Document:

Exhibit 10.141

 

 

PACIFICARE
OF CALIFORNIA

MEDICAL
GROUP/IPA SERVICES AGREEMENT

(PROFESSIONAL
CAPITATION)

 

THIS
PACIFICARE MEDICAL GROUP/IPA SERVICES AGREEMENT (this “Agreement”) is made and entered into this first day of July 1999, by and between
PACIFICARE OF CALIFORNIA, INC., a California corporation (“PacifiCare”), and Sierra Medical Group (“Medical Group”), with
reference to the following facts:

 

WHEREAS,
PacifiCare operates various prepaid health plans for the provision of Covered
Services to persons enrolled as Members in such plans in a manner consistent
with the laws of the State of California and the United States; and

 

WHEREAS,
Medical Group and its Participating Providers desire to participate in
PacifiCare’s prepaid
health service delivery system by providing or arranging for Covered Services
to Members on a prepaid basis in coordination with PacifiCare and its
Participating Providers under the terms specified in this Agreement.

 

NOW,
THEREFORE, it is agreed as follows:

 

ARTICLE
1

DEFINITIONS

 

Whenever
used in this Agreement, the following terms shall have the definitions
contained in this Article I:

 

1.1                                 Accreditation Organization is any organization, including, without
limitation, the National Committee for Quality Assurance (NCQA), engaged in accrediting
or certifying PacifiCare, any Managed Care Plans, or any Participating
Providers.

 

1 2                                 Agreement is this Medical Group/IPA Services Agreement between PacifiCare and
Medical Group, and any amendments, exhibits and attachments hereto, including
Product Attachments.

 

1.3                                 Base Agreement is this Medical Group/IPA Services Agreement
between PacifiCare and Medical Group, and any amendments, exhibits and
attachments hereto, excluding Product Attachments.

 

1.4                                 Capitation Payments are monthly payments made to Medical Group
on a prepaid basis for Covered Services provided or arranged by Medical Group
under this Agreement.

 

1.5                                 Commencement Date is the commencement date of this Agreement
as specified in Section 6.1.

 

 

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

 

1

 

 

1.6                                 Copayment is a fee that may be charged to Medical Group Members for certain
Medical Group Services and collected by Medical Group or its Participating
Providers at the time Medical Group Services are provided, as set forth in the
applicable Managed Care Plan.

 

1.7                                 Cost of Care is the valuation of Covered Services and
other health care services provided or arranged by Medical Group, as described
in Section 5.7.

 

1.8                                 Covered Services are those medically necessary health care
services, supplies and benefits which are required by a Member as determined by
Medical Group or PacifiCare in accordance with the Member’s Managed Care Plan and PacifiCare’s Quality Improvement Program and Utilization
Management Program.  For purposes of
this Agreement, “medically
necessary” shall have the
meaning set forth in the applicable Subscriber Agreement.

 

1 9                                 Division of Financial Responsibility is the matrix for each Managed Care Plan
which specifies the financial responsibility for Covered Services between
PacifiCare, Medical Group and the Hospital incentive Program.  The Division of Financial Responsibility for
each Managed Care Plan is set forth in the applicable Product Attachment.

 

1.10                           Eligibility List is the list of Members for whom Medical
Group shall provide or arrange Covered Services.

 

1.l1                              Emergency Services are Covered Services required by a Member as
the result of a medical condition manifesting itself by the sudden onset of
symptoms of sufficient severity, which may include severe pain, such that a
reasonable person would expect the absence of immediate medical attention to
result in: (1) placing the health of the Member in serious jeopardy; (2) serious
impairment to bodily functions; or (3) serious dysfunction of any bodily
part.  The final determination of
whether Emergency Services were required shall be made by the PacifiCare
medical director or designee, subject to appeal under the applicable Member
appeals procedure.

 

1.12                           Government Agency shall mean any local, state or federal
government agency or entity with regulatory or other authority over PacifiCare,
this Agreement or any Managed Care Plan.

 

1.13                           Hospitals are licensed acute care hospitals in the Medical Group Service Area
which have entered into a written agreement with PacifiCare to provide Hospital
Services to Members.

 

1.14                           Hospital Services are Covered Services for Medical Group
Members which are initially paid for by PacifiCare and are the shared financial
responsibility of PacifiCare and Medical Group, as specified in the Hospital
Incentive Programs set forth in the Product Attachments.  A summary of Hospital Services is set forth
in the Division of Financial Responsibility for each Managed Care Plan.

 

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 became due, subject to applicable grace
periods, if any, whether at stated maturity or otherwise; (ii) fails to
maintain the financial reserves required by PacifiCare; (iii) voluntarily
ceases to

 

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conduct its business in the
ordinary course; (iv) commences any insolvency proceeding with respect to
itself; or (v) takes any action to effectuate or authorize an insolvency
proceeding.  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.

 

1.16                           Managed Care Plan is any one of the various health plans or
products sponsored or administered by PacifiCare or its subsidiaries or
affiliates including, without limitation, a commercial prepaid health plan (“PacifiCare Commercial Health Plan”), a commercial point-of-service plan (“PacifiCare Commercial POS Health Plan”), a Medicare-risk plan (“Secure Horizons Health Plan”) and a Medicare-risk point-of-service plan (“Secure Horizons POS Health Plan”). 
Each Managed Care Plan is described in the applicable Subscriber
Agreement and Product Attachment. 
PacifiCare may make available some, and not all, of the Managed Care
Plans under this Agreement.

 

117                              Medical Group Facility is each office of Medical Group and its
Participating Providers, identified in Exhibit 1 to this Agreement,
where Medical Group Services may be provided to Medical Group Members.

 

1.18                           Medical Group Members are the Members listed on the Eligibility
List.

 

1.19                           Medical Group Service Area is the geographic area as defined in Exhibit
1 to this Agreement.

 

1.20                           Medical Group Services are Covered Services for Medical Group
Members which are the financial responsibility of Medical Group, as specified
in the Division of Financial Responsibility for each Managed Care Plan.

 

1.21                           Member is an individual who is enrolled in a Managed Care Plan and meets all
the eligibility requirements for membership in the Managed Care Plan and for
whom the applicable Premium has been received by PacifiCare.

 

1.22                           Out-of-Area Services are those Urgently Needed Services and
Emergency Services provided while a Medical Group Member is outside the Medical
Group Service Area.  Referred services
that are provided outside of the Service Area are not considered to be
Out-of-Area Services.

 

1.23                           Participating Providers are (i) physicians and health care
professionals who are shareholders, partners or employees of Medical Group and
(ii) physicians, medical groups, individual practice associations (“IPA”), health care professionals, hospitals, facilities and other providers
of health care services or supplies that have entered into written contracts
with PacifiCare, Medical Group or Hospital to provide Covered Services to
Members pursuant to Managed Care Plans.

 

l.24                              Premium is the payment for Covered Services under each Managed Care Plan as
defined in the applicable Product Attachment.

 

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1.25                           Primary Care Physician is any of Medical Group’s Participating Providers who meet PacifiCare’s criteria for providing initial and primary
care Covered Services to Medical Group Members, for maintaining the continuity
of patient care, and for initiating and coordinating referrals for Covered
Services to Medical Group Members.

 

1.26                           Product Attachments are the attachments to the Base Agreement
which set forth the terms and conditions under which Medical Group shall
provide or arrange Covered Services to Medical Group Members pursuant to the
Managed Care Plans.  All Product
Attachments which are signed by both PacifiCare and Medical Group shall become
a part of this Agreement and are incorporated herein.

 

1.27                           Provider Manual is the PacifiCare Provider Policies and
Procedures Manual and related written materials which shall be provided to
Medical Group by PacifiCare prior to or concurrent with the execution of this
Agreement.  The Provider Manual is
incorporated into this Agreement, and may be updated from time to time by
PacifiCare as provided in this Agreement.

 

1.28                           Quality Management and Improvement (“QI”) Program are those standards, protocols, policies and procedures adopted by
PacifiCare to monitor and improve the quality of clinical care and quality of
services provided to Members.  The QI
Program is described in the Provider Manual, and may be updated from time to
time by PacifiCare as provided in this Agreement.

 

l 29                              State and Federal Law shall mean any and all laws and regulations
of the State of California or of the United States and all orders and other
requirements of any governmental agency which are applicable to PacifiCare,
this Agreement, Managed Care Plans, and Medical Group and its Participating
Providers.

 

1.30                           Subscriber Agreement is the contract between PacifiCare and a
Subscriber or Subscriber Group which describes the costs, benefits or services,
procedures, conditions, limitations, exclusions, and other obligations to which
Members are entitled and subject to under a Managed Care Plan.  A copy of the current standard form
Subscriber Agreement for each Managed Care Plan shall be provided to Medical
Group by PacifiCare concurrent with the execution of each Product Attachment,
and may be updated from time to time by PacifiCare.

 

1.31                           Subscriber or Subscriber Group is the individual or employer, organization,
firm or other entity which contracts with PacifiCare under a Subscriber
Agreement to obtain the benefits of a Managed Care Plan.

 

1.32                           Urgently Needed Services are Covered Services under a Managed Care
Plan which are required without delay in order to prevent the serious
deterioration of a Member’s
health as a result of an unforeseen illness or injury.

 

1.33                           Utilization Management (“UM”) Program are those standards, protocols, policies and procedures adopted by
PacifiCare regarding the management, review and approval of the provision of
Covered Services to Members.  The UM Program
is described in the Provider Manual, and may be updated from time to time by
PacifiCare as provided in this Agreement.

 

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ARTICLE
2

DUTIES OF MEDICAL GROUP

 

2.1                                 Provide or Arrange Covered Services.  Medical
Group, through its Participating Providers, shall provide or arrange Covered
Services in the Medical Group Service Area to Medical Group Members, in
coordination with PacifiCare and PacifiCare’s Participating Providers and in accordance with the terms and
conditions set forth in this Agreement and the Managed Care Plans.  Medical Group shall be financially
responsible for Medical Group Services. 
The primary concern of Medical Group and its Participating Providers
under this Agreement shall be the quality of Covered Services provided to or
arranged for Medical Group Members. 
Nothing stated in this Agreement shall be interpreted to diminish this
responsibility.

 

2.2                                 Professional Standards.  All
Covered Services provided or arranged by Medical Group shall be provided or
arranged by duly licensed, certified or otherwise authorized professional
personnel and at physical facilities in accordance with (i) the generally
accepted medical and surgical practices and standards prevailing in the
applicable professional community at the time of treatment, (ii) the provisions
of PacifiCare’s QI Program and
UM Program, (iii) the requirements of State and Federal Law and (iv) the
standards of Accreditation Organizations.

 

2.2.1                        Licensure
of Medical Group.  Medical Group is
legally organized and incorporated under the laws of the State of
California.  Medical Group shall
maintain in good standing at all times during the term of this Agreement any
and all licenses, certificates and/or approvals required under State and Federal
Law for the performance by Medical Group of the duties required by this
Agreement.

 

Medical Group shall notify
PacifiCare upon receiving any notice from the Department of Corporations or any
other entity with the regulatory or contractual authority to audit Medical
Group relating to compliance with applicable law, including, without
limitation, notices of medical surveys or financial audits.

 

2.2.2                        Licensure/Certification
of Medical Group’s Participating Providers.  Each of Medical Group’s Participating Providers shall maintain in
good standing at all times during the term of this Agreement the necessary
licenses or certifications required by State and Federal Law and by the Managed
Care Plans to provide Covered Services to Medical Group Members.

 

2 2.3                        Hospital
Privileges for Medical Group’s Participating Providers.  Unless otherwise specified by Medical Group
and approved by PacifiCare for specific Participating Providers, Medical Group
shall make best efforts to ensure that each of Medical Group’s Participating
Providers who is a physician shall maintain in good standing at all times
during the term of this Agreement medical staff membership and clinical
privileges at Hospital necessary to provide or arrange Covered Services to
Medical Group Members.

 

2.3                                 Medical Group’s
Participating Providers.  Medical
Group shall have a sufficient number of Participating Providers throughout the
Medical Group Service Area to provide or arrange

 

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Covered Services and meet the needs of PacifiCare and Medical Group
Members as determined by PacifiCare’s QI Program and in accordance with State
and Federal Law.  Medical Group’s
Participating Providers shall provide or arrange Covered Services, including
Emergency Services, to Medical Group Members twenty-four (24) hours a day,
seven (7) days a week.  Medical Group’s
Participating Providers must meet PacifiCare’s credentialing standards and must
be approved by PacifiCare before providing or arranging Covered Services to Medical
Group Members.

 

2.3.1                        Participating
Provider Information.  Medical Group
shall provide PacifiCare with a complete list of its Participating Providers,
together with the provider specific information required by PacifiCare for
credentialing and for administration of the Managed Care Plans, at the time
this Agreement is signed.

 

2.3.2                        Notice
of Participating Provider Additions. 
Medical Group shall use its best efforts to provide at least sixty (60)
calendar days prior written notice to PacifiCare of the addition of any new
Participating Providers.  Such notice
shall include the provider specific information required by PacifiCare.  All new Participating Providers must be approved
by PacifiCare before providing or arranging Covered Services to Medical Group
Members.  PacifiCare shall use its best
efforts to approve new Participating Providers as quickly as possible after
receiving the written notice from Medical Group.

 

2.3.3                        Notice
of Participating Provider Terminations. 
Medical Group shall provide sixty (60) calendar days prior written
notice to PacifiCare of the termination of any of its Participating Providers;
provided, however, that if any Participating Providers are terminated with less
than sixty (60) calendar days notice, then Medical Group shall provide written
notice to PacifiCare within five (5) business days of Medical Group becoming
aware of such termination. 
Notwithstanding the termination of any Participating Providers, Medical
Group shall remain responsible for providing or arranging Covered Services
through its remaining Participating Providers and shall remain financially
responsible for Medical Group Services provided to Medical Group Members under
this Agreement.

 

2.3.4                        Restriction,
Suspension or Termination of Participating Providers.  Medical Group shall, as warranted,
immediately restrict, suspend or terminate its Participating Providers from
providing or arranging Covered Services to Medical Group Members in the
following circumstances: (i) the Participating Provider ceases to meet the
licensing/certification requirements or other professional standards described
in this Agreement; (ii) PacifiCare or Medical Group reasonably determines that
there are serious deficiencies in the professional competence, conduct or
quality of care of the Participating Provider which affects or could adversely
affect the health or safety of Medical Group Members; or (iii) PacifiCare
reasonably demands that the Participating Provider be restricted, suspended or
terminated.  Medical Group shall
immediately notify PacifiCare of any of its Participating Providers who cease
to meet the licensing/certification requirements or other professional
standards described in this Agreement and Medical Group’s actions under this
Section.  If Medical Group fails to act
as required by this Section with respect to any of its Participating Providers,
PacifiCare shall have the right to immediately

 

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prohibit such Participating Providers from continuing to provide
Covered Services to Medical Group Members.

 

2.3.5                        Changes
in Capacity.  Medical Group and its
Participating Providers will continue to accept Members enrolled by PacifiCare
for so long as Medical Group and its Participating Providers have the capacity
to provide and arrange Covered Services under this Agreement and for so long as
Medical Group continues to accept new patients from any HMO or other prepaid
health plan.  Medical Group shall
provide at least ninety (90) calendar days prior written notice to PacifiCare
of any significant changes in the capacity of Medical Group to provide or
arrange Covered Services that would prevent Medical Group from accepting
additional Members.  A significant
change in capacity includes, without limitation, the following: (i) inability of
Medical Group to properly serve additional Members due to a lack of Primary
Care Physicians or other Participating Providers; (ii) inability of any one of
Medical Group’s Primary Care Physicians or other Participating Providers to
serve additional Members; or (iii) closure of any Medical Group Facility.  PacifiCare may continue to enroll Members
with Medical Group until the expiration of the notice period required under
this Section, and in such event, Medical Group and its Primary Care Physicians
and other Participating Providers shall continue to accept such Members.  PacifiCare shall discontinue the enrollment
of Members with Medical Group upon expiration of the notice period required
under this Section until such time, if any, that Medical Group provides written
notification to PacifiCare that it has the capacity to accept new Members.

 

2.4                                 Medical Group’s
Subcontracts with Participating Providers. 
Medical Group shall demonstrate and certify to PacifiCare prior to the
Commencement Date and upon PacifiCare’s written request at any time during the
term of this Agreement (in the format specified by PacifiCare) that its
subcontracts with Participating Providers comply with requirements of this
Agreement.  Medical Group shall amend
any and all of its existing subcontracts with Participating Providers which do
not comply with this Agreement within ninety (90) calendar days following the
execution of this Agreement and shall provide PacifiCare with written
certification thereof.

 

2.4.1                        Compliance
with Provisions of Agreement. 
Medical Group’s subcontracts with Participating Providers shall be in
writing.  All such subcontracts shall be
consistent with the terms and conditions of this Agreement (including the
Product Attachments) and shall meet PacifiCare’s requirements for Participating
Provider subcontracts.  If this
Agreement is amended or modified, all such subcontracts shall be amended or
modified within sixty (60) calendar days to be consistent with such amendments
or modifications.

 

2.4.2                        Compliance
with Standards of Accreditation Organizations and Requirements of State and
Federal Law.  Medical Group’s
subcontracts with Participating Providers shall comply with the standards of
Accreditation Organizations and requirements of State and Federal Law.  If there are changes in such standards
and/or requirements, Medical Group shall amend its subcontracts with
Participating Providers to comply with such changes within thirty (30) calendar
days following notice thereof from PacifiCare.

 

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2.4.3                        Access
by PacifiCare, Accreditation Organizations and Government Agencies to
Subcontracts and Books and Records of Participating Providers.  Medical Group shall make available for
inspection, examination and copying by PacifiCare, Accreditation Organizations
and Government Agencies during normal business hours (i) its Participating
Provider subcontracts and (ii) books and records of its Participating Providers
relating to Covered Services provided to Medical Group Members.  Unless shorter notice is specified by a
Government Agency, PacifiCare shall provide Medical Group with two (2) business
days prior written notice of any inspection, examination and copying under this
Section.  Any such inspection,
examination, and copying shall be conducted consistent with State and Federal
Law.  Copies of subcontracts and the
books and records of Participating Providers shall be maintained for at least
five (5) years from the close of the fiscal year in which the Covered Services
were provided.

 

2.4.4                        Medical
Group’s Responsibility for Providing or Arranging Covered Services.  Notwithstanding the existence of Medical
Group’s subcontracts with its Participating Providers, Medical Group shall
remain responsible for satisfying the obligations of Medical Group set forth in
this Agreement.  If any of Medical
Group’s subcontracts with Participating Providers are terminated, Medical Group
shall remain responsible for providing or arranging Covered Services through
its remaining Participating Providers and shall remain financially responsible
for Medical Group Services provided to Medical Group Members under this
Agreement.

 

2.4 5                        Assignment
of Subcontract Rights.  Medical
Group’s subcontracts shall require its Participating Providers who are
independent contractors to agree to be bound, at PacifiCare’s option, to the
terms and conditions of this Agreement in the event of dissolution or
insolvency of Medical Group, in the event of termination of this Agreement by
PacifiCare for cause pursuant to Section 6.2.2 or in the event of termination
by PacifiCare pursuant to Section 6.3. 
Medical Group’s subcontracts shall provide that in the event PacifiCare
exercises such option, Medical Group’s subcontracts shall provide that Medical
Group’s subcontractors agree to accept payment from PacifiCare, as payment in
full, at rates which are the lesser of the Cost of Care or the rate set forth
in the applicable subcontract.

 

2.5                                 Acceptance and Transfer of Members. 
Medical Group and its Participating Providers may not impose any
limitations on the acceptance of Members for care or treatment that are not
imposed on other patients.  PacifiCare,
Medical Group and its Participating Providers shall not request, demand,
require or seek directly or indirectly the transfer, discharge or removal of
any Member for reasons of Member’s
need for, or utilization of, Covered Services, except in accordance with the
procedures established for such action. 
Medical Group and its Participating Providers shall not refuse or fail
to provide or arrange Covered Services to any Member.

 

PacifiCare and Medical Croup shall exercise reasonable efforts in
following the procedures for transfer, discharge or removal of Members as set
forth in the Provider Manual. 
Nevertheless, PacifiCare may require transfer of Medical Group Members
for any reason, and Medical Group may request that PacifiCare transfer Medical
Group Members to another of PacifiCare’s Participating Providers if Medical
Group is unable to provide the Covered Services required by

 

8

 

this Agreement for reasons related to capacity of Medical Group and its
Participating Providers.  In addition,
Medical Group may request that PacifiCare transfer a Medical Group Member to
another of PacifiCare’s Participating Providers in the event of a material
breakdown in the physician-patient relationship.  PacifiCare shall evaluate such requests considering the best
interests of the Member.  In the event
PacifiCare grants a request for transfer of a Member by Medical Group, the
transfer shall not be effective until the end of the month following the month
in which the Member receives notice of transfer, unless the Member agrees to an
earlier transfer and PacifiCare has made arrangements with another of PacifiCare’s
Participating Providers to accept the Member.

 

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 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, at Medical Group’s or Participating Provider’s expense, 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 and shall reimburse PacifiCare for
the actual copying expense.  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 five (5)
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.

 

2.7                                 Insurance.  Medical Group, at its sole
cost and expense, shall maintain throughout the term of this Agreement and for
a period of four years following termination of this Agreement, professional
liability insurance (i.e., medical malpractice insurance) and managed care
errors and omissions insurance in the minimum amount of one million dollars
($1,000,000) per occurrence and three million dollars ($3,000,000) annual
aggregate, the annual aggregate to apply separately for each physician and
health care practitioner who is insured under the policy (or policies)
purchased by Medical Group.  If the
policy (or policies) is canceled or not renewed and coverage is provided on a
claims-made basis, Medical Group agrees to exercise any option contained in the
policy (or policies) to extend the reporting period to the maximum period
permitted under the policy (or policies); provided, however, that Medical Group
need not exercise such option if the superseding insurer will accept all prior
claims.

 

9

 

Medical Group’s Participating Providers who are not insured under the
Medical Group’s policy (or policies) shall maintain the same insurance coverage
required of Medical Group under this Section, unless otherwise consented to by
PacifiCare in writing.

 

All insurance required under this Agreement shall be provided by
insurers who meet PacifiCare’s standards. 
A certificate of insurance shall be issued to PacifiCare prior to the
Commencement Date and upon the renewal of the insurance coverage specified in
this Section.  The certificate shall
provide that PacifiCare shall receive thirty (30) days prior written notice of
cancellation or material reduction in the insurance coverage specified in this
Section.  Notwithstanding any other
provision of this Agreement, failure to provide the certificate of insurance
when requested by PacifiCare shall be grounds for immediate termination of this
Agreement.

 

2.8                                 Financial
Statements.

 

2.8.1                        Copies
of Financial Statements.  Medical
Group shall provide to PacifiCare within forty-five (45) calendar days of the
end of each calendar quarter copies of its quarterly financial statements,
which shall include a balance sheet, statement of income and statement of cash
flow (the “Financial Statements”) prepared in accordance with generally
accepted accounting principles.  Such
quarterly Financial Statements shall be certified by the chief financial officer
of Medical Group as accurately reflecting the financial condition of Medical
Group, including without limitation, its operations in the Medical Group
Service Area for the period indicated. 
In addition, Medical Group shall provide to PacifiCare, within
forty-five (45) calendar days of the end of each fiscal year, or upon
completion of audit if later, copies of its audited annual Financial Statements
together with copies of all auditor’s letters to management in connection with
such audited annual financial statements.

 

2.8.2                        Security
Deposit.  Upon execution and
delivery of this Agreement, Medical Group shall deliver to PacifiCare a deposit
in the amount of zero ($0) as a security deposit for its obligations under this
Agreement (the “Security Deposit”).  The
amount of the Security Deposit shall be reviewed on a semi-annual basis and,
after the number of Medical Group Members exceeds, an amount to be determined
by Medical Group and PacifiCare shall be adjusted to equal the number of
Medical Group Members at the time of the semi-annual review multiplied by an
amount reasonably estimated by PacifiCare to equal three months of the Medical
Group’s anticipated provider claims. 
The balance of funds constituting the Security Deposit shall be
reflected as a liability to Medical Group on PacifiCare’s books (“Medical Group
Deposit Balance”).  The Security Deposit
and Medical Group Deposit Balance shall remain in place throughout the term of
this Agreement.  PacifiCare shall have
no obligation to maintain the Security Deposit or Medical Group Deposit Balance
in accounts separate from PacifiCare’s own accounts and may be commingled with
other funds of PacifiCare.  PacifiCare
shall not pay interest on the Security Deposit or Medical Group Deposit
Balance.  PacifiCare shall be entitled
to apply the Security Deposit to satisfy Medical Group’s financial obligations
under the Agreement without notice to the Medical Group in PacifiCare’s sole
and absolute discretion.  The exercise
of PacifiCare’s rights with respect to the Security

 

10

 

Deposit shall not be deemed to be an election of any remedy or the
forfeiture of any rights by PacifiCare. 
All of PacifiCare’s rights are cumulative and the exercise of any remedy
shall not preclude the exercise of any other remedies available to PacifiCare
under this Agreement and applicable law.

 

2.9                                 Administrative Requirements

 

2.9.1                        Administrative
Guidelines.  Medical Group agrees to
perform its duties under this Agreement in accordance with the administrative
guidelines, policies and procedures set forth in the Provider Manual and State
and Federal Law.  Medical Group shall be
responsible for distributing copies of the Provider Manual, as necessary, to
its Participating Providers.

 

2.9.2                        Medical
Director, Health Plan Coordinator, Quality Improvement Committee and
Utilization Management Committee. 
Medical Group shall designate one of its Participating Providers who is
a physician or osteopath to act as Medical Group’s Medical Director and shall
designate an individual to act as the health plan coordinator with
PacifiCare.  The duties of Medical
Group’s Medical Director and health plan coordinator shall be set forth in the
Provider Manual.  In addition, Medical
Group shall establish and maintain a quality improvement committee and a
utilization management committee to assist PacifiCare in implementing the QI
Program and UM Program with respect to Medical Group Members.

 

2.9.3                        Participation
in PacifiCare Orientation and Training Programs.  Medical Group shall require its administrative personnel and its
Participating Providers to participate in PacifiCare’s orientation and training
programs.

 

2.9.4                        Encounter
Data.  Medical Group shall maintain
and provide to PacifiCare, no later than the fifteenth (15th) day of each
month, (i) the utilization data pertaining to Covered Services which are
provided directly by Medical Group and its Participating Providers and (ii) the
utilization data pertaining to Covered Services which are paid for by Medical
Group during the preceding month, including data not provided in the most
recent submission, as required by PacifiCare (the “Encounter Data”).  Medical Group shall submit Encounter Data in
accordance with the procedures and standards established by PacifiCare.  Medical Group shall submit Encounter Data in
an electronic format acceptable to PacifiCare.

 

For each month in which Medical Group fails to submit Encounter Data
described above in this Section, PacifiCare shall deduct one percent (1%) of
the Medical Group’s Capitation Payment until such data is submitted.  PacifiCare shall provide fifteen (15) days
written notice of intent to implement this deduction.

 

2.9.5                        Other
Data and Information.  Medical Group
shall maintain and provide to PacifiCare, upon written request, any and all
information required by PacifiCare, State and Federal Law, Government Agencies
or Accreditation Organizations for the administration of

 

11

 

Managed Care Plans.  Medical
Group shall submit such information and data to PacifiCare in the format and
within the time periods specified by PacifiCare.

 

2.10                           Medical Group’s Failure
to Comply with Agreement, Provider Manual or Managed Care Plans.  If Medical Group fails to comply with any
provision(s) of this Agreement, the Provider Manual or the Managed Care Plans,
PacifiCare may provide written notice of such failure to Medical Group,
specifying a date at least forty-five (45) days following the date of the
notice by which Medical Group must be in compliance with such provision(s), as
reasonably determined by PacifiCare.  If
Medical Group fails to comply with such provision(s) by the dale specified in
the notice, PacifiCare shall have the right to cease marketing efforts on
behalf of Medical Group and/or discontinue assignment of Members to Medical
Group until such time as Medical Group complies with such provision(s), as
reasonably determined by PacifiCare.  In
addition, PacifiCare shall have the right to either (i) collect from Medical
Group or (ii) recoup against amounts due Medical Group under this Agreement,
any penalties or other monetary amounts payable by PacifiCare to Government
Agencies, Subscriber Groups, Participating Providers or any other health care
providers as a result of Medical Group’s failure to comply with any
provision(s) of this Agreement, the Provider Manual or Managed Care Plans.  PacifiCare’s rights and remedies under this
Section shall be in addition to all other rights and remedies available to
PacifiCare to enforce this Agreement, including the right of termination.

 

2.11                           Reciprocity Arrangements.  If any Member who is not a Medical Group
Member or if any individual who is enrolled in a benefit plan and program of
any PacifiCare affiliated entity (“PacifiCare Affiliate”) receives services or
treatment from Medical Group or its Participating Providers, Medical Group or
the Participating Provider agrees to bill PacifiCare or the PacifiCare
Affiliate (or their respective designees), as applicable, at billed charges and
to accept the Cost of Care amount less any applicable Copayments, coinsurance
and/or deductibles as payment in full for such services or treatment.  PacifiCare or the PacifiCare Affiliate will
process payment for such services or treatment in accordance with the payment
procedures for the applicable benefit plan or program.

 

If any Medical Group Member receives Covered Services from a PacifiCare
Participating Provider or PacifiCare Affiliate contracted provider, PacifiCare
shall, where contractually available, provide reciprocity to Medical Group at
PacifiCare rates for such Covered Services. 
Medical Group shall comply with the procedures established by PacifiCare
or the PacifiCare Affiliate for reimbursement of such Covered Services.

 

Only medically appropriate Covered Services, as determined by
PacifiCare, shall be subject to the reciprocity arrangement specified in this
Section.  Medical Group shall abide by
all provisions of this Agreement relating to non-billing of Members with
respect to all services and treatment subject to this reciprocity arrangement.

 

2.12                           Hospital Admissions.  In recognition of the need for coordination,
continuity, and quality of care of Covered Services provided to Medical Group
Members, Medical Group agrees to utilize Hospital(s) as provider of Hospital
Services for Medical Group Members, subject to the following exceptions:

 

12

 

(i)                                     Medical
Group Members admitted for Emergency Services or Urgently Needed Services; and

 

(ii)                                  Medical
Group Members requiring Hospital Services not available at Hospital.

 

2.13                           PacifiCare Rights in the
Event of Insolvency of Medical Group. 
In the event that Medical Group is determined to be Insolvent by
PacifiCare’s independent accountants, Medical Group shall be in material breach
of this Agreement.  Upon such breach,
PacifiCare shall, without waiving any of its other rights under this Agreement,
including the rights set forth above, and rights of termination, have the following
rights to:

 

(i)                                     Increase
withholds for the payment of claims as provided pursuant to Section 5.2 of this
Agreement;

 

(ii)                                  Cease
enrollment of PacifiCare Members with Medical Group, transfer Members, and
cease marketing efforts.

 

(iii)                               Require
Medical Group, at its cost, to retain, on terms and conditions acceptable to
PacifiCare, a third party manager approved by PacifiCare to assist Medical
Group in addressing its financial and operational problems.

 

ARTICLE
3

ADMINISTRATIVE DUTIES OF PACIFICARE

 

3.1                                 Administration and
Provision of Data.  PacifiCare shall
perform administrative, accounting, enrollment, eligibility verification and
other functions necessary for the administration and operation of the Managed
Care Plans.  PacifiCare shall provide
Medical Group with management information and data reasonably necessary to
carry out the terms and conditions of this Agreement and for the operation of
the Managed Care Plans.

 

3.2                                 Marketing.  PacifiCare shall make
reasonable efforts to market the Managed Care Plans.  Medical Group agrees that PacifiCare may, in its discretion, use
Medical Group’s name, address
and telephone number as well as the names, addresses and telephone numbers and
specialties of its Participating Providers in PacifiCare’s marketing and informational materials
including, without limitation, PacifiCare’s directory of Participating Providers.  Nothing in this Agreement shall be deemed to require PacifiCare
to conduct any specific marketing activities on behalf of Medical Group and its
Participating Providers or to identify Medical Group or its Participating
Providers in any specific PacifiCare marketing or informational materials.

 

3.3                                 Enrollment and Assignment of Members. 
PacifiCare shall be responsible for distributing the PacifiCare
Enrollment Packet to all Members upon enrollment and at open enrollment
periods.  PacifiCare shall provide
benefit information to Members concerning the type, scope and duration of
benefits to which Members are entitled under the Managed Care Plans.  Nothing in this Agreement shall be construed
to require PacifiCare to assign any minimum or maximum

 

13

 

number of Members to Medical Group or to utilize Medical Group for any
Members in the Medical Group Service Area.

 

3.4                                 Eligibility Information. 
PacifiCare shall provide the Eligibility List to Medical Group on or
about the fifteenth (15th) day of each month.

 

3.5                                 Benefit Design and Interpretation; Coverage
Decisions.  PacifiCare shall be solely responsible for
the benefit design of all Managed Care Plans, including establishing benefits,
Premiums and Copayments.  PacifiCare
shall be solely responsible for interpreting the terms of and making final
coverage determinations under the Managed Care Plans.

 

3.6                                 Case Management. 
PacifiCare shall manage and coordinate Covered Services for Medical
Group Members (including Emergency Services and Urgently Needed Services) with
complex medical conditions to ensure that care is provided in a manner which
encourages quality, continuity of care and cost-effectiveness (“Case Management”). 
Medical Group shall cooperate fully with PacifiCare in providing
information that may be required in determining the need for Case Management
and in the transfer of Medical Group Members to designated PacifiCare
Participating Providers for cost effective care.

 

3.7                                 Out-of-Area Services. 
PacifiCare shall manage and coordinate Out-of-Area Services.  Medical Group shall cooperate fully with
PacifiCare in providing information that may be required for transferring
Members back into the Medical Group Service Area, including promptly notifying
PacifiCare of known or suspected Out-of-Area Services, and shall accept the
prompt transfer of Members to the care of Medical Group and its Participating
Providers following the receipt of Out-of-Area Services.  PacifiCare, in conjuction with Medical Group
and Hospital, shall make all decisions regarding the duration of a Member’s care at the Out-of-Area facility and
transfer of the Member to a Medical Group Service Area facility.

 

ARTICLE
4

MANAGED CARE PROGRAM SERVICES

 

4.1                                 Managed Care Program services. 
Consistent with the requirements of State and Federal Law and the
standards of Accreditation Organizations, PacifiCare shall be accountable for
the performance of the following services for all Managed Care Plans: (i)
quality management and improvement, (ii) utilization management, (iii)
credentialing, (iv) Member rights and responsibilities, (v) preventive health
services, (vi) medical record review and (vii) payment and processing of claims
(collectively, “Managed Care
Program Services”).  Medical Group and its Participating
Providers shall cooperate with PacifiCare in the performance of all Managed
Care Program Services and conduct their activities in a manner consistent with
the provisions of this Article 4 including specifically, but without
limitation, PacifiCare’s QI
Program, UM Program, Credentialing Program, Member Services activities, and
Claims Processing Guidelines.

 

4.1.1                        Quality
Management and Improvement. 
PacifiCare shall maintain an ongoing Quality Management and Improvement
Program (“QI Program”) to assess and improve the quality of clinical care and
the quality of service provided to Members under the

 

14

 

Managed Care Plans.  The QI Program
shall be maintained in accordance with the requirements of State and Federal
Law and the standards of Accreditation Organizations.

 

Medical Group shall, at the written request of PacifiCare, make
available its Participating Providers who are physicians to serve on
PacifiCare's QI Committee.  Medical
Group shall establish and maintain an independent quality improvement committee
which shall meet as frequently as advisable (but not less than ten (10) times
throughout the year).  A member of the
PacifiCare medical services staff may participate in Medical Group’s quality
improvement committee meetings.  Medical
Group shall keep minutes of its quality improvement committee and subcommittee
meetings, copies of which shall be made available to PacifiCare upon ten (10)
days’ written notice by PacifiCare to Medical Group.  If the functions of the quality improvement committee are
performed together with its utilization review committee, Medical Group shall
implement and maintain procedures which maintain all applicable confidentiality
protections for quality assurance activities and decisions.

 

Medical Group shall develop written procedures for focused review or
remedial action whenever it is determined by PacifiCare’s QI Committee that
inappropriate or substandard Covered Services have been furnished or Covered
Services that should have been furnished have not been furnished.  Upon request, PacifiCare shall assist
Medical Group in the formulation of such focused review and remedial
procedures.

 

4.1.2                        Utilization
Management.  PacifiCare shall
maintain an ongoing Utilization Management Program (“UM Program”) to address
pre-authorization, concurrent and retrospective review of the quality,
appropriateness, level of care and utilization of all Covered Services provided
or to be provided to Members under the Managed Care Plans.  The UM Program shall be maintained in
accordance with the requirements of State and Federal Law and the standards of
Accreditation Organizations.

 

Medical Group shall establish and maintain a utilization review
committee which shall meet as frequently as necessary.  A member of the PacifiCare medical services
staff may participate in Medical Group’s utilization review committee meetings.  Medical Group shall keep minutes of its
utilization review committee meetings, copies of which shall be made available
to PacifiCare upon ten (10) days’ written notice by PacifiCare to Medical
Group.  Medical Group’s utilization
review committee shall review, as necessary, elective referrals and hospital
and skilled nursing facility admissions on a prospective basis, and Emergency
Services and Urgently Needed Services requiring hospital admissions on a
retrospective basis.  The committee
shall also be responsible for monitoring patterns of care, isolating inappropriate
utilization and performing other management and review duties as specified in
the UM Program.

 

4.1.3                        Credentialing.  PacifiCare shall maintain standards,
policies and procedures for credentialing and recredentialing physicians,
hospitals and other health care professionals and facilities that provide
Covered Services to Members under the Managed Care Plans (“Credentialing
Program”).  The Credentialing Program
shall be

 

15

 

maintained in accordance with the requirements of State and Federal Law
and the standards of Accreditation Organizations.

 

4.1.4                        Member
Rights and Responsibilities. 
PacifiCare shall inform Members of their rights and responsibilities
under each Managed Care Plan, provide Members with membership cards and member
handbooks, distribute periodic communications to Members, process Member
complaints and grievances and respond to inquiries and requests from Members
regarding Managed Care Plans (collectively “Member Services”).

 

4.1.5                        Preventive
Health Services.  PacifiCare shall
develop preventive health guidelines for the prevention and early detection of
illness and disease (“Preventive Health Guidelines”) and shall encourage
Members to use preventive health services. 
The Preventive Health Guidelines shall be maintained in accordance with
the standards of Accreditation Organizations and shall be distributed to
Participating Providers.  Medical Group
and its Participating Providers shall provide preventive health services
required pursuant to the applicable Subscriber Agreements to Medical Group
Members in accordance with the Preventive Health Guidelines.

 

4.1.6                        Medical
Record Review.  PacifiCare shall on
an ongoing basis review medical records maintained by Medical Group and its
Participating Providers to assess compliance with the requirements of State and
Federal Law and the standards of Accreditation Organizations.  Medical Group and its Participating
Providers shall maintain medical records in accordance with the provisions of
this Agreement regarding medical records and in accordance with PacifiCare’s
guidelines regarding medical records.

 

4.1.7                        Claims
Processing.  PacifiCare shall
establish and maintain standards, policies and procedures for the timely and
accurate processing and payment of claims for Covered Services provided to
Members (“Claims Processing Guidelines”). 
The Claims Processing Guidelines shall be maintained in accordance with
the requirements of State and Federal Law and the Managed Care Plans.

 

4.1.8                        Policies
and Procedures.  For Managed Care
Program Services not delegated to Medical Group, Medical Group agrees to abide
by PacifiCare’s policies and procedures pertaining to the administration of
such services.  The applicable policies
and procedures may include, but not be limited to, policies and procedures
pertaining to PacifiCare’s Utilization Management Program, Credentialing
Program, and Claims Processing Guidelines. 
Such policies and procedures will outline the non-delegated requirements
for claims submission, subcontract rate information, utilization management,
and credentialing.

 

4.2                                 Delegation of Managed Care Activities.

 

4.2.1                        Delegation
Audits and Determinations. 
PacifiCare may, in its discretion, delegate utilization management,
credentialing, medical records review, claims processing, and/or other
activities consistent with regulatory and accrediting standards to Medical
Group.  Such delegation may occur at any
time during the term of this Agreement if

 

16

 

PacifiCare determines the Medical Group is capable of performing such
activities and if Medical Group consents in writing to such delegation.  Medical Group’s consent and written
agreement may be evidenced by this Agreement, amendments to this Agreement, or
a separate delegation agreement between PacifiCare and Medical Group.

 

Managed Care Program Services which are delegated to Medical Group
shall be specified in Exhibit 2 to this Agreement (collectively, the “Delegated
Activities”).  Exhibit 2 may be amended
from time to time during the term of this Agreement by PacifiCare to reflect
changes in delegation standards; delegation status; performance measures;
reporting requirements; and other provisions of Exhibit 2.  Any and all changes to Exhibit 2 shall not
be deemed a material amendment to this Agreement, but shall, to the extent
provided at Section 5.2 of this Agreement result in an automatic adjustment to
Medical Group’s Capitation Payment.

 

4.2.2                        Medical
Group’s Responsibility for Delegated Activities.  Medical Group shall be responsible for the performance of all
Delegated Activities, as specified
in Exhibit 2.  Medical Group shall have
no right to modify Exhibit 2 or Medical Group’s obligations to perform
Delegated Activities without PacifiCare’s prior written consent.

 

4.2.3                        PacifiCare
Policies.  For all Delegated
Activities, PacifiCare shall provide Medical Group with PacifiCare’s standards
and requirements applicable to the Delegated Activities, as amended from time
to time (the “PacifiCare Delegation Policies”) and shall notify Medical Group
of all substantive changes to the PacifiCare Delegation Policies.  Medical Group may utilize its own policies
and procedures for the Delegated Activities, provided that such policies and
procedures are consistent with the PacifiCare Delegation Policies.  If Medical Group’s policies and procedures
are inconsistent with the PacifiCare Delegation Policies, the PacifiCare
Delegation Policies shall apply.

 

4.2.4                        Sub-Delegation.  Medical Group shall not further delegate the
performance of Delegated Activities to any of its Participating Providers or
any other organization or entity without the prior written consent of
PacifiCare.

 

4.2.5                        Maintenance
of Information and Records.  Medical
Group shall maintain all information and records reviewed or created in
connection with performing the Delegated Activities in a form acceptable to
PacifiCare, provide PacifiCare with access to such information and records, and
permit PacifiCare to review and copy such information and records.

 

4.2.6                        Reporting
Obligations.  Medical Group shall
provide PacifiCare with periodic written reports regarding all Delegated
Activities in the formats specified by PacifiCare for each of the Delegated
Activities.  Medical Group’s
arrangements with its Participating Providers shall provide that Medical Group
may disclose to PacifiCare its Participating Provider credentialing files.

 

4.2.7                        Monitoring/Audits.  PacifiCare shall oversee Medical Group’s
performance of Delegated Activities through review of periodic written reports
provided by Medical Group as described above and meetings with appropriate
Medical Group representatives

 

17

 

and on-site audits and assessments of Medical Group.  Medical Group shall cooperate, participate
and comply with PacifiCare in such monitoring and oversight activities.  Such audits and assessments will be
performed in accordance with the requirements of State and Federal Law and the
standards of Accreditation Organizations, PacifiCare’s Delegation Policies and
the terms of this Agreement.

 

4.2.8                        Insurance.  Medical Group shall comply with the
insurance provisions of this Agreement relating to managed care errors and
omissions insurance.

 

4.3                                 Payment for Delegated Activities. 
PacifiCare’s Payment for
Delegated Activities is specified in Section 5.2 of this Agreement.

 

4.4                                 Revocation and Resumption of Delegated Activities..

 

4.4.1                        PacifiCare's
Right to Revoke Delegated Activities. 
PacifiCare may, in its sole discretion, revoke any or all Delegated
Activities at any time if PacifiCare determines that such Delegated Activities
are not being performed in accordance with the standards and requirements
established by PacifiCare or if Medical Group’s performance of Delegated
Activities is inconsistent with, or in violation of, State and Federal Law or
the standards of any Accreditation Organization.

 

4.4.2                        Revocation
Notices.

 

(a)                                  Deficiencies
Capable of Cure.  For deficiencies
in Medical Group’s performance of Delegated Activities, which PacifiCare
determines are capable of being cured, PacifiCare shall provide Medical Group
with reasonable prior written notice of not less than thirty (30) days
specifying the Delegated Activities which PacifiCare intends to revoke (the
“revocation notice”).  PacifiCare shall
specify in its revocation notice the corrective actions to be taken by Medical
Group to continue performance of Delegated Activities and the timeframes within
which such corrective actions must be completed (the “cure period”).  Promptly following the cure period,
PacifiCare shall advise the Medical Group, in writing, whether PacifiCare will
proceed with revocation of the Delegated Activities.

 

(b)                                 Deficiencies
Not Capable of Cure.  For
deficiencies which PacifiCare determines are not capable of being cured,
including but not limited to PacifiCare’s determination that Medical Group’s
continued performance of Delegated Activities presents a risk of imminent harm
to PacifiCare Members or would be contrary to the requirements of any
Government Agency, State or Federal Law or Accreditation Standard, PacifiCare
shall provide Medical Group with written notice that the Delegated Activities
shall be revoked by the effective date of revocation.

 

(c)                                  Contents
of Notices.  The written notices
from PacifiCare to Medical Group under this Section shall, where applicable,
specify (i) the adjustments to Capitation Payments as a result of the
revocation of any Delegated Activities in

 

18

 

accordance with the allocations
set forth in Section 5.2 of this Agreement, (ii) in the event that claims
processing is revoked, the adjustments to Capitation Payments for claims
payment as set forth in Section 5.3 of this Agreement, and (iii) any and all
changes to Exhibit 2 resulting from revocation.

 

4.4.3                        Continued
Cooperation Following Revocation. 
Upon revocation of any of the Delegated Activities, or any portion
thereof, PacifiCare will resume responsibility for performing such activities,
and Medical Group and its Participating Providers shall continue to cooperate
with PacifiCare with respect to the performance of Managed Care Services.

 

4.4.4                        Revocation
Not Exclusive Remedy. 
Notwithstanding PacifiCare’s right to revoke the Delegated Activities,
Medical Group’s failure to perform the Delegated Activities shall be a breach
of the Agreement.  In such event,
PacifiCare may exercise all of its other rights and remedies to enforce the
Agreement, including the right of termination.

 

4.4.5                        Resumption
of Delegated Activities.  Following
the revocation of Delegated Activities by PacifiCare, any resumption by Medical
Group of responsibility for Delegated Activities shall be pursuant to the
provisions of Section 4.2.1, above.

 

ARTICLE
5

COMPENSATION

 

5.1                                 Capitation Payments. 
PacifiCare shall make monthly Capitation Payments to Medical Group as
payment for providing and arranging Covered Services to Medical Group Members
for each Managed Care Plan, as specified in this Agreement and the applicable
Product Attachment.

 

5.l.l                              Due
Date.  Each Capitation Payment shall
be due and payable on the tenth (10th) day of the month for the current month’s
Covered Services.  In the event the
tenth (10th) day of the month is not a business day, the Capitation Payment
shall be due and payable on the next business day following the tenth (10th)
day of the month.

 

5.1.2                        Documentation.  PacifiCare shall provide Medical Group
appropriate documentation in support of each Capitation Payment.

 

5.1.3                        Retroactive
Adjustments.  Capitation Payments
shall be subject to retroactive adjustments either upward or downward due to
retroactive changes in the Premium for each Managed Care Plan as specified in
the applicable Product Attachment and retroactive changes in the number of
Medical Group Members for each Managed Care Plan.  Retroactive adjustments to Capitation Payments for Medical Group
Members enrolled in Managed Care Plans which are government funded (including,
without limitation.  Medicare, Medicaid,
public employees) shall be made within thirty (30) days after the adjustment is
determined.  Retroactive adjustments to
Capitation Payments for Medical Group Members enrolled in Managed Care Plans
which are not government funded shall be made within one hundred eighty (180)
days after the end of the month for which the Capitation Payment applies.

 

19

 

5.2                                 Pavement for Performance of Delegated
Activities.  PacifiCare’s payment for performance of the Delegated
Activities by Medical Group is included in Capitation Payments made to Medical
Group.  The Capitation Payment rates set
forth in each Product Attachment assume that the Medical Group is fully
delegated to perform Managed Care Program Services.  Accordingly, for each month in which any Delegated Activity is
not delegated or has been revoked by PacifiCare as provided at Article 4, the
Medical Group’s Capitation
Payment shall be reduced by the following percentages:

 

	
  Activity Not Delegated

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Utilization Management

  	
   

  	
  4.0

  	
  %

  
	
  Credentialing

  	
   

  	
  0.5

  	
  %

  
	
  Claims Processing

  	
   

  	
  3.0

  	
  %

  

 

If only a portion of a specific Delegated Activity is delegated or
revoked, PacifiCare shall have the right to adjust percentages set forth above
to reflect the portion of the specific Delegated Activity performed by Medical
Group.  PacifiCare may modify the
payment for Delegated Activities effective at the beginning of any calendar
year by providing Medical Group with sixty (60) days’ prior written notice.

 

5.3                                 Withhold to Pay Claims.  If PacifiCare does not
delegate performance of claims processing to Medical Group or if the delegation
of claims processing is revoked by PacifiCare, PacifiCare shall deduct from
Medical Group’s monthly
Capitation Payments an amount reasonably estimated by PacifiCare to be
necessary for PacifiCare to process and pay claims for Medical Group Services
which are not provided directly by Medical Group and its employed Participating
Providers.  Initially, this amount shall
be three percent (3.0 %) of Medical Group’s monthly Capitation Payment. 
This amount may be increased or decreased each month to more accurately
reflect Medical Group’s actual
and expected claims experience and any changes in Covered Services which are
provided or arranged by Medical Group and its Participating Providers, with
adjustments for claims incurred but not received.

 

5.4                                 Incentive Programs. 
Incentive programs are designed to ensure that PacifiCare and Medical
Group work collaboratively to deliver Covered Services in an effective and
efficient manner by ensuring appropriate utilization of Covered Services.  Incentive programs for each Managed Care
Plan are set forth in the applicable Product Attachment.

 

5.4.1                        Incentive
Program Withhold.  PacifiCare shall
establish a single withhold from Medical Group’s monthly Capitation Payment for purposes of
offsetting potential deficits for the combined incentive programs.  The monthly incentive withhold shall
initially be zero percent (0 %) of Premium for each Managed Care Plan.  PacifiCare, in its sole discretion, shall
prospectively adjust the withhold based on Medical Group’s experience under the
combined incentive programs at the time of the program settlements described
below.

 

20

 

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.  The incentive program withhold
described above shall be refunded to the Medical Group at the time of the
incentive program settlements, except that Medical Group’s share of any
incentive program deficits shall be deducted from such refund.  Payments under the combined incentive
programs will be due from the owing party within one hundred and twenty (120)
days following the end of the six (6) 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 carried forward from a prior settlement period, this 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.

 

5.4.3                        Incentive
Program Compliance with State and Federal Law.  PacifiCare and Medical Group acknowledge and agree that the
payments which may be made directly or indirectly under the incentive programs
described in this Agreement are not made as an inducement to reduce or limit
Covered Services to any specific Member. 
Medical Group acknowledges and agrees that any payments which may be
made directly or indirectly under physician incentive programs Medical Group
may utilize with respect to its Participating Providers shall not be made as an
inducement to reduce or limit Covered Services to any specific Member.  Medical Group further acknowledges and
agrees that the incentive programs described in this Agreement shall be subject
to modification by PacifiCare during the term of this Agreement in order to
comply with changes in State and Federal Law, and Medical Group further agrees
to modify any physician incentive programs utilized with respect to its
Participating Providers to comply with such changes.

 

5.4.4                        Limitation
on Medical Croup’s Risk.  In the event
Medical Group incurs an obligation under the overall incentive program
settlement described above.  Medical
Group shall not be responsible for reimbursing PacifiCare nor shall PacifiCare
offset the Medical Group’s obligation against Medical Group’s Capitation
Payments due under this

 

21

 

Agreement.  PacifiCare shall
carry forward any Medical Group obligations as the result of an incentive
program obligation and the amount carried forward shall be offset against
amounts otherwise due to Medical Group under future settlements for the
combined incentive programs. 
Notwithstanding the foregoing, Medical Group shall be responsible for
reimbursing PacifiCare for deficits in pharmacy incentive programs to the extent
there are insufficient surpluses due Medical Group from other incentive
programs to offset pharmacy deficits; such reimbursement shall be made within
thirty (30) days following completion of the Final Calculation for all
incentive program settlements described above.

 

5.5                                 Stop-Loss Program(s)

 

5.5.1                        Individual
Stop-Loss Program.  PacifiCare shall
provide Individual Stop-Loss (“ISL”) protection in order to limit Medical
Group’s financial risk for Medical Group Services.  The ISL Program is designed to limit Medical Group’s financial
responsibility for Medical Group Services to a specified dollar amount per
Medical Group Member per calendar year (the “ISL Deductible”), while
encouraging Medical Group’s continuing involvement with Medical Group Member’s
care by sharing a portion of the financial responsibility for Medical Group
Services which exceed the ISL Deductible (“ISL Coinsurance”).  PacifiCare shall charge a premium (the “ISL
Premium”) as consideration for the ISL Program.  The ISL Deductible, ISL Coinsurance and ISL Premium for Medical
Group are specified in each Product Attachment.  Notwithstanding any other provision of this Agreement, PacifiCare
may amend the ISL Deductible, ISL Coinsurance and ISL Premium on an annual
basis effective at the beginning of any calendar year by providing sixty (60)
calendar days prior written notice to Medical Group.  For Medical Group Services which exceed the ISL Deductible,
PacifiCare will pay Cost of Care, less the Medical Group’s ISL Coinsurance
amount, subject to the Medical Group’s compliance with the procedures set forth
in the Provider Manual and the provisions of this Section set forth below.

 

5.5.2                        Reinsurance
Program.  PacifiCare shall provide
Reinsurance protection in order to limit Medical Group’s financial risk for
Hospital Services under the Commercial Hospital Incentive Program and Secure
Horizons Hospital Incentive Program (the “Hospital Incentive Programs”) to a
specified dollar amount per Medical Group Member per calendar year (the
“Reinsurance Deductible”), while encouraging Medical Group’s continuing
involvement with Medical Group Member’s care by sharing a portion of the
financial responsibility for Hospital Services which exceed the Reinsurance
Deductible (“Reinsurance Coinsurance”). 
The Reinsurance Deductible and Reinsurance Coinsurance for Medical Group
are specified in each Product Attachment. 
Notwithstanding any other provision of this Agreement, PacifiCare may
amend the Reinsurance Deductible and Reinsurance Coinsurance on an annual basis
effective at the beginning of any calendar year by providing sixty (60)
calendar days prior written notice to Medical Group.  For Hospital Services which exceed the Reinsurance Deductible,
the Reinsurance Coinsurance shall be based on actual amounts paid by
PacifiCare, subject to the Medical Group’s compliance with the procedures set
forth in the Provider Manual and the provisions of this Section set forth
below.

 

22

 

5.5.3                        Submission
of Claims.  Medical Group shall
submit all claims under the ISL Program and Reinsurance Program in accordance
with the procedures set forth in the Provider Manual.  PacifiCare shall pay claims under the 1SL Program and Reinsurance
Program only if such claims are submitted within one (1) year following the
date the claim is incurred.

 

5.5.4                        Notification
of Claims.  Medical Group shall
provide written notification to PacifiCare when Medical Group Services or
Hospital Services for any Medical Group Member(s) equal fifty percent (50%) of
the ISL Deductible or fifty percent (50%) of the Reinsurance Deductible,
respectively.  Such written notification
shall be provided to PacifiCare no later than the fifteenth (15th) day of the
month following the month in which such threshold is reached.  Medical Group acknowledges and agrees that
if Medical Group fails to provide the written notice required by this Section
within the time frame specified in this Section, Medical Group shall be
financially responsible for ten percent (10%) of all Medical Group Services or
ten percent (10%) of all Hospital Services provided to the Medical Group
Member(s) in excess of the ISL Deductible or Reinsurance Deductible, as
applicable, which amount shall be in addition to the ISL Coinsurance or
Reinsurance Coinsurance, as applicable.

 

5.5.5                        Opt-Out
from ISL and/or Reinsurance Programs. 
Subject to PacifiCare’s approval, Medical Group may elect to opt out of
the ISL Program or Reinsurance Program, effective upon the Commencement Date or
at the beginning of any calendar year. 
In such event, Medical Group shall be required to obtain stop-loss
coverage from a third-party insurance carrier acceptable to PacifiCare and in
the amounts required by PacifiCare and State and Federal Law.  In order to opt-out of PacifiCare’s ISL
Program or Reinsurance Program, Medical Group must provide written notice to
PacifiCare at least thirty (30) days prior to the beginning of the calendar
year.  Such notice shall specify the
name of the third-party insurance carrier, and proposed effective date,
coverage levels and charges.  If
PacifiCare does not object to such coverage in writing within fifteen (15) days
of the date of the notice, Medical Group shall be required to purchase such
coverage as of the effective date specified in the notice.

 

5.6                                 Payments Following Termination of Agreement. 
Following termination of this Agreement, PacifiCare shall make
Capitation Payments to Medical Group as compensation for providing and
arranging Covered Services to remaining Medical Group Members until transferred
to PacifiCare Participating Providers.

 

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 that Covered
Services be valued at Cost of Care.  For
purposes of this Agreement, “Cost
of Care” shall mean the amount
determined to be payable for such health care services or Covered Services by
PacifiCare as follows: (i) for professional services which are paid under the
Medicare Fee Schedule, the Cost of Care shall be the lesser of billed charges
or amount payable under the Medicare Fee Schedule; (ii) for all other health
care services (other than inpatient and outpatient Hospital Services) which are
paid

 

23

 

by Medicare, the Cost of Care shall be the lesser of billed charges or
amount payable by Medicare; (iii) for any other Covered Services or health care
services covered under a Managed Care Plan which do not fall within any of the
above specified categories, other than inpatient and outpatient Hospital
Services, the Cost of Care shall be the lesser of billed charges or amount
determined under PacifiCare’s allowable fee schedule.

 

5.8                                 Collection of Copayments. 
Medical Group and its Participating Providers shall be responsible for
the collection of Copayments upon rendering Medical Group Services to Medical
Group Members in accordance with the applicable Subscriber Agreement.  Any Copayments which are stated as a
percentage shall be calculated using the Cost of Care for such Medical Group
Services.

 

5.9                                 Collection of Charges From Third Parties.  If
a Medical Group Member is
entitled to payment from a third party (excluding a workers’ compensation carrier or primary insurance
carrier under applicable coordination of benefits rules), PacifiCare hereby
assigns to Medical Group for collection, any claims or demands against such
third parties for amounts due for Medical Group Services, subject to the
following conditions: (i) To the extent liens are utilized, Medical Group shall
utilize lien forms which are provided by PacifiCare or approved in advance by
PacifiCare; (ii) Medical Group shall notify PacifiCare each time it pursues and
each time it obtains a signed lien from a Medical Group Member; (iii) Medical
Group shall not commence any legal action as it relates to this Agreement
against a third party without obtaining the prior written consent of
PacifiCare; (iv) Medical Group shall make no demand upon PacifiCare for
reimbursement under the ISL Program until all third party claims have been
pursued and it is determined that full payment cannot be obtained within twelve
(12) months from the date of the provision of Medical Group Services; (v)
PacifiCare may immediately rescind the assignment of any or all claims and
demands against third parties by providing written notice of rescission to
Medical Group; and (vi) in the event Medical Group receives payment from a
third party after receipt of an ISL payment from PacifiCare, Medical Group
shall reimburse PacifiCare to the extent that the combined amounts received
from all parties exceeds one hundred percent (100%) of Medical Group’s usual and customary fee-for-service rates.

 

5.10                           Segregation of Funds/Use of Funds. 
Medical Group shall segregate all Capitation Payments paid to Medical
Group by PacifiCare pursuant to this Agreement in a bank account separate from
all of the Medical Group’s other
accounts and Medical Group shall apply such amounts solely to Medical Group’s clinical and business activities directly
related to the provision of services to PacifiCare Members.

 

5.11                           Coordination of Benefits. 
Medical Group shall cooperate with and support, as mutually agreed upon by the parties, PacifiCare’s coordination of benefits rights.

 

5.11.1                  Plan
Is Primary.  If a Medical Group
Member possesses health benefits coverage through another policy which is
secondary to PacifiCare under applicable coordination of benefits rules,
including the Medicare secondary payor program, Medical Group shall accept
payment from PacifiCare for Covered Services as provided herein as full payment
for such Covered Services, except for applicable Copayments.  Medical Group

 

24

 

Member shall have no obligation for any fees, regardless of whether
secondary insurance is available.

 

5.11.2                  Plan
is Secondary.  If a Medical Group
Member possesses health benefits coverage through another policy which is
primary to PacifiCare under applicable coordination of benefits rules,
including the Medicare secondary payor program, or if Medical Group Member is
entitled to payment under a workers’ compensation policy or automobile
insurance policy, Medical Group may pursue payment from the primary payor or
workers’ compensation carrier consistent with applicable law and regulations
and Medical Group’s contract, if any, with the primary payor.  In such event, PacifiCare’s responsibility
shall be limited to the amounts it would pay pursuant to the ISL Program
described at Section 5.5 above, less all amounts collected from the primary
insurer.

 

5.12                           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.  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 due to
overpayments or payments made in error by PacifiCare; (ii) amounts owed by
Medical Group as a result of claims for Medical Group Services that PacifiCare
may pay on behalf of Medical Group; (iii) amounts owed by Medical Group for
Covered Services provided outside the Medical Group Service Area; (iv) amounts
owed by Medical Group as a result of the outcome of the Member appeals and
grievance procedure; (v) amounts owed by Medical Group in connection with any
other prior, existing or future agreement between Medical Group and PacifiCare
or any PacifiCare Affiliate.  As a
material condition to PacifiCare’s obligations under this Agreement, Medical
Group agrees 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 governmental
authority that may now or hereafter have jurisdiction over Medical Group.

 

5.13                           Adequacy of Compensation.  Medical Group agrees to accept payment as
provided herein as payment in full for providing and arranging the Covered
Services required under this Agreement, whether that amount is paid in whole or
in part by Member, PacifiCare or any Subscriber, including other health care
plans that pay before PacifiCare as required by applicable state or federal coordination
of benefits provisions.  This Section
does not prohibit Medical Group from collecting applicable Copayments,
coinsurance or deductibles consistent with the Managed Care Plans.

 

5.14                           Character of Payments
from PacifiCare.  Any sums,
including, without limitation, capitation, remitted to Medical Group pursuant
to this Agreement are in the nature of advances and estimates of the amounts
due and owing by PacifiCare to Medical Group for the expense of
operations.  PacifiCare and Medical
Group agree that the amounts owed by PacifiCare to Medical Group on account of
the provision of services may vary from time to time, and PacifiCare may
reduce, settle, suspend, adjust or deduct from the amount to be transferred to
the Medical Group at any time such amounts as PacifiCare determines, in its
sole and absolute

 

25

 

discretion, are necessary to compensate PacifiCare for any claims,
whether contingent, liquidated, disputed or undisputed, which PacifiCare may have
against Medical Group on account of the Provider Agreements or this
Agreement.  PacifiCare may, in its sole
and absolute discretion, suspend, terminate, alter the frequency of or reduce,
any sums to be remitted to Medical Group until such time as PacifiCare
determines that there has been a fair and equitable adjustment of the
respective financial or other obligations of PacifiCare and Medical Group.  In no event shall any sum of money be fully
earned by Medical Group until there is a final settlement of the amounts owed
between PacifiCare and the Medical Group.

 

5.15                           Ownership of Withholds.  All sums withheld by PacifiCare pursuant to
specific provisions of this Agreement shall be deemed to be the sole and
exclusive property of PacifiCare.

 

ARTICLE
6

TERM AND TERMINATION

 

6.1                                 Term.  The term of this Agreement shall commence on July 1, 1999 (the “Commencement Date”) and end on December 31, 2000.  Thereafter, the term of this Agreement shall
be automatically extended for one (1) year on each January 1, (“Anniversary Date”), unless either party provides the other
with written notice of such party’s
intention not to extend the term at least one hundred twenty (120) calendar
days prior to the Anniversary Date or until this Agreement is appropriately
terminated by either party as provided herein.

 

6.2                                 Termination of Agreement with Cause. 
Either PacifiCare or Medical Group may terminate this Agreement for
cause as set forth below, subject to the notice requirement and cure period set forth below.

 

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) days of the Capitation
Payment due date or failure by PacifiCare to make any other payments due
Medical Group hereunder within forty-five (45) 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.

 

6.2.2                        Cause
for Termination of Agreement by PacifiCare.  The following shall constitute cause for termination of this
Agreement by PacifiCare:

 

(i)                                     Insolvency
of Medical Group.  Medical Group
shall have the opportunity to dispute such determination by PacifiCare by
providing reasonable evidence and assurances of financial stability and
capacity to perform under this Agreement within fifteen (15) days of PacifiCare’s
determination.

 

26

 

(ii)                                  Failure
To Provide Quality Services. 
Medical Group’s failure to arrange or provide Covered Services in
accordance with the standards set forth in this Agreement and PacifiCare’s QI
Program and UM Program.  Notwithstanding
the foregoing, PacifiCare reserves the right to immediately withdraw from
Medical Group or any of its Participating Providers any or all Members in the
event the health or safety of Members is endangered by the actions of Medical
Group or any of its Participating Providers or as a result of continuation of
this Agreement.

 

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

 

6.2.3                        Notice
of Termination and Effective Date of Termination.  The party asserting cause for termination of this Agreement (the
“terminating party”) shall provide written notice of termination to the other
party.  The notice of termination shall
specify the breach or deficiency underlying the cause for termination.  The party receiving the written notice of
termination shall have thirty (30) calendar days from the receipt of such
notice to cure the breach or deficiency to the satisfaction of the terminating
party (the “Cure Period”).  If such
party fails to cure the breach or deficiency to the satisfaction of the
terminating party within the Cure Period or if the breach or deficiency is not
curable, the terminating party shall provide written notice of failure to cure
the breach or deficiency to the other party following expiration of the Cure
Period.  This Agreement shall terminate
upon receipt of the written notice of failure to cure or at such other date as
may be specified in such notice.  During
the Cure Period, PacifiCare may cease marketing efforts for Medical Group,
discontinue enrollment of Members with Medical Group and begin transferring
Medical Group Members to other PacifiCare Participating Providers.

 

6.3                                 Automatic Termination Upon Revocation of
License or Certificate.  This Agreement shall automatically terminate
upon the revocation, suspension or restriction of any license, certificate or
other authority required to be maintained by Medical Group or PacifiCare in
order to perform the services required under this Agreement or upon the Medical
Group’s or PacifiCare's failure to obtain such license, certificate
or authority.

 

6.4                                 Termination for Transfer to a Successor
Entity.  As set forth in Section 7.12, PacifiCare
shall have the right to terminate Medical Group on ninety (90) days’ prior written notice to Medical Group if
PacifiCare reasonably determines that any successor entity or management
company, as defined in Section 7.12, cannot satisfactorily perform the
obligations of Medical Group under this Agreement or that PacifiCare prefers
not to do business with the successor entity or management company.

 

6.5                                 Transfer of Medical Records. 
Following termination of this Agreement, at PacifiCare’s request, Medical Group and its
Participating Providers shall copy all requested Medical Group Member patient
medical files in the possession of Medical Group or its Participating Providers
and forward such files to another provider of Covered Services designated by
PacifiCare, provided such copying and forwarding is not otherwise objected to
by such Members.  The copies of

 

27

 

such medical files may be in summary form.  The  cost of copying
the patient medical files shall be borne by Medical Group.  Medical Group shall cooperate with
PacifiCare in maintaining the confidentiality of such Member medical records at
all times.

 

6.6                                 Repayment Upon Termination. 
Within one hundred eighty (180) calendar days of the effective date of
termination of this Agreement, an accounting shall be made by PacifiCare of the
monies due and owing either party and payment shall be forthcoming by the
appropriate party to settle such balance within thirty (30) calendar days of such
accounting.  Either party may request an
independent audit of such PacifiCare accounting by a mutually acceptable
independent certified public accountant and such audit shall be equally paid
for by both parties.  The parties agree
to abide by the findings of such independent audit.  Appropriate payment, if any, by the appropriate party shall be
made within thirty (30) calendar days of such independent audit.

 

6.7                                 Termination Not an Exclusive Remedy.  Any
termination by either party pursuant to this Article is not meant as an
exclusive remedy and such terminating party may seek whatever action in law or
equity as may be necessary to enforce its rights under this Agreement.

 

ARTICLE
7

GENERAL PROVISIONS

 

7.1                                 Independent Contractor Relationship.  The
relationship between PacifiCare and Medical Group is an independent contractor
relationship.  Neither Medical Group nor
its Participating Providers, employees or agents are employees or agents of
PacifiCare and neither PacifiCare nor its employees or agents are members,
partners, employees or agents of Medical Group.  None of the provisions of this Agreement shall be construed to
create a relationship of agency, representation, joint venture, ownership,
control of employment between the parties other than that of independent
parties contracting solely for the purpose of effectuating this Agreement.  Nothing contained in this Agreement shall
cause either party to be liable or responsible for any debt, liability or
obligation of the other party or any third party unless such liability or
responsibility is expressly assumed by the party sought to be charged
therewith.

 

7.2                                 Responsibility for
Own Acts.  Each party shall be
responsible for its own acts or omissions and for any and all claims,
liabilities, injuries, suits demands and expenses of all kinds which may result
or arise out any alleged malfeasance or neglect caused or alleged to have been
caused by that party or its employees or representatives in the performance or
omission of any at or responsibility of the party under this Agreement.  In the event that a claim is made against
both parties, it is the intent of both parties to cooperate in the defense of
said claim and to cause their insurers to do likewise.  However both parties shall have the right to
take any and all actions they believe necessary to protect their interest.

 

7.3                                 Physician-Patient Relationship. 
PacifiCare and Medical Group acknowledge and agree that Medical Group or
each of Medical Group’s
Participating Providers shall maintain the physician-patient relationship with
each Medical Group Member.  Nothing
contained in this Agreement is intended to interfere with such
physician-patient relationship.  Nothing
in this Agreement shall be interpreted to discourage or prohibit Medical Group
and its Participating

 

28

 

Providers from discussing treatment options or providing other medical
advice or treatment deemed appropriate by Medical Group or its Participating
Providers.  Medical Group or its
Participating Providers shall have the sole responsibility for the medical care
and treatment of Medical Group Members.

 

7.4                                 Member Appeals and Grievances. 
PacifiCare shall be
responsible for resolving Medical Group Member claims for benefits under the
Managed Care Plans and all other claims against PacifiCare.  PacifiCare shall resolve such claims
utilizing the Member Appeals and Grievance Procedures set forth in the
Subscriber Agreement and the Provider Manual. 
Medical Group shall assist PacifiCare in the handling of Member
complaints, grievances and appeals, consistent with the Member Appeals and
Grievance Procedures.  In the event an
oral or written complaint, grievance or appeal is presented to Medical Group or
any of its Participating Providers relating to benefits or coverage under a
Managed Care Plan and is not resolved within two (2) business days, Medical
Group or its Participating Provider will immediately deliver such complaint,
grievance or appeal to PacifiCare for handling pursuant to the Member Appeals
and Grievance Procedures.  At the end of
each month.  Medical Group shall submit
a report to PacifiCare of all Medical Group Member complaints and grievances
which were received and resolved by Medical Group and its Participating
Providers within two (2) business days during the previous month.  The monthly report shall include the Medical
Group Member’s name and
PacifiCare identification number, date of complaint, nature of complaint, and
the resolution of complaint.  Medical
Group and its Participating Providers shall comply with all final
determinations made by PacifiCare through the Member Appeals and Grievance
Procedures.  Medical Group Member claims
against Medical Group or its Participating Providers, other than claims for
benefits under the Managed Care Plans, are not subject to the Member Appeals
and Grievance Procedures and are not governed by this Agreement.

 

7.5                                 Disputes Between Medical Group or its
Participating Providers and Member.  Any controversies or claims
between Medical Group or its Participating Providers and a Member arising out
of the performance of this Agreement by Medical Group or the Medical Group’s Participating Provider, other than claims
for benefits under Managed Care Plans, are not governed by this Agreement.  Medical Group or its Participating Provider
and the Member may seek any appropriate legal action to resolve such
controversy or claim deemed necessary.

 

7.6                                 Disputes Between PacifiCare and Medical Group

 

7.6.1                        
Dispute Resolution Procedure. 
PacifiCare has established a Provider Dispute Resolution Procedure, set
forth in the Provider Manual, to provide a mechanism by which PacifiCare’s
Participating Providers, including Medical Group and any of its Participating
Providers, may submit to PacifiCare certain disputes arising out of the
performance of this Agreement or relating to the decisions made by PacifiCare
under this Agreement for resolution on an informal basis.  Any dispute submitted pursuant to the
Provider Dispute Resolution Procedure should be addressed to the appropriate
PacifiCare person(s) or department(s) at the address and/or telephone number
identified in the Provider Manual.  Any
provider dispute which is not resolved informally through the Provider Dispute
Resolution Procedure may be submitted for arbitration as provided in Section
7.6.2 below.

 

29

 

7.6.2                        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 Los Angeles                            ,
California, 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.

 

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.

 

7.7                                 Notice.  All notices required or
permitted by this Agreement shall be in writing and may be delivered in person
or may be sent by registered or certified mail or U.S.  Postal Service Express Mail, with postage
prepaid, or by Federal Express or other overnight courier that guarantees next
day delivery, or by facsimile transmission, and shall be deemed sufficiently
given if served in the manner specified in this Section.  The addresses below shall be the particular
party’s address for delivery or
mailing of notice purposes:

 

If to PacifiCare:

 

PacifiCare of California

5701 Katella Avenue

Cypress, CA 90630-0006

Attention: President

 

If to Medical Group:

 

30

 

Sierra Medical Group 44469
10th Street West

Lancaster, CA 93534

 

Attention: Administrator

 

The parties may change the names and addresses noted above through
written notice in compliance with this Section.  Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark date.  Notices delivered by U.S.  Postal Service Express mail, Federal Express
or overnight courier that guarantees next day delivery shall be deemed given
twenty-four (24) hours after delivery of the notice to the United States Postal
Service, Federal Express or overnight courier. 
If any notice is transmitted by facsimile transmission or similar means,
the notice shall be deemed served or delivered upon telephone confirmation of
receipt of the transmission, provided a copy is also delivered via delivery or
mail.

 

7.8                                 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 Agreement and its rights, interests
and benefits hereunder to any entity which is a corporate affiliate of
PacifiCare.

 

7.9                                 Amendments

 

7.9.1                        Amendments
to Managed Care Plans.  PacifiCare
may amend or change any or all provisions of the Managed Care Plans by
providing thirty (30) calendar days prior written notice to Medical Group.  Such amendment shall be binding upon Medical
Group at the end of the thirty (30) calendar day period.

 

7.9.2                        Amendments
to Provider Manual.  PacifiCare may
amend the Provider Manual by providing thirty (30) calendar days prior written
notice to Medical Group.  Such
amendments shall be binding upon Medical Group at the end of the thirty (30)
calendar day period, except as provided in Section 7.9.5 of this Agreement.

 

7.9.3                        Amendments
to Agreement to Comply With State and Federal Law.  PacifiCare may amend this Agreement by
providing thirty (30) calendar days prior written notice to Medical Group in
order to maintain compliance with State and Federal Law.  Such amendment shall be binding upon Medical
Group at the end of the thirty (30) calendar day period, except as provided in
Section 7.9.5 of this Agreement.

 

7.9.4                        Amendments
or Modifications to Agreement. 
Except as otherwise provided in this Section 7.9, all amendments or
modifications to this Agreement shall be effective only upon mutual written
agreement of the parties.

 

7.95                           Material
Amendments.  In the event PacifiCare
provides notice of amendment to the Agreement or the Provider Manual, Medical
Group shall be bound by such amendment

 

31

 

unless (i) Medical Group provides PacifiCare with notice of objection
within the thirty (30) calendar day notice period, and (ii) such change affects
a material duty or responsibility of Medical Group, and (iii) the change has a
material adverse economic effect upon Medical Group as reasonably demonstrated
by Medical Group to PacifiCare.  In such
event, Medical Group and PacifiCare shall seek to agree to an amendment to this
Agreement which satisfactorily addresses the effect on Medical Group’s material
duty or responsibility and reimburses the material economic detriment caused to
Medical Group.  In such event, the
amendment shall not be effective until the parties amend the Agreement through
a written amendment signed by both parties.

 

7.10                             Confidential and Proprietary Information

 

7.10.1                  Information
Confidential and Proprietary to PacifiCare.  Medical Group and its Participating Providers shall maintain
confidential all information designated in this Section.  The information which Medical Group and its
Participating Providers shall maintain confidential (the “Confidential
Information”) consists of: (i) the Eligibility List and any other information
containing the names, addresses and telephone numbers of Members which has been
compiled by PacifiCare; (ii) lists or documents compiled by PacifiCare which
include the names, addresses and telephone numbers of employers, employees of
such employers responsible for health benefits and the officers and directors
of such employers; (iii) PacifiCare’s Provider Manual and any of PacifiCare’s
member, employer and administrative service manuals and all forms related
thereto; (iv) the financial arrangements between PacifiCare and any of
PacifiCare’s Participating Providers; (v) PacifiCare underwriting and rating
information and any other information utilized by PacifiCare for determining
eligibility or rates for the Managed Care Plans; and (vi) any other information
compiled or created by PacifiCare which is proprietary to PacifiCare and which
PacifiCare identifies in writing to Medical Group.

 

7 10.2                  Non-Disclosure
of Confidential Information. 
Medical Group and its Participating Providers shall not disclose or use
the Confidential Information for their own benefit or gain either during the
term of this Agreement or after the date of termination of this Agreement.  Medical Group and its Participating
Providers may use the Confidential Information to the extent necessary to
perform their duties under this Agreement or upon express prior written
permission of PacifiCare.  Upon the
effective date of termination of this Agreement, Medical Group and its
Participating Providers shall provide and return to PacifiCare the Confidential
Information in their possession in the manner specified by PacifiCare.

 

7.10.3                  Information
Confidential and Proprietary to Medical Group.  Medical Group shall provide PacifiCare with a written description
of all information proprietary to Medical Group which is confidential and
contains trade secrets of Medical Group (the “Medical Group Information”).  PacifiCare shall maintain and shall cooperate
with Medical Group to maintain the confidentiality of Medical Group
Information.  PacifiCare shall not
disclose or use any Medical Group Information for its own benefit either during
the term of this Agreement or after the effective date of termination of this
Agreement.  Upon termination of this
Agreement, PacifiCare shall provide and return to Medical

 

32

 

Group all Medical Group Information in its possession in the manner to
be specified by Medical Group.

 

7.10.4                  PacifiCare
Names, Logos and Service Marks. 
Medical Group shall obtain the written consent of PacifiCare prior to
using PacifiCare’s name, product names, logos and service marks in any of
Medical Group’s promotional, marketing or advertising materials or for any
other reason.

 

7.11                           Solicitation of PacifiCare Members or
Subscriber Groups.  Medical Group and its Participating
Providers shall not engage in
the practice of solicitation of Members, Subscribers and Subscriber Groups
without PacifiCare’s prior
written consent.  Solicitation shall
mean conduct by an officer, agent, employee of Medical Group or its
Participating Providers or their respective assignees or successors during the
term of this Agreement and continuing for a period of one (1) year after the
effective date of termination of this Agreement which may be reasonably
interpreted as designed to persuade Members, Subscribers or Subscriber Groups
to disenroll from any Managed Care Plan or discontinue their relationship with
PacifiCare.  Notwithstanding any other
provision of this Agreement, Medical Group agrees that PacifiCare shall, in
addition to any other remedies provided for under this Agreement, have the
right to seek a judicial temporary restraining order, preliminary injunction, or
other equitable relief against Medical Group and its Participating Providers to
enforce its rights under this Section. 
Nothing in this Agreement shall be interpreted to discourage or prohibit
Medical Group and its Participating Providers from discussing a Member’s health care, including, without limitation,
communications regarding treatment options, alternative plans or other coverage
arrangements, unless such communications are for the primary purpose of
securing financial gain.

 

7.12                           Notification and Approval of Sale or Change
in Management of Medical Group.  Medical Group agrees that it shall provide
prior written notice to PacifiCare of its intent to either (i) sell, transfer
or convey its business or any substantial portion of its business assets to
another entity (“successor
entity”) or (ii) enter into a
management contract with a physician practice management company (“management company”)
which does not manage Medical Group as of the Commencement Date.  Such prior written notice shall be given at
least ninety (90) days prior to Medical Group selling its business or entering
into such contract.  As set forth in
Section 6.4, PacifiCare shall have the right to terminate this Agreement upon
ninety (90) days’ written notice
to Medical Group if PacifiCare reasonably determines that any successor entity
or any management company cannot satisfactorily perform the obligations of
Medical Group under this Agreement or that PacifiCare prefers not to do
business with the successor entity or management company.  Medical Group warrants and assures that this
Agreement, if not otherwise terminated by PacifiCare, will be assumed by all
successor entities and that all successor entities and management companies
will be bound by the terms and conditions of this Agreement.

 

7.13                           Confidentiality of this Agreement.  To
the extent reasonably possible, each party agrees to maintain this Agreement as
a confidential document and not
to disclose the Agreement or any of its terms without the approval of the other
party.

 

33

 

7.14                           Invalidity of Sections of Agreement.  The
unenforceability or invalidity of any paragraph or subparagraph of any section
or subsection of this Agreement shall not affect the enforceability and
validity of the balance of this Agreement.

 

7.15                           Captions.  Captions in this Agreement
are descriptive only and do not affect the intent or interpretation of the
Agreement.

 

7.16                           Waiver of Breach.  The
waiver by either party to this Agreement of a breach or violation of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any subsequent breach or violation thereof.

 

7.17                           Medical Group’s Authorized Representative. 
Unless otherwise indicated in writing to PacifiCare, Medical Group warrants
and authorizes its administrator to act as its fully authorized representative
to represent Medical Group in this Agreement and to receive any and all
communications and notices hereunder.

 

7.18                           No Third Party Beneficiaries. 
This Agreement shall not create any rights in any third parties who have
not entered into this Agreement, nor shall this Agreement entitle any such
third party to enforce any rights or obligations that may be possessed by such
third party.

 

7.19                           Entire Agreement. 
This Agreement, including all exhibits, attachments and amendments
hereto, contains all the terms and conditions agreed upon by the parties
regarding the subject matter of this Agreement.  Any prior agreements, promises, negotiations or representations
of or between the parties, either oral or written, relating to the subject
matter of this Agreement, which are not expressly set forth in this Agreement
are null and void and of no further force or effect.

 

7 20                           Incorporation of Exhibits, Attachments and
Provider Manual.  The exhibits and attachments to this
Agreement and the Provider Manual are an integral part of this Agreement and
are incorporated in full herein by this reference.

 

ARTICLE
8

GOVERNING LAW AND REGULATORY REQUIREMENTS

 

8.1                                 Governing Law. 
This Agreement and the rights and obligations of the parties hereunder
shall be construed, interpreted, and enforced in accordance with, and governed
by, the laws of the State of California and the United States of America,
including, without limitation, the Knox-Keene Health Care Service Plan Act of
1975, as amended, and the regulations adopted thereunder by the California
Department of Corporations, the federal Health Maintenance Organization Act of
1973, as amended, and the regulations adopted thereunder by the United States
Department of Health and Human Services. 
Any provisions required to be in this Agreement by State and Federal Law
or by Government Agencies shall bind PacifiCare and Medical Group whether or
not expressly provided in this Agreement.

 

8.2                                 No Billing of Members (Member  Hold
Harmless Provision).  With the exception of Copayments and charges
for non-covered services delivered on a fee-for-service basis to

 

34

 

Members, Medical Group shall in no event, including, without
limitation, non-payment by PacifiCare, insolvency of PacifiCare, or breach of
the Agreement, bill, charge, collect a deposit from, or attempt to bill,
charge, collect or receive any form of payment from any Member for Covered
Services provided or arranged pursuant to this Agreement.

 

Medical Group and its Participating Providers shall not maintain any
action at law or equity against a Member to collect sums owed by PacifiCare to
Medical Group.  Upon notice of any such
action, PacifiCare may terminate this Agreement as provided above and take all
other appropriate action consistent with the terms of this Agreement to
eliminate such charges, including, without limitation, requiring Medical Group
and its Participating Providers to return all sums collected as surcharges from
Members or their representatives.  For
purposes of this Agreement, “Surcharges” are additional fees for Covered
Services which are not disclosed to Members in the Subscriber Agreement, are not
allowable Copayments and are not authorized by this Agreement.  Nothing in this Agreement shall be construed
to prevent Medical Group from providing non-Covered Services on a usual and
customary fee-for-service basis to Members.

 

Medical Group’s obligations under this Section shall survive the
termination of this Agreement with respect to Covered Services provided or
arranged during or after the term of this Agreement, regardless of the cause
giving rise to such termination.

 

8.3                                 Continuing Care Obligations of Medical Group.  In
the event of termination of this Agreement for any reason, Medical Group and
its Participating Providers shall continue to provide or arrange Covered
Services to Members, including any Members who become eligible during the
termination notice period, beginning on the effective date of termination and
continuing until the termination or next renewal date of the Member’s Subscriber Agreement, unless PacifiCare
arranges for the transfer of the Member to another PacifiCare Participating
Provider and provides written notice to Medical Group of such transfer prior to
the termination or next renewal date of the Subscriber Agreement.  Notwithstanding the foregoing, Medical Group
and its Participating Providers will continue to provide or arrange Covered
Services to any Members who cannot be transferred within the time period
specified above in accordance with PacifiCare’s legal and contractual obligations to: (i) provide Covered Services
under the Managed Care Plans and Subscriber Agreements; (ii) provide notice of
termination to Members; and (iii) ensure continuity of care for its Members.

 

Notwithstanding the above or any other provisions to the contrary,
Medical Group agrees that in the event PacifiCare ceases operations for any
reason, including insolvency, Medical Group 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.  This continuation of
Covered Services obligation shall be for the period for which Premium has been
paid, but shall not exceed a period of thirty (30) 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 shall continue to arrange for Covered Services to those
Members who are hospitalized on an inpatient basis at

 

35

 

the time PacifiCare ceases operations or Medical Group terminates this
Agreement until such Members are discharged from the hospital.  Medical Group may file a claim with
PacifiCare for such services as previously specified in this Section.

 

Medical Group agrees that the provisions of this Section and the
obligations of Medical Group and its Participating Providers herein shall
survive termination of this Agreement regardless of the cause giving rise to
such termination, and shall be construed to be for the benefit of Members.

 

8.4                                 Inspection and Audit of Records and
Facilities.  Upon written notice, Medical Group and its
Participating Providers shall provide access at reasonable times upon demand by
PacifiCare, Accreditation Organizations and Governmental Agencies to
periodically audit or inspect the facilities, offices, equipment, books,
documents and records of Medical Group and its Participating Providers relating
to the performance of this Agreement and the Covered Services provided to
Members, including, without limitation, all phases of professional and
ancillary medical care provided or arranged for Members by Medical Group and
its Participating Providers, Member medical records and financial records
pertaining to the cost of operations and income received by Medical Group for
Covered Services rendered to Members. 
Medical Group and its Participating Providers shall comply with any
requirements or directives issued by PacifiCare, Accreditation Organizations
and Government Agencies as a result of such evaluation, inspection or audit of
Medical Group and its Participating Providers. 
Medical Group and its Participating Providers shall retain the books and
records described in this Section for at least five (5) years.  The provisions of this Section shall survive
termination of this Agreement for the period of time required by State and
Federal Law.

 

8.5                                 Nondiscrimination. 
Medical Group assures that Covered Services shall be provided to Members
in the same manner as such services are provided to other patients of Medical
Group and its Participating Providers, except as required pursuant to this
Agreement.  Medical Group and its
Participating Providers shall not unlawfully discriminate against any Member on
the basis of source of payment or in any manner in regards to access to, and
the provision of, Covered Services. 
Medical Group and its Participating Providers shall not unlawfully
discriminate against any Member, employee or applicant for employment on the basis
of race, religion, color, national origin, ancestry, physical handicap, medical
condition, marital status, age or sex.

 

36

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement
in                              ,
California.

 

 

	
   

  	
  PACIFICARE OF CALIFORNIA

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Jeffrey

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  VP Network Mgmt

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  9/29/99

  	
   

  
	
   

  	
   

  
	
   

  	
  SIERRA MEDICAL GROUP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter G. Goll

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  9-16-99

  	
   

  
						

 

37

 

PACIFICARE
OF CALIFORNIA

 

MEDICAL
GROUP/IPA SERVICES AGREEMENT

(PROFESSIONAL CAPITATION)

 

EXHIBIT
1

MEDICAL GROUP FACILITIES AND SERVICE AREA

(This Exhibit 1 is an integral part of this Agreement)

 

Medical
Group Facilities:

 

 

Hospital(s):

Antelope
Valley Hospital Medical Center

 

Lancaster
Community Hospital

 

Medical
Group Service Area:

 

The
geographic area within a thirty (30) mile radius of each of the above listed
Medical Group Facilities.  Such radius
shall be determined by PacifiCare, based upon the shortest route using public
streets and highways.

 

38

 

PACIFICARE
OF CALIFORNIA

 

MEDICAL
GROUP/IPA SERVICES AGREEMENT

(PROFESSIONAL CAPITATION)

 

EXHIBIT
2

DELEGATED
ACTIVITIES

(This Exhibit 2 is an integral part of this Agreement)

 

The purpose of the following
Grids is to specify the responsibilities of PacifiCare and Medical Group under
the Agreement with respect to (i) claims processing and payment, (ii)
credentialing and recredentialing, (iii) medical records, (iv) quality
management and improvement and (v) utilization management.

 

The Grids set forth the
specific activities with respect to (i) claims processing and payment, (ii)
credentialing and recredentialing, (iii) medical records, (iv) quality
management and improvement and (v) utilization management, which PacifiCare has
delegated to Medical Group and which Medical Group shall perform on behalf of
PacifiCare.  The Grids also set forth
the specific activities with respect (i) claims processing and payment, (ii)
credentialing and recredentialing, (iii) medical records, (iv) quality
management and improvement and (v) utilization management, which PacifiCare has
not delegated to Medical Group under the Agreement and which PacifiCare shall
perform directly utilizing its own personnel. 
Medical Group is responsible for cooperating, participating and
complying with PacifiCare’s performance of such activities.

 

PacifiCare does not formally
delegate to its contracting medical groups the responsibility for performing
quality management and improvement activities on behalf of PacifiCare.  However, PacifiCare does require contracting
medical groups to maintain a quality improvement and management program,
participate and cooperate in PacifiCare’s quality improvement program and
collect data for PacifiCare’s quality improvement activities, and carry out
corrective actions required by PacifiCare. 
Accordingly, the Grids set forth certain quality improvement activities
which PacifiCare has not delegated to Medical Group to perform on behalf of
PacifiCare, but which PacifiCare and Medical Group shall perform concurrently
under the Agreement.  PacifiCare also
does not formally delegate to contracting medical groups the responsibility for
performing member services, preventive health services and medical records
review activities on behalf of PacifiCare. 
However, PacifiCare does require contracting medical groups under the
Agreement to participate, cooperate and comply with PacifiCare’s activities
relating to member services, preventive health services, and medical records
reviews as required by PacifiCare.

 

The Grids also identify (i) the
elements and performance measures established by PacifiCare for the Delegated
Activities in accordance with the NCQA accreditation standards and State and
Federal law and regulatory requirements, (ii) the reports which shall be
provided to PacifiCare by Medical Group for each of the Delegated Activities
and the frequency of reporting, and (iii) the oversight activities which PacifiCare
shall perform with respect to each of the Delegated Activities.

 

39

 

Exhibit 2 may be amended from
time to time during the term of this Agreement by PacifiCare to reflect changes
in delegation standards; delegation status; performance measures; reporting
requirements; and other provisions of this Exhibit 2.

 

40

 

CLAIMS DELEGATION
GRID

 

	
  Claims

  Standard

  	
   

  	
  Delegation

  Status

  	
   

  	
  PacifiCare

  	
   

  	
  MG

  	
   

  	
  Medical
  Group

  Performance

  Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare
  Oversight

  	
   

  
	
  1.0              HCFA
  Regulations are

  met

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Claims Processing
  review

  •             Denials/

  Denial letters review 

  •              Provider reporting

  	
   

  	
  Monthly

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool

  •             Annual oversight
  assessment utilizing approved oversight tool 

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool 

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.0              PacifiCare
  Standards for Commercial products are met

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Claims Processing
  review

  •             Denials/

  Denial letters review

  •             Provider reporting

  	
   

  	
  Monthly

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool

  •             Annual oversight
  assessment utilizing approved oversight tool

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Medicaid Regulations are met

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •              Claims Processing
  review

  •             Denials/

  Denial letters review

  •             Provider reporting

  	
   

  	
  Monthly

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool

  •             Annual oversight
  assessment utilizing approved oversight tool

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.0              State
  Regulations that are stricter than or not included in PacifiCare Standards
  are met

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             COB and TPL review

  •             Compliance with
  State Regulations

   

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool

  •             Annual oversight
  assessment utilizing approved oversight tool

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  

 

41

 

	
  5.0              OPM
  Requirements

  are met

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Claims Processing
  review

  •             COB identification

  •             Debarred providers
  suspended

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool 

  •             Annual oversight
  assessment utilizing approved oversight tool 

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool 

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.0              Standards
  for employer performance guarantees are met

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Employer
  performance guarantee measurement

  	
   

  	
  As required
  by employer

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool 

  •             Annual oversight
  assessment utilizing approved oversight tool 

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.0              Eligibility
  benefits are maintained

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Eligibility process
  review

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool

  •             Annual oversight
  assessment utilizing approved oversight tool

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.0              PacifiCare
  financial accounting requirements are met

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Review financial
  statements

  •             Review IBNR
  reserves

  •             Review processes
  for expense reduction

  	
   

  	
  Annually

  	
   

  	
  •             Initial review
  utilizing approved oversight tool

  •             Annual review
  utilizing approved oversight tool

  •             Additional/

  intensified reviews as warranted by the plan

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  

 

42

 

	
  9.0              Check
  production processes assure timely claim payments and IRS requirements are
  met

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Review check
  production processes

  •              Perform Provider
  Satisfaction Survey

  •             Review process to
  settle claims in collections

  •             Review 1099
  production processes

  •             Review claim
  retention and retrieval processes

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool

  •             Annual oversight
  assessment utilizing approved oversight tool

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.0        Staffing
  levels sufficient to support claims volume and processing timeliness
  requirements

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Review staffing
  levels

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite assessment
  utilizing approved oversight tool

  •             Annual oversight
  assessment utilizing approved oversight tool

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.0        Audit
  reports available

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Review reports
  provided for audit

  	
   

  	
  As needed
  for audits

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool

  •             Annual oversight
  assessment utilizing approved oversight tool

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.0        Staff
  available to answer claims questions during PacifiCare’s hours of Operation

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Review Customer
  Service capabilities 

  •             Past experience for
  claims resolution

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool 

  •             Annual oversight
  assessment utilizing approved oversight tool 

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool 

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  

 

43

 

	
  13.0        Encounter
  data reported and submitted to PacifiCare Monthly

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Review encounter
  data submission process

  •             Past experience
  with encounter submission

  	
   

  	
  Monthly

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool

  •             Annual oversight
  assessment utilizing approved oversight tool 

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool 

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.0        Newly

  delegated

  payors

  not anticipating

  system

  conversion

  within

  120 days

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Review plans for
  operational systems

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool 

  •             Annual oversight
  assessment utilizing approved oversight tool 

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.0        Utilization
  Management delegated

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure standards are met.

  	
   

  	
   

  	
   

  	
  •             Determine if
  provider delegated for UM

  •             Review UM’s plan
  for delegation

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight tool 

  •             Annual oversight
  assessment utilizing approved oversight tool 

  •             Additional onsite
  reviews as warranted by the plan utilizing approved oversight tool 

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  	
   

  

 

PacifiCare’s responsibilities relating to
Claims and those responsibilities which PacifiCare has delegated to the Medical
Group/IPA/Hospital are outlined above.

 

The Medical Group/IPA/Hospital agrees to be
accountable for all responsibilities delegated by PacifiCare and will not
further delegate any such responsibilities without the prior written approval
by PacifiCare.

 

44

 

CREDENTIALING DELEGATION GRID

 

	
  NCQA

  Credentialing

  Standard

  	
   

  	
  Delegation

  Status

  	
   

  	
  Pacifi-

  Care

  	
   

  	
  MG

  	
   

  	
  Medical Group

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
  1.0              Credentialing
  Policies and Procedures

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA
  responsible for all identified functions

  	
   

  	
  •             Full Compliance
  with NCQA Standards

  •             Identity scope

  •             Define criteria and
  verification of criteria

  •             Describe
  decision-making process, including how advice is received from participating
  practitioners

  •             Describe extent of
  any delegated credentialing/

  recredentialing arrangements

  •             Describe right of
  practitioner to review information

  •             Develop process to
  notify practitioner of information discrepancies

  •             Include
  practitioners right to correct erroneous information

  •             Ensure
  confidentiality

  •             Define Medical
  Director responsibilities and participation

  	
   

  	
  •             Submit
  Credentialing Program annually 

  •             Revised
  credentialing policies and procedures submitted quarterly, if applicable

  	
   

  	
  •             Initial onsite
  assessment 

  •             Annual oversight
  assessment

  •             Annual PacifiCare
  committee approval

  •             Evaluate and
  approve written Credentialing Program

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.0              Credentialing

  Committee

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA
  responsible for all identified functions

  	
   

  	
  •             Full Compliance
  with NCQA Standards

  •             The MG/IPA
  designates a credentialing committee or other review body that makes
  recommendations regarding credentialing decisions

  	
   

  	
  •             Annual
  credentialing program to include committee structure

  	
   

  	
  •             Initial onsite
  assessment

  •             Annual oversight
  assessment

  •             Annual PacifiCare
  committee approval

  •             Annual Review of
  committee minutes 

  •             Annual review of
  membership

  •             Frequency of
  meetings

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  

 

45

 

	
  3.0              Primary
  source verification of credentialing information

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA
  responsible for all identified functions.

  	
   

  	
  •             Full
  compliance with NCQA Standards regarding verification of information within
  180 days of presentation to Committee for approval

  •             Meet 90% of all
  NCQA credentialing standards (exempt from primary source verification of
  license).

  •             Meet 100% of NCQA
  standards related to primary source verification of licenser.

  •             Primary source
  verification to include:

  •             License

  •             Clinical privileges

  •             DEA/CDS

  •             Education

  •             Board certification

  •             Work history

  •             Malpractice
  insurance

  •             Professional
  liability claims

  	
   

  	
  •             Submit current list
  of physicians credentialed with quarterly report.

  	
   

  	
  •             Initial onsite
  assessment

  •             Annual oversight
  assessment

  •             Annual PacifiCare
  committee approval

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance.

  •             Audit conducted of
  provider credentialing files: 5% or a random sample of 50 to represent entire
  contracted network..

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.0              Application/

  Attestation

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA
  responsible for all identified functions

  	
   

  	
  •             Full compliance
  with NCQA Standards 

  •             The MG/IPA
  application must include a statement regarding:

  1.          Reasons
  for any inability to perform.

  2.          Lack
  of present illegal drug use.

  3.          History
  of loss of license or felony conviction.

  4.          History
  of loss or limitation of privileges or disciplinary activity.

  5.          Attestation
  by applicant of the correctness and completeness of the application.

  	
   

  	
  •             Immediate
  submission of any changes to application utilized.

  	
   

  	
  •             Initial onsite
  assessment

  •             Annual oversight
  assessment

  •             Annual PacifiCare
  Committee approval

  •             Annual review of
  credentialing files (5% or 50 credentialing files reviewed, whichever is
  less, with a minimum of 10 credentialing and 10 recredentialing files
  reviewed) 

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  

 

46

 

	
  5.0              NPDB
  information /sanction information

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA
  responsible for all identified functions

  	
   

  	
  •             Full compliance
  with NCQA Standards regarding verification of information within 180 days of
  presentation to Committee for approval 

  For all Medicare and/or Medicaid sanctions as appropriate:

  1.          State
  Board of Dental Examiners

  2.          Sate
  Board of Pediatric Examiners 

  3.          State
  Board of Medical Examiners

  4.          Federation
  of State Medical Boards or Dept of Professional Regulations

  5.          State
  Board of Chiropractic Examiners of the Federation of Chiropractic Licensing
  Boards

  	
   

  	
  •             None

  	
   

  	
  Initial onsite assessment Annual oversight assessment 

  •             Annual PacifiCare
  committee approval

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.0              Initial
  office visit of all PCPs and OB/GYNs and medical record keeping review

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA
  responsible for all identified functions

  	
   

  	
  •             Full compliance
  with NCQA Standards regarding initial site visit/medical record review and
  subsequent biannual site visit/medical record review

  •             Structured review
  that evaluates the office site against standards in the following areas:

  •             Physical
  accessibility

  •             Physical appearance

  •             Adequacy of waiting
  room and exam room space

  •             Availability of
  appointments vs expected performance standards

  •             Documentation of an
  evaluation of medical record keeping practices for conformity with standards 

  •             Incorporation of
  this info into credentialing process 

  	
   

  	
  •             Include list of all
  initial site reviews completed on an annual basis

  	
   

  	
  •             Initial onsite
  assessment

  •             Annual oversight
  assessment

  •             Annual PacifiCare
  committee approval

  •             Biannual site
  review

  •             Biannual medical
  record review

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  •             Annual review of
  audit tool

  •             Verification of all
  sites completed within 2 years prior to initial credentialing 

  •             Review of
  credential files annually as above to include evidence of initial site review
  and record keeping review.

  

 

47

 

	
  7.0              Recredentialing
  Primary source verification

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA
  responsible for all identified functions

  	
   

  	
  •             Meet 90% of all
  NCQA recredentialing standards (except PSU of Licenser)

  •             Meet 100% of NCQA
  Standards related to PSV of licenser

  •             Recredentialing to
  include license, clinical privileges, DEA/CDS, Board Certification,
  malpractice insurance, professional liability claims, signed attestation
  regarding any inability to perform and lack of present illegal drug use

  	
   

  	
  Include list of all providers recredentialed on a quarterly basis
  (with quarterly report)

  	
   

  	
  •             Annual audit of
  files - 5% or random sample of 50 to represent entire contracted network

  •             Annual onsite
  assessment

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.0              Recredentialing
  NPDB information/sanction information

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA
  responsible for all identified functions

  	
   

  	
  •             Full compliance
  with NCQA Recredentialing Standards regarding verification of information
  within 180 days of presentation to Committee for approval

  •             Recredentialing
  conducted biannually by the Provider

  •             Recredentialing
  information found in credential files includes the following:

  1.          Information
  from NPDB

  2.          Sanction
  information, as appropriate:

  •              State Board of
  Medical Examiners, Federation of State Medical Boards

  •              Department of
  Professional Regulations

  •              State Board of
  Chiropractic Examiners on the Federation of Chiropractic Licensing Boards

  •              State Board of
  Dental Examiners

  3.          For
  all providers: review of Medicare/ Medicaid sanctions.

  	
   

  	
   

  	
   

  	
  •             Initial onsite
  assessment

  •             Annual oversight
  assessment

  •             Annual PacifiCare
  committee approval

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  •             Annual audit of
  files of 5% or random sample of 50 to represent the entire contracted network
  to include sanction information.

  

 

48

 

	
  9.0              Incorporation
  of the following data in the recredentialing decision-making process:

  •        Member complaints

  •        QI activities

  •        UM

  •        Member satisfaction

  •        Medical record reviews

  •        Site visits

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA responsible
  for all identified functions

  	
   

  	
  •             Full compliance
  with NCQA Recredentialing Standards

  •             Recredentialing
  conducted biannually by the Provider

  •             Incorporate the
  following information into the recredentialing decision-making process for
  PCPs.

  1.          Member
  complaints

  2.          Information
  from quality improvement activities

  3.          Utilization
  management

  4.          Member
  satisfaction

  5.          Medical
  record reviews

  6.          Site
  visits conducted as part of CR 10.1

  	
   

  	
  •             List of all
  recredentaling site reviews completed on an annual basis

  	
   

  	
  •             Initial onsite
  assessment

  •             Annual oversight
  assessment 

  •             Annual PacifiCare
  committee approval

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  •             Annual review of
  audit tool

  •             Verification of all
  sites completed within 2 years prior to recredentialing

  •             Review of files
  annually includes verification of recredentialing site visit

   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.0        Site
  Visits

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA responsible for all identified functions

  	
   

  	
  •             Full compliance
  with NCQA Standards regarding biannual recredentialing site visit/medical
  record review

  •             Visit to offices of
  all PCPs, OB/GYNs, and High Volume Specialists within 2 years prior to
  recredentialing

  •             Review office vs.
  standards in areas listed in Section 3.0 and documented evaluation of medical
  record keeping practices

  	
   

  	
  •             List of all
  recredentialing site reviews completed on an annual basis

  	
   

  	
  •             Initial onsite
  assessment

  •             Annual oversight
  assessment

  •             Annual PacifiCare
  committee approval

  •             Biannual Site
  Review

  •             Biannual Medical
  Record Review

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  •             Annual review of
  audit tool

  •             Verification of all
  sites completed within 2 years prior to recredentialing

  •             Review of files
  annually includes verification of recredentialing site visit

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.0        Peer
  Review/

  Disciplinary Action

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA responsible for all identified functions

  	
   

  	
  •             Full compliance
  with NCQA Standards

  •             Policy and
  Procedures (P&Ps) for reporting of quality deficiencies

  •             P&Ps for range
  of actions to be taken to improve performance prior to termination

  •             P&Ps to
  describe appeals process

  	
   

  	
  •             New P&Ps
  submitted quarterly

  	
   

  	
  •             Initial onsite
  assessment

  •             Annual oversight
  assessment

  •             Annual PacifiCare
  committee approval

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance.

  

 

49

 

	
  12.0        Assessment
  of Organizational Providers(hospitals, home health agencies, SNFs, and free
  standing surgical centers)

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA
  responsible for all identified functions

  	
   

  	
  •             For subcontracted
  acute care hospitals, home health agencies, SNFs, and freestanding surgical
  centers:

  1.          Confirms
  good standing with State and Federal regulatory bodies; and

  2.          Confirms
  accreditation; or

  3.          If
  not accredited, develops standards of participation and reviews for
  compliance; and

  4.          At
  least every three years, confirms continued good standing of regulatory
  bodies and, if applicable, accreditation

  	
   

  	
  •             Submit list of
  subcontracted organizational providers on an annual basis

  	
   

  	
  •             Annual assessment
  including P&Ps and random pull of files; two in each of the four
  categories; one accredited, one non-accredited as applicable

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.0        Subdelegation
  of Credentialing

  	
   

  	
  DELEGATED

  	
   

  	
   

  	
   

  	
  MG/IPA
  responsible for all identified functions

  	
   

  	
  •             If MG/IPA
  subdelegates credentialing to a CVO, Hospital, IPA, etc:

  1.          Detailed
  documentation of delegation agreement

  2.          Initial
  evaluation

  3.          Annual
  evaluation, including file review

  4.          MG/IPA
  retains right to approve/

  disapprove new providers and to discipline providers

  	
   

  	
  •             Submit copies of
  sub-delegation agreements to PacifiCare on an annual basis

  	
   

  	
  •             Annual assessment
  of sub-delegation process agreements, and policies and procedures

  

 

PacifiCare’s responsibilities relating to
Credentialing and those responsibilities which PacifiCare has delegated to the
Medical Group/IPA are outlined above.

 

The Medical Group/IPA agrees to be
accountable for all responsibilities delegated by PacifiCare and will not
further delegate any such responsibilities without the prior approval by
PacifiCare.  PacifiCare will perform
audits annually and as needed to evaluate the group’s delegated status.  In the event there are deficiencies identified
in the audit, PacifiCare will provide a specific corrective action plan.  If the group is not able to comply with the
corrective action plan within the specified time frame, PacifiCare may revoke
the group’s delegated status.

 

50

 

MEDICAL RECORDS DELEGATION GRID

 

	
  Medical Records

  Standard

  	
   

  	
  Delegation

  Status

  	
   

  	
  PacifiCare

  	
   

  	
  MG

  	
   

  	
  Medical Group

  Performance

  Measure

  	
   

  	
  Reporting Frequency

  	
   

  	
  PacifiCare Oversight

  	
   

  
	
  1.0      Medical Record Maintenance

  •             Confidentiality

  •             Documentation
  Standards

  •             Organization
  Availability

  	
   

  	
  NOT
  DELEGATED

  

  PacifiCare responsible for developing standards related to confidentiality
  & medical records documentation and for communicating this information to
  the provider network.

  	
   

  	
  X

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.0              Systematic
  Review and Action

  	
   

  	
  DELEGATED

  Required for
  any medical records delegation.

  	
   

  	
   

  	
   

  	
  X

  	
   

  	
  •             Audit medical
  records from at least 90% of all primary care practice sites with 50 members
  or more, and 2 years participation in the medical group.

  •             Audit tool to
  include all elements required by NCQA and PacifiCare.

  •             Trend deficiencies
  noted and take action for improvement.

  	
   

  	
  •             Annual submission
  of medical records review workplan

  •             Annual submission
  of report to include monitoring activities performed, deficiencies noted and
  action taken for improvement

  	
   

  	
  •             Approval by the
  Quality Improvement Committee of Annual Workplan and annual monitoring
  report.

  •             Audit of medical
  group policies and process on an annual basis to include 5% or 50 worksheets
  to ensure conformance to standards and note deficiencies identified.

  •             Site visit
  assessments correlates with review of medical records

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.0              Documentation
  of Items on the NCQA Medical Record Review Sheet during Accreditation Visit

  	
   

  	
  NOT
  DELEGATED

  	
   

  	
  X

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

51

 

	
  40                 Delegation
  of Oversight of Medical Records

  	
   

  	
  NOT
  DELEGATED

  PacifiCare
  to perform oversight of all delegated activities & to institute signed
  delegation agreements which clearly define the delegates activities &
  specific duties and responsibilities and the delegates reporting
  requirements.

  	
   

  	
  X

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

PacifiCare’s responsibilities relating to
Medical Records and those responsibilities which PacifiCare has delegated to
the Medical Group are outlined above.

 

52

 

QUALITY IMPROVEMENT DELEGATION GRID

 

	
  NCQA
  Quality

  Improvement

  Standard

  	
   

  	
  Delegation

  Status

  	
   

  	
  PacifiCare

  	
   

  	
  MG

  	
   

  	
  Medical Group

  Performance

  Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
  1.0              Program
  Structure

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  responsible for all activity related to program structure

  	
   

  	
  Required by
  PacifiCare but not delegated

  	
   

  	
  •             Quality Mgmt.
  Program Structure

  •             QM Program outlines
  structure and content

  •             QM Program
  accountable to the governing body

  •             Program description
  evaluated annually and updated as necessary

  •             Designated
  physician has substantial involvement in QM Program implementation

  •             A Committee
  Oversees and is involved in QM activities

  •             Program description
  specifies role, structure, and function

  •             QM Workplan
  includes objectives, scope, and planned activities; planned monitoring of
  previously identified issues; planned evaluation of QM Program 

  •             QM Program
  resources adequate to meet needs 

  	
   

  	
  •             Annual written QM
  Plan

  •             Annual work plan

  •             Annual evaluation

  •             Submit quarterly
  reports

  •             Submit all required
  corrective action plans

  	
   

  	
  •             Initial onsite
  assessment 

  •             Annual oversight
  assessment

  •             Annual PacifiCare
  committee approval

  •             Annual Review and
  Approval of QM Program, Evaluation, and Workplan 

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  

 

53

 

	
  2.0              Program
  Operations

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  responsible for all activity related to program operations

  	
   

  	
  Required by
  PacifiCare but not delegated

  	
   

  	
  •             Quality Mgmt.
  Program Operations

  •             QM Committee
  recommends policy decisions: reviews QM activities and institutes needed
  action; ensures follow-up

  •             Contemporaneous
  dated and signed minutes

  •             Practitioners
  participate in QM Program 

  •             QM Program
  coordinated with

  1.          UM

  2.          Credentialing

  3.          Member
  complaints and appeals 

  4.          Member
  satisfaction

  5.          Medical
  records review

  	
   

  	
  •             New PMG/IPA
  policies and procedures related to QI submitted quarterly.

  •             Annual report to
  include monitoring activities and results.

  	
   

  	
  •             Initial onsite
  assessment

  •             Annual oversight
  assessment

  •             Annual PacifiCare
  committee approval

  •             Annual review of QM
  Committee minutes

  •             Annual review of
  membership 

  •             Frequency of
  meetings

  •             Quarterly report to
  PacifiCare, including new provider policies and procedures related to QM

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.0              Health
  Services Contracts

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  responsible for including appropriate language regarding participation in QI
  and access to records.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.0              Availability
  of Primary Care Practitioners

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  responsible for all activity related to geographic network distribution.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.0              Accessibility
  of Services

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  responsible for all activity related to geographic network distribution.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.0              Member
  Satisfaction

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  responsible for implementing mechanisms to assure member satisfaction.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  

 

54

 

	
  7.0              Health
  Management Systems

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  responsible for identification of chronic conditions, identification of
  members, development of programs, educating practitioners, and measuring
  effectiveness.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.0              Clinical
  Practice Guidelines

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  responsible for developing, adopting, and discriminating practice guidelines
  for acute and chronic case services.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.0              Scope
  and content of Clinical Quality Improvement Activities

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  to identify (5) five meaningful clinical issues for plan-wide monitoring and
  review

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.0        Clinical
  Measurement Activities

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  to use data collection, measurement, and analysis to track clinical quality
  improvement of plan-wide activities.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.0        Intervention
  and Follow-up for Clinical Issues

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  to take action to improve quality by addressing opportunities identified by
  plan-wide monitoring, or through other clinical quality improvement
  activities.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  

 

55

 

	
  12.0        Effectiveness
  of QI Program

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  to evaluate the effectiveness of the plan-wide QI Program and demonstrate
  required improvements in the quality of clinical care and the quality of
  service to its members.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.0        Delegation
  of QI Activity

  	
   

  	
  NOT
  DELEGATED (PacifiCare never delegates this function)

  	
   

  	
  PacifiCare
  to perform oversight of all delegated activities and to institute signed
  delegation agreements which clearly define the delegate’s activities and
  specific duties and responsibilities and the delegate’s reporting.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NONE

  	
   

  	
   

  

 

PacifiCare’s responsibilities relating to
Quality Improvement and those responsibilities which PacifiCare has delegated
to the Medical Group/IPA are outlined above.

 

The Medical Group/IPA agrees to be
accountable for all responsibilities delegated by PacifiCare and will not
further delegate any such responsibilities without the prior written approval
by PacifiCare.  PacifiCare will perform
audits annually and as needed to evaluate the group’s delegated status.  In the event there are deficiencies
identified in the audit.  PacifiCare
will provide a specific corrective action plan.  If the group is not able to comply with the corrective action
plan within the specified time frame, PacifiCare may revoke the group’s
delegated status.

 

56

 

UTILIZATION MANAGEMENT DELEGATION GRID

 

	
  NCQA 1997/

  HCFA/

  PacifiCare

  Standard

  	
   

  	
  Delegation

  Status

  	
   

  	
  PacifiCare

  	
   

  	
  MG

  	
   

  	
  Medical Group

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare Oversight

  
	
  1.0              PacifiCare:  Structure & Processes

  	
   

  	
  DELEGATED

  	
   

  	
  Responsible
  for ensuring structure design meets standards.

  	
   

  	
  Required if
  delegated

  	
   

  	
  •             Development and
  documentation of program structure and accountability, including:

  1.          Goals
  & Objectives 

  2.          Committee
  responsibilities:

  a)          Membership

  b)         Minutes

  c)          Dissemination
  of information

  d)         Education
  of staff & providers

  3.          UM
  director & senior physician’s roles.

  4.          UM
  department interfaces with other departments

  5.          Program
  is evaluated and approved annually

  •             For each UM
  Function delegated there will be documentation of:

  1.          Staff
  & physician responsibilities related to each UM function

  2.          Adequate
  staffing mix

  3.          After-hours
  UM process defined.

  4.          Interface
  with PacifiCare appropriately.

  5.          Data
  elements captured as required.

  6.          Reporting
  capability.

  	
   

  	
  Annual
  submission of UM plan.

   

  	
   

  	
  •             Initial
  onsite assessment utilizing approved oversight document.

  •             Annual oversight
  assessment utilizing approved oversight document.

  •             Annual PacifiCare
  committee approval of UM program document.

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance

  
	
  

  

  

  

  

  

  

  

  

  

  

  

  

  

  
Weekly Submission of logs.  Monthly submission of bed-day statistics.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met.

  Responsible
  for performing this function if not delegated.

  	
   

  	
  Required if
  delegated

  	
   

  	
  Development
  and documentation of program processes of:

   

  •             Prior-authorization

  	
   

  	
  N/A

  	
   

  	
   

  

 

57

 

	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met.

  Responsible
  for performing this function if not delegated.

  	
   

  	
  Required if
  delegated.

  	
   

  	
  Development
  and documentation of program processes of:

  •             Concurrent review

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met.

  Responsible
  for performing this function if not delegated.

  	
   

  	
  Required if
  delegated.

  	
   

  	
  Development
  and documentation of program processes of:

  •             Discharge planning

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met.

  Responsible
  for performing this function if not delegated.

  	
   

  	
  Required if
  delegated.

  	
   

  	
  Development
  and documentation of program processes of:

  •             Retrospective
  review (excluding ER services)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met.

  Responsible
  for performing this function if not delegated.

  	
   

  	
  Required if
  delegated.

  	
   

  	
  Development
  and documentation of program processes of:

  •             Expedited reviews

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are me?

  Responsible
  for performing this function if not delegated.

  	
   

  	
  Required if
  delegated.

  	
   

  	
  Development
  and documentation of program processes of:

  •             Case management

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met.

  Responsible
  for performing this function if not delegated.

  	
   

  	
  Required if
  delegated.

  	
   

  	
  Development
  and documentation of program processes of:

  •             Out-of-area reviews

  	
   

  	
   

  	
   

  	
   

  

 

58

 

	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met.

  Responsible
  for performing this function if not delegated.

  	
   

  	
  Required if
  delegated.

  	
   

  	
  Development
  and documentation of program processes of:

  •             Home health review

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met

  Responsible
  for performing this function if not delegated.

  	
   

  	
  Required if
  delegated.

  	
   

  	
  Development
  and documentation of program processes of:

  •             Denials

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met

  	
   

  	
  Required if
  delegated.

  	
   

  	
  Development
  and documentation of program processes of:

  •             First level appeals
  for Commercial members

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NOT DELEGATED
  (PacifiCare never delegates these functions)

  	
   

  	
  Responsible
  for performing those functions not delegated.

  	
   

  	
   

  	
   

  	
  •             Appeals and
  expedited appeals for Senior Members

  •             Second level
  appeals for commercial members

  •             New technology

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.0              Criteria
  for decision

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met

  	
   

  	
  Required if
  delegated.

  	
   

  	
  •             Written criteria
  identified and documented.

  •             Reviewed &
  updated annually.

  •             Criteria
  availability to providers.

  •             Use appropriate practitioners
  to develop/review criteria.

  •             Evidence of
  criteria use.

  •             Consistency of
  application is evaluated.

  •             Annual audits of
  nurse and physician reviews.

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight document. 

  •             Annual oversight assessment
  utilizing approved oversight document.

  •             Annual PacifiCare
  committee approval of UM program document.

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance.

  

 

59

 

	
  3.0              Professionals
  involved in case review

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met

  	
   

  	
  Required if
  delegated.

  	
   

  	
  •             Appropriate level
  of qualified professional(s) process.

  •             Physicians review
  denials.

  •             Use of board
  certified physicians for specially reviews.

  •             Absence of
  incentives for inappropriate decisions.

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight document.

  •             Annual Oversight
  assessment utilizing approved oversight document.

  •             Annual PacifiCare
  committee approval of UM program document.

  •             Implementation of
  Corrective Action plan(s) for elements of non-compliance.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.0              HCFA/
  PacifiCare: 

  

  Turn-around times and notification

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated functions to ensure that standards are met

  Oversight of
  delegated functions to ensure that standards are met

  	
   

  	
  Required for
  each function delegated in UM 10.

  	
   

  	
  •             Timeliness of
  decisions documented/

  demonstrated.

  •             Timeliness of
  notification of denials. 

  •             Follow HCFA
  guidelines for expedited reviews and appeals.

  •             Measure turnaround
  time and take action to improve as needed.

  •             Appropriate review
  and approval of emergency services.

  	
   

  	
  N/A

  	
   

  	
  •             Initial onsite
  assessment utilizing approved oversight document.

  •             Annual oversight
  assessment utilizing approved oversight document.

  •             Annual PacifiCare
  committee approval of UM program document.

  •             Implementation of
  Corrective Action Plan(s) for elements of non-compliance.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.0              Clinical
  Information

  	
   

  	
  DELEGATED

  	
   

  	
  Responsible
  for performing those functions not delegated.

  

  Oversight of delegated functions to ensure that standards are met

  	
   

  	
  Required if
  delegated.

  	
   

  	
  •             Consistent
  collection of relevant clinical information.

  •             Audit process and
  corrective action plan for deficiencies in clinical information collection.

  •             Evaluating
  eligibility.

  	
   

  	
  N/A

  	
   

  	
  •             Initial
  onsite assessment utilizing approved oversight document.

  •             Annual oversight
  assessment utilizing approved oversight document.

  •             Annual PacifiCare
  committee approval of UM program document.

  •             Implementation of Corrective
  Action Plan(s) for elements of non-compliance.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.0              HCFA/

  PacifiCare: 

  

  Denial Process

  	
   

  	
  DELEGATED

  	
   

  	
  Responsible
  for performing this function if not delegated.

  

  Oversight of delegated functions to ensure that standards are met

  	
   

  	
  Required if
  delegated.

  	
   

  	
  •                       Written
  denial notification sent to members.

  •                       Reasons
  for denial documented clearly.

  •                       Appeals
  information included in denial notification.

  •                       HCFA
  language for denial letters in place

  •                       Interface
  with PacifiCare appropriately

  	
   

  	
  N/A

  	
   

  	
  •                       Initial
  onsite assessment utilizing approved oversight document.

  •                       Annual
  oversight assessment utilizing approved oversight document.

  •                       Annual
  PacifiCare committee approval of UM program document.

  •                       Implementation
  of Corrective Action Plan(s) for elements of non-compliance.

  

 

60

 

	
  7.0              PacifiCare:
  New Technology

  	
   

  	
  NOT
  DELEGATED

  	
   

  	
  Responsible
  for determining inclusion in benefit package

  	
   

  	
   

  	
   

  	
  •                       New
  technology is evaluated for benefits

  •                       New uses
  for existing technology are evaluated.

  	
   

  	
  N/A

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DELEGATED

  	
   

  	
  Perform
  medical case review for determining if a covered benefit & establishing
  medical necessity if function is not delegated.

  Oversight of
  delegated function to ensure meets standards & to ensure process exists
  to interface with PacifiCare.

  	
   

  	
  Required if
  delegated.

  	
   

  	
  •                       Medical
  group utilizes PacifiCare to identify benefits and uses of new technology.

  	
   

  	
  N/A

  	
   

  	
  •                       Initial
  onsite assessment utilizing approved oversight document.

  •                       Annual
  oversight assessment utilizing approved oversight document.

  •                       Annual
  PacifiCare committee approval of UM program document.

  •                       Implementation
  of Corrective Action Plan(s) for elements of non-compliance.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.0              PacifiCare:

  Member & provider satisfaction

  	
   

  	
  DELEGATED

  	
   

  	
  Responsible
  for performing this function if not delegated.

  

  Oversight of delegated function to ensure standards are met & to ensure
  process exists to interface with PacifiCare.

  	
   

  	
  Required if
  delegated.

  	
   

  	
  •                       Responsible
  for conducting member and provider surveys, related to UM process and
  functions.

  •                       Develop
  and implement action plans resulting from group and PacifiCare data to
  promote satisfaction.  (May use
  PacifiCare survey results to accomplish above.)

  	
   

  	
  N/A

  	
   

  	
  •                       Initial
  onsite assessment utilizing approved oversight document.  Annual oversight assessment utilizing
  approved oversight document.

  •                       Annual
  PacifiCare committee approval of UM Program document.

  •                       Implementation
  of Corrective Action Plan(s) for elements of non-compliance.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.0              PacifiCare:

  Delegation of UM processes.

  	
   

  	
  DELEGATED

  	
   

  	
  Oversight of
  delegated function to ensure standards are met & to ensure process exists
  to interface with PacifiCare.

  	
   

  	
  Responsible
  if sub-delegated arrangements in place.

  	
   

  	
  •                       Obtain
  pre-approval from PacifiCare prior to sub-delegating UM.

  •                       Initial
  onsite assessment utilizing approved oversight document.

  •                       Annual
  oversight assessment utilizing approved oversight document.

  •                       Annual
  approval of sub-delegated UM program document.

  •                       Implementation
  of Corrective Action Plan(s) for elements of non-compliance.

  	
   

  	
  N/A

  	
   

  	
  •                       Initial
  onsite assessment utilizing approved oversight document.

  •                       Annual
  oversight assessment utilizing approved oversight document.

  •                       Annual
  PacifiCare committee approval of UM program document.

  •                       Implementation
  of Corrective Action Plan(s) for elements of non-compliance.

  

 

PacifiCare’s responsibilities relating to UM
and those responsibilities which PacifiCare has delegated to the Medical
Group/IPA are outlined above.

 

61

 

The Medical Group/IPA agrees to be
accountable for all responsibilities delegated by PacifiCare and will not
further delegate any such responsibilities without the prior written approval
by PacifiCare.

 

PacifiCare will perform audits annually and as
needed to evaluate the group’s delegated status.  In the event there are deficiencies identified is the audit,
PacifiCare will provide a specific corrective action plan.  If the group is not able to comply with the
corrective action plan within the specified time frame, PacifiCare may revoke
the group’s delegated status.

 

62

 

 

	
   

  	
  PACIFICARE OF CALIFORNIA

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Jeffrey

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  VP Network Mgmt

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  9/29/99

  	
   

  
	
   

  	
   

  
	
   

  	
  SIERRA MEDICAL GROUP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter G. Goll

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  9-16-99

  	
   

  
						

 

63

 

PACIFICARE
OF CALIFORNIA

 

MEDICAL
GROUP/IPA SERVICES AGREEMENT

(PROFESSIONAL CAPITATION)

 

EXHIBIT
3

PRODUCT
ATTACHMENTS

VERIFICATION OF RECEIPT OF PROVIDER MANUAL

AND
FORM SUBSCRIBER AGREEMENTS

(This Exhibit 3 is an integral part of this Agreement)

 

MEDICAL GROUP NAME: Sierra
Medical Group

 

VERIFICATION OF RECEIPT OF
PROVIDER MANUAL AND SUBSCRIBER AGREEMENTS.

 

A copy of the PacifiCare
Provider Policies and  Procedures
Manual and standard form Subscriber Agreements for each of the Managed Care
Plans specified below has been provided to Medical Group by PacifiCare prior to the execution of this
Agreement:

 

	
  By:

  	
  /s/ Peter G. Goll

  	
   

  
	
   

  
	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  
	
  Date:

  	
  11/8/99

  	
   

  
				

 

PRODUCT ATTACHMENTS

 

The following attachments, when
initialed by PacifiCare and Medical Group, are an integral part of this
Agreement

 

	
   

  	
   

  	
  PacifiCare

  	
   

  	
  Medical
  Group

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PacifiCare Commercial Health Plan

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PacifiCare Commercial POS Health Plan

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secure Horizons Health Plan

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secure Horizons POS Health Plan

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*** Confidential Treatment
requested

 

64

 

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                                 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                                 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.

 

1.3                                 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.

 

l.4                                    Commercial Plan Members are Medical Group Members enrolled in the
PacifiCare Commercial Plan.

 

1.5                                 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

 

65

 

provisions of the OPM Agreement which are applicable
to Medical Group’s Participating Providers are included in 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                                 Capitation
Payments for Commercial Plan Members. 
Capitation Payments for
Commercial Plan Members shall be *** of the Commercial Plan Premium per
Commercial Plan Member per month, subject to the adjustments set forth in
Article 5 of the Base Agreement and the adjustments set forth below in this
Section.  Beginnning in January, 2000,
Capitation Payments shall increase ***.

 

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
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.

 

3.1.3                        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.

 

(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

 

66

 

Commercial Plan Premium, shall exclude broker and
agent commissions, premium taxes and premiums for Supplemental Benefits.

 

3.2                                 Individual Stop-Loss Program.  The
ISL Deductible and ISL Premium for the PacifiCare Commercial Plan initially
will be:

 

(i)                                     ISL
Deductible - Not Applicable per Commercial Plan Member per calendar year.

 

(ii)                                  ISL
Premium - Not Applicable of Commercial Plan Premium.

 

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 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.  The Reinsurance Deductible and Reinsurance
Premium for the PacifiCare Commercial Plan initially will be:

 

(i)                                     Reinsurance
Deductible - [samount] ($[samt]) per Commercial Member per calendar year.

 

(ii)                                  Reinsurance
Premium - [spercent] percent ([spct)%) of Commercial Plan Premium.

 

The Reinsurance Coinsurance shall be [spercent2] percent ([spct2]%) in
excess of the Reinsurance Deductible.

 

3.3.2                        CHIP Budget.  The CHIP Budget for Commercial Plan Members
shall be thirty-eight and forty-four tenths percent (38.44%) of the Commercial
Plan Premium per Member per month, excluding Commercial POS Plan Members,
subject to the adjustments set forth in Article 5 of the Base Agreement and
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,

 

67

 

(iii)                               the actual amount paid
for Hospital Services which are rendered by non Participating Providers; plus,

 

(iv)                              the
amount of the Reinsurance Premium; minus,

 

(v)                                 one
hundred percent (100%) of any and all costs for Hospital Services rendered to
Commercial Plan Members, excluding Commercial POS Plan Members, valued as set
forth in subsections (i) through (iii) above, in excess of the Reinsurance
Deductible; minus,

 

(vi)                              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:

 

	
  For Bed Days PTMPY

  	
   

  	
  IPA% share
  of Savings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Over 180

  	
   

  	
  ***

  	
   

  
	
  179 - 160

  	
   

  	
  ***

  	
   

  
	
  159 - 140

  	
   

  	
  ***

  	
   

  
	
  under 140

  	
   

  	
  ***

  	
   

  

 

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

Limited to ten percent (10%)
of the CHIP Budget.  

*** to PacifiCare

 

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

 

3.4.1                        Outpatient Pharmacy
Supplemental Benefits shall be the benefits made available by PacifiCare
under the PacifiCare Supplemental Pharmacy Benefit, as defined in the
applicable Subscriber Agreement.

 

68

 

3.4.2                        PIP Budget shall equal
eighty percent (80%) of the premium received by PacifiCare for Outpatient
Pharmacy Supplemental Benefits for Commercial Plan Members.  The PIP Budget shall be retained by
PacifiCare for purposes of administering the PIP.

 

3.4.3                        PIP Expense shall equal
the actual or valued expenses incurred for the provision of Outpatient Pharmacy
Supplemental Benefits during the applicable period, less amounts received from
pharmacy rebates and third parties as the result of coordination of benefits
and third party recoveries.

 

3.4.4                        PIP Surplus.  In the event the PIP Expense is less than
the PIP Budget, [spercent] fifty percent (50%) of the surplus shall be
allocated to Medical Group.

 

3.4.5                        PIP Deficit.  In the event that the PIP Expense is greater
than the PIP Budget, [spercent] fifty percent (50%) of the deficit shall be allocated
to Medical Group.

 

ARTICLE
4

DIVISION OF FINANCIAL RESPONSIBILITY

(PacifiCare
Secure Horizons and Commercial Plan)

 

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 should
be consulted for an accurate and complete description of Covered Services and
the Provider Manual for administrative clarification.

 

69

 

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

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Autologus 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

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  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/Orthorics - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Emergency Room - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Emergency Room - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Endoscopic Studies - IP - 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

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  

 

 

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

 

70

 

	
  Home Health Care / Home Infusion Therapy - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

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

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

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

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Hospice Services - IP - Prof - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Hospitalization Services - IP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Immunizations &  Inoculations
  (Medically Necessary] - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Injectables - Not Part of Outpatient Pharmacy Benefits - OP

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Laboratory/Pathology (Diagnostic Only) - OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Laboratory/Pathology (Diagnostic Only) - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Laboratory/Pathology - IP - 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 - IP - Fac - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Mental Health - IP - Fac - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Mental Health - IP - Prof - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Mental Health - IP - Prof - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Mental Health - OP - Fac - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Mental Health - OP - Fac - SH

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Mental Health - OP - Prof - CO

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Mental Health - 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

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Radiology (Diagnostic Only) -
  OP - Fac

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Radiology (Diagnostic Only) - OP - Prof

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Radiology - IP - 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

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  

 

71

 

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

 

	
   

  	
  PACIFICARE OF CALIFORNIA

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Jeffrey

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  VP Network Mgmt

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  7/29/99

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SIERRA MEDICAL GROUP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter G. Goll

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  9-16-99

  	
   

  

 

72

 

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
2

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                                 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.

 

1.2                                 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.

 

1.3                                 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.

 

1.4                                 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.

 

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

 

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

 

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

 

1.6.2                        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-

 

73

 

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 sixty-five percent (65%) of the Capitation Payment for
Commercial Plan Members, subject to the adjustments set forth in Article 5 of
the Base Agreement and Section 3.1 of Product Attachment A.  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.

 

3.2                                 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 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 twenty-eight percent (28%) of
In-Network Premium plus twenty-eight percent (28%) of Out-of-Network Premium.

 

(ii)                                  POS Plan Costs shall mean the following:

 

claims paid for In-Network
Hospital Services incurred during the current period, calculated at the actual
amount paid; plus,

 

74

 

claims paid for
Out-of-Network Services incurred during the current period, calculated at the
actual amount paid; plus,

 

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,

 

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

 

3.2.2                        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 and the Capitation Restoration Amount.

 

3.2.3                        Budget Surplus Reconciliation. 
Medical Group shall receive *** 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 one-half of the remaining Budget Surplus.

 

3.2.4                        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, *** 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 PacifiCare Commercial POS Plan; provided, however, that in
no event shall the amount of

 

75

 

any increase or decrease to
such Capitation Payments be greater than ten (10) percentage points in any
given year.

 

76

 

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

 

	
   

  	
  PACIFICARE OF CALIFORNIA

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Jeffrey

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  VP Network Mgmt

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  9/29/99

  	
   

  
	
   

  	
   

  
	
   

  	
  SIERRA MEDICAL GROUP

  
	
   

  	
  By:

  	
  /s/ Peter G. Goll

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  9-16-99

  	
   

  
							

 

77

 

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                                 HCFA is the Health Care Financing Administration, an administrative agency
of the United States Government, responsible for administering the Medicare
program.

 

1.2                                 HCFA Agreement is the Medicare-risk contract between
PacifiCare and HCFA.

 

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 HCFA Payment is the revenue received by PacifiCare each
month from HCFA, as determined by HCFA, 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 HCFA 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 HCFA Payment for Medical Group
Members enrolled in the Secure Horizons Health Plan, less payments for
broker and agent commissions/compensation, 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 HCFA Agreement and Federal
Medicare Law.  Medical Group shall comply with all
requirements in the HCFA 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 HCFA Agreement which are
applicable to Medical Group’s Participating Providers as a subcontractor of
PacifiCare are included in

 

78

 

Medical Group’s subcontracts
with its Participating Providers.  A
copy of the HCFA 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 HCFA
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 HCFA.

 

2.3                                 Confidentiality of Medical Records. 
Medical Group shall establish and maintain procedures and controls so
that no information contained in its records or obtained from HCFA 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.

 

2.4                                 Site Evaluations; Right to Inspect. 
Medical Group shall permit the United States Department of Health and
Human Services or its designated representatives, to conduct periodic site
evaluations of Medical Group’s facilities, offices, equipment, medical records
of Secure Horizons Members, and all phases of professional and ancillary
medical care provided to Secure Horizons Members by Medical Group and its
Participating Providers.  Such site
evaluation may include inspection and audit of books, documents, papers and
records relating to any aspect of Covered Services provided to Secure Horizons
Members and determinations of amounts payable under this Agreement, as required
by law.  The right of the United States
Department of Health and Human Services to inspect, evaluate and audit shall
extend through three (3) years from the date of the final settlement between
PacifiCare and an agency thereof. 
Medical Group and its Participating Providers shall comply with any
requirements or directives issued by Government Agencies as a result of such
site evaluation, inspection and/or audit.

 

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

 

79

 

2.7                                 Non-Discrimination. 
Medical Group understands that HCFA 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), or physical or mental handicap.  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 HCFA Agreement.  In
the event the HCFA Agreement is terminated or not renewed, the provisions of
this Agreement relating to the Secure Horizons Health Plan shall automatically
terminate unless otherwise agreed by HCFA 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, subject to the adjustments set forth in Article 5 of the Base
Agreement.  Beginning in January 2000,
Capitation Payments for Secure Horizons Members shall be ***.

 

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                                 Individual Stop-Loss Program.  The
ISL Deductible and ISL Premium for the Secure Horizons Health Plan initially
will be:

 

(i)                                     ISL Deductible - Not Applicable per Secure Horizons Member
per calendar year.

 

(ii)                                  ISL Premium - Not Applicable of Secure Horizons Revenue.

 

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

 

80

 

SHIP is designed to provide
an incentive for efficient and effective use of Hospital Services, and shall be
calculated utilizing the terms defined below. 
All calculations for the SHIP shall be based upon Secure Horizons
Members.

 

3.3.1                        Reinsurance Program.  The
Reinsurance Deductible for Secure Horizons Members initially will be:

 

(i)                                       Reinsurance Deductible - [samount]
($[samt]) per Secure Horizons Member per calendar year.

 

(ii)                                  Reinsurance Premium - [spercent] percent ([spct]%) of Secure
Horizons Revenue.

 

The Reinsurance Coinsurance
shall be [spercent2] percent ([spct2]%) in excess of the Reinsurance
Deductible.

 

3.3.2                        SHIP Budget.  The SHIP Budget for Secure
Horizons Members shall be [spercent] thirty-eight and twenty-four tenths
percent (38.24%) of the Secure Horizons Revenue per Secure Horizons Member per
Month, subject to the adjustments set forth in Article 5 of the Base Agreement
and further specified below.

 

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, excluding Secure Horizons POS Members, by
Participating Providers, valued at the actual costs incurred by PacifiCare; plus,

 

(ii)                                  other Hospital Services rendered to Secure
Horizons Members, excluding Secure Horizons POS 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; plus,

 

(iv)                              the amount of the Reinsurance Premium; minus,

 

(v)                                 *** of any and all costs for Hospital Services
rendered to Secure Horizons Members, excluding Secure Horizons POS Members,
valued as set forth in subsections (i) through (iii) above, in excess of the
Reinsurance Deductible; minus,

 

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

 

81

 

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

 

	
  For Bed Days PTMPY

  	
   

  	
  IPA %
  Share of Savings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Over 180

  	
   

  	
  ***

  	
   

  
	
  179 - 160

  	
   

  	
  ***

  	
   

  
	
  159 - 140

  	
   

  	
  ***

  	
   

  
	
  under 140

  	
   

  	
  ***

  	
   

  

 

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, with a
limit of ten percent (10%) of the SHIP Budget. 
***  to PacifiCare

 

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 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:

 

Acute Hospital days greater
than one hundred fifty (150) per year

Dental Benefits

Immunosuppressive Drugs

Outpatient Pharmacy Benefits

Respite Care

 

PacifiCare shall retain
seven percent (7.0%) of the Monthly HCFA Payment (the “MSBP Budget”) 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.

 

82

 

3.4.2                        MSBP Expense shall equal the actual or valued expenses incurred for the provision of
MSBP Benefits during the applicable period, less amounts received from pharmacy
rebates (in the case of Outpatient Pharmacy Benefits) and third parties as the
result of coordination of benefits and third party recoveries.

 

3.4.3                        MSBP Surplus.  In the event the MSBP Expense
is less than the MSBP Budget, fifty percent (50%) of the surplus shall be
allocated to the Medical Group, but not more than ten percent (10%) of the MSBP
Budget for the calendar year.

 

3.4.4                        MSBP Deficit.  In the event the MSBP Expense
is greater than the MSBP Budget, fifty percent (50%) of the deficit shall be
allocated to the Medical Group, but not more than ten percent (10%) of the MSBP
Budget for the calendar year.

 

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.

 

ARTICLE
4

DIVISION
OF FINANCIAL RESPONSIBILITY

(Secure Horizons)

 

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 Secure Horizons Member’s Subscriber
Agreement should be consulted for an accurate and complete description of
Covered Services.

 

The Division of Financial
Responsibility for the PacifiCare Commercial Health Plan set forth in Product
Attachment A shall also apply to the Secure Horizons Health Plan.

 

83

 

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

 

	
   

  	
  PACIFICARE
  OF CALIFORNIA

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian
  Jeffrey

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  VP Network
  Mgmt

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date: 

  	
  9/29/99

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STERRA
  MEDICAL GROUP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter G.
  Goll

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: 

  	
  Senior Vice
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date: 

  	
  9-16-99

  	
   

  
							

 

84Exhibit 10.142

 

 

2001 AMENDMENT

TO THE PACIFICARE OF CALIFORNIA

MEDICAL GROUP/IPA SERVICE AGREEMENT

(PROFESSIONAL CAPITATION)

 

This 2001 Amendment to the
Professional Capitation Medical Group/IP A Services Agreement (the “Amendment”)
is entered into effective as of January 1, 2001 by and between PACIFICARE
OF CALIFORNIA, a California corporation (“PacifiCare”), and Sierra Medical
Group (“Medical Group”), with respect to the following facts:

 

The parties have previously
entered into that certain Professional Capitation Medical Group/IPA Services
Agreement dated July 1, 1999 (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:

 

Article 5
Section 5.4 of the Base Agreement is hereby deleted and replaced with the
following:

 

5.4         Incentive Programs. 
Incentive programs are designed to ensure that PacifiCare and Medical
Group work collaboratively to deliver Covered Services in an effective and
efficient manner by ensuring appropriate utilization of Covered Services.
Incentive programs for each Managed Care Plan are set forth in the applicable
Product Attachment.

 

5.4.1                        Incentive Program Withholds. 
PacifiCare shall establish a single withhold from Medical Group’s
monthly Capitation Payment for purposes of offsetting potential deficits for
the combined incentive programs. The monthly incentive withhold for Commercial
Hospital Incentive Program shall initially be *** of monthly capitation for
each Commercial Member, such withhold shall not exceed *** PMPM of Medical
Group’s monthly Capitation Payments for Commercial Members.

 

For Secure Horizons Members
the monthly incentive withhold for Secure Horizons Incentive Program shall
initially be *** PMPM of the monthly capitation for each Secure Horizons
Member, however such withhold shall not exceed *** PMPM of Medical Group’s
monthly Capitation Payments for Secure Members. PacifiCare will examine the
Secure Horizons Incentive pool for 1st and 2nd Quarters of 2001 by July 15, 2001 and, if necessary, will make a
one time adjustment effective July 1, 2001 to increase the amount of the
withhold based on the pool status at that time. But at no time is Secure
Horizons Incentive Program withhold to be more than *** PMPM.

 

 

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

 

1

 

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. The incentive program withhold
described above shall be refunded to the Medical Group at the time of the
incentive program settlements, except that Medical Group’s share of any
incentive program deficits shall be deducted from such refund. Payments under the
combined incentive programs will be due from the owing party within one hundred
and twenty (120) days following the end of the six (6) 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 *** of the calculated amount due to account for
incurred but not received claims. To the extent a Medical Group deficit has
been carried forward from a prior settlement period, this 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.

 

The following additional
settlement will occur for establishing or changing the Secure Horizons Hospital
Incentive withhold amounts:

 

PacifiCare has the sole
right to adjust withholds for the purposes of adjusting the Commercial and
Secure Horizons Incentive pools. The following additional settlement will occur
as follows:

 

PacifiCare
will examine the Secure Horizons Hospital Incentive Pool for lst and
2nd Quarters 2001 by July 15, 2001. For
January through April 2001 dates of service PacifiCare will examine
all paid and pended claims, apply a completion factor, and add ten percent
(10%) to the total. For expenses related to May and June 2001 dates of
service, PacifiCare will establish the expenses based on the previous 8 months
experience (September 2000-April 2001) and apply that experience to
May and June 2001. Medical Group shall have thirty (30) days from the date
of written notice to audit and submit any revisions to the additional incentive

 

2

 

program
settlement to PacifiCare. PacifiCare must approve any submitted revisions 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 for this
additional settlement unless Medical Group and PacifiCare agree to extend the
calculation process.  Based on the
settlement status, the withhold of the monthly capitation for Secure Horizons
Members may be increased up to the limit of $*** PMPM. This adjustment to the
withhold would be effective July 1, 2001 and would remain in place through
the end of the calendar year.

 

5.4.3                        Incentive Program Compliance with State and
Federal Law.  PacifiCare and Medical Group acknowledge and
agree that the payments which may be made directly or indirectly under the
incentive programs described in this Agreement are not made as an inducement to
reduce or limit Covered Services to any specific Member.  Medical Group acknowledges and agrees that
any payments which may be made directly or indirectly under physician incentive
programs Medical Group may utilize with respect to its Participating Providers shall
not be made as an inducement to reduce or limit Covered Services to any
specific Member. Medical Group further acknowledges and agrees that the
incentive programs described in this Agreement shall be subject to modification
by PacifiCare during the term of this Agreement in order to comply with changes
in State and Federal Law, and Medical Group further agrees to modify any
physician incentive programs utilized with respect to its Participating
Providers to comply with such changes.

 

5.4.4                        Limitation on Medical Group’s Risk.  In
the event Medical Group incurs an obligation under the overall incentive
program settlement described above, Medical Group shall not be responsible for
reimbursing PacifiCare nor shall PacifiCare offset the Medical Group’s obligation
against Medical Group’s Capitation Payments due under this Agreement.
PacifiCare shall carry forward any Medical Group obligations as the result of
an incentive program obligation and the amount carried forward shall be offset
against amounts otherwise due to Medical Group under future settlements for the
combined incentive programs. 
Notwithstanding the foregoing, Medical Group shall be responsible for
reimbursing PacifiCare for deficits in pharmacy incentive programs to the
extent there are insufficient surpluses due Medical Group from other incentive
programs to offset pharmacy deficits; such reimbursement shall be made within
thirty (30) days following completion of the Final Calculation for all
incentive program settlements described above.

 

PacifiCare will have the
right to establish pharmacy deficit withholds as necessary to allow collection
of any pharmacy deficits up to the downside limit.

 

3

 

Section 5.12
or the Base Agreement is hereby deleted and replaced by the following:

 

5 12                           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. 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
due to overpayments or payments made in error by PacifiCare; (ii) amounts owed
by Medical Group as a result of claims for Medical Group Services that
PacifiCare may pay on behalf of Medical Group; (iii) amounts owed by Medical
Group for Covered Services provided outside the Medical Group Service Area;
(iv) amounts owed by Medical Group as a result of the outcome of the Member
appeals and grievance procedure; (v) amounts owed by Medical Group in
connection with any other prior or existing agreement between Medical Group and
PacifiCare or any PacifiCare Affiliate; (vi)
PacifiCare has the right to collect Pharmacy deficits in the form of withholds
if PacifiCare is unable to collect from Medical Group up to the maximum limits
as set forth in this Agreement. As a material condition to PacifiCare’s
obligations under this Agreement, Medical Group agrees 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.

 

Product Attachment A PacifiCare Commercial Health Plan,
Article 3 –
Section 3.1, 3.3.2 , 3.3.4, and 3.4.5 are hereby deleted and replaced by
the following:

 

3.1                                 Capitation Payments for Commercial Plan Members.                                      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. The Base Capitation Rate shall be ***
dollars and twelve cents *** per Commercial Plan Member per month for Antelope
Valley Medical Group Members and *** dollars and seventy-four cents ($***) per
Commercial Plan Member per month for Sierra Medical Group Members. The Base
Capitation Rate shall be adjusted for each Medical Group Member by multiplying
the adjustment factor for the applicable Member by the Base Capitation Rate.
Age/gender adjustment factors are actuarially determined and are listed below.
Benefit adjustment factors are actuarially determined and take into
consideration various co-pay and coinsurance levels. PacifiCare may modify the
adjustment factors based on actuarially determined changes. Based on Medical
Group Members for the month of March 2001 (without taking into account
retroactive adjustments), the Medical Group’s average capitation rate would be
*** per Member per month. 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

 

4

 

 

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.

 

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

  	
   

  	
  03554

  
	
  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
3.2                        CHIP Budget.  The CHIP Budget for
Commercial Plan Members shall be *** PMPM, excluding Commercial POS Plan
Members, subject to the adjustments set forth in Article 5 of the Base
Agreement and further specified below.

 

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

 

3.4.5                        PIP Deficit.  In the event that the PIP
Expense is greater than the PIP Budget, *** of the deficit shall be allocated
to Medical Group with a limit of *** PMPM.

 

5

 

Product
Attachment  C Secure Horizons
Health Plan, Article 3 – Section 3.1, 3.3.2, 3.3.4; and 3.4 are
hereby deleted and replaced by the following:

 

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, subject to the adjustments set forth in Article 5 of the Base
Agreement.

 

3.3.2                        SHIP Budget.  The SHIP Budget for Secure
Horizons Members shall be *** percent *** of the Secure Horizons Revenue per
Secure Horizons member per month, subject to the adjustments set forth in
Article 5 of the Base Agreement and further specified below.

 

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

 

3.4                                 Market-Specific Benefit Program. 
PacifiCare may establish, at its sole discretion, an annual
Market-Specific Benefit Program (the “MSBP”). The MSBP is designed to 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 ***
of the Monthly HCFA Payment (the “MSBP Budget”) per Secure Horizons Plan Member
per month. 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, the surplus shall be
allocated as follows:

 

6

 

*** to Medical Group

*** to PacifiCare

 

3.4.4                        MSBP Deficit.  In
the event the MSBP Expense is greater than the MSBP Budget, *** of the deficit shall be allocated to the
Medical Group, but not more than *** PMPM of the MSBP Budget for the calendar
year.

 

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.

 

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

 

	
  PacifiCare
  of California

  	
  Sierra
  Medical Group

  
	
  A
  California Corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
  /s/ Brian Jeffrey

  	
   

  	
  Signature:

  	
  /s/ Peter G. Goll

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  5/21/01

  	
   

  	
  Date:

  	
  5-15-01

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name:

  	
   Brian Jeffrey

  	
   

  	
  Print Name:

  	
  Peter G. Goll

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Title:

  	
  Vice President

  	
   

  	
  Print Title:

  	
  Senior Vice President

  	
   

  
											

 

7

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