Document:

Exhibit 10.112

 

 

Fully Executed

 

AMENDMENT TO

Professional Capitation Medical Group/IPA Services Agreement

 

This Amendment
to Professional Capitation Medical Group/IPA Services Agreement (the
“Amendment”) is entered into effective as of January 1, 2003 by and between
PacifiCare of California, a California corporation (“PacifiCare”), and
Professional Care IPA Medical Group (“Medical Group”), with respect to the
following facts:

 

RECITALS

 

A.    The parties have previously
entered into that certain Medical Group/IPA Services Agreement dated June 1,
1999 (the “Agreement”) and was subsequently amended by documents dated January
1, 2002 and January 1, 2003.

 

B.    The parties desire to enter
into this Amendment for the purpose of amending the Agreement for the period commencing
January 1, 2003.

 

NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree that the Agreement is hereby modified as specified below:

 

1.                                       The
following Sections of the Agreement are revised or added to the Agreement as
follows:

 

ARTICLE 1

DEFINITIONS

 

1.36                           DMHC is the California Department of Managed Health Care.

 

1.37                           Standard Service Capitation Amount. The Standard Service Capitation amount is
the monthly per Commercial Plan Member per Month Capitation Payment based on
the age/gender/benefit factors, prior to adjustments. The Standard Service
Capitation Amount is found on the monthly capitation reports that accompany the
monthly Capitation Payment.

 

2.                                       The
following Sections of the Agreement are revised or added to the Agreement as
follows:

 

ARTICLE 2

DUTIES OF MEDICAL GROUP

 

	
  2.8.2   Letter of Credit

  	
  (c)  Triggering Event Conditions. Immediately
  upon the occurrence of a Triggering Event (as defined in this subsection),
  Medical Group shall obtain the Letter of Credit in the amount of the then
  applicable Letter of Credit Funding Amount. A Triggering Event, for purposes
  of this Section 2.8.2, shall mean any of the following: (i) Medical Group’s
  failure to maintain a current ratio (current assets divided by current
  liabilities) of 1.0 to 1.0, as determined by PacifiCare upon review of
  Medical Group’s financial statements, or (ii) Medical Group’s failure to
  maintain positive Tangible Net Equity, calculated in a manner consistent with
  the California Health and Safety Code.

  

 

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

 

 

1

 

2.14                           Provide Referral Services. With the prior approval of PacifiCare
(except in the case of Emergency Services), Medical Group shall arrange any
necessary Referral Services to PacifiCare’s selection of Participating
Providers for Medical Group Members, which shall be shown on the PacifiCare’s
list of providers of Referral Services sent to the Medical Group on a monthly
basis. Use of PacifiCare’s list of providers of Referral Services does not
apply to Medically Necessary Services arranged by Medical Group that are not
available through a provider on PacifiCare’s list of providers of Referral
Services. Furthermore, PacifiCare may determine that such failure constitutes
material breach in accordance with Section 6.2.3 of this Agreement.

 

3.               The following Sections of the Agreement
are added to the Agreement as follows:

 

ARTICLE 5

COMPENSATION

 

5.15                           PacifiCare Quality Incentive Program. PacifiCare’s Quality Incentive Program
(“QIP”) is a bonus program, which recognizes PacifiCare Participating Providers
who have statistically demonstrated sound clinical care practice,
quality-focused provision, or arrangement of Covered Services on behalf of
their assigned PacifiCare Members and demonstrated superior customer
satisfaction. Exhibit 6 of this Agreement describes the QIP. The terms
of Exhibit 6 reflect PacifiCare’s participation in the “pay for
performance” initiative of the Integrated Healthcare Association.

 

5.16                           PacifiCare Women’s Health Bonus Program. PacifiCare’s Women’s Health Bonus Program
(WHBP) is designed to compensate Medical Group and its Participating Providers
for efforts taken to improve the accessibility of women’s health services and
the stability of PacifiCare’s women’s health network. Exhibit 7 of this
Agreement describes the WHBP.

 

4.                                       Exhibit 2 DELEGATED ACTIVITIES is
deleted in its entirety. A new Exhibit 2 DELEGATED ACTIVITIES is
attached hereto and incorporated into the Agreement.

 

5.                                       Exhibit
3, PRODUCT ATTACHMENT A, PacifiCare Commercial Health Plan, Section 3.1 Age/Gender/Benefit
Adjusted Commercial Capitation shall be amended by adding the following
language to reflect the rate effective January 1, 2004:

 

Effective January 1, 2004, there will be a *** increase to the 2003
Base Capitation Rate of *** resulting in a 2004 Base Capitation Rate of
***.  The parties agree that the Base
Capitation Rate of $48.86 would have yielded a monthly per Member per month
Capitation Payment of *** based on the demographics of the Medical Group’s
assigned Medical Group Members for the month of May 2003.

 

2

 

6.                                       Exhibit
3, PRODUCT ATTACHMENT A, PacifiCare Commercial Health Plan, Section 3.1.2 Adjustment
for PacifiCare-sponsored NPTN carveout program shall be deleted in its
entirety.

 

7.                                       Exhibit
3, PRODUCT ATTACHMENT B, PacifiCare Commercial Point-of-Service Plan, Section
3.1 Capitation Payments for Commercial POS Plan Members shall be amended
by adding the following language to reflect the rate effective January 1, 2004:

 

Effective January 1, 2004, for Commercial POS Plan Members, PacifiCare
will pay Medical Group *** of the monthly Standard Service Capitation Amount
for Commercial Plan Members.

 

8.                                       A
new Exhibit 6 QUALITY INCENTIVE PROGRAM is attached hereto and
incorporated into the Agreement.

 

9.                                       A
new Exhibit 7 WOMEN’S HEALTH BONUS PROGRAM is attached hereto and
incorporated into the Agreement.

 

10.                                 Use
of Defined Terms. Terms utilized in this Amendment shall have the same
meaning set forth in the definitions to the Agreement.

 

11.                                 Agreement
Remains in Full Force and Effect. Except as specifically amended by this
Amendment, the Agreement shall continue in full force and effect.

 

3

 

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

 

	
   

  	
  PACIFICARE
  OF CALIFORNIA

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Greg
  Wright

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  VICE
  PRESIDENT, NETWORK MGMT

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  6/5/03

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROFESSIONAL
  CARE IPA MEDICAL GROUP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Rick
  Shinto

  	
   

  
	
   

  	
   

  
	
   

  	
  Title: 

  	
   MEDICAL DIRECTOR

  	
   

  
	
   

  	
   

  
	
   

  	
  Date: 

  	
   JUNE 3, 2003

  	
   

  
										

 

4

 

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) medical 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) medical 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 to:
(i) claims processing and payment, (ii) credentialing and recredentialing,
(iii) medical records, (iv) quality management and improvement and (v) medical
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, collect data for PacifiCare’s quality improvement
activities, and carry out corrective actions as 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. 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 record 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.

 

Exhibit 2 may be amended
pursuant to Section 7.8 Amendments during the term of this Agreement to
reflect changes in delegation standards; delegation status; performance
measures; reporting requirements; and other provisions of Exhibit 2.

 

5

 

MEDICAL MANAGEMENT DELEGATION GRID

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacificCare Oversight

  
	
  UM Program Structure and Process

  	
   

  	
  ý Delegated

  o Not delegated

  	
   

  	
  Medical Group (MG) will meet all regulatory, NCQA, and PacifiCare
  Standards.

  Development and documentation of program structure and accountability,
  including:

  1.                    Goals &
  Objectives, including behavioral health care aspects

  2.                    Cmte
  responsibilities;

  a)         Membership

  b)        Minutes

  c)         Dissemination of information

  d)        Education of staff & providers

  3.                    UM Director
  & senior physician’s and designated behavioral health care practitioner
  roles

  4.                    UM Dept interfaces
  with other depts.

  5.                    Program
  is evaluated & approved annually

   

  For each UM function delegated there must be documentation of:

  1.                    Staff &
  Physician responsibilities related to each UM function

  2.                    Appropriate
  and Adequate professional and non-professional staffing mix and
  decision-making responsibilities

  3.                    Regular and
  after-hours UM process and communication services defined

  4.                    Interface
  with PacifiCare appropriately

  5.                    Data
  elements as required

  6.                    Reporting
  capability

  
Implementation of corrective action
  plan for elements of non-compliance.

  	
   

  	
  • Annual submission of UM Program
  and Work Plan and Evaluation.

  • Submission of corrective action
  plans as needed.

  	
   

  	
  • Initial onsite assessment using
  approved oversight document

  • Annual oversight assessment

  • Identification of corrective
  action plans for elements of non-compliance.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Communication Services

  	
   

  	
  ý Delegated

  o Not delegated

  	
   

  	
  Medical Group (MG) provides communication services to practitioners
  and members regarding UM issues relating to inbound calls during and after
  business hours and outbound calls during business hours, in compliance with
  NCQA and PacifiCare standards.

  	
   

  	
  Reviewed during annual assessment.

  	
   

  	
  • Pre-delegation onsite
  assessment to determine ability to perform function

  • Annual onsite assessment to
  determine ability to perform function

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pre-Service Authorization Professional

   

  	
   

  	
  ý Delegated

  o Not delegated 

   

  	
   

  	
  For pre-service authorization the Medical Group (MG) must:

  •  Comply with PacifiCare’s Turn
  Around Times and notification requirements, consistent gathering of
  appropriate information, and assisting in transition of care when benefits
  end

   

  	
   

  	
  • Weekly submission of
  authorization/ denial logs

  • Monthly submission of encounter
  data

   

  	
   

  	
  • Pre-delegation onsite
  assessment to determine ability to perform function

  • Annual onsite assessment to
  determine ability to perform function

  
	
  Institutional

  	
   

  	
  o Delegated

  ý Not delegated

  	
   

  	
  •  Follow nationally recognized medical necessity criteria or criteria
  based on sound clinical evidence

  •  Develop and document program
  to perform pre-service authorization function of outpatient care meeting all
  regulatory and PacifiCare standards

  	
   

  	
  • Participation in census
  verification process

  	
   

  	
   

  

 

6

 

	
  Function

  	
   

  	
  Delegation 

  Status

  	
   

  	
  Medical Group Responsibility /

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare Oversight

  
	
  Concurrent Review

  	
   

  	
  o Delegated

  ý Not delegated

  	
   

  	
  For concurrent review MG must:

  • Comply with PacifiCare’s Turn
  Around Times and notification requirements.

  • Follow nationally recognized medical necessity
  criteria or criteria based on sound clinical evidence

  •   Develop and document programs
  to perform concurrent review of acute and Skilled Nursing Facility inpatients
  meeting all regulatory and PacifiCare standards, including cooperative
  process with facilities for on-site review as appropriate.

  	
   

  	
  • Daily submission of patient
  census by admission and discharge and Level of Care

  • Monthly submission of Bed Days
  per thousand members per year

  	
   

  	
  • Pre-delegation onsite
  assessment to determine ability to perform function

  • Annual onsite assessment to
  determine ability to perform function

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Discharge Planning

  	
   

  	
  o Delegated

  ý Not delegated

  	
   

  	
  Develop and document program to perform discharge planning functions
  for Acute and Skilled Nursing Facility meeting all regulatory and PacifiCare
  standards

  
Issue timely and appropriate acute
  facility notice of non-coverage.

  
Issue timely and appropriate Skilled
  Nursing Facility Notice of Non-coverage.

  	
   

  	
  Reviewed during annual assessment.

  	
   

  	
  • Pre-delegation onsite
  assessment to determine ability to perform function

  • Annual onsite assessment to
  determine ability to perform function

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Out Of Area  (OOA)

  	
   

  	
  o Delegated

  ý Not delegated

  	
   

  	
  If not delegated, report any OOA notifications received by group.

  
If delegated, develop and document
  program to perform OOA concurrent review meeting all regulatory and
  PacifiCare standards.

  	
   

  	
  If delegated, include OOA in weekly authorization/denial log
  submission

  	
   

  	
  • Pre-delegation onsite
  assessment to determine ability to perform function

  • Annual onsite assessment to
  determine ability to perform function

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Case Management

  	
   

  	
  ý Delegated

  o Not delegated

  	
   

  	
  Develop and document program to perform Case Management function
  meeting all regulatory and PacifiCare standards

  
If NOT delegated, responsible to
  share coordination of care with PacifiCare Case Managers

  	
   

  	
  Monthly submission of Case Management Log

  • ESRD

  •   Transplants

  •   Catastrophic

  	
   

  	
  • Pre-delegation onsite
  assessment to determine ability to perform function

  • Annual onsite assessment to
  determine ability to perform function

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Transplants

  	
   

  	
  ý Not delegated

  	
   

  	
  Develop and document Policies and Procedures to support notification
  to PacifiCare of potential transplant candidates.

  
Responsible to provide PacifiCare
  with all necessary information to make medical determination and manage the
  case.

  	
   

  	
  Report cases immediately.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New Technology

  	
   

  	
  ý Not delegated

  	
   

  	
  Develop and document Policies and Procedures to support notification
  to PacifiCare of requests for new technology and coordination of making
  determinations.

  	
   

  	
  Ad Hoc

  	
   

  	
  N/A

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Retrospective Review

  

  Professional:

  	
   

  	
  

  

  ý
  Delegated

  o Not delegated

  	
   

  	
  For Retroactive-review of services MG must:

  • Comply with PacifiCare’s Turn
  Around Times and notification requirements.

  • Follow nationally accepted
  medical necessity criteria or criteria based on sound clinical evidence

  • Develop and document program to
  perform retrospective review function.

  	
   

  	
  Weekly submission of authorization/denial logs

  	
   

  	
  • Pre-delegation onsite
  assessment to determine ability to perform function.

  • Annual onsite assessment to
  determine ability to perform function

  

 

7

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare Oversight

  
	
  Institutional

  	
   

  	
  o Delegated ý
  Not delegated

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Denials

  

  Professional

  

  

  

  

  
Institutional

  	
   

  	
  

  

  ý
  Delegated o Not delegated

  

  

  

  

  o
  Delegated

  ý Not delegated

  	
   

  	
  For Denials of services MG must:

  • Comply with PacifiCare’s Turn
  Around Times and notification requirements.

  • Follow nationally recognized
  medical necessity criteria or criteria based on sound clinical evidence

  •   Develop and document of
  program to perform denial function, meeting all regulatory and PacifiCare
  standards.

  	
   

  	
  Weekly submission of denial logs.

  

  	
   

  	
  • Pre-delegation onsite
  assessment to determine ability to perform function.

  •   Annual onsite assessment to
  determine ability to perform function.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Benefit Interpretations

  	
   

  	
  ý Not delegated

  	
   

  	
  For Benefit Interpretations MG must:

  •             Comply with
  PacifiCare’s Turn Around Times and notification requirements.

  •   Request PacifiCare
  interpretation when unable to make clear determination based on resources
  provided by PacifiCare (e.g., Benefits Manual)

  •   Request PacifiCare
  determination regarding medical necessity when requested service appears to
  be of an experimental or investigational nature for a member who has a
  “life-threatening” or “seriously debilitating” condition as defined in the
  California Health &Safety Code (see note below)”.

  	
   

  	
  N/A

  	
   

  	
  •   Pre-delegation onsite
  assessment to determine ability to perform function.

  •   Annual onsite assessment to
  determine ability to perform function.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Appeals

  	
   

  	
  ý Not delegated

  	
   

  	
  •             Develop and
  document program to support cooperation with PacifiCare in handling appeals.

  •             Notify PacifiCare
  of all member and provider appeals coming through MG.

  	
   

  	
  PacifiCare will provide the MG a quarterly report to show number of
  appeals and overturn rate for specific MG.

  	
   

  	
  • Pre-delegation onsite
  assessment to determine ability to perform function.

  • Annual onsite assessment to
  determine ability to perform function.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Satisfaction with UM Process

  	
   

  	
  ý Delegated o
  Not delegated

  	
   

  	
  MG will meet all regulatory, NCQA, and PacifiCare Standards.

  

  MG will annually gather and evaluate
  information about member and practitioner satisfaction with the UM process
  and address opportunities for Improvement.

  	
   

  	
   

  	
   

  	
  •             Pre-delegation
  onsite assessment to determine ability to perform function.

  •             Annual onsite
  assessment to determine ability to perform function.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Emergency Services

  	
   

  	
  ý Delegated o
  Not delegated

  	
   

  	
  MG will meet all regulatory, NCQA, and PacifiCare Standards

  

  Emergency policies and procedures
  require:

  •             Coverage
  of emergency services to screen and stabilize the member without prior
  approval where a prudent layperson, acting reasonably, would have believed
  that

  	
   

  	
   

  	
   

  	
  •             Pre-delegation
  onsite assessment to determine ability to perform function.

  •   Annual onsite assessment to
  determine ability to perform function.

  

 

8

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare Oversight

  
	
   

  	
   

  	
   

  	
   

  	
  an emergency condition existed

  •   Coverage of emergency services if an authorized
  representative, acting for PBHC, authorized the provision of emergency
  services.

  •   A behavioral healthcare practitioner or physician
  reviews presenting symptoms as well as the discharge diagnosis for potential
  denial of emergency services

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ensuring Appropriate Utilization

  	
   

  	
  ý Delegated o
  Not delegated

  	
   

  	
  MG will meet all regulatory, NCQA, and PacifiCare Standards.

  

  MG at least annually monitors and
  analyzes relevant data and takes action to correct any patterns of potential
  or actual inappropriate under- or over-utilization, using quantitative and
  qualitative data analysis.

   

  	
   

  	
   

  	
   

  	
  • Pre-delegation onsite
  assessment to determine ability to perform function.

  

  • Annual onsite assessment to
  determine ability to perform function.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subdelegation of Utilization Management

  	
   

  	
  ý Delegated o
  Not delegated

  	
   

  	
  If MG subdelegates UM, MG will:

   

  •Develop
  detailed documentation of mutually agreed upon delegation agreement
  identifying:

  • Listing of responsibilities of
  delegate (MG) & sub-delegate,

  • Specific delegated activities;

  • Process for evaluating
  sub-delegate’s performance, and

  • Remedies if sub-delegate does
  not perform

  • Conduct pre-delegation
  evaluation

  • Conduct annual evaluation, including
  file review, according to NCQA’s methodology

  •   If sub-del agreement includes the use of
  Protected Health Information (PHI), the sub-del document includes:

  • List of allowed uses of PHI 

  • Description of sub-delegate
  safeguards to protect the information from inappropriate use or further
  disclosure

  • Stipulation that the delegate
  will ensure that subdelegates have similar safeguards

  • Stipulation that the
  subdelegate will provide individuals with access to their PHI

  • Stipulation that the subdelegate
  will inform the organization if inappropriate uses of the information occur

  • Stipulation that the
  subdelegate will ensure PHI is returned, destroyed

  	
   

  	
  Submit copies of subdelegation agreements to PacifiCare prior to
  subdelegation and on an annual basis

  	
   

  	
  • Annual
  assessment of sub-delegation process, including agreements, policies and
  procedures, and ongoing evaluation of performance, according to NCQA
  standards & methodology

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

  

 

9

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare Oversight

  
	
   

  	
   

  	
   

  	
   

  	
  or protected if the delegation agreement
  ends

  	
   

  	
   

  	
   

  	
   

  

 

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

 

The Medical Group agrees to be accountable for all responsibilities
delegated by PacifiCare and will not further delegate any such responsibilities
without thirty (30) days prior written notice to PacifiCare.

 

PacifiCare will perform audits annually or with prior written notice as
needed to evaluate the group’s delegated status.  In the event there are deficiencies 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 thirty (30) days of receipt of
notification, PacifiCare may revoke the group’s delegated status in accordance
with the terms of the Agreement in Section 4.4.

 

* California Health and Safety Code Section 1370.4(a)(1)(B)(i) and
(ii) and Section 1370.4(a)(1)(C) defines the following terms:
“Life-threatening” means either or both of the following: (i) Diseases or
conditions where the likelihood of death is high unless the course of the
disease is interrupted.  (ii) Diseases
or conditions with potentially fatal outcomes, where the end point of clinical
intervention is survival.  “Seriously
debilitating,” means diseases or conditions that cause major irreversible
morbidity.

 

10

 

CREDENTIALING DELEGATION GRID

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
  Credentialing Program description and/or Policies and Procedures
  (P&Ps)

  	
   

  	
  ý Delegated o
  Not delegated

  	
   

  	
  Full Compliance with NCQA Standards:

  •             Define the scope of
  practitioner network to be cred/recred, i.e. MD, DO, DPM, DDS, DC, and
  behavioral health and other licensed independent practitioners.

  •             Define criteria and
  verification sources used to meet criteria

  •   Describe the process to
  delegate credentialing/recredentialing

  •    Describe process used to ensure that
  credentialing and recredentialing are conducted in a non-discriminatory
  manner

  •   Ensure confidentiality.

  •   Describe decision making
  process.

  •   Specify practitioner rights,
  notification process and time frames.

  	
   

  	
  Submit Credentialing Program annually

  
Revised credentialing policies and
  procedures submitted at least annually.

  	
   

  	
  •             Initial onsite
  assessment

  •   Annual oversight Assessment

  •   Evaluate and approve

  Written

  Credentialing

  Program

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credentialing Committee

  	
   

  	
  ý Delegated 

  

  o Not delegated

  	
   

  	
  Full Compliance with NCQA Standards

   

  •             The Medical Group
  (MG) designates a credentialing committee, including a range of participating
  practitioners of different specialties, that makes recommendations regarding
  credentialing decisions using a peer review process.

   

  •   The MG documents committee’s
  opportunity to review credentials of all practitioners and advice in all
  credentialing/recredentialing decisions.

  	
   

  	
  Annual credentialing program to include committee structure.

  	
   

  	
  •   Initial onsite assessment

  •   Annual oversight assessment

  •   Annual Review of Committee
  minutes

  •   Annual review of membership

  •   Frequency of meetings

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Primary source verification of credentialing information

  	
   

  	
  ý Delegated 

  

  o Not delegated

  	
   

  	
  Full compliance with NCQA Standards regarding verification of
  information within 180 days prior to Committee approval date.  Meet 100% of NCQA & regulatory body
  standards related to primary source verification of the following:

  •      License

  •      Education & Training

  •      Board certification

  •      Professional liability
  claims for past 5 years

   

  Meet 100% of NCQA & regulatory body standards related to data
  collection of the following:

  DEA/CDS

  •      Work History

  •      Hospital Admitting
  privileges, if applicable

  	
   

  	
  Submit current list of practitioner credentialed and date approved with
  quarterly report

  	
   

  	
  •   Initial onsite assessment

  •   Annual
  oversight assessment

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

  •   Annual audit conducted of provider’s practitioners’ credentialing files according to NCQA methodology.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Application/Attestation

  	
   

  	
  ý Delegated 

  

  o Not delegated

  	
   

  	
  Full compliance with NCQA Standards.

   

  The MG application must include a statement regarding

  •      Reasons for any inability
  to perform.

  •      Lack of present illegal
  drug use.

  •      History of loss of sense
  or

  	
   

  	
  Immediate submission of any changes to application.

  	
   

  	
  •   Initial onsite assessment.

  •   Annual oversight assessment.

  •   Annual audit conducted of
  provider’s

  

 

11

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
   

  	
   

  	
   

  	
   

  	
  felony conviction.

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

  •   Current malpractice insurance
  coverage, including dates & coverage amount

  •   Attestation by applicant of
  the correctness and completeness of the application

  •             Signed within 180
  days prior to Committee approval date.

  	
   

  	
   

  	
   

  	
  practitioners’ credentialing files according to NCQA methodology.

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Initial Sanction Information

  	
   

  	
  ý Delegated 

  

  o Not delegated

  	
   

  	
  Full compliance with NCQA Standards regarding verification of
  information within 180 days prior to Committee Approval date.

  •      Sanction or Limitations
  information on licensure, as appropriate, must cover the most recent 5 year
  period available through the data source:

  •   MD, DOs: NPDB, State Board of Medical Examiners, or
  Federation of State Medical Boards

  •   DCs: State Board of
  Chiropractic Examiners or the Federation of Chiropractic Licensing Boards

  •   DDSs: NPDB or State Board of
  Dental Examiners

  •   DPMs: State Board of
  Podiatric Examiners of Federation of Podiatric Medical Boards

  •   Nonphysician behavioral
  health & other independently licensed practitioners: Appropriate state
  agency or State Board of Licensure of Certification

   

  •   For all practitioners (except
  DDS): review of Medicare/Medicaid sanctions, must cover the most recent
  3-year period available through the data source:

  •   NPDB

  •   FSMB

  •   Cumulative Sanctions Report

  •   Medicare and Medicaid
  Sanctions and Reinstatement Report

  •   Federal Employees Health
  Benefits Program department record

  •   State Medicaid agency or
  intermediary and the Medicare intermediary

  	
   

  	
  None

  	
   

  	
  •             Initial onsite
  assessment

  •   Annual oversight assessment

  •   Annual audit conducted of
  provider’s practitioners credentialing files according to NCQA methodology.

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Initial office site visit and medical record keeping practice review
  of all PCPs, OB/GYNs, and High Volume Behavioral Healthcare practitioners
  (applicable to HMO products only)

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Full compliance with NCQA Standards regarding Initial site
  visit/medical record keeping review prior to the Committee approval date.

  Set standards for office sites and establish thresholds for
  acceptable performance.

  

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

  •   Physical accessibility

  	
   

  	
  On an annual basis, include list of all site reviews subsequent to
  the initial site visit.

  	
   

  	
  •             Initial onsite
  assessment

  •             Annual oversight
  assessment

  •             Annual review of
  audit tool

  •             Annual audit
  conducted of provider’s

  

 

12

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
   

  	
   

  	
   

  	
   

  	
  •   Physical appearance

  •   Adequacy of waiting room and
  exam room space

  •   Availability of appointments

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

  

  Specify methodology for
  identification of potential high volume behavioral health practitioners.

  Institute actions for improvement with
  sites not meeting thresholds.

  Evaluate effectiveness of actions at least
  every 6 months until sites with deficiencies meet thresholds.

  Follows same procedure for an initial site
  visit when a PCP, OB/GYN, or high volume behavioral health practitioners
  relocates or opens a new site.

  Procedures for detecting deficiencies subsequent to the initial site
  visit, at least every six months. 
  Reevaluates site of new deficiencies and institutes actions for
  improvement.

  

  Incorporation of this information
  into the credentialing process.

  	
   

  	
   

  	
   

  	
  practitioners’ credentialing files according to NCQA methodology.

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Recredentialing Primary source verification (PSV)

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Full compliance with NCQA Recredentialing Standards regarding
  verification of information within 180 days prior to Committee approval date.

  Recredentialing must be completed within 36 months of prior
  credentialing or recredentialing activity.

  Meet 100% of NCQA and regulatory body standards related to obtaining
  from practitioner.

  •   Signed Attestation regarding

  •   Reasons for any inability to
  perform.

  •   lack of present illegal drug
  use,

  •   History
  of loss or limitation of privileges or disciplinary activity, and

  •   Current
  malpractice insurance coverage, including dates & amount, and

  •   correctness and completeness of application

  Meet 100% of NCQA and regulatory body standards related to primary
  source verification of the following:

   

  •   License

  •   Board certification (if
  expired or new since initial credentialing)

  •   Professional liability claims

  
Meet 100% of NCQA and regulatory body
  standards related to data collection of the

  	
   

  	
  Include list of all practitioners recredentialed, including approval
  dates, on a quarterly basis (with quarterly report)

  	
   

  	
  •             Initial onsite
  assessment

  •   Annual oversight assessment

  •             Annual audit
  conducted of provider’s practitioners’ recredentialing files according to
  NCQA methodology.

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

  

 

13

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
   

  	
   

  	
   

  	
   

  	
  following:

  •             DEA/CDS

  •             Hospital Admitting
  privileges, if applicable

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Recredentialing Sanction

  information

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Full compliance with NCQA Recredentialing Standards regarding
  verification of information within 180 days prior to Committee approval
  date.  Recredentialing must be
  completed within 36 months of prior credentialing or recredentialing activity
  (as required by CMS & DMHC)

  

  Recredentialing information found in credentialing files includes the
  following:

  •             Sanction or
  Limitations information on licensure, as appropriate, must cover the last
  3-year period available through the data source (data that may not have come
  to the attention of the provider previously):

  •              MD, DOs: NPDB, State Board of Medical Examiners, or
  Federation of State Medical Boards

  •              DCs: State Board
  of Chiropractic Examiners or the Federation of Chiropractic Licensing Boards

  •              DDSs: NPDB or
  State Board of Dental Examiners

  •              DPMs: State Board
  of Podiatric Examiners or Federation of Podiatric Medical Boards Nonphysician
  behavioral health & other independently licensed practitioners:
  Appropriate state agency or State Board of Licensure or Certification

  •   For all practitioners (except
  DDS): review of Medicare/Medicaid sanctions, must cover the last 3-year
  period available through the data source (data that may not have come to the
  attention of the provider previously):

  •              NPDB

  •              FSMB

  •              Cumulative
  Sanctions Report

  •              Medicare and
  Medicaid Sanctions and Reinstatement Report

  •              Federal Employees
  Health Benefits Program department record

  State Medicaid agency or intermediary and the Medicare intermediary

  	
   

  	
  None

  	
   

  	
  •   Initial onsite assessment

  •   Annual oversight assessment

  •   Annual audit conducted of
  provider’s practitioners’ recredentialing files according to NCQA
  methodology.

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Performance Monitoring: (Applicable
  to HMO products only)

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Full compliance with NCQA Recredentialing Standards.

  Specify criteria/methodology for identification of potential high
  volume behavioral health practitioners.

  	
   

  	
  List of all recredentialing decisions completed on an annual basis

  	
   

  	
  •   Initial onsite assessment

  •   Annual oversight assessment

  •   Annual audit conducted of

  

 

14

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
   

  	
   

  	
   

  	
   

  	
  Incorporate the following information into the recredentialing
  decision making process for PCPs and high volume behavioral health
  practitioners:

  •   Member complaints (as received
  from plan)

  •   Information from quality improvement activities

  	
   

  	
   

  	
   

  	
  provider’s practitioners’ recredentialing files according to NCQA
  methodology.

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ongoing monitoring of Sanctions and Complaints

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Full compliance with NCQA standards.

  P&Ps for ongoing monitoring of sanctions and complaints include
  addressing the following sources:

  •   Medicare and Medicaid
  Sanctions

  •   State Sanctions or limitations
  on licensure

  •   Complaints (as received from
  Plan) 

  
Evidence the MG collects and reviews
  information from the above-referenced sources.

  

  MG takes action on instances of poor quality.

  	
   

  	
  New P&Ps submitted at least annually

  

  Notification to PacifiCare of any actions reported on a practitioner
  immediately.

  	
   

  	
  •   Initial onsite assessment

  •   Annual oversight assessment

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Notification to Authorities and Practitioner Appeal Rights

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Full compliance with NCQA Standards.

  

  P&Ps for altering the conditions of the practitioner’s participation with
  PacifiCare based on quality of care of service:

  

  P&Ps for reporting of quality
  deficiencies to appropriate authorities. 
  P&Ps for range of actions to be taken to improve performance prior
  to termination.

  P&Ps to describe appeals process & process of notifying
  practitioners of appeal rights.

  	
   

  	
  New P&Ps submitted at least annually

  

  Notification to PacifiCare of any actions reported on a practitioner
  immediately.

  	
   

  	
  •   Initial onsite assessment

  •   Annual oversight assessment

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assessment of Organizational Providers

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  For all contracted acute care hospitals, home health agencies, SNFs,
  free-standing surgical centers, and facilities providing mental health or
  substance abuse services in an inpatient, residential or ambulatory setting
  where the contract is held by the MG.

  1             Confirms good
  standing with State and Federal regulatory bodies (including if providing
  services to Medicare enrollees, MG must confirm provider’s participation in
  Medicare); and

  2.          Confirms
  accreditation; or

  3.          Conducts an on-site
  quality assessment, if there is no accreditation status;

  •    If
  a free-standing surgical center is not accredited, the MG must confirm
  Medicare certification (Calif. Health & Safety Code)

  4.          And initially & at
  least every three years, confirms continued good standing of regulatory
  bodies, and if applicable.

  	
   

  	
  Submit list of contracted organizational providers on an annual basis

  	
   

  	
  •   Initial onsite assessment

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

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

  

 

15

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility
  of

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
   

  	
   

  	
   

  	
   

  	
  accreditation

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sub-Delegation of Credentialing

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  If MG sub-delegates
  Credentialing to a CVO, Hospital, IPA, Behavioral Health, etc:

  •   Detailed documentation of mutually agreed upon delegation agreement
  identifying.

  Listing
  of responsibilities of delegate (MG) & sub-delegate;

  •    Specific delegated
  activities;

  •              Process
  for evaluating sub-delegate’s performance, and

  •    Remedies if sub-delegate does not perform

  •    If sub-delegation
  includes the use of Protected Health Information (PHI), the sub-delegation
  document includes:

  •   List of allowed
  uses of PHI

  •   Description of sub-delegate safeguards to protect
  the information from inappropriate use or further disclosure

  •   Stipulation that
  the delegate will ensure that subdelegates
  have sinular safeguards

  •   Stipulation that
  the subdelegate
  will provide individuals with access to their PHI

  •   Stipulation that the subdelegate will inform the organization if
  inappropriate uses of the information occur

  •   Stipulation that the subdelegate will ensure
  PHI is returned, destroyed or protected if the delegation agreement ends

   

  •   MG retains right to approve disapprove new
  providers and to discipline providers

  •   Pre-delegation evaluation

  •   Annual evaluation, including file review,
  according to NCQA’s methodology

  •   If deficiencies
  found, evidence of MG & sub-delegate follow up for opportunities for
  improvement

  	
   

  	
  Submit copies of sub-delegation agreements to
  PacifiCare prior to subdelegation and on an annual basis

  	
   

  	
  •   Initial onsite assessment

  •   Annual assessment of
  sub-delegation process, including agreements, polices and procedures, and
  ongoing evaluation of performance, according to NCQA standards &
  methodology

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accessibility to Credentialing Files

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Should any of the following provider events
  occur, PacifiCare shall have access to MG’s credentialing files to ensure
  practitioners are properly credentialed for continuity and coordination of
  care for members:

  •      Bankruptcy

  •      Termination of contract

  •      De-delegation of credentialing activities

  	
   

  	
  Immediately notify PacifiCare of any such
  provider event.

  

  As needed, provide PacifiCare access to MG credentialing/ recredentialing

  	
   

  	
  •   Access MG
  credentialing/ recredentialing files should any of the referenced provider
  events occur.

  •   Collection of copies of
  selected credentialing

  /recredentialing files from MG for regulatory

  

 

16

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
   

  	
   

  	
   

  	
   

  	
  Credentialing files must be available, including making appropriate
  copies, for regulatory & accreditation audits.

  	
   

  	
  files should any of the referenced provider events occur.

   

  Comply with requests for selected credentialing files for regulatory
  &/or accreditation audits.

  	
   

  	
  and accreditation audits, as applicable.

  

 

The Medical Group agrees to be accountable for all responsibilities
delegated by PacifiCare and will not further delegate any such responsibilities
without thirty (30) days prior written notice to PacifiCare.  PacifiCare’s responsibilities relating to
Credentialing and those responsibilities, which PacifiCare has delegated to the
Medical Group, are outlined above.

 

PacifiCare will perform audits prior to delegation, annually, and upon
prior written notice, 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
corrective action plan within thirty (30) days of receipt of notification,
PacifiCare may revoke the group’s delegated status in accordance with the terms
of the Agreement in Section 4.4.

 

PacifiCare retains the right to approve, suspend and terminate
individual practitioners, providers and sites.

 

17

 

MEDICAL RECORDS DELEGATION
GRID

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group
  Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
  Systematic Review of Medical Records

  	
   

  	
  ý Delegated

  o Not delegated

  	
   

  	
  •  Set documentation
  standards and distribute to practice sites. 
  Documentation audit tool to include all elements required by NCQA and
  PacifiCare.

  •
  At least annually, audit medical records from a sample of primary care
  practitioners.

  •
  Conduct focused follow-up to improve documentation by PCPs who perform poorly
  against standards.

  	
   

  	
  Annual submission of medical records review work plan and audit tool.

  
At least annually report as a
  minimum: the number of physicians whose medical records were reviewed; any
  practitioner- specific actions taken for improvement; and the results of
  those actions.

  	
   

  	
  •   Audit Medical Group’s
  policies and processes on an annual basis to ensure conformance to standards
  and note deficiencies identified. 
  Facilitate and monitor Medical Group’s compliance with work plan and
  corrective action plans.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sub-Delegation of medical Records

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  If MG sub-delegates Medical Records to any
  entity. MG will have:

  •   Detailed documentation of
  mutually agreed upon delegation agreement identifying:

  •    Listing of responsibilities of delegate
  (MG) & sub-delegate;

  •    Specific delegated activities;

  •    Process for evaluating sub-delegate’s
  performance, and

  •    Remedies if sub-delegate
  does not perform

  •    If sub-delegation
  includes the use of Protected Health Information (PHI), the sub-delegation
  document includes:

  •   List of allowed uses of PHI

  •   Description of sub-delegate safeguards
  to protect the information from inappropriate use or further disclosure

  •   Stipulation that the delegate
  will ensure
  that subdelegates have similar safeguards

  •   Stipulation that the
  subdelegate will provide individuals with access to their PHI

  •   Stipulation that the
  subdelegate will inform the organization if inappropriate uses of the
  information occur

  •   Stipulation that the subdelegate
  will ensure PHI is returned, destroyed or protected if the delegation
  agreement ends

  •   MG retains right to approve/ disapprove
  new providers and to discipline providers

  •   Pre-delegation evaluation

  	
   

  	
  Submit copies of sub-delegation agreements to PacifiCare prior to
  subdelegation and on an annual basis

  	
   

  	
  •   Initial onsite assessment

  •   Annual assessment
  of sub-delegation process, including agreements, polices and procedures, and
  ongoing evaluation of performance, according to NCQA standards &
  methodology

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

  

 

18

 

	
  Function

  	
   

  	
  Delegation

  Status

  	
   

  	
  Medical Group
  Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare

  Oversight

  
	
   

  	
   

  	
   

  	
   

  	
  •   Annual evaluation, including file review,
  according to NCQA’s methodology

  •   If deficiencies found, evidence of MG
  & sub-delegate follow up for opportunities for improvement

  	
   

  	
   

  	
   

  	
   

  

 

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

 

The Medical Group agrees to be accountable for all responsibilities
delegated by PacifiCare and will not further delegate any such responsibilities
without thirty (30) days prior written notice to PacifiCare.

 

PacifiCare will perform audits annually and upon prior written notice,
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 thirty (30) days of receipt of notification,
PacifiCare may revoke the group’s delegated status in accordance with the terms
of the Agreement in Section 4.4.

 

19

 

CLAIMS
DELEGATION GRID

 

	
  Function

  	
   

  	
  Delegation
Status

  	
   

  	
  Medical
  Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacificCare
  Oversight

  
	
  CMS Regulations

  	
   

  	
  ý Delegated

  

  o No delegated

  	
   

  	
  Compliance with all CMS regulations & guidelines for claims
  processing and payment including:

  Claims payment turnaround times Appropriate reimbursement for contracted and
  non-contracted providers

  Interest payments

  Denials/denial letters

  BBA regulations

  Provider reporting
•
  Y2K compliance

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PacifiCare Standards for Commercial Products

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Compliance with PacifiCare’s standards for processing and payment of
  claims for Commercial Products including:

  Claims payment turnaround times

  Appropriate reimbursement for

  contracted and non-contracted providers

  Interest payments

  Denials/denial letters

  Provider reporting

  Appropriate IBNR reserves

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  State Regulations

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Compliance with State Regulations for claims processing:

  COB and TPL review

  Compliance with all Medicaid 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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OPM Requirements

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Compliance with Office of Personnel Management for Federal Employees
  requirements for claims processing and payment including:

  COB identification

  Debarred providers suspended

  	
   

  	
  N/A

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Standards for Employer Performance Guarantees

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Meet Employer performance guarantee measurements for claims
  processing and payment.

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eligibility and Benefits

  	
   

  	
  o Delegated

  

  ý Not delegated

  	
   

  	
  Medical Group must:

  Verify eligibility at time of claim review

  Update eligibility and benefit information in their system as often as
  communicated by the plan.

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Financial Accounting

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Meets PacifiCare financial accounting requirements and solvency
  requirements including those for:

  Financial statements

  IBNR reserves

  Processes for expense reduction

  	
   

  	
  Annually

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Check Production

  	
   

  	
  ý Delegated

  	
   

  	
  Compliance with timely claims payments

  	
   

  	
  N/A

  	
   

  	
  Initial onsite assessment utilizing

  

 

20

 

	
  Function

  	
   

  	
  Delegation
Status

  	
   

  	
  Medical
  Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacificCare
  Oversight

  
	
  Processes

  	
   

  	
  o Not delegated

  	
   

  	
  and IRS requirements including:

  Check production processes

  Performing Provider Satisfaction Survey Process to settle claims in
  collections 1099 production processes

  	
   

  	
   

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Staffing

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Staffing sufficient to support claims volume and processing
  timeliness requirements including:

  Staffing levels

  Customer Service capabilities

  Past experience for claims resolution

  Staff available to answer claims questions during normal hours of operation

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Audit Reporting

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  Appropriate and adequate audit reporting available including:
• 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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Encounter Data

  	
   

  	
  ý Delegated

  

  o Not delegated

  	
   

  	
  The Medical Group must have an encounter data submission process with
  encounter data reported and submitted to PacifiCare monthly

  	
   

  	
  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.

  

 

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

 

The Medical Group agrees to be accountable for all responsibilities
delegated by PacifiCare and will not further delegate any such responsibilities
without thirty (30) days prior written notice to PacifiCare.

 

PacifiCare will perform audits annually or with prior written notice,
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 thirty (30) days of receipt of notification,
PacifiCare may revoke the group’s delegated status in accordance with the terms
of the Agreement in Section 4.4.

 

21

 

QUALITY IMPROVEMENT DELEGATION GRID

 

	
  Function

  	
   

  	
  Delegation
Status

  	
   

  	
  Medical
  Group Responsibility/

  Performance Measure

  	
   

  	
  Reporting

  Frequency

  	
   

  	
  PacifiCare
  Oversight

  
	
  Program Structure

  	
   

  	
  Not Delegated

  	
   

  	
  Medical Group is required to maintain the following:

  QM Program

  Structure to carry out Quality Mgmt. 
  Program

  QM Program outlining structure and content

  Program description must be evaluated annually and updated as necessary

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Program Operations

  	
   

  	
  Not Delegated

  	
   

  	
  Participate and cooperate in PacifiCare’s

  Quality Improvement program

  Collect data for PacifiCare’s Quality Improvement Activities

  Carry out corrective actions required by PacifiCare

  Have a peer review process

  Participate in PacifiCare Quality

  Improvement Committee, (if requested)

  Provide PacifiCare access to Medical Records

  Identify barriers to improving key initiatives

  Implement interventions

  Comply with PacifiCare’s confidentiality standards

  	
   

  	
   

  	
   

  	
   

  

 

PacifiCare does not formally delegate to its contracting Medical Groups
the responsibility for performing quality management and improvement activities
on behalf of PacifiCare.

 

22

 

PACIFICARE OF CALIFORNIA

 

MEDICAL GROUP/IPA SERVICES AGREEMENT

(SPLIT CAPITATION)

 

EXHIBIT 6

 

QUALITY INCENTIVE PROGRAM

(This Exhibit 6 is an integral part of
this Agreement)

 

1.                                       Introduction.

 

This Exhibit sets forth the terms of a quality incentive program being
implemented by PacifiCare.  The program
is designed to compensate Medical Group for efforts it takes to improve the
quality of services provided to PacifiCare Members as reflected by data
measured by PacifiCare, all as described below (the “Quality Incentive Program”
or the “QIP”).

 

The Quality Incentive Program provides additional compensation to
Medical Groups, which are successful in improving and maintaining certain
levels of patient safety, patient satisfaction and quality of care.  The Quality Incentive Program tracks
specific performance measures and calculates payments to the Medical Group
based on aggregating and paying specific amounts for separate performance
measures, as described in this Exhibit.

 

2.                                       Definitions.

 

In addition to other terms defined in this Exhibit or in the Agreement,
the following terms shall have the meanings set forth below:

 

2.1                                 Eligible Membership
shall be the monthly Secure Horizons Members reflected on the PacifiCare
Eligibility List for the month preceding the month in which the applicable QIP
Payment will be made.  The determination
of Eligible Membership shall not be changed at any later time to reflect
retroactive membership adjustments otherwise made by PacifiCare in connection
with its Managed Care Plans. 
Additionally, Eligible Membership shall exclude Members who had been
transferred to Medical Group in a group transfer from another PacifiCare
Participating Provider within six (6) months prior to the date of the
applicable QIP Payment.

 

2.2                                 Leapfrog as
used in the Table shall refer to data reported to PacifiCare on the website
maintained by The Leapfrog Group and supplemental data reviewed by PacifiCare
as reported by the California Office of Statewide Health Planning and
Development.

 

2.3                                 Measurement Component
shall mean the Measures described in the QIP Table.

 

2.4                                 Measurement Period
is the period for which PacifiCare shall measure data in order to calculate the
applicable QIP Payment.  For the initial
and subsequent QIP Payment, the Measurement Period shall vary as defined in
Section 3, QIP Table.

 

2.5                                 PMPM Component
Payment shall be the amount attributable to each Measurement Component as
specified in the Table and shall be earned by Medical Group only if

 

23

 

Medical Group meets or exceeds the Performance Target for the
applicable Measurement Component.

 

2.6                                 PMPM Payment Rate
shall be the total of the PMPM Component Payments earned by Medical Group for
the applicable Measurement Period.

 

2.7                                 QIP Payments
are the quarterly payments made pursuant to the Quality Incentive Program.

 

2.8                                 Table means the
table or tables set forth below specifying the Measurement Components,
Performance Targets, Measurement Period, Data Source, Members Measured and PMPM
Component Payment.

 

2.9                                 Performance Target
is the performance target for each Measurement Component as defined in
Section 3, QIP Table.  Performance
Targets are determined by the sole discretion of PacifiCare.

 

Members Measured is defined as described in Section 3.  For Measurement Components in which Members
Measured is a combination of Commercial and Secure Horizons membership,
PacifiCare shall perform calculations utilizing a weighted average of the
Commercial and Secure Horizons membership.

 

3.                                       QIP
Table.

 

	
  Measure

  	
   

  	
  Performance
  Target

  	
   

  	
  Measurement

  Period

  	
   

  	
  Data
  Source

  	
   

  	
  PMPM
  Component

  Payment

  	
   

  	
  Members
  Measured

  
	
  Leapfrog Initiative Participation

  	
   

  	
  85% of elective admissions at hospital self-reported on Leapfrog
  website

  	
   

  	
  12 month period ending six months prior to month of payout

  	
   

  	
  Leapfrog website

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons assigned to PMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CABG volume threshold (per PHS TAG threshold), combined with CCMRP
  risk — adjusted CARG outcomes

  	
   

  	
  85% of CABG admission at qualifying hospitals with >100 CABGs in
  latest reported year (or per latest OSHPD data available) AND NOT CCMRP
  “Worse Than Expected” outcome status

  	
   

  	
  12 month period ending six months prior to month of payout

  	
   

  	
  Leapfrog website, supplemented by OSHPD data

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons assigned to PMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PTCA volume threshold (per PHS TAG threshold)

  	
   

  	
  85% of PTCA admissions at hospitals with >200 PTCAs in latest
  reported year (or per latest OSHPD data available)

  	
   

  	
  12 month period ending six months prior to month of payout

  	
   

  	
  Leapfrog website, supplemented by OSHPD data

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons assigned to PMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Computerized patient entry

  	
   

  	
  85% of elective admissions at hospitals with self-reported compliance
  on Leapfrog website

  	
   

  	
  12 month period ending six months prior to month of payout

  	
   

  	
  Leapfrog website, supplemented by OSHPD data

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons assigned to PMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Intensive ICU staffing

  	
   

  	
  85% of elective admissions at hospitals with self-reported compliance
  on Leapfrog website

  	
   

  	
  12 month period ending six months prior to month of payout

  	
   

  	
  Leapfrog website, supplemented by OSHPD data

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons assigned to PMG

  

 

24

 

	
  Measure

  	
   

  	
  Performance
  Target

  	
   

  	
  Measurement

  Period

  	
   

  	
  Data
  Source

  	
   

  	
  PMPM
  Component

  Payment

  	
   

  	
  Members
  Measured

  
	
  PEP-C Project Participation

  	
   

  	
  85% of elective admission at hospitals participating in PEP-C Project

  	
   

  	
  2002 Survey

  	
   

  	
  California Health and Foundation

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons assigned to PMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Breast Cancer screening

  	
   

  	
  70.6% screening performed on members measured

  	
   

  	
  24 month period ending six months prior to payment period

  	
   

  	
  PacifiCare Quality Index and Provider Profile

  	
   

  	
  $***

  	
   

  	
  Females age 52-69

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cervical Cancer Screening

  	
   

  	
  51.0% screening performed on members measured

  	
   

  	
  36 month period ending six months prior to payment period

  	
   

  	
  PacifiCare Quality Index and Provider Profile

  	
   

  	
  $***

  	
   

  	
  Females age 21-64

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Childhood Immunizations

  	
   

  	
  45.0% of recommended Immunization performed on members measured

  	
   

  	
  12 month period ending six months prior to payment period

  	
   

  	
  PacifiCare Quality Index and Provider Profile

  	
   

  	
  $***

  	
   

  	
  Children age 2

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HgbA Ic Testing - Diabetes

  	
   

  	
  72.0% Testing performed on members measured

  	
   

  	
  12 month period ending six months prior to payment period

  	
   

  	
  PacifiCare Quality Index and Provider Profile

  	
   

  	
  $***

  	
   

  	
  Diabetic members age 31 or older

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LDL Cholesterol Testing - CAD

  	
   

  	
  71.4% Testing performed on members measured

  	
   

  	
  12 month period ending six months prior to payment period

  	
   

  	
  PacifiCare Quality Index and Provider Profile

  	
   

  	
  $***

  	
   

  	
  Diabetic members age 31 or older

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Satisfaction with PMG

  	
   

  	
  69.0% overall satisfaction level

  	
   

  	
  2002 Member Satisfaction Survey

  	
   

  	
  PacifiCare Member Satisfaction Survey

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons members assigned to PMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Satisfaction with PCP

  	
   

  	
  77.2% overall satisfaction level

  	
   

  	
  2002 Member Satisfaction Survey

  	
   

  	
  PacifiCare Member Satisfaction Survey

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons members assigned to PMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Satisfaction with Specialist

  	
   

  	
  73.4% overall satisfaction level

  	
   

  	
  2002 Member Satisfaction Survey

  	
   

  	
  PacifiCare Member Satisfaction Survey

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons members assigned to PMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Satisfaction with Referral Process

  	
   

  	
  68.9% overall satisfaction level

  	
   

  	
  2002 Member Satisfaction Survey

  	
   

  	
  PacifiCare Member Satisfaction Survey

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons members assigned to PMG

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PCP Communicates Effectively

  	
   

  	
  63.1% overall satisfaction level

  	
   

  	
  2002 Member Satisfaction Survey

  	
   

  	
  PacifiCare Member Satisfaction Survey

  	
   

  	
  $***

  	
   

  	
  All Commercial and Secure Horizons members assigned to PMG

  

 

4.                                       Calculation
and Payment of QIP Payments.  The
following calculations and payment mechanisms shall apply:

 

(a)                                  Payment Frequency.  QIP Payments shall be paid to Medical Group
quarterly.  The QIP Payments shall be
made together with Medical Group’s Capitation Payment for the months of
July 2003, October 2003, January 2004, and April 2004.

 

(b)                                 Payment Calculation.  Each quarterly QIP Payment shall equal: the
Eligible Membership multiplied by three (3), the product of which shall be
multiplied by the PMPM Payment Rate.

 

25

 

(c)                                  Criteria for Determining QIP Payment
Eligibility.  In order to comprehensively assess Medical
Group’s improvements in the Measurement Components, data on services provided
to both Commercial Health Plan Members and Secure Horizons Health Plan Members
will be measured in connection with the Quality Incentive Program.  Payments shall be based solely on Eligible
Membership, which only includes Secure Horizons Members.  However, payments for certain Measurement
Components, if earned, shall be made from commercial capitation funds.

 

5.                                       QIP Payments Final. 
PacifiCare’s calculation of the QIP Payment shall be final.  Medical Group recognizes that the
measurement of the QIP data is subject to variation and reasonable statistical
and operational error.  Medical Group
acknowledges that PacifiCare would not be willing to offer the Quality
Incentive Program if PacifiCare’s calculation of the QIP Payments would expose
PacifiCare to increased risk of disputes and litigation arising out of
PacifiCare’s calculation of the QIP Payment. 
Accordingly, in consideration of PacifiCare’s agreement to offer the
Quality Incentive Program to Medical Group, Medical Group agrees that Medical
Group will have no right to dispute PacifiCare’s determination of the QIP
Payment, including determination of any data or the number of Eligible Members.

 

6.                                       QIP Programs for Future Periods. 
PacifiCare in its sole and absolute discretion may implement quality
incentive programs for periods from and after January 1, 2004.  Any such programs shall be on terms
determined by PacifiCare.  PacifiCare
currently intends to provide for a quality incentive program for calendar year
2004.  Until PacifiCare and Medical
Group enter into a written agreement with respect to any such new program for
calendar year 2004, or thereafter, no such program shall be binding upon
PacifiCare.

 

7.                                       Cancellation and Termination of QIP.  The
terms of this Exhibit shall be cancelled and of no effect if Medical Group does
not participate in the Secure Horizons Health Plan as of January 1,
2003.  Additionally, the Quality
Incentive Program shall terminate at such time as Medical Group no longer is
assigned eligible Membership of at least both one thousand (1,000) Commercial
Health Plan Members and one hundred (100) Secure Horizons Health Plan
Members.  In the event of such
termination, the QIP Payments shall be prorated by changing the multiple “3” in
Paragraph 4(b) above to be the number of whole months between the last
quarterly QIP Payment and the month of termination.  (Example: Last QIP Payment is July 2003 and the termination
date is September, the “3” in Paragraph 4(b) would be changed to “2”.)

 

8.                                       Effect of Termination of Agreements.  In
the event of the termination of the Agreement, for any reason, no QIP Payments
shall be earned or made following termination of the Agreement.  In the event that the Medical Group’s
participation in the Secure Horizons Health Plan terminates prior to
April 10, 2004 but the Agreement continues to be in effect and apply to
Commercial Health Plan Members, QIP Payments shall continue to be made through
the April 2004 quarterly period, with the QIP Payments to be made based upon
the Eligible Members for the month preceding the effective date of the
termination of the Medical Group’s participation in the Secure Horizons Health
Plan under the Agreement.

 

26

 

PACIFICARE OF CALIFORNIA

 

MEDICAL GROUP/IPA SERVICES AGREEMENT

(SPLIT CAPITATION)

 

EXHIBIT 7

 

WOMEN’S HEALTH BONUS PROGRAM

(This Exhibit 7 is an integral part of this Agreement)

 

1.                                       Introduction.

 

This Exhibit sets forth the terms of a bonus program being implemented
by PacifiCare.  The program is designed
to compensate Medical Group and its Participating Providers for efforts taken
to improve the accessibility of women’s health services and the stability of
PacifiCare’s women’s health network as reflected by data measured by
PacifiCare, all as described below (the “Bonus Program”).

 

The Bonus Program will apply only to Medical Group’s provision of
services in certain counties for 2003. 
The Bonus Program shall not be available to Medical Group unless: 1)
Medical Group and PacifiCare were parties to the Commercial Health Services
Agreement for the entire 2002 calendar year; 2) Membership in each unique
PacifiCare Dec is a minimum of 1,000 Commercial members throughout calendar
year 2003; 3) Medical Group must meet the minimum threshold for number of
physicians (OB/GYNs and Pediatricians); and, 4) The other Bonus Program
requirements are met as outlined below.

 

2.                                       Bonus Program Terms. 
Medical Group and its Participating Providers will be eligible for the
following separate payments under the Bonus Program: (a) access bonus payments
relating to obstetrical/gynecological services and pediatric services, (b)
stability bonus payments relating to obstetrical/gynecological services, (c)
stability bonus payments relating to pediatric services.  Such payments may be earned upon
satisfaction of the conditions set forth in this Exhibit.

 

a.                                       Access Bonus.  PacifiCare shall make “Access
Bonus” payments with respect to each Obstetrician-Gynecologist and each
Pediatrician who is available to accept additional PacifiCare members and who
maintains extended office hours throughout calendar year 2003.  Determinations whether the provider is
available to accept additional PacifiCare members and is maintaining extended
office hours shall be determined by calls made periodically by PacifiCare to
the provider’s office.  Payments shall
be made to Medical Group for Obstetrician-Gynecologists and Pediatricians who
are independent contractors of Medical Group or employed by Medical Group.  The amount of the Access Bonus payments
shall be: (i) ***  for each delivery
(without regard to  multiple
births) performed by the Obstetrician-Gynecologist if such provider is
determined to have been available to accept additional PacifiCare members and
to have maintained extended office hours throughout the entire 2003 calendar
year; and (ii) a ***  single payment for
each pediatrician determined to have been available to accept additional
PacifiCare members and to have maintained extended office hours throughout the
entire 2003 calendar year. 
Pediatricians who participate in more than one Medical Group is only
eligible for a one time payment.

 

27

 

b.                                      Stability Bonus – Obstetrical/Gynecological
Services.  PacifiCare shall make “Stability Bonus”
payments directly to Medical Group if (i) Medical Group maintains at least one
Obstetrician/Gynecologist for each thirteen thousand (13,000) patients assigned
to Medical Group for all plans and (ii) Medical Group shall, as of
December 31, 2003 contract with not less than ninety percent (90%) of the
same obstetrician/gynecologists contracting with Medical Group as of
October 1, 2002.  Determinations
whether the Medical Group meets the foregoing criteria shall be determined by
PacifiCare’s review of information in PacifiCare’s system.

 

Bonus Payment - The amount of the Stability Bonus shall be *** per
commercial health plan member per month, not adjusted for age/sex/plan-type
factors, for the calendar year 2003.

 

c.                                       Stability Bonus – Pediatric Services.  PacifiCare
shall make Stability Bonus payments directly to Medical Group if (i) Medical
Group maintains one Pediatrician for every twelve thousand patients, and (ii)
Medical Group as of December 31,2003 contract with not less than ninety
percent (90%) of the pediatricians contracting with Medical Group as of
October 1, 2002.  Determinations
whether the Medical Group meets the foregoing criteria shall be determined by
PacifiCare’s review of information in PacifiCare’s system.  PacifiCare shall pay Medical Group ***  for each Assigned Medical Group Member
assigned to Medical Group.

 

Stability Payment.  The amount of
the Stability Bonus shall be ***  per
commercial health plan member per month, not adjusted for age/sex/plan-type
factors, for the calendar year 2003.

 

d.                                      Additional Terms. 
“Extended office hours” means physician office is accepting appointments
before 8:30 a.m. or after 5:30 p.m. at least one day per week.  “Patients” for the purpose of determining
the Stability Bonus shall be the number of Medical Group patients, regardless
of payment source (e.g., private pay, HMO, PPO, etc.), who would be reasonably
expected to request services from Medical Group on an annual basis.

 

e.                                       Timing of Bonus Payments.  All
payments by PacifiCare pursuant to the Bonus Program shall be made to Medical
Group by May 15,2004 for 2003 performance.

 

28

 

Bonus Program Summary.

 

	
   

  	
   

  	
   

  
	
  Access – OB/GYN

  	
   

  	
  $***
  per delivery

  
	
  Access
  – Pediatrician

  	
   

  	
  $***
  one time payment.

  
	
  OB-GYN Network Stability

  	
   

  	
  $***
  PMPM

  
	
  Pediatrician Network Stability

  	
   

  	
  $***
  PMPM

  

 

4.                                       Bonus Program Payments Final. 
PacifiCare’s calculation of the Bonus Program Payment shall be
final.  Medical Group recognizes that
the measurement of the Bonus Program data is subject to variation and
reasonable statistical and operational error. 
Medical Group acknowledges that PacifiCare would not be willing to offer
the Bonus Program if PacifiCare’s calculation of the Bonus Program Payments
would expose PacifiCare to increased risk of disputes and litigation arising
out of PacifiCare’s calculation of the Bonus Program Payment.  Accordingly, in consideration of
PacifiCare’s agreement to offer the Bonus Program to Medical Group, Medical
Group agrees that Medical Group will have no right to dispute PacifiCare’s
determination of the Bonus Program Payment.

 

5.                                       Bonus Programs for Future Periods. 
PacifiCare in its sole and absolute discretion may implement Bonus
programs for periods from and after January 1, 2004.  Any such programs shall be on terms
determined by PacifiCare.  Until
PacifiCare and Medical Group enter into a written agreement with respect to any
such new program for calendar year 2004, or thereafter, no such program shall
be binding upon PacifiCare.

 

6.                                       Cancellation and Termination of Bonus Program.  The
terms of this Exhibit shall be cancelled and of no effect if Medical Group does
not, for any reason, participate in PacifiCare’s Commercial Health Plan through
December 31, 2003.

 

29Exhibit 10.113

 

CLAIMS MANAGEMENT AGREEMENT

 

This Claims
Management Agreement (the “Agreement”) is entered into with an effective date
of October 1, 2003 (the “Effective Date”), by and among Prospect Medical Group
and Professional Care IPA Medical Group (collectively referred to as “Medical
Groups”) and PacifiCare of California (“PacifiCare”) with reference to the
following facts;

 

A.                                   WHEREAS,
Medical Groups and PacifiCare are parties to those certain agreements described
on Schedule 1 attached hereto, as amended (collectively, the “Provider
Agreement”), pursuant to which Medical Groups arranges health care services to
enrollees of PacifiCare’s Medicare-risk plan, Secure Horizons, who have
selected or been assigned to Medical Groups as their participating medical
groups (“Senior Members”) and of PacifiCare’s various commercial health benefit
plans (“Commercial Members”);

 

B.                                     WHEREAS,
Medical Groups’ obligations under the Provider Agreement include the
performance of certain delegated claims processing and payment functions with
respect to medical services provided or arranged by Medical Groups to Senior
Members and Commercial Members, subject to Medical Groups’ compliance with
Health Care Financing Administration’s (“HCFA”) and California Department of
Corporations (“DOC”) claims processing standards, as applicable;

 

C.                                     WHEREAS,
Medical Groups has failed to comply with HCFA’s claims processing standards
with respect to Senior Members;

 

D.                                    WHEREAS,
PacifiCare has determined (i) that it is necessary for PacifiCare to manage and
control the claims processing and payment functions for Senior Members and (ii)
that the least disruptive and most efficient method for PacifiCare to manage
and control the claims processing and payment functions is for PacifiCare to
utilize Medical Groups’ premises, equipment, systems and support personnel;

 

NOW THEREFORE, the parties
hereto agree as follows:

 

1.                                       Definitions.  Whenever used in this Agreement, the
following terms shall have the definitions contained in this Section 1:

 

Data
is all information, data, documentation, reports and records relating to the
Support Services.

 

Commercial
Members means those persons enrolled in PacifiCare’s
various commercial health benefit plans who have selected or been assigned to
Medical Groups as their participating medical groups, including, without
limitation, PacifiCare commercial plan members.

 

Medical Groups
Risk Services means medical services provided to
Senior Members that are the financial responsibility of Medical Groups pursuant
to the terms of the Provider Agreement.

 

Professional
Care IPA Medical Group and Prospect Medical Group

Claims
Management Agreement

Effective:  October 1, 2003

 

1

 

Management
Services means the management and supervision of the
Support Services as more particularly described on Schedule 2, attached hereto.

 

Monthly HCFA
Payment is the revenue received by PacifiCare each
month from HCFA, as determined by HCFA, for providing covered health care
services to Senior Members.

 

PacifiCare
Capitation Payments means the monthly capitation
payments payable by PacifiCare to Medical Groups pursuant to the terms of the
Provider Agreement.

 

PacifiCare
Management Personnel means (i) the PacifiCare
employees identified to Medical Groups from time to time by PacifiCare, and
(ii) third party consultants retained from time to time on a temporary or
emergency basis by PacifiCare.

 

Support
Facilities means Management Company’s premises,
equipment and systems set forth on Schedule 3, attached hereto, as such
schedule may be modified from time to time upon the written consent of
PacifiCare and Medical Groups.

 

Support
Services means the claims processing and payment
support service functions and related services provided in connection with
Medical Groups Risk Services under the management and supervision of the
PacifiCare Management Personnel, which service functions are more particularly
described on Schedule 4, attached hereto. 
Support Services shall include, without limitation, claims processing
and payment support service functions for Medical Groups-Risk Services when
such claims are incurred on a fee-for-service, discounted fee-for-service or
per-diem basis and for both contracted and non-contracted providers.

 

Support Staff
means (i) the claims processing and other administrative staff positions
utilized by Medical Groups to perform the Support Services, and (ii) adequate
support by clerical staff and mailroom staff as deemed reasonably necessary by
PacifiCare for use by the PacifiCare Management Personnel in the performance of
the Management Services and Support Services. 
With respect to the Support Staff described in clause (i) above, the
staff positions and full-time-equivalent (“FTE”) employee allocations and
allocation criteria shall be mutually agreed upon by Medical Groups and
PacifiCare prior to the Effective Date.

 

2.                                       Management
Services.  Commencing the Effective
Date and continuing until this Agreement is terminated pursuant to the terms of
Section 11 below, PacifiCare shall cause the PacifiCare Management Personnel to
provide the Management Services.  Except
as otherwise provided in this Agreement, PacifiCare shall not unreasonably
interfere in the operations and activities of Medical Groups unrelated to the
Support Services or Management Services. 
Medical Groups agrees that PacifiCare may amend the Management Services
by providing notice to Medical Groups in order to ensure compliance by
PacifiCare with the requirements of HCFA or the DOC and that such amendment may
include, without limitation, expansion of the Management Services to include
claims processing and payment management and supervision for medical services
provided to Commercial Members.

 

2

 

3.                                       Support
Services and Support Staff.  Medical
Groups will make available to PacifiCare the Support Staff for purposes of
performing the Support Services. 
Medical Groups represents and warrants that the Support Staff is
sufficient and competent to timely and accurately perform the Support
Services.  Pursuant to this Agreement,
the PacifiCare Management Personnel shall manage and supervise the Support
Staff and Support Services.  Except as
set forth in this Agreement, Medical Groups shall be responsible for the
Support Staff in all other aspects of their employment.  PacifiCare, at its sole discretion, may
remove any individual from the Support Staff upon written notice to Medical
Groups of PacifiCare’s reason for such removal.  Medical Groups, however, shall have the sole authority with
respect to (i) the engagement, termination of the support staff, and (ii) the
reassignment of any individual removed from the Support Staff by
PacifiCare.  Although PacifiCare will
utilize the Support Staff where possible, PacifiCare may utilize its own staff
in lieu of some or all of the Support Staff as it reasonably deems necessary
for purposes of ensuring timely and accurate performance of the Support
Services.  Medical Groups agree that
PacifiCare may amend the Support Services and/or the Support Staff by providing
notice to Medical Groups in order to ensure compliance by PacifiCare with the requirements of HCFA or the DOC and
that such amendment may include, without limitation, expansion of the
Support Services to include claims processing and payment support for medical
services provided to Commercial Plan Members.

 

4.                                       Compensation. 
PacifiCare will charge and collect from Medical Groups its actual expenses
incurred in providing the Management Services and the Support Services ( the
“PacifiCare Administrative Cost”).  The
PacifiCare Administrative Cost shall be equal to the sum of the following:  (i) for PacifiCare employees, the number of
hours spent by each such employee performing Management Services and/or Support
Services multiplied by an hourly rate which, in PacifiCare’s good faith
determination, will fully reimburse PacifiCare for the salary or wages and all
employee benefits paid to such employee on an hourly basis; (ii) for third
party consultants who are PacifiCare Management Personnel, the actual billings
provided by such consultants in support of the Management Services and the
Support Services; and (iii) actual travel expenses determined according to
PacifiCare’s standard travel expense reimbursement procedures.  The PacifiCare Administrative Cost will be
calculated in increments of one quarter of an hour, rounded off to the nearest
one quarter of an hour.  Each month,
PacifiCare will submit a billing to Medical Groups that shall itemize the PacifiCare
Administrative Cost.  Medical Groups
shall pay the PacifiCare Administrative Cost identified in the monthly billing
within thirty (30) days of receipt.  If
PacifiCare has not received payment in full of the PacifiCare Administrative
Cost within such thirty (30) day period, PacifiCare shall, in its sole
discretion, have the right to withhold from future PacifiCare Capitation
Payments an amount to cover the PacifiCare Administrative Cost attributable to
such month.  In addition, if Medical
Groups fails to make timely payments of the PacifiCare Administrative Cost,
PacifiCare shall have the right to establish a withhold from the PacifiCare
Capitation Payments to cover the estimated PacifiCare Administrative Cost for
the month covered by the PacifiCare Capitation Payment.  The compensation set forth in this Section 4
shall be in lieu of and shall not be limited by any specified reduction to the
PacifiCare Capitation Payments as may be set forth in the Provider
Agreements.  Medical Groups shall be
obligated to reimburse PacifiCare for PacifiCare Administrative Costs incurred
beginning the Effective Date and continuing for the remaining term of this
Agreement.

 

3

 

5.                                       Access
to and Maintenance of Support Facilities and Data.  Medical Groups will allow PacifiCare and
PacifiCare Management Personnel full and complete access to and use of the
Support Facilities and the Data for the purpose of providing Management
Services and facilitating the performance of Support Services.  Medical Groups shall maintain the Support
Facilities and the Data during the entire term of this Agreement and for a
period of at least two (2) years from the termination of this Agreement.

 

6a.                                 Cooperation
of Medical Groups.  Medical Groups
shall (i) fully cooperate with PacifiCare in the performance of the services
provided under this Agreement, (ii) take all actions necessary to cause the
timely and accurate performance of the Support Services, and (iii) make
available on a timely basis for use, review, or copying by duly authorized
representatives of PacifiCare any and all contracts, Data, records, reports,
information and resources deemed reasonably necessary by PacifiCare in
connection with providing Management Services and facilitating the performance
of Support Services in accordance with the standards of PacifiCare, HCFA and
the DOC, including, without limitation, claims processing data, subcontracted
provider rates, and authorization and utilization management information.

 

6b.                                Cooperation
of PacifiCare.  PacifiCare shall cooperate
with Medical by forwarding to Medical Groups claims for Medical Groups-Risk
Services which are received by PacifiCare on or after the Effective Date.

 

7.                                       Claims
Account.  Upon the execution of this
Agreement, Medical Groups shall (a) establish a segregated checking account
(the “Medical Groups Account”) with a continuing balance no less than
$50,000.00 (the “Minimum Balance”), and (b) in the event that the normal
payment and check writing process will cause Medical Groups to be out of
compliance with HCFA claims processing standards, and upon notification from
PacifiCare to Medical Groups, take all action necessary to cause PacifiCare to
be authorized to make withdrawals from and write checks upon such account for
the sole purpose of paying claims for Medical Groups Risk Services.  Medical Groups shall deposit such additional
funds in the Medical Groups Account to cause the balance thereof to equal or
exceed the Minimum Balance no later than two (2) business day following Medical
Groups becoming aware that the balance of the Medical Groups Account is less
than the Minimum Balance.

 

If Medical
Groups fails to maintain the segregated checking account in accordance with the
terms of this Section 7 or PacifiCare determines that the following action is
necessary to comply with HCFA’s standards, then, in lieu of the Medical Groups
Account, PacifiCare may withhold from the PacifiCare Capitation Payment an
amount equal to the Minimum Balance and deposit such amount into its own
segregated checking account (the “PacifiCare Account”) for the sole purpose of
paying claims for Medical Groups Risk Services.  PacifiCare may continue to withhold from each PacifiCare
Capitation payment as necessary to maintain the Minimum Balance in the
PacifiCare Account.

 

4

 

PacifiCare may increase the amount of the Minimum Balance in the
Medical Groups Account or the PacifiCare Account, as the case may be, upon
notice to Medical Groups if PacifiCare determines that such action is necessary
to comply with HCFA and/or DOC standards.

 

8.                                       PacifiCare
Corrective Action Plans.  PacifiCare
may recommend improvements and develop corrective action plans regarding the
Support Facilities, the Support Services and other services and functions
related to the proper performance of Medical Groups under the Provider
Agreements, including without limitation, utilization management and quality
management.  Medical Groups will allow
PacifiCare access to appropriate Medical Groups management and to its respective
boards of directors for purposes of communicating such recommendations and
corrective action plans.  Medical Groups
will promptly and fully implement any and all such recommendations and
corrective action plans developed by PacifiCare.

 

9.                                       Membership
Freeze.  PacifiCare reserves the
right, at its discretion, to discontinue marketing and enrollment of new Senior
Members until PacifiCare determines that claims processing and payment
functions for Medical Groups have been brought into compliance with HCFA’s
claims processing standards (the “Membership Freeze Period”).  During the Membership Freeze Period,
PacifiCare will cease any and all marketing, sales and enrollment activities
for Senior Members at Medical Groups. 
Exceptions will be allowed only upon the prior written approval of
PacifiCare.

 

10.                                 PacifiCare
Audits.  PacifiCare and its
representatives will conduct any and all audits that PacifiCare reasonably
determines are necessary to (i) monitor Medical performance under this
Agreement and (ii) assure PacifiCare of Medical Groups’ ability to satisfy its
continuing obligations under the Provider Agreement.  Medical Groups will cooperate in full with all such audits.

 

11.                                 Termination
of this Agreement.  This Agreement
may be terminated as set forth below:

 

11.1                           Immediately
and automatically upon the termination of any one or more of the Provider
Agreements with respect to Senior Members covered by the terminated Provider
Agreement.

 

11.2                           Upon
written notice of termination by PacifiCare to which notice under this Section
11.2 shall only be provided if PacifiCare has confirmed that all of the
following are true:

 

a.                                       Medical
Groups has demonstrated to PacifiCare’s satisfaction that adequate systems,
resources and personnel are available to perform the Support Services without
the Management Services and in compliance with DOC’s and HCFA’s claims
processing standards applicable to Senior Members.

 

b.                                      Medical
Groups has fully complied with any and all reasonable corrective action plans
developed by PacifiCare.

 

5

 

c.                                       Medical Groups has fully cooperated with
PacifiCare during the term of this Agreement, including, without limitation,
provision of requested information on a timely basis and cooperation with
audits conducted by PacifiCare.

 

d.                                      Medical Groups has entered into a delegation
amendment, substantially in the form attached hereto as Schedule 5, which
amendment will amend each of the Provider Agreements.

 

e.                                       Any and all required regulatory approvals
have been obtained.

 

12.                                 Notice of Assumption of Support Services.  In
the event of Medical Groups’ breach of this Agreement or inability to continue
performing the Support Services or at the direction of HCFA or DOC, PacifiCare
may, upon written notice to Medical Groups, elect to assume full control for
the Support Services and discontinue utilizing the Support Facilities and the
Support Staff.  In such event,
PacifiCare may, in its sole discretion, elect to utilize PacifiCare Management
Personnel to perform the Support Services directly, utilizing the Support
Facilities and the Data.  In such event,
(i) Medical Groups shall allow PacifiCare full and complete access to and use
of the Support Facilities and the Data in order to perform the Support Services
and shall fully cooperate with PacifiCare as specified in Section 6 above; (ii)
PacifiCare shall deduct from the PacifiCare Capitation Payments during the
period it assumes full responsibility for Support Services and Management
Services an amount reasonably estimated by PacifiCare to cover its actual costs
for providing the Support Services, including any and all start-up costs
incurred by PacifiCare, which amount shall be adjusted from time-to-time to
reflect the actual costs of PacifiCare; and (iii) PacifiCare shall further
withhold from the PacifiCare Capitation Payments an amount reasonably necessary
to cover PacifiCare’s costs in performing the Support Services.

 

PacifiCare’s
full assumption of Support Services shall continue until (i) Medical Groups has
demonstrated to PacifiCare’s satisfaction that adequate systems, resources and
personnel are available to perform the Support Services without the Management
Services and in compliance with PacifiCare’s, HCFA’s and DOC’s claims
processing standards, (II) Medical Groups has fully complied with any and all
reasonable corrective action plans developed by PacifiCare, (iii) Medical
Groups has fully cooperated with PacifiCare during the term of this Agreement,
including, without limitation, provision of requested information and Data on a
timely basis and cooperation with audits conducted by PacifiCare, and (iv) any
and all required regulatory approvals have been obtained.  The rights set forth in this Section 12 and
in Section 11 above are not intended as exclusive remedies and PacifiCare may
seek whatever action in law or equity as may be necessary to enforce its rights
under this Agreement or under the Provider Agreements.

 

13.                                 Non-Solicitation of Employees.  The
parties agree that during the term of this Agreement and for one (1) year after
the termination of this Agreement, (i) Medical Groups will not solicit the
employment of, or employ, any of PacifiCare’s personnel involved in the
provision of Management Services or Support Services without PacifiCare’s prior
written consent and (ii)

 

6

 

PacifiCare will not solicit
the employment of, or employ, any of Medical Groups’ personnel involved in the
provision of Support Services without the prior written consent of Medical Groups,
as the case may be.

 

14.                                 Independent
Contractor Status.  PacifiCare and
Medical Groups agree that the parties hereto shall perform the services
described herein as independent contractors. 
This Agreement is not and shall not be considered to create an
employer/employee relationship, joint venture, partnership or agency
relationship of any kind, and none of the parties hereto shall represent to any
third persons that any such relationship exists.  Each party hereto is and shall remain professionally and
economically independent of the others, and none of the parties hereto will
have any authority to bind or commit the other parties.  With respect to its own personnel, each
party is, accordingly, independently responsible for all obligations incumbent
upon an employer.

 

15.                                 Liability
of Obligations.  Notwithstanding the
provisions of any other section of this Agreement, nothing contained herein
shall cause PacifiCare to be liable or responsible for any debt, liability or
obligation which Medical Groups has to the employees of Medical Groups, as the
case may be, or to any third party, unless such liability or responsibility is
assumed in writing by an authorized representative of PacifiCare.  Notwithstanding the provisions of any other
section of this Agreement, nothing contained herein shall cause Medical Groups
to be liable or responsible for any debt, liability or obligation which
PacifiCare has to its employees, or to any third party, unless such liability
or responsibility is assumed in writing by an authorized representative of
Medical Groups or Management Company. 
Each party shall be solely responsible for any obligation for payment of
wages, salaries or other compensation (including all state and federal withholding
taxes and mandatory employee benefits), insurance and any voluntary
employment-related or other contractual or fringe benefits that may be due or
payable by the party on behalf of such party’s employees, agents and
representatives.

 

16.                                 Indemnity.

 

16.1                           Medical Groups Obligation to PacifiCare. 
Medical Groups shall defend, indemnify and hold harmless PacifiCare and
its directors, officers, employees, affiliates and agents against any claim,
loss, damage, cost, expense or liability (collectively, “Losses”) arising out  of or related to the performance or
nonperformance by Medical Groups and its respective employees, agents or
contracting providers of any services to be performed or arranged by Medical
Groups under this Agreement or the Provider Agreements.

 

16.2                           PacifiCare Obligation to Medical Groups. 
PacifiCare shall defend, indemnify and hold harmless Medical Groups and
its directors, officers, employees, affiliates and agents against any Losses
arising out of or related to the performance or nonperformance by PacifiCare,
its employees or agents of any services to be performed by PacifiCare under
this Agreement or the Provider Agreements. 
Notwithstanding the foregoing sentence, PacifiCare shall not be liable
to Medical for any Losses sustained by Medical Groups or Management Company as
a result of PacifiCare’s performance of Management Services and Support
Services

 

7

 

or
the exercise of any right which PacifiCare has under this Agreement, provided
that PacifiCare performed such Management Services or Support Services or
exercised such right in good faith.

 

17.                                 No
Implied Warranties.  Except as
expressly set forth in this Agreement, PacifiCare makes no express or implied
warranties regarding the Management Services or Support Services.

 

18.                                 Confidential and Proprietary Information.

 

18.1                           Information Confidential and Proprietary to
PacifiCare.  Medical Groups shall maintain the
confidentiality of all information designated in this Section.  For purposes of this Section 18, the
term Medical Groups shall include its partners, shareholders, owners, officers, directors, employees, agents,
representatives, consultants and contractors. 
The information which Medical Groups shall maintain confidential (the
“Confidential Information”) consists of: 
(i) the list of Senior Members for whom Medical Groups shall provide or
arrange Covered Services (as defined in the Provider Agreements) and any other
information containing the names, addresses and telephone numbers of Senior
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) the PacifiCare Provider
Policies and Procedures Manual, related written materials 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 (as defined in the Provider Agreements);
(v) PacifiCare underwriting and rating information and any other information
utilized by PacifiCare for determining eligibility or rates for the Managed
Care Plans (as defined in the Provider Agreements); and (vi) any other
information compiled or created by PacifiCare which is proprietary to
PacifiCare and which PacifiCare identifies in writing to Medical Groups.  The term “Confidential Information” does not
include information which either Medical can prove:  (i) is already in its possession, provided that such information
is not known by it to be subject to another confidentiality agreement or other
obligation of secrecy; (ii) was or becomes generally available to the public
other than as a result of disclosure by it in violation of this Agreement;
(iii) was or becomes available to it on a non-confidential basis from a source
other than PacifiCare, provided that such source is not known to the recipient
of the information to be bound by a confidentiality agreement, or other
obligation of secrecy or otherwise prohibited from transmitting such
information by a contractual, legal or fiduciary obligation to PacifiCare; or
(iv) is independently developed by it.

 

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

 

8

 

18.3                           Information Confidential and Proprietary to
Medical Groups.  PacifiCare shall maintain the confidentiality
of all information designated in this Section 18.3.  For purposes of this Section 18.3, the term PacifiCare shall
include its partners, shareholders, owners, officers, directors, employees,
agents, representatives, consultants and contractors.  The information which PacifiCare shall
maintain confidential (the “Medical Groups Confidential Information”) consists
of the following information to the extent it was in the lawful possession of
Medical Groups and made available to PacifiCare in the course of performing
Management Services hereunder; (i) the list of senior members for whom other
HMOs provide or arrange for Covered Services and any other information
containing the names, addresses and telephone numbers of seniors which have
been compiled by the other HMOs; (ii) lists or documents compiled by other HMOs
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) other HMOs’ Provider Policies and
Procedures Manual, related written materials and any of the other HMOs’ member,
employer and administrative service manuals and all forms related thereto; (iv)
the financial arrangements between the other HMOs and any of the other HMOs’
participating providers; (v) the other HMOs’ underwriting and rating
information and any other information utilized by the other HMOs for
determining eligibility or rates for the managed care plans; and (vi) any other
information compiled or created by Medical Groups which is proprietary to
Medical Groups and which Medical Groups identifies in writing to
PacifiCare.  The Term “Medical Groups
Confidential Information” does not include information which PacifiCare can
demonstrate:  (i) is already in its
possession, provided that such information is not known by it to be subject to
another confidentiality agreement or other obligation of secrecy; (ii) was or
becomes generally available to the public other than as a result of disclosure
by it in violation of this Agreement; (iii) was or becomes available to it on a
non-confidential basis from a source other than Medical Groups, provided that
such source is not known to the recipient of the information to be bound by a
confidentiality agreement, or other obligation of secrecy or otherwise
prohibited from transmitting such information by a contractual, legal or
fiduciary obligation to Medical Groups; or (iv) is independently developed by
it.

 

18.4                           Non-Disclosure of Medical Groups Confidential
Information.  PacifiCare shall maintain and shall
cooperate with Medical Groups to maintain the confidentiality of the Medical
Groups Confidential Information. 
PacifiCare shall not disclose or use any of the Medical Groups
Confidential 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 Groups all of the Medical Groups
Confidential Information in its possession in the manner to be specified by
Medical Groups.

 

18.5                           Provider
Agreement.  With respect to
PacifiCare and Medical Groups, the provisions of this Section 18 shall
supplement, but not replace, the covenants regarding confidential information
set forth in the Provider Agreement.

 

19.                                 General
Provisions.

 

19.1                           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 US

 

9

 

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
5757 Plaza Drive, Suite 150
Cypress, California 90630
Mail Stop
CY44-116

Attention:  Vice President, Network Management

 

If
to Medical Groups:

 

Professional
Care IPA Medical Group

1920 E. 17th St

Santa Ana, CA 92705

Attention:  President

 

Prospect
Medical Group

1920 E. 17th St

Santa Ana, CA 92705

Attention:  President

 

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 US 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.

 

19.2                           Assignment.  This Agreement and the rights, interests and
benefits hereunder shall not be assigned, transferred or pledged in any way by
Medical Groups 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.

 

10

 

19.3                           Amendments.  Amendments or modifications to this
Agreement shall be effective only upon mutual written agreement of the parties,
except as provided below or as specifically authorized elsewhere in this
Agreement:

 

a.                                       PacifiCare
may amend this Agreement by providing written notice to Medical Groups in order
to maintain compliance with state and federal law or the directives of HCFA or
DOC.

 

b.                                      The
Support Staff positions and FTE allocations may be modified from time to time
by PacifiCare upon notice to Medical Groups, except that any addition of a
Medical Groups employee to the Support Staff shall require the approval of
Medical Groups and PacifiCare.

 

c.                                       PacifiCare may amend the PacifiCare
Management Personnel upon notice to Medical Groups.

 

19.4                           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.

 

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

 

19.6                           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.

 

19.7                           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.

 

19.8                           Entire
Agreement.  This Agreement,
including all schedules attached hereto, contains all the terms and conditions
agreed upon by the parties regarding the subject matter of this Agreement.  Except as specifically provided below, any
prior agreements, promises, negotiations or representations of or between the
parties, either oral or written, relating to the matters specifically addressed
in this Agreement, which are not expressly set forth in this Agreement are
Superseded.  Notwithstanding the other
provisions of this Section 19.8 to the contrary, PacifiCare and Medical Groups
agree that (i) this Agreement amends the Provider Agreement, (ii) except as
specifically provided herein, to the extent the terms of this Agreement
conflict in any way with the terms of the Provider Agreement, the terms of this
Agreement shall govern, and (iv) in all other respects, the Provider Agreement
shall remain in full force and effect, as amended by this Agreement.  The termination of this Agreement shall not
affect the enforceability of the Provider Agreement and the provisions thereof
superseded by this

 

11

 

Agreement during the term
hereof shall come into full force and effect upon the termination of the
Agreement.

 

19.9                           Incorporation
of Schedules.  The schedules
attached hereto and referenced herein are an integral part of this Agreement
and are incorporated in full herein by this reference.

 

This
Agreement is executed by the parties and is effective as of the date set forth
above.

 

	
  PACIFICARE OF CALIFORNIA

  
	
   

  	
   

  
	
  BY:

  	
   

  	
   

  
	
   

  	
   

  
	
  TITLE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PROFESSIONAL CARE IPA MEDICAL GROUP

  
	
   

  	
   

  	
   

  
	
  BY:

  	
  /s/ Catherine Dickson

  	
   

  
	
   

  	
   

  
	
  TITLE:

  	
  COO-PMS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PROSPECT MEDICAL GROUP

  
	
   

  
	
  BY:

  	
  /s/ Catherine Dickson

  	
   

  
	
   

  	
   

  
	
  TITLE:

  	
  COO-PMS

  	
   

  
				

 

12

 

SCHEDULE 1

 

PROVIDER
AGREEMENTS

 

 

The
Professional Capitation Medical Group/IPA Services Agreement between PacifiCare
of California and Professional Care IPA Medical Group effective June 1, 1999.

 

 

SCHEDULE
2

 

MANAGEMENT
SERVICES

 

 

PacifiCare, through the
PacifiCare Management Personnel, shall manage and supervise the Support Staff
in the performance of the Support Services, including but not limited to the
following:

 

1.                                       Interpret and analyze daily receipts volume
(both total and PacifiCare)

2.                                       Utilize PacifiCare criteria for payment or
denial of claims including PacifiCare medical criteria

3.                                       Quality review/auditing of claims processing

4.                                       Interpret and analyze management reports

5.                                       Participate in management meetings with
cross-functional activities (e.g. utilization management and/or information
services)

6.                                       Manage and supervise Support Staff

•                                          goals setting

•                                          provide feedback (on, e.g., productivity and
quality)

•                                          provide performance evaluations

7.                                       Issue periodic reports to Medical Group
regarding findings and recommendations with respect to the Support Services

8.                                       Such other services which the PacifiCare
Management Personnel deems reasonably necessary for the processing and payment
of claims in connection with Medical Group Risk Services in compliance with
HCFA’s and DOC’s claims processing standards applicable to Senior Members.

 

 

SCHEDULE 3

SUPPORT FACILITIES

 

 

1.             Office
space for use by the PacifiCare Management Personnel.

2.             Access to hardware, software and other
systems owned, leased or operated by or on behalf of Medical Group which relate
to the Support Services.

3.             Access
to telephones, telecopier, facsimile machine, word processing equipment,
printers and other general office equipment that is deemed reasonably necessary
by PacifiCare for use by the PacifiCare Management Personnel in the performance
of the Management Services.

4.             Access
to dedicated space and facilities, in a central location, for use by the
Support Staff and the PacifiCare Management Personnel.

 

 

SCHEDULE
4

 

SUPPORT
SERVICES

 

 

All claims processing and
payment support functions and related services provided in connection with
Medical Group Risk Services, including but not limited to the following:

 

1.                                       Track daily receipts volume (both total and
PacifiCare)

2.                                       Sort and distribute work (both contract and
non-contract) (and route to PacifiCare if needed)

 

Process (i.e. pay or deny)
claims pursuant to contracts and PacifiCare medical necessity guidelines,
including:

•                                          data entry

•                                          document authorization

•                                          document eligibility

 

3.                                       Production and distribution of checks,
explanation of benefits and explanation of payment

4.                                       Reprocessing of errors

5.                                       Handling of returned checks

6.                                       Provide information regarding opportunities
for improvement

7.                                       Generate management reports

8.                                       Submit encounter data to PacifiCare

9.                                       Identify COB, TPL, overpayment processes

10.                                 Such other services which the PacifiCare
Management Personnel deems reasonably necessary for the processing and payment
of claims in connection with Medical Group Risk Services in compliance with
HCFA’s and DOC’s claims processing standards applicable to Senior Members.

 

 

SCHEDULE
5

 

DELEGATION
AGREEMENT

 

 

Exhibit 2, Delegated
Activities, effective January 1, 2003 in the Amendment to the Professional
Capitation Medical Group/IPA Services Agreement between PacifiCare of
California and Professional Care IPA Medical Group.

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