disputes amount
owed, PacifiCare and Medical Group shall work to resolve the dispute within
thirty (30) days. If the disputed is not resolved within thirty (30) days the
dispute will be resolved through the dispute resolution process as set forth in
section x.x of this Agreement. This right shall include, without
limitation, PacifiCare’s right to recoup the following amounts owed to
PacifiCare by Medical Group:  (i)
amounts owed by Medical Group under the incentive programs described in this
Agreement and in the Product Attachments; (ii) amounts owed by Medical Group
due to overpayments or payments made in error by PacifiCare; (iii) amounts owed
by Medical Group as a result of claims for Medical Group Services that
PacifiCare may pay on behalf of Medical Group; (iv) amounts owed by Medical Group
for Covered Services provided outside the Medical Group Service Area; (v)
amounts owed by Medical Group as a result of the outcome of the Member appeals
and grievance procedure; (vi) amounts owed by Medical Group in connection with
any other prior or existing agreement between Medical Group and PacifiCare or
any PacifiCare Affiliate. As a material condition to PacifiCare’s obligations
under this Agreement, Medical Group agrees

 

6

 

that all recoupment and any offset rights pursuant to this Agreement
shall be deemed to be and to constitute rights of recoupment authorized in
State or Federal law or in equity to the maximum extent possible under law or
in equity and that such rights shall not be subject to any requirement of prior
or other approval from any court or other government authority that may now or
hereafter have jurisdiction over Medical Group.

 

9.                                       Section 6.2.1, Cause for Termination of
Agreement by Medical Group is hereby amended in its entirety to read as
follows:

 

6.2.1                        Cause for Termination of Agreement by Medical
Group. The following shall constitute cause for termination of this Agreement
by Medical Group:

 

(i)                                     Non-Payment. Failure by PacifiCare to pay
Capitation Payments due Medical Group hereunder within thirty (30) day’s of the
Capitation Payment due date or failure by PacifiCare to make any other payments
due Medical Group hereunder within thirty (30) days of any such payment’s due
date.

 

(ii)                                  Breach of Material Term and Failure to Cure.
PacifiCare’s breach of any material term, covenant, or condition and subsequent
failure to cure such breach as provided below.

 

10.                                 Section 7.5.2, Arbitration, is hereby
amended in its entirety to read as follows:

 

7.5.2                        Arbitration. Any controversy, dispute or
claim arising out of the interpretation, performance or breach of this
Agreement which is not resolved pursuant to the Provider Dispute Resolution
Procedure specified above shall be resolved by binding arbitration at the
request of either party, in accordance with the Commercial Rules of the
American Arbitration Association. Such arbitration shall occur in Orange
County, CA, unless the parties mutually agree to have such proceeding in some
other locale. The arbitrators shall apply California] substantive law and
Federal substantive law where State law is preempted. Civil discovery for use
in such arbitration may be conducted in accordance with the provisions of
California law, and the arbitrator(s) selected shall have the power to enforce
the rights, remedies, duties, liabilities and obligations of discovery by the
imposition of the same terms, conditions and penalties as can be imposed in
like circumstances in a civil action by a court of competent jurisdiction of
the State of California. The provisions of California law concerning the right
to discovery and the use of depositions in arbitration are incorporated herein
by reference and made applicable to this Agreement.

 

7

 

The arbitrators
shall have the power to grant all legal and equitable remedies and award
compensatory damages provided by California law, except that punitive damages
shall not be awarded. The arbitrators shall prepare in writing and provide to
the parties an award including factual findings and the legal reasons on which
the award is based. The arbitrators shall not have the power to commit errors
of law or legal reasoning.

 

Notwithstanding
the above, in the event either Medical Group or PacifiCare wishes to obtain
injunctive relief or a temporary restraining order, such party may initiate an
action for such relief in a court of general jurisdiction in the State of
California. The decision of the court with respect to the requested injunctive
relief or temporary restraining order shall be subject to appeal only as
allowed under California law. However, the courts shall not have the authority
to review or grant any request or demand for damages.

 

10.                                 Section 7.5.3,
Payment Disputes Between Hospital and Medical Group, is hereby added, to read
as  follows:

 

7.5.3                        Payment Disputes Between
Hospital and Medical Group. In the event of a dispute between Hospital and
Medical Group concerning amounts due or owing under the Hospital Incentive
Program, Hospital or Medical Group may submit a written complaint to
PacifiCare. The complaint shall describe the disputed claim and the basis for
the amounts claimed. PacifiCare shall investigate the complaint and make a
written determination of whether or not the claim is valid and should be paid.
Medical Group and Hospital shall cooperate with PacifiCare’s investigation by
providing in a timely manner all information reasonably requested by
PacifiCare. If PacifiCare determines that Medical Group owes any amount to
Hospital or that Hospital owes any amount to Medical Group, the owing party
shall make the appropriate payment within thirty (30) days of PacifiCare’s
written determination. If the owing party fails to pay the amount due within
this thirty (30) day period, PacifiCare may deduct the amount owed from the owing
party’s next monthly capitation payment. This amount will temporarily be placed
in an account (the “Claims Dispute Account”) which shall be established by
PacifiCare. If Medical Group or Hospital wish to contest PacifiCare’s
determination, either may do so by initiating an action for binding arbitration
and notifying PacifiCare of such initiation within thirty (30) days of
PacifiCare’s written determination. If Medical Group or Hospital fails to
request arbitration within thirty (30) days or if the arbitration affirms
PacifiCare’s decision, PacifiCare shall release from the Claims Dispute Account
the amount owing to the appropriate party as initially determined by
PacifiCare. If the arbitration results in a decision that no money or a lesser
amount than

 

8

 

was determined by PacifiCare is owing to either Hospital or Medical
Group, PacifiCare shall release to Medical Group and or Hospital the amounts
owing each party as determined by the arbitration.

 

11.                                 Section 7.7, Assignment, is hereby
amended in its entirety to read as follows:

 

7.7                                 Assignment. This Agreement and the rights,
interests and benefits hereunder shall not be assigned, transferred or pledged
in any way by Medical Group or PacifiCare and shall not be subject to
execution, attachment or similar process. However, PacifiCare may assign this
agreements and its rights, interests and benefits hereunder to any entity which
is a PacifiCare Affiliate.  For purposes
of this Agreement. PacifiCare Affiliate shall mean those companies included in
the consolidated financial statements of PacifiCare Health Systems. PacifiCare
shall provide Medical Group with a list of PacifiCare Affiliates upon Medical
Group’s request.

 

12.                                 Section 8.3.2, Obligations if PacifiCare
Ceases Operating or Termination of Agreement for Nonpayment, is hereby amended
in its entirety to read as follows:

 

8.3.2                        Obligations if PacifiCare Ceases Operating or
Termination of Agreement for Nonpayment. Notwithstanding any other provisions
of this Agreement, Medical Group agrees that in the event PacifiCare ceases
operations for any reason, including insolvency, Medical Group and its
Participating Providers shall provide or arrange Covered Services and shall not
bill, charge, collect or receive any form of payment from any Member for
Covered Services provided after PacifiCare ceases operations. Such obligation
shall be for a period for which Premium has been paid, but shall not exceed a
period of thirty (3) calendar days, except for those Members who are
hospitalized on an inpatient basis as provided below.

 

In the event PacifiCare ceases operations or Medical Group terminates
this Agreement on the basis of PacifiCare’s failure to make timely Capitation
Payments, Medical Group and its Participating Providers shall continue to
provide or arrange for Covered Services to those Members who are hospitalized
on an inpatient basis at the time PacifiCare ceases operations or Medical Group
terminates this Agreement until such Members are discharged from an acute care
hospital.

 

13.                                 Product Attachment A, Commercial, is hereby
amended in its entirety. See attached Product Attachment A

 

9

 

14.                                 Product
Attachment B, PacifiCare Commercial Point-of-Service Plan is hereby amendment
in its entirety. See attached Product Attachment B.

 

15.                                 Product
Attachment C, Secure Horizons Health Plan is hereby amended in its entirety.
See attached Product Attachment C.

 

IN WITNESS
WHEREOF, the undersigned parties hereby agree to this Amendment as of the date
first set forth above.

 

	
   

  	
  PACIFICARE OF
  CALIFORNIA

  A California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Jeffrey

  
	
   

  	
  Name:

  	
    Brian
  Jeffrey

  
	
   

  	
  Title:

  	
  Vice
  President, Network Management

  
	
   

  	
   

  	
  2/26/2002

  
	
   

  	
   

  
	
   

  	
  Gateway
  Physicians Medical Associates

  A California professional corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike Olson

  
	
   

  	
  Name:

  	
  Mike Olson

  
	
   

  	
  Title:

  	
  Contracting/Provider
  Network Development Director

  
	
   

  	
   

  	
  February 26, 2002

  

 

10

 

PRODUCT ATTACHMENT A

 

PACIFICARE COMMERCIAL HEALTH PLAN

 

This Product Attachment A, along with the Base Agreement, sets forth
the specific terms and conditions which are applicable to the PacifiCare
Commercial Health Plan, as defined below.

 

ARTICLE 1

DEFINITIONS

 

The following terms shall have the meaning attributed below for
purposes of the PacifiCare Commercial Health Plan, as described in this Product
Attachment A. Capitalized terms not otherwise defined herein shall have the
meaning assigned to them in the Base Agreement.

 

1.1                                 OPM Agreement is the agreement between PacifiCare and the
Federal Office of Personnel Management for the provision of Covered Services to
persons enrolled in the PacifiCare Commercial Plan through their participation
in the health benefits programs for federal employees and their dependents.

 

1.2                                 PacifiCare Commercial Plan is any and all of the various Managed Care
Plans sold by PacifiCare to individuals (excluding individuals eligible for the
PacifiCare Medicaid Plan and the Secure Horizons Health Plan) and employer groups,
associations with employer group participation and unions which purchase
benefits for their employees and their dependents.

 

1.3                                 Commercial Plan Members are Medical Group Members enrolled in the
PacifiCare Commercial Plan.

 

1.4                                 Supplemental Benefits are benefits offered under the PacifiCare
Commercial Plan which require separate premium, in addition to the Commercial
Plan Premium, as consideration for the additional benefits.

 

ARTICLE 2

DUTIES OF MEDICAL GROUP

 

2.1                                 Provision of Covered Services. 
Medical Group and its Participating Providers shall provide Covered
Services to Commercial Plan Members pursuant to the terms of the Base Agreement
and this Product Attachment A.

 

2.2                                 Compliance with OPM Agreement. 
Medical Group shall comply with all requirements in the OPM Agreement
which are applicable to Medical Group as a subcontractor of PacifiCare as a
result of this Agreement. Without limiting the foregoing, Medical Group shall
ensure that all provisions of the OPM Agreement which are applicable to Medical
Group’s Participating Providers are included in

 

11

 

Medical Group’s subcontracts with its Participating Providers. A copy
of the OPM Agreement shall be provided to Medical Group concurrent with the
execution of this Agreement.

 

2.3                                 Compliance with Subscriber Agreements for
PacifiCare Commercial Plan.  Medical Group and its Participating
Providers shall comply with all requirements in Subscriber Agreements for the
PacifiCare Commercial Plan which are applicable to Medical Group PacifiCare
shall make good faith efforts to notify Medical Group of any such requirements
that are not otherwise reflected in this Agreement.

 

ARTICLE 3

COMPENSATION

 

3.1                                 Age/Gender/Benefit Adjusted Commercial
Capitation. Capitation Payments for Commercial Plan Members shall be made based
upon a per Member per month base capitation rate (“Base Capitation Rate”)
adjusted to reflect the Medical Group Members’ age, gender, and benefit plan
participation.

 

For Medical Group Members who have selected Gateway – Placentia Linda,
as their primary Medical Group Facility, the Base Capitation Rate shall be ***
per Commercial Plan Member per month.

 

For Medical Group Members who have selected Gateway – United Western
Medical Center as their primary Medical Group Facility, the Base Capitation
Rate shall be *** per Commercial Plan Member per month.

 

Effective January 1, 2002, *** per Member per Month will be
carved-out of the Medical Group Capitation for outpatient mental health crisis
benefit. This amount shall be carved out to PacifiCare Behavioral Health for
the financial and medical management responsibility for this benefit.

 

Age/gender adjustment factors are actuarially determined and are listed
below. Benefit adjustment factors are actuarially determined and may take into
consideration variations in benefit plan types, copay and coinsurance levels.
PacifiCare may change its benefit adjustment factors as needed to support the
differing plan types that it offers. On an annual basis, PacifiCare may modify
the benefit adjustment factors based on actuarially determined changes. The
average capitation rate will vary during subsequent months as a result of
changes in the age, gender, and benefit plan participation of the Medical
Group’s Members for the applicable month. The total monthly Capitation Payment
shall also be adjusted in the manner set forth in Article 5 of the Base
Agreement.

 

12

 

The following are PacifiCare’s age/gender adjustment factors:

 

	
  Child
  0

  	
   

  	
  1.9939

  
	
  Child
  1

  	
   

  	
  1.2664

  
	
  Child
  2 – 9

  	
   

  	
  0.4730

  
	
  Child
  10 – 17

  	
   

  	
  0.4375

  
	
  Female
  18 – 19

  	
   

  	
  0.7395

  
	
  Female
  20 – 24

  	
   

  	
  1.4564

  
	
  Female
  25 – 29

  	
   

  	
  1.6593

  
	
  Female
  30 – 34

  	
   

  	
  1.4785

  
	
  Female
  35 – 39

  	
   

  	
  1.2495

  
	
  Female
  40 – 44

  	
   

  	
  1.3095

  
	
  Female
  45 – 49

  	
   

  	
  1.2221

  
	
  Female
  50 – 54

  	
   

  	
  1.5869

  
	
  Female
  55 – 59

  	
   

  	
  1.7404

  
	
  Female
  60 – 64

  	
   

  	
  2.0135

  
	
  Female
  65 plus

  	
   

  	
  2.0630

  
	
  Male
  18 – 19

  	
   

  	
  0.3554

  
	
  Male
  20 – 24

  	
   

  	
  0.4774

  
	
  Male
  25 – 29

  	
   

  	
  0.5702

  
	
  Male
  30 – 34

  	
   

  	
  0.6033

  
	
  Male
  35 – 39

  	
   

  	
  0.7038

  
	
  Male
  40 – 44

  	
   

  	
  0.7700

  
	
  Male
  45 – 49

  	
   

  	
  0.8742

  
	
  Male
  50 – 54

  	
   

  	
  1.3235

  
	
  Male
  55 – 59

  	
   

  	
  1.7024

  
	
  Male
  60 – 64

  	
   

  	
  2.2284

  
	
  Male
  65 plus

  	
   

  	
  2.3563

  

 

3.1.1                        Adjustment for ISL Premium.  In
calculating Capitation Payments due to Medical Group, PacifiCare shall deduct
the ISL Premium amount set forth herein from the amounts otherwise due to
Medical Group, unless PacifiCare has approved of Medical Group’s opting out of
PacifiCare’s ISL Program.

 

3.1.2                        Adjustment for Experience-Rated Managed Care
Plans.  Capitation Payments for Experience Rated
Plans shall be calculated utilizing the following definitions and methodology:

 

(i)                                     An “Experience-Rated Plan” is a
non-federally-qualified plan in which the Subscriber Group’s premium is
partially deferred or adjusted to reflect the actual medical costs incurred by
Commercial Plan Members.

 

(ii)                                  The “Net Actuarial Experience Rate” shall
mean a rate calculated by the same method used to determine premium for
federally-qualified plans, except that trended claims and utilization data may
be considered to determine expected medical costs and PacifiCare’s
administrative retention may be adjusted to reflect actuarial risk taken by the
Subscriber Group instead of PacifiCare.

 

13

 

(iii)                               For Experience-Rated Plans, Capitation
Payments shall be calculated as a percent of the Net Actuarial Experience Rate
rather than based on a percent of the Commercial Plan Premium. The Net
Actuarial Experience Rate, like the Commercial Plan Premium, shall exclude
broker and agent commissions, premium taxes and premiums for Supplemental
Benefits.

 

3.2                                 ISL. Program.                         The ISL Deductible, ISL Premium and ISL
Coinsurance for the Commercial Plan shall initially be:

 

(i)                                     ISL Deductible shall be Zero Dollars ($0) per
Commercial Plan Member per calendar year.

 

(ii)                                  ISL Premium shall be Zero Dollars and Zero
Cents ($0.00) per Commercial Plan Member per month.

 

(iii)                               ISL Coinsurance shall be zero percent (0%) of
Cost of Care in excess of the ISL Deductible.

 

If PacifiCare has approved of Medical Group’s opt out of the ISL
Program, the above amounts and percentages will reflect “zero.”  In such event, Medical Group shall be
required to obtain ISL coverage from a third-party insurance carrier in
accordance with Section 5.6.5 of the Base Agreement.

 

3.3                                 Commercial Hospital Incentive Program. 
PacifiCare shall establish and administer an annual Commercial Hospital
Incentive Program for the PacifiCare Commercial Plan (the “CHIP”). The CHIP is
designed to provide an incentive for the efficient and effective use of
Hospital Services, and shall be calculated utilizing the terms defined below.
All calculations for the CHIP shall be based upon Commercial Plan Members,
excluding Commercial POS Plan Members.

 

3.3.1                        Reinsurance Program. 
Claims under the Reinsurance Program shall be valued at the Cost of Care
as defined in this Agreement. The Reinsurance Deductible, Reinsurance Premium
and Reinsurance Coinsurance for the Commercial Plan shall initially be:

 

(i)                                     Reinsurance Deductible shall be [WORD]
($         ) per Commercial Plan
Member per calendar year.

 

(ii)                                  Reinsurance Premium shall be [WORD] percent
(        %) of Commercial Plan Premium.

 

(iii)                               Reinsurance Coinsurance shall be fifty
percent (50%) of the Cost of Care for amounts in excess of the Reinsurance
Deductible but less than two hundred fifty thousand dollars ($250,000) and
twenty percent (20%) of the Cost of Care for amounts in excess of two hundred
fifty thousand dollars ($250,000)

 

14

 

3.3.2                        CHIP Budget.  The CHIP Budget for
Commercial Plan Members shall *** per Member per month, excluding Commercial
POS Plan Members, less PacifiCare Commercial Plan Reinsurance Premium, if any,
and is subject to the adjustments set forth in Article 5 of the Base
Agreement and the adjustments further specified below.

 

3.3.3                        CHIP Expense. 
CHIP Expense shall be equal to the sum of the following:

 

(i)                                     Inpatient costs for Hospital Services
rendered to Commercial Plan Members, excluding Commercial POS Plan Members, by
Participating Providers, valued at the actual costs incurred by PacifiCare; Plus,

 

(ii)                                  Other Hospital Services rendered to
Commercial Plan Members, excluding Commercial POS Plan Members, by
Participating Providers other than inpatient services, valued at actual costs
incurred by PacifiCare; plus.

 

(iii)                               The actual amount paid for Hospital Services
which are rendered by non-Participating Providers; minus,

 

(iv)                              Amounts
paid by PacifiCare under the Reinsurance Program, if any; minus

 

(v)                                 Any and all amounts received from third
parties for Hospital Services provided to Commercial Plan Members, excluding
Commercial POS Plan Members, through coordination of benefits, work-related
accidents or injuries, stop-loss and reinsurance payments and Member
Copayments.

 

3.3.4                        CHIP Surplus.  In
the event the CHIP Expense is less than the CHIP Budget, the surplus shall be
allocated as follows:

 

*** to Medical Group

*** to PacifiCare

 

3.3.5                        CHIP Deficit.  In
the event the CHIP Expense is greater than the CHIP Budget, the deficit shall
be allocated as follows:

 

*** to Medical Group

*** to PacifiCare

 

Medical Group’s responsibility for the CHIP Deficit shall be limited to
Two Dollars ($2.00) per Member per Month

 

3.3.6                        Settlements and Reconciliation. 
Interim settlements and the final settlement and reconciliation of the
CHIP shall be performed by PacifiCare as provided in Article 5 of the Base
Agreement.

 

3.4                                 Commercial
Plan Pharmacy Upside Sharing Program. 
PacifiCare shall establish and

 

15

 

administer an annual Pharmacy Upside Sharing Program for the PacifiCare
Commercial Plan (the “CPUP”). The CPUP is designed to provide an incentive for
the efficient and effective use of Outpatient Pharmacy Supplemental Benefits
for Commercial Plan Members. The CPUP shall be established and calculated as
follows:

 

3.4.1                        The CPUP will be settled on a quarterly basis
beginning with the second quarter of 2002. A cumulative second quarter interim
payout, minus IBNR adjustment, will be made, in addition to the final,
cumulative year-end settlement distribution.

 

3.4.2                        The CPUP payout to Medical Group will be
based upon the following formula:

(Threshold – Actual Performance) * 50%

 

3.4.3                        There will be no downside risk should actual
performance exceed the Threshold.

 

3.4.4                        The Threshold for the CPUP shall be Sixteen
Dollars and Eighty Six Cents ($16.86). 
The Threshold is calculated using several factors, including trended
2001 actual performance for the Medical Group, inflationary trends, and benefit
adjustments.

 

3.4.5                        The Medical Group will continue its pharmacy
management programs. The PacifiCare pharmacist will continue to work with
Medical Group to identify opportunities for performance improvement. Medical
Group will work cooperatively with the PacifiCare pharmacist and participate in
PacifiCare’s pharmacy management initiatives, as applicable.

 

3.4.6                        The Commercial Pharmacy Upside Program will
be adjusted annually to reflect changes, including pharmacy expenses, pharmacy
inflation, pharmacy benefit plans, and drug management programs.

 

3.4.7                        This administrative details of administering
the Commercial Pharmacy Upside Sharing Program are subjective to change.

 

16

 

IN
WITNESS WHEREOF, the parties hereto have executed this Product Attachment A.

 

	
   

  	
  PACIFICARE OF
  CALIFORNIA

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Jeffrey

  
	
   

  	
   

  	
  Brian Jeffrey

  
	
   

  	
  Title:

  	
  Vice
  President, Network Mgmt

  
	
   

  	
  Date:

  	
  2/26/2002

  
	
   

  	
   

  
	
   

  	
  Gateway
  Physicians Medical Associates

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike Olson

  
	
   

  	
   

  	
  Mike Olson

  
	
   

  	
  Title:

  	
  Contracting Network
  Development Director

  
	
   

  	
  Date:

  	
  February 26, 2002

  

 

17

 

PRODUCT ATTACHMENT B

PACIFICARE COMMERCIAL POINT-OF-SERVICE PLAN

 

This Product Attachment B, along with Product Attachment A and the Base
Agreement, sets forth the terms and conditions which are applicable to the
PacifiCare Commercial Point-of-Service Plan, as defined below.

 

ARTICLE 1

DEFINITIONS

 

The following terms shall have the meaning attributed below for
purposes of the PacifiCare Commercial Point-of-Service Plan, as described in
this Product Attachment B. Capitalized terms not otherwise defined herein shall
have the meaning assigned to them in the Base Agreement.

 

1.1                                 Commercial
Plan Premium is the premium received by PacifiCare each month for
PacifiCare Commercial Plan Members, excluding amounts to pay broker and agent
commissions compensation, Premium taxes and premiums for Supplemental Benefits.

 

1.2                                 In-Network Services are Covered Services received by Commercial
POS Plan Members which are (a) provided or arranged by Medical Group pursuant
to the PacifiCare Commercial Plan; (b) received from a non-contracting Provider
following an authorization from Medical Group; (c) Emergency Services; and (d)
Urgently Needed Services.

 

1.3                                 In-Network Hospital Services are Hospital Services received by Commercial
POS Plan Members which are (a) provided or arranged by Medical Group pursuant
to the PacifiCare Commercial Plan; (b) received from a non-contracting Provider
following an authorization from Medical Group; (c) Emergency Services; and (d)
Urgently Needed Services.

 

1.4                                 Out-of-Network Services are Covered Services, excluding Emergency
Services and Urgently Needed Services, which are received by Commercial POS
Plan Members without the prior authorization of Medical Group.

 

1.5                                 PacifiCare
Commercial Point-of-Service (“POS”) Plan is any PacifiCare Commercial Plan,
as defined in Product Attachment A, under which Members are entitled to
coverage for both In-Network Services and Out-of-Network Services.

 

1.6                                 Commercial
POS Plan Members are Medical Group Members enrolled in the PacifiCare
Commercial POS Plan.

 

1.7                                 POS Plan Premium is the sum of the In-Network Premium and the
Out-of-Network Premium, as defined below:

 

18

 

1.7.1                        In-Network Premium is the Commercial Plan Premium, as defined
in Product Attachment B, billed or accounted for by PacifiCare for coverage of
In-Network Services under the PacifiCare Commercial POS Plan.

 

1.7.2                        Out-of-Network Premium is the Commercial Plan Premium, as defined
in Product Attachment A, billed or accounted for by PacifiCare (or an insurance
company or self-insured employer which has assumed the risk for the
Out-of-Network Services), for coverage of Out-of-Network Services under the
PacifiCare Commercial POS Plan.

 

ARTICLE 2

DUTIES OF MEDICAL GROUP

 

2.1                                 Covered Services. 
Medical Group and its Participating Providers shall provide or arrange
Covered Services to Commercial POS Plan Members under same terms and conditions
as Commercial Plan Members.

 

2.2                                 Reciprocity: Reimbursement for Out-of-Network
Services.  If any of Medical Group’s Participating
Providers provides Out-of-Network Services to a Commercial POS Plan Member,
such Medical Group Participating Provider shall bill PacifiCare or the payor
responsible for payment for Out-of-Network Services for such services and
agrees to accept full payment at the Cost of Care. Neither Medical Group nor
its Participating Providers shall encourage Members to receive Covered Services
from non- Participating Providers. Medical Group shall include the requirements
of this Section in all subcontracts with its Participating Providers.

 

ARTICLE 3

COMPENSATION

 

3.1                                 Capitation Payments for Commercial POS Plan
Members.  For Commercial POS Plan Members, PacifiCare
will pay Medical Group *** of the Capitation Payment for Commercial Plan
Members, subject to the adjustments set forth in Article 5 of the Base
Agreement and the adjustments set forth below in this Section. Capitation
Payments for Commercial POS Plan Members will be based on a percentage of the
In-Network Premium only. The payment described in this Section is payment
in full for In-Network Services, except for Copayments, coordination of
benefits, third party recoveries and payments under the PacifiCare POS Control
Program set forth below.

 

3.1.1                        Premium Adjustments.  The
Commercial Plan Premium and benefits may be amended for each Subscriber
Agreement upon the annual renewal date of each Subscriber Agreement at the sole
discretion of PacifiCare.

 

3.1.2                        Adjustment for ISL Premium.  In
calculating Capitation Payments due to the Medical Group for Commercial POS
Plan Members, PacifiCare shall deduct eighty percent (80%) of the ISL Premium
amount set forth in Section 3.2 of Product Attachment A

 

19

 

from the amounts otherwise due to Medical Group, unless PacifiCare has
approved of Medical Group’s opt out of PacifiCare’s ISL Program.

 

3.2                                 Commercial POS Control Program. 
PacifiCare shall establish and administer an annual Control Program for the
PacifiCare Commercial Point-of-Service Plan (“Commercial POS Control Program”).
The Commercial POS Control Program is designed to provide an incentive for the
efficient and effective use of In-Network Hospital Services and to control
Out-of-Network Services, and shall be calculated in accordance with the
following provisions.

 

3.2.1                        Definitions.  The following terms shall
have the meaning attributed below for purposes of the Commercial POS Control
Program.

 

(i)                                     POS Plan Budget shall equal the CHIP Budget plus the POS
Medical Capitation Withhold of twenty percent (20%) plus fifty percent (50%) of
Out-of-Network Premium, less PacifiCare POS Control Program Reinsurance
Premium, if any.

 

(ii)                                  POS Plan Costs shall mean the following:

 

(a)          Claims paid for In-Network Hospital Services incurred during the
current period, calculated at the actual amount paid: plus,

 

(b)         Claims paid for Out-of-Network Services incurred during the current
period, calculated at the actual amount paid; plus,

 

(c)          Claims paid for In-Network Hospital Services and Out-of-Network
Services incurred but not included in prior period Commercial POS Control
Program calculations, calculated at the actual amount paid; minus,

 

(d)         Any and all amounts received from third party liability and coordination
of benefit recoveries for In-Network Hospital Services and Out-of-Network
Services that are received during the period of calculation.

 

(iii)                               Budget Surplus.  The
amount, if any, by which the POS Plan Budget exceeds the POS Plan Costs for any
calendar year.

 

(iv)                              Budget Deficit.  The
amount, if any, by which the POS Plan Costs exceeds the POS Plan Budget for any
calendar year.

 

(v)                                 Capitation Restoration Amount.  The
difference between (a) the amount Medical Group would have received if Medical
Group’s Capitation Payments for Commercial POS Plan Members had been determined
by multiplying the percentage set forth in Section 3.1 of Product

 

20

 

Attachment A by the In-Network Premium and (b) the actual capitation
paid to Medical Group for Commercial POS Plan Members for the relevant contract
year.

 

3.2.2                        POS Control Program Reinsurance. 
Unless PacifiCare has approved of Medical Group’s opt out of POS
reinsurance (“POS Control Program Reinsurance”), PacifiCare shall provide
reinsurance (the “Commercial POS Control Program Reinsurance”) in order to
provide protection for the Commercial POS Plan Budget when Cost of Care for POS
In-Network Hospital Services and Out-of-Network Medical Group and Hospital
Services (“Out-of-Network Services”) exceeds a specified dollar amount per
Medical Group Member per calendar year (the “Commercial POS Control Program
Reinsurance Deductible”). Costs for In-Network Hospital Services and
Out-of-Network Services that exceed the Commercial POS Control Program
Reinsurance Deductible shall be considered an expense against the Commercial
POS Plan Budget, of which surpluses and deficits are shared between PacifiCare
and Medical Group as noted below.

 

3.2.3                        Reinsurance Program. 
Claims under the POS Control Program Reinsurance shall be valued at one
thousand five hundred dollars ($1,500) per acute inpatient day, four hundred
dollars ($400) per skilled nursing facility day, and zero dollars ($0) for all
other claims. The Reinsurance Deductible and Reinsurance Premium for the
Commercial POS Plan shall initially be:

 

(i)                                     Reinsurance Deductible shall be [WORD] ($
      ) per Commercial Plan Member per calendar year.

 

(ii)                                  In-Network Reinsurance Premium shall be
[WORD] percent (      %) of the Commercial Plan
Reinsurance Premium amount set forth in Section 3.3.1 of Product
Attachment A.

 

(iii)                               Out-of-Network Reinsurance Premium shall be
[WORD] percent (       %) of the Commercial Plan
Reinsurance Premium amount set forth in Section 3.3.1 of Product
Attachment A.

 

If PacifiCare has approved of Medical Group’s opt out of the
Reinsurance Program, the above amounts and percentages will reflect “zero.” In
such event, Medical Group shall be required to obtain reinsurance coverage from
a third-party insurance carrier in accordance with Section 5.6.5 of the
Base Agreement.

 

3.2.4                        Documentation. 
PacifiCare shall provide Medical Group with a list of In-Network
Hospital Services claim payments and Out-of-Network claim payments in support
of computation and accuracy of POS Plan Costs, third party liability and
coordination of benefit recoveries, assumptions and data supporting the POS
Plan Budget, the Budget Surplus, and the Budget Deficit

 

21

 

and the Capitation Restoration Amount.

 

3.2.5                        Budget Surplus Reconciliation. 
Medical Group shall receive one hundred percent (100%) of the Budget
Surplus, until such time as Medical Group has received the applicable
Capitation Restoration Amount.  If the
Budget Surplus exceeds the Capitation Restoration Amount, then PacifiCare and
Medical Group shall each be entitled to fifty percent (50%) of the remaining
Budget Surplus.

 

3.2.6                        Budget Deficit Reconciliation.  In
the event of a Budget Deficit, Medical Group shall not be responsible for
making any payments under the PacifiCare POS Control Program. However, fifty
percent (50%) of the Budget Deficit amount shall be considered a Medical Group
obligation for purposes of offsetting surpluses under other incentive programs
under the Agreement.

 

3.3                                 Adjustment of Rates. 
Capitation Payments for Commercial POS Plan Members and the POS Plan
Budget may be prospectively adjusted on an annual basis to reflect actual
experience under the Commercial POS Plan; provided, however, that in no event
shall the amount of any increase or decrease to such Capitation Payments be
greater than ten (10) percentage points in any given year.

 

22

 

IN WITNESS WHEREOF, the
parties hereto have executed this Product Attachment B.

 

	
   

  	
  PACIFICARE OF
  CALIFORNIA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Jeffrey

  
	
   

  	
   

  	
  Brian Jeffrey

  
	
   

  	
  Title:

  	
  Vice
  President, Network Management

  
	
   

  	
  Date:

  	
  2/26/2002

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GATEWAY
  PHYSICIANS MEDICAL ASSOCIATES

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike Olson

  
	
   

  	
   

  	
  Mike Olson

  
	
   

  	
  Title:

  	
  Contracting / Network
  Development Director

  
	
   

  	
  Date:

  	
  February 26, 2002

  

 

23

 

PRODUCT ATTACHMENT C

 

SECURE HORIZONS HEALTH PLAN

 

This Product Attachment C, along with the Base Agreement, sets forth
the terms and conditions which are applicable to the Secure Horizons Health
Plan, as defined below.

 

ARTICLE 1

DEFINITIONS

 

The following terms Shall have the meaning attributed below for
purposes of the Secure Horizons Health Plan, as described in this Product
Attachment C. Capitalized terms not otherwise defined herein shall have the
meaning assigned to them in the Base Agreement.

 

1.1                                 CMS is the Centers for Medicare and Medicaid Services, an administrative
agency of the United States Government, responsible for administering the
Medicare program.

 

1.2                                 CMS Agreement is the Medicare - Choice contract between
PacifiCare and CMS.

 

1.3                                 Medicare is the Hospital Insurance Plan (Part A) and the Supplementary Medical
Insurance Plan (Part B) provided under Title XVIII of the Social Security Act,
as amended.

 

1.4                                 Monthly CMS Payment is the revenue received by PacifiCare each
month from CMS, as determined by CMS, for providing Covered Services to Secure
Horizons Members.

 

1.5                                 Secure Horizons Health Plan is the prepaid health plan operated by
PacifiCare pursuant to the CMS Agreement which provides Covered Services to
individuals (including retirees) eligible to receive Medicare benefits.

 

1.6                                 Secure Horizons Members are Medical Group Members enrolled in the
Secure Horizons Health Plan.

 

1.7                                 Secure Horizons Revenue is the Monthly CMS Payment for Medical Group
Members enrolled in the Secure Horizons Health Plan, less payments for
broker and agent commissions/compensation (when applicable), premium taxes and
amounts used to fund the Market Specific Benefit Program (as defined below).

 

ARTICLE 2

DUTIES OF MEDICAL GROUP

 

2.1                                 Compliance with CMS Agreement and Federal
Medicare Law.  Medical Group shall comply with all
requirements in the CMS Agreement which are applicable to Medical Group as a
subcontractor of PacifiCare as a result of this Agreement. Without limiting

 

24

 

the foregoing. Medical Group shall ensure that all provisions of the
CMS Agreement which are applicable to Medical Group’s Participating Providers
as a subcontractor of PacifiCare are included in Medical Group’s subcontracts
with its Participating Providers. A copy of the CMS Agreement shall be made
available to Medical Group concurrent with the execution of this Agreement.
Medical Group and its Participating Providers shall comply with Title XVIII of
the Social Security Act and the regulations adopted thereunder by CMS for the
Medicare program.

 

2.2                                 Medicare Participation Standards. 
Medical Group shall require that all of its Participating Providers who
provide services to Secure Horizons Members meet the standards for
participation and all applicable requirements for providers of health care
services under the Medicare program. In addition, Medical Group shall require
that all facilities and offices utilized by Medical Group and its Participating
Providers to provide or arrange Covered Services to Secure Horizons Members
shall comply with facility standards established by CMS.

 

2.3                                 Specific Provisions Pertaining to Benefits,
Coverage and Beneficiary Protections.  Without limiting any of
Medical Group’s other obligations under this Agreement, Medical Group
specifically agrees to comply with the following policies and procedures:

 

(i)                                     PacifiCare’s policies pertaining to the
collection of Copayments which prohibit the collection of Copayments for
routine injections, routine immunizations, flu immunizations, and the
administration of pneumococcal/pneumonia vaccine.

 

(ii)                                  PacifiCare’s policies pertaining to
pre-certification which provide that Secure Horizons Members may directly
access a provider for mammography and influenza vaccinations and women’s health
specialists for routine and preventative health care.

 

(iii)                               PacifiCare’s policies pertaining to complex
and serious conditions which provide for procedures to identify, assess and
establish treatment plans for persons with complex or serious medical
conditions.

 

(iv)                              PacifiCare’s policies pertaining to
enrollment and assessment of new Secure Horizons Members including requirements
to conduct a health assessment of all new Secure Horizons Members within ninety
(90) days of the effective date of their enrollment.

 

2.4                                 Confidentiality of Medical Records. 
Medical Group shall establish and maintain procedures and controls so
that no information contained in its records or obtained from CMS or from
others in carrying out the terms of this Agreement shall be used by or
disclosed by it, its agents, officers, or employees except as provided in
Section 1106 of the Social Security Act, as amended, and regulations
prescribed thereunder.

 

2.5                                 Submission of Data. 
Medical Group shall cooperate with PacifiCare in submitting to

 

25

 

the Secretary of Health and Human Services statistical data pertaining
to Covered Services provided by Medical Group, enrollment and disenrollment
data and any other reports the Secretary may reasonably require to carry out
its functions under the Medicare + Choice program.

 

2.6                                 Advance Directives. 
Medical Group shall document all Secure Horizons Member patient records
with respect to the existence of an Advance Directive in compliance with the
Patient Self-Determination Act (Section 4751 of the Omnibus Reconciliation
Act of 1990), as amended, and other appropriate laws. For purposes of this
Agreement, an Advance Directive is a Member’s written instructions, recognized
under State law, relating to the provision of health care when the Member is
not competent to make health care decisions as determined under State law.
Examples of Advance Directives are living wills and durable powers of attorney
for health care.

 

2.7                                 Non-Discrimination. 
Medical Group understands that CMS requires compliance with the
provisions of this Section as a condition for participation in the Secure
Horizons Health Plan. Medical Group and its Participating Providers shall not
unlawfully discriminate against any of their employees or applicants for
employment or against any Members on the basis of race, color, creed, national
origin, ancestry, religion, sex, marital status, age (except as provided by
law), sexual orientation, gender identity, or physical or mental handicap,
including HIV status. Medical Group and its Participating Providers shall
ensure that the evaluation and treatment of their employees and applicants for
employment and of Members are free of such discrimination. Medical Group and
its Participating Providers shall comply with Title VI of the Civil Rights Act
of 1964, as amended (42 U.S.C. Section 2000d et. seq.), Section 504
of the Rehabilitation Act of 1973, as amended (29 U.S.C. Section 794) and
the regulations thereunder, Title IX of the Education Amendments of 1972, as
amended (20 U.S.C. Section 1681 et. seq.), the Age Discrimination Act of
1975, as amended (42 U.S.C. Section 6101 et. seq.), Section 654 of
the Omnibus Budget Reconciliation Act of 1981, as amended (42 U.S.C.
Section 9849), the Americans With Disabilities Act (P.L. 101-365) and all
implementing regulations, guidelines and standards as are now or may be
lawfully adopted under the above statutes.

 

2.8                                 Termination of CMS Agreement.  In
the event the CMS Agreement is terminated or not renewed, the provisions of
this Agreement relating to the Secure Horizons Health Plan stall automatically
terminate unless otherwise agreed by CMS and PacifiCare.

 

ARTICLE 3

COMPENSATION

 

3.1                                 Capitation Payments for Secure Horizons
Members.  Capitation Payments for Secure Horizons
Members shall be *** of the Secure Horizons Revenue per Secure Horizons Member
per month, plus Zero Dollars ($0.00) for each Secure Horizons Member for whom
PacifiCare has received a monthly member premium, subject to the adjustments
set forth in Article 5 of the Base Agreement and the adjustments set forth
below in this Section.

 

26

 

3.1.1                        Adjustment for ISL Premium.  In
calculating Capitation Payments due to Medical Group, PacifiCare shall deduct
the ISL Premium amount set forth herein from the amounts otherwise due to
Medical Group, unless PacifiCare has approved of Medical Group’s opting out of
PacifiCare’s ISL Program.

 

3.2                                 ISL Program.  The ISL Deductible, ISL
Premium and ISL Coinsurance for the Secure Horizons Plan shall initially be:

 

(i)                                     ISL Deductible shall be Zero Dollars ($0) per
Secure Horizons Member per calendar year.

 

(ii)                                  ISL Premium shall be Zero percent (0%) of the
Secure Horizons Revenue.

 

(iii)                               ISL Coinsurance shall be Zero percent (0%) of
the Cost of Care in excess of the ISL Deductible.

 

If PacifiCare has approved of Medical Group’s opt out of the ISL Program,
the above amounts and percentages will reflect “zero.” In such event, Medical
Group shall be required to obtain ISL coverage from a third-party insurance
carrier in accordance with Section 5.6.5 of the Base Agreement.

 

3.3                                 Secure Horizons Hospital Incentive Program. 
PacifiCare shall establish and administer an annual Hospital Incentive
Program for the Secure Horizons Health Plan (the “SHIP”). The SHIP is designed
to provide an incentive for the efficient and effective use of Hospital
Services, and shall be calculated utilizing the terms defined below.

 

3.3.l                           Reinsurance Program. 
Claims under the Reinsurance Program shall be valued at the Cost of Care
as defined in this Agreement. The Reinsurance Deductible, Reinsurance Premium
and Reinsurance Coinsurance for the Secure Horizons Plan shall initially be:

 

(i)                                     Reinsurance Deductible shall be [WORD]
($      ) per Secure Horizons Member per calendar
year.

 

(ii)                                  Reinsurance Premium shall be [WORD] percent
(       %) of the Secure Horizons Revenue.

 

(iii)                               Reinsurance Coinsurance shall be fifty
percent (50%) of the Cost of Care
for amounts in excess of the Reinsurance Deductible but less than two hundred
fifty thousand dollars ($250,000) and twenty percent (20%) of the Cost of Care
for amounts in excess of two hundred fifty thousand dollars ($250,000).

 

3.3.2                        SHIP Budget.  The SHIP Budget for Secure
Horizons Members shall be *** of
the Secure Horizons Revenue per Secure Horizons

 

27

 

Member per Month, subject to the adjustments set forth in
Article 5 of the Base Agreement and further specified below, less
PacifiCare Secure Horizons Plan Reinsurance Premium, if any

 

3.3.3                        SHIP Expense. 
SHIP Expense shall be equal to the sum of the following:

 

(i)                                     Inpatient costs for Hospital Services
rendered to Secure Horizons Members by Participating Providers valued at the
actual costs incurred by PacifiCare; plus,

 

(ii)                                  Other Hospital Services rendered to Secure
Horizons Members by Participating Providers other than inpatient services,
valued at actual costs incurred by PacifiCare; plus,

 

(iii)                               The actual amount paid for Hospital Services,
which are rendered by non- Participating Providers; minus,

 

(iv)                              Amounts paid by PacifiCare under the
Reinsurance Program, if any; minus,

 

(v)                                 Any and all amounts received from third
parties for Hospital Services provided to Secure Horizons Members through
coordination of benefits, work-related accidents or injuries, stop-loss and
reinsurance payments and Medical Group Member Copayments.

 

3.3.4                        SHIP Surplus.  In
the event the SHIP Expense is less than the SHIP Budget, the surplus shall be
allocated as follows:

 

*** to Medical Group

*** to PacifiCare

 

3.3.5                        SHIP Deficit.  In
the event the SHIP Expense is greater than the SHIP Budget, the deficit shall
be allocated as follows:

 

*** to Medical Group

*** to PacifiCare

 

Medical Group’s share of the SHIP Deficit shall be limited to Six
Dollars ($6.00) per Member per Month.

 

3.3.6                        Settlements and Reconciliation. 
Interim settlements and the final settlement and reconciliation of the
SHIP shall be performed by PacifiCare as provided in Article 5 of the Base
Agreement.

 

3.4                                 Market-Specific Benefit Program. 
PacifiCare may establish, at its sole discretion, an annual
Market-Specific Benefit Program (the “MSBP”). The MSBP is designed to

 

28

 

provide an incentive to control costs for certain additional benefits
(the “MSBP Benefits”) offered to Secure Horizons Members, as defined in the
applicable Subscriber Agreement, for the purpose of enhancing the marketability
of the Secure Horizons Health Plan. The MSBP may include the following
additional benefits and may be amended from  time
to time by PacifiCare to reflect changes in the benefits:

 

Dental Benefits

Immunosuppressive Drugs

Outpatient Pharmacy Benefits

Respite Care

 

PacifiCare shall retain seven percent (7%) of the Monthly CMS Payment
(the “MSBP Budget”) and add to it Sixty – Four Cents ($0.64) per Secure
Horizons Plan Member per month, which amount is established as a credit for
rebates received from pharmaceutical manufacturers. This credit may or may not
reflect the total pharmaceutical manufacturer rebate revenues received by
PacifiCare for purposes of funding and administering the MSBP. The MSBP shall
be calculated as follows:

 

3.4.1                        MSBP Benefits shall be the additional benefits listed
above in this Section and made available under the Secure Horizons Health
Plan as defined in the applicable Subscriber Agreement.

 

3.4.2                        MSBP Expense shall equal the expense incurred for the
provision of MSBP Benefits during the applicable period.

 

3.4.3                        MSBP Surplus. In the event the MSBP Expense is less than
the MSBP Budget, zero percent (0%) of the surplus shall be allocated to Medical
Group.

 

3.4.4                        MSBP Deficit. In the event the MSBP Expense is greater
than the MSBP Budget, zero percent (0%) of the deficit shall be allocated to
Medical Group.

 

3.4.5                        Settlements. The calculations in this Section and settlements shall be
performed in accordance with the procedures specified in Article 5 of the
Base Agreement.

 

3.5                                 Collection of Charges From Third Parties When
Medicare Is Not the Primary Payor.  Medical Group shall accept
Capitation Payments from PacifiCare as payment in full for Covered Services
provided to Secure Horizons Members; provided, however, when Medicare is not
the primary payor for Covered Services, such as when the Secure Horizons Member
is entitled to payment from another third party or for payment for a workers’
compensation claim, or from other primary insurance coverage maintained by
Secure Horizons Member, Medical Group shall make no demand upon PacifiCare for
reimbursement under the Individual Stop-Loss Program until all primary sources
of payment have been pursued and it is determined that full payment cannot be
obtained within ten (10) months from the date of the provision of Covered
Services.

 

29

 

IN WITNESS WHEREOF, the
parties hereto have executed this Product Attachment C.

 

 

	
   

  	
  PACIFICARE OF
  CALIFORNIA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Jeffrey

  
	
   

  	
   

  	
  Brian Jeffrey

  
	
   

  	
  Title:

  	
  Vice
  President, Network Management

  
	
   

  	
  Date:

  	
  2/26/2002

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GATEWAY
  PHYSICIANS MEDICAL ASSOCIATES

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike Olson

  
	
   

  	
   

  	
  Mike Olson

  
	
   

  	
  Title:

  	
  Contracting / Network
  Development Director

  
	
   

  	
  Date:

  	
  February 26, 2002

  

 

30

 

PACIFICARE OF CALIFORNIA

 

MEDICAL GROUP/IPA SERVICES AGREEMENT

(PROFESSIONAL CAPITATION)

 

EXHIBIT 5

 

DIVISION OF FINANCIAL RESPONSIBILITY

 

(This Exhibit 5 is an integral part of
this Agreement)

 

The
following matrix outlines the division of financial responsibility between
PacifiCare, Medical Group and the Hospital Incentive Program, the intent being
to clarify Covered Services categories in order to provide for accurate
administration. The matrix serves as a model under which broad Covered Service
categories suggest the appropriate financial responsibility for Covered
Services not specifically listed. The applicable Subscriber Agreement and
Evidence of Coverage should be consulted for an accurate and complete
description of Covered Services and the Provider Manual for administrative
clarification. Member benefit information should be verified prior to the
provision of services.

 

Division of Financial
Responsibility

 

KEY: M = Opt-out to Medicare benefit for Hospice

 

	
  Service Description

  	
   

  	
  Medical

  Group

  	
   

  	
  Hospital

  Incentive

  Program

  	
   

  	
  PacifiCare

  
	
  Allergy
  - Serum - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Allergy
  - Testing & Tx - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Ambulance
  (Air and Ground) - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Amniocentesis
  - OP - Fac & Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Anesthesiology
  - IP & OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Autologous
  Blood Services - OP - Fac &  Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Biofeedback
  (Medically Necessary) - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemical
  Dependency (Detox) - IP &  OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemical
  Dependency (Detox) - IP & OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemical
  Dependency (Rehab) - IP - Fac - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemical
  Dependency (Rehab) - IP - Fac - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemical
  Dependency (Rehab) - IP - Prof - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemical
  Dependency (Rehab) - IP - Prof - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemical
  Dependency (Rehab) - OP - Fac - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemical
  Dependency (Rehab) - OP - Fac - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemical
  Dependency (Rehab) - OP - Prof- CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemical
  Dependency (Rehab) - OP - Prof - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chemotherapy (Including Chemotherapy Drugs -
  Inject/Oral) - OP - Fac & Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  

 

*** All references to the
division of financial responsibility have been deleted.

 

 

31

 

	
  Service Description

  	
   

  	
  Medical

  Group

  	
   

  	
  Hospital

  Incentive

  Program

  	
   

  	
  PacifiCare

  
	
  Chemotherapy - IP -
  Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chiropractic - Medical
  - OP - Fac & Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Chiropractic -
  Supplemental - OP - Fac & Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Circumcision - OP - Fac
  & Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Diagnostic Tests - OP -
  Fac & Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  DME - IP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  DME, Ostomy/Colostomy
  Supplies, Prosthetics/Orthotics - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Emergency Room - OP -
  Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Emergency Room - OP -
  E.R. Phys.

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Endoscopic Studies - LP
  - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Endoscopic Studies - OP
  - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Endoscopic Studies - OP
  - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family Planning -
  Abortions - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family Planning
  -Abortions - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family Planning -
  Contraceptive Devices - Insertion - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family
  Planning - Contraceptive Devices - Non-Rx (eg. Norplant/IUD) - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family
  Planning - Contraceptive Devices - Prescription - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family
  Planning - GIFT/ZIFT/IVF - OP - Fac & Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family
  Planning - Infertility Procedures - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family
  Planning - Infertility Procedures - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family
  Planning - Infertility Testing - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family
  Planning - Sterilization - IP & OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family
  Planning - Sterilization - IP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Family
  Planning - Sterilization - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Fetal
  Monitoring - OP - Fac & Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Health
  Education - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Health
  Eval/Physical

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Hearing
  Aids/Molds - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Hearing
  Screening (Audiologic Evaluation) - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Hemodialysis
  / Dialysis - IP & OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Hemodialysis / Dialysis
  - OP - Fac (including all drugs)

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Home
  Health Care / Homebound Infusion Therapy - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Hosp Based Phys Interpretative Serv Incl Radiology
  & Pathology - IP & OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Hospice
  Services (Medicare) - IP - Fac & Prof - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Hospice
  Services - Prof - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Hospitalization
  Services - IP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Immunizations &
  Inoculations (Medically Necessary) - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Infusion
  therapy - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Injectables - Not Part
  of Outpatient Pharmacy Benefits - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Laboratory/Pathology
  (Diagnostic Only) - OP - Fac  

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Laboratory/Pathology
  (Diagnostic Only) - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Laboratory/Pathology -
  LP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Lithotripsy
  - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Lithotripsy
  - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Med/Surg
  Supplies (casts, splints, bandages) - Office - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Medication
  - Prescription - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Mental
  Health (Crisis Intervention) - OP - Prof - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  MENTAL HEALTH: AB88 Benefits (Mental Health Party
  applies to CO only)

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  

 

*** All references to the
division of financial responsibility have been deleted.

 

32

 

	
  Service Description

  	
   

  	
  Medical

  Group

  	
   

  	
  Hospital

  Incentive

  Program

  	
   

  	
  PacifiCare

  
	
  Mental Health - IP & OP - Fac - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Mental Health - IP & OP - Prof - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  MENTAL
  HEALTH: Secure Horizons and Commercial (non AB88 Benefits)

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Mental Health - IP and OP - Fac - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Mental
  Health - IP and OP - Fac - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Mental
  Health - IP and OP - Prof - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Mental Health - IP and  OP - Prof - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Observation
  Room - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Oral Surgery / Dental Services - Accident & Injury Only - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Oral Surgery / Dental Services - Accident &
  Injury Only - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Out
  of Area - IP & OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Out
  of Area - IP &  OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Outpatient Surgery - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Outpatient Surgery - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Physician
  Services (All Professional Services) - IP &  OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Prosthetics
  - Surgical Implants - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Radiation
  Therapy - IP & OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Radiation
  Therapy - OP - Fac and/ or freestanding facility

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Radiology (Diagnostic
  Only) - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Radiology (Diagnostic
  Only) - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Radiology - LP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Reconstructive
  Surgery - IP & OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Reconstructive
  Surgery - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Rehabilitation
  - Cardiac/OT/PT/RT/ST - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Rehabilitation
  - Cardiac/OT/PT/RT/ST - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Skilled Nursing
  Facility - IP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Sleep Studies - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  TMJ
  - Evaluation (excludes dental exams/treatment) - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Transfusions - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Transplants - IP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Transplants - IP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Urgent Care - OP - Fac
  & Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Vision - Medical
  Treatment - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Vision - Refraction for
  Contact Lenses/Frames - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Vision
  Care Materials - Contact Lenses/Frames (non-cataract) - OP - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  Vision
  Care Materials - Contact Lenses/Frames (non-cataract) - OP - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  

 

*** All references to the
division of financial responsibility have been deleted.

 

33Exhibit
10.190

 

[SEAL]

 

Business
Associate Amendment,

Amendment
Number 2 to the Medical Group/IPA Services Agreement

 

This
Amendment Number 2 (“Amendment”) supplements and is made a part of the Medical
Group/IPA Services Agreement (“Agreement”) dated January 1, 2001 by and
between PacifiCare of California, Inc., a California corporation (“PacifiCare”)
and Gateway Physicians Medical Associates, Inc. (“Medical Group”).

 

A.           PacifiCare and Medical Group are parties to the Agreement pursuant to
which Medical Group provides a service to, or performs a function on behalf of,
PacifiCare and, in connection therewith, uses or discloses Protected Health
Information (“PHI”) that is subject to protection under the Health Insurance
Portability and Accountability Act of 1996 (“HIPAA”) and certain regulations
found at 45 CFR Parts 160 through 164 (“HIPAA Regulations”);

 

B.             PacifiCare is a Covered Entity as that term
is defined in the HIPAA Regulations. 
Medical Group creates or receives PHI from or on behalf of PacifiCare and
is, therefore, a Business Associate, as defined in the HIPAA Regulations;

 

C.             Pursuant to the HIPAA Regulations, Medical
Group, as a Business Associate of PacifiCare, must agree in writing to certain
mandatory provisions regarding the use and disclosure of PHI; and

 

D.            The purpose of this Amendment is to satisfy
the Business Associate contract requirements as set forth at § 164.504(e)
of the HIPAA Regulations, as they may be amended from time-to-time.

 

NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
herein, the parties agree as follows:

 

1.               Definitions.  Unless otherwise provided in
this Amendment, capitalized terms have the same meaning as set forth in the
HIPAA Regulations.

 

2.               Scope of Use and Disclosure of PHI. 
Except as otherwise limited in this Amendment:

a.               Medical Group shall use and disclose PHI
solely to provide the services, or perform the functions, described in the
Agreement, provided that such use or disclosure would not violate the HIPAA
Regulations if so used or disclosed by PacifiCare.

 

*** Confidential
Information omitted and filed separately with the Securities and Exchange
Commission.

 

1

 

b.              Medical Group may use or disclose PHI for the
proper management and administration of Medical Group or to provide Data
Aggregation services to PacifiCare.

 

3                  Obligations of Medical Group.  In connection with its use
and disclosure of PHI, Medical Group shall:

a.               Not use or disclose PHI other than as
permitted or required by the Agreement or as Required By Law.

b.              Use reasonable and appropriate safeguards to
prevent use or disclosure of the PHI other than as provided for by this
Amendment.

c.               Mitigate, to the extent practicable, any
harmful effect that is known to Medical Group of a use or disclosure of PHI by
Medical Group in violation of the requirements of this Amendment.

d.              Report to PacifiCare any use or disclosure of
the PHI not provided for by this Amendment of which Medical Group becomes
aware.

e.               Require contractors, subcontractors, and/or
agents to whom Medical Group provides PHI created or received by Medical Group
on behalf of PacifiCare to agree to the same restrictions and conditions that
apply to Medical Group with respect to such PHI under this Amendment.

f.                 Medical Group access, at the request of
PacifiCare, and in the time and manner as set forth in Section 2.9.5,
General Data and Information Requirements, of the Agreement, to PHI in a
Designated Record Set, to PacifiCare in order to meet the requirements under
§ 164.524 of the HIPAA Regulations. 
If PacifiCare and Medical Group mutually agree, Medical Group may
provide such access directly to Individual, provided that such access is
provided to the Individual in the time-frames set forth in § 164.524 of
the HIPAA Regulations.

g.              Make any amendment(s) to PHI in a Designated
Record Set that PacifiCare directs or agrees to pursuant to § 164.526 of
the HIPAA Regulations at the request of PacifiCare in the time and manner as
set forth in Section 2.9.5, General Data and Information Requirements, of
the Agreement.

h.              Make internal practices, books, and records,
including, but not limited to, policies and procedures, relating to the use and
disclosure of PHI created or received by Medical Group on behalf of PacifiCare
available to the Secretary, and to PacifiCare, if requested, in a time and
manner designated by the Secretary, for purposes of the Secretary determining
PacifiCare’s compliance with the HIPAA Regulations.

i.                  Maintain for a period of six (6) years an
accounting of all disclosures of PHI that are required to be maintained under
§ 164.528 of the HIPAA Regulations. 
Such accounting will include the date of the disclosure, the name of the
recipient, a description of PHI disclosed and the purpose of the disclosure.

 

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j.                  Provide to PacifiCare in time and manner as
set forth in Section 2.9.5, General Data and Information Requirements, of
the Agreement, information collected in accordance with Section 3.i. of
this Amendment, to permit PacifiCare to respond to a request by an Individual
for an accounting of disclosures of PHI in accordance with § 164.528 of
the HIPAA Regulations.  If PacifiCare
and Medical Group mutually agree, Medical Group may provide such accounting
directly to Individual, provided that such accounting is provided to the
Individual in the time-frames set forth in § 164.528 of the HIPAA
Regulations.

k.               Make reasonable efforts to implement any
restriction of the use or disclosure of PHI that PacifiCare has agreed to under
Section 4.c. of this Amendment.

 

4.               Obligations of PacifiCare. 
PacifiCare shall:

a.               Provide Medical Group with the notice of
privacy practices that PacifiCare furnishes to Individuals in accordance with
§ 164.520 of the HIPAA Regulations.

b.              Promptly notify Medical Group of any changes
in, or revocation of, permission by Individual to use or disclose PHI, to the
extent that such changes may affect Medical Group’s use or disclosure of PHI.

c.               Promptly notify Medical Group of any restriction
to the use or disclosure of PHI that PacifiCare has agreed to in accordance
with § 164.522 of the HIPAA Regulations, to the extent that such
restriction may affect Medical Group’s use or disclosure of PHI.

d.              Not request Medical Group to use or disclose
PHI in any manner that would not be permissible under the HIPAA Regulations if
so used or disclosed by PacifiCare, unless such use or disclosure is necessary
for the purposes of Data Aggregation or management and administrative
activities of Medical Group under the Agreement.

 

5.             Termination for Breach. 
Upon PacifiCare’s knowledge of a material breach of the terms of this
Amendment by Medical Group, PacifiCare shall, in accordance with the
notification requirement and cure period set forth in the Agreement, provide an
opportunity for Medical Group to cure the breach or end the violation.  PacifiCare may terminate the Agreement if
Medical Group does not cure the breach or end the violation within the cure
period set forth in the Agreement.

 

6.               Future Confidentiality of PHI. 
Upon the expiration or earlier termination of the Agreement, for any
reason, Medical Group shall return or destroy all PHI received from PacifiCare,
or created or received by Medical Group on behalf of PacifiCare that Medical
Group still maintains and retain no copies of such PHI; provided that if such
return or destruction of PHI is infeasible, Medical Group shall provide to
PacifiCare notification of the conditions that make return or destruction
infeasible and shall extend the protections of this Amendment to

 

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such PHI and limit further uses and disclosures of such PHI to those
purposes that make the return or destruction infeasible, for so long as Medical
Group maintains such PHI.

 

7.               Amendment.  The parties agree to take
such action to amend this Amendment from time-to-time as is necessary for
PacifiCare to comply with the requirements of HIPAA and the HIPAA Regulations.

 

8.               Survival.  The respective rights and
obligations of Medical Group under Section 6 of this Amendment shall
survive the termination of the Agreement.

 

9.               Interpretation.  Any
ambiguity in this Amendment shall be resolved to permit PacifiCare to comply
with the HIPAA Regulations.

 

10.         Conflict of Terms. 
Whenever the terms of the Agreement and this Amendment are in conflict,
the terms of this Amendment shall control.

 

11.         Other Terms, Remain in Force. 
Except as expressly modified by the terms of this Amendment, all of the
terms and conditions set forth in the Agreement shall remain in full force and
effect.

 

12.         Effective Date. 
This Amendment shall be effective immediately.

 

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